Daron Acemoglu, the Charles P. Kindleberger Professor of Applied Economics at the MIT Department of Economics, has written an excellent article for Esquire titled ‘What Makes a Nation Rich? One Economist’s Big Answer’. The hypothesis that Acemoglu proposes is that political and economic freedom are the ingredients for poverty reduction. The argument proposed is certainly compelling.
Acemoglu of course is not the first to make note of the linkage between prosperity and freedom. Each year the Heritage Foundation and Wall Street Journal produce the Index of Economic Freedom that describes the benefits of economic freedom as ‘studies … demonstrate important relationships between economic freedom and positive social and economic values such as per capita income, economic growth rates, human development, democracy, the elimination of poverty, and environmental protection.’ The ten components of Economic Freedom as measured by the Heritage Foundation are; business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labour freedom.
Milton Friedman, in his book ‘Capitalism and Freedom’ takes us back in time to early thinkers on the understanding of political freedom relating to economic prosperity: ‘The relation between political and economic freedom is complex and by no means unilateral. In the early nineteenth century, Bentham and the Philosophical Radicals were inclined to regard political freedom as a means to economic freedom. They believed that the masses were being hampered by the restrictions that were being imposed upon them, and that if political reform gave the bulk of the people the vote, they would do what was good for them, which was to vote for laissez faire.‘
The Objectivist and individual rights evangelist Ayn Rand adds to the evidence “Another current catch-phrase is the complaint that the nations of the world are divided into ‘haves’ and the ‘have-nots.’ Observe that the ‘haves’ are those who have freedom, and that it is freedom that the ‘have-nots’ have not.”.
Acemoglu has written an interesting article which is sure to create debate. It is definitely worth a read.