Economics 101

Are We Going in Circles Concerning Freedom and Economic Growth?

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There is a connection between economic freedom and flourishing. Specifically, as Anne Bradley and Joseph Connors show in “Economic Freedom and the Path to Flourishing,” there is a “strong correlation” between economic freedom and human flourishing as measured in seven areas: life expectancy, infant mortality, quality of healthcare, abject poverty rates in the developing world, corruption levels, environmental performance, and civil liberties.

However, as Elise Daniel points out, merely being in a state of economic freedom does not guarantee that flourishing will result. Economic freedom and flourishing may be correlated, but this does not tell us whether there is a direct causal relationship between them.

What, then, is the precise nature of the relationship between the two? Some argue that while the conditions of economic freedom (small government, robust property rights, limited regulations, etc.) are indeed conducive to economic growth and other manifestations of flourishing, it is also accurate to say economic growth itself—particularly as measured in growing incomes—directly leads to an increase in political and economic freedom. Benjamin M. Friedman, former chair of the Harvard Economics Department, makes this argument in The Moral Consequences of Economic Growth.

Does Growth Beget Freedom?

Friedman writes that historically, when countries such as the United States, Britain, France, and Germany have experienced economic growth in the form of rising incomes throughout the general population, those countries have become freer and more democratic, as evidenced by specific reforms enacted following these periods of economic growth (in America examples include the trust-busting and electoral reforms of the Progressive Era at the beginning of the twentieth century, as well as the Civil Rights Acts of 1957 and 1964).

He grants that this pattern of increased freedom following economic growth does not occur in all countries at all times – China, Singapore, and Saudi Arabia, all of which have enjoyed healthy economic growth without a corresponding increase in freedom, are just a few glaring exceptions. But on the whole, he says,

The experience of the developing world during the last two decades, indeed since World War II, is clearly more consistent with a positive connection between economic growth and democratization than with the opposite.

So what is to be done in those countries where poverty continues to be rampant, and undemocratic and corrupt governments remain in power?

Going in Circles

A significant problem with attempting to eliminate poverty in developing nations, Friedman notes, is that

A country can…get stuck, either in a favorable situation in which a high income level promotes a democratic society and vice versa, or in a vicious circle in which poverty and the absence of basic freedoms mutually reinforce each other.

With countries stuck in vicious circles, it is difficult to determine whether we should try to stimulate economic growth so that greater freedom will result, or establish basic economic freedoms to encourage growth. Worse, if the poverty and absence of freedom in some countries are as mutually reinforcing as they seem to be, the question becomes whether pursuing either freedom or growth as a starting point is enough to end the vicious circle at all. Friedman summarizes the problem thus:

The debate over how to break out of such a vicious circle inevitably revolves around questions of what to do first: whether to take whatever steps are necessary to promote rising incomes, in the hope that political and social reforms will then follow in due course, or instead to give first priority to key elements of political and social liberalization on the grounds that progress in those dimensions is a precondition for successful economic growth. If the two-way reinforcement between the character of a society and the performance of its economy is sufficiently strong, however, this familiar discussion of the proper sequencing for political and economic reform misses the point. Jump-starting economic growth in a closed, repressive society is then just as problematic as implanting the outward forms of democracy where incomes are stagnant. Either endeavor is then difficult at best, and neither on its own is likely to prove lasting.

It seems as though the problem of vicious circles is intractable. If economic growth alone may not spur the development of basic freedoms and vice-versa, what can be done?

A Third Option

The key to jump-starting both economic growth and the development of basic freedoms may lie in simultaneously collaborating with people both at the institutional and individual level. “Implanting the outward forms of democracy” has a ring of external imposition to it, whereas meaningful change could have a greater chance of being implemented through cooperation instead of coercion. As Andy Crouch observes in Playing God concerning the work of the International Justice Mission, it really is possible to reform the institutions and apparatuses of state law enforcement so that they serve the people rather than preying on them. In the same way, it should be possible to work within institutionalized power structures to open up economic freedom so that ordinary people can use their initiative for greater flourishing.

Still, it is also true that economic freedom alone will not assure economic growth or flourishing. As Elise Daniel says, a culture of creativity, generosity, and virtue is essential to flourishing, and these qualities are most fully realized in the gospel of Jesus Christ. Economic flourishing in particular will be possible once people see that:

  • They have everlasting value because they are made in the image of God.
  • They were created to in turn exercise creativity throughout the earth.
  • Christ died so they could be free from their sins and follow God’s callings, creative and otherwise.

Whether growth leads to freedom or freedom to growth, in either case, the power of Christ to change people—or at least work through them—is the best hope we have for breaking vicious circles.

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