What role has political entrepreneurship played in changes in human freedom this century?

 

For the purposes of this exercise, I have used the Human Freedom Index, published by Cato and the Fraser Institute, to identify which countries have experienced greatest change in human freedom this century.

In my view, this index provides the best available information on the state of liberty throughout the world. The latest publication in this series, The Human Freedom Index 2024, by Ian Vásquez, Matthew D. Mitchell, Ryan Murphy, and Guillermina Sutter Schneide, provides measures of personal and economic freedom in 2022 for jurisdictions covering 98% of the world’s population. The accompanying data set enables change in personal and economic freedom to be assessed for 157 countries over the period from 2000 to 2022.

This study is associated with my recent research efforts directed toward attempting to understand the role of political entrepreneurship in institutional change. The research reported here links most directly to some previous research which suggests that levels of personal and economic freedom in some countries have been more strongly influenced by political entrepreneurship than by underlying cultural values of the people.

The idea behind the current study is that if we can identify the countries that have experienced greatest change in economic and personal freedom and know a little about the recent political history of those countries, we will better placed to make judgements about the factors responsible for institutional change. The question I ask myself is whether changes in freedom can be attributed to the efforts of a political entrepreneur with an ideological mission, as opposed to other factors such as cultural change in the broader community, responses to economic crises, and external factors including advice of foreign governments and international agencies.

In this essay, I first consider the above graph which shows changes in personal and economic freedom this century for the full data set (157 countries) and then consider a second graph showing the same data for countries with above median human freedom in 2022.

Jurisdictions with greatest change in human freedom

The human freedom index reflects the combined impact of economic freedom and personal freedom. In the graph shown above, the 10 countries with greatest improvement in human freedom are labelled and identified with a green marker and the 10 countries with the greatest decline in human freedom are labelled and identified with a red marker.

An initial point worth noting about the graphs is the relatively small number of countries in the bottom right quadrant with an increase in personal freedom accompanied by a decline in economic freedom. That result is consistent with Milton Friedman’s observation that economic freedom “promotes political freedom because it separates economic power from political power and in this way allows the one to offset the other.” Hopefully, the people in counties in the top left quadrant, who have experienced substantial increases in economic freedom under oppressive governments, will subsequently be able to experience greater personal freedom as well.

It is not difficult to identify political entrepreneurs who have made a major contribution to repression of liberty in jurisdictions that have experienced the greatest declines in human freedom since 2000. Peronism remained a dominant force in Argentinian politics in the first two decades on this century, even though Juan Peron died in 1974. The political landscape in Venezuela was dominated by Hugo Chavez and Nicholas Maduro, who have both pursued policies inimical to economic and personal freedom. In Venezuela, Daniel Ortega held the presidency for extended periods. Chad was subject to authoritarian rule by Idriss Deby Itno until his death in 2021. Iranian politics has been dominated by Supreme Leader Ali Khamenei since 1989. Much of the decline in economic and personal freedom in Egypt has occurred since 2014, under the presidency of Abdel Fattah el-Sisi. In Turkey, economic and personal freedom have also declined substantially since 2014, when Recep Erdogan came to power. The ruler of Syria, Bashar al-Assad, imposed substantial additional restrictions on personal freedom following the outbreak of civil war in 2011. Personal freedom in Hong Kong has been increasingly restricted since 2012 when Xi Jinping came to power in China. The decline in personal freedom in Bahrain since 2010 reflects the response of the government of King Hamad bin Isa Al Khalifa to an upsurge of political opposition.

It is more difficult to identify political entrepreneurs who have made a major contribution to expansion of liberty in jurisdictions that have experienced the greatest improvement in human freedom since 2000. That may partly reflect poor media coverage of good news stories in Africa. Substantial improvements in human freedom occurred in Liberia under the political leadership of Ellen Johnson Sirleaf, and in Gambia, under the leadership of Adama Barrow.

Some of the other countries that have experienced substantial improvements in human freedom have had governments that have tended to favour free markets consistently. Countries in that category include Lebanon, Armenia, Sierra-Leone and Colombia.

In some countries, including Timor-Leste, international agencies have played an important role in encouraging policies to strengthen government institutions and reduce corruption.

Many of the countries that have experienced substantial increases in human freedom have improved from a low base and still have human freedom levels well below the world average. Countries in that category include Angola, Lebanon, Laos and Sierra-Leone.

 Changes in freedom in relatively high freedom countries

 

When we focus on countries which currently have relatively high levels of freedom, a substantially different set of countries emerges as the 10 with largest declines or increases in economic freedom. Argentina is the only country with reduced human freedom which is common to both groups. Timor Leste and Armenia are the only countries with increased human freedom that are common to both groups.

Among countries with reduced human freedom, political entrepreneurs who have played a prominent role in implementing restrictive policies include Victor Orban in Hungary, Pravind Jugnauth in Mauritius, Evo Morales in Bolivia, and Andrzej Duda in Poland.

The decline in human freedom in Guyana, Greece, France, UK, and USA seem to have occurred mainly via gradual slippage rather than deliberate policy. In addition, restrictions on freedom imposed in those countries during the coronavirus epidemic had not been fully removed in 2022.

It is difficult to identify political entrepreneurs who have played a prominent role in promoting economic and personal freedom in the countries with greatest increases in human freedom. However, Maia Sandu played a prominent role in Moldova. Bidzina Ivanishvili has played a prominent role in politics in Georgia since 2012, during a period of improvement in human freedom, but it is unlikely that his more recent political endeavours have had a positive influence on human freedom.

The countries with greatest increase in human freedom generally have policies which strongly favour free markets. The main exceptions seem to be the governments of Malawi and Timor Leste, which have been less supportive of economic freedom.

Conclusion

This essay has focused on countries that have experience substantial changes in human freedom over the period from 2000 to 2020 in an endeavour to assess the role of political entrepreneurship in those changes.

The Human Freedom Index, published by Cato and the Fraser Institute, has been used to identify countries with greatest changes in freedom levels. Information on the recent political history of those countries has then been used to assess whether the changes could be attributed to the influence of political entrepreneurs with an ideological mission.

The study first considered changes in freedom in the full data set of 157 countries and then at changes in freedom for countries with above median freedom levels.

My general conclusion is that, at least during the period considered, political entrepreneurship has played a larger role in bringing about substantial declines in human freedom than in bringing about substantial improvements in human freedom.

