Some astonishing facts: the average human living before 1800 "could expect to make, earn, and consume" about $3 per day. Today, the average Afghan and the average Liberian—residents of two of the poorest countries in the world—spend $33 per day, adjusted for exchange rates and inflation. In the emerging economy of Brazil, real per-person income is "about the same as it was in the world-beating United States in 1941, or in the still-recovering postwar Britain in 1959." And the average per-person daily income in "well-off free-trade democracies," which are home to one-sixth of the world’s population, is about $100. In fact, worldwide, "[i]ncome now is thirty to one hundred times more than our ancestors could manage…."
Since 1800, the world has witnessed unprecedented economic growth. In her new book Bourgeois Equality, economic historian Deirdre McCloskey explains that while many have sought to explain this growth as a function of the accumulation of capital, it is much better understood as a function of the "expanding ideology of liberty and dignity that inspired the proliferating schemes of betterment by and for the common people." This liberty and dignity led to what McCloskey calls the Bourgeois Deal, which led in turn to this Great Enrichment.
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The Bourgeois Deal allowed prospectors the liberty to take entrepreneurial risks while also recognizing that, if successful, others would have the opportunity to profit off of them, either by imitating their business ideas or by creating other businesses that could link up in some fashion with the first one. What is essential is that other bourgeois prospectors look at their fellow man who has created a business through his own imagination and ingenuity, and recognize that they can do the same. After the first and second "acts" of the Bourgeois Deal comes the third: the former aristocrat also gets richer than he ever imagined. The Bourgeois Deal is a positive-sum game.
Without understanding the massive importance of the Bourgeois Deal, McCloskey argues we fail to understand what has led to the consistent betterment that is the Great Enrichment. Both proponents and critics of capitalism point to the consumerism, increased materialism, and accumulated capital since the Enlightenment as the defining characteristic of the modern world, for good or ill. But "what led to our automobiles and our voting rights, our plumbing and our primary schools, were the fresh ideas that flowed from liberalism, that is, a new system of encouraging betterment and a partial erosion of hierarchy." The Bourgeois Deal’s indispensable contribution was not the material consequence of the Deal, but rather the ideas employed for betterment of commoners by commoners.
McCloskey doesn’t believe in capitalism, because it emphasizes accumulation of capital rather than dignity and liberty of the individual, and she doesn’t believe in socialism because it refuses to recognize that a system of "trade-tested betterment" (her replacement for "capitalism") has led to the greatest increase in wealth and some of the greatest spiritual enrichments in human history. She insists that the Great Enrichment cannot be explained by "economists and historians from left or right or center." Accordingly, she suggests that, "[p]erhaps their science and their politics need revision."
McCloskey begs the skeptical reader to reconsider being sour on modernity "for the good of the wretched of the earth." She argues for trade-tested betterment and innovation while also calling out the "fallacies" of left-wing trickle-up and right-wing trickle-down economics. She is both a social justice warrior and a radical recoverer of the term "bourgeois." She is a staunch defender of "trade-tested betterment" while also writing with one of the morally clearest voices this reviewer has encountered in some time. Morality and gain from trade are not irreconcilable; in fact, they have worked together and led to the best conditions for life human beings have ever enjoyed.
Explaining why accumulated capital is not the cause of the Great Enrichment, McCloskey notes that physical objects fall apart and depreciate. "Anyone who has replaced the roof of her house knows that a house is a continuing and recent accumulation, like a garden, not to be acquired unmodified from past centuries." Material constantly needs to be revived by ideas. "Accumulated capital becomes unusually, nonroutinely profitable only if it embodies betterment, innovism." McCloskey, too, breathes new life into an old tradition.