The Birth of Plenty: How the Prosperity of the Modern World was Created

On the back cover of this book, one reviewer says, "Put simply, this is my favorite economic history book. It gathers what is interesting about economic history to draw important lessons." I think this sums it up for me, as well.The author is very clear about his thesis. He tells us of it early, then repeats it over and over again, as he builds his case and weaves his flow of information. The thesis is that until about 1820, per capita growth, worldwide, was at about zero. For the most part, people did not get wealthier, they did not move or travel far, and they did not expect the world around them to change very much. This was true under the Greeks, as it was true under the Romans. Sure, some emperors gained in wealth, land and power, but the common man, essentially, stood still.Explaining the pessimism of all this, English economist Thomas Malthus told us that food supply and mouths to feed keep things in balance: If there were to be more food, there would be more mouths to feed. But some years would not produce as much food as others. And, back in medieval times, serfs had little to no incentive to produce more than was expected. There was really nothing to do with any excess food. One could only eat so much, and storage facilities were poor to non-existent. And, if one were to somehow accumulate "wealth," it would probably be taken by the landowner, The Church and/or thieves.But things were about the change. The thesis of the book is that about 1820 the four elements that need to be in place to create economic growth came into place:1) Secure property and individual rights2) The scientific method3) The modern capital marketplace4) Improved communications and transportationsAs a result, worldwide population and per capita income increase significantly by 1880.The birthplace of it all was England, and it was the right of property (including the right to own slaves) that started things off. It is this right, per the author, that guarantees all other rights. English common law established private property rights and individual rights by the early 1600s. But these rights, alone, could not unleash economic prosperity. No, next would come the breakdown of the "intellectual monopoly" of the Catholic Church. The separation of science and religion would take place over a period of centuries. Galileo, Newton and Halley make essential contributions. Over time, the scientific method would be developed. This along with the right of property, which included the right to patent one's ideas and/or inventions, was one of the essential elements to economic prosperity.In the area of capital, it was in Holland that the concept of investment banking was born. And it was the joint-stock companies of the Dutch East India Company and the English East India Company that led to the development of the English capital markets, which would provide capital for major public and private projects that would lead to improvements in communications and transportation.In the U.S., it was J.P. Morgan, in the late 1800s, who played an essential role by facilitating separate banks and other entities to form syndicates to provide vast capital and to share risk.In the area of communications and transportation, the two major entries are the telegraph and the steam engine. Sustained energy is essentially "stuck" until the steam engine and other engines come along. Man, even with animals and/or slaves, generates relatively little sustained horsepower. The waterwheel improves things, for sure, as does the windmill. But it is steam power, leading up to the railroad locomotive and the electrical generator in the 1880s that gives mankind huge leaps in economic productivity and prosperity. At the same time, canals were a huge improvement, both in Europe and America, for internal transportations, while the steam ships on the high seas increased speed and bulk between countries.In the cities, in the late 1880s, huge power plants supported electrical grids and electric lighting. Says the author, "The half century from 1825 to 1875 saw more thoroughgoing change in the way people lived their lives than any other period in history." He adds, "...a person of the 1820s transported through time to the year 1875 would have been rendered speechless."Some factoids gathered from the book along the way:* By the year 1700, the Dutch were by far the world's wealthiest people.* One of the best ways to measure prosperity in historically remote times is by calculating the percentage of the population living in cities....In 1700, 34% of the Dutch population lived in cities...England 13%, France 9% and Italy 15%.* In the year 1800, fully 70% of the U.S. population worked as farmers.* In the early 1800s, a triangular trade developed among the U.S. (cotton) to England (finished goods) to Africa (slaves) and back to the U.S. Between 1790 and 1850, the number of slaves in the U.S. went from 700,000 to 3,200,000.* For thousands of years, the primary goal of any ruler was to maximize his own wealth.* Before the modern era, the idea that a nation could grow wealthy through commerce was almost unheard of....The wise ruler collects taxes in ways that do not interfere with free market incentives.* Colonialism in the Latin countries of the New World did not produce poverty, in itself, but because neither individual nor property rights were established, a wide gap between the majority of haves and the minority of have nots would be the ultimate result. Such is the legacy that is now in evidence in much of Latin America today.The author would seem to embrace worldwide democracy, capitalism and globalization, in a similar way as Tom Friedman and others. He even gives us data to have us believe that more secularism and freedom leads to more individual happiness. And having money, at the individual level, also helps. While he would say that "man is on a sort of `hedonic treadmill,'" he would also say that "In the absolute sense, we are winning the battle against worldwide poverty."But, ultimately, Bernstein is all about property rights. Confiscation of property by government, he thinks, for whatever reason, and without proper compensation to the owner, is the worst thing that could happen to a society. As for the gaps between the rich and the poor, he says, "The United States appears to be cautiously probing the `right edge' of that envelope, exploring just how much income and wealth inequality can be tolerated in the interest of encouraging optimum growth. The rest of the developed world seems to dwell to the `left edge'". But he also says:* Military expenses...have a very high deadweight loss* The Europeans "tax smarter" than the U.S. does* Tolerance of wealth inequality decreases dramatically during tough times, as happened during The Great Depression.Amidst his thesis is his belief that "Both (successful) democracy and military power spring from the same source: economic prosperity, spread widely among the populous." But any nation has the risk of being passed up. England, he would say, did not get poorer, it was simply surpassed, economically, over time, by the U.S. in wealth and power. In turn, he sees China as having a shot at passing the U.S. At one point, if it continues to grow as it is doing, it simply could increase its military presence and, by definition, become the leading military power in the world. He does not think that this would be the worst thing that could happen to the U.S. On personal finances, he gives us, on a lighter note, a quote from H.L. Mencken: "A wealthy man is one who earns more than his brother-in-law."And on a subject of a current debate, he is highly skeptical that expecting democracy to flourish in a country like Afghanistan, without a foundation of individual and property rights and/or a solid legal system, is a dream that is doomed to fail. On the general subject of war, he simply thinks that might makes right, but that if a society does not have the four fundamental elements discussed above, the power of that nation will not last long. World War II, he feels, was won because the addition of the wealth of the U.S. to the Allies' wealth gave the edge to the Allies. And in the Pacific, the reason the U.S. won the Battle of Midway was because it had more firepower.The book ends with a summary chapter. There he tells us again that it is the four institutions discussed above that determine economic prosperity. Once in place for a nation, prosperity for that nation follows, almost automatically. Those nations that fail to have the four in place are doomed to fail, almost inevitably. And this includes nations with valuable natural resources, such as Saudi Arabia, which can appear, superficially, to have achieved great national wealth.

