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This is what prosperity is: the increase in the amount of goods or services you can earn with the same amount of work.
(Alcoa’s reward for this price cut was to be sued by the government on 140 counts of criminal monopoly: the rapid decrease in the price of its product being used as evidence of a determination to deter competition. Microsoft suffered the same allegation later in the century.)
And, once again, notice that the true metric of prosperity is time. If Cornelius Vanderbilt or Henry Ford not only moves you faster to where you want to go, but requires you to work fewer hours to earn the ticket price, then he has enriched you by granting you a dollop of free time.
If you choose to spend that spare time consuming somebody else’s production then you can enrich him in turn; if you choose to spend it producing for his consumption then you have also further enriched yourself.
As I write this, it is nine o’clock in the morning. In the two hours since I got out of bed I have showered in water heated by North Sea gas, shaved using an American razor running on electricity made from British coal, eaten a slice of bread made from French wheat, spread with New Zealand butter and Spanish marmalade, then brewed a cup of tea using leaves grown in Sri Lanka, dressed myself in clothes of Indian cotton and Australian wool, with shoes of Chinese leather and Malaysian rubber, and read a newspaper made from Finnish wood pulp and Chinese ink.
I am now sitting at a desk typing on a Thai plastic keyboard (which perhaps began life in an Arab oil well) in order to move electrons through a Korean silicon chip and some wires of Chilean copper to display text on a computer designed and manufactured by an American firm. I have consumed goods and services from dozens of countries already this morning. Actually, I am guessing at the nationalities of some of these items, because it is almost impossible to define some of them as coming from any country, so diverse are their sources.
Think of this: never before this generation has the average person been able to afford to have somebody else prepare his meals.
‘never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess’.
There is no such thing as unproductive employment, so long as people are prepared to buy the service you are offering.
Innovation changes the world but only because it aids the elaboration of the division of labour and encourages the division of time.
True barter requires that you give up something you value in exchange for something else you value slightly more.
Without trade, innovation just does not happen. Exchange is to technology as sex is to evolution. It stimulates novelty.
People do their utmost to cut themselves off from the free flow of ideas, technologies and habits, limiting the impact of specialisation and exchange.
Specialisation would lead to expertise, and expertise would lead to improvement. Specialisation would also give the specialist an excuse for investing time in developing a laborious new technique.
If you have a single fishing harpoon to make, there’s no sense in building a clever tool for making harpoons first, but if you have to make harpoons for five fishermen, then maybe there is sense and time-saving in first making the harpoon-making tool.
According to the anthropologist Joe Henrich, human beings learn skills from each other by copying prestigious individuals, and they innovate by making mistakes that are very occasionally improvements – that is how culture evolves. The bigger the connected population, the more skilled the teacher, and the bigger the probability of a productive mistake.
There was nothing special about the brains of the moderns; it was their trade networks that made the difference – their collective brains.
Technology was made possible by division of labour: market exchange calls forth innovation.
All it took was an occasional incomer from the mainland to keep technology from regressing.
The argument is not that exchange teaches people to be kind; it is that exchange teaches people to recognise their enlightened self-interest lies in seeking cooperation.
Collaboration between unrelated strangers seems to be a uniquely human achievement. In no other species can two individuals that have never before met exchange goods or services to the benefit of each other, as happens routinely each time you visit a shop or a restaurant or a website.
Almost invisible, the guarantors of trust lurk beneath every modern market transaction: the sealed packaging, the warranty, the customer feedback form, the consumer legislation, the brand itself, the credit card, the ‘promise to pay the bearer’ on the money.
The internet, in other words, may be the best forum for crime, but it is also the best forum for free and fair exchange the world has ever seen.
Trust matters, said J.P. Morgan to a congressional hearing in 1912, ‘before money or anything else. Money cannot buy it ... because a man I do not trust could not get money from me on all the bonds in Christendom.’
A successful transaction between two people – a sale and purchase – should benefit both. If it benefits one and not the other, it is exploitation, and it does nothing to raise the standard of living.
The history of human prosperity, as Robert Wright has argued, lies in the repeated discovery of non-zero-sum bargains that benefit both sides.
Random violence makes the news precisely because it is so rare; routine kindness does not make the news precisely because it is so commonplace.
The American civil rights movement drew its strength partly from a great economic migration. More African-Americans left the South between 1940 and 1970 than Poles, Jews, Italians or Irish had arrived in America as immigrants during their great migrations.
The sexual and political liberation of women in the 1960s followed directly their domestic liberation from the kitchen by labour-saving electrical machinery.
Politically, as Brink Lindsey has diagnosed, the coincidence of wealth with toleration has led to the bizarre paradox of a conservative movement that embraces economic change but hates its social consequences and a liberal movement that loves the social consequences but hates the economic source from which they come.
‘One side denounced capitalism but gobbled up its fruits; the other cursed the fruits while defending the system that bore them.’
70 per cent of all the world’s water usage is for crop irrigation.
