Ideological foundations
An ideology is a conceptual framework with the way people deal with reality. Everyone has one [..] To exist, you need an ideology. The question is not whether it exists but whether it is accurate or not. - Alan Greenspan, 23 October 2008 Testimony to Committee of Government Oversight and Reform
Liberalization as an economic strategy can be thought of as a synthesis of three components - as an ideology, an economic model and policy strategy.
Term | Description |
Ideology | A set of axioms, beliefs and values of good and bad outcomes for society and the way that it operates |
Economic model | Falsifiable (testable) hypothesis of how certain set of economic metrics are related |
Policy strategy | Guide for how to set specific government policies and measure their success - taxes, spending, labor, property rights, rules and other laws |
This section presents the theoretical foundations for the ideology starting with the motivating case for individuals and how they interact with government - the social contract. The ideological premise lists important theoretical claims and the concept of economic freedom is examined for it's intended meaning and tested for completeness and consistency.
In this section
Premises
In an effort to construct a coherent first principles basis for policy, the liberalization ideology attempts to build a logically coherent chain of conclusions about economic policy starting from a simple first principles premise of the general idea of freedom.
Premise | Description |
Human motivation | Associates the basic drive for autonomy to “economic freedom” |
Moral philosophy | Claims moral values of reward for accomplishment and work ethic |
Tragedy of the commons | Belief that a “tragedy of the commons” is the inevitable end for any alternative institution for managing common resources. |
Public choice | Avoids imperfect information transmission and rent-seeking in public choice |
Social contract model
The presumed logic of the liberalization social contract connecting policy to outcomes is illustrated in the simplified diagram in Figure 2.1. The first assertion often implicit is that the social contract and right to govern is rooted in the level of life satisfaction in the general public. This assertion not only sounds ethical it is also supported empirically that there is a statistical relationship between reported subjective satisfaction and opinion polls of popular approval of government (Ward, 2015).
The framework considers two possible means of achieving public satisfaction through policy - the first through higher incomes and the second through employment at any income. The first of these two pathways asserts that the primary means for households to improve life satisfaction, fulfilment is through rising real wages as this enables them to exchange their income for goods and services. The second pathway asserts that employment at any income leads to higher life satisfaction. Another important link is the claim that liberalization policies are the best means of achieving consistently rising real wages and or low unemployment through the intermediary role of private capital markets. A few important links are the assertions that liberalization policies are successful at attracting private capital, that private capital is the most efficient means of either growing unemployment or growing labor productivity and that labor productivity growth is an effective means to achieving rising real wages. Another implicit and weak assumption is that there are no side-effects of any of these steps on the ultimate life satisfaction.
Economic freedom
We owe our high living standards to economic freedom, with its reliance on market incentives that encourage us to work, save, invest, innovate, start businesses and take risks. Our free enterprise system favors production over taxes and handouts, responsibility over dependence and opportunity over equality. The rewards have been progress instead of decline, wealth instead of poverty - Michael Cox, 2011 Annual report : William J O’Neill Center for Global Markets and Freedom, Southern Methodist University
The premise of liberalization is that “economic freedom” is the defining feature separating successful from unsuccessful societies. This “freedom of choice to acquire and use goods and services” through commercial exchanges as a consumer, employee and business owner is considered the “foundation of a fulfilling existence” and equated to one’s sense of “a self-directed life, guided by one’s own philosophies and priorities rather than those of a government or technocratic elite” (Miller, 2020). In the 1987 “tear down this wall” speech US President Ronald Reagan mentioned the world “freedom” 17 times (Reagan, 1987).
that just as truth can flourish only when the journalist is given freedom of speech, so prosperity can come about only when the farmer and businessman enjoy economic freedom. - US President Ronald Reagan, 1987 Speech at Brandenburg gate “Mr Gorbachev tear down this wall!”
In the speech Reagan connects his idea of freedom as a common denominator among all things that he considers good about society and presents his theory that this idea of freedom is the single explanatory feature of contrast between East and West Berlin. For example he uses the idea of freedom to connect the terms of labor negotiation for business enterprises with the negotiation against censorship of the press. Furthermore in the same paragraph he equates this freedom common denominator to specific policy differences “reduced tariffs, expanded free trade, lowered taxes” between East and West Germany (Reagan, 1987). The policy conclusions and extensions are derived from that axiomatic starting point. Evidence for the universal appeal of a sense of autonomy and freedom is the relationship to appraisal of well-being in life satisfaction surveys (Helliwell, 2017). Reagan’s idea of freedom in the Brandenburg speech also appealed to this universal “human impulse to create, to enjoy, to worship” (Reagan, 1987). It isn’t so simple though, “the concept of freedom, by its very nature, resists a narrow definition” (Miller, 2020).
No country provides perfect freedom to its citizens, and those that do permit high levels of freedom differ with respect to which aspects they believe are most important. That is consistent with the nature of liberty, which allows individuals and societies to craft their own unique paths to prosperity. - Miller, Heritage Foundation, Economic Freedom Index report 2020
Simply stating the world “freedom” is not sufficient to resolve situations when different rights come into conflict. There are different forms of rights as in the example in the case of an air polluting factory one company’s “right” to earn a profit may come into conflict with another person’s “right” to breathe clean air. Figures D.2 and D.3 provide another contrast illustrating the ambiguity of the concept of freedoms and rights. Figure D.2 shows a photo of a young girl on a horseback confronting the US military in a conflict over land and water rights between Native American tribes and energy companies defended by the US military for an oil pipeline - Dakota Access Pipeline that would cross the watershed shared by the tribal territory. In the second photo a young Singapore resident holds a placard that reads “SG is better than oil”. The young man was issued a warning for the offense of a violation of the Public Order Act which restricts political expression in public.
So the word freedom alone is insufficient to unambiguously define the ideological assertions. Liberalization both attempts to make an equivalence of a broad range of freedoms to “Economic freedom” - the right to earn wages from employment, to accumulate and own capital and other properties and to deploy, restrict the use of and recover profits from the use of that capital. The potential for rights conflict is understood. “your rights end at your neighbors doorsteps” (Miller, 2020), but whereas the state is called on to provide formal protections for economic rights, the prescription for setting and enforcing rules that have a collective benefit is left as a task for communities to resolve themselves informally as the first line of defence. “Decisions and activities that have an impact or potential impact on others are rightly constrained by societal norms and, in the most critical areas, by government laws or regulations” (Miller, 2020).
This liberal view of individual interaction leaves the moral dimensions of resource allocation to be formed and enforced through social norms. The intention is to remove the egalitarian, cooperative, empathetic morals from the economic interactions with a different moral philosophy based on self-interest and personal responsibility.
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