Due Process: Economics


“The idea that political freedom can be preserved in the absence of economic freedom, and vice versa, is an illusion.  Political freedom is the corollary of economic freedom.”

Ludwig von Mises,
Plain Talk, January 1949

Hindsight teaches due process and economic vitality are inseparable handmaidens.  It is difficult to imagine a governance system capable of broad-based economic progress that lacks substantial due process.  Throughout history, alternatives to the British model of modernity gained little traction.

Widely praised before WWII as a paragon of efficiency, Fascism’s Thousand Year Reich and repellent Italian and Japanese imitators were ground down and destroyed after a few wretched years by the over­whelm­ing production firepower of a messy, democratic industrial model originally evolved in 18th century England.

The model – a fortuitous blend of economic opportunism and broad based democracy – has repeatedly demonstrated supremacy; beginning with the casual ease Britain ruled those outside the model.

Marxism, an economic policy theory to transform industrialized societies into classless utopias, ironically worked best as a technique to hijack developing countries.   The USSR operated as a firm with Stalin as its CEO and never devel­oped a market economy.  It, too, was ground down by superior Western productivity.

De Soto argues that an important prerequisite for a dynamic economy is the functioning state protection of property [due process] rights in a formal property system where ownership and transactions are clearly recorded.  He persuasively attributes the lack of such rights as a major cause of South American economic stagnation.

While some Westerners worry Islamists may wreck capital­ism if they lay their hands on a means of doing so, not even Islamists believe Islamists will produce their way to dominance.

The point is, authoritative regimes merely offer a model of appropriation as an alternative to the West’s model of innovation.  None offer a more productive economic engine or a higher standard of living.

In The World is Flat, Pulitzer Prize winning author and New York Times columnist, Thomas L. Friedman argues value-creation is shifting from vertical to horizontal models.  Not only does governance structure move from vertical to horizontal, but the essence of governance changes from “no” to “know.”   Legacy “one size fits all” regulation no longer serves its public policy objectives. Sarbanes-Oxley, for example, failed to head-off the subprime meltdown; and, it contributed to the 90% decline in capital for seed-stage enterprise.

Common sense intimates against expecting different results from business as usual.  Interconnected twenty-first century economies require a corresponding regulatory paradigm shift – a transformation from Industrial Age proscrip­tions for command-and-control to Information Age prescriptions for collabora­tive commerce and connectivity.