The Compatibility of Freedom and Equality (13): More Income Equality Makes Us More Free

Another reason not to worry too much about the supposed incompatibility of equality and freedom is the fact that an equal level of monetary resources promotes freedom. Money in the form of a relatively decent income allows us to choose from and engage in a wide variety of activities. It makes it possible for us to buy the commodities and services we want to buy, and consequently do with them what we want to do. (Of course, within the legal limits that determine what can be commercially traded and how traded goods can be used; e.g. we can’t buy people, and we can’t use the guns we buy to kill people). As a result, we have a wider choice of life plans and more means to pursue our chosen plan.

This is freedom in one sense of the word: more choice. Freedom in another sense, namely the ability to do what we want without interference, looks absolutely anemic compared to this. After all, what good is the absence of interferes when the world we live in offers us only very few options or none of the monetary resources to choose and pursue options. This freedom from interference is hardly valuable, if it is freedom at all.

So, if we agree that monetary means promote freedom in a certain sense of the word because these means broaden our sets of choices, then I guess we’ll also agree that a more equal distribution of money, wealth and income promotes freedom: it gives people who receive more money in the new, more egalitarian distribution more freedom, without necessarily diminishing the freedom of those whose resources are diminished in the new distribution. The monetary freedom of the rich isn’t necessarily reduced after income redistribution and after reductions of income inequality, because of diminishing marginal utility. The ability to buy a fifth yacht doesn’t increase anyone’s freedom in any sense of the word. And taking away this ability doesn’t reduce anyone’s freedom. On the contrary, if the monetary means that could have been used for this fifth yacht are instead given to a number of other people who don’t have a lot of money, then these means will benefit the freedom of those other people, and aggregate freedom will have increased.

So that’s a good reason to reduce income inequality. However, it’s probably not a good reason to eliminate income inequality completely, for four reasons. First, even if, ideally, people have a right to the same extent of monetary freedom as it is defined here, that doesn’t mean they should have the same amount of money. In order to be able to do the same things and have the same choices, different people need different amounts of money. The handicapped, for instance, may need more than average.

The second problem with equal money is that it would mean deep and frequent violations of property rights, and property rights are important, perhaps just as important as freedom (and no, property rights and freedom are not the same thing: the former are a means to interfere with the freedom of others, namely the freedom of others to use goods that belong to you).

A third problem created by equal income is related to incentives. And finally, equal income doesn’t combine well with considerations of desert (one definition of desert is that people deserve different levels of monetary wealth for their contributions to society, culture etc.).

We could react to these different considerations by framing the issue as one of value pluralism: income equality and freedom are important values, and so are desert and property. The difficulty would then be to balance these different values which, it turns out, are sometimes contradictory. That would mean limiting the equalization of income at some point before total income equality, at a level that is compatible with respect for property rights (also limited), with due consideration of incentive problems (also limited), and with recognition of the moral value of desert (also limited).

There’s possibly some Gini value that would hit this balance. This Gini value of x gives a level of income inequality at which monetary freedom is maximized for a maximum number of people. A value lower than x (the lower the Gini value, the more equal the income distribution) resulting from higher levels of income redistribution would not increase the monetary freedom of the poor because the amount of money taken from the rich has become so high that it doesn’t just eat away at marginal utility but also produces disincentives high enough to reduce the size of total social wealth.

We could try this kind of delicate balancing between redistribution on the one hand and incentives produced by rewards for deserving actions on the other hand. (Alternatively, we could also drop income equality as a value and instead focus on a so-called sufficientarian approach in which we would try to give people enough monetary means to achieve a certain level of freedom – freedom as it is understood here – regardless of the means and freedom of the people at the top of the income or wealth distribution. However, I’ll leave that option aside for the moment).

However, there are some problems: we’re dealing here with a somewhat strange notion of freedom. Freedom is obviously much more than the use of monetary means to choose and pursue goals. Also, we don’t want to promote consumerism. The problem with consumerism is that the truly important parts of life can’t be bought, and that focusing on consumption tends to sideline those important parts. It also has ecological disadvantages.

