Economics and History
The Lessons of History, Chapter VIII
By: Will & Ariel Durant
Overview
Societies oscillate over time between productive prosperity driven by freedom, and poverty created by collective redistribution. Every state that has tried central planning has eventually had to resort to the incentive of profits to escape stagnation and grinding poverty.
Highlights
“The experience of the past leaves little doubt that every economic system must sooner or later rely upon some form of the profit motive to stir individuals and groups to productivity. Substitutes like slavery, police supervision, or ideological enthusiasm prove too unproductive, too expensive, or too transient. Normally and generally men are judged by their ability to produce—except in war, when they are ranked according to their ability to destroy.”
Concentration of wealth is the natural result of diversity of ability and the rate of concentration correlates with the degree of freedom. Despotism slows the concentration, but democracies that promote liberty under the rule of law accelerate it by unleashing individual energy and ingenuity.
As the inequality of wealth in free societies builds, an unstable equilibrium is generated, creating a “… critical situation, which history has diversely met by legislation redistributing wealth (as in Athens) or by revolution distributing poverty (as in Rome).” It is this inequality of wealth, created through natural differences in ability and the privileges and immunities granted by government (favor seeking or cronyism), and its periodic resolution in history through revolution or forced redistribution that Will and Ariel Durant described as “… the slow heartbeat of the social organism, a vast systole and diastole of concentrating wealth and compulsive recirculation.”
The Durants “… conclude that the concentration of wealth is natural and inevitable, and is periodically alleviated by violent or peaceable partial redistribution.” Will history repeat itself?
(See: Inequality and Prosperity)
Lesson
Many people consider the material inequality resulting from natural inequality to be the greatest problem in society, without realizing that their own situation has actually been improving as the wealthy become wealthier. They try to redistribute the material abundance they see in the hands of others through the coercive power of the state or through revolution. But both high taxation and revolution actually destroy the wealth that is supposed to be redistributed, ultimately producing an equality of poverty instead of greater abundance for all.
Will the people of the world finally come to understand that freedom and productive inequality is in their own rational best interest, or will they emotionally continue the destructive “economically flattening” pursuit of material equality in the historical cycle that has been the “heartbeat” of civilization through the ages?