Texte initialement publié par l'institut Hayek De Bruxelles
Can capitalism promote political freedom and vice versa ?
Peitsinis Charilaos (Institut Hayek)
Peitsinis Charilaos (Institut Hayek)
Prediction is always dangerous in social sciences. Society does not succumb to iron laws (as some Marxists used to believe) but it follows different and variable historical routes. Still, Samuel Huntington's pessimistic speculations about the fate of democracy can be considered to be one of the most mistaken predictions by a social scientist. This controversial scientist didn't hesitate to conclude that the prospects for the extension of democracy to other societies were not great in 1984. With his later book, the clash of civilization he attempted to introduce the fateful "historical law" of the Struggle between civilizations by extracting (with the use of a figurative "axe" -to paraphrase Emmanuel Todd- ) some ideas from Oswald Spengler's famous works.
Huntington's conservatism doesn't allow him to fully understand the inner organic connections between economic, political and historical forces. But the question remains: which economic system can guarantee the future world a libertarian and prosperous social environment? Moreover, there is renewed popular interest in whether open and competitive domestic political systems are good, bad, or indifferent for the economic system of any given country. Do free government institutions promise better economic performance? Worse ? The same ? These questions are especially important for underdeveloped countries who attempt the grand step towards democratic and economic regeneration.
History shows democratic institutions can sometimes encourage destructive economic plans, and give in to demagogic pressures for fatal policies. This leads to the conclusion that many times greater popular involvement in public life is translated to a haul on rising production, growth rates and therefore public welfare.
Capitalism on the other hand needs certain regularised, state-sponsored codes of business conduct to function smoothly. Among the capitalist institutions, economic historians believe that particularly vital is the ability of individuals and organisations to make enforceable claims to property. After centuries and many struggles in western countries, property and contract law became institutionalised as rights. These market-friendly rights are distinct from the rights to participate in collective decisions; they don't need any majority's approval to function for every individual. From a certain viewpoint they represent the only known institution of self/governance from the beginning of time.
Following this path many philosophers distinguished democracy from liberalism, political rights from civil rights, as if these freedoms do not or should not ?'belong'' to the same people, as if there is absolutely no link between them. Truth is that to a certain extent this point of view is correct. Popular leaders, like Salvador Allende in Chile, expropriated private assets , while authoritarian leaders, such as Allende's successor General Augusto Pinochet, supported the institution of property . There is no particular association, according to this viewpoint, between the freedom to join in collective decisions and the freedom to use and dispose of property.
But is this so? If this view is totally correct then how could we explain the undemocratic acts of Allende, during the period before his tragic death? how can one clarify the economic crisis of Chile during the 80s? Normally a successful capitalism would of course result in some necessary booms and limited crises just like in Europe and U.S.A. But in Chile this seemed to be a deep structural crisis of the whole economic and political system of the country that eventually led to the fall of Alliende. Could it be, that the theorists of the ??systemic' separation'' were in some way, mistaken.
F. Hayek, Milton Friedman, Ludvig Von Mises, and many others see matters differently. They believe that liberties in the political and economic spectrum are complementary and mutually dependent. According to them, there is an inbuilt similarity between democratic government and property rights, for democracy is the best guarantor of limited government and free enterprise. Open political systems tend constrain government from expropriating private holdings. We could also add that democracy has independent benefits, too, because of the constant float of information permitted in democratic societies.
The modern institution of property rights improved the climate for private enterprise. In the eighteenth century notions of property were shifting and unclear. It was not long ago since the aristocrats of Europe maintained the right of prima noctae, i.e. sexual abuse of the newly married wives of their servants. This means that the citizens during these dark times did not have property rights even on their own body. The dying feudal system with its odious casts and sectarianism, with the clear distinction between classes and all the inequality flowing from it couldn't provide a safe base for the development of two seemingly different systems, an economic and a political one, that is capitalism and democracy. These historical contradictions which reflected the differences between the level of the productive potential of the moment and the inability of the social system to adjust to these new perspectives were the cause of a number of social revolutions, which ended with the victory of a market/friendly middle class. Moreover this class was determined not only to obtain its economic program, but also to seize power as well. Politics and economy seem bound with tight bonds.
Moreover as statistics prove representative government institutions and property, each have a positive association with the rate of production. Democratic and property-oriented regimes have the better growth record in recent years. The connection between politics and economy is not grammical but dialectic. One is affected by the other and from the forthcoming results the latter is affected from the former. Over the longer-term, it is likely that growth does modify the institutional framework in a country.
Its easy to understand that democracy needs growth to a certain extent. Lack of goods brings hunger, hunger aggravates the economic inequality which results in the decomposition of the social cohension. Clash of the classes and dictatorships seem to be an inevitable result. So democracy is tightly connected with the economic system that brings growth , and that is as we already cited and will try to prove, capitalism.
Research proves that open economies tend to grow faster and achieve higher incomes than closed economies. The Economic Freedom of the World study by James Gwartney and Robert Lawson found that nations that ranked in the top quintile in terms of economic openness from 1980 to 1998 experienced annual economic growth that was almost five times faster (2.4 percent vs. 0.5 percent) than those nations in the bottom quintile of openness. People living in free market economies had far higher annual incomes per capita ($22,306 vs. $2,916) than those living in the most closed economies. A study by World Bank economists David Dollar and Aart Kraay found that less developed countries that opened themselves to the global economy grew much faster than those the close and isolated ones .
The inner connection between highly productive economies and democracy is not and should not be used as a panacea. It is true that a resource-rich country (i.e. Saudi Arabia or Kuwait) can have a relatively high per capita gross domestic product, but if its natural wealth is centrally held it is easy to understand that the social classes will be highly depended on the supreme authorities and so the final result has to be, authoritarianism and oligarchical tendencies. No, central planning is not the road for a democratic and prospering community even in a rich country. The secret in this truth is that democracy's prerequisite, liberty of the individual can be obtained only when the latter is free to exploit his productive capacities and make profit without the interference of State.