And another problem I already mentioned: some people will be worse off if money is equalized because they need comparatively more money just to have the same capabilities. Hence, rather than equalizing money we should perhaps equalize capabilities.

More posts in this series are here. More on income inequality here. And here‘s a related post about the link between poverty and freedom.

Income Inequality (25): And Economic (In)Efficiency

As I stated before, economic theory suggests that income inequality is a necessary price to pay for economic efficiency: unequal rewards incite those with talents, skill and perseverance to innovate and to be productive, so they can reap higher benefits. Ultimately, this serves the welfare of the whole of society (a process which is then caricatured in trickle down economics). The mirror image of this is reductions of inequality that take away incentives for doing well, and that therefore result in economic inefficiency and less prosperity for all.

Tyler Cowen has framed it like this:

Redistribution of wealth has some role in maintaining a stable democracy and preventing starvation. But the power of wealth redistribution to produce net value is quite limited. The power of wealth creation to produce net value is extraordinary … We should be putting our resources, including our advocacy and our intellectual resources, into wealth creation as much as we can. (source)

But is that really true? There is some evidence that reducing inequality through redistribution actually promotes wealth creation. What’s the mechanism? Sam Bowles claims to have identified one element of it:

Inequality breeds conflict, and conflict breeds wasted resources … [I]n a very unequal society, the people at the top have to spend a lot of time and energy keeping the lower classes obedient and productive. Inequality leads to an excess of what Bowles calls “guard labor”. (source)

More about that effect here and here. Other parts of the mechanism through which inequality impedes and equality promotes growth may be the following:

Poverty causes credit constraints. This stops the poor investing in businesses or education; the low aspirations caused by poverty can have the same effect. … Inequality can create the threat of redistribution which can blunt incentives to invest. Or it can lead to state interventions – such as the minimum wage – that harm wealth creation. … The backlash against wealth-creating processes such as globalization, offshoring and private equity in the UK and US are founded in the view that they create inequality. If we had better redistribution mechanisms (say, a basic income) such backlashes would be reduced, and the wealth creation process enhanced. (source)

That sounds persuasive and I want to see some evidence. In the meantime, it’s perhaps a bit glib to announce that “the power of wealth redistribution to produce net value is quite limited”.

The Compatibility of Freedom and Equality (12): How Coercion Promotes Freedom

Freedom understood as independence and the absence of interference or intentional coercion (especially government coercion) is an important concept. The problem is that it seems to invalidate redistribution through taxation. If the government taxes a wealthy person to transfer some of her wealth to another person living under a fixed threshold of basic resources, then the government intentionally coerces the wealthy person and takes away (part of) her freedom. That’s one of the origins of the traditional view that freedom and equality are incompatible. For people who believe strongly in freedom as the absence of intentional coercion, it’s very difficult if not impossible to accept taxation and redistribution.

On the other hand, there are those who want to maintain the use of government and taxation as a means to guarantee people an equal share of those basic resource necessary for a decent human life. And I’m one of them. How can we reply to those – let’s call them libertarians – who voice concerns about the loss of freedom that’s inherent in redistribution?

1. First, we could argue that freedom, as it is understood here, isn’t the only important value, and that we should put it “in the mix” of the whole of human values, including welfare and equality, and try to balance those values in a fair way. That’s the value pluralism approach, but it’s an approach that won’t be successful to those who don’t believe in value pluralism or who believe that if there are many values, freedom is still the most important one (e.g. many libertarians).

2. Another reply could be that redistribution reduces one type of freedom – freedom from intentional coercion – in order to promote another type of freedom, namely a more positive type of freedom in which not only the absence of coercion is important but also the availability of choices, capabilities and power. Of course, a wealthy person’s choices, capabilities and power aren’t enhanced by the fact that she pays taxes – on the contrary – but when these taxes are used to guarantee a poor person’s basic income for example (or education, or health etc.) then that poor person will have a wider array of choices, capabilities, opportunities, power etc. So positive freedom is redistributed by means of a limitation on negative freedom, and is redistributed in such a way that on average people have more equal access to it. (If a rich person pays $10,000 in taxes for the welfare benefits, healthcare, education etc. of a poor person, then the rich person loses less choices, opportunities and capabilities then those gained by the poor person. Of course, the exact tax rate is important: punitive tax rates may harm the rich more than they benefit the poor).