This is a great book.  Like many writers before and after, Bernstein tries to answer the question: What causes economic prosperity?  Also like other writers, Bernstein concludes that technological advances cause prosperity.  Then what causes innovation?"Why Nations Fail" says it's inclusive institutions.  "The Rational Optimist" says it's the freedom to trade.  "Mass Flourishing" says it's individualism.  "Enlightenment Now" says it's rational thinking.  "Guns, Germs, and Steel" says it's geographical factors.  "Bourgeois Equality" says it's language, ideas, and luck.  "Birth of Plenty," in my opinion, gets it the most right.  Bernstein argues that property rights, scientific rationalism, capital markets, and transportation/communication are all needed, like four legs of a table.  Property rights provide the incentive to invent, scientific rationalism provides the mental ability to create, capital markets provide the ability to mass produce, and communication/transportation provide the means of dissemination. The first section of the book explains the history of each of the four factors, where they first developed, and how they added to the process of innovation, which led to more economic prosperity. The second section of the book was much more interesting and much less convincing.  Here, Bernstein attempts to use the four-factor thesis to make further claims about the world.  Arguments I found reasonable: There is a trade-off between equality and growth that countries must balance, and the US is trending toward too much inequality while many European nations are trending toward too slow growth.  Democracy does not cause prosperity as much as prosperity causes democracy.  A history of colonialism is not necessarily a decisively-negative factor for modern independent nations -- in other words, some former territories are rich now, some countries that were never colonized are now poor.Arguments I found less reasonable: Bernstein says that *the reason* too much inequality is bad is because the poor will begin taking unlawful actions because they will no longer care about maintaining a social order that doesn't benefit them. This might be *one reason* that inequality is bad but there's also lack of access to quality education, predatory financial markets, government corruption, etc... Also, Bernstein argues that development aid doesn't really help poor countries unless the four factors are in place there.  His evidence is that countries with a lot of natural resources aren't prosperous.  The efficacy of aid is still debatable but I think the preponderance of the evidence is in favor of aid.  And if he's going to devote only a few paragraphs to the topic, he should at least explain that it's unsettled.  Also, is inciting perpetual growth the *only* goal of aid? If I give a poor person a healthful meal and antibiotics and new clothes and these gifts don't solve their financial problem forever, was it pointless? I don't think so.All in all, it's an impressive book that I've found myself rereading more than any other "How did we get here?" genre of book.

