Editor’s note: This is the first in a series of posts by Ron Knecht addressing this subject.

Maximizing real economic growth per capita is and should be the primary public policy and political and social organizational goal, except in major war periods.  This is so because it determines aggregate human wellbeing and contributes to the related goals of freedom, fairness and increasing individual wellbeing.  The rapid economic growth of the last 300 years has been caused by a complex of economic, philosophic, political, and social factors, practices, policies and institutions known as classical liberalism (not modern western liberalism and statism).  It has made life rich and sublime relative to history for a great majority of the world’s people. 

However, these factors and the resulting rapid growth and human flourishing have been challenged and eroded by the Progressive and statist movements of the last 150 years and by recent wokeism.  Continuation of these Progressive and related trends threatens not only the wellbeing of future generations and key economic, political and social institutions that provide human and individual flourishing, freedom and fairness; they even jeopardize world peace.

The Historic Role of Classical Liberalism in Economic Growth

For thousands of years, very slow economic growth, punctuated by the economic destruction of occasional famines, wars and other cataclysmic events, kept most people from experiencing significant progress across generations. Thus by 1725, most folks would have understood well the economic status, social practices and beliefs of Greece and Rome 2000 years earlier; but they would have been mystified by economic, social, political and personal practices, policies and prevalent institutions and beliefs today, merely 300 years later.  This phenomenon is reflected in Graph 1 nearby, which shows the world per capita real GDP estimates for the last two millennia. (As discussed later, GDP is an imperfect measure, but the best available and reasonable for our purposes.)

Graph 1 can be applied with modification to any society (e.g., with slightly faster growth for part of the early period, or delayed onset of rapid growth, or slower or more rapid later growth).  At the left end, the curve would have been somewhat higher for about five centuries for the Roman Empire, before Europe’s collapse into the Dark Ages. During this time, India became the richest country in the world, was succeeded by China 1000 years ago, and then resumed its lead again about 500 years ago, despite the flourishing of Western Europe in the Renaissance immediately before and during that time.  India held the lead until the flowering of the British Empire before and during the 18^th and 19^th Centuries.  However, the key fact is that the ascendancy of Britain and then the United States was driven by classical liberalism, where the primacy of Rome, India, China and other earlier societies was driven by one-off phenomena, including trade and commerce among large greatly urbanized populations, powerful and effective rulers, scientific and technology developments, natural resource endowments, etc. 

The other fact emphasized by the graph is that the earlier large-nation growth spurts were temporary and of limited impact on world levels because they did not spread to other countries, as did classical liberalism.  For these reasons and as shown in the graph, the impact of British and American reforms and their spread are quite stunning compared to the earlier history.  Data before the mid-20^th Century are sketchy, but various sources have projected them at comparable rates.  So, representative of these estimates, the year 1 AD annual per capita GDP was roughly $158 (these figures in 2008 U.S. purchasing parity dollars).  It rose to about $615 in 1700 and then soared to $7,614 in 2008.  So, the slow growth before the advent of classical liberalism and the resulting Industrial Revolution was 0.08%/year, followed by 0.82%/year in the next 300 years.  Thus, this curve consists of two, not one exponential growth segments.  So, it is more extreme.

These percentages seem like small amounts, but when sustained they make huge differences.  Over 30 years (here taken as a generation), the early growth rate leads to a 2.4% net improvement in wellbeing, while the latter growth rate yields 28%.  Thus, in the early period each generation’s lot was essentially the same as their parents’ lot, but later each generation was significantly better off than their parents.  However, even these figures understate the true effect of the rise of classical liberalism because it took much time for the practices, etc. to spread to other nations; even today they have not been completely adopted around the world.  More telling is that from 1950 to 2000, the U.S. per capita GDP grew about 2.5% annually, but then fell to 1% per year since 2000 (for reasons discussed later).  At 2.5%, each generation is more than twice as well off as their parents, but at 1%, they are only 35% better off.  Had the 1950-2000 growth rate been sustained, average U.S. incomes today would be about $99,500 annually, not $60,000!

What Are the Key Elements of Classical Liberalism? 

We start by noting some traditional drivers of economic development that contribute to growth, did so for Rome and other early large civilizations, and still help modern growth.  However, they are not the systemic factors that have animated the last three centuries, beginning in Britain and the U.S. and then around the world.  Major ones are geographic: the existence of great river systems or good harbors for coastal ports; fertile plains; mountains that store snow and release melt to the lowlands to grow crops; and the rise of scientific and technological improvements such as roads and railroads from ample internal resources and productive areas and cultures to ports.  Other scientific and technological phenomena include: masses of warriors on horseback for conquest; widespread common languages; communication methods such as printing presses; seafaring cultures that allowed countries to spread their dominion wide; new armaments systems; and so on.

While these things have been very helpful, they are site-specific and provide usually local and area-only advantages and transitory growth over the long run.  The classical liberal views, practices, policies and institutions that created the Industrial Revolution in Britain and the U.S., on the other hand, have proven to be permanent, portable and not site- or area-specific. For example, Singapore, Hong Kong and Switzerland have become very wealthy despite having very small lands and nearly no natural resource endowments.