What role does political entrepreneurship play in institutional change?

 

One of the reasons I quoted that passage by Douglass North is because it mentions political entrepreneurship. I went looking for a quote from North in Institutions, Institutional Change and Economic Performance because I was particularly impressed by that book when I first read it about 30 years ago. (The quoted sentence appears on page 87.)

As defined by North, institutions are “the rules of the game of society” that shape human interaction. He argued that formal institutions—such as constitutions, laws, and regulations—make up only a small proportion of the sum of constraints that shape choices. Informal constraints include codes of conduct, norms of behavior, conventions, and customs. They may be internalized in personal values, rather than imposed by others.

North acknowledged that political entrepreneurship plays a role in institutional change. He doesn’t have much to say about political entrepreneurship, but his analysis implies that political entrepreneurs may play an important role in reducing transactions costs associated with institutional change.

Path dependence and institutional stickiness

The transactions costs of institutional change are high because of the path dependence of institutions. As institutions evolve, ideologies tend to evolve to support them. Organizations and interest groups that have grown up under existing institutions often have a stake in maintaining them.  

The most important point I had remembered from reading Institutions … is that countries with similar formal institutions – constitutions, property rights etc. – can have vastly different economic performance outcomes if informal institutions (cultural settings) are different. Governments and international agencies that have sought to transplant formal institutions to foreign countries have been slow to recognize that point.

The implications of path dependence have been further explored by Peter Boettke, Christopher Coyne, and Peter Leeson in “Institutional Stickiness and the New Development Economics”, Chapter 6 in Culture of Economic Action, ed. Laura E. Grube and Virgil Henry Storr (2015).  The authors contend that the ability of a new institutional arrangement to take hold when it has been transplanted depends on that institutions status in relations to indigenous agents in the previous time period. They suggest that institutional transplants are unlikely to stick if they are inconsistent with indigenously introduced endogenous institutions.

The analytical framework used by Boettke et al is also relevant to considering the challenges faced by endogenous political entrepreneurs in bringing about institutional change.

Entrepreneurship (political and economic)

As discussed recently on this blog, political entrepreneurship has characteristics that differ from economic entrepreneurship. I suggested that it might be reasonable to assume that political entrepreneurs are motivated largely by the satisfaction they obtain from constructing ideological narratives and selling them, and from exercising the political power required to implement policies.

Nevertheless, there are similarities between political and economic entrepreneurship that become apparent when economic entrepreneurship is considered in a cultural context. In his article, “The discovery and interpretation of profit opportunities and the Kirznerian entrepreneur”, reproduced as Chapter 3 of Culture and Economic Action (cited above), Don Lavoie writes:

“Entrepreneurship necessarily takes place within culture, it is utterly shaped by culture, and it fundamentally consists in interpreting and influencing culture.” (p. 50)

He suggests:

“entrepreneurship is the achievement not so much of the isolated maverick who finds objective profits others overlooked as of the culturally embedded participant who picks up the gist of a conversation.” (p. 51)

Later, he observes:

“Most acts of entrepreneurship are not like an isolated individual finding things on beaches; they require effort of the imagination, skillful judgements of future costs and revenue possibilities, and an ability to read the significance of complex social situations.”

In the following chapter of Culture and Economic Action, Virgil Henry Storr and Arielle John suggest that rather than viewing Lavoie’s contribution as a critique of Kirzner’s theory of entrepreneurship it is more appropriate to view it as a suggestion as to how that theory may be fruitfully amended. The amendments suggested by Lavoie seem to me to make the role of the economic entrepreneur seem similar in some respects to the role of a political entrepreneur.

Max Weber’s understanding of political entrepreneurship

Douglass North seems to have given minimal acknowledgement of Max Weber’s work as a social theorist, even though there was considerable overlap in their areas of interest.  Francesca Trivellato has noted that in one publication North does refer to Weber as a scholar of “the role of belief and values in shaping change”. Weber is, of course, most often remembered for his theory of the Protestant ethic but he also made other important contributions.

Weber’s writings on charismatic and demagogic leadership shed some light on the nature of political entrepreneurship in democracies. The following points summarize an article by Xavier Márquez, entitled “Max Weber, demagogy and charismatic representation”, published in the European Journal of Political Theory (2024).

• Weber argued that effective leaders must be able to fight for ‘causes’ beyond the narrow immediate interests of economic groups or party organisations and thus to struggle against the impersonal forces of bureaucratization (the subsumption of politics under bureaucratic and technical imperatives). Effective leaders must therefore have a charismatic form of authority – the only form of authority capable of overcoming the constraints of organisation, legality and tradition.
• The need to appeal to mass publics in modern democratizing societies selects for leaders who have a talent for mobilising large groups of people through rhetorical means. In the context of mass politics, charismatic authority manifests as demagogy. Weber thinks of the masses as unorganized and irrational and argues that even ‘democratically’ elected leadership is a form of ‘dictatorship which rests on the exploitation of the emotionality of the masses.
• Weber's praise for charismatic and demagogic leadership is tempered by the worry that political leaders must also be responsible. This is so in a twofold sense: objectively, a political system must be able to hold leaders accountable for their actions; and subjectively, leaders must display an ethics of responsibility, and thus be able to ‘take responsibility’ for their actions.
• Elections formalize the recognition of charisma. If charismatic leaders capable of mobilizing and representing broad masses will tend to arise in any case, it is better if the recognition of their charisma is subject to periodic formal tests rather than informal, extra-legal events.
• Charismatic authority in the broadest sense tends to appear in moments of deep, even existential crisis, where the charismatic leader performs a ‘miracle’ for a group that feels otherwise impotent and deeply threatened, and can sustain itself only when the leader can provide such ‘miracles.
• The charismatic demagogue produces a wondrous or miraculous representation of the people as a charismatic community but also a ‘wondrous’ representation of himself.
• Weber argues that charismatic leaders must provide evidence of benefiting their charismatic community if they are to retain their authority. The implicit ‘bargain’ between leaders and followers that exists even in cases of strong charismatic authority allows us to speak of a degree of accountability and influence.
• Instead of distinguishing between the ‘mere’ demagogue and its antithesis, the statesman, in terms of whether or not they deceive the demos or act for the common good, Weber stresses the ethical distinction between the politician who is responsible for their cause, and thus capable of intentionally and rationally directing state power towards its achievement (in what is, strictly speaking, a value–rational way), and the politician who is not.
• Lack of objectivity (wishful thinking, extreme overconfidence, ignoring inconvenient information) in assessing a situation leads to irresponsible political action, insofar as it leads to a misunderstanding of the means necessary to achieve particular ends and the physical, social and political constraints on the use of such means. All leaders are susceptible to these vices, but the situation of the charismatic demagogue, surrounded by adoring followers and capable of summoning the adulation of crowds, makes these vices extremely common occupational hazards.
• Weber hoped that training in committee or party work would hone the political judgement of leaders so that they would be more likely to see the consequences of their decisions and to take responsibility for them. 

