Human rights matter as an end in themselves; I hope this isn’t disputed among liberals. These rights are also crucial to achieve economic growth in developing states.
Institutions are the ‘rules of the game’ in society, which shape how people live their lives and participate in the economy. Good institutions promote economic development, for example stable democratic institutions can play a part in stopping political disagreements from turning into civil wars. Other problems a country might face, for example disease, impact a country differently depending on how good the institutions of that country (e.g. healthcare, education) are.
Investment is sorely needed in many developing countries, and institutions which provide incentives to invest are crucial for economic growth. Investment can be promoted by the institutionalized of property rights; people will be more prepared to invest if they know that they will benefit from the profits of this investment themselves. If property rights are not respected, then a businessman has no incentive to build a factory that may be arbitrarily nationalised, and a farmer has no incentive to buy better machinery if he worries that he may be forced off his land.
To protect property rights, the government must protect property owners from theft and other violations of property rights, which will require a well-equipped and professional police force, as well as a reliable judiciary. Governments must also demonstrate that they will not violate these rights themselves, and will not decide tomorrow to declare a 90% wealth tax or compulsory nationalisation of businesses. While government of course has the power to tax businesses, it must give the sense that they are free from arbitrary or excessive government action, and it must be possible to anticipate and plan for government action.
Not just economic rights but political rights are needed to provide the stable environment for investment, for example the right to free speech and free and fair elections. With a free press, the budget decisions of government are subject to public scrutiny, and poor decisions can be punished electorally. Government may restrain from arbitrary appropriation of private property or large-scale corruption, if they know that their decisions will be known by the public and reflected in the next election.
Institutions are difficult to change, because those who are advantaged by existing institutions can and will resist effectively. But institutions must be changed. We should be demanding and campaigning for political and economic rights across the world because of their intrinsic value: it is the right thing to do, because as human beings we are entitled to certain freedoms and protections. But these rights also have an instrumental value: with these freedoms and protections, investment can be attracted to build economies able to secure economic growth and development.
Note: these are just a handful of examples drawn from a vast empirical literature. One starting point for further reading would be Why Nations Fail by Daron Acemoglu and James Robinson.
Rachel Edwards is a member of Liberal Youth (UK), and she’s currently studying Politics and Economics at the University of York. Rachel can be found on Twitter at @racheledwards42, or blogging at www.rachedwards.wordpress.com.
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