Foundations of plenty challenged

Continuing on the next economy theme this week with The Birth of Plenty: How the Prosperity of the Modern World was Created. This is a historical look at how we got to where we are. Good futuring says we look backward as well as forward. The premise is that economic growth takes off around 1820, more or less in synch with the industrial revolution. I think we’d all agree with that and appreciate the date and some nice storytelling around that. There are four factors that ignited this takeoff:

• property rights, including intellectual property
• scientific rationalism
• funding: capital markets
• communications: improvements in transportation and communication

The author suggests that these four factors first coalesced, albeit briefly, in sixteenth century Holland but were not securely in place in the English-speaking world until about 1820, not coincidentally the date of the boom. Property rights and the rule of law are foundational. Scientific rationalism drives the technological progress –“economic growth is almost entirely the result of technological advance.” Capital markets provide the financial support, and transport and communications facilitate everything. The author also makes a strong point that institutions are also extremely important – “national prosperity is not about physical objects or natural resources, rather it is about institutions – the framework within which human beings thin interact and carry on business.”

There is very little about the future in the book. It even trots out the old saw: “it’s very hard to make predictions, particularly about the future.” Ah! We can look at the factors and speculate. I would say that the fourth factor – transport and communications – looks the most solid going forward. Hard to argue with that. But there are potential challenges for the others. Intellectual property is being challenged on several front, in particular by open source movements. Scientific rationalism is being questioned. For our purposes this is a quintessential “modern” concept that is being questioned by those with postmodern and integral approaches. Capital markets are also being challenged on multiple fronts. They are a target for those protesting unequal distribution of wealth. New approaches to markets are also being considered with crowdsourcing, P2P, sharing, Blockchain, etc. So, three of the four foundations of the “birth of plenty” are being challenged, although one could argue that challenges are still fairly weak.

Social change note:

Last week we looked at development and progress; this week it’s markets, our friend progress, and a bit of technology:

• The markets argument is thus: “the destinies of nations are far more determined by their economic dynamism than by the vagaries of war, culture, and politics.”
• Progress comes in as what’s really important. And the ultimate measure of progress is statistical, e.g. literacy, longevity, wealth, with per capita growth advocated as the single best measure. That is the typical approach of progress advocates – show the aggregate improvement of the numbers.
• There is also a hint of technology: “the steady flow of scientific and technological advance, which is the ultimate source of economic growth.”

Quibbles

There are a few “hallowed be thy markets” points in there that made me cringe, but it’s not a full-on ideological screed about the wonders of markets, but a little too close for my comfort. For instance, the point is made that for vigorous regulatory oversight of the securities industries by government

It’s one of my pet peeves when folks attack the Limits to Growth and Club of Rome without studying the argument. Here, we get “an entire generation of pessimists led by the Club of Rome embarrassed themselves by suggesting limits …..” (a review on that topic) – Andy Hines 

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