Márquez argues that Weber's conception of charismatic authority allows some demagogues to play a genuinely democratic role in modern societies when viewed through contemporary theories of representation. He suggests that a Weberian analysis of democracy points to the need for strong accountability mechanisms and for institutions that socialize potential leaders into productive habits of adversarial conduct and responsibility, while preventing easy ‘buck passing’.

Márquez observes that although Weber provides a stronger sense of democratic possibility than did Joseph Schumpeter, he is very much the ancestor of the ‘minimalist’ model of democracy that Schumpeter first articulated explicitly in Capitalism, Socialism and Democracy. (I wrote about Schumpeter’s model of democracy here in 2012.)

Directions of future research

This essay is the second in a series in which I am attempting to obtain a better understanding of political entrepreneurship. The first essay can be found here.

My next step is to read Robert Faulkner’s book, The Case for Greatness (2007). I am wondering whether the ancients thought it was possible for a charismatic demagog to also be a "great-souled" leader who is keen to promote liberty and opportunities for individuals to flourish. 

After that, I will consider how the concept of political entrepreneurship fits in with modern public choice literature.

Summary and Conclusions

This essay briefly considers the context in which political entrepreneurship is most relevant, some similarities between economic and political entrepreneurship, and the role of charismatic and demagogic leadership in political entrepreneurship within democracies.

The essay begins by considering the role that Douglas North saw for political entrepreneurship in bringing about institutional change – i.e. change in the rules of the game of society. Political entrepreneurship is required to overcome high transactions costs of change that arise from the path dependent nature of institutions. Building on the concept of path dependency, Peter Boettke, Christopher Coyne and Peter Leeson developed an analytical framework to consider the consequences of institutional stickiness for foreigners engaged in institution building exercises that seek to transplant institutions from one country to another. That framework is also relevant to considering the challenges faced by political entrepreneurs seeking to bring about institutional reforms in their own countries.

The essay then turns to consideration of the relevance to political entrepreneurship of Don Lavoie’s view of economic entrepreneurship. Lavoie suggests that entrepreneurship takes place within culture and is concerned with interpreting and influencing culture. He makes the role of the economic entrepreneur seem similar in some respects to that of the political entrepreneur.

The other major topic considered in the essay is the contribution that Max Weber makes to our understanding of political entrepreneurship through his writings on charismatic and demagogic leadership. Weber makes the case that charismatic and demagogic leadership may be required to overcome the impersonal forces of bureaucratization within democracies. He also sheds light on the circumstances in which demagogic leadership can be consistent with democracy.

North and Weber both add to our understanding of the role of the political entrepreneur in overcoming obstacles to institutional change. However, the fundamental question that both leave aside is how to ensure that institutional change enhances liberty and opportunities for individuals to flourish. 

 

Addendum

Do ideas play a larger role than interests in bringing about institutional change, or is the opposite true? Prominent economists have been associated with opposing views on this question. Keynes and Hayek emphasized the role of ideas; Stigler and Becker emphasized the role of vested interests.

Perhaps the respective influence of ideas and interests depends on the narratives constructed by political entrepreneurs. The role of political entrepreneurs in constructing narratives has been discussed briefly in an earlier essay.

Some recent research suggests that political entrepreneurs discover “memes” (narratives, cues, frames) that invoke voters’ identity concerns (interests) or shift their ideas about how the world works. (Ash E, Mukand SW, Rodrik D, Economic Interests, Worldviews, and Identities: Theory and Evidence on Ideational Politics , Research Paper, May 2024). The authors identify a potential complementarity between worldview politics and identity politics and illustrate how they may reinforce each other. The authors develop a model which predicts that adverse economic shocks will lead to a greater incidence of ideational politics in affected regions. The results of empirical work using televised political ads seem to be consistent with their model predictions.

Why is cheap domestic gas a bad policy choice?

 

This is a guest post by my old friend, Geoff Edwards. I refer to him as my old friend not because of his age (he is not much older than me) but because I have known him for a long time. Geoff was my supervisor when I began working in the Bureau of Agricultural Economics in Canberra in 1967, and found a way to give me some interesting research projects to work on. Several years later, Geoff left the Australian public service to pursue an economics career in academia.

The post has its origins in an email message that Geoff sent me a few days ago suggesting that the “east coast gas reservation” plan, recently announced by Peter Dutton, the Leader of the Opposition in the federal parliament, was bad policy. The plan seeks to reduce the domestic price of gas by delivering to the domestic market “an additional 10 to 20 per cent of the east coast’s demand – gas which would otherwise be exported for use in other markets for consumers in those countries.”

Since this proposal was announced at the beginning of the current Australian election campaign, I should make clear that while I agree with Geoff that Dutton’s gas plan is bad policy, I don’t consider Dutton’s Liberal Party to be a greater source of bad policies than any of the other political parties contesting this election. That explains why I have chosen the quote from The Wisdom of Henry Hazlitt to put at the top of this post.

Here is the guest post by Geoff Edwards:

Peter Dutton says his government would separate the domestic price of gas in eastern Australia from the export price.

For efficient resource use for tradeables, whether meat, steel or gas, prices within Australia need to be driven by prices in world markets.

That is fundamental to the liberal trading order long supported by Australia.

Seeking to make the price of gas used in Australia independent of the price in international trade is a policy of distorting the gas market and the broader economy.

Not efficient. Not liberal. Not smart.

High gas prices perform the valuable, albeit sometimes painful, role of discouraging use of environmentally-negative gas in electricity generation and directly.

And imagine the ammunition the domestic subsidy policy would provide to Australia's powerful friend in the US to expand trade restrictions.

