Democracy, economic freedom, competitiveness
Сучасна демократія стала ареною зіткнень інтересів різних особистостей, і в боротьбі за свої інтереси кожна з них вибирає корисні рішення і більш переважні політичні рухи. Демократичні системи процвітають, якщо застосовуються громадянами, коли останні, користуючись здобутою свободою, готові взяти уч...
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Khakhverdyan, D. 2011-07-25T19:58:23Z 2011-07-25T19:58:23Z 2010 Democracy, economic freedom, competitiveness / D. Khakhverdyan // Економіка пром-сті. — 2010. — № 3. — С. 54-60. — Бібліогр.: 14 назв. — анг. 1562-109Х https://nasplib.isofts.kiev.ua/handle/123456789/24805 Сучасна демократія стала ареною зіткнень інтересів різних особистостей, і в боротьбі за свої інтереси кожна з них вибирає корисні рішення і більш переважні політичні рухи. Демократичні системи процвітають, якщо застосовуються громадянами, коли останні, користуючись здобутою свободою, готові взяти участь у громадському житті. Ключові слова: демократія, економічна свобода, конкурентоспроможність, потерналізм, держава. Современная демократия стала ареной столкновений интересов разных личностей, и в борьбе за свои интересы каждая из них выбирает полезные решения и более предпочтительные политические движения. Демократические системы процветают, если применяются гражданами, когда последние, пользуясь приобретенной свободой, готовы принять участие в общественной жизни. Ключевые слова: демократия, экономическая свобода, конкурентоспособность, патернализм, государство. Modern democracy became an arena of individuals’ interests’ collision. In the struggle for their interests each of these individuals chooses the political decisions useful for himself and the most preferable political movements. Democratic systems prosper in the case of being used by the citizens, when taking an advantage of their freedom, they are ready to take part in the social life. Keywords: democracy, economic freedom, competitiveness, paternalism, state. en Інститут економіки промисловості НАН України Проблеми сучасної економіки Democracy, economic freedom, competitiveness Демократія, економічна свобода, конкурентоспроможність Демократия, экономическая свобода, конкурентоспособность Article published earlier |
| institution |
Digital Library of Periodicals of National Academy of Sciences of Ukraine |
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DSpace DC |
| title |
Democracy, economic freedom, competitiveness |
| spellingShingle |
Democracy, economic freedom, competitiveness Khakhverdyan, D. Проблеми сучасної економіки |
| title_short |
Democracy, economic freedom, competitiveness |
| title_full |
Democracy, economic freedom, competitiveness |
| title_fullStr |
Democracy, economic freedom, competitiveness |
| title_full_unstemmed |
Democracy, economic freedom, competitiveness |
| title_sort |
democracy, economic freedom, competitiveness |
| author |
Khakhverdyan, D. |
| author_facet |
Khakhverdyan, D. |
| topic |
Проблеми сучасної економіки |
| topic_facet |
Проблеми сучасної економіки |
| publishDate |
2010 |
| language |
English |
| publisher |
Інститут економіки промисловості НАН України |
| format |
Article |
| title_alt |
Демократія, економічна свобода, конкурентоспроможність Демократия, экономическая свобода, конкурентоспособность |
| description |
Сучасна демократія стала ареною зіткнень інтересів різних особистостей, і в боротьбі за свої інтереси кожна з них вибирає корисні рішення і більш переважні політичні рухи. Демократичні системи процвітають, якщо застосовуються громадянами, коли останні, користуючись здобутою свободою, готові взяти участь у громадському житті.
Ключові слова: демократія, економічна свобода, конкурентоспроможність, потерналізм, держава.
Современная демократия стала ареной столкновений интересов разных личностей, и в борьбе за свои интересы каждая из них выбирает полезные решения и более предпочтительные политические движения. Демократические системы процветают, если применяются гражданами, когда последние, пользуясь приобретенной свободой, готовы принять участие в общественной жизни.
Ключевые слова: демократия, экономическая свобода, конкурентоспособность, патернализм, государство.
