Foundations of a Free Society Foundations of a Free Society EAMONN BUTLER The Institute of Economic Affairs First published in Great Britain in 2013 by CONTENTS The Institute of Economic Affairs 2 Lord North Street Westminster London sw1p 3lb in association with Profile Books Ltd The author 8 The mission of the Institute of Economic Affairs is to improve public understanding of the fundamental institutions of a free society, with particular Foreword by Ali Salman 9 reference to the role of markets in solving economic and social problems. Acknowledgements 12 Summary 13 Copyright © The Institute of Economic Affairs 2013 The moral right of the author has been asserted. 1 Introduction 17 The purpose of this book 17 All rights reserved. Without limiting the rights under copyright reserved above, How the book is set out 18 no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written 2 The moral and economic benefits of freedom 20 permission of both the copyright owner and the publisher of this book. A free society 20 The moral case for freedom 24 A CIP catalogue record for this book is available from the British Library. The economic case for freedom 31 ISBN 978 0 255 36687 8 eISBN 978 0 255 36691 5 3 The institutions of a free society 44 Many IEA publications are translated into languages other than English or Society without the state 44 are reprinted. Permission to translate or to reprint should be sought from the Why government must be limited 47 Director General at the address above. Ways to limit government 58 Setting the rules 64 Typeset in Stone by MacGuru Ltd [email protected] 4 Equality and inequality 67 Printed and bound in Britain by Hobbs the Printers Equality in a free society 67 Kinds of equality 68 5 5 Equality of outcome 75 9 The argument in brief 175 Equality and justice 80 The case for freedom 175 Further damage of egalitarianism 85 Limited government 175 Greater equality 176 5 Free enterprise and trade 89 A free economy 177 The free-market economy 89 Justice and the rule of law 178 How to grow rich 93 The spontaneous society 179 How markets work 99 A world of freedom 179 International trade 105 Select bibliography 181 6 Property and justice 110 Private property 110 About the IEA 184 The rules of justice 115 The rule of law 121 Human rights 126 7 The spontaneous society 130 Order without commands 130 Toleration 134 The problem of altruism 144 8 Privatisation and globalisation 150 Migration and technology 150 Growing a free society 151 Property rights in action 153 Human services without government 161 Globalisation and trade 168 The importance of peace 172 THE AUTHOR FOREWORD Eamonn Butler is director of the Adam Smith Institute, a Economic and political crises have often led to attacks on leading policy think tank. He has degrees in economics, philos- freedom. During the Great Depression all the major economies ophy and psychology, gaining a PhD from the University of St restricted trade by raising tariffs. This knee-jerk reaction only Andrews in 1978. During the 1970s he worked for the US House aggravated geo-political tensions and further increased economic of Representatives, and taught philosophy at Hillsdale College, hardship. The emergence of radical socialist regimes led to total Michigan, before returning to the UK to help found the Adam oppression of civil, political and economic liberties in half the Smith Institute. In 2012 he was awarded an Hon DLitt by the world. Edinburgh Business School. He is currently Secretary of the Mont More recently, the events of 9/11 and the US reaction have set Pelerin Society. in motion policies that have sacrificed freedom in an attempt to Eamonn is author of books on the pioneering economists increase security. Similarly, the global financial crisis that began Milton Friedman, F. A. Hayek and Ludwig von Mises, and a in 2008, and which was also germinated on US soil, has been primer on the Austrian School of Economics. For the IEA, he has followed by increasing controls, regulations and protections. written primers on Adam Smith, Ludwig von Mises and public Instead of relying on the creative destruction principle of free choice theory. He is co-author of a history of wage and price markets, governments on both sides of the Atlantic have used controls, and of a series of books on IQ. His recent popular publi- huge amounts of taxpayers’ money to bail out failing businesses. cations, The Best Book on the Market, The Rotten State of Britain and Threats to freedom abound. A quarter of a century ago, the The Alternative Manifesto, have attracted considerable attention, world embraced ‘glasnost’ in the Soviet Union and then cele- and he is a frequent contributor to print and broadcast media. brated the fall of the Berlin Wall. But new challenges have now emerged in the form of