Economics

The 6 killer apps of Western civilization: Part 1: Competition

Check out this great TED talk, in which British historian Niall Ferguson explains his answer to the question of why Western civilization achieved such a clear dominance over the rest of the world.

The presentation is a summary of Ferguson’s book Civilization: The West and the Rest. I highly recommend reading it; it expands on the points from the TED talk and is thoroughly enjoyable. What I’d like to do here is investigate, one at a time, the state of the six “killer apps” in modern America.

Let’s start with Ferguson’s first “killer app”: competition. Here’s a little more background from the book:

Competition—A decentralization of both political and economic life, which created the launch-pad for both nation-states and capitalism.

In Ferguson’s view, centralization of power (political, social, and/or economic) in the hands of a single authority leads to stagnation. On the other hand, if power is decentralized, competition to obtain power (or profit) will drive innovation, expansion, and wealth creation. How much of a difference can this make? Consider the following graph, taken directly from Ferguson’s book:

Source: Ferguson, Niall. Civilization: The West and the Rest. p.45

How can this massive disparity (rising to 16-to-1 during the 1960s), be explained? According to Ferguson, the crucial factor was that England faced far more competition than China, both internally and externally. Externally, the English were in constant competition with France and Spain, which drove them to, among other things, plant colonies in the Americas. But England was also a land of intense internal competition. As Ferguson says:

Officially, Henry V was king of England … But on the ground in rural England real power was in the hands of the great nobility… as well as thousands of gentry landowners and innumerable corporate bodies, clerical and lay. … crucially, the most important commercial centre in the country [London] was almost completely autonomous. Europe was not only made up of states; it was also made up of estates: aristocrats, clergymen and townsfolk.

Nothing of this sort existed in China, where the imperial bureaucracy was all-powerful. Ferguson again:

By comparison with the patchwork quilt of Europe, East Asia was—in political terms at least—a vast monochrome blanket … China was ruled from the top down by a Confucian bureaucracy…

Eventually, and over many years, the cumulative effects of these widely differing societies—one highly centralized, one borderline chaotic—is made clear in the graph above. Further confirming Ferguson’s point, note that the UK/China GDP ratio begins to reverse starting in the 1970s—when Deng Xiaoping introduced his economic liberalization reforms.

So, what does this all mean? Well, if you buy Ferguson’s argument, as I do, then you have to be concerned with the direction that America is moving in today. We are increasingly centralizing power—economic, political, and cultural—into the hands of the federal government in Washington, D.C.

Not only are we concentrating power in the hands of the federal government, we’re increasingly concentrating it in the sector of the government least influenced by competition: the federal bureaucracy. Ming China would be proud: The bureaucracy is nearly immune from both outside influences—look at how incredibly difficult it is to cut anything from the federal budget—and from internal competition, yet it has immense influence on the rest of society. We are forced to follow an ever-increasing number of mandates, laws, and regulations emanating from unelected, job-secure bureaucrats who possess no incentives to perform their jobs well. These regulations stifle innovation, hamper technological advancement, and, in general, hold our nation back.

The liberal desire for one-size-fits-all solutions is motivated by a sense of national unity—as Obama says “we’re greater together than we are on our own”—but these ideas ultimately fail to produce positive results for the nation they are trying to assist. History suggests that only by maintaining or even strengthening America’s historically decentralized approach to government and society, only by allowing for individual and corporate competition, can we achieve the innovation that our society needs to succeed in the future.

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