Modern democracy became an arena of individuals’ interests’ collision. In the struggle for their interests each of these individuals chooses the political decisions useful for himself and the most preferable political movements. Democratic systems prosper in the case of being used by the citizens, when taking an advantage of their freedom, they are ready to take part in the social life.
Keywords: democracy, economic freedom, competitiveness, paternalism, state.
|
| issn |
1562-109Х |
| url |
https://nasplib.isofts.kiev.ua/handle/123456789/24805 |
| citation_txt |
Democracy, economic freedom, competitiveness / D. Khakhverdyan // Економіка пром-сті. — 2010. — № 3. — С. 54-60. — Бібліогр.: 14 назв. — анг. |
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| fulltext |
D. Hakhverdyan
DEMOCRACY, ECONOMIC
FREEDOM, COMPETITIVENESS
The concept “Democracy” has two quite
different senses: democratic governance and
public.
Modern democracy, first, is a unity of
individuals, civil society. Only in century of
New Times and only in the West Europe they
are realized, that each man has “natural rights”
is appreciable as individual independent from
his social status. Republics of Ancient Times
and Middle Ages inevitably “evaporated”
becoming oligarchies and imperials. On the
contrary, the triumphal cortege of democratic
society paradigm led to the gradual
accomplishment of political equality in
European civilization countries without property
qualification and national and racial restriction
[1, 73-74]. For example, the density of voting
right having persons in Great Britain, which are
elder then twenty years old, has changed in this
way- 4% of population in 1831, 9% in 1864,
18% in 1883, 30% in 1914, 74% in 1921 and
97% in 1931 [2, 29]:
Modern democracy became an arena of
individuals’ interests’ collision and in struggle
for their interests each of these individuals
choose the political decisions useful for him and
which political movements are preferable
independently. Therefore, when speaking about
democracy, we must not forget about the most
important prerequisites of that institute and
deem it a universal political principle. At the
same time, if it is possible “to import” the
democratic form of governance into any place, it
is impossible “to import” democratic (civil)
society. That is why under the similarity of
appearance of politics in different countries can
be hidden non-identical content [3, 144-145].
Despite some opinions, the democratic
healthy society is not just an arena, where
individuals pursue only private goals.
Democratic systems prosper in the case of being
used by citizens, when they taking an advantage
of their freedom, are ready to take part in social
life, to add their voice to public discussions,
vote for representatives, which are responsible
for their activity to accept the necessity of
cessions and compromises in public life. Though
the citizens of democratic systems enjoy
individual freedom, at the same time they have
with others the responsibility of creating a
future, which will include the main values of
freedom and autonomy.
Democracy definition. Thought many
people now the democracy as an understanding,
but they still perceive it incorrectly as an idea. It
is presumed by totalitarian governments, which
try to conquer the people by adorning
themselves with democratic labels. By
dictionary definition democracy “is the
government obtained by people, the sovereignty
of which is trusted with people and is
implemented by them or by figures elected in
the network of liberal election system” [4, 4].
By Abraham Lincoln, democracy is a
government of people, from people, for people
[4, 4]. Freedom and democracy are often used as
equivalents. However, these are not synonyms.
Of course, democracy is a range of ideas and
principles concerning freedom. Nevertheless, it
consists of a group of actions and processes
which have formed during the history. For short,
democracy is the incarnation of freedom through
the institutes. Therefore, we can define the
equality fundamentals of constitutional
government, human rights and equal protection
of the law, which every society needs, if is
worthy to be called democratic.
Democracy and economy. The
democracy does not include any special doctrine
of economy. Democratic governments include
orthodox socialists and free market supporters.
Of course, in modern democratic systems the
most part of debates concerns the role of
government in economy. It is fare to say, that
the apologists of democracy commonly consider
that the economic freedom is the key for
democratic systems. This fact did not forbid the
economic questions become the main driving
force of ruggedness and definitions, which we
now as “left-right” political arms.
For example, social democrats have put an
accent on the necessity of equality and social
___________________________
© Davit Hakhverdyan – General director.
Graduate school of corporate management, Yerevan, Armenia.
