What causes wealth?

Today, most discussions about poverty involve who is to blame for it, observes Steven Pinker in Enlightenment Now: The Case for Reason, Science, Humanism, and Progress

This line of thinking is misguided, he believes.  

Poverty needs no explanation.

“In a world governed by entropy and evolution, it is the default state of humankind.  Matter does not arrange itself into shelter or clothing, and living things do everything they can to avoid becoming our food,” Steven observes.  

“As Adam Smith pointed out, what needs to be explained is wealth,” writes Steven. 

To put it succinctly, “Poverty has no causes.  Wealth has causes,” the economist Peter Bauer tells us. 

This week RWD Monday and RWD Tuesday we’ve looked at the graph showing human progress over time.  Prosperity did not improve gradually.  There was little or no progress for thousands of years.  Then, around 1800, the Industrial Revolution happened, and nothing has been the same since.

What was life like – for thousands of years – prior to the Industrial Revolution?

The endurance of poverty was the reality.  “If you could afford to buy bread to survive another day, you were not poor,” writes Steven referencing historian Johan Norberg.

Johan quotes the childhood reminiscence of a contemporary of one of his ancestors from 1868 in Sweden, one of the wealthiest countries in the world at the time:  “We often saw mother weeping to herself, and it was hard on a mother, not having any food to put on the table for her hungry children.  Emaciated, starving children were often seen going from farm to farm, begging for a few crumbs of bread.  

“One day three children came to us, crying and begging for something to still the pangs of hunger.  Sadly, her eyes brimming with tears, our mother was forced to tell them that we had nothing but a few crumbs of bread which we ourselves needed.  When we children saw the anguish in the unknown children’s supplicatory eyes, we burst into tears and begged mother to share with them the crumbs that we had.  Hesitantly she acceded to our request, and the unknown children wolfed down the food before going on to the next farm, which was a good way off from our home.  The following day all three were found dead between our farm and the next.”

“In wealthy Genoa, poor people sold themselves as galley slaves every winter,” writes Steven.  “In Paris, the very poor were chained together in pairs and forced to do the hard work of cleaning the drains.  In England, the poor had to work in workhouses to get relief, where they worked long hours for almost no pay. Some were instructed to crush dog, horse and cattle bones for use as fertilizer, until an inspection of a workhouse in 1845 showed that hungry paupers were fighting over the rotting bones to suck out the marrow.”

These anecdotes capture the reality of human life for many less than two hundred years ago.

“We are led to forget the dominating misery of other times in part by the grace of literature, poetry, romance, and legend, which celebrate those who lived well and forget those who lived in the silence of poverty,” writes economist Nathan Rosenberg and legal scholar L. E. Birdzell Jr.  “The eras of misery have been mythologized and may even be remembered as the golden ages of pastoral simplicity.  They were not.”

Our political debates today surround how wealth should be distributed.  This presupposes, Steven observes, that wealth worth distributing exists in the first place.

“Economists speak of a ‘lump fallacy'” writes Steven, “in which a finite amount of wealth has existed since the beginning of time, like a lode of gold, and people have been fighting over how to divide it up ever since.”

How much as human wealth, progress, and prosperity increased?

“If the pie we were dividing in 1700 was baked in a standard nine-inch pan, then the one we have today would be more than ten feet in diameter,” Steven reflects.  “If we were to surgically carve out the teensiest slice imaginable – say, one that was two inches at its widest point-it would be the size of the entire pie in 1700.”

Many people today believe we are living in the worst of times.  The data tells a very different story.  

More tomorrow.

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Reflection:  Why has capitalism made such an impact on worldwide prosperity and the quality of human life?

Action: Journal about it.

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