For millennia, the average standard of living around the world was more or less flat. Then, around 200 years ago, starting in Europe, a spectacular increase in prosperity set in, in the course of which the average citizen gained more income, more free time, became healthier, lived longer and received better education than ever before in human history.
But what was at the root of this “great enrichment,” as the economic historian Deirdre McCloskey calls it? And why did real average income shoot through the roof in some countries, while others lagged far behind?
Free markets are a decisive factor in achieving a higher standard of living. They give people the opportunity to take their fate into their own hands and develop their potential to the utmost. State transfers of pre-existing wealth, on the other hand, are often only a flash in the pan with no lasting effect.
It is historically evident that the market economy is most effective in combating poverty. And yet, capitalism and poverty reduction are often portrayed as opposites: especially in the mainstream media and thus in public opinion.
The fact that market economies have not worked equally well in all countries straight away raises the question of what it takes for them to have a positive impact. The basic framework of the rule of law plays an important role in this regard, as do the ways in which (government) power can be limited vis-à-vis entrepreneurial individuals. Values such as trust or fairness, on which entrepreneurship is built, also prove crucial.
This offprint analyzes the foundations of prosperity and shows what needs to happen so that even more people can live in prosperity.
Wishing you an exciting and stimulating read,