ISSN 1562-109X
welfare as the kernel of government's economic
policy. The state ownership was the result of that
in the past, such as communicational network,
vehicles and heavy industry. They also demand
of government to provide the people in need with
medical, unemployment and other social
assistance. Despite this, the centrifugal and
conservative political parties gave a great role to
market economy without government supervision
or economic interventions as the most productive
form of reaching economic development and
welfare. In fact, all sides of economic debates
have more general opinions, than they are ready
to accept under the torrent of political debates.
For example, either “the left” or “the right”
accepts the role that labor movement and
independent from government workpeople have.
In free society, they have an opportunity to
member unities that present their interests to
employers by carrying negotiations about
salaries, health, pensions, work conditions and
complaints.
No democratic state has such economic
system, which completely belongs to the state or
is out of government leadership. All of them are
mixtures of private corporations and state
supervision. All of them greatly trust the free
market mechanism, where governments don’t
set prices, these are determined by thousands of
consumers and producers (service providers),
which are in relations with each other.
Political left parties, which usually have
social democratic orientation, accept that free
market working by a principle of “supply-
demand” is the main driving force of welfare.
The centrist right parties also, which usually are
against the government interventions or its
production property, have accepted the
government responsibility in several spheres
such as the assistance to unemployed, further the
economic development. Therefore, modern
democracies tend to have such economies
which, being in different particularities, have
generalities. At last years, the crash of
economies planned by one center in many parts
of the world again puts the accent on the
important role of free markets. In economic and
political questions, it seems that freedom is a
compulsory factor. Only the freedom cannot
ensure economic fortune but its pressure surely
ensures economic crash. In democratic
countries, people must continue to argue about
economic questions as much as in the past.
However, the debates are focused not on
state orders, but on the perceptive of
providing free market benefits to everybody in
the world where mutual dependency grows day
by day.
The crash of socialism in East European
countries in 1989-1990s and UCCR in the end
of 1991 became a reason for several new
democratic republics genesis. This wave of
democratization continued the process of
crashing imperials and selective democracies1
genesis, which had started at the first part of XX
century and fastened at the second part. There
were no democratic countries in 1900 in the full
sense of the word and there were no countries
where the universal suffrage was established.
There were 22 democratic countries with
31% of world population in 1950. Until the end
of century this indicators became 120 countries
and 58,2% respectively (see figure 1) [5, 590-
592].
The problem is that the general universal
suffrage is not a guaranty of free society, were
1 Selective democracies are the countries, where the
universal suffrage predominates.
the government influence is limited, human
rights are protected and legal norms are
preserved. Actually, the research of International
Institute of Press Freedom House illustrates that
only 89 (which present the 43,6% of world
population) of 121 elective democracies could
be characterized as “free” at 2002 [6, 1-2]. A
real progress criterion in this sphere will be the
fortune of new democratic countries in
government authority limitation, property and
human rights guaranty preservation, which will
serve basis for country’s universal welfare.
By James Madison the challenge to be
modern, the development of freedoms is more
difficult problem, than the support of vast
majority management idea. If people want to
protect their “sacred freedom”, they must learn
to think about those advantages, which
government authority limiting constitutional
rights give and don’t appear in trap of promises
about “quick” goods expected from experienced
scheme of redistribution. James Madison, the
“general architect” of USA constitution, strived
to unite the freedom and democracy with
constitutional order [7, 22-30].
From the Madison’s understanding of
liberal constitution, several conclusions for new
democratic countries are made:
(Source. Freedom House, Freedom in the World (for different years)).
Figure 1. The number of selective democracies in the world at 1900-2000
to establish real democracy government
authority must be limited, actions must be fare
and the safety of people and property must
predominate over the elective policy;
for corruption prevention and rent aimed
behavior it is necessary economic freedom to
predominate, people must accept norm of low
which will provide equality, guaranty private
property and contract freedom rights;
sweeping liberal-marketing order will
systematize economic activity and will create
wealth in the case when government has
minimal role in economy and lets people be free
in their choice;
there can’t be free society in the network
of redistributing country, there is no “third”
way, people must supervise guaranteed that
majority will not the repress rights of minority
for the sake of distribution justice.
