Over the twentieth century economists laboured over trying to determine what were the fundamentals of economic growth and development. There were many competing schools of thought and the debate settled down into a fight between capitalism being espoused by the West and communism being championed by the Soviets. However, this battle between the ideologies offers a shallow assessment on development, in the sense that the debate only focused on the aspect of economic freedom. What was missing from the analysis was the role of political freedoms, which appears to be a common mistake throughout modern economics. Economists can gain a holistic understanding of development by looking at it through an economic and political lens. This paper will examine the relationship between economic and political freedoms, and how economic freedoms are needed to attain greater political freedoms.
I will begin by defining terms and providing context for my discussion. This will be followed up with an explanation of two fundamental philosophies that underpin the way development is viewed; one philosophy argues that economic freedoms go together with political freedoms and the other argues that economic freedoms precede political liberties. I will then transition to explaining the theories that have been derived from these philosophies: the Modernization Theory and the Lee Thesis. Lastly, I will delve into my analysis and explain the respective roles of economic and political freedoms with regards to development and offer my judgement on the subject.
Before any further discussion can be had, some basic parameters must be established. A major term in this paper will be “liberalism,” which will not be used in the social democratic sense but rather in the European Enlightenment sense. Liberalism in this paper will mean to favour maximizing individual liberty in the political and economic spheres (Friedman, 1962: pg. 13). Another common term will be “institution,” which refers to an established law, practice, custom or organization that is founded for some social purpose (Elgin, 201: pg.136). “Rule of law” is another key term for this discussion, which means that the law should govern a nation as opposed to arbitrary decisions by individual government officials. Lastly, I will be referring extensively to “economic and political freedoms.” Political freedoms refer to the right of an individual to participate meaningfully in the political process of a country and include voting rights along with proper implementation of rule of law. Milton Friedman describes political freedoms in even simpler terms and defines them as the absence of coercion of a man by his fellow man (Friedman, 1962: pg. 15). Economic freedoms refer to the ability of an individual to engage freely in decisions of trade, exchange, consumption and production (Gwartney and Lawson, 2003: pg. 405).
The first philosophy that underpins development is that economic rights go together with political rights and that both must be present in order to achieve meaningful development, hereafter known as the “Harmonic View”. This view is most prominently supported by Amartya Sen in his book titled, “Development as Freedom.” His thesis is that development is the pursuit of freedom and must be done by expanding the real freedoms that people enjoy, which requires the removal of major sources of “unfreedoms.” Unfreedoms arise from an inadequate process or opportunity within society that hinder an individual from attaining their full potential (Sen, 1999: pg. 3). In the development context, Sen sees poverty as a deprivation of the basic capabilities of an individual as poverty prevents one from fully participating in society and living the kind of life that he or she values (Sen, 1999: pg. 4). As an example, deprivation from poverty can be reflected in the issue of premature mortality, which prevents people from living full productive lives. Low incomes will not alone explain premature mortality, however if one looks beyond the economic scope and looks at the social and political factors then he or she can gain a better understanding of the issue. The point to be made here is that development must be seen as more than just an economic process and doing so would require incorporating a social-political lens (Sen, 1999: pg. 9).
For Sen freedom is both the means and principle end of achieving development (Sen, 1999: pg. 5). He argues that freedom is an end to development because in order for people to live optimal and content lives they must do so according to their own choosing. The problem arises when those in poverty are forced to make decisions on their survival that they may otherwise not make; having development may allow for freedom in life choices, as people would have fewer constraints to deal with (Sen, 1999: pg15). Sen also argues that freedom is the means for development. Once again he argues that individuals are best equipped to make decisions that will enhance their circumstances. In order for an individual to carry out these decisions they require economic and political freedom. Economic freedoms help the individual engage in the kinds of economic activities that aid the enhancement of his own personal capabilities (Sen 1999: pg. 19). Political freedoms ensure that proper public policy is in place to facilitate the economic and social freedoms. Either way freedoms allow for people to choose the outcomes and directions of their lives. For Sen economic and political rights go together because they reinforce each other.
The second major philosophy that underpins development is that economic freedoms precede political freedoms and that the latter cannot occur unless economic liberties have been secured, hereafter known as the “Dissonant View”. This argument is made by prominent macroeconomist Robert Barro in his paper titled, “Democracy and Growth.” In this paper he sets out to determine the relationship between economic and political freedoms and utilises regression analysis in a creative manner that yields some surprising results. It should be noted that this study does not begin with the express aim of proving that economic freedoms precede political rights but rather looks to gain further insight into the topic from an objective point of view. Barro conducts a study of 100 countries between 1960 and 1990 and uses regression analysis to assess the effect of different variables related to economic and political liberty with respect to growth. A major reason for why this study stands out is that it goes as far as including democracy as a variable. The issue with including democracy as a variable is that it can be very difficult to quantify such a subjective concept, as the idea of democracy varies among different societies (Barro, 1996: pg. 2). Democracy is also difficult to quantify because it is an abstract human concept that cannot be directly measured but rather requires a wide range of proxies for assessment (Barro, 1996: pg. 2). Much of the debate around the relationship between economic and political rights can be summarized using the two views explained.
Picture titled, "Haymaking", taken by Bernard Spragg on January 21, 2008, obtained through Creative Commons (https://flic.kr/p/fA1Kou)