Business and Politics
Volume 12, Issue 2
2010
Article 2
Human Rights and Economic Liberalization
Art Carden, Rhodes College
Robert A. Lawson, Auburn University
Recommended Citation:
Carden, Art and Lawson, Robert A. (2010) "Human Rights and Economic Liberalization,"
Business and Politics: Vol. 12 : Iss. 2, Article 2.
Available at: http://www.bepress.com/bap/vol12/iss2/art2
DOI: 10.2202/1469-3569.1293
©2010 Berkeley Electronic Press. All rights reserved.
Human Rights and Economic Liberalization
Art Carden and Robert A. Lawson
Abstract
Using several case studies and data from the Economic Freedom of the World annual report
and from the CIRI Human Rights Data Project, we estimate the effect of human rights abuses on
economic liberalization. The data suggest that human rights abuses reduce rather than accelerate
the pace of economic liberalization.
KEYWORDS: economic freedom, human rights, institutions, Chile, torture
Author Notes: This essay was inspired by Johan Norberg’s critique of Naomi Klein’s The Shock
Doctrine (Norberg 2008). This is a substantially revised version of our earlier paper “Truthiness
and Torture in The Shock Doctrine.” Parts of this paper are taken from an early draft of Carden
(2009). Seminar and conference participants at the University of Central Arkansas, the University
of Memphis, the University of Mississippi, the Naval Postgraduate School, the 2008 Missouri
Valley Economic Association meetings, the 2009 Association of Private Enterprise Education
meetings, and the 2009 Southern Economic Association meetings provided valuable and useful
comments. We also thank Dan Gropper, Mike Hammock, David Richards, and anonymous
referees for valuable comments. Lara Wagner and Pramesti Resiandini provided research
assistance. We thank David Cingranelli for sharing data on structural adjustment programs.
Carden and Lawson: Human Rights and Economic Liberalization
1. Introduction
What Andrei Shleifer (2009) calls “The Age of Milton Friedman” was
accompanied by increasing economic freedom in countries around the world.
Shleifer notes that since 1980, the world has grown freer, richer, healthier, more
educated, and more democratic while enjoying lower taxation and lower inflation.
Some of the transitions that have enabled these changes, like the one that took
place under the brutal military junta led by Augusto Pinochet in Chile, were also
marred by systematic abuses of human rights. Do human rights abuses and
economic crises lead to economic liberalization? In other words, are countries
where human rights are abused and where people are tortured, disappear, or are
denied rights to movement, speech, and religion likely to see increases or
decreases in economic freedom? Using data on human rights violations and
economic freedom, we show that between 1980 and today, torture,
disappearances, extrajudicial killings, and other violations of human rights are
associated with slower rather than faster economic liberalization.
A growing body of empirical research considers the relationship between
economic liberalization and human rights. Abouharb and Cingranelli (2007)
focus their attention on structural adjustment programs and argue specifically that
“structural adjustment programs undermine human rights” (the title of their first
chapter) and that “respect for human rights promotes economic development” (the
title of their second chapter). Richards and Gelleny (2007:855) focus on the
status of women and argue that “in the majority of instances [they consider],
economic globalization is associated with improved women’s status.” Richards et
al. (2001:219) argue that “both foreign direct investment and portfolio investment
are reliably associated with increased government respect for human rights.”
Finally, Richards and Gelleny (2009) argue that government respect for human
rights make countries more attractive places to invest.
In a provocative 2007 polemic entitled The Shock Doctrine: The Rise of
Disaster Capitalism, Naomi Klein argues that economic liberalization is aided
and abetted by human rights abuses. The villains in her story are Milton
Friedman and the Chicago School economists, and she lays a legacy of human
rights violations, torture, corruption, and ideology-fueled blindness and
callousness at their feet. Klein argues that since free-market economic reforms
are democratically unpopular, capitalist change requires disasters, crises, social
upheavals, and human rights violations in order to create the conditions in which
these unpopular policies can be foisted upon the polity. To drive this point home,
Klein’s index entry for "Friedman, Milton" includes a passage on "his
responsibility for human rights violations suggested," that refers the reader to
pages 73, 99, 116-18, 191, and 273. She explicitly ties economic liberalization to
torture, suggesting that torture is necessary for the imposition of “economic shock
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therapy” in the face of resistance (Klein 2007:25-26) and tries to connect the
horrific abuses that occurred during CIA experiments with electroshock therapy
and Friedman’s economic policy prescriptions (Klein 2007:25-71). Torture is not
something to be taken lightly, and the implications of Klein’s thesis, particularly
for the intellectual legacy of Milton Friedman and the Chicago School of
economics, are severe.