In order to relieve pressures on households and small businesses without introducing damaging, incentive-destroying market distortions, cash payments targeted to those judged most in need would be a better way to go.

Geoff Edwards

Kew, Vic, 3101

Addendum

Several comments have been received on Geoff's post other than those below. 

First, here is an exchange between Bernard Wonder and myself on LinkedIn:

Bernard: "Geoff's suggested payments to households could be funded by a reformed resource rent tax."

My response:

It could be funded that way. However, the introduction of such a tax is somewhat complex because the states own the resource (onshore) and mining companies are sensitive to the sovereign risk issues associated with governments extracting a larger slice of rents than companies agreed to pay prior to their investment.

Bernard: "Sounds like a sacred cow, Winton."

My response:

Geoff’s proposal could be viewed as an alternative to the current government’s approach of providing a subsidy to all power users. It is funded from general revenue, which has been boosted by high international gas prices.

Second, an email to Geoff from Neil Bryon:

"I completely agree re Dutton’s gas policy.

Albanese’s house battery proposal is also bad policy, but in a different way - using taxpayer funding to subsidise wealthier citizens to install a very inferior technology.

EV (car batteries) are 4-8 times the KwH capacity of fixed house batteries and a fraction of the cost/unity of storage capacity. If anyone did want a battery to store PV solar power during the day to use at night, (I do not) by far the best and cheapest is a battery on 4 wheels (except Tesla who won’t / can’t do vehicle to house or vehicle to grid). All the Japanese Korean Chinese and most European EVs will.

My general point is that governments are notoriously weak at choosing technology winners ( e.g. many now think NBN was a white elephant once 5G arrived)."

Third, an email to Geoff from David Player:

"Burning gas is a bad thing as it increases the amount of CO2 in the atmosphere which in turn increases the temperature of the Earth, and Global Warming is bad.

BUT

If burning gas significantly reduces the amount of coal being burned, it is the better of the two evils.

Burning coal releases lots of very nasty gases into the atmosphere, while burning 

gas is relatively clean.  Apart from the CO2 of course!"

Is Alexander Hamilton's ideal of a modern commercial republic still relevant today?

 

Alexander Hamilton was one of the Founding Fathers of the United States. He served as secretary to the Treasury from 1789 to 1795 during the presidency of George Washington.

I knew little about Alexander Hamilton’s contribution to American economic policy before reading Samuel Gregg’s book, The Next American Economy: Nation, State, and Markets in an Uncertain World, 2022. Gregg suggests that America faces a choice between a form of state capitalism – top-down interventionism focused on achieving political objectives such as greater economic security for specific groups and “national security” – and a free market economy. He argues that in making the case for free markets it is helpful to take another look at the ideal of a modern commercial republic as espoused by Alexander Hamilton.

Centralization of powers

Prior to reading Gregg’s book, I knew that Hamilton had argued successfully for greater centralization of government powers than prevailed in the original confederation. On that basis, I had entertained the idea that he might possibly have been responsible for much that is wrong with the U.S. today.

Gregg presents a more positive view of Hamilton’s contribution. He suggests that integration of the states into a more unified commercial republic made it easier for Hamilton to apply principles of free trade among the states and between the U.S. and other countries.

Gregg’s line of reasoning poses a challenge both to libertarian globalists, who see national governments as the source of barriers to the functioning of free markets, and to economic nationalists who want governments to prevent foreign economic competition because they see it as a threat to national sovereignty. He challenges libertarian globalists by suggesting that “failure by the government to smooth the economic ups and downs which are part of life in a market economy risks opening the door to political movements that have no particular regard for human freedom”. He challenges economic nationalists by suggesting that tariffs and other measures that protect of American industry from foreign competition are harmful to Americans.

 It isn’t necessary for libertarian globalists, like myself, to abandon utopian thinking in order to see merit in effective unilateral action by national governments to promote free trade. At a national level, the case for free trade rests on it providing individual citizens and their descendants with the prospect of better opportunities than would otherwise be available to them.

To eliminate the excesses of statism, it is necessary for political leaders to exercise statecraft (or what Adam Smith and David Hume referred to as “the science of the legislator”). As Gregg puts it Smith and Hume recognized that:

 “the knowledge furnished by … integration of moral, political, and economic inquiry needed to be brought to bear upon society by statesmen and governments in the interests of its improvement”.

Gregg notes that although Edmund Burke’s involvement in economic policy was “attuned to political realities” he leaned strongly towards promoting greater commercial freedom within Britain’s empire and between Britain and other nations.

America’s Founding Fathers, including Alexander Hamilton, were also influenced by Adam Smith and David Hume.

Hamilton’s vision of a commercial republic

Samuel Gregg explains how Hamilton advanced his vision of a commercial republic in his contributions to the Federalist Papers and in his role as secretary to the Treasury. Hamilton’s vision of a modern civilized nation combined republican government and a private enterprise economy, with merchants subject to the discipline of competitive markets. He hints that character traits that make for commercial success – industry, innovation, economy, self-restraint, honesty, prudence – are also republican virtues.

Hamilton argued for free trade between the states and for revenue tariffs only on international trade. He suggested that tariffs “force industry out of its more natural channels into others in which it flows with less advantage”. He maintained that trade policy should be driven by national interest and was adamantly opposed to use of trade sanctions as an instrument of foreign policy.

What next?

Samuel Gregg ends his book by acknowledging that he doesn’t know whether there is a real possibility that an American commercial republic could emerge to shape America’s future. He hopes that it could on the basis that he can “see no reason why America cannot embrace the habits, incentives, and disciplines associated with markets while also grounding them in the language, norms, and virtues of the American experiment”.

Since 2022, when Gregg’s book was published, it has become clearer that the U.S. is likely to continue, for a few more years at least, down the path towards greater international trade protectionism.  The choice that the two major political parties are offering voters in the 2024 presidential election certainly does not include a candidate offering an alternative to higher trade barriers.

Unfortunately, the adverse impacts of increased trade protectionism in the U.S. cannot be guaranteed to result in a strong impetus for policy reversal. The U.S. economy is sufficiently large and diverse that increased barriers to international trade are likely to have relatively minor adverse impacts by comparison with those that would occur in most other countries if they followed similar policies.

It looks to me as though trade liberalisation is unlikely to occur in the U.S. until influential politicians come to see merit, from a foreign policy perspective, in supporting multilateral efforts to encourage trade among countries that have more than minimal regard for free market principles.

