Economic Freedom Against Poverty and Authoritarianism
Marek Tatala // 26 October 2017
Throughout history, people have lived in extreme poverty. However, it is since the industrial revolution and flowering of the Enlightenment ideas – liberal in their nature – that a gigantic increase in human income happened.
Nevertheless, we sometimes hear that the only type of liberalism we need today is “political liberalism” while classical liberal ideas in the economy can be neglected. The view that we need only political freedom, without a broad range of economic freedoms, is not isolated and requires a response. Moreover, some people try to link classical liberal economic ideas with poverty and I would like to debunk this myth as well.
Labels Do Not Help
Public debate today is full of labels and slogans and it does not help in evidenced-based discussions and forming policies. There is no point in sticking labels “leftist,” “rightist” or “neoliberal” to opponents because they no longer mean what they used to. Or even they do not mean anything at all.
For example, Polish ruling party Law and Justice should not be labelled “conservative”, because conservatives would not carry out an unconstitutional political revolution, weakening rule of law. It is also not a “rightist” party because the economic program of Law and Justice is in fact left-wing in many areas.
In turn, “neoliberalism” is a word that has become an insult, and the vast majority of people who use it have no idea what the word really means. Oliver Marc Hartwich explained it in the article “Neoliberalism: the genesis of a political insult”. These labels usually do not have much in common with decent analysis or simply with reality.
Which Institutional System Gets Out of Poverty?
To do a thorough analysis and talk about reality, we must operate in the realm of facts. In the article by Ignacy Dudkiewicz, published on the website of the Polish magazine Liberte! one can read that: “At the same time, in the language of liberalism I cannot express the need to emancipate the most discriminated group – that is, the enormous number of people living in the world in degrading poverty. First and foremost, however, in the language of economic liberalism I cannot offer an efficient way to realize their liberation.”
Similar opinions are expressed by other people from different countries who try to associate classical liberal values with poverty. We see here how facts about reality and personal opinions diverge.
This view means in fact assigning the label of “poverty creator” to classical liberalism and liberals. Throughout the most of history, people lived in extreme poverty. However, it is since the industrial revolution and flowering of the Enlightenment ideas – events liberal in their nature – that a gigantic increase in human income has happened, something that Professor Deirdre McCloskey calls a stunning “Great Enrichment”.
It was precisely when many economic developments were realizing the “language of economic liberalism” (industrialization, technological revolution, flourishing capitalism, free trade, globalization) that the world’s largest poverty reduction took place.
As Chelsea Follett, Managing Editor at HumanProgress.org, emphasizes “in 1820, more than 90 per cent of the world population lived on less than $2 a day and more than 80 per cent lived on less than $1 a day (adjusted for inflation and differences in purchasing power). By 2015, less than 10 per cent of people lived on less than $1.90 a day, the World Bank’s current official definition of extreme poverty.”
The escape of millions of people from “degrading poverty” (see the quote above) has affected many parts of the world, but the most obvious example is China. The lack of political and economic freedom during the Maoist dictatorship (the variant of communist ideology) led to the deaths of millions of victims and the above mentioned “degrading poverty”. It was only after Mao’s death that China’s economic freedom began to rise, and at the same time the rapid growth helped hundreds of millions to work their way out of poverty.
I think that the reluctance of some to the economic liberalism is due to similar premises that we see in this case – people wrongly associate various negative phenomena in the world with classical liberal ideas. Poverty, hunger, corruption, environmental destruction or financial crises are the things that economic liberalism or market mechanisms are often blamed for, without any in-depth analysis. Only an analytical approach allows identifying real sources of the above-mentioned problems, and they would require separate papers to discuss in details. Some examples of potential causes include the failed or erroneous interventions by governments or state-controlled institutions, harmful and counterproductive regulations, deep involvement of politicians in the economy or legal barriers to entrepreneurial activity of residents. These actions have nothing to do with either “economic liberalism” or “political liberalism.”
In their interesting paper “The Liberty of Progress: Increasing Returns, Institutions, and Entrepreneurship” Peter J. Boettke and Rosolino A. Candela recall two publications that discuss the problem of the loss of political and civic freedom as a consequence of the loss of economic freedom: Friedrich von Hayek’s Road to Serfdomand Milton Friedman’s Capitalism and Freedom. Boettke and Candela explain how “the accumulation of liberties, the institutionalization of liberty, and the generalized increasing returns to economic activity unleash the creative powers of a free civilization to deliver societies from poverty and subjugation”. In other words, they show how economic freedom and various political freedoms over the years have brought about the level of broadly understood freedom above the threshold that has caused the “Great Enrichment”.
Caracas in Warsaw?
At this point, it is worth recalling the important role of free trade – the phenomenon that is described by the “language of economic liberalism”, critically assessed by some authors. “When goods don’t cross borders, soldiers will” are the words frequently attributed to the French economist and philosopher Frédéric Bastiat (which are important irrespective of who said them). This very true thought shows how global trade and market mechanisms in the world are essential for the maintenance of peace and existence of “political liberalism.” The populist campaigns against openness, globalization and the international trade are also dangerous for civil and political liberties.
Dudkiewicz concludes: “[Political] Liberal values would be … for me only and as much as a safety fuse that protects from falling into the soft or hard authoritarianism of any colour.” Nevertheless, political freedom alone is not enough to protect us against authoritarianism. The scheme known from the history is as follows – anti-market bashing combined with a revolution or populist election campaign as a way to authoritarianism. The last country that went along this route is Venezuela.
Jaroslaw Kaczynski, the leader of the ruling Law and Justice party, has been dreaming about the Hungarian scenario in Poland for years and in 2011 after another lost elections he said: “I am deeply convinced that the day of success will come and we will have Budapest in Warsaw”. It is worth supporting both political liberties and economic freedom if we do not want to arrive at a day when we have something much worse – Caracas in Warsaw. That is why I defend and fight for both economic and political freedom, which means full liberalism, not a selective one.
EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).