Wealth
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Humans started their journey in Sumeria as “Lulus”, “Primitive workers”, or “Slaves”. Slavery was illegal on the native planet of the gods. So, they avoided calling humans enslaved people. Just like indentured servants, they would use other terms like those mentioned above and “helpers”, as well, etc. Starting from there, until the eighteenth and nineteenth centuries, ninety-eight percent of humans mostly lived in abject poverty. All the privileges, wealth, and respect were for gods, their sons, and the descendants of royals. Lulus or commoners only existed to collect leftovers. All the systems that existed until that time were completely top-down. Gods, demigods, pharoahs, emperors and kings, dictators and presidents, along with their cronies or royals, decided the fate of everyone else.
“The history of poverty is almost the history of humanity. The ancient writers have left us few specific accounts of it. They took it for granted. Poverty was the normal lot. The ancient world of Greece and Rome, as modern historians reconstruct it, was a world where houses had no chimneys, and rooms, heated in cold weather by a fire on a hearth or a fire-pan in the center of the room, were filled with smoke whenever they lit a fire, and consequently walls, ceiling, and furniture were blackened by smoke and more or less covered by soot at all times; smoky oil lamps provided the light and eye problems as a result of all this smoke were common. Greek dwellings had no heat in winter, no adequate sanitary arrangements, and no washing facilities.” Mises.org.
Europe was not different from the rest of the world. Nobles had Everything available, and the masses were in extreme poverty. In the eighteenth century, the name of the same old system was Mercantilism.
Europe was in the grip of Mercantilism. What we would call cronyism today was the word of the day. You were born rich, got richer, and died even richer. You were born poor, stayed poor, and died poor. Economic and social mobility was rare and limited. There was a very clear-cut distinction between nobility and commoners. “Mercantilism enriched the wealthy at the expense of the poor.” Wiley Online Library. Nobles had all the available opportunities, while commoners had minimal options. Standards of living in the poor classes were very low..
One of the hallmarks of Mercantilism is the imposition of trade restrictions and the awarding of exclusive privileges to nobles. We call these Tariffs, now. Hence, the privileged merchants could easily raise the prices and would not have to worry much about quality and service. Higher prices and low quality were just another blow to the poverty-ridden masses.
“Merchants and manufacturers, who
being collected into towns, and
accustomed to that exclusive
corporation spirit which prevails in
them, naturally, endeavour to obtain
against all their fellow citizens, the same
exclusive privilege, which they generally
possess against the inhabitants of their
respective towns. They accordingly
seem to have been the original
inventors of those restraints upon the
importation of foreign goods, which
secure to them the monopoly of the
home–market.” Adam Smith.
In the middle of this mess comes Adam Smith. By that time, Europe and Britain were facing the horrible consequences of Mercantilism. Kings and royals were deeply concerned about the growing sentiments of dissatisfaction among the masses, the declining economy and business, and the threat to the standards of living of nobles. In his foundational book, “The Wealth of Nations,” Adam Smith performed a revolutionary analysis of the economy and economic conditions.
“Smith’s analysis of the market as a self-correcting mechanism was impressive. However, his purpose was more ambitious than simply demonstrating the self-adjusting properties of the system. Rather, it was to show that, under the impetus of the acquisitive drive, the annual flow of national wealth could grow steadily.” Britannica.
For the kings, there was not much to lose in trying the Smith’s proposal. So, it is likely that the most significant change in human history has occurred. Britain opened its borders for trade and migration. America, the new country on the map, had, for the most part, already had open borders and trade policies. Borders opening to trade and migration marked the beginning of a revolutionary period in the world’s history. Europe and America quickly became the symbols of growth, wealth, and civilization. The economic and financial development, wealth generation, and rise in standards of living were unmatched in the entire history of the world, all of this occurring in a remarkably short period. Freedom opened the doors to incredible creativity, innovation, invention, entrepreneurship, business, and organization.
Adam Smith was right on the mark on so many counts. His probably the best discovery was the idea of the hidden hand. He was right on the mark when he said that natural order markets have self-correcting mechanisms that render external interventions unnecessary. The path to growth in Europe and America was not smooth. There were significant downslides and crashes in the markets, accompanied by fraud, deception, and cheating, as well as conspiracies to form cartels. But markets always corrected those flaws quickly and efficiently. The hidden hand was always at work and worked very well. Capitalism spread in one form or another to most of the world, and whoever properly adopted it with sufficiently free markets benefited from it, as well.
In the meantime, many countries adopted the alternative systems, but they failed to match the success of Capitalism, at least. Fascism, Nazism, Cronyism, public-private partnerships, non-profits, and Socialism all failed miserably. There are other alternatives, such as Democratic Socialism and Mixed Economies, that are popular nowadays. Democratic socialism is basically a parasite on Capitalism. After the epic failures of Socialist Economies, Socialists have decided to become eternal parasites on Capitalism. The idea is to have a bunch of governments with incredibly unsustainable welfare programs that tax the immense productivity of Capitalist economies to the death under a regime of highly strangling regulations.
The results are apparent. It is a fact that Capitalism has its roots in the unbridled freedom to exchange value. Government interventions do not allow the invisible hand to work effectively and efficiently.