In virtually all spheres of human endeavour, freedom is the dividing line between progress and failure. But freedom is one of the most misunderstood concepts. Especially so in the arena of public policy, where interest groups lobby for the enactment of laws which they say will enhance freedom of choice or protect the freedom of those they represent. In the economic sphere particularly, the term is often invoked in support of alleged rights to houses, jobs, medical care and so on. It is argued that the lack of these goods limits the freedom of the people.
Mark Twain is said to have cautioned It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so. Freedom is simply the capacity to act according to ones own will in any given set of circumstances, without artificially imposed constraints. Freedom should not be equated with material welfare. It does not equate with benefits of any kind, be they material or otherwise. The benefits that might accrue from ones choices should not be misconstrued as freedom in itself but as the consequences of the exercise of freedom.
Freedoms are circumscribed by the moral principle that in the exercise of our freedom we do not cause harm to our fellow human beings. Freedom brings responsibility, in the sense that in exercising it we should not knowingly harm our fellow men and women. It also requires that we should be responsible for the consequences of our own actions. This principle is widely understood by most people, irrespective of their cultural backgrounds. Interestingly, it is the point of departure for common law.
The ancient Greeks were perhaps the first to articulate the benefits of freedom. The Greek historian Thucydides (460 BC 396 BC) once said, The secret of happiness is freedom. The secret of freedom is courage. Of all the varieties of virtues, liberalism is the most beloved, wrote Aristotle. (Aristotle here means liberalism as it denotes freedom and not liberalism in its modern sense.)
The exercise of individual freedom drives the creation of wealth. When people are free to act upon their aspirations and make choices informed by rational self-interest, they will do so. They may make mistakes along the way, but they will learn from their mistakes. Generally, they will engage in economic activities that are calculated to uplift them from circumstances that they find inadequate. They do this for themselves. In pursuit of their objectives, they will of necessity interact with others who are similarly motivated. Thus, in a market economy, consumers become the very raison dêtre of producers. There would be no point in producing goods or services if there was no one who wished to consume them. Conversely, without producers, consumers would have nothing to consume. The relationship between the two is symbiotic. Yet they need not even know one another. In most cases they do not. Likewise, employers need employees and vice versa. The owners of capital need labour in order to set their capital to work. Again the symbiotic relationship means that capital and labour do not merely co-exist, but find that their co-existence is defined by their mutual interests. There is no other option. This is how wealth is created in a market economy.
Once individuals begin to reap the fruits of their economic endeavours they are encouraged to further enhance their productivity. When individuals are free to pursue their endeavours without artificially imposed impediments, such as cumbersome state policies, the spirit of enterprise explodes. The seminal Economic Freedom of the World and the Index of Economic Freedom studies, which measure economic freedom and correlate it with various socio-economic indicators, demonstrate empirically that freedom delivers. The more economically free countries reflect higher economic growth rates per capita; longer life spans; lower unemployment levels; improvements in health care and higher levels of education. The converse is also true. The lower the level of economic freedom, the lower the economic growth rate per capita; life spans are shorter; health care is poorer and levels of education are lower.
So how is freedom, especially economic freedom, eroded? David Humes insight is very relevant to this question. It is seldom that liberty of any kind is lost at once. Though Hume was born in 1711, his words easily find resonance in the contemporary world. In democratic countries the erosion of liberties is of special concern because it is insidious and incremental and therefore does not raise alarm. Protection of liberties requires constant vigilance.
Well-known author and expert on security, Bruce Schneier, born in 1963, maintains Terrorists can only take my life. Only my government can take my freedom. In democracies and dictatorships alike, it is generally the government that curtails the liberties of individuals. But in democracies, curtailment of liberty is often not the purpose of government but merely the by-product of interventionist policies that are formulated with the best of intentions.
The economist Friedrich Hayek identified what he called the fatal conceit which is the belief held by many politicians and government officials that they have the necessary knowledge and wisdom to direct the lives of others as the main genesis of bad policy. Afflicted with this conceit, policy makers are wont to conceive of comprehensive policies, programmes or master plans, grand designs that seek to encompass a huge and diverse range of economic activities as though they comprised a single composite whole. They fail to apprehend that knowledge is dispersed amongst millions of individuals, who act in their own rational self-interest and in their own idiosyncratic ways, with diverse and shifting priorities. It is naïve to think that a handful of policy makers and bureaucrats could know what is best for everyone involved in such a complex web of individual circumstances.
In this way, the state grows at the expense of individual liberties. In the name of the common good, it enacts laws and regulations that further erode liberty. When the laws do not seem to work, or prove counterproductive, they are not repealed but instead are reinforced by even more complex and cumbersome regulations and so the spirit of enterprise is further curtailed and productivity drops.
As Ronald Reagan quipped some years ago: Governments view of the economy could be summed up in three short phrases. If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it. Policy makers should take heed.
Author: Temba A Nolutshungu is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the authors and are not necessarily shared by the members of the Foundation.
FMF Feature Article/29 July 2008 - FMF Policy Bulletin/12 January 2010
Temba A Nolutshungu
Temba A Nolutshungu is a Director of the Free Market Foundation.
Publish date: 20 January 2010
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.