This is what it would take to feed nine billion people in 2050: at least a doubling of agricultural production driven by a huge increase in fertiliser use in Africa, the adoption of drip irrigation in Asia and America, the spread of double cropping to many tropical countries, the use of GM crops all across the world to improve yields and reduce pollution, a further shift from feeding cattle with grain to feeding them with soybeans, a continuing relative expansion of fish, chicken and pig farming at the expense of beef and sheep (chickens and fish convert grain into meat three times as
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It’s a wonderful goal and one that can only be brought about by further intensification and change, not by retreat and organic subsistence. Indeed, come to think of it, let’s make farming a multi-storey business, with hydroponic drip-irrigation and electric lighting producing food year-round on derelict urban sites linked by conveyor belt directly to supermarkets. Let’s pay for the buildings and the electricity by granting the developer tax breaks for retiring farmland elsewhere into forest, swamp or savannah. It is an uplifting and thrilling ideal.
But then genetic engineers took the bt toxin and incorporated it into the cotton plant to produce bt-cotton, one of the first genetically modified crops. This had two huge advantages: it killed bollworms living inside the plant where sprays could not reach them easily; and it did not kill innocent insects that were not eating the cotton plant.
Yet, though this was an officially organic product, biologically integrated into the plant, and obviously better for the environment, organic high priests rejected the technology. Bt cotton went on to transform the cotton industry and has now replaced more than a third of the entire cotton crop.
One estimate puts the amount of pesticide not used because of genetic modification at over 200 million kilograms of active ingredients and climbing.
Ingo Potrykus, developer of golden rice, thinks that ‘blanket opposition to all GM foods is a luxury that only pampered Westerners can afford.’ Or as the Kenyan scientist Florence Wambugu puts it, ‘You people in the developed world are certainly free to debate the merits of genetically modified foods, but can we eat first?’
Imports are Christmas morning; exports are January’s MasterCard bill.
It is common to find that two traders both think their counterparts are idiotically overpaying: that is the beauty of Ricardo’s magic trick. ‘The English have no sense,’ said a Montagnais trapper to a French missionary in seventeenth-century Canada. ‘They give us twenty knives for this one beaver skin.’ The contempt was mutual. When HMS Dolphin’s sailors found that a twenty-penny iron nail could buy a sexual encounter on Tahiti in 1767, neither sailors nor Tahitian men could believe their luck; whether the Tahitian women were as happy as their menfolk about this bargain goes unrecorded. Twelve
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The chief reason is surely that strong governments are, by definition, monopolies and monopolies always grow complacent, stagnant and self-serving.
Monarchs love monopolies because where they cannot keep them to themselves, they can sell them, grant them to favourites and tax them.
Think about this from the consumer’s point of view. Nobody in China can blow glass; nobody in Europe can reel silk. Thanks to a middleman in India, however, the European can wear silk and the Chinese can use glass. The European may scoff at the ridiculous legend that this lovely cloth is made from the cocoons of caterpillars; and the Chinese may guffaw at the laughable fable that this transparent ceramic is made from sand. But both of them are better off and so is the Indian middleman. All three have acquired the labour of others. In Robert Wright’s terms, this is a non-zero transaction. The
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Europe could trade with Asia because it traded so much with itself, not vice versa.
governments gradually employ more and more ambitious elites who capture a greater and greater share of the society’s income by interfering more and more in people’s lives as they give themselves more and more rules to enforce, until they kill the goose that lays the golden eggs.
Because it is a monopoly, government brings inefficiency and stagnation to most things it runs; government agencies pursue the inflation of their budgets rather than the service of their customers; pressure groups form an unholy alliance with agencies to extract more money from taxpayers for their members. Yet despite all this, most clever people still call for government to run more things and assume that if it did so, it would somehow be more perfect, more selfless, next time.
The reach of the Moloch-state, the omnipotence of the bureaucracy, goes much further. There are clothing regulations, a regulation of public and private construction (dimensions of houses); the colours one wears, the music one hears, the festivals – all are regulated. There are rules for birth and rules for death; the providential State watches minutely over every step of its subjects, from cradle to grave. It is a regime of paperwork and harassment, endless paperwork and endless harassment.
Do not be fooled by the present tense: this is Ming, not Maoist, China that Balazs is describing. The behaviour of Hongwu, the first of the Ming emperors, is an object lesson in how to stifle the economy: forbid all trade and travel without government permission; force merchants to register an inventory of their goods once a month; order peasants to grow for their own consumption and not for the market; and allow inflation to devalue the paper currency 10,000-fold.
His son Yong-Le added some more items to the list: move the capital at vast expense; maintain a gigantic army; invade Vietnam unsuccessfully; put your favourite eunuch in charge of a nationalised fleet of monstrous ships with 27,000 passengers, five astrologers and a giraffe aboard, then in a fit of pique at the failure of th...
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The message from history is so blatantly obvious – that free trade causes mutual prosperity while protectionism causes poverty – that it seems incredible that anybody ever thinks otherwise. There is not a single example of a country opening its borders to trade and ending up poorer (coerced trade in slaves or drugs may be a different matter). Free trade works for countries even if they do it and their neighbours do not. Imagine a situation in which your street is prepared to accept produce from other streets but they are only allowed what they produce: who loses?