In a way, this second reply also involves an appeal to value pluralism: negative freedom (one value) is balanced against more equal access to positive freedom (another value), and is – sometimes and in part – outweighed by it.

3. A third reply isn’t based on value pluralism. We could argue that redistribution of income or wealth through government taxation merely limits one person’s negative freedom for the sake of another person’s negative freedom. It’s fairly easy, in fact, to argue that poverty, or the absence of those basic resources necessary for a decent human life, reduces the negative freedom of the poor. The poor are intentionally coerced all the time, for no other reason than their poverty: the homeless are forcibly removed from train stations, gypsies from land where they aren’t allowed to camp, poor migrant workers have their passports taken away by their employers and are forced to repay “travel costs” by working for free, etc.

If the government gave these people a basic income for example, or rent subsidies, they wouldn’t be coerced in these ways. The taxes that the government would collect for this purpose would not simply reduce negative freedom for the sake of another value (positive freedom, welfare, equality etc.). It would reduce the negative freedom of some for the sake of the negative freedom of others (possibly many others depending on the type of taxation system). In other words, it would modify and equalize the distribution of negative freedom. It would increase intentional coercion on some people in order to reduce intentional coercion on (many) others.

Taxation and redistribution do indeed reduce freedom (in one sense of the word) but at the same time they increase freedom (freedom in the same sense as well as in a more positive sense). Conversely, a failure to tax and redistribute could reduce freedom.

More posts in this series are here.

Why Do Countries Become/Remain Democracies? Or Don’t? (9): The Resource Curse

If we value democracy, then it’s interesting to know

  • how societies have achieved the transition from authoritarian forms of government to more democratic ones
  • why other societies have failed
  • and how democracies have avoided the opposite transition.

This knowledge will help us to promote and sustain democracy in the future. Something we already know is that this isn’t simple. There are a huge number of factors at play and there’s no silver bullet. Some of the most widely discussed factors are economic development, levels of education, and religion and culture.

I’ll bracket two important issues here: what kind of democracy are we talking about, and how do we measure transition or development towards democracy? If you want to know what promotes or inhibits democracy and act on this knowledge in order to further the cause of democracy, you can’t avoid these questions, but discussing them here would take us too far.

What I want to focus on here is the so-called resource curse. This curse is believed to be a phenomenon that blocks countries’ development towards democracy. Promoting democracy means lifting the curse. Now, what is this curse, and is it real or just another simplistic explanation of the course of history?

Countries which own lots of natural resources such as diamonds, oil or other valuables that are found in the ground, are often relatively poor, badly governed, violent and suffering from gross violations of human rights. Resource wealth can trigger corruption and grabbing, can give autocrats the means to retain power by buying off opposition or building a repressive state apparatus, or can tempt democratically elected leaders to cling to highly beneficial positions of power.

This sounds good but even a cursory glance at reality reveals some counter-indications. There are many resource rich countries that are governed very well and are pinnacles of democracy (take Norway). Still, that may only disprove part of the resource curse. It may be the case that democracies benefit from resources and are able to solidify themselves, while non-democracies are doomed to remain as they are because of resource abundance. Resources then only create a curse when democratic institutions are absent. So we shouldn’t worry about democracies failing because of resources, but about autocracies failing to transform because of them.

However, there’s an article here claiming that

resource wealth is positively associated with both economic growth and institutional quality.

Much depends, it seems, on how to measure resource abundance. There also is a reversal of the direction of causation, a common mistake in statistics:

There is no evidence that resource-dependent countries end up with slow growth and bad institutions. Rather, countries with bad institutions attract little investment, and as a result they grow more slowly and remain dependent on exports of commodities.

The Causes of Poverty (25): The Matthew Effect

The Matthew Effect – a concept invented by sociologist Robert K. Merton – is based on the following extract of the Gospel of Matthew:

For to all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.