The day after finishing this book I felt strangely happy. It is really a history book and, since history is not normally my thing, I did not expect to enjoy it. However it is the first history book I have actually enjoyed reading. It is well and convincingly written and puts the whole of modern history into context.I have now realized what made me happy. The guilt that I had unknowingly harbored was lifted from me. You see I have increasingly felt that my wealth, our wealth, was due to our exploitation of the mineral and human resources of the rest of the planet. It is true that we have much to feel guilty about, the slave trade particularly, but our continued wealth is not a direct result of exploitation; it is the result of Bernstein's magic four factors being present together in our country.Now I can still give to Oxfam, but it won't feel like guilt money!The astonishing counter-intuitive idea that democracy does not lead to wealth, but the other way around, convincingly argued, was a real eye opener, as was much else in this wonderful book. Gorge W Bush should definitely read it!

Wow, I really enjoyed this read.The first part is quite technical, but interesting. This is a big story that spans time and I think the tenets put forward are solid.Probably the leaders (and aspiring leaders) of every country should read this book and take note - world progress is inexorable and if the right concepts are in place a country will, in time, prosper (much more than doing nothing).William Bernstein is an admirable Cliometrist ! !

Good

When I first visited a developed country, I was amazed at the wealth, about how people have so much money to buy costly houses and cars and big TVs and so on, at the infrastructure, the roads, the metros, and so on. It's a revelation the first time you see for yourself.But where did all this wealth come from? What caused its creation, after millennia of poverty (by modern standards)?This book explains, breaking it down into four factors:- property rights (which incentivise investment, knowing that you'll enjoy the returns)- scientific rationalism (which freed us to understand and improve the world around us)- capital markets (because the person with the great idea isn't often the one with the money to make it happen)- transport and communication (because otherwise a factory can serve only the town it's located in)This book gives a riveting history of millennia of capital markets and economics, going as far back as the Roman empire! It gives us a graph of interest rates over the course of the empire — information I never imagined would be available, let alone lucidly presented, and connected to the real-world rise and fall of the empire, rather than left alone as dry statistics.Moving on to the medieval period, we see how different countries had their fortunes ebb and flow, and how the Netherlands's superior capital markets and lower interest rates, compared to Britain, let the former dominate the latter in trade and military. A number like 4% is no longer an abstract number that only an economist would be interested in, but affects the fortunes of entire countries!The book tells us how we may think that the modern world is a period of uniquely rapid progress, but that nothing could be farther from the truth. The fastest progress ever happened in the 19th century, when the railways were built, and people could suddenly travel faster than the horse.Until then, each town had its own clock, independent of other towns, and the people set their watches by the town's clocktower. That system worked for millennia, but with the creation of the railways, it broke down. To have a railway timetable, all stations along a route had to have the same measurement of time. This led to the creation of timezones, of cities and towns being grouped into discrete zones, where everything in one zone used the same clock. Did you ever wonder where timezones came from? Now you know the answer!A person born in the early part of the 19th century couldn't recognise or understand the world at the end of the century, when the telephone and telegraph existed, and messages could be sent across the entire Atlantic Ocean in less than a second. That was unimaginable technology to a person who couldn't imagine anything faster than a horse.The book is full of fascinating insights like this — a must-read if you've wondered about where the prosperity of the developed world comes from, and what the main causes are, all interwoven into a gripping and masterful historical narrative.

The Author impressed me with his book „This Splendid Exchange“. The book excelled with the scope of the presented facts and the bridging of histories of different nations. It is an indeed an “international“ history at its best. (The book unfortunately ended with some ideological chapters on free trade, but some critique was admitted at the very end, balancing the overall impression.)I bought "The Birth of Plenty" hoping that I will find the same trove of facts and the same pleasure of discovery of the international element of national histories. Elements so often intentionally hidden - no nation and no nations historians are perfect.Well the book does not disappoint with the facts and details, the author is really informed and knows Western European (not European) and colonial history extremely well.But what a strange interpretation!It is kind of amazing how the underlying premise of the 4 feature building a successful society are derived without thinking about countries like contemporary China, Japan, the Asian Tigers and the ex-socialist countries (average growth above 7% for tens of years, and for China 10% over 30 years ). All of them have shown a rapid growth, outrunning by far any of the countries so highly praised by the author (hardly ever reaching real growth of more than 3.5 – 4%). And yet none of their societies have been built on all 4 pillars (property rights, scientific rationalism, capital markets, communication and transportation). Especially capital markets.Denying and distorting history has never helped anybody. Blind ideology has never helped anybody and yet we see more and more of it.I am halfway through, but the Anglo-Saxon focus on interpretation of the world history and the dismissal of the historical lessons of any nation but Britain, Netherlands and the USA robs me of the highly anticipated pleasure of reading this book.