Shleifer (2009) describes the Chicago School’s prescription as a program
of macroeconomic stability, openness to international trade, and well-specified,
well-enforced private property rights. The political problem is that policies
promoting secure private property rights, markets, and monetary stability are
often unpopular, upsetting to the ruling elites, and very difficult to implement.
Accordingly, adoption of reforms, whether they are liberal or illiberal, is perhaps
most likely during a period of upheaval in which the political coalitions and rentseeking interest groups that forestall economic change are shaken up.
Our purpose here is not to review The Shock Doctrine; we refer the reader
to Cowen (2007), Norberg (2008), and Carden (2009) for critical reviews. The
relationship between crisis and institutional change as such is well documented.*
We seek to isolate one of the The Shock Doctrine’s primary claims that lends
itself to empirical testing and that has broader implications for our understanding
of the institutional foundations of prosperity. Specifically, we explore the
empirical relationship between human rights abuses and changes in economic
freedom. The data show that liberal economic reforms occur more readily in
countries with better human rights records. Conversely, human rights abuses
reduce the pace of economic liberalization.
2. Institutions, Economic Freedom, and Development
A number of recent contributions highlight the importance of institutions as
determinants of economic growth (Acemoglu et al. 2001, 2004; Rodrik et al.
2004; North 2005; North et al. 2009). Institutions are formal rules, informal
norms, and their enforcement characteristics that define the rules of the economic
game (North 2005:48). The importance of institutions is by now reasonably wellunderstood. The factors that generate institutional change are more poorly
understood, though crises like wars and natural disasters are important sources of
institutional change. They upset and, in some cases, destroy the rent-seeking
coalitions that cause economic sclerosis (Olson 1965). In some cases, countries
liberalize. In other cases, states take greater control over the private economy.
The state’s tendency to broaden its discretion in times of crisis is explored
in the American context by Robert Higgs (1987), who argued that the disastrous
*
cf. Higgs (1987) for a discussion of crisis and change in 20th century American history and
Norberg (2008) for a more specific discussion of Klein’s thesis.
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Carden and Lawson: Human Rights and Economic Liberalization
conditions during the World Wars and the Great Depression contributed to a
“ratchet effect” whereby the United States government expanded its discretion
over Americans’ day-to-day affairs. The mechanism leads to permanent changes
in government authority by increasing state discretion during the crisis. Postcrisis, the new range of authority creates new rent-seeking coalitions and interest
groups that actively resist reversion to the pre-crisis status quo. After the dust
settles, the state is larger and more powerful than it was before.
Ideological change is central to Higgs’s thesis. In times of disaster, people
reflexively turn to government for answers. Caplan (2007:170) points out that in
the wake of one of the most conspicuous government failures in history—the
terrorist attacks of September 11, 2001—the public’s faith in government to “do
the right thing” increased substantially. Ideological change of this type has two
effects. First, it allows for the expansion of government authority as new
programs which normally would have been opposed are now sanctioned by the
polity. Second, it allows the unscrupulous and the opportunistic to slide damaging
political favors past a newly-credulous public.
Almost without exception, the empirical evidence favors the view that
economic freedom is consistent with better economic and human development
(Carden and Hall, 2010). There are many empirical uncertainties as scholars
consider difficult issues associated with causality and endogeneity, but the
correlations are undeniably positive. The most widely studied area is the
relationship between economic freedom and economic growth. De Haan et al.
(2007:157) survey many published articles on economic freedom and growth and
conclude that “there are strong indications that liberalization, i.e. an increase in
the EF index, stimulates economic growth.” Blume and Voigt (2007) show that
respect for human rights is associated with faster GDP growth per capita, more
rapid capital accumulation, and higher total factor productivity.
Others show positive associations between economic liberalism and other
measures of human development. For example, Gerring and Thacker (2008) find
that liberal policies like trade openness, inflation fighting, and private property
rights are associated with lower infant mortality through channels independent of
their effects on economic variables. Eriksen and de Soysa (2009:485) find that “a
proxy for neo-liberal policies, the index of economic freedom, correlates strongly
with better human rights.” Aixalá and Fabro (2009:177) find a “virtuous circle”
between economic freedom, growth, and civil liberties. Burkhart (2002) finds
some mixed evidence about the relationship between capitalism and human rights.
