A Splendid Exchange

The Birth of Plenty, dealt with the institutional origins of the global prosperity that occurred after 1820. Few readers found the book’s basic premise—that the recent wealth of the modern world was underpinned by the development of property rights, rule of law, capital market mechanisms, and scientific rationalism—at all controversial. The failure of the communist experiment and the current wealth and poverty of individual nations testify to the power of these critical institutions.
This book enjoys no such ideological shelter. The pain and dislocations in the lives of individuals, industries, and nations caused by the globalization of the planet’s economy are real, and the debate is rancorous. In the language of economics, human well-being is affected not only by the mean (the prosperity of the average citizen) but also by the variance (the increasing dispersion between rich and poor). In plainer English, the incentives and equal opportunity afforded by free trade simultaneously improve the overall welfare of mankind and increase socially corrosive disparities of wealth. Even if trade slightly improves the real income of those at the bottom, they will feel the pain of economic deprivation when they fix their gaze at the growing wealth of those above them.