Economic freedom liberates a heterogeneous social group and soon forms it to a differentiated social class with common interests and objectives. A middle class that earns its wealth independently of the state, is then able to question this institution and in certain cases to fight it. This social process objectively opens the way for political pluralism, civil liberties, and democracy.
Many former communist states from the old Soviet Union and its empire have successfully transformed themselves into functioning democracies that protect basic civil and political freedoms. Otherwise, without democratization, civil society would be weak and the power of the old elite substantial, compromising the reform process and transferring power to the antidemocratic establishment. Therefore, the economical transition process depends on how well developed civil society is, because the better developed it is, the sooner other, more representative forces will defeat the state managers and the remnants of socialism in general. Thus democracy and economic reform go together. Correspondingly, the goal of the transition economies should be a combination of economic and political reforms.
Greece after the 7 year dictatorship which ended in 1974, followed a democratic route and a mixed economic system where state intervention and planning overwhelmed private enterprise. Until today almost 60% of the countries resources are controlled by the state at least partly. Greek Foreign Dept rose dramatically during the 10 quasi/socialist years (1980-1990) What was the result in the political field? Corruption and Nepotism have been two of the most characteristic phenomena in the greek political spectrum during the last 20 years. According to Transparency International Greece has one of the most corrupted states in the world. Even today, in an age of reforms and liberal revolutions in the greek economy, political scandals and secret conspiracies sometimes outweigh the positive steps of the political leadership -see for example the recent scandals involving illegal networks of judges, civil servants, high priests (the church is not yet divided from the state in Greece) and politicians. An overall improvement in the field of governance though has been evident since the 90s , when the governments tried to follow a liberal economic strategy of privatizations and the country entered in to a phase of deregulation and state minimization.
India also took a quasi-socialist path with its Permit Raj and central planning; on the other hand countries like South Korea and Taiwan, preferred a more private enterprise path. By the 1990s those countries' per capita incomes were 10 to 15 times that of India. As a result democracy and respect for human rights have replaced authoritarian rule in South Korea, Taiwan. And the recent turn of India towards liberal capitalism is not irrelevant with these historical consequences.
Now let's take a look at another part of the Third World, sub/saharian Africa. Professor Stephen Smith made an interesting comparison between two different countries, Zaire and Botswana. Zaire is among the best endowed countries in natural resources; it has enough arable land to feed the entire African continent and enough hydro power to provide for all of Africa's electricity. But forty million Zairians are among the poorest people in the world - On the other hand Botswana is among the most productive countries of the third world. This difference can be explained very easily if we take into account the fact that Zaire is a statist country. State controls economy in a substantial way, such as through its ownership of the country's large productive enterprises. The state is controlled by one single authoritarian party. It is nt difficult to understand that the political climate in Zaire is turbulent. Zaire has had eight government crises, eleven riots, one coup d'etat, twelve revolutions, and at least three assassinations of major politicians during its recent history. As a result the country's economy tends to shrink more and more in terms of economic growth. On the other hand Botswana is following an open market model. Under these circumstances limited government is inevitable. And of course civil rights, free press and the absence of political prisoners. As Martin L. Weitzman notes ''The capitalist economy, because of its high degree of decentralization, automatically builds in some countervailing power to check the encroachment of the state."(23)
Indeed the spread of liberal capitalism was followed by a steadily increasing democratisation of many countries. According to New York-based human rights organization ??Freedom House'', the number of the world's population that has full civil and political liberties has been increased sharply in the past three decades. The share of the world's people who live in countries Freedom House classifies as "Free"?meaning "countries in which there is broad scope for open political competition, a climate of respect for civil liberties, significant independent civic life, and independent media"?has risen from 35 percent in 1973 to 44 percent today a raise rather significant if we take into account that transitional eras do not last fo months or years but for decades and aeons.
Changes in the way the global economy works are playing a big part in rendering government control unproductive. As the Cato Institute notes while global output rised at an annual rate of 1.4% between 1989 and 1997, international trade grew much more swiftly -- at 5.3%. Foreign direct investment increased even faster, at an annual rate of 11.5%. As a consequence, it is not possible nowadays to keep a national economic policy in isolation. Business now easily reaches across national boundaries, and governments no longer have the leverage over their own economies that they once did. The social consequences of this truth are more than obvious. Free markets remove boundaries and promote cultural exchange, freedom of movement and information circulation. Decentralized governance seems to be an inevitable perspective.
The reason for these events is obvious. Free markets provide a successful counterweight to central/planning and governmental decision making, thus mobilizing uncontrolled social forces which tend to seize power from the ruling elites and distribute it to the masses. Private enterprise maybe the answer to the question why open market as Cato Institute notes, ?'till the soil for democracy''.
BIBLIOGRAPHY
D.Griswold: Trading tyranny for freedom: How open markets till the soil for democracy, paper for the Cato Institute, Trade Policy Analysis No. 26 January 6, 2004
Gwartney J. and Robert Lawson with Erik Gartzke, Economic Freedom of the World: 2005 Annual Report
John Marangos, Was shock therapy consistent with democracy?, Review of Social Economy, June 2004 v62 i2 p221(23)
Jose Pinera. Latin America: a way out., The Cato Journal, Wntr 2003 v22 i3 p409(8)
Smith, Case Studies in Economic Development (2nd Edition), Addison Wesley Publishing Company; 2nd edition (January 1, 1997)
Martin L. Weitzman, "Capitalism and Democracy: A Summing up of the Arguments".
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