Book Review – The Birth of Plenty by William Bernstein

Finished reading this book by William Berstein. It is  one of those several books which tries to figure why the west grew in the last 200 years and others did not?

Bernstein has simplified the answers to four factor theory:

In The Birth of Plenty, William Bernstein, the bestselling author of The Four Pillars of Investing, presents his provocative, highly acclaimed theory of why prosperity has been the engine of civilization for the last 200 years.

This is a fascinating, irresistibly written “big-picture” work that highlights and explains the impact of four elements that when occurring simultaneously, are the fundamental building blocks for human progress:

  • 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;
  • Transportation/communication, which allows for the effective transfer of ideas and products.

Meticulously researched, splendidly told, and featuring a new preface and introduction, The Birth of Plenty explains the interplay of the events, philosophies, and related phenomena that were nothing less than the crucible of the modern age. This is one of the rare books that will change how you look at the world.

Further

In the tradition of Peter Bernstein’s Against the Gods: The Remarkable Story of Risk, comes Dr. William Bernstein’s The Birth of Plenty. This newsworthy book sheds new light in the history of human progress. Bill Bernstein is no stranger to McGraw-Hill. He has written two successful investing books for us and both have exceeded expectations; The premise of Dr. Bernstein’s book is fascinating as well as provocative. From the beginning of civilization until 1820, mankind experienced zero economic growth (0% GDP). This basically means that life for the average individual was no better in 5 A.D. than in 1555 A.D or 1555B.C. But after 1820, the world rapidly becomes a much more prosperous place for the average individual. What happened in 1820? Bernstein contends that there are four conditions necessary for sustained human economic progress: Property rights. Scientific rationalism. Capital markets. Communications and transportation technology. Holland, and by 1820 they were securely in place in the English-speaking world. It was not until much later that all four had spread over much of the rest of the globe. Global GDP since then has consistently been around 2%. And that 2% of growth has allowed most of the world to live in a much better place than our ancestors. While the historical aspect of Bernstein’s story will appeal to certain history buffs. His book is also full of implications for today’s society. Bernstein asserts that the absence of even one factor endangers economic progress and human welfare. He uses the beleaguered Middle East as one example – where the absence of capital markets and scientific rationalism have deterred the quality of life from improving. And Africa is sited as a dire example, where tragically in most of Africa all four factors are essentially absent

The book is written in a very nice and simple way trying to connect the dots. The examples picked from history are quite informative and tell you quite a few things.

Now one is not disagreeing that these four factors are not important. But to say these four sum up whatever it is to economic development, takes the story too far. All these books for instance have no answer to Chinese growth in the last 30 years It neither had property right nor very great capital markets. Likewise many Asian countries which have developed have not really followed these recipes for growth.

Overall, the book is a decent read given the various stories and ideas the book gives. Mixing technology with economics is quite interesting. It clearly has lessons on how to write an ambitious book like this.

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