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How Freedom Made Us Rich

Economist Deirdre McCloskey explains the roots of "The Great Enrichment" of the last 200 years.

(Page 3 of 6)

There's this tremendous up swell coming from ideas, whereas my colleagues, most of them, there's a little tiny group that includes this fellow Joe Mokyr, who believe that ideas are important, but most of my colleagues in economic history and economics believe that it's trade or that it's, if they're on the left, it's slavery or whatever. The trouble with that is that we've had trade and slavery since Cane and Abel. Look, in 1792, if you were going to bet on who was going to have a great enrichment of 3,000% per capita when previous increases has been a hundred percent and then falling back to $2 or $3 a day per person, 3,000% per capita, in 1492 you would have been crazy not to bet on China because China had the most advanced commercial institutions, the most advanced ship building technology, the most advanced machinery all together, indeed the most advanced science at that stage. My claim is that liberty was the key to modern economic growth .

Gillespie: To put it in a context that, as somebody coming out of literary studies, when I looked at your work, you're anti-determinist.

McCloskey: I am.

Gillespie: There are a lot of libertarians or free-market people who will say well, it's because the west was well situated demographically or geographically ...

McCloskey: Yes, so they say.

Gillespie: ... where we had natural ...

McCloskey: Resources.

Gillespie: ... resources and things.

McCloskey: Lots of ports.

Gillespie: You're saying it's essentially ideas. What are the essential ideas that allowed people to have a go of it?

McCloskey: Well, the essential ideas, as the blessed Adam Smith said, "The liberal plan of equality, liberty, and justice," by which he meant social equality. He was an egalitarian, a somewhat advanced egalitarian for his age. By liberty, he meant this right to open a hairdressing salon and the like, or to invent a Uber, which would destroy the taxi industry. And t hat just, it inspirited people. I think it's very important to not think in mechanical terms. I think socialists and some people, some conservatives, think the economy is just mechanical. People are always talking about, I don't know, increasing economic growth in Youngstown by pouring money into it and that will have multiplier effects. They have this kind of vaguely Keynesian idea that you can make things happen in this mechanical way by just stuffing ... They speak of priming the pump and all that, but it's inventing the pump that's the key .

Gillespie: How did it happen that the west creates a system where a lot of people are relatively equal and can act and live how they want and that even say, you know, business people or rich people, wealthy people, powerful people, will sign on to a system that allows other people to possibly compete with them and beat them and surpass them?

McCloskey: Yeah, well, that's the big one. If you were betting, you would never in the 15th century have bet on Europe. That would have been stupid. This quarrelsome, poor, disease ridden place of fanatics who then became more fanatical in the 16th century. No, it was accidents. For example, the Protestant Reformation, which Max Weber claimed changed the psychology of the entrepreneur. I don't think it did. I think what it did, the radical Protestant Reformation, the Quakers being the most extreme case one can think of, but also the Anabaptists and so forth, got along without hierarchies. In the case of the Quakers, there's no minister. They just gather in a circle and wait until the spirit of the Lord descends. That experiment in getting away from what had been the hierarchy in this very important part of their life, mainly religion, made people think oh yeah, maybe I could get along without bishops.

Gillespie: What was the role of chopping off the head of Charles the First in all of that?

McCloskey: Well, see, these are all contingent.

Gillespie: Yeah.

McCloskey: They're all accidents. There's nothing deterministic about them. Had Charles been a more sensible man, his father was called the, James the First, was called the wisest fool in Christendom, but his son wasn't that much smarter and he said, on the scaffold, he was allowed under English law to give it because he'd been convicted under an English law. Shocked the whole of Europe that an anointed Prince could be tried. I mean, Princes died violently all the time, but could be tried and found guilty. He said, "Don't you understand, a sovereign and a subject are clean different things?" That's what broke down, this conviction that that's true. A conviction actually, which was invigorating in Europe in the 16th, and especially the 17th, century. All across Europe, east and west, the divine right of kings was being asserted, and it could have gone the other way. It could have been that we became Russia or Prussia, for that matter, but we didn't. We became French or British.

Gillespie: Now you're talking, you've made an allusion to Uber and the kind of regulatory burden that companies or new business, new ideas face in 21st century America, hair braiding, occupation licensing. Are we backsliding from that tradition and what do we do to arrest that?

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  • loveconstitution1789||

    Life, Liberty, and the pursuit of happiness....

  • Jerryskids||

    That's the answer to the precedential question of "What makes us rich?" If I can sit out on the back porch of an evening, sipping a beer and watch the grandkids playing, knowing as I look around that "this is mine", I'm as rich as any king. YMMV, and that's okay - you pursue happiness in your way, me in mine.

