Markets, Law, and Democracy

What passes for a market economy in many of the countries that abandoned communism in the last decade has offered a sorry spectacle: In Russia, it has produced few material benefits for the majority of citizens. Their levels of health care, life expectancy, education, and economic security have all declined. In China, the transition to a freer economy has produced some striking material gains, in part because the starting point was so low and in part because a ruthless suppression of political liberties has underwritten a measure of social stability and order. Russia and China may be cited as models of bandit and tyrant capitalism, respectively. Of the smaller states that have emerged from the wreckage of the Soviet empire, few have been unqualified successes, and most have been plagued to some degree with the bandit mentality that afflicts Russia in a more extreme form. Undoubtedly, Václav Havel was correct to warn that a half-century or more of communism had degraded the human spirit so thoroughly that privatization, property rights, and even the recognition of basic political and personal liberties could not quickly reproduce in those ravaged lands the lineaments of a functioning liberal democracy. ¹

If we ask what is missing in either bandit or tyrant capitalist societies (in the way a physician studies the pathological in order to understand the healthy constitution), we will be led to those presuppositions of a healthy liberal market democracy so basic that they are almost invisible. The pathology that casual observers and critics of bandit economies have tended to emphasize is a crushing disparity between the situation of the many and the few. The focus on income inequality, however, obscures deeper truths, falsely suggesting that income equality is both necessary and sufficient to a well-ordered society. This fallacy leads many to treat the attainment and maintenance of income equality as the overriding virtue of the good society, and to be willing to sacrifice everything to its attainment and to suppress by all means anything that would disturb it.

This undue focus on equality deflects attention from the true goal of a good and well-ordered society: to offer every citizen a reasonable opportunity to define and attain his or her goals in life. This means a prosperous society. The few recent experiments in which societies have tried to create a good life for their citizens by deliberately suppressing prosperity (Pol Pot's Cambodia, Mao's Cultural Revolution) have been disasters. To be sure, they avoided prosperity, but they also crushed the human spirit with a brutality and totality unmatched by even the most corrupt, venal, and materialistic of regimes. The good society is also a prosperous society--not because material goods are an assurance of happiness, but because being productive for oneself, one's family, and one's fellow human beings is a natural expression of the active human spirit.

This definition of a good society may not seem, at first glance, to contradict the claims of tyrant capitalists. Their societies might permit infinitely varied opportunities for economic contracting (and thus engender economic prosperity), though without popular control over the mechanisms of government. Indeed, Hong Kong under Chinese rule may currently embody just such a compromise. Defenders of tyrant capitalism sometimes posit "Asian values" that are said to justify diminished individual political liberty in the name of increased collective wealth. Yet in the end, no matter what their geographic locale, tyrant capitalists defend their power-grabs by variants of the same slogan: The poor prefer bread to the ballot.

I believe that this general defense of tyrant capitalism fails for two interrelated reasons. First, as argued above, the true goal of society is to facilitate the independent choices of its constituent members. Even the desperately poor recognize that these choices cannot be restricted to the economic realm. Indeed the boundaries of the economic are not all that clear: Consumer choice is not free if it does not extend to the books and newspapers one may read, and...