Why Wealth Works?

Everyone benefits from economic freedom, not just the rich.

economyIt's a simple question: why are some parts of the world rich while other parts are poor? It isn't brains. No place is stupider than Hollywood, yet its residents are wading in money. Meanwhile in Russia, where chess is a spectator sport, they're boiling stones for soup.

Natural resources aren't the secret either. Impoverished Africa has gold, uranium, oil. Affluent Holland has none of those, and half the places is underwater besides.

Actually we know the answer – and if people would just open their eyes to it, the whole world could be rich. The poor of Asia could stop pulling rickshaws; the people in the Brazilian rain forest could be singing in the rain.

All this would be possible because of the simple lesson of history: free markets work. The tremendous improvement in the standard of living in countries with individual liberty proves this.

A free market means that people have an innate right to the fruits of their labour and the right to dispose of this fruit the way they see fit, as long as other people don't get pasted in the face with a rotten peach or something.

There are people who don't  believe this. Some steal. Some think it's okay to take things from other people if they live more than a peach toss away or speak another language or have a different religion or look funny. And the kings, emperors and so forth who ruled mankind during most of history were under the impression that everything on earth rightfully belonged to them.

But the most common reason given for market is that it is "unfair" Socialists and all other kings of economic levelers think that to close the poverty gap, all we have to do is take money away from people who have too much and give it to the people who don't have enough.


There is no fixed amount of wealth in the world that just needs to be divided fairly. If you have more money, it doesn't mean that I have less. Wealth is something we create. When you have too few slices of pizza, you don't have to eat the box. You need to bake another pizza.

One of the best ways to measure the wealth of ordinary people is to see if they're getting the things that they want – like staying alive. In the early 1950s people in rich countries lived, on average, 66.5 years. By the early 1990s they were living 74.2 years. Meanwhile, in the poorest countries life-spans increased from 35.5 years to 49.7 years. This improvement in well-being did not harm the well-being of others. The difference in life expectancy between the rich and the poor has decreased 6.5 years in the past four decades. The rich are getting richer. The poor are getting richer. And we're all getting older.

When we take money away from people just because they're rich, we destroy the system. Then we give the money to the poor, either it is worthless or the poor don't have anything to buy with their money, the way didn't in the old Soviet Union.

If we want the whole world to be wealthy, we need to recognize that the problem is poverty, not the difference between poverty and plenty. Poverty is hard, wretched and humiliating. Poverty is schoolgirl prostitutes trying to feed their parents in Cuba. Poverty is African children dying for lack of medicines that cost a pittance.

Poverty is not sad. Poverty is infuriating. These things don't have to happen. World leaders should know by now how to get rid of poverty, how to create wealth. They have to institute free-market reforms and abide by the rule of law. But because of laziness, complacency, love of power or misguided idealism, they refuse to do it.

SO IF WEALTH IS not a worldwide round robin of purse-snatching, and if the thing that makes you rich doesn't make me poor, why should we care about fairness at all?

Fairness is good thing in marriage and at school. But as a foundation for a political system, it has drawbacks. the bible is clear on this point. It might seem a strange place to do economic research, especially for someone like me who spend most Sundays playing golf. however i have been thinking a lot lately about the Tenth Commandment.

The first nine Commandments concern theological principles and social laws: thou shalt not make graven images, steal, kill, etc. Fair enough. Then: "Thou shalt not covet thy neighbour's house, thou shalt not covet thy neighbour's wife, nor his manservant, nor his maidservant, not his ox, nor his ass, nor anything that is thy neighbour's."

Here are God's basic rules about how to live, a very brief list of sacred obligations and solemn moral precepts, and right at the end of it is, "Do not envy your friend's cow."

What is that doing in there? Why would God, with just ten things for Moses, choose as one of them envy over the livestock next door ? And yet, think about how important to the well-being of a community this Commandment is. If you want a donkey, a cake, a cleaning lady, don't whine about what the people across the street have. Go get your own.

The tenth commandment sends a message to all the people who think that poverty can be cured by redistribution of wealth, by economic "fairness," by beggar thy neighbour. And the message is clear: it's the road to hell.

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