  • ChipToBeSquare||

    A lot of leftists try going out of their way to explain why some people are poor without realizing the absurdity of that question. Poverty is the natural state of human existence and a thing we battled for thousands of years. What needs to be explained is wealth. They'll usually throw out some crap about exploitation, but that's easy to destroy: you're telling me there was no exploitation anywhere prior to the 17th century?

  • mtrueman||

    "Poverty is the natural state of human existence and a thing we battled for thousands of years. "

    Same with freedom. People have been subjugating themselves to all sorts of authority figures in return for a measure of security and material comfort.

  • mtrueman||

    I doubt you're as happy as the average Nigerian, happiest people on the planet.

  • Philadelphia Collins||

    unPlanned Parenthood disagrees.

  • SQRLSY One||

    ... and now, next upcoming, how OTHER new ideas made it all come crashing down! Communism, socialism, political correctness, and over-sized Government Almighty that promises to be ALL things to ALL people!

  • Jerryskids||

    The concept of sanitation and modern medicine created a vast over-supply in the labor market and somehow we dealt with that. Not to mention women entering the workforce. To people who croaked left and right from getting a drink of water or cutting themselves on a broken piece of glass or popping out a baby, modern human beings must seem like miraculous self-healing robots impervious to death and disease. How the heck can you expect to keep this many people employed when a substantial part of your workforce isn't dropping dead and creating a job opening every winter?

  • Scarecrow Repair & Chippering||

    Not sure how you prioritize your first and last sentences, if my sarcasmometer is busted ...

    The answer is quite simple, whether it is immigrants "stealing jobs" or newborns doing the same: all those new people are also new consumers and gladly create demand for all the new jobs.

  • Jerryskids||

    Maybe that last sentence should have been in quotes - I'm saying that to somebody from few hundred years ago, it might have been a puzzle as to how you could possibly expect to keep this many people employed for their whole long, healthy lives. Somehow no matter how cheaply and easily you produce everything anybody could possibly want, they find yet more things to add to the list of things they want and create new demands for new jobs. Look at agriculture for example. A mere few generations ago, everybody and their brother worked on farms and now it's all done by machinery. Where did all those millions of unemployed farm workers go? Among other things, they're making apps for iPhones that can remotely check to see how much milk you have in the fridge - and who could have imagined a hundred years ago that there'd ever be a market for such nonsense?

  • Scarecrow Repair & Chippering||

    Thanks for clarifying that. It was what I hoped you were saying, that yes the last sentence was a quote question, not a statement in conflict with the first one.

  • Bra Ket||

    I think we have seen a real problem when these life-supporting benefits of western development trickle down to parts of the world that still restrict the liberty part of the equation. We end up with the fastest population growth in the places least able or willing to absorb the new population.

    Nature on its own had handled the "life extension problem" reasonably well, with minimal reproductive rates for highly-skilled workers, and shrinking populations in developed countries.

  • mtrueman||

    "How the heck can you expect to keep this many people employed when a substantial part of your workforce isn't dropping dead and creating a job opening every winter?"

    If you're an employer, you can lay off employees. You don't need to keep them employed. That's why they're employees and not slaves.

  • Bgoptmst||

    Maybe I am being stereotypical ... but I bet she doesn't fit in well with the majority of the Chicago crowd.

  • mtrueman||

    She works at the University of Illinois, at Chicago. A truly second rate institution along the lines of George Mason University.

  • Sevo||

    As judged by a third-rate intellect.

  • OM Nullum gratuitum prandium||

    Excellent interview, Nick. I was fascinated by it. I didn't know Ms. McCloskey but now that I know I'm going to search for her book.

  • Stephen Mintz||

    Nice article pure informative and knowledgeable thank you for sharing it. visit here

  • SorinGhinescu||

    Very interesting point of view, that ideas, not something else, fuel the enrichment.
    There should be further research available through to demonstrate a strict causality between freedom empowerment and economic development. I will gladly read her book looking for such connections

  • SorinGhinescu||

    ... and it's a bit like the egg - hen problem

  • Johnandrews||

    Bourgeois Equality - nice title. I'm sure that this will be my next book to read. It seems to be a complex topic that contains a lot of facts from economics, history, sociology and other spheres. As for me, as for the freelancer who provides college essay writing service, this could be extremely helpful to make the papers for students. And some historical books even inspired me for writing the blog, and I'm looking forward to reading this one.

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