In a study of economic freedom and unemployment, Feldmann (2007) shows that
economic freedom reduces unemployment “especially among women and young
people.”
War is undoubtedly one of the biggest crises to afflict any society often
with significant attendant human rights violations. Several papers show that
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economic liberalism contributes to less war. De Soysa and Fjelde (2009) find
strong evidence of a capitalism-peace linkage, as do Gartzke (2007) and Hall and
Lawson (2009).
These studies use measures of capitalism, or economic freedom, as an
independent variable to explain some other dependent variable (like growth,
infant mortality, etc.). In contrast, The Shock Doctrine places human rights
violations on the right-hand side of the equation as an independent causal
predictor for economic liberalization.
In a discussion of international human rights conventions, McGinnis
(1999:1029) points out that these conventions posit rights to paid holidays but no
rights to economic freedoms such as “a right to compensation for takings of
property or…protection for other individual freedoms, such as the right to
contract…” He claims that economic freedoms should be integral to the
international human rights agenda. Powell (2006) points out that what look like
victories for human rights—such as restrictions (voluntary or otherwise) on
“sweatshops”—are not necessarily victories because workers in low-productivity
countries are willing to trade workplace safety and comfort for higher wages.
Chicago economist Arnold Harberger (1998:3) points out that "(m)oments
of crisis open up opportunities, both for good and for ill, because people are more
willing to make sacrifices and take risks in the hope of surmounting the crisis."
This is not a statement of strategy but an empirical statement about a sad,
unfortunate, and non-controversial reality. Friedman himself is quoted by Yergin
and Stanislaw (1998:149) as saying that “(t)he role of people is to keep ideas alive
until a crisis occurs.” The data on economic freedom give us the opportunity to
apply more rigorous standards to the hypothesis that disaster and human rights
abuses lead to human rights abuses.†
3. The Case of Chile
The crown jewel of the "liberalization requires authoritarianism" argument is the
experience in Chile, where Augusto Pinochet’s brutal regime allegedly foisted
liberalization on the people of the country after deposing (and perhaps murdering)
their democratically-elected president, Salvador Allende. Klein and others
implicate Friedman, but he was not the intellectual architect of Pinochet’s
experiment. From the 1950s through the mid-1960s, USAID funded Chilean
students from the Catholic University of Chile to study at the University of
Chicago, and the most active member of the faculty with regard to this program
was Arnold Harberger, not Friedman (Friedman and Friedman 1998:397).
†
This section is explicitly motivated by some of the comparisons made by Norberg (2008).
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DOI: 10.2202/1469-3569.1293
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Carden and Lawson: Human Rights and Economic Liberalization
Friedman taught the introductory economic theory course for graduate
students, and there were a number of students from Chile who participated in
Friedman's money and banking workshop (Friedman and Friedman 1998:397).
He never “acted as an adviser to the Chilean dictator, General Augusto Pinochet”
as Klein claims (Klein 2007:7). Friedman met with Pinochet for 45 minutes while
he was giving private lectures in Chile in 1975 at the behest of a private
foundation and wrote a single letter “arguing for a plan to end hyperinflation and
liberalize the economy” (Norberg 2008:3). Friedman went to great lengths to
distance himself from Pinochet, condemning his human rights abuses in public
and refusing “two honorary degrees from Chilean universities that received
government funding because he thought it could be interpreted as a support for
the regime” (Norberg 2008:3).
In 1970, the Marxist Salvador Allende was elected to the Chilean
presidency. But just barely: Allende won 36.8% of the vote and after some
political wrangling was selected by the legislature to be president of the country.
This thrilled officials in the Soviet Union because, for the first time, a Marxist
government had come to power through politically legitimate means (Friedman
and Friedman 1998:397-398). Allende and Unidad Popular ran against
monopoly, dependency, oligarchy, and capitalism, and their movement was
specifically Marxian; it was aimed at “replac(ing) the capitalist system with
socialism” (Larrain and Meller, 1991:179-180, 175). Allende took over and set
about destroying “a highly urbanized, industrial economy” by focusing his
attention on redistribution (Cardoso and Helwege 1991:52-53). He ran a fiscal
deficit of approximately forty percent of GNP; this could only be financed
through inflation (Piñera 2009).
