Discussion

Most of the human race has lived under mild autocracies.

The economic policy followed by most of these despots doesn’t differ too much from what has been followed by most historic democracies.

Athens and Rome had price control over basic necessities.

The bread of Rome was largely provided directly by the Roman state.

Anyone living today realizes that democracies muddle around a good deal in their economies, just like despots.

Most despots have not done a great deal in their economy, not because they have any theoretical objections to it, but because they are busy with other things, such as their harem.

I recently acquired a book on a guide for local officials under the old Chinese Empire.

The official slogan of the Chinese Empire from the time of Mencius was:

“The government should own all important industries and carefully control the rest.”

In this very thick book the author devotes almost no attention to economic control. The only conspicuous example of intervention in the economy was his decision that the wine shops located directly across from the entrance of his Yamen were overcharging their customers. He imposed price control on them.

Mainly, however, he was occupied in holding court, collecting taxes, and performing the many other duties of governing about 100,000 people. Once again, despots, like democracies, when they do engage in government intervention in the economy, tend to be responding to rent-seeking activities of well-organized political groups rather than carrying out anything we would refer to as planning. As far as I know, none of the early despotisms engaged in anywhere near as much detailed economic intervention into their economics as is normal in present day democracies.

The type of dictatorship we tend to think of as totalitarian—Stalin, Hitler, Mao Tse Tung, et cetera—is a very unusual phenomenon historically. So is democracy. It is not surprising then that there are no coincidences. I should say, however, that I doubt that this kind of government could operate with a true democracy, not because it would necessarily be able to strangle the democracy but because the voters would surely throw the rascals out.

Having said that I disagree with this aspect of what we may call the Hayek-Friedman argument, there is another sense in which there is no doubt that capitalism and freedom are closely connected. This is a sense which the Friedmans emphasize much more than Hayek. My freedom to spend my income as I wish is surely of great importance to me. It is equally surely a freedom, although many people on the left would deny that. Further, my freedom to move from one government system to another without too much inconvenience is another freedom, and it puts governments into competition with each other. With respect to the last, I should say that it does not really require democracy. I have recently seen an investigation of the situation in Germany before the unification of that state, and discovered the individual princes, counts, et cetera behaved very much as businessmen do today. They realized they had no monopolistic power because the peasant could move down the road a few miles, and they attempted to maximize profits on their “enterprise” using low production costs and a high level of service in order to attract customers. One of the arguments for a free economy is false. It doesn’t follow that the free economy is not important or that it does not lead to individual freedom. The freedom that it gives, however, is economic freedom. There is no reason why we should be ashamed of that, or regard that as in any sense a criticism of the system. Arguments for political freedom are strong, as are the arguments for economic freedom. We needn’t make one set of arguments depend on the other. But the principal problem I wish to talk about is not about economic but political freedom. At the time I read Hayek’s book and heard Friedman’s lecture, it seemed to me very reasonable that a government which completely dominated the economic system would suppress political freedom.

Alas, for those of us who follow another aspect of Friedman’s work and believe in empirical testing, in present-day Sweden the government takes control of 63 percent of the GNP.

Most of the other North European countries have somewhat similar shares. It is hard to argue that there is any lack of political freedom in any of these countries, nor does there seem to be any evidence that political freedom is declining. This should not be taken as praise of these governments; indeed I think they are very objectionable. But the apparent logical connection between government control of a large part of the economy and the loss of political freedom is only apparent. Milton Friedman I only want to point out one thing, and that is one of the major reasons why this conference was called and took the approach it did was precisely because of the kind of empirical evidence you end up with—which leads us to the conclusion that our initial belief, that these went together as closely as they did, was wrong. I would cite as my main example Hong Kong rather than Sweden, in the sense that there is almost no doubt that if you had political freedom in Hong Kong you would have much less economic and civil freedom than you do as a result of an authoritarian government. Raymond Gastil The biggest difference between our approach and Milton’s has to do with the difference between emphasis on the individual and emphasis on the group. I will turn to that more in the discussion of our own paper later on. Specifically, in regard to Milton’s discussion today, the first point to be made is that it is quite possible that none of these three should be regarded as the end—neither economic, political nor civil freedoms or rights. I would think the end lies outside those three. I am not going to define what it is, but there are a lot of words around like joy and love and human betterment with which one can go in various directions. But the fact that I do a survey of political and civil rights doesn’t mean I think those are ends. 64 Discussion copyright The Fraser Institute The second point is that I think one should distinguish between absolutes and ends. One could say, for example, that freedom of speech is an absolute. But I don’t think freedom of speech should be regarded as an end. The third point is that it is true that as far as the Survey is concerned, we talk about those civil rights that are supportive of political rights. So, we emphasize one group of civil rights or civil liberties and de-emphasize other kinds of civil liberties because they don’t really contribute as directly to the legitimacy of political rights. That doesn’t mean we regard them as less important. It just means that for the purpose of the Survey that is what we do, because that seems to make a neat package which goes together nicely. But the other civil liberties might, in fact, be just as important in the general scheme of things.

Assar Lindbeck I would like to follow up on a very strong statement made by Gordon Tullock: “There is an intimate connection between economics and politics, in that only certain combinations of political and economic arrangements are possible, and that, in particular, a society which is socialist cannot also be democratic in the sense of guaranteeing individual freedom.” I don’t see any reasons why that should be true, either from an a priori point of view or from empirical experience. I have no difficulty imagining a society where the means of production are owned by the government but you still have elections every year, where state-owned newspapers publish articles on people from different parties, et cetera, provided there were pluralistic political structures in the country from the very beginning. I agree that there may be a low probability of a pluralistic political culture under those circumstances, but I really see no impossibility.

Sweden has 65% of the GNP goes to the government budget, half with transfer payments and the other half in public spending on goods and services, and we are going to discuss that another day.

Austria is another example where some 40 percent of the manufacturing sector is owned by the public sector. I could imagine that even if 95 percent or one hundred percent were owned by government, you could still have civil liberties, elections and freedom of speech.

A crucial point is control over or the ownership of mass media and newspapers. It is very tempting for a ruling party to control mass media, as it tried to do with television in France, for instance. If the government owns all mass media, then civil liberties and freedom of speech might go down considerably. But if you make an exception and let private individuals, organizations and political parties own mass media, I think you could very well have a democratic society.

Voice: Where would they get their paper from?

Assar Lindbeck: That is an open question. I agree with you that there are larger risks for authoritarian regimes if government owns the mass media. But I don’t see it as logically impossible. That’s my only point. What I see as threatened by government ownership is, first of all, pluralism. You could have freedom of speech, but a pluralistic political culture might be difficult because people would be afraid to use freedom of speech if there were only one career in society, that is, through the government. You could have non-pluralistic democracies with elections every four years and freedom of speech, but they would not be very vital political cultures. Mexico might be such an example, where everybody has to make a career through the same political party. If one party completely dominates, political democracy might not be very vital, but I think it could still exist.

In my opinion, where a very big government really intrudes on individual freedom—that is really what Gordon Tullock said—is through its impact on disposable income. If you pay tax at 90 percent of your income, you cannot influence your own economic situation by your own effort. Or, if government rations goods and services, you don’t have much freedom of choice. If there are government monopolies, you cannot choose different types of services; you have to rely on government services. So it is really pluralism and freedom of choice rather than civil liberties that are threatened.