How quick these lessons will be
assimilated by countries with transition eco-
nomies depends on the government power
sphere and size in the old regime conditions and
from duration. In the countries where the state
was omnipotent and predominated central
planning, the transition into democracies with
rule of law and market freedom takes place
more slowly, than in the countries with small
governments, in countries, which have an
experience in running market economy and
memories about freedom.
Post communistic countries, which have
an prewar experience of liberalism (Hungary,
Poland, Slovenia, Slovakia, Czech Republic and
Baltic countries), move faster in direction of
democratic capitalism.
Progress takes place more slowly in CIS
countries, where there was extraordinary strong
control over all spheres of life and which had no
chance for formation of market or civilized
society during many years.
There are brought several indicators of
post-communistic countries according to
Freedom House research in table 1:
democratization level, rule of law, economic
freedom degree. Practically, post communistic
countries or countries recently become
independent actually yield to East and Central
European countries, which had an experience of
liberal economic and political social order.
Thus, Poland has the highest indicators of
democratization and economic liberalization
(respectively 1.5 and 1.92). On the other hand,
Russia has a low indicator of democratization
and economic liberalization (respectively 4.81
and 3.92)1
Similar results show the classification of
Freedom House by rule of law rate. Those post-
communistic countries, such as Poland,
1 We would like to advise to approach to this
data with a little skepticism associated with the
evaluation methodology subjectivity. We should note
that the rating reflects most common trends quite ad
0
22
69
108 120
0
20
40
60
80
100
120
140
1900 1950 1989 1994 2000
Slovenia, Estonia, Hungary, which were legal
states and ensure private property rights before
The Second World War, had bigger progress in
refining on their legislation and in shortening
corruption at transition period then Russia,
Ukraine and Armenia.
Table.
The ratings of post communist countries by democratization, Rule of low
and of economic liberalization*
Countries PP CS IM GPA DEM CLJF CO ROL PR MA MI ECON
Poland 1,25 1,25 1,50 2,00 1,50 1,50 2,25 1,88 2,25 2,00 1,50 1,92
Slovenia 1,75 1,50 1,75 2,25 1,81 1,75 2,00 1,88 2,50 2,00 2,00 2,17
Lithuania 1,75 1,50 1,75 2,50 1,88 2,00 3,75 2,88 2,25 2,75 2,25 2,42
Estonia 1,75 2,00 1,75 2,25 1,94 1,75 2,50 2,13 1,75 2,00 2,00 1,92
Hungary 1,25 1,25 2,25 3,00 1,94 2,00 3,00 2,5 1,50 2,50 2,00 2,00
Latvia 1,75 2,00 1,75 2,25 1,94 2,00 3,75 2,88 2,50 2,25 2,25 2,33
Slovakia 1,75 1,75 2,00 2,25 1,94 2,00 3,25 2,63 2,00 2,50 2,50 2,33
Czech
Republic 2,00 1,75 2,50 2,25 2,13 2,50 3,75 3,13 1,75 2,25 2,25 2,08
Bulgaria 2,00 3,25 3,25 3,50 3,00 3,50 4,50 4 3,00 3,00 3,75 3,25
Croatia 3,25 2,75 3,50 3,50 3,25 3,75 4,5 4,13 3,25 3,50 3,75 3,50
Romania 3,00 3,00 3,50 3,75 3,31 4,25 4,75 4,5 3,75 3,75 4,25 3,92
Yugoslavia 3,75 3,00 3,50 4,25 3,63 4,25 5,25 4,75 4,75 5,25 5,00 5,00
Albania 3,75 3,75 4,00 4,25 3,94 4,50 5,25 4,88 3,25 4,00 4,00 3,75
