“The Birth of Plenty is meant to be an economic history of the world. A tall order, for sure. But it delivers. Bernstein’s basic premise is that healthy institutions promote prosperity. In particular, countries must possess the following basic institutional ingredients in order to prosper:
1. Property Rights
2. The Scientific Method
3. Capital Markets
4. Effective Means of Transportation and Communication
After describing the historical development of each of these institutions, Bernstein then goes on to describe which countries were able to develop such institutions, which countries were not, and to what effect. He then follows the path of economic development for several of those countries. He concludes that the four institutional factors are not only sufficient, but necessary, for a country to achieve prosperity. For Bernstein, it’s all or nothing. It’s not enough to have any one, two, or three of those institutions. All four must be in place at the same time.
Bernstein then makes what I think is the boldest conjecture of the book (with some, though scant, supporting evidence). He asserts that the aforementioned four institutional characteristics not only lead to prosperity, but that they also precede democracy, but not vice versa. That is, you can’t simply thrust democracy onto an institutionally underdeveloped country and expect prosperity to follow. The path runs from institutional development to prosperity to democracy because, as he argues, an increasingly wealthy population will accept nothing less.
In the interest of full disclosure, this book provided an especially timely and interesting read for me since I’ve been getting into institutions lately. Some of my most recent academic work explores how cultural, political, and economic institutions impact the differential development and performance of firms across countries. So maybe I’m a bit biased. Nevertheless, I thought it was a truly fascinating read. And not fascinating in the interesting, but dry, academic way. The storytelling was superb.”
A Hypothesis of Wealth
The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together.
—Karl Marx, Manifesto of the Communist Party
It’s all too tempting to lament the state of the world, particularly when you focus on the melodramas of mankind—violent conflicts, large-scale malfeasance and failure, and the latest installments in the age-old racial and religious hatreds that permeate the human story.
A paragon of such fashionable pessimism has been journalist Anthony Lewis, who, at the end of a long and distinguished career, was asked whether the world had gotten to be a better place since he had begun covering it a half century earlier:
I have lost my faith in the ideal of progress. I mean that in the sense that it was used at the beginning of the twentieth century, that mankind is getting wiser and better and all—how, how can you think that after Rwanda and Bosnia and a dozen other places where these horrors have occurred?
Mr. Lewis’ problem is that his subjective criterion—that mankind has not achieved moral perfection as defined in Ivy League universities and the editorial suites of the New York Times—sets the bar too high. Mr. Lewis seems unaware that we can measure the welfare of mankind; in fact, we can do it superbly. Contrary to his gloomy impressions, the second half of the twentieth century was far less murderous than the first. Further, the proportion of the world’s population subjected to totalitarianism, genocide, starvation, war, and pestilence has been steadily decreasing over the past two centuries, with most of the improvement coming in the half century that so depressed Mr. Lewis.
William J. Bernstein
William J. Bernstein, Ph.D., M.D., is founder of the popular Website efficientfrontier.com. He is also author of The Four Pillars of Investing and The Intelligent Asset Allocator.
Личен сайт: http://www.efficientfrontier.com/