Opinion

The curse of the economic: We often forget how we became so prosperous in the first place

Free markets have allowed the West to have unprecedented economic growth and send standards of living up and up, year after year. We often forget that things that we consider everyday items now, not even the richest among us possessed 100 years ago.

John D. Rockefeller was one of the richest men to ever live, possibly the richest. His adjusted net worth, while varying from source to source, was at least several hundred billion dollars once adjusted for inflation. However, John D. Rockefeller never once in his life ever owned a cell phone. Only towards the end of his life in the 1930s did TV even start to come into existence, and it was vastly inferior to the TVs we know and enjoy today.

The internet has completely changed our world, but poor Rockefeller never once in his life used an instant messenger application to talk to friends and family. You could probably look around and see numerous items and luxuries that didn’t exist in his lifetime. (Rockefeller died in 1936).

Taking off to new heights means that some things are left behind. Existential crises that threatened the survival of man hundreds of years ago are unknown to most of the developed world today. One of these forgotten horrors is famine. During a famine, not only do you lack food, but even your neighbors and friends are lacking.

Fields are empty. Pastures are empty. Silos are empty. Markets are empty. Stomachs are empty. This situation could persist for several months at a time before more food would start coming in from the harvest. Until then, empty.

Cornelius Walford wrote a book in 1879 titled, The Famines of the World. It offers a brief but harrowing glimpse into what the past looked like. The beginning of the book gives us a list of every famine recorded prior to the book’s publication, starting all the way in 1708 BC. A brief description is provided with each entry into the list of famines.

An early record goes: “436…Famine: Thousands threw themselves into the Tiber.” Most of the early entries are lacking in details considering we often have very limited information, but once you hit the Middle Ages, details start to emerge. Here’s a few highlights:

  • Ireland 963-64: An intolerable famine, “so that parents sold their children for food.”
  • England 1073: Famine, followed by mortality so fierce that the living could take no care of the sick, nor bury the dead.
  • Ireland 1586: “Human flesh is said to have been eaten.”

This is not the only reference to cannibalism, sadly. It is reported in several entries.

This is probably one of the more depressing books that you could ever read, but it serves as a valuable reminder.

I only picked a few examples above, but there are hundreds of famines listed by Walford. Their great number is understandable. For centuries, all it takes is one bad harvest to effectively wreck a society for many years.

To our modern minds and modern comforts, it is hard to imagine that you could at any time be one bad harvest away from having your world thrown upside down. In our world, food is just there. Other than some occasional events, such as a natural disaster that clears off grocery store shelves, we never even think about if we can get food or not.

To state the obvious, something has fundamentally changed from then to now. How did we get from the past reality of Walford’s history to our present reality of comfort?

Obviously, we have more food now than we did then. Are we just planting more food? Yes, but the answer is much more complicated than that. In our modern age we have transportation, infrastructure, technology, and equipment able to sustain vast numbers of people.

Not only just for the process of growing the food itself, but for packaging, transportation, preservation, and everything in between that gets it from the land to the aisle in the store. It is this infrastructure and modern equipment that gives us the capacity to produce large amounts of food.

Does this mean the solution to famine is just better technology? After all, we live in an age of technological miracles. We can do things today that seemed impossible a hundred years ago. Why can’t technology just give us more food? Technology, however, is a fundamentally empty answer to this question.

Technology in its purest form, knowledge, is simply theoretical. Having the blueprint to be able to build a house does not give you a house. What is necessary is the actual materials to build it. An increase in the amount of materials is what is really needed to help increase real wealth. How does this occur?

What is necessary is what economists refer to as capital. Capital is used in production to help increase the productivity of labor. Having a hammer certainly increases one’s productively in nailing wood. The magic of capital is that with the same amount of labor, I can be more efficient. This means that with the same amount of labor, I can produce more goods with the same input than I could before.

Capital is accumulated by saving. If I decide to spend all my time and labor on consumption goods, then my labor will always yield the same amount of goods. However, if I decide to spend part of my labor on tools or equipment rather than on something I can directly consume, then the labor on consumer goods becomes more productive from that point on.

Why was capital not being accumulated in eons past? It certainly was, but the process of building up more and more capital was often frustrated by the lack of something important: property rights. If I spend time and energy to create more capital, but it is taken or destroyed because of property rights violations, what’s the point? Why would I even go through the hassle if I can’t enjoy the benefits of increased productivity?

It is only when property rights are firmly established that capital can begin to accumulate. Classical Liberalism rose to predominance in the 18th and 19th centuries, leading to strong property rights and laissez-faire policies. Predictably, this led to an increase in capital stocks, and a concomitant rise in the standard of living. These unprecedented increases in the standard of living often is referred to as the “Industrial Revolution.”

The riches enjoyed by us today are not permanent. If a regression in property rights occurs, then we will slowly start to regress back into the life of our ancestors. It is a curse of the economically prosperous that we often forget how we became so prosperous in the first place. Accumulation of capital under strong property rights gave us what we have today, and without it, we would still be living in the past realities of famine, sickness, and living at all times only a few degrees from death.

Americans would do well to not take this prosperity for granted. If we have a famine in sound economic thought, famines in our fields will come once more.

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