Different drummers and economic prosperity

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James Peron | President | Moorfield Storey Institute | Contributing Author | Free Market Foundation | mail me |


Because of its illiberal and authoritarian policies the choice of Qatar for the World Cup created a lot of controversy. A repressive dictatorship itself, Qatari police had their hands full going after people from countries who actually believed they had a right to freedom of speech. 

On one hand the police waged war on supporters of rights for LGBT people, something Qatar itself represses, and on the other it tried to prevent women from standing up for Iranian women who are being beaten, raped and imprisoned in that sad country.

One video from Qatar showed women being forcibly removed from the stadium for daring to wear a shirt saying “Women, Life, Freedom.” Everyone remembers the Iranian players refusing to sing their national anthem in protest over the violent repression that is everyday life in Iran today – especially of women.

So, what does all this have to do with economics?

In simple terms you can’t have free markets without free people. Repression of groups of people, be they minorities or majorities, creates markets that are less efficient and less prosperous for everyone.

Repression not only makes the market less efficient but it destroys innovation - or limits it only to the ideas of those living privileged lives in a sea of repression. Prof. Lisa Cook, from the U.S. Federal Reserve Board of Governors explained, “If there is something that impedes the rate of arrival of ideas, you’re going to slow down the economy. It’s not just for that period and it’s not just for black people. This is a cautionary tale for all economies.”

Ms. Cook explored the role of violence against African-Americans under the American South’s version of apartheid – Jim Crow. In particular, she investigated the rise and fall in the numbers of new patents sought by Black inventors and compared them to the racial violence that was being inflicted by groups such as the Ku Klux Klan, the White Citizens Councils, and others – including Southern law enforcement.

She investigated the period from 1870 to 1940 and concluded:

The increase in scope and intensity of hate-related violence in the late 19th and early 20th centuries depressed patent activity among African Americans by 1% per year, or the equivalent of a year’s worth of African American patent activity. The gap between white and black patents per million was maximized in years of heightened violence …In general, by 1936, the effect of conflict indicators on patenting by blacks falls as conflict itself wanes.

Cook concluded patents “suggest that changes in personal security and the rule of law can shift the scale, quality, and direction of technological progress and economic activity.” Stifling individual liberty stifles innovation and when that happens everyone is poorer as a result.

Oscar Wilde discussed the diversity of individualism and called it a “disturbing and disintegrating force” but said this is why it has value. “It seeks to show new perspectives and other choices. It is a way to help expand and liberate the consciousness; our experiences, understandings, imaginings, options and thereby our lives.”

Innovation requires freedom for the innovators. The more classes of people who are treated as 2nd rate citizens the less innovation there will be. Yet, innovation benefits everyone including those who are waging war on the rights and liberties of oppressed classes of people.

The International Monetary Fund found an “uneven playing field between women and men comes at a significant economic cost as it hampers productivity and weighs on growth.” They noted barriers to women participating in markets “are costlier than suggested by previous research and the benefits from closing gender gaps are even larger than thought before. Policymakers should therefore focus on removing such barriers urgently.”

IMF researchers Christine Lagarde and Jonathan Ostry argued men and women are not merely interchangeable but often hold different perspectives, which are complimentary, not competitive. The result would be “adding more women to the labour force should bring larger economic gains than an equal increase in male workers.”

Paradoxically – which is often the case in economics – “men’s wages will also increase as a result of greater inclusion of women in the labour force since productivity will increase. This is important because these higher wages should strengthen support for removing barriers that hold women back from decent work.”

This complimentary perspective of men and women working together, I think, applies to all sorts of social diversity. Free societies create greater diversity and with more people “marching to a different drummer” the culture is not weaker, but stronger. In economic terms it means there are more perspectives and ideas floating about and ideas are the first step in achieving economic prosperity.

In the end it doesn’t matter where the repression of diversity originates – it may be cultural and imposed by social sanctions or it may be legally enforced by a crack on the skull from Morality Police. In the end it makes us all worse off economically. Not only do free markets help create free people but freer people lead to freer markets – creating greater prosperity for everyone.


 



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