TWO things will be taking place simultaneously tomorrow: the 2014 Budget announcement, and the Universal Periodic Review (UPR) in Geneva, a review of our human rights records over the past four years. Is there any direct correlation between civil liberties and economic growth? What is the relationship and can this be measured?
Researchers (BenYishay and Betancourt) in their study of the relationship between the two found that “personal autonomy and individual rights” is the most significant indicator in explaining long-term economic growth. This is because it captures the ability of individuals to exercise their personal social freedoms and economic rights freely with respect to employment, location, and ownership of property.
The significant relationship between the two is unsurprising. Individuals having the ability to freely choose whom they wish to marry, the education they want for themselves, where to work and live, without interference from any external party including the state, allows for individuals to own property and participate in the exchange of goods and services freely, which make for a flourishing economy.
Of course, some critics would question how China or Vietnam have progressed so remarkably without fulfilling certain civil liberty criteria. One response is that their economic activities in the earlier years revolved around low level development growth, such as in agricultural markets.
Once economies move into modern development markets that require the rule of law such as financial markets, the application of civil liberties and political rights – the equal treatment of all citizens alike before the law – will certainly start to matter. The Index of Economic Freedom, for example, also shows how a higher score for the rule of law leads to better economic freedom. As China and Vietnam move into these markets, it may perhaps become more imperative that they apply these principles.
Another study by a World Bank economist showed that civil liberties impact positively on government projects and government effectiveness by allowing citizens’ voices and a free media to keep government accountable, since centralised, top-down approaches to governance fail to deliver expected results. (Pritchett and Kaufman, 1998).
Our human rights record as compiled by the UN Human Rights Council from various organisations for the UPR shows violations with regard to religion, peaceful assembly, indigenous people’s native customary rights, refugee rights, and so on. The passing of the Prevention of Crime Act (PCA) that brings back detention without trial and is essentially a return of the Internal Security Act (ISA), and the court judgment on “Allah” make our record even more troubling.
Malaysia is one such country that has moved up the value chain into higher level modern development markets, and its growth now depends on these, hence the emphasis on the services sector. But what policymakers and cabinet leaders must realise is that apart from focusing on industrial policy, fundamental factors to achieving long-term economic growth must include civil liberties, political freedom and the rule of law.
This is essentially an exercise on whether greater democratisation leads to a more vibrant and robust economy, and different research seem to show this is certainly the case. As individual freedoms are granted and civil liberties restored, Malaysia would eventually become an attractive place to live, work and set up a family. Foreign companies wanting to invest, and the foreign talent pool we hope to attract are made up of individuals who want to exercise their rights to religion, expression and peaceful assembly. These are all factors that contribute directly to a dynamic economy.
Individual liberties would also allow for greater participatory democracy. Local communities being able to check on local council, state and federal government spending, for example, would reduce the likelihood of corruption taking place. Government projects would be more effective in their delivery, thereby boosting economic development the way in which they are set out to do.
The study referred to at the beginning of this piece unfortunately does not provide country by country data. It would be interesting to examine how Malaysia fares in the “personal autonomy and individual rights” category. While individuals are free to exercise social and economic rights, these rights do not seem to apply uniformly to all citizens of all races, religions, regions, genders or political affiliations.
Finally, it is also apt to ask whether individuals in our society are free to “participate in the exchange of goods and services”, especially given the dominance of state-owned companies prevalent in our economy. For private enterprises to participate in the economy – which would be the driver of growth – the presence of government-linked companies and by default, political interests in the economy, must eventually be reduced to a minimum.
As Malaysians tune in to the budget announcement tomorrow, let us not forget that at the very same time, our human rights record will be under intense scrutiny for a full 3.5 hours in Geneva, and that these two events are more inextricably linked than what governments may have us think.