Meanwhile, Samuel Gregg’s book will hopefully be widely read in other countries where some current political leaders may be more receptive to Alexander Hamilton’s vision of a commercial republic based on free market principles.

Conclusion

Samuel Gregg’s book, The Next American Economy, urges Americans to adopt the ideal of a modern commercial republic, as originally espoused by Alexander Hamilton. Hamilton argued for the U.S. to adopt, unilaterally, the principle of free international trade on the grounds that this would serve the economic interests of Americans and promote republican virtues.

Unfortunately, American political leaders do not currently seem to be in the mood to re-endorse Hamilton’s vision of a modern commercial republic.

Hopefully, Gregg’s book will be widely read in other countries where some political leaders may be receptive to messages about the contemporary relevance of the role that free market polices played at an early stage in the economic and social development of the United States.

Addendum

A year has passed since I suggested: "The U.S. economy is sufficiently large and diverse that increased barriers to international trade are likely to have relatively minor adverse impacts ...". A year ago, I had no idea that the 2nd Trump administration would generate so much uncertainty about future tariff levels, or that it would raise tariffs to such an extent that it might start a trade war. 

I expect that the tariffs imposed by the 2nd Trump administration will have substantial adverse impacts on the U.S. economy, particularly during the next couple of years while the economy is adjusting to these new price distortions. The price increases resulting from the tariffs is likely to generate expectations of higher inflation that the Fed will presumably try to contain via tighter monetary policy. That would be likely to result in a recession even without taking account of the impact of foreign retaliation on U.S. exports. 

It now does seem possible that the Trump tariffs might have a sufficiently large adverse impact on the U.S. economy to generate political pressure for some kind of policy reversal.

What makes a narrative good?

 

I asked myself the question posed above as I was reading Michèle Lamont’s book, Seeing Others, How to Redefine Worth in a Divided World. The passage quoted below seems central to Michèle Lamont’s book:

“The hegemony of the American dream manifests in the emphasis Americans put on neoliberal virtues of material success, self-reliance, individualism, entrepreneurialism, and competitiveness. These criteria of worth have gained more and more influence as “models of ideal selves,” and encourage many to internalize blame for the increasing precarity of their lives. This model can also lead people to seek out a scapegoat group to blame.” (p 31)

Those sentences seem to suggest that neoliberalism encourages people to either internalize blame for misfortune or to seek scapegoat groups to blame.

Internalizing blame

The author doesn’t explain why she believes neoliberalism can cause people to “internalize blame for the increasing precarity of their lives”, but she lists several references in the notes section which may support her claims. The one which seems likely to be most relevant is an article by Glen Adams, Sara Estrada-Villalta, Daniel Sullivan, and Hazel Rose Markus entitled ‘The Psychology of Neoliberalism and the Neoliberalism of Psychology’, Journal of Social Issues 75 (1), 2019.

Adams et al use the term ‘neoliberalism’ to refer to an economic and political movement that came to prominence in the late 1970s, advocating “deregulation of markets and free movement of capital with an emphasis on fluidity and globalization”. Such usage of ‘neoliberalism’ to refer to advocacy of free markets is now common, even though the term was once generally understood to refer to advocacy of left-leaning policies, e.g. a ‘social market economy’, rather than free markets. Like most advocates of free markets, I would prefer to be referred to as a classical liberal or libertarian, but I can usually assume that I am among good company when I am labelled as a neoliberal.

The authors argue that neoliberalism encourages “an entrepreneurial approach to self as an ongoing development project, an imperative for individual growth and personal fulfillment, and an emphasis on affect regulation”. I don’t object to that characterisation. It describes some aspects of the approach to human flourishing in Part III my book, Freedom, Progress, and Human Flourishing.

However, the authors suggest that neoliberalism also supports psychological “responsibilization” - an ugly word for an ugly concept. The claim they make is that neoliberals advocate that individuals should not only accept personal responsibility for problems which it may be possible to ameliorate through behaviour change (such as obesity and substance abuse) but also to accept responsibility for misfortune more generally.

Neoliberals argue that free markets tend to reward individual effort, but that doesn’t mean that they believe that economic misfortune is always attributable to lack of individual effort. In fact, one of the characteristics of neoliberalism is recognition that social problems of poverty, unemployment etc. are often attributable to foolish government economic policies that are opposed to economic freedom.

I don’t know any neoliberal who would suggest that individuals should “internalize blame” for any disruption of their lives associated with innovation and competition. Neoliberals are more likely to suggest that people who lose jobs or other remuneration because of the disruptive impact of innovation and competition should view such setbacks as beyond their control. The potential for such setbacks is a price that previous generations have willingly paid to enable to enable their descendants to enjoy the benefits of economic growth. Deirdre McCloskey – a prominent classical liberal – has coined the term, ‘bourgeois deal’, to refer to the willingness of people to accept the potential for their lives to be disrupted by innovation and competition in exchange for ongoing expansion of economic opportunities. (See Bourgeois Equality.)

I doubt that many psychologists would suggest that their clients should “internalize” blame for all the bad things that happen to them. When psychologists suggest that individuals should take responsibility for their lives, I am sure that the vast majority would mean that individuals should focus on taking personal responsibility for problems that are within their locus of control.

Who is responsible for the scapegoat narrative?

It took me some time to work out why Michèle Lamont believes that neoliberalism encourages people to seek out scapegoat groups to blame for misfortune. Her reasoning evidently has more to do with her belief that Donald Trump is a neoliberal than with the beliefs of neoliberals.

On the page following the passage quoted above, Lamont writes: 

“From Ronald Reagan to Donald Trump, neoliberalism has come to be understood as a precondition for a successful society”.

I believe that free markets help societies to become and remain successful, but it is hard to understand how anyone could perceive Donald Trump to be an advocate of that view. While in office, Trump administered the final blow to the “neoliberal consensus” on international trade that characterised the post-Cold War period, and he currently favors further restrictions on international trade and international movement of labor.  

