Constitution matters to growth

Thank goodness for Benjamin Franklin, Alexander Hamilton and James Madison. That was my reaction on hearing a recent news story about the ongoing constitutional convention in Afghanistan.

The story noted a fierce argument over whether the new constitution should guarantee all Afghanis free education through high school or through university. I shuddered in dismay.

I have never been to Afghanistan but I have worked in other developing countries. I’ll be highly surprised if even 75 percent of Afghan children get through grade school by 2010, much less high school or college. Putting such a guaranteed right into the constitution makes it less likely — rather than more likely — that Afghan children will get good educations.

My liberal friends will pounce on me for saying that. Everyone deserves an education and health care, they say. Resources are bountiful. Food, health, education and employment ought to be defined as unquestionable human rights, my friends will argue. Adding them to the U.S. Constitution would be an advance.

My friends are wrong, and Isaiah Berlin and Brazil demonstrate why.

Berlin, one of the greatest political philosophers of the 20th century, sympathized with human needs and desired that people have better lives. He was convinced, however, that trying to ensure that people get education, health care and medicine by defining them as constitutional rights was not only doomed to fail, but also counterproductive.

In his “Four Essays on Liberty,” Berlin distinguished between “negative liberty,” which allows people the freedom to act diversely, and “positive liberty,” which limits some freedoms so as to achieve a higher good. The freedom to speak, to assemble, to worship and so forth are “negative” liberties. Saying everyone has a constitutional right to food, medicine, a job and a college education are “positive liberties.”

The second set is attractive but ignores the human reality that “all political values must end up in conflict, and all conflicts require negotiation,” Berlin wrote. “All those doctrines which define liberty as self-realization and then prescribe what this is, end up by defending liberty’s opposite. Liberty is liberty, not equality or fairness or justice or human happiness or a quiet conscience.”

The creators of our Constitution — Franklin, Hamilton, Madison and others — realized these hard facts. Those who drafted the latest Brazilian constitution in 1986 did not. That extensive document guarantees and requires all sorts of things. Everyone has rights to food, education, health care and a job. Interest rates cannot exceed 12 percent. States get specified shares of all tax revenues. Government pensions can never be altered or reduced. No one may express racist ideas.

Seventeen years later, many Brazilians still are hungry, sick, homeless and uneducated. Businesses pay 50 percent interest; households even more. Racism abounds. Brazil remains, as its recent President F.H. Cardoso said, “not a poor country, but an unjust one.”

Economists tend to ignore how constitutional design affects national economic performance. They argue that government should “define the rules of the game” as far as economic activity goes, but they pay little attention to the incentives embodied in constitutional guarantees and prohibitions. They should.

Writing guarantees that are impossible to implement into national constitutions not only dooms these documents to being ignored, but also creates roadblocks to efficient use of resources — in private and public sectors.

Brazil’s interest rates are high and its government continues to gobble up all national savings because political factions that oppose fiscal reforms can use the constitution to block change. Such changes would improve economic efficiency and justice. They would favor the poor just as the status quo favors the rich, but they are exceedingly difficult to bring about.

Cynics may argue that the Afghani constitution is going to be a dead letter anyway, a symbolic document that will have no effect on everyday life or resource allocation in that desperately poor country. They claim people should not worry — life will go on as before.

To a great extent that may be true in the short run. But laws do matter, even in historically lawless countries. Incentives matter.

There is no historical example of a nation that larded its constitution up with “positive rights” and subsequently had strong economic growth that lifted most of its population out of poverty. There are dozens of examples of nations where idealistic rights, written into constitutions or ordinary legislation, have put a stranglehold on broad-based economic growth. In all cases, the poor suffer more than the rich.

It has become commonplace in contemporary academia to scorn our “founding fathers.” Some contend they were a group of sexist, racist, white males who wrote a document to protect their wealth and opinions. Any group of people brought in off the street at random could do just as well today.

This is poppycock. The writers of the Constitution were not saints; indeed many of them committed reprehensible acts. But the document has been singularly successful in guaranteeing “negative” political freedoms over two centuries while allowing for the creation of wealth, however unjustly distributed, that makes us better off than many, many others.

© 2003 Edward Lotterman
Chanarambie Consulting, Inc.