Saturday, January 21, 2012

Book Review: The Birth of Plenty

The Birth of Plenty is William Bernstein's examination of the factors which resulted in some countries producing rising GDP and rising living standards for their citizens and others growing more slowly, stagnating or declining.

Bernstein identifies four factors which are necessary conditions for economic prosperity:

1. Property rights and the rule of law: these essentially ensure that risk taking will be rewarded - without which few people will be willing to work hard or take economic risk. The absence of punitive taxation and the absence of confiscation by the state

2. Power, transport and communication: essential to the development of trade (competitive advantage), lower costs and efficiency of markets

3. Capital markets: essential for providing capital needed for development and for limiting destructive behaviour by governments (particularly in the form of military adventurism)

4. Scientific rationalism: allowing for the possibilities of creative thinking unshackled by religious or other intellectual straight jackets permitted technological progress

Bernstein illustrates his thesis by using a number of countries as case studies, in particular England, France, Holland and Spain. For my part I found his arguments compelling. Of relevance to contemporary issues, Bernstein discusses issues such as economic inequality, excessive taxation and the link between economic prosperity and democracy.

Overall, a fascinating read.

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