If societal affluence is to be discussed it must first be noted that all humankind began in poverty. Human beings started with no wealth, capital, or knowledge of surroundings whatsoever. Anything that is to be considered a resource must first be discovered and developed to usefulness. From that starting point, humans may begin to engage in acts that enhance their material wellbeing. No matter how great the difference in material wellbeing, the default state of man is necessarily one of ignorance and nothingness.
The phenomenon of economic inequality has commanded the attention of the world’s foremost intellectuals for centuries and continues to be a controversial topic today. Its most common explanations usually center around lack of productivity or discrimination. Nevertheless, it is my belief that societal stagnation can be routed to hinderance relating to the Law of Association.
The Law of Association Leads to Innovation
The Law of Association, coined by Ludwig Von Mises, is the process by which the division of labor takes place and “expands the network of human relationships,” as Richard Ebeling states in Austrian Economics and Public Policy. Ebeling writes that “the means are now provided for leisure and the peace of mind required for art, literature, and scientific and philosophical reflection.”
I will expand this law by describing it as the process by which humans collaborate in a manner that produces goods and services more efficiently, thus freeing up leisure time. For expediency, this expansion will be referred to as the Expanded Law of Association.
It is precisely the leisure time afforded by the Expanded Law of Association that allows humans to develop more complicated, mentally-intensive creations owning to their advancement. Said creations could range from pieces of technology that aid in production to intellectual works guiding the public toward prosperous decision-making. What is imperative is facilitating an environment for innovation to take place. If a society is shown to be stagnant in affluence, then it can be deduced that the society has failed to partake in some aspect of the Expanded Law of Association.
Wealth, Poverty, and Politics by Thomas Sowell provides myriad documentation on “factors that influence the economic fates of human beings,” which will provide some examples for this assessment. Due to the book’s exhaustive content, only the most inclusive factors will be referenced.
Geography Creates Inequality of Opportunity
Geographical location is one of the most crucial elements in societal advancement. Isolation has often been attributed to “poverty and backwardness around the world,” as Sowell puts it. This is because those living in isolation are separated from the knowledge and ideas of others. In this instance, isolation prohibits the collaboration portion of the Expanded Law of Association.
Geography also plays a role in exchanging goods. Navigable waters and roadways are a tremendous asset for trade, which fosters comparative advantage. Those societies with restrictive paths to trade may not be able to direct resources to what they are more apt at producing. This would not only stunt efficiency but may also cut into the leisure time necessary for intellectual pursuit. Also, living in areas with infertile soil or lack of useable animals would hamper production.
Those societies engulfed in a culture that balks at labor limit their productivity. 16th-century Spain, for example, built its vast wealth through conquest, which bred a culture that frowned upon private enterprise. Sowell notes that its “technology lagged, even at the height of its military glory, and Spain was also backward in the sciences, compared to contemporary European nations.”
Today Spain is not among the most prosperous nations. The same fate has befallen other nations that descended from the Ottoman Empire and Genghis Kahn. In addition, a culture that is apprehensive toward collaborating with other groups will experience similar results as those that are geographically isolated. The unwillingness to utilize foreign advancement is functionally the same as never having been exposed to said advancement at all.
Majoritarianism Politics Promotes Isolationism and Demagoguery
Political obstacles to affluence are perhaps the most obvious element in societal stagnation. It goes without saying that legislation that artificially mimics poverty-inducing factors (price ceilings causing shortages, inflation devaluing currency, etc.) or discourages work (the welfare state and certain instances of taxation) negatively impacts productivity.
The political arena also provides incentives for demagoguery. While market activity may take advantage of the sentiments separating people, there are profit incentives that persuade against creating that separation. Alienating a potential market share could spell lower profits or even financial ruin for a firm. Elections, on the other hand, award office to the person with the most votes regardless of margin. This means that so long as there are enough people in one group to outnumber another group, the cost of separating the groups is low so long as there is unity among the demagogues’ preferred group. Sowell examines:
Despite the economic losses that poorer groups may sustain when they are no longer part of [isolated from] a more advanced economy, their political leaders gain from acquiring more power as leaders of a nation and have every incentive to promote national pride in independent nationhood, whether that has made the people they lead better off or worse off economically.
This also provides an environment where blaming a scapegoat would be more warranted than speaking extensively on prosperity. So long as the demagogue can direct the supposed reason for a group’s misfortune toward the scapegoat, there will always be an alibi for any policy that fails the demagogue’s promises. While this may console the demagogue’s group, it discourages productive habits from forming within that group.
While this assessment is by no means comprehensive, it does demonstrate the link between the Expanded Law of Association and progress. Collaboration, production efficiency, and innovation are vital in becoming affluent. Any society that is prevented from engaging in any of these aspects will have its progress hamstrung.