This statement is intuitively convincing. Those who already have economic resources can use these to acquire even more of them, often if not by definition at the expense of those who don’t have them. It’s easy to see how wealthy people have better information to use their wealth in such a way that they can increase it. How they know the right people, how they can use the education system to their advantage (and to the advantage of their offspring), how they can use the political system to their advantage etc. Conversely, poor people are often stuck in a poverty trap: their poverty makes them sick, and their sickness even more poor; their poverty makes it hard to access education, and their lack of education makes them more poor etc.

You can see at once how this is relevant to the issue of human rights. While income or wealth inequality as such isn’t a human rights violation, it does have implications for human rights. And poverty is a human rights violation. But the Matthew Effect can be observed in other human rights as well. Take for instance the wiretapping that is used in the war on terror. Initially, wiretapping is targeted towards individuals who are suspected of plotting an attack. However, it seems inevitable that those who are authorized to use wiretapping expand the field of their authority. Instead of targeted wiretapping, they go on fishing expeditions: throwing out the nets as wide as possible and see which fishes end up in it. They start to use data-mining, for instance, checking private information of entire populations in order to filter out suspect individuals.

Another example of the Matthew Effect in human rights can be found in hate speech laws. The laws may initially impose limits on the freedom of speech that crack down on cases of hate speech that may cause violence and riots. However, once certain exceptions on the freedom of speech are legal and legitimate, the boundaries may move towards more restrictions. Maybe speech that doesn’t pose an imminent threat of violence but perhaps a longterm threat to the stability of a multicultural society – such as derogatory speech, or blasphemous speech – should also be prohibited. And then you may find yourself on a slippery slope.

I can also mention what I called “searchlight human rights violations” (see this previous post): for example, a certain level of sexual violence against women in a particular society, can teach young men a certain culture, mentality and value system that automatically leads to a wider use of violence.

However, I don’t believe things are as simple as this. While the Matthew Effect is certainly a force that is driving human rights violations, I don’t think there is anything inevitable or mechanical about it. There are other forces at play as well, and some of them go in the other direction. If that wouldn’t be the case, then the Matthew Effect would have landed us in a place where respect for human rights is non-existent, and would have done so a long time ago.

Regarding the particular case of wealth inequality, a simple application of the Matthew Effect would require a vision of the world with limited resources. And although some – important – resources are indeed limited, others – equally important ones – are not. It’s not because one person receives a good education, that another one must receive less education. And when one person accumulates riches, this can benefit others (his or her employees for example).

Income Inequality (16b): Its Moral Significance

Will Wilkinson’s recent paper on income inequality argues that it’s an overrated problem (see also here). Before I deal with his arguments in detail, a quick reminder of my personal views on income inequality. From the point of view of human rights (which is my default starting point), the most urgent problem is not necessarily the unequal distribution of wealth or income, but the insufficient wealth and income of the poor in a given population. The urgent problem is absolute poverty, rather than relative poverty. Or, in other words, what we have to tackle first is some people’s inability to gather sufficient resources necessary to survive in a decent way, not the fact that some people have more resources than others. The human rights of people in a very poor but highly egalitarian society can be violated more extensively than the human rights of the relatively poor in a society that is very rich on average but highly inegalitarian. Eliminating or reducing income inequality – or “killing the rich” (metaphorically) as in the image above – doesn’t necessarily help the poor.

However, inequality can be a problem. The absence of poverty or the availability of sufficient resources for a decent human life is a human right, but it isn’t the only human right (some would even say that it isn’t a right at all, but I disagree, together with the drafters of the Universal Declaration). Human rights also include political human rights, and these political human rights usually mean the right to democratic participation in government and legislation. Income inequality makes these political rights highly problematic. Democracy is based on the equal influence of every citizen, but income inequality, by definition, gives the wealthier citizens more influence in politics.

In addition, income inequality may also lead to social fragmentation, with negative consequences for the cohesiveness of a society. We see that highly inegalitarian societies, such as the U.S., are also societies with relatively low levels of social mobility. One could argue that income inequality isn’t much of a problem when everyone has the same chance to be on the good side of the inequality. But when it is combined with social rigidity and stratification, it undermines meritocracy and equality of opportunity, which in turn enhances social fragmentation.

