Everything you need to know about the power of economic freedom in 3 charts

From:http://blog.american.com/2012/02/everything-you-need-to-know-about-the-power-of-economic-freedom-in-3-charts/

By James Pethokoukis

February 28, 2012

The West was quite poor heading into the 1700s and then it got richer. A lot richer. Real fast. Its embrace of economic freedom and creative destruction, both legally and culturally—what economist Deirdre McCloskey calls the idea of bourgeois dignity and liberty—led to a rise in real income per head in 2010 prices from about $2-3 a day in 1800 worldwide to over $100 today.
But China didn’t follow the same path. It did not embrace bourgeois dignity and liberty. It did not embrace innovation. As this chart from Gapminder illustrates, China’s per capita income was $986 in 1800 vs. $1,900 for the United States.

And by 1978, U.S. per capita income had skyrocketed to $28,000 (adjusted for inflation), while China was actually a bit worse off at $861. But 1978 was also the year when China began to open up its economy to enterprise and the West.

By 2010, China’s per capita GDP had surged to $8,000 vs $42,000 for the United States.

See, the Great Recession is not the Big Economic Story of our time. McCloskey:

The Big Economic Story of our own times is that the Chinese in 1978 and then the Indians in 1991 adopted liberal ideas in the economy, and came to attribute a dignity and a liberty to the bourgeoisie formerly denied. And then China and India exploded in economic growth. The important moral, therefore, is that in achieving a pretty good life for the mass of humankind, and a chance at a fully human existence, ideas have mattered more than the usual material causes. …
The Big Story of the past two hundred years is the innovation after 1700 or 1800 around the North Sea, and recently in once poor places like Taiwan or Ireland, and most noticeably now in the world’s biggest tyranny and the world’s biggest democracy. It has given many formerly poor and ignorant people the scope to flourish. And contrary to the usual declarations of the economists since Adam Smith or Karl Marx, the Biggest Economic Story was not caused by trade or investment or exploitation. It was caused by ideas. The idea of bourgeois dignity and liberty led to a rise of real income per head in 2010 prices from about $3 a day in 1800 worldwide to over $100 in places that have accepted the Bourgeois Deal and its creative destruction.

And to keep its economic machine humming, says the World Bank, China must further its embrace of free-market capitalism. The United States, too.