#readwise # How the West (and the Rest) Got Rich  ## Metadata - Author: [[Deirdre N. McCloskey]] - Full Title: How the West (and the Rest) Got Rich ## Highlights - 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.** (Page 2) ^nqm1i3 - **Today’s concerns over the stagnation of real wages in the U.S. and other developed economies are overblown if put in historical perspective.** (Page 2) - Look at the magnificent plenty on the shelves of supermarkets and shopping malls. Consider the magical devices for communication and entertainment now available even to people of modest means. Do you know someone who is clinically depressed? She can find help today with a range of effective drugs, none of which were available to the billionaire Howard Hughes in his despair. Had a hip joint replaced? In 1980, the operation was crudely experimental. Nothing like the Great Enrichment of the past two centuries had ever happened before. (Page 3) - What caused it? ... from the blessed Adam Smith onward, the trick was thought to be savings. The wild Highlanders could become as rich as the Dutch—“the highest degree of opulence,” as Smith put it in 1776 —if they would merely save enough to accumulate capital (and stop stealing cattle from one another). ... A recent extension of Smith’s claim, put forward by the late economics Nobelist Douglass North (and now embraced as orthodoxy by the World Bank) is that the real elixir is institutions. On this view, if you give a nation’s lawyers fine robes and white wigs, you will get something like English common law. Legislation will follow, corruption will vanish, and the nation will be carried by the accumulation of capital to the highest degree of opulence. But none of the explanations gets it quite right. **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 was a 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 ideas sufficed. Once we had the ideas for railroads or air conditioning or the modern research university, getting the wherewithal to do them was comparatively simple, because they were so obviously profitable. (Page 3) - **If capital accumulation or the rule of law had been sufficient, the Great Enrichment would have happened in Mesopotamia in 2000 B.C., or Rome in A.D. 100 or Baghdad in 800. Until 1500, and in many ways until 1700, China was the most technologically advanced country.** Hundreds of years before the West, the Chinese invented locks on canals to float up and down hills, and the canals themselves were much longer than any in Europe. China’s free-trade area and its rule of law were vastly more extensive than in Europe’s quarrelsome fragments, divided by tariffs and tyrannies. Yet **it was not in China but in northwestern Europe that the Industrial Revolution and then the more consequential Great Enrichment first happened. Why did ideas so suddenly start having sex, there and then? ... The answer, in a word, is “liberty.” Liberated people, it turns out, are ingenious. Slaves, serfs, subordinated women, people frozen in a hierarchy of lords or bureaucrats are not. By certain accidents of European politics, having nothing to do with deep European virtue, more and more Europeans were liberated. ... Europeans came to believe that common people should be liberated to have a go. You might call it: life, liberty and the pursuit of happiness.** (Page 6) - The Great Enrichment is the most important secular event since human beings first domesticated wheat and horses. It has been and will continue to be more important historically than the rise and fall of empires or the class struggle in all hitherto existing societies. Empire did not enrich Britain. America’s success did not depend on slavery. Power did not lead to plenty, and exploitation was not plenty’s engine. **Progress toward French-style equality of outcome was achieved not by taxation and redistribution but by the Scots’ very different notion of equality. The real engine was the expanding ideology of classical liberalism. The Great Enrichment has restarted history. It will end poverty.** For a good part of humankind, it already has. China and India, which have adopted some of economic liberalism, have exploded in growth. Brazil, Russia and South Africa, not to speak of the European Union—all of them fond of planning and protectionism and level playing fields—have stagnated. (Page 9) - **What public policy to further this revolution? As little as is prudent. As Adam Smith said, “it is the highest impertinence… in kings and ministers to pretend to watch over the economy of private people.”** We certainly can tax ourselves to give a hand up to the poor. Smith himself gave to the poor with a liberal hand. The liberalism of a Christian, or for that matter of a Jew, Muslim or Hindu, recommends it. **But note, too, that 95% of the enrichment of the poor since 1800 has come not from charity but from a more productive economy.** (Page 10)