Finally, people in more egalitarian societies tend to be healthier, to live longer and to be happier (as Wilkinson should know).

These are serious issues from the point of view of human rights. If reducing income inequality (for example through progressive taxation, public spending – on welfare, education, healthcare etc. –  and regulation of political funding and lobbying) can go some way towards a solution, we should consider it.

One last point: all these issues are based on the assumption that income inequality is the outcome of just processes. In other words, we assume that people’s incomes are the result of their own desert and effort. If, on the other hand, we assume – more correctly in my view – that income and wealth distributions are affected by unjust processes (such as colonialism, slavery, discrimination, inheritance and a lack of social mobility etc.) than we have additional reasons to do something about income inequality. And these reasons have nothing to do with the negative consequences of inequality. They are, instead, related to its origins.

(If you want to know more about my views on income inequality, before I tackle Wilkinson’s views, you can read this old post).

Wilkinson claims that

income inequality is a dangerous distraction from the real problems: poverty, lack of economic opportunity, and systemic injustice.

Those are real problems indeed, and even more urgent problems, as I’ve stated above. But income inequality is also a real problem, and I fail to see how one problem is necessarily a distraction from another problem. Human beings are perfectly capable of tackling several problems at the same time.

He also states that

there is little evidence that high levels of income inequality lead down a slippery slope to the destruction of democracy and rule by the rich.

That’s not true, as you can read here and here. Income inequality obviously doesn’t necessarily “destroy” democracy or replace it with “plutocracy”, but it significantly reduces its meaning, on both sides of the income gap: wealthy people use their wealth, their higher education, their networks etc. to gain influence, and poor people tend to participate less and thereby lose influence. While it’s true that wealthy people can use their political influence for the benefit of their poor fellow-citizens, it’s still a fact that many don’t. If we cherish democracy, we should implement policies that limit the risk of selfish interventions by disproportionately influential individuals or groups, as well as policies that encourage participation of relatively less influential individuals and groups. It’s not sufficient, as Wilkinson does, to point to the fact that many wealthy people voted for Obama, knowing that he would raise their taxes.

Wilkinson also believes that the level of American income inequality was not caused by exploitative, institutional mechanisms. Given the historical inheritance of slavery and discrimination, I think this opinion is false. This inheritance, combined with astonishingly high levels of correlation between parental income and the income of children, does suggest that there are institutional mechanisms which perpetuate income inequality. While it’s wrong to claim that the inheritance of racism and slavery is to blame for the poverty of African-Americans living today, it’s very likely that it has some effect.

Few people argue for a completely egalitarian society. I certainly don’t. Some inequalities are perfectly just, and probably necessary from the point of view of economic efficiency. But there are many who argue for the opposite: don’t do anything about inequality. While I don’t believe Wilkinson is one of them, his statement that “income inequality is a dangerous distraction” encourages those who believe that we shouldn’t care about inequality.

The Causes of Poverty (9): Poverty Traps

A poverty trap occurs when poverty has effects which act as causes of poverty, creating a vicious circle in which poverty engenders more poverty, a circle of cumulative causation leading to a downward spiral of ever more extreme poverty.

Poverty traps or poverty circles can be of different kinds: individual, social, national, international…

1. Individual poverty traps

A poverty trap can be limited to the purely individual: for example, a person being discouraged by his or her situation or misfortune, and thereby sinking deeper into misfortune because of inactivity.

2. Regional poverty traps

The poverty trap may also have a regional aspect: some parts of the country or the population may be poor because they are isolated geographically from the rest of the population and the main centres of wealth and prosperity.

Profitable business opportunities may be few, and thus productive employment lacking, owing to poor transport and communication links with those centres. But the low level of economic activity in the isolated region means that transport services are inadequate and that improved transport infrastructure cannot be economically justified, thus perpetuating the isolation. (source)

3. Racial/ethnic poverty traps

The isolation may also be racial or ethnic. This may harm their self-esteem or their sense of responsibility for their own advancement. The responsibility for their fate is, not without reason, projected on others, but this can become a fetish creating passivity and hence more poverty.