Figure 1 shows trends in economic freedom in Chile, as measured by the
Economic Freedom of the World (EFW) index (Gwartney and Lawson, 2008).
The data suggest that economic freedom fell between 1970 (when Allende was
elected) and 1975 (when Pinochet turned to the Chicago Boys for help), but it is
unclear how much of this can be traced to Allende's anti-market reforms and how
much can be attributed to the junta's attempts to run the economy. Economic
freedom rose between 1975 and 1980 with an upward trend continuing through
the 1980s.
There was another large leap in economic freedom between 1990 and
1995 after Pinochet ceded power to a democratically-elected government. Chile's
Economic Freedom score increased from 6.93 to 7.48. The increase in economic
freedom between 1975 and 1980 lends some support to Klein's thesis, but the leap
between 1990 and 1995 lends support to Friedman's thesis that economic liberty
is incompatible with military autocracy. For the first year that the data are
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reported (1970), Chile was near the bottom of the EFW index. Today, it is near
the top.‡
Figure 1: Economic Freedom in Chile, 1970-2005.
Lawson (2008).
Source: Gwartney and
Fear of expropriation by the Allende regime reduced capital inflows, and
Allende’s regime restricted imports even though Chile did not have agricultural
infrastructure that would be necessary to feed its population (Cardoso and
Helwege, 1991:53). Wariness over expropriation also created conflict and led to
organized opposition to Allende as the regime spent all of its international
political goodwill during the expropriations of foreign firms. As Larrain and
Meller (1991:185) write,
the president of the republic was authorized to deduct from [the value of
compensation for state-ized assets] the excess profits obtained by the
foreigners since 1965. Allende used this provision to deduct some $800
million from the total indemnification.
This dealt the decisive blow to potential elite support for the Allende government.
In September 1973, the military coup led by General Augusto Pinochet ended the
Allende presidency (and Allende’s life). The military first tried to solve the
‡
cf. Piñera (2009), who argued—perhaps tongue-in-cheek—that if anything, Chile should perhaps
be ranked higher.
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Carden and Lawson: Human Rights and Economic Liberalization
economic crisis, but failed. A year and a half later, in the spring of 1975, the
government brought in 'Los Chee-Ca-Go Boys,' as they were nicknamed, to begin
with the reforms advocated in a document some of them had written during the
Allende regime. This document came to be known as “El Ladrillo,” or “The
Brick” (van Overtveldt 2007:349).
Friedman himself accompanied Al Harberger to Chile in 1975 and stayed
for six days, giving lectures and attending meetings with the sponsorship of
Banco Hipotecario (Friedman and Friedman 1998:398-399). One of the meetings
he attended "was with General Pinochet--which gave an iota of substance to later
charges that [he] was a personal adviser to the general" (Friedman and Friedman
1998:399). Friedman quickly diagnosed the fundamental problem facing the
Chilean economy over the long run: inflation. The government continued to
finance its expenditures by unsustainably debasing the currency, and the
accelerating rate of inflation meant that many people were distracted from their
core activities by trying to adjust those activities to deal with the inflation.
From the perspective of the Chicago-trained Chilean economists, the
Allende regime had much going against it. Under Allende in Chile and the
Peronists in Argentina, University faculty members were forced to sign “loyalty
oaths” to the ruling governments. In a passage in Johan van Overtveldt’s history
of the Chicago School, Larry Sjaastad points out that after the Peronist
government was overthrown in Argentina, all those who had signed such oaths
were fired (van Overtveldt 2007). van Overtveldt (2007:349) writes,
Allende's militia conducted a vicious war against its adversaries, including
the economists at [Universidad Catolica de Chile]. 'The situation was
totally insane,' Larry Sjaastad, the Chicago economist who was in
Santiago in those days, remembers, 'with, for example, the salaries being
blocked for all economists thought of as anti-socialist.'
During the chaos of the Allende regime, Chicago-trained economists at the
Universidad Catolica de Chile wrote out a diagnosis of the social and economic
disaster their country was experiencing and a plan for recovery. Their assessment
advocated the introduction of a free-market economy, but also devoted
considerable attention to educational reform, infant nutrition, hygiene programs,
better provision of social services for the poor, and housing programs.
