The Relation Between Economic Freedom and Political FreedomFreedom

The relation between political and economic freedom is complex and not unilateral.

In the early 19th century, Bentham and the Philosophical Radicals:

• saw political freedom as a means to economic freedom.
• believed that the masses were being hampered by restrictions
• believed that if political reform gave the people the vote, they would do what was good for them, which was to vote for laissez faire

They were not wrong.

A large political reform was accompanied by economic reform towards laissez faire.

An enormous increase in the well-being of the masses followed this change in economic arrangements.

The triumph of Benthamite liberalism in 19th-century England was followed by a reaction toward increasing intervention by government in the economy.

This tendency to collectivism was greatly accelerated, both in England and elsewhere, by the two World Wars.

Welfare rather than freedom became the dominant note in democratic countries.

Recognizing the implicit threat to individualism, the intellectual descendants of the Philosophical Radicals—Dicey, Mises, Hayek, and Simons feared that a continued movement toward centralized control of economic activity would prove The Road to Serfdom, as Hayek entitled his penetrating analysis of the process.

Their emphasis was on economic freedom as a means toward political freedom.

Events since the end of World War 2 display still a different relation between economic and political freedom.

Collectivist economic planning has indeed interfered with individual freedom.

At least in some countries, however, the result has not been the suppression of freedom, but the reversal of economic policy. England again provides the most striking example.

The turning point was perhaps the “control of engagements” order which, despite great misgivings, the Labour party found it necessary to impose in order to carry out its economic policy.

Fully enforced and carried through, the law would have involved centralized allocation of individuals to occupations. This conflicted so sharply with personal liberty that it was enforced in a negligible number of cases, and then repealed after the law had been in effect for only a short period. Its repeal ushered in a decided shift in economic policy, marked by reduced reliance on centralized “plans” and “programs,” by the dismantling of many controls, and by increased emphasis on the private market. A similar shift in policy occurred in most other democratic countries.

The proximate explanation of these shifts in policy is the limited success of central planning or its outright failure to achieve stated objectives.

However, this failure is itself to be attributed, at least in some measure, to the political implications of central planning and to an unwillingness to follow out its logic when doing so requires trampling rough-shod on treasured private rights. It may well be that the shift is only a temporary interruption in the collectivist trend of this century.

Even so, it illustrates the close relation between political freedom and economic arrangements. Historical evidence by itself can never be convincing. Perhaps it was sheer coincidence that the expansion of freedom occurred at the same time as the development of capitalist and market institutions. Why should there be a connection?

What are the logical links between economic and political freedom? In discussing these questions we shall consider first the market as a direct component of freedom, and then the indirect relation between market arrangements and political freedom. A by-product will be an outline of the ideal economic arrangements for a free society.

As liberals, we take freedom of the individual, or perhaps the family, as our ultimate goal in judging social arrangements. Freedom as a value in this sense has to do with the interrelations among people; it has no meaning whatsoever to a Robinson Crusoe on an isolated island (without his Man Friday).

Robinson Crusoe on his island is subject to “constraint,” he has limited “power,” and he has only a limited number of alternatives, but there is no problem of freedom in the sense that is relevant to our discussion. Similarly, in a society freedom has nothing to say about what an individual does with his freedom; it is not an all-embracing ethic. Indeed, a major aim of the liberal is to leave the ethical problem for the individual to wrestle with. The “really” important ethical problems are those that face an individual in a free society—what he should do with his freedom.

There are thus 2 sets of values that a liberal will emphasize:

1. The values relevant to relations among people.

This is the context in which he assigns first priority to freedom.

2. The values relevant to the individual in the exercise of his freedom

This is the realm of individual ethics and philosophy.

The liberal:

• conceives of men as imperfect beings.
• regards the problem of social organization to be as much a negative problem of preventing “bad” people from doing harm as of enabling “good” people to do good;

“Bad” and “good” people may be the same people, depending on who is judging them.

The existence of a free market does not of course eliminate the need for government.

On the contrary, government is essential both as a forum for determining the “rules of the game” and as an umpire to interpret and enforce the rules decided on. What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby to minimize the extent to which government need participate directly in the game. The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity.

It is, in political terms, a system of proportional representation. Each man can vote, as it were, for the colour of tie he wants and get it; he does not have to see what colour the majority wants and then, if he is in the minority, submit. It is this feature of the market that we refer to when we say that the market provides economic freedom. But this characteristic also has implications that go far beyond the narrowly economic.

Political freedom means the absence of coercion of a man by his fellow men. The fundamental threat to freedom is power to coerce, be it in the hands of a monarch, a dictator, an oligarchy, or a momentary majority. The preservation of freedom requires the elimination of such concentration of power to the fullest possible extent and the dispersal and distribution of whatever power cannot be eliminated—a system of checks and balances.

By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power. It enables economic strength to be a check to political power rather than a reinforcement. Economic power can be widely dispersed. There is no law of conservation which forces the growth of new centers of economic strength to be at the expense of existing centers. Political power, on the other hand, is more difficult to decentralize. There can be numerous small independent governments.

But it is far more difficult to maintain numerous equipotent small centers of political power in a single large government than it is to have numerous centers of economic strength in a single large economy. There can be many millionaires in one large economy. But can there be more than one really outstanding leader, one person on whom the energies and enthusiasms of his countrymen are centered? If the central government gains power, it is likely to be at the expense of local governments. There seems to be something like a fixed total of political power to be distributed.

Consequently, if economic power is joined to political power, concentration seems almost inevitable. On the other hand, if economic power is kept in separate hands from political power, it can serve as a check and a counter to political power.