Mancur Olson's Power and Prosperity was published two years after his death in 2000. In it, he describes exactly what made the world's major economies so prosperous.
Yes, Olson says, free markets are critical, but the power of trade and of the division of labor to improve the human condition is so great that they can not be stopped, not by an anarchical Hobbesian "state of nature," or by the most oppressive of governments, or by the almost anarchical black markets they engender. Free markets are so essential as to be irrepressible; informal ones are to be found in all societies and all eras.
Those informal markets are indeed the essence of free markets and are truly everywhere, even in the poorest of countries of the third world and under the most oppressive regimes. Why then, Olson asks, are not all countries prosperous?
He points out that almost the only trades that can be made in informal markets are the self-enforcing ones: those where the goods or services -- and sometimes money -- change hands instantly and on the spot.
However, transactions involving present delivery for future payment -- or the opposite -- are impossible without a societal willingness to enforce private contracts. No sensible person would loan money to someone if there were no requirement that it be repaid, or pay for something in advance if there were no requirement that it be delivered.
Furthermore, development of productive capacity to be employed over a period of years is not sensible if there is no societal commitment to protect private property from lawless taking. No reasoning person would pay to build a plant, to develop a medicine, or to develop a piece of software, if anyone who wanted it could just take it.
Olson says that on the respect for these two individual rights prosperity is based.
Without investment in tools and equipment even the smallest business could not produce the goods and services on which we all rely. Without investment in technology development the miraculous software we use would never have existed. Without investment in physical plant no store could open doors, or have products delivered to sell. And without enforceable contracts and property rights no one would make those investments.
Large scale production is a great thing for a society. It goes almost without saying that the confiscation of those investments from individuals and their conversion to collective operation was the reason for the failure of the collective societies of Marx and Lenin, Stalin, Mao, and soon Castro.
So, Olson says, those two things -- enforceable contracts for future performance and assured private control of property -- are essential to the development of the large scale productive capacity that is itself essential to prosperity. Without them, no major economy develops. Hence, the national will to enforce individual contract rights and property rights is essential to a truly prosperous nation.
Olson died in 1998 and was not alive to see the confiscation of the residual rights of bond holders in General Motors and Chrysler by outright theft through alteration of bankruptcy law in 2009.
Obama and his progressivist administration empowered by a progressivist Congress abrogated one individual right after another finally down to the right not to purchase a future promise of payment for health services.
Now we reap what they have sown.
Many with money let it sit idle while its purchasing power decays slowly, a clearly wiser choice than risking immediate or eventual loss by confiscation, their faith in recourse to the law destroyed by government, that very agency essential to the protection of individual rights.
Many with obligations to make payments on previous mortgages sit and wait for the government to permit them to default in full or in part or for the government to take over for the bank so they won't have to pay.
If we as a nation don't reinvigorate our respect for those critical rights of contract and property, we'll be first France, then Greece, and finally Cuba or Somalia.
Individual economic rights must be restored. Prosperity depends on them.
