One reason the economist Deirdre McCloskey goes on the road to explain how most of civilization became rich is to help audiences understand that the system of ideas that created our fantastic material wealth isn’t indestructible.
She’s an unabashed champion of these ideas, the foundation of what was once called a “liberal” society. Don’t be confused by the term. In her work liberal means granting a lot of freedom for regular people to choose their own path.
These ideas make her a version of a libertarian, but for a moment stop thinking about this label or how it might be easy to disagree with her. Instead be open to what’s an awfully compelling explanation for how we’ve come to have our material wealth, a story many of us have likely never really considered.
McCloskey, in Minnesota to speak at the Nobel Conference at Gustavus Adolphus College in St. Peter, happily summarized her recent work — and it’s more than 1,500 pages — in a conversation earlier this week. Her books describe how, beginning a few hundred years ago in northwestern Europe and spreading from there, whole societies rapidly became a lot richer.
Over the past 200 years, she said, the average global inflation-adjusted income per person has grown by a factor of 10. And average income in Western societies like ours has grown far more.
It’s not just the well-off becoming richer. The Economist, in a review of a new book of economic history, pointed out that in 1820 more than nine out of 10 people in the world lived on less than the equivalent of $2 per day. It’s now down to about one out of 10 people.
McCloskey, who retired last year from the faculty of the University of Illinois at Chicago, called this “the Great Enrichment.” Nothing like it had ever happened before. There were societies that grew richer, like ancient China, only to have their people slip back into a grim existence.
Her colleagues in the universities have generally done a lousy job of explaining how this could have happened, she said. One theory she finds unpersuasive is that the fledgling manufacturers of Europe figured out how to exploit the labor of poor people. As brutal as early industrial labor practices were, she said, exploitation wasn’t exactly an innovation. After all, the feudal lords of the castle had pretty much specialized in it.
Her own explanation comes from a close observation of the class of people called the bourgeois. These people she’s happy to defend, even though it’s hard to think of many social situations where being called “bourgeois” is now a compliment.
In our culture the term usually suggests a narrow-minded interest in making more money or simply wanting nice stuff.
McCloskey finds nothing particularly wrong with having nice stuff, things like medicines that effectively treat our depression or smartphones that give us feature films at our fingertips. And besides, the shopkeepers and inventors may have been interested in making money, but they wouldn’t have been able to do that if their inventions did nothing to improve the lives of others.
What created the bourgeois was the freedom for people to do what they thought best. They had become equal under the law, at one time a radical idea. They had begun to consider themselves equal in the community, meaning no one of humble background had to feel inferior anymore or curtsy when the prince walked by. They weren’t frozen in their place by a rigid social caste system or stifling bureaucracy.
And when increasingly left alone to seek their own path, these people came up with a lot of profitable ideas to make their lives a lot better.
It’s admittedly risky boiling down complex ideas into a paragraph or two, but I found it easiest to think of the contribution of the bourgeois in phases. The first is when the entrepreneur makes money with the innovation, maybe even getting rich.
That’s followed by a second phase, when other entrepreneurs see a chance to make money and jump into the market, maybe by making a better version of the invention or dramatically cutting its cost. The last phase is when the innovation is now broadly and cheaply available, and that’s when we all benefit.
That’s when we all get richer.
That’s also how we ended up with a smartphone in nearly every pocket, a handheld computer so fast it would have been called a supercomputer not that long ago, and now so cheap that if last year’s model is forgotten in a restaurant on the other side of town we may not bother going back for it.
Her ideas about how societies get richer are really old ideas, McCloskey said. The American printer and inventor Ben Franklin and his buddies in 1750 Philadelphia would have bought her argument right away. For a long time it was called liberalism, although in the United States the term liberal has come to mean a political preference for a greater government role in solving problems.
We are in a period when some societies have turned away from market-oriented, classically liberal ideas, instead embracing concepts like socialism and protectionism. Meanwhile, in places that have become more like the societies of northwestern Europe McCloskey writes about, people have gotten richer. China is a great example, adopting market reforms in the late 1970s and then watching as the number of Chinese living in poverty declined by more than 800 million.
That’s why McCloskey gives speeches about how we got rich, “sweet talking” audiences, as she called it. “I don’t care about rich people,” she said. “I don’t mind them, but I don’t care about making them better off. A liberal society … is what makes the poor better off.”
McCloskey, now 74 and retired from university life, seems far from finished with this topic. She and a colleague at another university have started what she called a “popular book,” one they hope a vacationer might pick up when passing through an airport shop.
The book’s working title? “Leave Me Alone and I’ll Make You Rich.”