4. Social poverty traps

Poor people, because they tend to be more often sick, hungry and weak, don’t manage to get well paid jobs or – if they are independent producers – tend to produce less. As a result, they have less money, less food, and limited access to health care. And because of this, they get even more hungry, weak or sick, and the circle starts again.

Another example: an individual is poor because his or her parents are poor; because of this, a good education becomes problematic – the children may have to work instead of attending school; without a good education the individual does not acquire the tools and capabilities to escape poverty, may succumb to the temptation of crime, and as a result sinks deeper into poverty.

5. National poverty traps

Low income leads to low savings; low savings lead to low investment; low investment leads to low productivity and low incomes. Poverty leads to environmental degradation, which in turn undermines the assets of the poor and exacerbates poverty. Poverty can lead to violence and conflict, and the associated destruction of physical, human, social and organizational capital in turn causes poverty to intensify. (source)

6. International poverty traps

A poor country may have to rely on its natural resources for its exports and hard currency. As a result, however, other and more stable sectors of the economy are neglected and the resource curse may set in, creating poverty and forcing the other sectors even more to the background.

Some countries may find that they are regionally isolated from the global economic centres, much like some social groups can be regionally isolated within a country (see above). Their import markets are too far away from the main exporters, or too difficult to reach because of the poverty of the country and the resulting lack of investments in infrastructure and transport facilities.

Needless to say that the different kinds of poverty traps can exacerbate each other, and thereby creating a “poverty trap of poverty traps”, a vicious circle in which different poverty traps reinforce each other. This sounds quite apocalyptic, but fortunately seems to be only a theoretical possibility because globally poverty is actually on the retreat, but only on average. Many countries, many social groups and many individuals are still terribly poor, and the poverty traps are one reason.

Marx and Democracy

According to Marxism, democracy suffers from a contradiction between political equality on the one hand (equal votes but also equal rights, equality before the law etc. – see here and here) and economic or material equality on the other hand. The absence of the latter prevents the full realization of political and even judicial equality (equality before the law). Wealthy persons have more means (such as money, time, education etc.) to inform themselves, to lobby, to influence, to get themselves elected, to defend themselves in court etc. A merely formal principle such as political equality loses much of its effectiveness when some can use their wealth to control political debates and decisions. Even more so, political equality, democracy and equal human rights (not only the right to private property) serve to cover up, justify and even maintain material inequality, exploitation and class rule in a capitalist society.

Real material equality and therefore also real political and judicial equality can only be brought about by an anti-capitalist revolution which brings down the capitalist system of property along with the legal and political tools that are used to protect this property. Material redistribution is not enough because it does not affect material inequality in a substantial way. It only provides a minimum of basic goods. The remaining material inequality still affects political equality. Democracy is self-defeating. It can never deliver what it promises because it does not go far enough. It can only give people formal instead of substantial equality. Elections, rotation in office, economic rights etc. are superficial phenomena without effect on the deeper economic processes of exploitation and class rule. Democracy must therefore be replaced by something better.

Marxism claims that there can only be real political equality and real equality of power when the most important goods – the means of production – are the equal property of all citizens. In all other cases, the rich will have more opportunities to benefit from political participation and judicial protection. Equal rights will lead to an unequal outcome, and this is intentional.

Much of this is, of course, correct. Wealthy groups can and do use elections and human rights to pursue their interests, often at the expense of less fortunate groups. They may even use democracy to maintain exploitation. They can speak better thanks to their education; they have a better knowledge of the ways in which to defend interests; they know their rights; they have friends in high places, etc. That is why compensating measures have to be taken, not only in order to respect economic rights, but political rights as well. By way of these measures, the state redistributes wealth from the rich to the poor, in order to grant the poor more political influence and not just in order to satisfy their basic needs. Other measures enhance the independence of political parties with regard to wealthy pressure groups (for example public instead of private funding for political parties).

