Wednesday, December 10, 2008

The Link Between Freedom and Prosperity

In general terms it would appear that countries with a high gross domestic product (GDP) are considered “Free” on the Freedom House assessment of “Freedom in the World” while those countries with the lowest GDP are considered “Not free.” Personal freedom depends on governments that respect individual rights and a judiciary that upholds those rights by respecting the rule of law without arbitrary rulings. For capitalism to thrive and produce high GDP requires the same things as personal freedom. The ruling institutions must respect the rights of property and the courts must impartially enforce contractual obligations. Trends in freedom and prosperity go in tandem since they rely on fair, well functioning governmental institutions.

The outliers to these trends are China and Russia. Both China and Russia have high GDPs but do not protect the civil liberties or political freedom of their people. Russia’s economy has benefitted from worldwide increase in demand for raw materials that are produced there even as the government has attempted to roll back political reforms started after the fall of the Berlin Wall. According to the CIA World Factbook entry on Russia, “in tandem with its prudent management of Russia's windfall energy wealth, which has helped the country rebound from the economic collapse of the 1990s, the Kremlin in recent years has overseen a recentralization of power that has undermined democratic institutions.” China economy has also benefitted from an increase in worldwide demand for products by producing those products. This increase in industrial production has increased the country’s GDP. China has nonetheless held onto it traditional authoritarian political structure that has been handed down for thousands of years. As noted in the CIA World Factbook entry for China, “DENG Xiaoping and other leaders focused on market-oriented economic development and by 2000 output had quadrupled. for much of the population, living standards have improved dramatically and the room for personal choice has expanded, yet political controls remain tight.” This assessment generally comports with the Freedom House rating.

The countries at the bottom of the GDP table either do not have raw materials worth exploiting or are ruled by dictators who do not respect the rights of individuals or both. Zimbabwe’s despotic ruler, of late, has not respected individual rights nor have the courts been willing to respect property deeds. As a consequence, the country is “Not Free” and the GDP is the lowest in the world. In the words of the CIA Factbook: “Robert MUGABE, the nation's first prime minister, has been the country's only ruler (as president since 1987) and has dominated the country's political system since independence. His chaotic land redistribution campaign, which began in 2000, caused an exodus of white farmers, crippled the economy, and ushered in widespread shortages of basic commodities.” Niger, the most free of the bottom of GDP table has had a working democracy on and off since 1991, but basically has an economy based on subsistence agriculture. Malawi, one of ”the world's most densely populated and least developed countries” has a economy based on subsistence agriculture” according the CIA World Factbook entry. While Malawi recently held elections, irredentist factions continue to vie to overturn the government, resulting in crackdowns that lower the Freedom House assessment.