Macedonia 4,50 4,00 3,75 4,25 4,13 4,75 5,50 5,13 4,25 4,75 5,00 4,67
Moldova 3,50 4,00 4,50 4,75 4,19 4,00 6,25 5,13 4,00 4,50 4,25 4,25
Georgia 5,00 4,00 3,75 5,00 4,44 4,25 5,50 4,88 3,25 4,00 4,00 3,75
Armenia 5,50 3,50 4,75 4,50 4,56 5,00 5,75 5,38 3,25 3,50 4,00 3,58
Bosnia 4,25 4,25 4,25 5,50 4,56 5,25 5,50 5,38 5,00 5,50 5,50 5,33
Ukraine 4,50 3,75 5,50 5,00 4,69 4,75 6,00 5,38 4,25 450 4,50 4,42
Russia 4,50 4,00 5,50 5,25 4,81 4,75 6,00 5,38 3,5 3,75 4,50 3,92
Kyrgyzstan 5,75 4,50 5,75 5,50 5,38 5,25 6,00 5,63 4,25 3,50 3,50 3,75
Azerbaijan 5,75 4,50 5,50 6,00 5,44 5,25 6,25 5,75 4,25 4,50 4,50 4,42
Tajikistan 5,25 5,00 5,75 6,00 5,50 5,75 6,00 5,88 5,50 5,50 5,25 5,42
Kazakhstan 6,25 5,50 6,00 5,75 5,88 6,00 6,25 6,13 4,00 4,25 4,50 4,25
Belarus 6,75 6,25 6,75 6,50 6,56 6,75 5,25 6,00 6,00 6,25 6,50 6,25
Uzbekistan 6,75 6,75 6,75 6,00 6,56 6,50 6,00 6,25 6,00 6,00 6,00 6,00
Turkmenistan 7,00 7,00 7,00 6,75 6,94 7,00 6,25 6,63 6,75 6,25 6,50 6,50
Median 3,75 3,75 3,75 4,25 4,13 1,25 5,25 4,88 3,50 3,75 4,00 3,75
Average 3,86 3,55 4,02 4,25 3,92 4,11 4,85 4,48 3,66 3,87 3,93 3,82
*Ratings (max-1, min-7).
Democratization (DEM) is the arithmetical mean of political process (PP), civil society (CS), independent
MEDIA (IM) and public administration (GPA) estimations
Rule of law (ROL) is the arithmetical mean of constitution legislative and juridical frameworks (CLJF)
and corruption (CO) estimations
Economic liberalization (ECON) is the arithmetical mean of privatization (PR), macroeconomic (MA)
and microeconomic (MI) policy estimations
The ratings describe the period of 1.11.2000-31.12.2001. Countries are ranked by DEM rating
Source. Karatnycky A., Motyl A., Handelman S. (eds.). Nations in Transit 2001. Civil Society, Democracy
and Markets in East Central Europe and the Newly Independent States. Washington, D. C., Freedom House,
2002 (http: // 216.119.117.183/ research/ nattransit.htm).
Insignificant progress of Armenia and a
range of post-communistic countries are not
amazing, because time is required for changing
the mind-set of people after totalitarian regime
of long years [8, 289]. Inconsistent measures
can’t solve the problems with communistic
social order: “As such, there is no other way
between modern civilization and socialism.
Market is incompatible with the state monopoly
of labor and universal property of production
means. Return to market is impossible without
large-scale privatization. It is impossible to
maintain law norms without multi-party system,
without communists’ refusal from the monopoly
power. It is impossible to accept moral values
and civilization, receive a right to return into
European family without refusing the idea about
society forced alteration” [8, 289].
The fact that communism wrecked
doesn’t means that left moods have disappeared.
As in developed democratic countries, in post-
communistic countries also many people still
want to have a government, which will restore
“social justice” by weakening property rights
and distribution of incomes. Thus, the danger
Madison warned about (“arbitrary expropriation
from some citizens for others”, “arbitrary
limitations, releases and monopolies” “unequal
taxes”, which “repress several types of property
and encourage others”) still exists [9, 102-103].