It is clear that we are not dealing with a potentially fatal argument against democracy. Wealth causes political inequality everywhere, not just in a democracy. Democracy and human rights are in fact the only solution to the problem of the unequal political result of economic inequality. Democracy and human rights are not merely formal. Equal voting power, equality before the law and equal rights do not cover up and do not maintain the social division between rich and poor. Democracy does not hide divisions; it shows them and it shows them in a better way than any other form of government. And because it allows divisions to become public, it offers the best chance of eliminating or softening unjust divisions. Democracy does not only serve the interests of the wealthy classes. Poor, exploited or oppressed groups also benefit from freedom of expression, from the election of their own representatives and from the possibility to claim rights (economic rights, for instance, equalize political influence because they create leisure time which can be spent on politics). Even the bare fact of being able to show an injustice is an advantage in the struggle against this injustice. If you are not able to see an injustice – and this can happen in an unfree society – then you are not aware of its existence and you can do nothing about it. Democracy at least gives poverty a voice.

The struggle against injustice means questioning society and the powers-that-be (also the economic powers). It is easier to question social relationships in a society in which political power can be questioned. Publicly questioning political power in a democracy is a process in which the entire people, rich and poor, are involved. This process legitimizes the act of questioning per se and therefore also the act of questioning injustices in society. Elections and rights are not a force against change. They create infinite possibilities, including the possibility to change economic structures.

Of course, the political and legal elimination of the difference between rich and poor (they all have an equal vote, equal rights and equality before the law) does not automatically result in the elimination of the social difference between rich and poor. However, democracy and human rights can diminish the influence of property and wealth because:

  • They give legal and political means to the poor in order to defend their interests; no other form of government performs better in this field because no other form of government gives the same opportunities to the poor (the opportunity to show injustices, to elect representatives, to lobby governments, to claim rights etc.).
  • They diminish the difference between rich and poor by way of redistribution; they allow for compensating measures to be taken, measures which help to preserve the value of political participation for all (for example redistribution, but also measures such as subsidies for independent TV-channels or for political parties which then become more independent from private wealth and private interests).

If certain divisions are made politically and legally irrelevant (by way of equal rights, equality before the law, equal vote etc.), then this is not necessarily part of a conscious strategy to maintain these divisions in real life. If it were part of such a strategy, it would probably produce the opposite of what is intended. The chances that injustices disappear are much higher in a society in which injustices can be shown and questioned, and only a democracy can be this kind of society. A society which can question itself because it can question the relations of power, is more likely to change. This is shown by the recent history of most western democracies where many injustices have been abolished by way of democracy and human rights. The labor movement, the suffragette movement and feminism would have been impossible without democracy and rights. Workers, women, immigrants etc. have all made successful use of the possibility to claim rights, to elect representatives, to enact legislation etc.

Political influence will probably never be equal for everybody (talent also plays a role, and it is difficult to correct for the effects of talent). But there is more and there is less. Democracy is probably the best we can hope for. On top of that, democracy constantly enhances the equality of influence, even though every victory creates a new problem. The Internet, for example, will empower many people and will enhance political equality, but it will also exclude many other people, namely those without the necessary computer skills or without the infrastructure necessary to use the Internet on an equal basis. It can become a new source of political inequality. We will have to finds ways in which to equalize the access to and the use of the Internet because we want to maintain or increase political equality. In the meanwhile, however, a new kind of inequality should not make us lose sight of the enormous progress for equality which the Internet allowed us to achieve. Many people, who today use the Internet to participate in politics, never participated in the past.

Why Do We Need Human Rights? (7): From Democracy to Prosperity

In a previous post I commented on the beneficial influence of prosperity on democracy – democracy being one human right among many. Here are some reasons why democracy is good for prosperity. The squeaky hinge gets the oil. Only in a democratic society in which human rights are protected, can an economic injustice be exposed and can claims for its abolition be heard and implemented. People can use human rights to call on the government or the international community to fulfill its duties and to implement certain economic measures. Most governments, including democratic governments, act only when they are put under pressure. The freedom of expression, the freedom of assembly and association (associations such as pressure groups, labor unions or political parties) and the right to choose your own representatives are instruments in the hands of the economically disadvantaged. They can use their rights and the democratic procedures to influence economic and social policy. Poverty must have a voice.

