Book Review: 'The Birth of Plenty' Is a True Economic History of the World 10 comments
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My intellectual research interests largely revolve around corporate strategy and international expansion. My dissertation, in fact, addressed how firms learn from international expansion (i.e. exporting), and how we can quantify such learning benefits. I was therefore extremely interested to read William J. Bernstein’s A Splendid Exchange: How Trade Shaped the World when it was released last year. According to those who have actually read the book, it supposedly provides a fascinating account of the economic history of trade.
Now while I was really looking forward to reading that book, I stumbled across the book that preceded it - The Birth of Plenty: How the Prosperity of the Modern World was Created. As I read through the reviews of The Birth of Plenty, I thought I really ought to read it first. So I started reading The Birth of Plenty several months ago. I just finished it last week (terribly slow, I know).
But now that I have finally read it, I can say that it is, unquestionably, worth the read.
The Birth of Plenty is meant to be an economic history of the world. A tall order, for sure. But it delivers. Bernstein’s basic premise is that healthy institutions promote prosperity. In particular, countries must possess the following basic institutional ingredients in order to prosper:
- Property Rights
- The Scientific Method
- Capital Markets
- Effective Means of Transportation and Communication
After describing the historical development of each of these institutions, Bernstein then goes on to describe which countries were able to develop such institutions, which countries were not, and to what effect. He then follows the path of economic development for several of those countries. He concludes that the four institutional factors are not only sufficient, but necessary, for a country to achieve prosperity. For Bernstein, it’s all or nothing. It’s not enough to have any one, two, or three of those institutions. All four must be in place at the same time.
Bernstein then makes what I think is the boldest conjecture of the book (with some, though scant, supporting evidence). He asserts that the aforementioned four institutional characteristics not only lead to prosperity, but that they also precede democracy, but not vice versa. That is, you can’t simply thrust democracy onto an institutionally underdeveloped country and expect prosperity to follow. The path runs from institutional development to prosperity to democracy because, as he argues, an increasingly wealthy population will accept nothing less.
In the interest of full disclosure, this book provided an especially timely and interesting read for me since I’ve been getting into institutions lately. Some of my most recent academic work explores how cultural, political, and economic institutions impact the differential development and performance of firms across countries. So maybe I’m a bit biased. Nevertheless, I thought it was a truly fascinating read. And not fascinating in the interesting, but dry, academic way. The storytelling was superb.
Up next: A Splendid Exchange…
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This article has 10 comments:
> democracy because, as he argues, an increasingly wealthy
> population will accept nothing less.
Interesting, but does it explain why a prosperous nation that has had all four of those, more or less, for quite some time -- the USA -- is abandoning democracy for socialism?
Democracy devolves into socialism due to the politics of envy and the 'infinite wealth' entitlement mentality.
The politics of envy begins when the economically less successful realize that via bureaucratic 'regulationizing' they can gain power over the productive. It's ego gratification and has nothing to do with economic rationality. It's cutting off your nose to spite your face, but they don't care about economically destructive hyperregulation as long as they feel it brings themselves up a notch or brings the successful down a notch.
The entitlement mentality begins as soon as these words are uttered, "In a rich country like this...". i.e. in a rich country like this everybody should be able to get everything they want, as if you are infinitely rich and not just hardworking and productive. Pretty soon a majority is voting only for politicians who promise to feed them more from the public trough. The productive are punished by taxation and the unproductive are rewarded with social programs.
People respond to these incentives. You get benefits for being 'needy', and you get taxed for being self-sufficient. More people are motivated to become needy and less people are motivated to become productive. National productivity and wealth declines accordingly, as we saw in the Soviet Union.
Social welfare bureaucrats love the groveling of their 'clients' who have come to beg some benefit or other. This is why legitimate workers' compensation claims are so often rejected while malingerers' claims succeed. Legitimate claimants go in demanding their due while malingerers grovel their case before the mighty bureaucrat.
Socialism begins when human vice is rewarded over human virtue, when the order of nature is overturned in favor of 'social justice'. The onset of socialism is the birth of privation, vicious spawn of the virtuous culture of plenty. In a democracy majority rules, so if your majority has become vicious rather than virtuous you are doomed to national decline.
Because I am mostly interested in books that tell me how to maximize my returns while reducing risk and protecting my principal, I will be taking a pass on reading The Birth of Plenty. Reading your book review was enough for me.
Sigh...the stupidity of right wing America in a nutshell.
On Jun 20 01:11 AM Missing_Link wrote:
> > The path runs from institutional development to prosperity to
www.econtalk.org/archi...
Quite an insightful interview, just takes an hour.
Assertion, and would suggest the rise of England from a
relatively obscure island off the coast of Europe two global
Mastery of trade, communications, mass production,
military dominance, and scientific prowess, while not
forgeting sewing the seeds for the future prosperous
natons, Australia.USA, Canada. New Zealand, Hong Kong,
Singapore, ...etc....all came from having those 4 composite
Assets.
> LOL! Do you know that there are parties called Social Democrats?
> Meaning that democracy and socialism are not mutually exclusive.
> You can vote for your leaders and they can institute socialist policies.
They may CALL themselves Social Democrats, but they are in fact socialists because they advance socialist policies.
Socialism may not be mutually exclusive with European "democracy," but it is absolutely mutually exclusive with American democracy as created by the Founding Fathers and written in the Constitution and the Bill of Rights.
pure unadorned Socialist principles, the last European leader to try
such a policy was "Mitterand" in France in "1980s", and ,was duly
punished, by the Global markets and France had to stand down!
Or become technically bankrupt ,by its inability to raise monies in
the market place!