We can’t consider the elective democracy
to be a necessary and sufficient condition for
long-term economic growth. At the beginning,
the transition into democratic regime can
stimulate economic growth if new regime
promotes the development of political freedoms,
increase of stability and property rights
protection improvement. However, if elective
democracy is not limited by effective
constitution, which defines the borders of state
power and ensures civil and economic freedoms,
annuity aimed behavior scales will increase and
goods production will be replaced by
redistribution system, which will
embarrass the increase of real incomes. By
Robert Barrow: “Where a moderate degree of
democracy is acquired, the following increase of
it will cause growth retardation, because
predominates the effect of putting accent on
resource redistribution social programs” [10, 1-
27].
For not falling into trap, new democratic
countries must pay more attention to limitation
of government power that is to define the role of
government in the free society. It is necessary
not only for strengthening the economy, but also
for protection of human basic rights. When
government can’t ensure the private property
rights and intervenes in free trade, principles of
law weaken and parallel to reduction of freedom
of speech and other civil rights human basic
rights start to be violated. In this respect, Milton
Friedman mentioned, “In the case when
economic freedom stimulates political freedom,
political freedom has a trend to destroy
economic freedom” [11, 7].
Data concerning post-communistic
countries illustrates, that for countries with a
high rank of economic freedom is typical a
higher rank of democratization (see figure 2
ready-built by table data).
Figure 2. Mutual dependence of democratization and economic liberalization
in post-communistic countries
The fact that this two indicators move at
the same way, prompt that they can mutually
strengthen each other, in extreme case up to a
certain point. However, let’s note that the point
depends on the size of state impact and sphere.
If elective democracy is limited by the
constitutional spirit of freedom, the universal
suffrage doesn’t constitute danger neither for
political, nor for economic freedom [12, 78].
Multi-party elections typical for former
USSR countries are a very good addition for
freedom. Nevertheless, a range of independent
countries couldn’t limit the discretion of
government power.
Special benefits in political process
continue predominate and use the legislative
power in prejudice of citizens' majority for the
appropriation of national wealth [7, 30-35].
The future of democracy. In order
democracy not to become dictatorship, new
democratic countries, including formed in post-
soviet area, need reliable constitution, which is
based on market liberal principles. The
principles of liberal social order must be fully
accepted and a universal understanding of
justice must be acquired in conditions of
freedom law, ideas that were outlined in
Madison’s papers.
From experience, those principles of law
and economic freedom have key importance for
economic growth [13, 163-190]. In information
century in the countries where the creation of
market supporting institutes, including
transparent legislation failed great risks appear.
Private property makes people responsible for
the decisions making when using limited
resources and give stimulus for more profitable
variants for labor and capital utilization
searching. In case of limited power of
government and observing the law, people are
more prone to concentrate the attention at the
consequences of their actions. At the same time,
when government has limited power, investment
decisions will have a political tone and resources
will be pointlessly wasted.
Using data about 150 countries L. Hos-
kins and A. Eiras found out that the countries,
were the private property rights are protected
and transparent, have higher level of welfare
(evaluated by the indicator of real GDP per
capita), than that countries, where the private
property is not ensued and high level corruption
is exists (see figure 3) [14, 37-38].
Figure 2. Mutual dependence of democratization and economic liberalization
in post-communistic countries
The fact that this two indicators move at
the same way, prompt that they can mutually
strengthen each other, in extreme case up to a
certain point. However, let’s note that the point
depends on the size of state impact and sphere.
If elective democracy is limited by the
constitutional spirit of freedom, the universal
suffrage doesn’t constitute danger neither for
political, nor for economic freedom [12, 78].
Multi-party elections typical for former
USSR countries are a very good addition for
freedom. Nevertheless, a range of independent
countries couldn’t limit the discretion of
government power.
Special benefits in political process
continue predominate and use the legislative
power in prejudice of citizens' majority for the
appropriation of national wealth [7, 30-35].
The future of democracy. In order
democracy not to become dictatorship, new
democratic countries, including formed in post-
soviet area, need reliable constitution, which is
based on market liberal principles. The
principles of liberal social order must be fully
accepted and a universal understanding of
justice must be acquired in conditions of
freedom law, ideas that were outlined in
Madison’s papers.
