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root evil

Certain institutions are under-appreciated in our society for their ability to foster prosperity. And not just under-appreciated, but often denigrated, attacked and undermined by factions favoring easy economic rents at the expense of others: this is the zero-sum crowd. This list of “10 Prerequisites for Prosperity” is offered by Harry Veryser, and it includes several such important institutions or social arrangements. (He includes a few excellent quotes from the likes of Hayek, Thomas Aquinas and Aristotle.) I find some of the prerequisites on the list to be of greater importance than others. For example, I’m not sure “leisure” deserves a place there, if only because it flows from some of the others. Nevertheless, it is a good list. Several of the pre-conditions have come under great threat in the U.S., and it is no coincidence that these threats have occurred in tandem with our society’s drift toward a collectivist dystopia.

Chronically impoverished societies are prone to instability, violent internal conflict, and even terrorism. Needless to say, these societies usually lack the prerequisites for prosperity enumerated by Veryser. Hernando de Soto writes of how creating such prerequisites can lead to more than a flourishing economy; it can also bring an end to terrorism. He witnessed such a change as a key player in Peru’s successful effort to use economic development to end the threat posed by the Shining Path guerillas in the 1980s and early 1990s. He asserts:

The people of the “Arab street” want to find a place in the modern capitalist economy. But hundreds of millions of them have been unable to do so because of legal constraints to which both local leaders and Western elites are often blind. They have ended up as economic refugees in their own countries. 

To survive, they have cobbled together hundreds of discrete, anarchic arrangements, often called the “informal economy.” Unfortunately, that sector is viewed with contempt by many Arabs and by Western development experts, who prefer well-intended charity projects like providing mosquito nets and nutritional supplements.

de Soto recommends that governments start by allowing entrepreneurs to build capital from the ground up, enabling them to obtain secure title to property, and by eliminating restraints on economic activity imposed by coercive authorities. Liberty can go a long way toward solving the most intractable social problems.

As countries from China to Peru to Botswana have proved in recent years, poor people can adapt quickly when given a framework of modern rules for property and capital. The trick is to start. We must remember that, throughout history, capitalism has been created by those who were once poor.