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Capitalism is the greatest anti-poverty scheme ever discovered

This is absolutely right. Figure 1 shows estimates of the world’s per capita GDP: one (Maddison’s) goes back to the birth of Christ and the other (DeLong’s) to the end of the last Ice Age. For most of human history, grinding poverty of a type almost unimaginable in the modern day United States was the lot of almost everybody on the planet. Over those centuries, humans survived on roughly the equivalent of $3 a day — enough for subsistence living. In good times living standards might rise, but one bad harvest or natural disaster could plunge a community back into abject poverty.

Figure 1

Thankfully, not anymore. As I wrote in the Star Tribune recently, “Around 200 years ago things began to change rapidly. Today the average American lives on about $130 a day. Europe, Canada, Australia and parts of South America and Asia have enjoyed similar increases.”

What happened? Capitalism happened.

The grim reality of life before capitalism

My article drew a letter to the Star Tribune in response. It said:

Yes, the early capitalists did make their own lives better, but the vast majority of people suffered greatly and were barely able to eke out a subsistence living. Keep in mind that unfettered capitalism meant working at least 12 hours a day, six days a week for the vast majority of men, women and children. 

No doubt, life in the “dark satanic mills” of early capitalism was grimmer than anything a developed economy offers today. But this correspondent completely ignores what life was before capitalism. It, too, was grim. In his book The Great Escape, the economist Angus Deaton explains the “nutritional trap” which Britain’s population once experienced:

The population of Britain in the eighteenth and early nineteenth centuries consumed fewer calories than they needed for children to grow to their full potential, and for adults to maintain healthy bodily functioning and to do productive and remunerative manual labor. People were very skinny and very short, perhaps as short as at any previous (or subsequent) time.

Deaton explains how this lack of nutrition affected the body:

Throughout history, people adapted to a lack of calories by not growing too big or too tall. Not only is stunting a consequence of not having enough to eat, especially in childhood, but smaller bodies require fewer calories for basic maintenance, and they make it possible to work with less food than would be needed by a bigger person. A six-foot-tall worker weighing 200 pounds would have survived about as well in the eighteenth century as a man on the moon without a spacesuit; on average there simply was not enough food to support a population of people of today’s physical dimensions.

If you’ve ever tried to squeeze yourself through the doorway of a Medieval English building, you’ll be able to picture this instantly. The average 18th-century Englishman got fewer calories than the average individual living in sub-Saharan Africa today. And, because they were too poor to eat, these Englishmen worked little. Deaton writes:

The small workers of the eighteenth century were effectively locked into a nutritional trap; they could not earn much because they were so physically weak, and they could not eat because, without work, they did not have the money to buy food.

In his excellent book Progress, Johan Norberg summarizes the findings of the research of economic historian Robert Fogel:

Two-hundred years ago some twenty percent of the inhabitants of England and France could not work at all. At most they had enough energy for a few hours of slow walking per day, which condemned most of them to a life of begging.

In short, before capitalism “the vast majority of people suffered greatly and were barely able to eke out a subsistence living”.

My correspondent continued, saying that:

Conditions in mines, factories and other workhouses were brutally dangerous. There’s a reason why “in 1860, the share of the global population that died in the first five years of life was 41%,” as Phelan says, a number that didn’t drastically improve until well into the 20th century.

But in 1860 the majority of people were not working in “mines, factories and other workhouses”. Even as quick as it was, capitalism took some time. In 1860, the Urban Population as a Percentage of the Total Population in the United States was just 19.8%. By 1900, it was double that and the share of the global population that died in the first five years of life was down to 36.2%. Most people were still living the same grim pre-industrial lives described by Deaton. After all, the Pettijohns, whose tragic story I told in my article, died in rural Minnesota, not a mine, factory, or workhouse.

Capitalism made us all richer

To get some idea of how widely shared the benefits of capitalism have been, ask yourself whether or not you would want to trade places with John D. Rockefeller and live as he lived in 1916?

As the economist Donald J. Boudreaux writes,

If you were a 1916 American billionaire you could, of course, afford prime real-estate.  You could afford a home on 5th Avenue or one overlooking the Pacific Ocean or one on your own tropical island somewhere (or all three).  But when you traveled from your Manhattan digs to your west-coast palace, it would take a few days, and if you made that trip during the summer months, you’d likely not have air-conditioning in your private railroad car.

And while you might have air-conditioning in your New York home, many of the friends’ homes that you visit – as well as restaurants and business offices that you frequent – were not air-conditioned.  In the winter, many were also poorly heated by today’s standards.