From experience, those principles of law
and economic freedom have key importance for
economic growth [13, 163-190]. In information
century in the countries where the creation of
market supporting institutes, including
transparent legislation failed great risks appear.
Private property makes people responsible for
the decisions making when using limited
resources and give stimulus for more profitable
variants for labor and capital utilization
searching. In case of limited power of
government and observing the law, people are
more prone to concentrate the attention at the
consequences of their actions. At the same time,
when government has limited power, investment
decisions will have a political tone and resources
will be pointlessly wasted.
Using data about 150 countries L. Hos-
kins and A. Eiras found out that the countries,
were the private property rights are protected
and transparent, have higher level of welfare
(evaluated by the indicator of real GDP per
capita), than that countries, where the private
property is not ensued and high level corruption
is exists (see figure 3) [14, 37-38].
Figure 2. Mutual dependence of democratization and economic liberalization
in post-communistic countries
The fact that this two indicators move at
the same way, prompt that they can mutually
strengthen each other, in extreme case up to a
certain point. However, let’s note that the point
depends on the size of state impact and sphere.
If elective democracy is limited by the
constitutional spirit of freedom, the universal
suffrage doesn’t constitute danger neither for
political, nor for economic freedom [12, 78].
Multi-party elections typical for former
USSR countries are a very good addition for
freedom. Nevertheless, a range of independent
countries couldn’t limit the discretion of
government power.
Special benefits in political process
continue predominate and use the legislative
power in prejudice of citizens' majority for the
appropriation of national wealth [7, 30-35].
The future of democracy. In order
democracy not to become dictatorship, new
democratic countries, including formed in post-
soviet area, need reliable constitution, which is
based on market liberal principles. The
principles of liberal social order must be fully
accepted and a universal understanding of
justice must be acquired in conditions of
freedom law, ideas that were outlined in
Madison’s papers.
From experience, those principles of law
and economic freedom have key importance for
economic growth [13, 163-190]. In information
century in the countries where the creation of
market supporting institutes, including
transparent legislation failed great risks appear.
Private property makes people responsible for
the decisions making when using limited
resources and give stimulus for more profitable
variants for labor and capital utilization
searching. In case of limited power of
government and observing the law, people are
more prone to concentrate the attention at the
consequences of their actions. At the same time,
when government has limited power, investment
decisions will have a political tone and resources
will be pointlessly wasted.
Using data about 150 countries L. Hos-
kins and A. Eiras found out that the countries,
were the private property rights are protected
and transparent, have higher level of welfare
(evaluated by the indicator of real GDP per
capita), than that countries, where the private
property is not ensued and high level corruption
is exists (see figure 3) [14, 37-38].
Source. Hoskins L., Eiras A. Property Rights: The Key to Economic Growth.
Figure 3. The guaranty of property rights and growth of welfare
Gwartney J., Holcombe R., Lawson R.,
studying the situation in 60 countries at 1980-
1995, defined that the expansion of government
sizes by 10 % (evaluated as a government
expenditures level towards GDP) at the
beginning of present period is identified with the
reduction of economic growth tempos by nearly
0.6% during next 15 years. They also concluded
that in the case when government activity is
limited by “the trial functions”, its expenditures
are 15% of GDP. Any exceed of this greatness
“has negative effect on nation welfare” [7, 36-
37].
These empirical results confirm the
importance of private property and government
functions limitation not only by Madison’s
meaning in purpose of creating a fair society,
but also population poverty reduction once more
time. For limiting the government actions the
growth of redistribution state must be inhibited,
which suppose an increase of individual
freedom and spirit of responsibility. If the nation
approaches to protect self-regulating liberal
market system, that Madison observed as a
system, which is compared with freedom of
people in the best way, not only “a narrow sense
democracy” but also “a broad sense democracy”
must be formed. As the post-communistic
countries’ experience shows, new democracies
suffer from elite corruptness, annuity aim and a
danger of alienation from democratic norms.
The essence of problem is that it is necessary to
help people to realize the benefits from the
limitation of government activity and
expenditures of unlimited democracy.
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