Political Freedom, Economic Freedom, and Prosperity: International Trade Policy as a Measure of Economic Freedom

By Nalley, Lawton Lanier; Barkley, Andrew | Journal of Private Enterprise, Fall 2005 | Go to article overview

Political Freedom, Economic Freedom, and Prosperity: International Trade Policy as a Measure of Economic Freedom


Nalley, Lawton Lanier, Barkley, Andrew, Journal of Private Enterprise


"I believe that free societies have arisen and persisted only because economic freedom is so much more productive economically than any other method of controlling economic activity."

(Milton Friedman, Foreword in Gwartney, et al., 1995)

Since the time of Adam Smith, if not before, economists and economic historians have argued that the central ingredients for economic progress include freedom to choose and supply resources, competition in business, trade with others, and secure property rights (North and Thomas, 1973). In 1962, Milton Friedman boldly asserted in Capitalism and freedom that economic freedoms, in the form of free markets, and political freedoms, in the form of civil liberties and democracy, were necessary conditions for the attainment of high levels of per capita income. The objective of this research is to measure the impact of political and economic freedom on economic growth for a cross-section of nations during the 1970-2000 time period. In Capitalism and Freedom, Friedman (1962) contended that price support programs in agriculture and trade barriers were not only unjustifiable, but hampered economic growth. Today, it is widely accepted among economists that, ceteris paribus, countries with fewer restrictions on trade will grow faster than those nations that place restrictions or barriers on trade.

Duncan and Quang (2004) found that trade liberalization can lead to faster economic growth by reducing distortions in relative prices and allowing activities characterized by comparative advantage to flourish. Bhagwati and Panagariya (2003) claimed that sustained economic growth can not be achieved without rapid growth in trade, which requires a reduction in trade barriers. This claim is based on the alternative result of trade diversion1 which can cause the misallocation of resources and have adverse effects on the economy. Bhagwati and Panagariya (2003) also stated that in the last four decades there is virtually no example of a country with sustained rapid economic growth possessing high and non-declining barriers to trade. Therefore, openness to international trade is included in a regression model to quantify the impact of government intervention in international trade on economic growth. The results provide some empirical evidence that Friedman's hypotheses are correct, contributing to our understanding of the relationships between political freedom, economic freedom, and economic growth. The results also show that nations with higher degrees of openness to international trade have been characterized by higher levels of economic growth.

The Role of Political, Civil, and Economic Freedom in GDP Growth

Several studies, including Vega-Gordillo and Alvarez-Acre (2003), have quantified a direct correlation between the levels of civil, economic, and political freedom and the rate of national economic growth. Gwartney and Lawson (1997) defined political freedom as a situation where citizens are completely free to participate in the political process; and where elections are fair, competitive, and free from corruption. They also defined civil liberties to include freedom of the press, freedom of association, freedom of religion, and freedom of speech. Economic freedom is defined by Freedom House (2004) as the presence of these characteristics: (1) property acquired without the use of force, fraud, or theft is protected from physical invasion by others; and (2) citizens are free to use, exchange, or give property to another as long as their actions do not violate the identical rights of others.

Vega-Gordillo and Alvarez-Acre (2003) proclaimed that democracy should facilitate economic growth through the development of an institutional framework that is more compatible with incentives to engage in productive transactions. Wittman (1989,1995) and Baba (1997) argued that democracy enables the development of institutions that guarantee the transparency of the policy-making process and that institutions such as property rights are crucial to economic growth. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Political Freedom, Economic Freedom, and Prosperity: International Trade Policy as a Measure of Economic Freedom
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.