In Questioning Milton Friedman’s Free Market and Freedom, Pranab Bardhan explores Friedman’s 1994 statement that “the free market is the only mechanism that has ever been discovered for achieving participatory democracy.” Looking at experiences of countries in Europe, Latin America, Asia, and elsewhere Pranab Bardhan suggests that Friedman was not necessarily correct in declaring the link between free markets and democratic society:
One mechanism for this evolution is supposed to work through the rise of the middle class. While economic liberalization may strengthen the middle classes, these classes have not always been pro-democratic: Latin American or South European history has been replete with many instances of middle classes hailing a supreme caudillo. It is often the case that market reform tends to sharpen inequality. The resultant structures of political power, buttressed by corporate plutocrats and all-powerful lobbies, may hijack or corrupt the democratic political process, sometimes undermining the expansion of mass democratic rights, including the freedom of association of organized workers, and raise barriers to entry into the political arena for common people. Thus economic freedom may be important by itself, but neither necessary nor sufficient for political freedom.
Professor Bardhan is correct in pointing out failures that have accompanied many of the free market and democracy experiments. One can also reference cases of Singapore, China, Chile, and others – where economic growth has been achieved within political systems that hardly resemble modern democracies. The problem with this analysis, however, is that it uses different terms interchangeably.
For example, there is a big difference between economic growth on the one hand and free markets and economic freedom on the other. Economic growth can be achieved without economic freedom. Sustainable economic growth can’t.
Part of the concept of economic freedom, as I view it, is the ability of people to enjoy the freedom of speech and participate openly in shaping of legislation that affects their activities on a day-to-day basis. If government provides economy-friendly legislation at its whim, what would stop it from taking it away just as easily? There is, in fact, a direct link between economic freedom and political freedom – and the real problem in development is that the two are often looked at as separate pieces of the same puzzle while in reality they are one and the same.
Is freedom of association a political or economic freedom? What about institutions of rule of law, free and fair competition, accountability, transparency and others? Where do you put them – on the economic or the political side? If you really do have genuine free and fair competition in the economy, can you sustain it in a tightly controlled political space?
And I wonder, how many other Singapore experiments have failed? Maybe, Friedman did have something in his statement and it should be looked at more closely. It is not all about economic growth – it alone can’t bring about political liberalization. But economic and political freedoms are in fact, two sides of the same coin, and you can’t have one without the other.
Published Date: March 02, 2007