The Allende regime presented a particular quandary for the Chilean
Congress.§ Allende was clearly violating the constitution, but there was no viable
impeachment procedure. Chile was being ruled by an elected president who was
imposing a communist dictatorship, and there was no constitutional or legitimate
§
This paragraph is drawn from notes on Piñera (2009). Published by Berkeley Electronic Press, 2010
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Business and Politics, Vol. 12 [2010], Iss. 2, Art. 2
way to remove him. On August 22, 1973, the Chilean Congress met and indicted
Allende for twenty different violations of the Constitution, a process which
Friedman would compare to the list of grievances presented by the Continental
Congress to King George III in the Declaration of Independence (Piñera 2009).
The institutional failure—which was a failure to anticipate the need for a
constitutional procedure by which an elected president could be removed—
manifested itself when the Chilean Congress called upon the military to remove
Allende (Piñera 2009).
Like Klein, Chilean economist (and assassination victim) Orlando Letelier
explicitly names Friedman as "the intellectual architect and unofficial adviser for
the team of economists now running the Chilean economy":
To put it briefly, the violation of human rights, the system of
institutionalized brutality, the drastic control and suppression of every
form of meaningful dissent is discussed (and often condemned) as a
phenomenon only indirectly linked, or indeed entirely unrelated, to the
classical unrestricted 'free market' policies that have been enforced by the
military junta. This failure to connect has been particularly characteristic
of private and public financial institutions, which have publicly praised
and supported the economic policies adopted by the Pinochet government,
while regretting the 'bad international image' the junta has gained from its
'incomprehensible' persistence in torturing, jailing, and persecuting all its
critics (Letelier 1976:137).
In a 1982 Newsweek column, Friedman disputed the myth that political
authoritarianism was necessary for economic liberalization, calling the Chilean
experience "an exception, not the rule" and arguing that the free market he
espoused was the opposite of the military hierarchy as practiced by the Chilean
junta. He went on to argue that free-market policies were not likely to persist
unless the junta gave way to political liberty (Friedman and Friedman 1998:407).
This is precisely what happened in Chile as the country liberalized further after
Pinochet stepped down. As Piñera (2009) notes, Chile has experienced
approximately 28 years of annual real growth of nine to ten percent, it has
enjoyed stable policies for thirty five years, and it is on its way to becoming the
first developed country in Latin America when, if trends continue, it reaches a
level of development roughly equal to Portugal in ten years and thereby obtains
European levels of prosperity.
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Carden and Lawson: Human Rights and Economic Liberalization
4. Empirical Analysis
Unfortunately, our data do not go far enough back to allow us to include Allende
and Pinochet’s Chile in a regression analysis, but data on economic freedom and
human rights going back to 1980 allow us to subject the relationship between
economic liberalization and human rights to empirical scrutiny. Klein makes
claims throughout The Shock Doctrine that lend themselves to statistical analysis.
On page 11, she claims that "authoritarian conditions are required for the
implementation of its true vision.” On page 115, she claims that "...the Chicago
School project in Latin America was quite literally built on the secret torture
camps where thousands of people who believed in a different country
disappeared.” She continues on pp. 133-34: "dictatorships--where freedom was
markedly absent--were the only governments who were ready to put free-market
doctrine into practice." On page 15, she claims that "(f)rom Chile to China to
Iraq, torture has been a silent partner in the global free-market crusade."
In contrast, Norberg (2008:7-8) points out several counterexamples of
“rapidly-liberalizing democracies like Iceland, Ireland, Estonia, Australia, or the
United States during the 1980s, where reforms were given renewed support in
several elections.” Fortunately, country-level data are available that allow us to
examine these claims more rigorously and explore the contribution of human
rights violations to economic liberalization. In short, the data can help us
determine whether “torture has been a silent partner in the global free-market
crusade.”
Data
Data from the CIRI Human Rights Project at SUNY-Binghamton and the
Economic Freedom of the World (EFW) index allow us to explore the
hypothesized link between political repression and economic liberalization in
greater detail. The CIRI data only go back to 1980, which means that they do not
cover Pinochet’s takeover in Chile or the late 1970s coup in Argentina. These are
conspicuous omissions, to be sure, and future attempts to measure human rights
abuses should extend the data backward to cover these important episodes.
Second, it is important to note that we do not include “disaster” as a trigger for
institutional change; rather, we look for the degree to which changes in human
rights practices increase or decrease the pace of economic liberalization based on
Klein’s empirical claims about human rights abuses being “silent partner[s] in the
global free-market crusade.” At the margin, according to Klein, torture,
disappearances, and other encroachments on human rights should increase the
pace of economic liberalization.
