The standard of living in the United States remains high today compared to many other countries. Historically, though, that wasn’t the case.
Since the 1840s, economic and social developments, industrialization and technical progress have created new expectations for wealth and longevity. The largest gains occurred during the first half of the 20th century, when life expectancy increased from 47.8 years in 1900 to 68.2 years in 1950. The internal combustion engine, other labor-saving inventions and improved communication, to name just a few innovations, transformed farming and industry. In the 1800s, rising political instability, economic distress, and religious persecution plagued Europe. This resulted in the largest mass human migration in the history of the world.
What made America the draw for those migrants? Freedom and the opportunity to thrive. The U.S. Constitution recognizes the rights of citizens to choose how to live, what work to engage in, what to spend money on and whom to associate with as well as own property and worship freely. The capability to act in self-interest served as a beacon of hope to migrants.
In his book “The Theory of Moral Sentiments,” Adam Smith wrote: “The uniform, constant and uninterrupted effort of every man to better his condition is also based on the need to earn the approval of those around us.” Smith’s self-interest is not just an economic tenet. The approval of others is the moral order serving as the foundation for economics.
Consider the example of Bill Gates developing computer software. He wasn’t thinking of the customer. Rather, he was operating in his own self-interest. Yet today, look at how many people benefit from his efforts. Individuals are successful whenever they’re free to provide products or services that add value to the lives of others.
In “The Capitalist Manifesto,” Gary Wolfram wrote: “The reason people in sub-Saharan Africa and rural India live like refugees is not that they don’t work as hard as we do or aren’t as smart as we are, but that they live in an economic system that doesn’t allow them to be productive.”
Compare North Korea and South Korea. Both countries have the same types of people and similar resources. However, South Korea has an Economic Freedom Index score of 69.1 to North Korea’s 8.9. In 2019, the gross domestic product of South Korea exceeded 1,900 trillion South Korean won, while that of North Korea was about 35.3 trillion North Korean won. The more free the society, the more prosperous its citizens.
The U.S. enjoys one of the world’s wealthiest and most diversified economies, yet ranked 20th in the 2021 Economic Freedom Index. Index scores reflect government policy, labor and trade agreements. A higher ranking equates to more economic freedom.
The U.S. continues to fall in rankings because of excessive government spending, unsustainable levels of debt and intrusive regulation of the health care and financial sectors. In 1964, President Lyndon Johnson ushered in what he billed as the Great Society by increasing the welfare state and decreasing economic freedom. With each successive year, welfare programs have burdened working citizens with onerous taxes, limiting people’s financial freedom. The beacon of hope that capitalism provided to generations grows dim because the U.S. is no longer classified as a free market economy.
Capitalism is the only system that can create wealth for the masses and provide a good quality of life for even the poorest person. Capitalism is a moral system.