Economic Political Freedom Definition

Some Problems Raised By The Concept Of Economic Freedom

The most obvious question posed to libertarians by those who are sceptical of their position is that the system of economic freedom is silent on the question of the distribution of property rights. In terms of our simple model, what
principle should determine the values of Y1,..., Yi.....Yn which, when aggregated,
would describe some initial distribution of income as measured, say, by the shape of the Lorenz Curve? What reason have we for supposing that the 'optimal' distribution of income would emerge from the process of economic exchange between individuals?

The answer to this question does not find libertarians speaking with one voice. The problem is not one of principle, for the ultimate test to them is how far any government intervention represents a restriction of freedom. The problem is one of interpretation. It would be difficult today to find libertarians who would object to government intervention designed to assure protection to those who are severely deprived. Thus Hayek has argued that so long as 'a uniform minimum income is provided outside the market to all those who, for any reason, are unable to earn in the market an adequate maintenance, this need not lead to a restriction of freedom, or conflict with the Rule of Law'. This still leaves room for much disagreement among libertarians as to the precise level of the minimum and how to decide on who is entitled to receive it. Some supporters of the libertarian position, including the present author, would go much further and argue, along with J.S. Mill, that concentrations of wealth sustained over lengthy time periods can endanger economic freedom, not to speak of political freedom, by the association of such concentrations with the concentration of power of wealthy individuals over the less fortunate.

If the concept of economic freedom cannot embrace some precise guidance about the extent to which economic exchanges should be interfered with, it certainly places limits on the form of that interference. Thus libertarians, to the extent that they accept the need for a state-guaranteed minimum standard of living, prefer the use of money transfers to individuals rather than the provision of social services below or at zero cost, that is to say the economic condition of individuals in receipt of state support should be reflected in reduction in Tik (whose value may have to be negative) rather than an increase in akk. Thus it is argued that individuals then retain responsibility for the purchase of goods and services designed to promote their own welfare and that the power of the state over the individual by bureaucratic dictatorship of preferences and by the lack of incentives in the public sector to economize in resource use is circumscribed.

A more severe test for the practicality of libertarian measures, designed to permit some redistribution without increasing the power of the state, arises in the case of any attack on the concentration of wealth. Clearly, a system of inheritance taxation which results in the transfer of capital from the private to the public sector would not conform to libertarian thinking, not only because this would discourage private saving but also because it would build up the power of the state. A system of taxation would have to be devised which not only did not discourage accumulation of private capital but also simultaneously encouraged legators to disseminate capital in favour of those with little capital. It is a long time since libertarians have plucked up the courage to try to develop such a system, given that eminent public finance specialists have failed in their attempts to fulfil these requirements.

The second major question arises from the persistent objection of Marxists and other socialist writers that the system of economic freedom, as depicted by the libertarians, fails to solve the problem of 'worker alienation'. It may be that the system of economic freedom can allow employees alone or in combination with others to influence the price of factor inputs and the work/leisure combination (ai), variables which play a crucial part in individual welfare. The fact remains that the system of property rights, which libertarians support, includes the individual ownership of capital and the use of capitalistic methods of production which imply an authority relationship between employer and worker. The hierarchical order at the place of work seems at complete variance with the independence of economic action attributed to the individual by the supporters of economic freedom.

Reactions to this argument by libertarians are sometimes reminiscent of the Scots preacher who, on recognizing a theological difficulty in his sermon, recommended his congregation to look the difficulty squarely in the face and pass it by. However, even socialist writers, notably the prominent Marxist Ota Sik (1974), have recognized that the alternative to market capitalism - collectivist production - does not solve the problem for it is not synonymous with demo­cratization at the shop-floor level. In other words, the basis of alienation is technological and not institutional. Some libertarians, notably Mill, have made common cause with socialists by arguing that alienation must not be taken to be an inevitable consequence of productive activity. Mill sought one solution in the encouragement of firms owned and managed by the labour force, but still subject to competition. Utopian socialists have claimed that the only solution is to reject altogether the technology which imposes hierarchical relations in the first place. Both 'solutions' are still the subject of lively debate in both the professional and political arena.