23A034 Explosions of Wealth by Jim Davies, 8/22/2023

They are very rare. I refer to increases in a society's living standards over several years - say, 20 years or more - averaging 5% or more; notice that in compound arithmetic a doubling takes place in only 14 years at that rate!

Check a few of these rare occurrences, after noting that for the great majority of people, the standard of life in 1750 was very little higher than that in AD 70 in the Roman Empire. The astonishing ruins in Herculaneum make the point; houses and their occupants were suddenly buried for 17 centuries by an eruption of the Vesuvius volcano.

(1) The explosion of the 1800s took place in Europe, the USA and Canada. Causes? There was a perfect storm. Two centuries earlier the Reformation had broken the hold on thinkers' minds by the Roman Church, and one century earlier those minds had almost feverishly explored science and philosophy and produced a scintillating array of discoveries. Then in the Industrial Revolution engineers put those to use in practice, so rapidly that government with its regulations followed way behind. Although money (the measure) was within its control it was tied to gold and so was worthy of trust. Result: in the UK population quadrupled and GDP rose from £21B to £158B in constant 2013 pounds; a factor of 7.5 times. In the USA, population grew by 14 times and GDP by 57 - a totally unprecedented and phenomenal achievement, vividly demonstrating the power of free enterprise. That was the source of American greatness, not the military strength which its government threw around a century later.

(2) The explosion of the Pacific Rim took place after WW2, notably in Hong Kong and Singapore; small island nations with dense populations, drawn in the HK case from mainland China from which refugees fled Communism. Singapore's GDP grew by 667 times since 1960 (while absorbing a 6x population growth) and Hong Kong's, by 273 times. Again, totally unprecedented.

Why? - because for each, although government existed, its burden was light. Singapore's deliberately tries to help business and imposes light taxes and few regulations, and the same is true for Hong Kong thanks to the liberal policies (in the true sense of the word) of Lord Chris Patten as Governor while it remained a British colony.

(3) The explosion in China itself, following the disastrous ruin caused by Mao Tse Tung as he tried to implement Marxist orthodoxy in agriculture but instead caused the deaths of thirty million people, so making him the worst mass murderer in history.

Mao's death was followed by a power struggle, from which emerged in 1980 Deng Xiaoping as leader. He demolished communist controls on enterprise while keeping the country nominally "communist." By the mid-90s NYT reporters Kristof and WuDunn spent over a year there studying what had taken place and concluded that the system could best be called "Market Fascism." Trade was very largely market-driven, with few restraints, while government remained in place to milk its profits and control its overall direction.

In the quarter century since the "fascism" aspect has become more prominent, with ominous controls on behavior through the notorious "social credit" surveillance network, but business prospers still. GDP has grown by 94 times since 1980, sustaining annual rates of 10% to 15% during most of the first 25 of those years. Given that annual GDP growth elsewhere is 2% or 3%, that is just amazing.

What's the secret? - it's very simple. In all these examples, government followed a laissez-faire policy with regard to business. Economist Adam Smith posed the same question, and found the same answer, in 1776. Hands off. Stay honest, otherwise do as you wish.

Was that totally true? - of course not; in each case government did still exist. Just think how much wealth would explode if its burden was altogether zero.

And then take action to make it happen.