Politics & Policy

Innovation Is the Thing

A new book reminds us that the recipe for economic success is simple, if not necessarily easy.

This is the miracle of the modern world: In advanced economies, real income per capita is at least 16 times what it was about 200 years ago.

We take this for granted. It is as natural as a grande latte macchiato or Dish TV. But it’s one of the most astonishing and consequential facts ever.

“In 1800 the average human consumed and expected her children and grandchildren and great-grandchildren to go on consuming a mere $3 a day,” Deirdre N. McCloskey writes in her dazzling new book, Bourgeois Dignity. “The only people much better off than $3 or so up to 1800 were lords or bishops or some few of the merchants. It had been this way for all of history, and for that matter all of prehistory. With her $3 a day the average denizen of the earth got a few pounds of potatoes, a little milk, an occasional scrap of meat.”

In short, almost all the world was Bangladesh. Then, everything changed. Even though the planet now has six-and-a-half times more people than it did two centuries ago, those people earn and consume on average ten times as much as they once did. “Starvation worldwide is therefore at an all-time low, and falling. Literacy and life expectancy are at all-time highs, and rising. Liberty is spreading. Slavery is retreating,” McCloskey writes.

What happened? That’s such a fraught question that McCloskey’s book is the second in a series of six (!) planned volumes. Her answer is that it wasn’t foreign trade (too small), it wasn’t imperialism (it didn’t enrich the imperial countries), it wasn’t the establishment of property rights (they had existed before), and it wasn’t the Protestant work ethic (hard work wasn’t new).

It was simply a new attitude toward wealth and its creation. McCloskey calls it the “Bourgeois Revaluation.” It afforded the shopkeeper the dignity that he had always been denied because he wasn’t a manorial lord, a cavalry officer, or a priest. It blessed commercial activity and its associated virtues. Europe became, in the words of the economist Joseph Schumpeter, a “business-respecting civilization.”

The combination of liberty and dignity for the bourgeoisie sparked the modern revolution that we wrongly, in McCloskey’s view, attribute to “capitalism.” The word is inapt, she argues, because the mere accumulation of capital is beside the point. The kings of Spain collected lots of gold from the New World, and no economic miracle ensued. It’s innovation that’s the thing, entrepreneurial “alertness,” the ceaseless drive for the new, the better, the cheaper.

The fruit of the new dispensation first made itself felt in Britain around 1820, but the formula results in rapid economic advance wherever it’s adopted, from Singapore to China to India.

This might be cold comfort at a time of 9.6 percent unemployment. It suggests, though, that the basic recipe for economic success is simple, if not necessarily easy — celebrate, reward, and create the conditions for innovation.

Unfortunately, we have a president of the United States who has been a member his entire adult life of what McCloskey — borrowing from Samuel Taylor Coleridge — calls “the clerisy.” These are the intellectualoids who never lost their instinctual scorn for commercial activity. Can you imagine Barack or Michelle Obama routinely urging college students to contribute to hope and change by entering the innovative economy’s great swirl of creative destruction?

Unfortunately, special interests will always pursue anti-innovation trade and regulatory policies to protect their fiefdoms.

Unfortunately, it’s easier to prop up what’s old than foster what’s new. A few years ago, the Federal Reserve handed out billions upon billions of dollars to practically every large, established firm in America.

The flip side to bourgeois dignity is governmental humility. Near the end of her tour de force, McCloskey quotes the great economist Frederic Bastiat: “Nothing is more senseless than to base so many expectations on the state, that is, to assume the existence of collective wisdom and foresight after taking for granted the existence of individual imbecility and improvidence.”

— Rich Lowry is editor of National Review. He can be reached via e-mail, comments.lowry@nationalreview.com. © 2010 by King Features Syndicate.


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