The following items have been important for growth, fairness and flourishing: the rule of law and equality of all persons before the law; recognition of individual sovereignty and personal liberty and freedom (especially First Amendment elements); constitutionally limited government; separation of powers between national, regional and local units; separation of powers at each level of government; individual rights, not group rights and preferences or subjugation; widespread education available to many or even all; strong property rights; and economic freedom, especially for trade and commerce at all levels.  Another phenomenon that has increased with classical liberalism, but is not limited or necessarily essential to it, is the location of peoples in large urban or extended areas.

Some classical liberal values, practices and institutions originated in the Code of Hammurabi, the teachings of Confucious, Greek and Roman cultures, and even to some extent in the reign of the Khans (by area the largest empire ever, albeit not the richest).  Many also originated in the cultures of Judaism and Christianity and the Arthurian Legends.  However, perhaps the turning point of their ascendance was the British Magna Carta Libertatum on June 15, 1215 and other legal documents in England and Europe it inspired.  The Arthurian Legends and Magna Carta established the rule of law, limited government, separation of powers, property rights and economic freedom, and even individual sovereignty and personal liberty.

These values, practices, etc. grew in Britain, especially in the 16^th and 17^th Centuries, and combined with the growth of the Scientific Revolution during that time, fostered the 18^th and 19^th Century Industrial Revolution and resulting urbanism.  The 17^th Century writings of John Locke and his empiricist predecessor Francis Bacon, plus England’s Glorious Revolution of 1688 inspired in the 18^th Century the French thinker Voltaire, Scottish Enlightenment notable Adam Smith, and American Revolutionaries Benjamin Franklin, the Adams clan, Thomas Jefferson and James Madison.  These people gave birth and momentum to the economic, social and political ideas, practices and institutions that fostered the rise of the Industrial Revolution and British and American prosperity.  Scientific and technological advances characterized the ascendance of great prior civilizations, especially Rome and China; but they all lacked classical liberalism.

The classical liberal palette also fostered the American Revolution.  However, because Britain had a long lead on the U.S., it remained the dominant economic power in the world through most of the 19^th Century.  But classical liberal culture was advancing even faster and more extensively in America, as chronicled by Alexis de Tocqueville beginning in 1835.  Thus, by the 20^th Century, the U.S. passed Britain economically, and in the Great War, it became the leading military and diplomatic power.  In 1789, inspired greatly by the American Revolution, the French began their own revolution, which took various wrong turns from classical liberalism and faltered.  Likewise, the Latin American wars of independence in 1808-1829 freed countries from Spain, but they failed to adopt much of classical liberalism.  So, except for Argentina, which embraced classical liberalism for a century, those new countries failed to prosper greatly on a sustained basis.

In mid- and late-19^th Century Prussia, Karl Marx’s writings and activities promoted communism and socialism to replace democratic republicanism, capitalism and other economic, social and political institutions that developed under classical liberalism.  That effort did not get traction until Vladimir Lenin embraced it in 20^th Century Russia.  Then it created chaos and led to the murder and deaths of more than 100-million people world-wide, especially in communist Eurasia under Mao Zedong, Joseph Stalin and Lenin.

The Rise of Progressivism and Its Damage

However, in the 1870s, Prussian Otto von Bismarck, who earlier became the Iron Chancellor by unifying Germany under King Wilhelm I, created the modern welfare state (which undermined his socialist and communist opponents) and pioneered the philosophy and practices of Progressivism.  It is a leftist political philosophy and reform movement that claims to advance the human condition via government intervention purportedly based on advances in political/social/ economic organization, science and technology.  These views and practices came to be seen in America by academician Richard Ely, his student Woodrow Wilson, and Theodore Roosevelt as a continuing recipe for extensive government intervention to reform what they perceived as the extensive injustices of capitalism (a few real and many imagined) and the alleged obsolescence of American government under the Constitution.

Progressivism took root in the U.S. federal government in 1883 with the passing by Congress and signing by President Chester Arthur of the Pendleton Act, which replaced the traditional federal employment spoils system with Civil Service.  Motivated by the 1881 assassination of Arthur’s predecessor President James Garfield by a deranged disappointed job seeker, Civil Service initially required modest and reasonable practices.  These included competitive examinations for many positions, promotion and firing based on qualifications and performance, and prohibition of party operatives forcing employees to contribute either time or money to political campaigns (or lose their jobs).

In the ensuing 142 years, this apparently sensible reform metastasized often and greatly, as did many Progressive initiatives.  As a primary example, it facilitated the unionization of federal public employees, which even President Franklin Roosevelt opposed. This metastasis, combined with that of regulation (starting with the Interstate Commerce Act of 1887, then trust busting) are the start that many folks would say created “The Swamp,” severely damaged the Constitution, rule of law, rights of people and businesses, classical liberalism and broad public interest in economic growth, freedom, fairness and individual wellbeing.  The per capita GDP growth was low for a century after America’s Revolution, due to costs incurred to continuously open the advancing frontier.  Moreover, while that (red) curve appears to be an exponential growth curve, beginning after the Progressive Era, it tails off into linear growth. That is the effect of the continuing metastasis of Progressivism that threatens our future and must be corrected to restore for future generations the rapid growth of classical liberalism.

My next post will detail America’s Progressive history and review the role of Friedrich von Hayek and others opposing it and related trends that have left America in dire straits today.  I will also offer reforms to reverse the slow economic growth, freedom, fairness and individual wellbeing growth we have suffered in recent decades.