Lamont’s claim that neoliberalism encourages people to seek out scapegoat groups to blame seems to rest on the behavior of Donald Trump. She observes that in 2015 former president Trump advanced a false narrative in which immigrants from Mexico were rapists and drug dealers. (pp 51-2). During the 2016 campaign Trump appealed to “America’s forgotten workers” by recognizing their plight and “by blaming globalization and immigration for it”. (p 70)

Lamont also suggests that Trump provided “an empowering narrative” for the working class “who are often perceived as “the losers of the system”. (p 165). Early in the book, she notes:

“Instead of depicting ‘everyday Americans’ as ‘deplorables’, as Hillary Clinton was perceived to do in the 2016 presidential campaign, her opponent Donald Trump affirmed their worth in his various electoral speeches, explaining their loss of social status as a result of globalization and immigration.” (p 8)

Lamont’s narrative

The title of Lamont’s book, “seeing others”, refers to “acknowledging people’s existence and positive worth, actively making them visible and valued, reducing their marginalization, and openly integrating them into a group”. (p 6) She suggests that having one’s sense of worth affirmed “is a universal need that is central to our identity as human beings and our quality of life”. (p 7) She urges that we “bridge boundaries with those who are different” via “ordinary universalism”, or “emphasizing similarities over differences”. (p 144)

I don’t object to those sentiments, and I doubt whether many other neoliberals would either. It is certainly appropriate to recognize that ordinary universalism can be “a vital counterweight” to “Nationalist populism, Islamophobia, and xenophobia” which “are on the rise in many countries”. (p 146) As an advocate of ordinary universalism, however, I think it is unfortunate that the author was not sufficiently “inclusive” to recognize that anti-Semitism also belongs on that list.  

I also object to the idea that “individualist approaches” to improving wellbeing “may harm more than they help, since they pull people’s attention away from more meaningful efforts”. (p 48) The author seems to be suggesting that excessive attention is given to approaches that help individuals to improve their assessments of their own worth. Instead, she urges:

“We need to ask ourselves hard questions about how we decide who matters and what we can do to create a more inclusive society.”

It seems to me that people who are lacking in regard for their own worth are unlikely to make a positive contribution to ensuring that the worth of others is appropriately recognized.

Much of the book is devoted to a discussion of how it is possible to change hearts and minds in order to reduce stigmatization of marginalized groups, and thus build a more inclusive society. That discussion is largely beyond the scope of this essay.

In Chapter 7, however, the author discusses the result of a survey of the attitudes of Gen Z students (aged 18 to 23). She seems a little perplexed that Gen Z tend to “embrace some neoliberal ideals – hard work and success” but is pleased that they “combine personal professional aspirations with the promotion of collective well-being”.

The author claims that apart from “the wealthiest of the wealthy” every other group “finds itself reeling from an onslaught of difficulties, disappointments, and anxieties, grasping for dignity and stability”. (p 47) That is implausible and seems at odds with her message about destigmatization of marginalized groups. However, it fits well with another theme of Lamont’s narrative.   

As already mentioned, Lamont suggests that Trump provided “an empowering narrative” for the working class. She suggests that the Democratic party should counter that with “messages of solidarity and dignity”:

“Redirecting working class anger toward the one percent is more likely to sustain fruitful alliances than driving wedges between diverse categories of workers who have so much in common.” (p 159)

Is Lamont’s narrative good?

It seems to me that appropriate criteria to consider whether a narrative is good include whether it encourages ethical behaviour and whether it is factually accurate.

Regarding ethical behaviour, Michèle Lamont seems to be seeking to “mobilize” good narratives when she suggests:

“We engineer our world together by mobilizing narratives that expand recognition of who is worthy.”

Leaving aside engineering, the message she is attempting to convey seems to be that narratives have a role in reinforcing the ethical intuition that we should respect other humans and behave with integrity toward them, irrespective of gender, sexual preference, race, nationality, religion, wealth, social status, political affiliations etc. I am not entirely convinced that she would include ideological opponents among those who are “worthy”, but she does acknowledge that “it is worth trying to understand even people we may strongly disagree with”. (p 159).   

On the question of factual accuracy, Lamont’s narrative, which suggests that the workers have reason to be angry with the wealthy one percent, seems to me to be just as questionable as Donald Trump’s narrative which suggests that the workers have reason to be angry about globalization and immigration. Neither of those narratives promotes an accurate understanding of economic reality.  

Conclusion

In this essay I have examined Michèle Lamont’s narrative that neoliberalism encourages people to either internalize blame for misfortune or to seek scapegoat groups to blame. My conclusion is that her claim that neoliberalism encourages people to internalize blame is baseless. Her claim about seeking to blame scapegoat groups seems to be based on the false belief that Donald Trump is a neoliberal.

Good narratives should encourage ethical behaviour and be factually accurate. One of Lamont’s objectives in this book seems to be to “mobilize” good narratives that reinforce the ethical intuition that we should behave with integrity toward all other humans. However, the factual accuracy of her narrative that workers have reason to be angry with the wealthy one percent is highly questionable. If accepted by governments that approach would encourage unethical redistributions of incomes and further dampen incentives that are essential to the ongoing growth of widespread economic opportunities.

How do democratic institutions survive in Papua New Guinea?

 

In countries with endemic law and order and corruption problems, outbreaks of rioting and looting often lead to military dictatorship, or some similarly authoritarian style of government.

However, I don’t think many people expect the recent outbreak of rioting and looting in Port Moresby and other major cities in Papua New Guinea (PNG) to result in authoritarian government. In the 50 years since it gained independence from Australia, PNG leaders have muddled through several major crises without resort to authoritarianism. Local leaders, including military leaders, have generally displayed little appetite for radical change. They have responded to major crises by seeking to uphold the PNG constitution. Responses to the Sandline crisis of 1997 are a prime example.

The Sandline crisis

In January 1997, the PNG government approved a contract to engage Sandline International – a firm employing mercenary soldiers – to neutralize the Bougainville Revolutionary Army (BRA). The aim of the exercise was to reopen the Panguna copper mine which had been shut down in 1989 as a consequence of BRA activities seeking Bougainville’s independence from PNG.

General Jerry Singirok, the commander of the PNG defence force, did not believe that the proposed Sandline operation would succeed, and was concerned that it might result in mass civilian casualties. He also believed that the Sandline contract was unconstitutional. He resolved to expel the mercenaries from PNG before they were able to begin military activities on Bougainville. To achieve that objective, Singirok and some trusted colleagues devised and implemented Operation Rausim Kwik. The operation received overwhelming public support in PNG.