To travel to Europe took you several days.  To get to foreign lands beyond Europe took you even longer.

Might you want to deliver a package or letter overnight from New York City to someone in Los Angeles?  Sorry.  Impossible.

You could neither listen to radio (the first commercial radio broadcast occurred in 1920) nor watch television.  You could, however, afford the state-of-the-art phonograph of the era.  (It wasn’t stereo, though.  And – I feel certain – even today’s vinylphiles would prefer listening to music played off of a modern compact disc to listening to music played off of a 1916 phonograph record.)  Obviously, you could not download music.

There really wasn’t very much in the way of movies for you to watch, even though you could afford to build your own home movie theater.

Your telephone was attached to a wall.  You could not use it to Skype.

Your luxury limo was far more likely to break down while you were being chauffeured about town than is your car today to break down while you are driving yourself to your yoga class.  While broken down and waiting patiently in the back seat for your chauffeur to finish fixing your limo, you could not telephone anyone to inform that person that you’ll be late for your meeting.

Even when in residence at your Manhattan home, if you had a hankering for some Thai red curry or Vindaloo chicken or Vietnamese Pho or a falafel, you were out of luck: even in the unlikely event that you even knew of such exquisite dishes, your chef likely had no idea how to prepare them, and New York’s restaurant scene had yet to feature such exotic fare.  And while you might have had the money in 1916 to afford to supply yourself with a daily bowlful of blueberries at your New York home in January, even for mighty-rich you the expense was likely not worthwhile.

Your wi-fi connection was painfully slow – oh, wait, right: it didn’t exist.  No matter, because you had neither a computer nor access to the Internet.  (My gosh, there weren’t even any blogs for you to read!)

Even the best medical care back then was horrid by today’s standards: it was much more painful and much less effective.  (Remember young Coolidge.)  Antibiotics weren’t available.  Erectile dysfunction?  Bipolar disorder?  Live with ailments such as these.  That was your only option.

You (if you are a woman) or (if you are a man) your wife and, in either case, your daughter and your sister had a much higher chance of dying as a result of giving birth than is the case today.  The child herself or himself was much less likely to survive infancy than is the typical American newborn today.

Dental care wasn’t any better.  Your money didn’t buy you a toothbrush with vibrating bristles.  (You could, however, afford the very finest dentures.)

Despite your vanity, you couldn’t have purchased contact lenses, reliable hair restoration, or modern, safe breast augmentation.  And forget about liposuction to vacuum away the results of your having dined on far too many cream-sauce-covered terrapin.

Birth control was primitive: it was less reliable and far more disruptive of pleasure than are any of the many inexpensive and widely available birth-control methods of today.

Of course, you adore precious-weacious little Rover, but your riches probably could not buy for Rover veterinary care of the sort that is routine in every burgh throughout the land today.

You were completely cut off from the cultural richness that globalization has spawned over the past century.  There was no American-inspired, British-generated rock’n’roll played on electric guitars.  And no reggae.  Jazz was still a toddler, with only a few recordings of it.

You could afford to buy the finest Swiss watches and clocks, but even they couldn’t keep time as accurately as does a cheap Timex today (not to mention the accuracy of the time kept by your smartphone).

So, not only wouldn’t the average American want to trade places with one of Deaton’s pre-capitalist malnourished dwarfs, they probably wouldn’t want to trade places with John D. Rockefeller. That sums up not only the power of capitalism to enrich, but its power to do so for the many.

Humankind’s Golden Age is now

The life capitalism liberated us from was hard beyond imagination. The 19th century Romantics who waxed lyrical about a lost pastoral paradise, were generally middle and upper class types who had done nothing in the way of manual labor in their lives. It is very easy to make a paradise out of something you never experienced.

With capitalism, for the first time in its history, humanity glimpsed the possibility of freedom from material poverty. Even Karl Marx, writing in 1848, paid tribute:

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalisation of rivers, whole populations conjured out of the ground — what earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?

You might read that under capitalism “a small privileged few are rich beyond conscience, and almost all others are doomed to be poor at some level”. This is nonsense. Before capitalism, almost all were poor at some level. With capitalism, almost all are richer than the richest person before it. As someone said recently, when your worldview starts with ‘How do we limit the amount of rich people?’, you reach for socialism. When your worldview starts with ‘How do we limit the amount of poor people?’, you reach for capitalism.”

John Phelan is an economist at the Center of the American Experiment. 

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