Does respecting the individual promote prosperity? (updated)

Over at Aid Watch William Easterly asks Does Respecting the Individual Promote Prosperity? Easterly writes

To drastically oversimplify, values across different cultures lie along a spectrum between two separate poles: (1) valuing individual autonomy, believing in equal treatment of individuals, reliance on formal law, the same moral standards apply to all, enforcement of morality is between individuals vs. (2) seeing the individual mainly or only as part of the group, different standards of treatment for group insiders and outsiders, morality only applies to interactions within the group, group enforcement of moral standards, reliance on informal rather than formal institutions.

To continue the drastic oversimplification, the values closer to the first pole are more consistent with the kind of good government associated with democratic capitalism, while values closer to the second pole are more associated with authoritarian and collectivist politics and economics.

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So the bottom line (again drastically oversimplified) could be something like “the value of individual liberty promotes prosperity.”

Should this surprise us? Individual liberty, among other things, helps get the incentives for people to innovate and produce right. The institutions that a society develops to help protect the individual and property rights also help to give the right incentives for people to become entrepreneurs, to develop new technologies, to improve productivity and therefore promote growth. The development of these political, social and economic institutions depends on ideology, in that ideology represents the beliefs and values which underlie these institutions.

Update: Brad Tayor comments on the Easterly piece here and Art Carden does so here.