The classic formula for helping troubled nations become part of the free world is to institute democracy first, then try to bring the economy up to speed. That has been the U.S. policy in Iraq, where the first elections were seen as pivotal. It has been the policy of the European Union, which requires new members to have functioning democracies before they integrate economically. And it was the implicit message sent by all Western countries after last year's elections in Ukraine, which were universally hailed as a sign that the nation was on the right track--even though its citizens have an average per capita income of less than $1,000.
To be fair, there are good reasons for trying to establish democracy early. But there is also evidence to suggest that the process works better the other way around: that democracy--a system for political freedom--may take root best when it is preceded or at least accompanied by economic freedom.
Indeed, the American experience suggests that starting a business develops precisely the traits that make democracy work. It requires independence, much effort, and self-discipline—but also the ability to collaborate and the recognition that one can only succeed by serving the needs of others.
History shows that many of the Founding Fathers gained, through business, the abilities needed to achieve and maintain self-governance. Ben Franklin left copious writings describing how he had honed his diplomatic skills in the course of establishing himself as a printer. Paul Revere, a silversmith, was a consummate networker who used business contacts to coordinate the revolutionary effort. Alexander Hamilton, who managed a clerical office while still in his teens, later applied those skills to organize the treasury.
Even Thomas Jefferson--Hamilton's adversary, who argued that America should remain a nation of farmers--was hardly the stereotypical rustic at the plow. He managed a sizable plantation and sought more scientific ways to cultivate it. In short, he was much like the best American entrepreneurs: a striver and learner, often brimming with ego and unconventional opinions, but civic-minded and, in the end, a farsighted philanthropist.
The experience of economic potency may breed the inclination for political freedom.
Students of the relationship of economics to democracy tend to portray the matter in terms of class—the rise of democracy, they say, depends on the emergence of a bourgeoisie capable of contesting the aristocracy. Perhaps it is more accurate to say that the experience of economic freedom breeds both the skills and the inclination for political freedom. And sometimes just the experience of economic potency may be sufficient.
Consider Solidarity, the labor movement that toppled Poland's communist regime. As the journalist Lawrence Wechsler has noted, it may be no coincidence that the uprising began on the industrial waterfront at Gdansk, where thousands of workers came together daily to build immense vessels. Wrote Wechsler in 1981: "From almost anywhere in the city, the cranes of the shipyard dominate the skyline.... It's easy to see how a worker...might begin to have delusions of grandeur--how, when he lost patience with the pesky incompetent bureaucrats downtown, he just might begin to imagine he had the power to do something about them."
A final and most curious example may be unfolding today in China. Here we see market capitalism taking shape in a country that is still communist. In recent years, the party has permitted the formation of small private businesses, then larger ones, and also has granted some autonomy to the managers of state-owned enterprises. Already this has created opportunity, prosperity, and de facto personal liberty. The question now is whether it will lead to democracy. The answer may hinge on how capitalism itself evolves.
Carl Schramm is president of the Ewing Marion Kauffman Foundation, which focuses on entrepreneurship and education. Robert Litan is a vice president there and senior fellow at the Brookings Institution.
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