Classical liberalism—the philosophy of individual freedom and limited government—often finds itself in a quandary. A liberal society maximizes opportunity and gives everyone a voice based on ability, work, and merit (economic considerations) rather than birth, sex, or race (non-economic, arbitrary considerations). F. Hayek, in freedom constitution explained that “the mark of a free man is that his livelihood should not depend on other people’s opinion of his merits, but solely on what he can offer them.” It was 1960, so he was still using the usual generic word for “person”, which modern readers might reject; the whole point, of course, is to include women. Voltaire similarly described the leveling effect of markets:
Go to the London Stock Exchange… and you will see representatives of all nations gathered there to serve mankind. There, a Jew, a Muslim, and a Christian treat each other as if they were of the same denomination, and call only those who have gone bankrupt infidels.
But what can a liberal society do to correct the lingering weight of past illiberal policies? On the one hand, individuals who are members of groups that have experienced discrimination in the past are often at a disadvantage. On the other hand, a liberal society cannot, if it wishes to remain true to its fundamental principles, treat individuals as members of groups and not as individuals. This kind of “reverse discrimination”, which is ultimately just discrimination, is at the heart of today’s identity politics and has no place in a free society.
Take women, for example, a group that has faced illiberal discrimination in voting rights, property ownership, and more. literature suggests two ways to promote gender parity on boards (one of the indicators of women’s economic opportunity): quotas and welfare laws that target women (especially state-mandated maternity leave). A dozen countries have laws guaranteeing quotas for women on boards of directors, and most countries have mandatory maternity leave. The problem with both quotas and welfare, of course, is that they are illiberal. The first treats people as members of a class (rather than as individuals), while the second expands the scope and size of the state.
What if there was a way to promote gender parity, thereby promoting the classical liberal goal of giving women the right to vote without losing their freedom?
Already in 1962Economists Armen Alchian and Ruben Kessel have shown that racial discrimination was more common in public utilities than in private companies, and more prevalent in regulated private companies than unregulated ones. Indeed, discrimination is costly as employers select workers on non-economic criteria. There is a cost to selecting employees based on preferred non-economic characteristics rather than ability, and these costs are reflected in lower revenues for public organizations and regulated private enterprises that are shielded from market profit discipline.
The same applies to the status of women. literature shows a positive correlation between a country’s economic freedom and the status of women. The very existence of greater economic freedom—more opportunities for all—improves the status of women.
We will dig deeper by examining the number of women in legislatures and company boards in countries where there are no gender quotas to assess whether economic freedom gives women the right to vote without the need for legislation. We found that economic freedom is positively correlated with the proportion of women on corporate boards and the proportion of women in the lower houses of the legislature (we focus on the lower houses because the data for bicameral legislatures is too limited).
We also found that the average percentage of women on corporate boards and legislatures tends to be significantly higher for the higher quartiles of economic freedom.
As classical liberals, we should pause for a moment and note that it is not clear that it is necessarily a good thing to have more women on boards and legislatures. Indeed, individual women may or may not take advantage of such opportunities depending on their personal circumstances. However, the proportion of women in leadership positions in legislatures and corporations is a proxy for the opportunities offered to women. Economic freedom increases this possibility without the need for illiberal intervention, whether it be quotas that treat people as members of classes or further expansion of the welfare state. Ironically, quotas end up hurting the cause of women, who are treated like class members rather than individuals. And further expansion of the welfare state, paradoxically, will ultimately lead to fewer opportunities for women as it undermines economic freedom and expanding opportunity.
There is a simple policy solution for women’s empowerment and voting rights: greater economic freedom. Markets decide, as we learned in our undergraduate microeconomics course, without the unintended consequences of illiberal intervention.