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The Birth of Plenty

Posted March. 25, 2005 23:40,   


◇ The Birth of Plenty/ Wrote by William J. Bernstein, Translated by Kim Hyun-gu/ 576 pages, 25,000 won, Siaa Publishing Company

“Do you want to make your nation wealthy?”

The answer from any political leader would be “yes.” But in order to open the door to wealth, four keys are required. No generation, civilization, or country has succeeded in the long journey for wealth without these four keys. What sort of keys are they? One author summarizes them as: property rights, scientific rationalism, thriving capital markets, and fast and efficient communications and transportation.

Thinking, earning, and investing freely-

In 1700, the Netherlands’ gross domestic product (GDP) per person was nearly twice that of second-ranked England. What was the secret behind this country’s preemptive victory to the finishing line of wealth, out of the whole of Europe?

Due to anti-Spanish protests, it claimed autonomy in 1648. This green nation, under stress from despotism, introduced a startling new definition: freedom of religion, including Catholicism, Protestantism, and Confucianism. It meant that there was to be no need to be uncomfortable in expressing one’s conscience and faith. As a result, the injection of revolutionary ideas and inventions, such as Leeuwenhoek’s microscope followed. This is an example of scientific rationalism.

The Netherlands’ good fortune did not stop there. As vast new tracts of land emerged after the construction of embankments in its shallow seas, emancipated farmers, freed from the duties of the medieval tenant, were born. They enjoyed the fruits of their labor without unfair exploitation or interference. Their property rights were guaranteed. Also, because a colossal amount of capital was needed for the reclamation project (including large-scale windmill construction), to procure this amount, a low interest rate was settled upon. A thriving capital market formed, creating a secure society and smooth means of debt recovery.

Water transportation through canals was much faster than land transportation and was efficient due to its low cost.

The prosperity of England followed the Netherlands’ affluence. William the Third, a descendant of the Netherlands, and the British Parliament ensured the rights of citizens, and the Enclosure movement, which fought for privatization of farming land, made modern property rights possible. The stabilization of politics decreased interest rates and allowed the aggregation of funds. The transformation blossomed with the advent of the industrial revolution that the invention of the steam engine and cotton gin engendered.

History leaves losers behind-

Through understanding these four keys, the reasons why nations failed to follow the Netherlands’s example become more prominent. Why did France lose to England after the 18th century? French liberal property rights were impeded because the French government tried to allot funds by selling monopoly rights to various industries. Tollage disrupted unrestricted transportation, and France, prohibiting new technology, executed about 16,000 people who violated rules related to cotton.

About 500 years ago, the Islamic world created a force that threatened impoverished and degenerated European countries. But why did their historical leadership wither? The greatest reason was the “interest ban” as prescribed by the Koran. The accumulation of capital was impossible because the financial industry was practically nonexistent. It was not until the 19th century that the Ottoman Empire strived to learn from Europe, but the answers they were in search of were distorted. Although they imported weapons, military policies, and even factories from the West, they never realized the four keys.

The ending of the communism versus capitalism showdown that embellished the late 20th century was preordained. Communism oppressed freedom of thought and ideas, banished the concentration of capital and, ultimately, was unable to obtain an active society through the implementation of liberal property rights.

The $20,000 era? In our case…-

Korea transformed itself from an indigent country into an Asian “tiger” early on. The writer attributes Asian development to “the obvious results of an open market, constitution, and expansion of secure property rights.” In today’s world, where we are working fervently to achieve our objective of a $20,000 per capita GDP, do we have the four keys?

The author comprehensively interprets the key of property rights as something that “does not confiscate incentives provided by a monopolized system, and does not deliberately dispossess the compensation of labor to proprietors.” The scientific rationalism key indicates a healthy intelligence that does not sway to populism or other types of political propaganda in the modern world. Liberal fundraising stipulates that companies must gain the trust of investors through logical management.

Japan is armed with advanced technology, and China is emerging armed with a monumental population and market. Placed between these two giants, will we clear the way to the era of a $20,000 per capita GDP in front of us and open the door wide?

The original title of the book is: “The Birth of Plenty,” and was published in 2005.

Yoon-Jong Yoo gustav@donga.com