neo-nationalism in Europe and radicalism in the Middle East. Both trends will reduce freedom if they go unchecked. In Europe, this reversion to nationalism, and even racism, is taking place despite a relatively high degree of political freedom – a functioning democracy exists. In the Middle East, the 8 9 foundations of a free society foreword rise of religious radicalism is less surprising – neither market nor The views expressed in this monograph are, as in all IEA publi- democracy is in good shape. cations, those of the author and not those of the Institute (which Despite these problems, individuals in the 21st century are has no corporate view), its managing trustees, Academic Advisory in many respects freer than their predecessors in the previous Council members or senior staff. With some exceptions, such as century. The information and communication technology revolu- with the publication of lectures, all IEA monographs are blind- tion has brought down all kinds of barriers. In China, for example, peer-reviewed by at least two academics or researchers who are Li Chengpeng is a prominent writer and social critic: his Sina experts in the field. Weibo blog has nearly six million followers. And, during the Arab Spring, social media helped bring about widespread political and social progress. If information is power, then information tech- nology has empowered the individual. Geographical boundaries remain, but they are becoming increasingly irrelevant. In this context, the publication of Eamonn Butler’s monograph could not be more timely. Foundations of a Free Society is a welcome addition to the family of modern primers on liberty. Butler’s unique skill lies in his ability to express complex and highly influ- ential ideas in plain English. He also successfully undermines the arguments of critics and opponents with real-world examples that illustrate his ideas and support the theoretical arguments. This Occasional Paper is therefore an excellent introductory text for those who would like to understand the basic principles of a free society. It will be particularly helpful for those promoting freedom in countries where these principles remain largely unknown, as well as for those protecting freedom in places where traditional liberties are under assault. ali salman Founder and Executive Director, Policy Research Institute of Market Economy (PRIME), Islamabad, Pakistan September 2013 10 11 ACKNOWLEDGEMENTS SUMMARY Special thanks are due to Nigel Ashford, who has allowed the • Freedom creates prosperity. It unleashes human talent, author to borrow heavily many ideas from his own book Prin­ invention and innovation, creating wealth where none existed ciples for a Free Society. Other helpful sources have included H. before. Societies that have embraced freedom have made B. Acton’s The Morals of Markets, J. S. Mill’s On Liberty, Madsen themselves rich. Those that have not have remained poor. Pirie’s Freedom 101, Richard Wellings’s A Beginner’s Guide to • People in a free society do not become rich by exploiting Liberty, Ernest Benn’s Why Freedom Works and Tom Palmer’s The others, as the elites of less-free countries do. They cannot Morality of Capitalism. become rich by making others poorer. They become rich only by providing others with what they want and making other people’s lives better. • The chief beneficiaries of the economic dynamism of free societies are the poor. Free societies are economically more equal than non-free societies. The poor in the most-free societies enjoy luxuries that were undreamed of just a few years ago, luxuries available only to the ruling elites of non- free countries. • International trade gives entrepreneurs new market opportunities and has helped lift more than a billion people out of abject poverty in the last twenty years. Freedom is truly one of the most benign and productive forces in human history. • Attempts by governments to equalise wealth or income are counter-productive. They destroy the incentives for hard work and enterprise and discourage people from building up the capital that boosts the productivity of the whole society. 12 13 foundations of a free society • A free society is a spontaneous society. It builds up from the actions of individuals, following the rules that promote peaceful cooperation. It is not imposed from above by Foundations of a Free Society political authorities. • Government has a very limited role in a free society. It exists to prevent harm being done to its citizens by maintaining and enforcing justice. It does not try to impose material equality and it does not prohibit activities just because some people consider them disagreeable or offensive. Leaders cannot plunder citizens for their own benefit, grant favours to their friends, or use their power against their enemies.