How Free Markets Made Us Rich

Don Boudreaux, Deirdre McCloskey, and Dan Hannan have all explained how capitalism enabled mass prosperity after endless stagnation and poverty.

There’s a similar message in this video from Kite & Key Media. The most relevant parts start at 2:30, though I recommend watching the entire video.

But if you don’t have time to watch any of the video, here are four of the key points.

1. We are much richer, on average, than we were 50 years ago. This is a point I made both in June and September, and it’s worth adding that the all income groups tend to rise together.
2. There was almost no growth for much of world history, a dismal reality that is beyond the comprehension of politicians such as Congresswoman Ayanna Pressley.
3. Technological progress enabled by capitalism not only ended mass poverty, but it also brings many luxuries within reach of lower-income and middle-class people.
4. As shown by basket cases such as Venezuela, Lebanon, and North Korea, bad policy can wreck economic progress.

Regarding point #4, my only complaint with the video is that some viewers might conclude that economic growth will be automatic so long as politicians don’t make catastrophic Venezuelan-style policy mistakes.

It would have been nice to point out that, yes, the worst-possible set of policies produces the worst-possible economic damage, but also to explain that a modest amount of statism can hurt growth by a modest amount and a lot of statism can hurt growth by a significant amount.

In other words, there’s a spectrum of possible policy outcomes (I’ve also referred to this as the “socialism slide“) and it’s best to get as close to laissez-faire capitalism as possible.

Remember, even small differences in economic growth lead to big differences in long-run living standards. And the “size of the pie” is a good predictor of whether a nation enjoys broadly shared prosperity.