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The CIRI Human Rights Data Project reports data on extrajudicial
killings, disappearances, torture, political imprisonment, political disappearances,
freedom of speech and government censorship, freedom of religion, freedom of
movement and migration, freedom of assembly and association, political
freedoms coded as “electoral self-determination” and free-and-fair elections,
workers’ rights, political rights for women, economic rights for women, social
rights for women, and several aggregated indices called the Physical Integrity
Rights Index and the Empowerment Rights Index. In every case, the data are
coded such that a higher number indicates greater respect for human rights. In the
case of the torture variable, for example, a country is coded with a zero if torture
is used frequently, a one if torture is sometimes used, and a two if torture is never
used.** Again, these data only go back to 1980 and therefore cannot tell us about
the specific transformations that occurred in Latin America in the 1970s.
Nevertheless, they allow us to estimate long panels involving countries from
around the globe in order to determine if human rights abuses increase or decrease
the pace of economic liberalization.
The measure we use for economic liberalism is the Economic Freedom of
the World (EFW) index by Gwartney and Lawson (2008).†† The EFW index is
designed to measure the consistency of a jurisdiction’s institutions and policies
with economic freedom. In order to achieve a high rating, a jurisdiction must
provide secure protection of privately owned property, evenhanded enforcement
of contracts, and a stable monetary environment. It also must keep taxes low,
refrain from creating barriers to both domestic and international trade, and rely
more fully on markets rather than the political process to allocate goods and
resources.
The index measures the degree of economic freedom present in five major
areas; (1) Size of Government: Expenditures, Taxes, and Enterprises, (2) Legal
Structure and Security of Property Rights, (3) Access to Sound Money, (4)
Freedom to Trade Internationally, (5) Regulation of Credit, Labor, and Business.
Within the five major areas, there are 23 components in EFW index. Many of
those components are themselves made up of several sub-components. In total,
the index is comprised of 42 distinct variables, and each component and subcomponent is placed on a scale from 0 to 10 that reflects the distribution of the
underlying data. The sub-component, component and five area ratings are
averaged up to derive the overall rating for each country. The final database
consists of an unbalanced panel of over 100 countries with data for the years
**
The data are described in greater detail here:
http://ciri.binghamton.edu/documentation/ciri_variables_short_descriptions.pdf.
††
The data and methods are described in greater detail here:
http://www.freetheworld.com/release_2008.html. We use the chain-linked index, which is
designed to be the most consistent time series.
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Carden and Lawson: Human Rights and Economic Liberalization
1980, 1985, 1990, 1995, 2000, and 2005, yielding over 600 observations.‡‡
Descriptive Statistics for these core variables are found in Table 1. The next
section discusses the empirical relationship between human rights violations and
economic liberalization.
Regression Analysis
Our empirical model can be written as:
Economic Freedomit = α + βEFW*Economic Freedomi,t-1 + βHRV*Human Rights
Violationsit + γ*X + εit
where X is a matrix of control variables to include country and time fixed effects
plus additional controls. Note that by including the lagged value of the dependent
variable, this specification isolates changes in the level of economic freedom. In
addition, using the lagged dependent variable as an explanatory variable should
dramatically reduce the impact of any omitted variable bias in our admittedly
parsimonious specification. This model can examine a plausible alternative
hypothesis: human rights abuses reduce the pace of economic liberalization, as
Norberg (2008) argued.
Table 2 presents coefficient estimates from 42 separate regressions using
the CIRI Human Rights variables individually as independent variables and three
different sets of control variables. In Column (1) we include controls for the
previous period’s economic freedom plus country and year fixed effects.§§ Contra
Klein but consistent with the results reported by Richards and Gelleny (2007,
2009), the data suggest that improved respect for human rights were linked with
increased economic liberalization. The result is statistically significant in 6 of the
14 regressions. The remaining cases had the same sign but were statistically
insignificant. The magnitude of the coefficients indicate that a one unit increase in
the 0-1-2 coded human rights variables yields between a 0.02 - 0.21 unit increase
in the EFW index. For example, a one-unit improvement in the 0-1-2 coded
Torture variable is associated with a 0.12 unit improvement in the EFWt (after
controlling for EFWt-1). This impact is very small, representing less than onetenth of one standard deviation, but it suggests that torture impedes rather than
facilitates economic liberalization.
