How The West Got Rich
May 23, 2016
There was a fascinating article in last Saturday’s Wall Street Journal. I want to point it out because it will be at the heart of our upcoming 2016 presidential election. We hear the talking heads speaking about gender-less bathrooms, free stuff for everyone, income disparity, redistribution of income, taxes, the benefits of socialism, bullying and lots of other issues.
The number one issue in survey after survey is the economy and this is what this article is all about. Look and read some of the facts.
Two centuries ago, the average world income per human (in present-day prices) was about $3 a day. It had been so since we lived in caves. Now it is $33 a day—which is Brazil’s current level and the level of the U.S. in 1940. Over the past 200 years, the average real income per person—including even such present-day tragedies as Chad and North Korea—has grown by a factor of 10. It is stunning. In countries that adopted trade and economic betterment wholeheartedly, like Japan, Sweden and the U.S., it is more like a factor of 30—even more stunning.
Now we have people calling for a change to our system in order to make it more like Cuba, Venezuela and a long list of countries run by top down federal bureaucracies.
Here is the explanation of how our society got these wonderful improvements. What enriched the modern world wasn’t capital stolen from workers or capital virtuously saved, nor was it institutions for routinely accumulating it. Capital and the rule of law were necessary, of course, but so were a hard working labor force and liquid water and the arrow of time.
The capital became productive because of ideas for betterment—ideas enacted by a country carpenter or a boy telegrapher or a teenage Seattle computer whiz. As Matt Ridley put it in his book “The Rational Optimist” (2010), what happened over the past two centuries is that “ideas started having sex.” The idea of a railroad was a coupling of high-pressure steam engines with cars running on coal-mining rails. The idea for a lawn mower coupled a miniature gasoline engine with a miniature mechanical reaper. And so on, through every imaginable sort of invention. The coupling of ideas in the heads of the common people yielded an explosion of betterments.
The other day I heard a report about our current Vice President, Joe Biden, wondering what he would do after the upcoming election. He has never had a private sector job working for a “for profit” company in his life. Neither has Barack Obama or most of the Washington DC politicians and bureaucrats. Let us get back to returning government to the people with important decisions made at the state and level local, empower local thinkers and entrepreneurs, and reduce the size of the DC bureaucracy. Do you believe in the benefits of legal and fair capitalism or do you want a radical change in our system?