William Easterly talks about it in terms of the tyranny of experts which forms the better part of his 2014 book's title, The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor. A long time critic of top down development assistance, Easterly has taken a broader and more abstract view of development economics in this latest work. The tyranny of which he speaks lies in the development community's prioritization of improvements in material well being over improvements in individual freedom and its embrace of benevolent autocrats as the most effective means of achieving this.
While there is a lot of meat on the bones of his book to chew on, one point he made seems particular relevant (at least to me). Easterly argues that changes in economic freedom can be more important in driving high economic growth than the absolute levels of freedom in a country. Therefore, a country may be less free than others but still experience higher economic growth than these freer nations if the less free country is freer than it used to be. After all an internal reform should unlock hitherto untapped economic opportunities and, thus, provide a new impetus to economic growth.
In Easterly's view, this sheds a new light on China's economic boom. While China is decidedly less free than many other countries, it has been undergoing a major liberalization of individual economic rights since 1978. So, while China may appear less free and more autocratic in cross-country comparisons, it is markedly more free and less autocratic in a cross-time comparison with itself. Therefore, rather than being a case in support of the idea that autocratic regimes are good for economic development, China is a case in support of the idea that increasing freedom and lessening autocratic control of the economy is good for economic development. (If that didn't strike you as significant, read it again.)
While Easterly does not explicitly argue the opposite point, that a decrease in freedom may harm economic growth even if a country is still relatively free in comparison to other nations, it may be that this opposite is also true. This brings to mind the case of Venezuela, which touts itself as a socialist nation and looks to China for inspiration and support. Venezuela rates a freedom rating of 5 (Partly Free) on Freedom House's Freedom in the World Index, which is slightly better than China's 6.5 (Not Free) rating. However, ten years ago, Venezuela had a rating of 3.5, and so has been on a downward trajectory. Indeed a rating of 5 is on the cusp of being in Freedom House's Not Free category.
Of course, China has been consistently at 6.5 on Freedom House's 7 point scale since the think tank started publishing the index in 1998. This is not surprising since China's major reforms predate this period and Freedom House looks primarily at political, not economic freedoms.
For a measure of economic freedom, we can turn to the Heritage Foundation's Index of Economic Freedom. The Heritage Foundation provides a graph of China's vs Venezuela's rating on economic freedom from 1995 to 2014 (which has resisted my attempts at embedding here, so you need to follow the link). The graph shows that economic freedom in China has been largely flat lined at between 51 and 56 point on Heritage's 100 point scale (though there was a small uptick from 1997-2000) while economic freedom in Venezuela has been trending downward since 2003, dropping from 55 to 36 points. Again this data set does not encompass China's reforms from 1978 to 1995 and is not capturing the biggest reforms in their economy. However, the lack of improvement in China's rating may explain the slowdown in Chinese economic growth and support a prediction of lower growth in the future.
With regard to Venezuela, we see that economic freedoms (as measured by the Heritage Foundation) have been deteriorating over the past decade, both in comparison with the country itself and it's supposed role model, China. Indeed, it is interesting to note that when we switch from an index of political freedom to one of economic freedom, Venezuela goes from the middle of the pack on the former index to fourth from the bottom on the latter (only Cuba, Zimbabwe and North Korea rate lower on Heritage's index). Since the point here is to emphasize cross time comparisons, Venezuela went from the Mostly Unfree category (which included no fewer than 60 out of 175 nations in 2014) on Heritage's index to the Repressed category (a more exclusive club of 27 nations in 2014).
It should be said that we need to avoid relying too much on Heritage Foundation's overall index as it aggregates no less than 10 separate sub-indexes of what the Heritage Foundation considers to be freedoms. Some of these sub-indexes may be more valid than others in capturing what Easterly means by freedom (such as Business Freedom, Property Rights and Labor Freedom) than others (such as Government Spending, Monetary Freedom and Investment Freedom), again as defined by the Heritage Foundation.
Furthermore, to the extent that the Heritage Foundation espouses what is pejoratively referred to as Neo-Liberal ideology, we need to be doubly careful in our use of their data. Indeed, if one subscribes to the notion that the embrace of Neo-Liberalism (or what Dani Rodrik calls Hyperglobalization) was harmful to economies (especially in Latin America) , we might expect to see increases in the Heritage Foundation's index preceding decreases in economic growth in those cases.
With these caveats in mind, I think that Easterly's idea survives first contact with data and is useful for evaluating development efforts. Of course, there are many more ideas from Easterly to come.
For a measure of economic freedom, we can turn to the Heritage Foundation's Index of Economic Freedom. The Heritage Foundation provides a graph of China's vs Venezuela's rating on economic freedom from 1995 to 2014 (which has resisted my attempts at embedding here, so you need to follow the link). The graph shows that economic freedom in China has been largely flat lined at between 51 and 56 point on Heritage's 100 point scale (though there was a small uptick from 1997-2000) while economic freedom in Venezuela has been trending downward since 2003, dropping from 55 to 36 points. Again this data set does not encompass China's reforms from 1978 to 1995 and is not capturing the biggest reforms in their economy. However, the lack of improvement in China's rating may explain the slowdown in Chinese economic growth and support a prediction of lower growth in the future.
With regard to Venezuela, we see that economic freedoms (as measured by the Heritage Foundation) have been deteriorating over the past decade, both in comparison with the country itself and it's supposed role model, China. Indeed, it is interesting to note that when we switch from an index of political freedom to one of economic freedom, Venezuela goes from the middle of the pack on the former index to fourth from the bottom on the latter (only Cuba, Zimbabwe and North Korea rate lower on Heritage's index). Since the point here is to emphasize cross time comparisons, Venezuela went from the Mostly Unfree category (which included no fewer than 60 out of 175 nations in 2014) on Heritage's index to the Repressed category (a more exclusive club of 27 nations in 2014).
It should be said that we need to avoid relying too much on Heritage Foundation's overall index as it aggregates no less than 10 separate sub-indexes of what the Heritage Foundation considers to be freedoms. Some of these sub-indexes may be more valid than others in capturing what Easterly means by freedom (such as Business Freedom, Property Rights and Labor Freedom) than others (such as Government Spending, Monetary Freedom and Investment Freedom), again as defined by the Heritage Foundation.
Furthermore, to the extent that the Heritage Foundation espouses what is pejoratively referred to as Neo-Liberal ideology, we need to be doubly careful in our use of their data. Indeed, if one subscribes to the notion that the embrace of Neo-Liberalism (or what Dani Rodrik calls Hyperglobalization) was harmful to economies (especially in Latin America) , we might expect to see increases in the Heritage Foundation's index preceding decreases in economic growth in those cases.
With these caveats in mind, I think that Easterly's idea survives first contact with data and is useful for evaluating development efforts. Of course, there are many more ideas from Easterly to come.
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