The destruction of value is graphic and tragic, caused by Russia invading Ukraine this month. Of course violence is common, around the world and throughout history. Violence and repression lead to poverty. Only in rare circumstances have autocracy and despotism been escaped, so that commerce can flourish and wealth can be shared.
Last week I blogged about my nice experience at Disney World. I was happy to see them telling the story of technological growth at The Carousel of Progress ride. At Disney, people really commit to their stories. Adults don’t wear mouse ears or Jedi robes ironically, in the park. The Carousel of Progress message is 100% optimistic about our future, without any cynicism or hedging. There is no mention of government institutions or which legal arrangements will allow progress to continue.
Here is some political economy that is missing from the ride. I quote, without indenting, from the late P.J. O’Rourke’s book On the Wealth of Nations. O’Rourke explains, sometimes using Adam Smith’s words, how in rare circumstances humans managed to rise out of poverty and subjugation.
Beginning of Chapter 7: The first two books of The Wealth of Nations are Adam Smith’s creed of economic progress. Smith placed his faith… in the logic of common sense. We are required to care for ourselves. We act upon this requirement. Our actions are demonstrably beneficial to others. The economy progresses, QED. Or it would, Smith wrote, “if human institutions had never thwarted those natural inclinations.”
More from Chapter 7, on pre-Medieval history of Europe: Smith wrote that the “rapine and violence which the barbarians exercised” left Western Europe “sunk into the lowest state of poverty.” Commerce was destroyed, towns were deserted, fields were left uncultivated. But although the rule of law and the legal title to property that goes with it were destroyed, the result was not “Imagine no possessions/ I wonder if you can.”
End of Chapter 7, an explanation of how economic progress started in the West when the merchants gained some freedom: Adam Smith argued that the inclination of the feudal overlords to be selfish was so strong that it overwhelmed their instinct for self-preservation:
All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with other persons. For a pair of diamond buckles… they exchanged… the price of the maintenance of a thousand men for a year, and with it the weight and authority which it could give them. The buckles, however, were to be all their own… whereas in the more ancient method of experience they must have shared with at least a thousand people… and thus, for the gratification of… vanities, they gradually bartered their whole power and authority.
Never complain that the people in power are stupid. It is their best trait.
Joy writing again: “Stupid” refers to the fact that the European lords could have maintained their own power if they had been willing to keep themselves and everyone else poor through continued violence. Consider who is currently being being crazy versus “stupid,” in Europe and elsewhere.
In Disney World’s Magic Kingdom, you can get off the Carousel of Progress and walk across the park, past the Main Street shops, to a dark scary ride called The Pirates of the Caribbean. Someone could teach a travel course where students do both rides and then discuss wealth creation. It would pair nicely with a Doug North reading. Then, everyone could ride “It’s Small World” ironically.
Economist Writing Every Day 