Although political freedom and economic freedom are far from perfectly correlated, history indicates that the two are mutually supportive. Political freedom often lays the foundation upon which economic freedom—and therefore prosperity—can be built. For example, a rule of law that respects property rights, enforces contracts, and punishes corruption is essential for the operation of business enterprise. These conditions most often exist in a country where free elections and active participation by the electorate ensure that government officeholders are responsive to the common good.

A society with wide berth for the political activity of its citizens also encourages civic participation, concern for the common good, and a sense of personal responsibility (traits that support enterprise and economic growth). This is substantiated by data from surveys that measure each. Based on studies by Freedom House (political freedom) and the Heritage Foundation/Wall Street Journal (economic freedom) Freedom House director Adrian Karatnycky reported that “there is a high and statistically significant correlation between the level of political freedom … and economic freedom."

One of the obstacles holding back developing nations is political oppression. “Bad governance,” one of the four main “poverty traps” identified by Paul Collier, keeps nations locked in poverty. Dictatorships and military juntas discourage the conditions necessary for economic development. In addition, the relative predominance of the political sphere over and above other spheres creates a set of bad incentives. As Theodore Dalrymple notes, in many poor nations “there’s no way of getting on in the world or becoming prosperous other than by finding a political sponsor.”

When people stand to gain more by political success than by entrepreneurial success, the most talented and ambitious individuals will tend to direct their energy toward personal success in the political sphere rather than to creating jobs and wealth through business activity. When minorities or individuals feel that they are powerless victims rather than active participants in the political arena, they will take their skill, creativity, and drive to a new location, depriving their native country of its most important resource: human capital.