Founders Perspctive

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Between 1000 BC and 1750 AD the Bank of England estimates that the average person’s standard of living no more than doubled. That is little advancement over almost 3,000 years. Yet they estimate that from 1750 to today, the average has gone up over seven-fold. (Changes in standard of living are closely aligned with GDP per person.) See Chart 1.

The massive change in living standards that occurred over a handful of generations is nothing short of a miracle. Most Americans today live better and longer than the wealthiest kings of a few hundred years ago.

We owe this magnificent change in human history to the advancements in math, science, physics, and medicine that laid the groundwork for the steam engine, telegraph, railroad, electricity, automobile, telephone, vaccines, aircraft, automation, software, the internet, smart phone, cloud computing, and so much more.

These are the more visible signposts that have been hallmarks of this age. However, there is much more to this story. Isaac Newton wrote in 1675, “If I have seen further (than others), it is by standing on the shoulders of giants.” In other words, each new bit of knowledge, each invention, is possible because of what has come before.

Much of the groundwork in basic sciences and math including geometry, astronomy, physics, and philosophy, was developed during Newton’s Age of Enlightenment. This was a period that saw the development of basic inventions necessary to our modern economy such as Gutenberg’s printing press.

Yet standards of living barely budged in this period. So, what was the “secret sauce” that unleashed the phenomenal economic growth of the past 250+ years in the Western world?

Two organizing concepts changed the world, democracy, and capitalism! Capitalism supplanted mercantilism as the basic economic model in England, Europe and particularly the United States, as spelled out in Adam Smith’s Wealth of Nations in 1776 … the same year of our independence. Mercantilism assumes a fixed economic pie (which meant you only grew more prosperous by taking someone else’s riches) while capitalism grows the economic pie and spreads it more broadly within the population.

Our new country's inspired leaders, not burdened with the yokes of history, had the freedom to take from the best thinking of the giants who had come before. They delivered a true democracy – divided government, elected leaders, rule of law, an independent judiciary and Bill of Rights.

They encouraged free markets and the private ownership of land and inventions.

Alex de Tocqueville, the French sociologist and author, traveled widely throughout the United States in 1830 and 1831. The results of his travels and countless interviews led to his insightful masterpiece, Democracy in America (1835). Among its many revelations to Europeans (and Americans) was the individualism, freedom, and equality that Americans deeply believed in.

One insight that set America apart from virtually every other culture to this day was the trust Americans held in their fellow Americans. This supported the vast network of community, state, and federal associations as well as political, social, and economic structures thriving in America. Americans also exhibited tremendous depth of belief in their country and were willing to risk their lives in support of these beliefs. This was the basis of American Exceptionalism.

All of this went rushing through my mind as I watched Ukrainian President Volodymyr Zelensky address our Congress – in person – on the 21st of December. Here is a man leading a nation with such conviction, such belief, such courage, in the fight for the freedom of democracy and self-rule. The standing ovation given by Congress was not by party affiliation but by recognition of the continuing fight for principles.

Authoritarian rulers come and go, but little of lasting value comes from them. They coerce, bully, or bribe allegiance to themselves, not to principles. They typically drape themselves in the egalitarian promise of socialism or communism. In the end they often leave their country either backward or in ruin as seen in the rule by such strongmen as Stalin, Hitler, Mao, Castro, Maduro, and now Putin. Will Chairman Xi be next?

The turn to democracy and capitalism in the Western world underwrote the sustained progress of the past 250 years. But as shown by the unbelievable courage and will of the Ukrainian people, it should not be taken for granted.

Disclosures