The Paradox of Prosperity
In Friedrich Hayek’s 1954 book Capitalism and the Historians, the late French philosopher and political economist Bertrand de Jouvenel noted a baffling historical trend: “Strangely enough, the fall from favor of the money-maker coincides with an increase in his social usefulness.”
In surveying the history of capitalism from its inception in the late eighteenth century to the mid-twentieth century when he was writing, De Jouvenel was struck by an ironic and counterintuitive phenomenon. By “money-maker,” he meant the capitalist entrepreneurs who became rich by supplying the masses with more consumer goods. Entrepreneurs generated the economic growth that uplifted standards of living; hence, their “social usefulness.”
De Jouvenel aptly wrote “strangely enough” to characterize the fact that as capitalists raised standards of living in each succeeding generation, the hatred of capitalists increased instead of diminished. This is paradoxical, but true. The more prosperous our society has become, the more the creators of that prosperity and the system that enables it have been vilified. How dare those wicked capitalists break the iron grip that abject poverty had held over the masses of human beings throughout millennia of history!
This graph of world per capita wealth over the last two thousand years tells an amazing story. (A chart of US per capita GDP growth shows a similar trajectory over the last 230 years.)
Mass poverty was the norm for centuries. That finally began to change in the late 1700s with the emergence of capitalism. The nineteenth-century socialist reaction to capitalism condemned capitalism for not making every human being prosperous equally and simultaneously. It’s true: some prospered before others. As I have explained before, the reason that there was not faster economic progress for more people in the 1800s was not that evil capitalists were exploiting workers, but simply that there were not enough capitalists t
Article from Mises Wire