Columns (2) and (3) add additional controls to test the robustness of the
result. Column (2) adds Foreign Direct Investment/GDP, Trade Sector Size, and
‡‡
Because the regressions will use a lagged dependent variable as an independent variable, the
regression sample will be based on data for 1985, 1990, 1995, 2000, and 2005.
§§
We experimented with alternative forms for the human rights variables such as lags as well as
categorical variables, but the results were qualitatively similar so they are omitted here. Published by Berkeley Electronic Press, 2010
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GDP per capita.*** Column (3) adds a set of six variables reflecting whether and
for how long a country fell under IMF or World Bank structural adjustment
programs as provided by Abouharb and Cingranelli (2007).††† The results in
Column (1) appear to hold even when controlling for a diverse set of other
factors.
Human rights abuses walk hand-in-hand with tyranny of all kinds.
Examples like Chile belie the statistical observation that repressive political
regimes have generally not enacted free market reforms as readily as more liberal
regimes. The broad evidence suggests that Friedman was correct: repressive
regimes like Pinochet’s Chile that adopt free market reforms are the exception
rather than the rule (Friedman and Friedman 1998:407).
5. Conclusions and Further Directions
Many studies suggest that economic freedom increases economic growth. Our
results suggest that human rights abuses reduce rather than increase the pace at
which countries adopt liberal economic institutions. In The Shock Doctrine,
Naomi Klein (2007:190) criticizes Milton Friedman for his failure to see the link
between violence and liberalization. Friedman can perhaps be forgiven because
the available data suggest that instead of hastening economic liberalization,
human rights abuses like torture, disappearances, and political imprisonments
actually reduce the pace of economic liberalization. Klein further excoriates
“Free-market crusaders” for being “slow learners when it comes to the unintended
consequences of their policies” (Klein 2007:278). The unintended consequences
she discusses—human rights abuses and torture—are most likely the results of
general tyranny of all stripes and not “silent partner[s] in the global free-market
crusade.”
***
Trade Sector Size is defined as (Imports + Exports)/GDP. GDP per capita is expressed in
constant PPP US$. These data were obtained from the World Bank’s World Development
Indicators Online.
†††
The six variables are dummy variables reflecting whether a country is involved in an IMF or
World Bank structural adjustment program and for how many years it has been in such a program. http://www.bepress.com/bap/vol12/iss2/art2
DOI: 10.2202/1469-3569.1293
12
Carden and Lawson: Human Rights and Economic Liberalization
Table 1: Descriptive Statistics for core variables
Variable
Economic Freedom of the World
(EFW) index
N
Mean
Median
StDev
Min
Max
700
5.96
5.99
1.28
2.10
9.23
Physical Integrity Index
671
5.01
5
2.34
0
8
Disappearances
674
1.70
2
0.59
0
2
Extrajudicial Killing
671
1.34
2
0.76
0
2
Political Imprisonment
674
1.14
1
0.85
0
2
Torture
674
0.83
1
0.77
0
2
Empowerment Rights Index
672
6.50
7
2.95
0
10
Assassinations
679
1.20
1
0.81
0
2
Freedom of Movement
674
0.79
1
0.41
0
1
Restrictions on Speech
674
1.13
1
0.68
0
2
Restricted Elections
674
1.27
1
0.77
0
2
Freedom of Religion
674
0.73
1
0.44
0
1
Worker Rights
673
1.06
1
0.78
0
2
Women's Economic Rights
664
1.37
1
0.65
0
3
Women's Political Rights
670
1.77
2
0.64
0
3
Published by Berkeley Electronic Press, 2010
13
Business and Politics, Vol. 12 [2010], Iss. 2, Art. 2
Table 2: Human Rights Violations and Economic Liberalization, 1985-2005
Dependent Variable: Economic Freedom (EFWt)
Note: This table presents coefficient estimates from 14 separate regressions using the CIRI
Human Rights variables individually as independent variables with 3 different sets of
control variables; this represents 42 regressions in all. Full regression results are available
upon request. Standard errors in parentheses. P-values in brackets. N = number of
observations. *** = 99%; ** = 95%; * = 90% statistical significance.
1.
Assassinations (0-2)
2.
Disappearances (0-2)
3.
Restricted Elections (0-2)
4.
