December 9, 2005
Excerpts: The Battle For The Soul of Capitalism - Part IV
The Birth of Plenty
The flourishing of capitalism was central to the soaring prosperity that became the hallmark of the modern era. During the past two extraordinary centuries, the global economy has experienced increasing productivity and economic growth at rates never witnessed before in all human history. According to the brilliant investor, philosopher, and neurologist William J. Bernstein, author of The Birth of Plenty: How the Prosperity ofthe Modern World Was Created:
[From] about A.D.1000...the improvement in human well-being was of a sort so slow and unreliable that it was not noticeable during the average person’s twenty-five-year [italics added] life span. Then, not long after 1820, prosperity began flowing in an ever-increasing torrent. With each successive generation, the life of the son became observably more comfortable, informed, and predictable than that of the father...[the result] of the four essential ingredients that are necessary for igniting and sustaining economic growth and human progress:
- Property rights—creators must have proper incentives to create, which go hand in hand with civil liberties.
- Scientific rationalism—innovators must possess the proper intellectual tools in order to innovate, and must be able to do so without fear of retribution.
- Capital markets—entrepreneurs must have access to sufficient capital to pursue their visions.
- Transportation/communication—society must be able to rapidly and efficiently move information and finished products.
It was only at the birth of modern capitalism in the early nineteenth century that all four of these elements began to flourish in concert. While the forces that drive economic growth are complex to evaluate, and often contested in academic circles, there was a timely convergence of human and physical capital, supported by a network of modern systems: legal, financial, commercial, educational, governmental, and the like. In any event, two centuries ago the world’s standard of living began inexorably to improve, and the modern world was born.
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