I don’t propose to present my view on whether Jerry Singirok did the right thing. I encourage readers of this blog to make up their own minds after reading Singirok’s recently published book, A Matter of Conscience: Operation Rausim Kwik. I enjoyed reading the book. It was given to me for Christmas by one of my brothers, who lives in PNG. As well as discussing the matters of conscience that Singirok had to consider, it provides an exciting account of the planning and implementation of this secret military operation.

My purpose in the remainder of this essay is to sketch out how the Sandline contract and Rausim Kwik were viewed in Australia, and to offer some additional thoughts about PNG institutions.

Australian views of the Sandline crisis

As I remember, there was intense interest in the Sandline affair in Australia. News stories about mercenaries and mutiny always attract attention but the Sandline affair was of particular interest because of the proximity of PNG to Australia, PNG’s history as an Australian colony, and the large number of Australians who had lived and worked in PNG or had family living there.

As the former colonial power, the Australian government didn’t want to interfere overtly unless it became necessary for action to be taken to protect Australian citizens. The official reaction of the government could be described as hand-wringing.

Prior to the Sandline affair, Australian authorities had been trying to persuade their counterparts in Port Moresby that peace on Bougainville could only be achieved via a negotiated settlement. Support provided under the Defence Cooperation Program included a requirement that the helicopters provided could not be used as “gunships”, and other similar conditions. Sir Julius Chan, the PNG prime minister, claimed that it was Australia’s reluctance to provide adequate support that had led his government “to go to the private sector”.

The Australian government did not send a strong message to the PNG government about its opposition to employment of mercenaries in the region until after Jerry Singirok had taken action to arrest the Sandline executives. At that point the Australian PM, John Howard, sent three senior public servants to PNG to urge Sir Julius to cancel the Sandline agreement and deport the mercenaries. The emissaries threatened that Australia might not continue its aid program if the PNG government continued in the proposed use of mercenaries to put down the rebellion on Bougainville.

In his public address to the nation, Singirok reassured the public that he was not conducting a military coup. Nevertheless, he insisted that the government ministers involved should step aside pending a judicial inquiry into the hiring of Sandline.

I think there was as much concern in Australia about Singirok’s mutinous behaviour as about the PNG government’s employment of mercenaries. The actions of the military commander in preventing implementation of government policy seemed like a step in the direction of military dictatorship. Singirok notes that the Australian High Commissioner handed him a diplomatic note from Canberra stating among other things:

“We strongly believe that it is essential that the PNGDF obey the directives of the PNG government and cease any illegal or unconstitutional activity.”

However, I doubt that the Australian government’s hand-wringing had much influence in ensuring that the Sandline crisis ended peacefully.

PNG institutions

Some prominent PNG citizens helped to end the Sandline crisis by assisting negotiations between Singirok and Sir Julius Chan. Singirok was dismissed as commander of the PNG defence force, but his demands were met. The PM and two other ministers stepped aside while an inquiry was held. Normal constitutional processes were resumed.

Sean Dorney, an Australian journalist with over four decades of experience in reporting on Papua New Guinea, regards the professionalism of its defence force as one of PNG’s strengths. In his book, The Embarrassed Colonialist, published in 2016, he writes about the PNGDF under the heading: “A Developing Country’s Military With No Ambition to Rule”. He quotes General Toropo, who was then commander of the PNGDF, as saying that he cannot see a military coup ever happening in PNG because the PNGDF regards itself as a professional organisation and “has got beyond tribal and regional differences”. Dorney notes that prior to independence, Australia made a conscious effort to recruit soldiers from all around the country so that the defence force would not be dominated by a group from any one province or region.

Dorney has a less favourable view of the police force. He notes that a police department had not even been created until the decade before independence and suggests that inexperienced and untrained staff were major problems at that time. He notes that by international standards the size of the police force relative to population is very low in PNG.

The professionalism of the police force is obviously still a problem. The most recent bout of rioting and looting occurred after police went on strike because of a pay dispute. Hopefully, the increased foreign aid that Australia announced last year to police training etc. will be of some help in improving the professionalism of the PNG police force.

Improved policing is an obvious response to a law-and-order problem, but it may not be necessary to invest vast amounts of public money in crime deterrence in order to make the transition from a high to low crime society. In his book, The Enlightened Economy, Joel Mokyr points out that firm government enforcement of laws could not have played a major role in enabling Britain to achieve a low crime society. In the 18^th century, large parts of Britain were virtual “lawless zones” and in others, legal practice often deviated considerably from the letter of the law. Enforcement was largely a private enterprise with the courts at best serving as an enforcer of last resort. There was no professional police force. Daily law enforcement was in the hands of amateurs and part-time parish constables. Justice had to rely to a large extent on volunteers, local informers, vigilante groups and private associations specializing in prosecution of felons. Private law enforcement remained of substantial importance until well into the 19^th Century (pages 376-379).

The incentive to engage in crime depends on the alternative economic opportunities available to potential criminals as well as on the expected rewards of crime. The more general issue of what has been holding back the growth of economic opportunities in PNG, discussed previously on this blog, is relevant in this context.

Criminal activity has certainly been having an adverse impact on the growth of economic opportunities, and lack of economic opportunity has no doubt tempted more people to resort to crime. However, that does not necessarily make the problem intractable. One possible solution is for police to give highest priority to deterring the violence and theft that is having a major adverse impact on the economic opportunities of poor people.

The survival of democratic institutions in PNG does not seem to be seriously threatened by current levels of crime and corruption. There is a risk, however, that crime and corruption will reach a stage where criminal gangs directly threaten the survival of democratic institutions.  

Conclusions

Democratic institutions survive in Papua New Guinea because local leaders have generally responded to major crises by seeking to uphold the constitution. That was particularly evident in the Sandline crisis of 1997.

The PNG defence force has been aptly described as a developing country’s military with no ambition to rule. The defence force regards itself as a professional organisation that has “has got beyond tribal and regional differences”.

The professionalism of the PNG police force is more questionable. A more professional police force could help ameliorate PNG’s endemic law and order problems by giving highest priority to deterring the violence and theft that is having a major adverse impact on the economic opportunities of poor people.

The main risk to democratic institutions in PNG seems to me to lie in the potential for crime and corruption to expand to a point where criminal gangs take over the government.

Postscript

1. Noric Dilanchian has provided the following comment:

You've written a good article Winton.