Empowerment Rights Index (08)
5.
Extrajudicial Killing (0-2)
6.
Freedom of Movement (0-2)
7.
Physical Integrity Rights Index
(0-10)
(1)
0.120*
(0.068)
[0.08]
N=554
0.210***
(0.68)
[0.002]
N=548
0.038
(0.067)
[0.58]
N=548
0.028
(0.02)
[0.22]
N=547
0.020
(0.06)
[0.73]
N=548
0.198*
(0.105)
[0.06]
N=548
0.075***
(0.026)
[0.005]
N=548
(2)
0.106
(0.07)
[0.146]
N=517
0.213***
(0.07)
[0.003]
N=512
0.004
(0.07)
[0.96]
N=512
0.023
(0.024)
[0.35]
N=511
0.043
(0.06)
[0.49]
N=512
0.233**
(0.114)
[0.043]
N=512
0.077***
(0.026)
[0.004]
N=512
(3)
0.099
(0.068)
[0.149]
N=512
0.220***
(0.07)
[0.003]
N=507
-0.005
(0.07)
[0.94]
N=507
0.023
(0.024)
[0.33]
N=506
0.055
(0.06)
[0.39]
N=507
0.240**
(0.11)
[0.03]
N=507
0.080***
(0.03)
[0.003]
N=507
Controls in Column 1: EFWt-1, Country and year fixed effects.
Controls in Column 2: EFWt-1, Country and year fixed effects, Foreign Direct
Investment/GDP, Trade Sector Size, GDP Per Capita.
Controls in Column 3: EFWt-1, Country and year fixed effects, Foreign Direct
Investment/GDP, Trade Sector Size, GDP Per Capita. 6 IMF/World Bank variables
representing structural adjustment.
http://www.bepress.com/bap/vol12/iss2/art2
DOI: 10.2202/1469-3569.1293
14
Carden and Lawson: Human Rights and Economic Liberalization
Table 2 (cont.): Human Rights Violations and Economic Liberalization, 1985-2005
Dependent Variable: Economic Freedom (EFWt)
Note: This table presents coefficient estimates from 14 separate regressions using the CIRI
Human Rights variables individually as independent variables with 3 different sets of
control variables; this represents 42 regressions in all. Full regression results are available
upon request. Standard errors in parentheses. P-values in brackets. N = number of
observations. *** = 99%; ** = 95%; * = 90% statistical significance.
8.
Political Imprisonments (0-2)
9.
Freedom of Religion (0-2)
10. Restrictions on Speech (0-2)
11. Torture (0-2)
12. Women’s Economic Rights (0-3)
13. Women’s Political Rights (0-3)
14. Workers’ Rights (0-3)
(1)
0.140**
(0.06)
[0.024]
N=548
0.003
(0.067)
[0.966]
N=548
0.056
(0.064)
[0.38]
N=548
0.117**
(0.047)
[0.013]
N=548
0.008
(0.06)
[0.895]
N=544
0.012
(0.055)
[0.822]
N=546
0.025
(0.055)
[0.652]
N=547
(2)
0.130**
(0.06)
[0.036]
N=512
-0.005
(0.07)
[0.94]
N=512
0.030
(0.07)
[0.65]
N=512
0.136***
(0.05)
[0.007]
N=512
0.020
(0.06)
[0.78]
N=508
-0.010
(0.059)
[0.866]
N=510
0.020
(0.058)
[0.723]
N=511
(3)
0.137**
(0.06)
[0.032]
N=507
0.0096
(0.077)
[0.9]
N=507
0.038
(0.065)
[0.567]
N=507
0.134***
(0.05)
[0.008]
N=507
0.010
(0.07)
[0.85]
N=503
-0.017
(0.06)
[0.77]
N=505
0.010
(0.05)
[0.84]
N=506
Controls in Column 1: EFWt-1, Country and year fixed effects.
Controls in Column 2: EFWt-1, Country and year fixed effects, Foreign Direct
Investment/GDP, Trade Sector Size, GDP Per Capita.
Controls in Column 3: EFWt-1, Country and year fixed effects, Foreign Direct
Investment/GDP, Trade Sector Size, GDP Per Capita. 6 IMF/World Bank variables
representing structural adjustment.
Published by Berkeley Electronic Press, 2010
15
Business and Politics, Vol. 12 [2010], Iss. 2, Art. 2
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