by Marian L. Tupy
September 6, 2018

One of the biggest and most pernicious myths about economic development is that capitalism or, as I prefer to call it, economic freedom, benefits the few, while impoverishing the many. The origins of this myth go back to Karl Marx, who thought that, under capitalism, competition would drive down profits, thus necessitating greater exploitation of the workers.

The mistaken theorizing of the German economist – in fact, real average global income per person rose by factor of 10 over the last 200 hundred years – was then updated by Vladimir Lenin.

The update was necessary because by Lenin’s time, the workers in the western industrialized countries were unambiguously better off than in Marx’s time. And so, in his Imperialism, the Highest Stage of Capitalism, the first Soviet dictator invented a new thesis. Contra Marx, the living standards of western workers continued to improve because of the riches that flowed to the West from the exploited colonies. While this was manifestly false — no country grew richer than the United States, which had no African colonies to exploit and which was competing against nations who did — Lenin’s thesis had a profound effect on generations of African nationalists, who rejected capitalism and embraced Soviet socialism instead.

But economic freedom not only continued to improve the lives of the workers in capitalist countries, it also improved the lives of the workers under socialism. Freedom, in other words, benefits everyone – even people who don’t have it.

Here is how the Nobel Prize-winning Austrian economist Friedrich Hayek put it in his 1960 magnum opus, The Constitution of Liberty:

“What is important is not what freedom I personally would like to exercise but what freedom some person may need in order to do things beneficial to society. This freedom we can assure to the unknown person only by giving it to all. The benefits of freedom are, therefore, not confined to the free-or, at least, a man does not benefit mainly from those aspects of freedom which he himself takes advantage of. 

There can be no doubt that in history unfree majorities have benefited from the existence of free minorities and that today unfree societies benefit from what they obtain and learn from free societies. Of course, the benefits we derive from the freedom of others become greater as the number of those who can exercise freedom increases. The argument for the freedom of some therefore applies to the freedom of all.” 

When Hayek wrote those words, the struggle between the communist and capitalist worlds was at its height, and the developing “third” world was caught in the middle of that contest.

Let us now look at a concrete example of what Hayek meant when he wrote that “unfree societies benefit from what they obtain and learn from free societies.”

In 2002, Stephen Van Dulken, an expert curator in the Patents Information Service of the British Library, published a well-reviewed book called Inventing the 20th Century: 100 inventions that shaped the world. The Wall Street Journal described it as “remarkable”, while the Boston Globe credited the author with assembling “a panoramic snapshot of the century”. In his book, Van Dulken identified the 100 most important inventions of the 20th century. One per year. Almost all have originated in the free countries.

Looking at the birthplace of the inventor, I counted 47 Americans, 30 Britons, 4 French citizens, 3 Canadians, 3 Germans and 2 Swedes. Argentina, Austria, Denmark, Finland, Hungary, Ireland, Israel, Italy, Japan, Soviet Union and Switzerland produced one inventor each.

Looking at the jurisdiction where these inventors decided to patent their inventions, the picture changes somewhat, but not too much. The United States has patented 46 inventions, Great Britain 29, and the World Intellectual Property Organisation 11. Germany patented 5, France 2 and the European Union as a whole patented 2. Canada, Denmark, Hungary, Japan and Switzerland patented one each.

Some readers might object that Van Dulken’s choices were, by necessity, subjective. That’s true, but I suspect that the airplane, air conditioning, the electric washing machine, tarmac road surfacing, the vacuum cleaner, neon lighting, stainless steel, rapid freezing of food, television, traffic lights, Nylon, Radar, Teflon, bar codes, the computer, the ballpoint pen, the microwave oven, the microchip, Kevlar and so on would have made anyone’s list.

In other words, it is unlikely that, looking back at the 20th century, others would pick a dramatically different list of the most important inventions. Needless to say, Van Dulken’s innovators did not only benefit their native countries. The benefits of their inventions spread across the globe and improved the lives of all people – including many of those who live or lived under tyranny.

— Free Enterprise Is Making the World Better originally appeared at Human Progress.