As my only closely relevant background, in my last year in law school (1982) I helped a friend write her Law in Developing Societies course thesis about protests by indigenous people on Bougainville Island before the first major conflict.

Our conclusion then was that massive mining pollution and industry behaviour, among other factors I cannot remember, were conducive for societal collapse. It then happened.

I was also reflecting on your thinking in light of three books I read late in 2023 on the 20th century history of Iran. There a central problem was that the royal rulers always sought exclusive rule-supporting control over the armed forces. That had very bad consequences. As for the police in cities, they performed the connected with elites thug role comparable to and evident in Sydney during and before Premier Robert Askin's administration (1965-1975).

2. Pat Green wrote:

If I could draw comics, I would draw a helicopter way up in the sky, and attached to it is a silhouette of PNG. Hanging up high on the rope is a bunch of politicians cutting the rope above their heads with a big tramontina that has "idependence" etched on it.

There is no future in the current system. 

Why were Australian Aborigines still hunter-gatherers in 1788?

Some readers may think this question is based on a false premise. So I will begin by considering the claim that Australian Aborigines were farmers rather than hunter-gatherers before 1788 when Britain established a penal colony in New South Wales.

The Dark Emu debate

 In 2014, Bruce Pascoe published the book entitled Dark Emu in which he argued that, in contrast to what most Australians believed, Aboriginal people were engaged in farming at the time British rule was

established. Unfortunately, Pascoe’s view remains influential despite having been debunked by Peter Sutton and Keryn Walshe in their book, Farmers or Hunter-Gatherers? which was published in 2021.

Sutton and Walshe acknowledge that the 1788 economy was somewhere between simple hunter-gathering and agriculture. They argue:

“Referring to certain regionally specific Aboriginal economic practices as ‘incipient agriculture’, as ‘proto-agriculture’ or as being at ‘an early stage in the development of agriculture’ is to suggest an unfulfilled developmental journey. We seek here to avoid this deficit model of the Old People, which is why we prefer the term ‘hunter-gatherers-plus’. It describes people accurately without attempting to place them in some supposed one-directional evolutionary scheme.”

Sutton and Walshe suggest that the hunting and gathering economy in pre-colonial Australia was as complex as gardening or farming. Even though it did not require deliberate planting of crops, it required fine-grained knowledge of hundreds of species and their habitats, annual cycles, names and generic classifications; of methods for processing them and for preparing them as food, as tools, as bodily decoration, and as ritual paraphernalia.

As documented by Sutton and Walshe, the hunting and gathering lifestyles of Australian Aboriginals does not conflict greatly with what I remember being taught about at school over 50 years ago. I think the main deficiency in the impression I gained was excessive emphasis of the role of British pioneers in clearing wilderness, and insufficient attention to the role of Aborigines in using slow-burning fires to make the landscape more suitable for kangaroos and other grazing animals. 

Bill Gammage’s book, The Biggest Estate on Earth (2012) made it abundantly obvious that European pastoralists did not need to make huge improvements to the land to make it suitable for grazing of sheep and cattle. Gammage compiled numerous descriptions of the landscape written by explorers and settlers and his book contains many landscape paintings made at the time of invasion/settlement.

The painting by Joseph Lycett at the top of this article shows people and scenery in about 1820, somewhere near Newcastle (possibly Eleebana on Lake Macquarie, close to where I currently live). Lycett was a convict who had been convicted of forgery. The local authorities made good use of his skills by encouraging him to paint what he saw.

What prevented Aborigines from farming?

 Sutton and Walshe make it clear that Aborigines were botanically knowledgeable. It was not lack of knowledge that prevented Aborigines from farming:

“Knowing—as the Old People did full well—that plants grew from seeds and tubers, ignorance played no role in this rejection of farming. It was cultural resistance, and loyalty to their own ways.”

Sutton and Walshe note that Aborigines in northern Australia adopted some of the cultural practices of Torres Strait people but did not adopt their horticultural practices. They also note that British settlers “tediously and repeatedly” claimed that many of the Aborigines they encountered were “averse to hoeing, weeding and planting”.   

The Aboriginal aversion to farming seems to have been associated with religion. They saw the practical aspects of obtaining food as “inseparable from their commitment to a spiritual understanding of the origin of species, to conservative values in relation to change, and to a cosmology in which economics had to be in conformity to ancestral authority”. In their way of thinking, the combination of “spiritual propagation” and practical resource management made farming unnecessary.

Sutton and Walshe explain the concept of “spiritual propagation” as including speaking to the spirits of ancestors and other rituals at species-related sites, maintaining a rich system of totems for various species, and handling food resources with reverence. They provide examples of the ways in which spiritual maintenance and practical resource management combined to characterise “the classical Aboriginal economy” in different parts of the country.

My response to the question posed at the outset is that Australian Aborigines were still hunter-gatherers in 1788 because they did not have strong incentives to adopt different lifestyles. By today’s standards their pre-1788 societies were not idyllic, but a stable equilibrium seems to have evolved in which change-resistant cultural practices had become embedded.

That is only a partial answer to the question of why Australian Aborigines did not become farmers. At some stage in the past, people not far away had also been hunter-gatherers before adopting farming practices. They must have faced different incentives. Perhaps their cultures evolved to become less hierarchical, providing greater scope for innovative individuals to try new ways of doing things. Perhaps they had an incentive to begin farming because population pressures were a greater problem for them. If so, that raises further questions. For example: Was climate change a greater problem in the regions in which they lived? Was their mobility restricted in some way to make a hunting and gathering lifestyle impossible to sustain?

Conclusion

 Prior to the establishment of a British colony in Australia in 1788, the lifestyles of Australian Aborigines can best be described as complex hunter-gathering. Their lifestyles required at least as much botanical knowledge as does simple gardening or farming.

 Lack of botanical knowledge certainly does not explain why Aborigines did not become farmers. Peter Sutton and Keryn Walshe suggest that Aborigines had an aversion to farming that stemmed from their religious beliefs. As Aborigines saw it, the combination of spiritual propagation of species and practical resource management made gardening or farming unnecessary.

Aborigines were still hunter-gatherers in 1788 because they did not have strong incentives to adopt different lifestyles. A stable equilibrium seems to have evolved in which change-resistant cultural practices had become embedded. However, that leaves open the question of why people living nearby on Torres Strait islands had stronger incentives to adopt gardening practices.