Some of the best observers of America were not born here. Alexis de Tocqueville is the classic example. His 1832 book, Democracy in America, is considered one of the most insightful accounts ever written about American society and our political institutions. Fareed Zakaria, born in India with degrees from Yale and Harvard, is in this tradition.

At the age of 28, Zakaria became managing editor of Foreign Affairs, the leading journal of international politics and economics. In his book, The Future of Freedom, Zakaria explores the relationships among capitalism, democracy, and liberty. He notes the American culture of liberty arises from our unique historical circumstances. Our founders understood that the greatest threat to freedom is the concentration of political power.

When crafting our national charters (i.e., the Constitution and the Bill of Rights) the founders drew deeply from the intellectual traditions of the Enlightenment. This intellectual revolution recognized that individual liberty was both innate and a prerequisite for democratic self-governance. Hence, our political institutions are designed to prevent the accumulation of power and protect individuals from coercion -- no matter the source (e.g., the church or a temporary majority).

The founders’ work set in motion the most successful large-scale social experiment in history. For over 200 years we’ve reaped the benefits. It’s not surprising that we easily forget much of the world has not been so fortunate. Writing this summer in the Atlantic Monthly, Robert Kaplan observed that “life inside the post-industrial cocoon of Western democracy has made people incapable of imagining life inside a totalitarian system. With affluence comes not only the loss of imagination, but also the loss of historical memory.”

Zakaria observes that liberal democracies and market economies go together. They alone nurture and protect individual liberty -- the key to social justice and progress. No society has enjoyed even a modicum of political freedom that did not use something close to a free market to organize its economic activity. Why is this?

The economic life of modern societies is dauntingly complex. It’s marked by uncertainty and decision making with incomplete information. Just as biological life evolves by genetic mutation and natural selection, economic life evolves by technological innovation and competition.

Spontaneous order arises through the undirected actions of millions of individuals each independently pursuing their own interests. The market process coordinates their activity via prices. Prices really are highly condensed information about relative values. Their signals transmit and coordinate the desires of producers and consumers.

History demonstrates that centrally planned, state-run economies are unsustainable. They can be maintained only temporarily and only through the use of force. Substituting the preferences of the state for the market choices of millions of individuals is both economically disastrous and profoundly anti-democratic. It’s the first step along the Road to Serfdom. The poor and disenfranchised are guaranteed to suffer most.

At its best capitalism acts as a check on the concentration of power -- unless it’s hijacked by special interests to protect them from competition or, for example, regulations to protect the environment.

Over centuries capitalism has helped displace both feudalism and monarchism. It breaks up the traditional economic power bases of small groups of businessmen, bankers, and bureaucrats. Over the past few decades, the spread of capitalism has lowered poverty rates and created opportunities for individuals all over the world. Living standards and life expectancy have risen substantially. There is more food, more education, and more democratization, less inequality and less oppression (especially of women).

But capitalism alone will not ensure freedom. Zakaria makes this clear. He notes it’s quite possible to have capitalist economic arrangements operating within political systems that restrict freedom. Singapore under the rule of autocrat Lee Kuan Yew is a recent example. Fascist Italy and Spain used private enterprise to organize economic activity but no one would describe them as politically free.

Freedom is fragile. It requires free speech, a free press, and freedom of religion. It can only flourish when nurtured by certain political institutions. They must ensure free and fair elections, protect and enforce private property rights, and provide for basic civil liberties. Only with these institutions in place can we expect to find conditions that foster a harmony between self-interest and the public good.