The free market is the only mechanism that has ever been discovered for achieving participatory democracy. So spake Milton Friedman. But political freedoms may not flow naturally from economic freedoms...
Friedman met Pinochet in 1975 during a lecture tour to Chile, and critics of Friedman, unfairly charged him, a champion of freedom, with endorsing the military regime. What did soften him somewhat toward that regime was its eagerness to listen to the economic advice of the "Chicago boys" on the value of free markets. Beyond the ephemeral oddities of personal behavior, there is a substantive issue worth pondering, particularly on the occasion of "Milton Friedman Day," celebrated on January 29, 2007.
Friedman openly gave primacy to economic freedom over political freedom. In his 1994 introduction to the 50th anniversary edition of Hayek’sRoad to Serfdom, he categorically stated: "The free market is the only mechanism that has ever been discovered for achieving participatory democracy."
In this, he seems to have gone beyond his line of thought expressed in the classic 1962 book,Capitalism and Freedom, where he stated: "History suggests only that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition."
His 1994 statement implies that economic freedom is a necessary and sufficient condition for political freedom. This important systemic issue in the transition paths of many developing countries today has not been adequately discussed.
In the Heritage Foundation ranking of countries in terms of their Economic Freedom Index for 2006, India’s rank, even after a decade and half of market reform, is much below that of Hong Kong, Singapore, Saudi Arabia, Kuwait, Cambodia, Kenya, Uganda and most of Latin America. Yet over several decades India has proved itself a vibrant, though unwieldy, democracy. Friedman sometimes made a distinction between political freedom and "human freedom." In terms of both, whether you take the well-known scores for political rights and civil liberties assigned by Freedom House, or the overall democracy scores given out by the Economist Intelligence Unit, India performs much better than those countries ranked far superior in economic freedom. Economic freedom does not seem to be a necessary condition for political freedom.
A look at the history of Western Europe does not clearly show that economic freedom, or "Manchester liberalism," brought about the victories of democracy. Theorists of democracy have often pointed to many other political or structural factors. For example, some ascribe the extensions of franchise and other democratic rights for the working class in the 19th century in Britain to the rivalry and conflicts between traditional aristocracy and the rising industrial bourgeoisie. Others suggest that democracy in Europe came as part of the political elite’s strategy to prevent widespread social unrest. In mid-19th century France, Louis Napoleon shrewdly used the restoration of universal male suffrage to play the landed classes against the urban; he even reportedly advised the Prussian government in 1861 to extend universal suffrage, because "in this system the conservative rural population can vote down the liberals in cities."
In India it is arguable that the survival of political and human freedom, against all odds and at a time when government control over the economy was pervasive, had something to do with the fact that the elite was heterogeneous and fractured. No individual group could overpower others, and competitive politics provided a procedural device to keep the contending partners at the bargaining table within some moderate bounds. Democracy served as a resilient mechanism for conflict management in a highly divisive society.
Pranab Bardhan is professor of economics at the University of California, Berkeley, and co-chair of the Network on the Effects of Inequality on Economic Performance, funded by the MacArthur Foundation. He was the editor of theJournal of Development Economics for many years. Rights: © 2007 Yale Center for the Study of Globalization.YaleGlobal Online