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Economic and Political Freedom Go Hand In Hand

© Bryan Johnson

With all the media attention being play to the Asian financial crisis (now culminating in a global economic crisis) some seem to forget the other crisis sweeping the globe: political chaos. Indeed, while many countries like Indonesia, Malaysia, Thailand, and South Korea went into economic tailspins, many glossed over the ensuing political crisis. Indeed, Indonesia underwent tremendous political turmoil. Does this mean that there is a linkage between economic and political trends?

Certainly, political scientists and economists for years have argued that politcal freedom leads to economic stability and long-term prosperity. Indeed, organizations like Amnesty International and Freedom House for decades have published annual studies on the level of poltical freedom around the globe. Others have used this data to provide substantial evidence that politcal freedom is an important element in achieving economic prosperity.

Moreover, organizations like The Heritage Foundation and The Wall Street Journal have produced annual studies demonstrating the important role that economic freedom plays in long-term economic prosperity. But what of the connection between the two?

This year, the Heritage Foundation/Wall Street Journal 1999 Index of Economic Freedom includes a chapter that stastically analyzes the association between these two factors. The results are astounding.

Using the Freedom House study which measures both Political Rights and Civil Liberties, the author was able to run a series of statistical tests to determine if an association exists between political freedom and economic freedom.

Freedom House defines political freedom as the ability of people "to chose their authoritative leaders freely from among competing groups and individuals who were not chosen by the government." It defines civil liberties as "the chance to act spontaneously in a variety of fields outside the control of government and other centers of potential domination." This includes freedom of the press and other social freedoms.

A statistical association between the Index scores and Freedom House's survey shows that the countries that are the most economically free generally are the most politically free. Specifically, The analysis shows that those countries that scored economically "free" (below 2.0) on the Heritage Index, on average scored politically "free" (below 2.5) on Freedom House's survey. By contrast, those countries that scored economically "repressed" (4.0 or above) on the Heritage Index, on average scored politically "not free" (5.5 or above) on the Freedom House study.

When the author ran a regression analysis on the two scores, he discovered that 64% of the time, an improvement in a country's economic freedom score was accompanied by an improvement in their political rights score. The statistical tests of this relationship showed that only a one in a million chance existed that these findings resulted from chance or random associations. These results can be expressed in the following equation: