The Pequod Review:
William Bernstein's The Birth of Plenty is a fascinating history of modern economic development, with a focus on the shift of Western societies from agrarian-based economies to industrialized economies. Bernstein's narrative takes a longer view than most other works of economic history:
Interest rates, according to economic historian Richard Sylla, accurately reflect a society's health. In effect, a plot of interest rates over time is a nation's "fever curve." In uncertain times rates rise because there is less sense of public security and trust. Over the broad sweep of history, all of the major ancient civilizations demonstrated a "U-shaped" pattern of interest rates. There were high rates early in their history, following by slowly falling rates as their civilizations matured and stabilized. This led to low rates at the height of their development, and, finally, as the civilizations decayed, there was a return of rising rates.
Before the modern era, the very idea that a nation could grow wealthy and powerful through commerce was almost unheard of. For millennia, the road to riches lay through victory and plunder.
In the end, he settles on four key factors which are required for economic prosperity (usually simultaneously):
-- Property rights, which drive creativity;
-- Scientific rationalism, which permits the freedom to innovate without fear of retribution;
-- Capital markets, which provide funding for people to pursue their visions; and
-- Transportation/communication, which allows for the effective transfer of ideas and products.