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Discovery Newsletter: Perspective, Charles Koch

October 1, 2016

min read

If we want greater well-being for the whole world, we need societies to be more free and open.

Something remarkable has happened during the last 20 years that should forever change the way we look at our world. 

It’s not smart phones, terrorism or even climate change — all of which have grabbed plenty of headlines. Quite the contrary. What I’m talking about has barely made headlines at all.

During the past 20 years, at least a billion people around the world have been lifted out of abject poverty. Think about that for a moment. A billion of the poorest lives on our planet have changed for the better during your lifetime. 

How did that happen? And why aren’t we making a point of talking about it more often?

The Great Enrichment

One of the few people shining a spotlight on this remarkable change is economic historian Deirdre McCloskey. (If you don’t have the time to read her most recent 700-page book, “Bourgeois Equality,” then try the brief article she wrote for National Review or her op-ed in The Wall Street Journal.)

What McCloskey calls the “Great Enrichment” started about 200 years ago. Since then, she notes, average global incomes have increased ten-fold, dramatically raising the standard of living for even the most disadvantaged. Because of this, their lives are not only healthier and happier, but much longer.

“You might think the rich have become richer and the poor even poorer,” she writes. “But by the standard of basic comfort in essentials, the poorest people on the planet have gained the most.”

McCloskey points to China, India and several nations in Europe where “even people who are relatively poor have adequate food, education, lodging and medical care — none of which their ancestors had. Not remotely.”

Who gets credit?

To what do we owe this dramatic improvement? Is it Socialism? Capitalism? Technology? Evolution? Maybe even luck? 

I agree with McCloskey that the answer is none of the above — especially not capitalism as most people define it. Capital becomes powerful when it is transformed by ideas

It was not more horses and buggies that transformed peoples’ lives, it was when they were replaced — through better ideas — by trains, planes and automobiles. 

What is changing our world for the better so dramatically is the accumulation of ideas.

McCloskey puts it this way: “Our riches did not come from piling brick on brick, or bachelor’s degree on bachelor’s degree, or bank balance on bank balance, but from piling idea on idea.”

If we truly want greater well-being for the world, we need societies to be more free and open so that more people can take part in the exchange and application of ideas. 

“Liberated people, it turns out, are ingenious,” writes McCloskey. “Slaves, serfs, subordinated women, people frozen in a hierarchy of lords or bureaucrats are not.”

Sadly, we still have plenty of examples around the world where the free exchange of ideas is denied or curtailed severely. People in those nations lack the opportunities to improve their lives, which in turn inhibits their ability to improve the lives of others. 

As a result, all of humanity is worse off. 

A better way

This is why we place so much importance on our MBM® Guiding Principles, which include emphases on shared knowledge, the openness of a challenge culture (Principle 6) and driving change constantly (Principle 7). It’s because all of us — employees, customers, stockholders and communities — are better off as a result.

To be fair, Adam Smith was not entirely wrong in his thoughts about creating a better life. He hit the nail on the head when he said we need a society that allows everyone “to pursue his own interest his own way, upon the liberal plan of equality, liberty and justice.”

I also like the way McCloskey describes the importance of this approach: “Give masses of ordinary people equality before the law and equality of social dignity, and leave them alone, and it turns out they become extraordinarily creative and energetic.” 

We should rejoice that a billion people have been lifted out of grinding poverty by the power of unfettered ideas. But think about how many more people could see dramatic improvements in their lives if every nation embraced these ideals of freedom and opened opportunity for everyone.

As we have proven repeatedly at Koch Industries, the open exchange of ideas is essential for a successful organization, as well as for society as a whole. Be wary of any politician or would-be leader who would deny you that freedom or insist that their cohorts, the ruling elite, are smarter and better — and therefore somehow more capable of running your life than you.