Towards a Worldwide Index of Human Freedom

Liberty in Comparative Perspective: China, India, and the West • 191
freedom2 and the roots of limited government in political fragmentation
and interstate competition. In a subsequent section of the paper I will
summarize why both China and India were overtaken by the West. In
doing so, I shall introduce some factors that might explain why China
could outperform India when both economies started to grow faster than
the global economy and began their catch-up growth spurts. The third
and fourth sections of the paper analyze Chinese and Indian growth in
the latter half of the twentieth century. The final sections of the paper
examine Western civilization’s future prospects and summarize the theoretical
approach elaborated in this paper.
Property rights, incentives and their
consequences in Eurasia
Until the end of the twentieth century, neither China nor India had made
much progress in overcoming mass poverty. Why did these great Asian
civilizations stand still when the West grew rich? Although explanatory
debates are by no means settled, I favor an approach focusing on institutions
(Weede, 1996, 2000, 2011a). Alternative theories underline the
importance of technological progress and innovation (Goldstone, 2008;
Huff, 2011; Paldam and Grundlach, 2008). It is frequently claimed that
technology accounts for about 50 percent of economic growth and 80 percent
of productivity growth. Despite the plausibility of the link between
technological progress and growth, Niskanen provides a useful warning
against exaggerating the impact of technology: “‘Technology’ is one of
economists’… favorite code words for what they do not understand….
All these estimates of technology are residuals, estimates of the percentage
of economic growth that economists cannot explain by the measured
increase in conventional inputs. Any underestimate of the increase in the
quantity or quality of labor or capital, for example, increases the magnitude
of the residual, attributed without any direct evidence to an increase
in technology. Similarly, any condition that improves the allocation of
resources, such as economies of scale or a reduction in the distortive
effects of taxes, tariffs, regulation, and litigation, is also attributed to an
increase in technology” (2008: 15).
2 Since the concepts “freedom” and “liberty” are frequently misunderstood, it is necessary
to point out that my understanding of freedom requires “that the individual be allowed to
pursue his own ends” (Hayek, 1988: 63). In philosophical discourse this type of freedom is
frequently called “negative freedom.” Although “open access” is related to liberty, the two
concepts differ. North, Wallis, and Weingast’s (2009) “open access societies” are not only
characterized by equality and the rule of law, but also by big government and universal
social insurance programs. Like Hayek, I regard big government as a threat to liberty. For
a comprehensive review of concepts of liberty, see McMahon (2012).
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