It is true that without a minimum degree of prosperity, human rights and democracy lose a lot of their value. If you have to struggle to survive, then you do not have the time to form an opinion, let alone express it. “Primum vivere, deinde philosophari”; first you make sure you live, and only then can you philosophize. However, life is more than just living. In a situation of poverty, it is indeed difficult to use rights and democracy, but without rights and democracy it is much more difficult to fight poverty.

If there are no free flows of information, no accountable government that needs to justify its actions in order to be re-elected, and no free press, then you are likely to have more corruption, more embezzlement of public funds and more people who acquire an unfair advantage from the proceeds of natural resources and other sources of prosperity. The rule of law and the openness of government, which are typical of democracy, limit not only corruption but also the ineffective management or outright squandering of natural or other resources by untouchable governments.

Economic development is supported by free flows of information and freedom of movement, both typical of democracies. A free press encourages the economy because it allows entrepreneurs to make informed decisions.

Democracy also guarantees the rule of law, which means legal security and predictability. The number of investments – foreign and local – will grow when investors are certain that their contracts are guaranteed by the law and enforceable by a judge, when oppression does not cause violent revolt and when investors are relatively certain that their property will not be stolen without punishment or will not be nationalized by some new revolutionary government.

The rule of law creates a limited state and a society that is relatively free and independent of the state. This means that economic activity is also relatively independent. A certain limit on state interference in the economy is traditionally considered as beneficial for economic development. In a free civil society, everybody can be economically active. In many authoritarian states, only a handful of privileged persons can be economically active, and these persons are not always the ones most suitable for this kind of activity (for example: large landowners, members of the official “nomenclatura” etc.). A free civil society, guaranteed by the rule of law, which in turn is guaranteed by democracy (although not only by democracy), allows everybody to be creative, to cooperate and to exchange on a relatively level playing field. This increases the chances that the best man is in the best place, which in turn encourages economic development. Furthermore, by pumping in as many people as possible in the economy and by letting them move and communicate freely, the economically most efficient and profitable transactions can take place.

Why Do Countries Become/Remain Democracies? Or Don’t? (2): From Prosperity to Democracy

Prosperity creates time and leisure, which can be used for democratic participation, public life and other uses of human rights. We often see democratic aspirations and claims of rights arising almost automatically in states that do well economically (see for example Taiwan, Korea and many South-American countries in the 1980s). People do not live on bread alone. They want something more.

Economic misfortune, on the contrary, forces people to focus on the struggle to survive and forces them to give up rights in exchange for material progress. If the expression of an opinion can cause the loss of your job and if there are not many jobs available, then the choice is simple. Certain classes of people in particular, will not have the time nor the money to participate in politics and will leave democracy to the rich. Seeing democracy degenerate into a tool for the rich, they will reject it and turn to authoritarian alternatives in despair. Unequal wealth or insufficient wealth for some classes of the population is often a characteristic of a lack of economic development and at the same time it hinders the proper functioning of democracy. Those who are rich will monopolize the democratic procedures not only because of the forced withdrawal of the poor, but also because of their privileged access to the media, education, representative institutions etc. Furthermore, large differences in wealth and bad economic performances are destabilizing for any form of government – democracy included – because they cause revolt.

A higher GDP/capita correlates with democracy and the wealthiest democracies have never been observed to fall into authoritarianism. There is also the general observation that democracy was very rare before the industrial revolution. Empirical research thus lead many to believe that economic development either increases chances for a transition to democracy (modernization theory), or helps newly established democracies consolidate. Some campaigners for democracy even believe that as economic development progresses, democratization will become inevitable. However, the debate about whether democracy is a consequence of wealth, a cause of it, or both processes are unrelated, is far from conclusion. (source)

The key findings are the positive and statistically significant effects on electoral rights from real per capita GDP and primary schooling. These results strongly confirm the idea that a higher standard of living goes along with more democracy. Moreover, the effects are predictive. Robert J. Barro

This post focuses on one side of the causation: growth in wealth and prosperity produces more and more stable democracy. In a future post, I will look at the other side, how democracy is good for wealth.