Quote of the Day: Freedom and Prosperity are Inextricably Linked

These places– Estonia and Lithuania in particular– are essentially devoid of natural resources. They’re tiny countries without oil or gold deposits.

And yet they’ve been able to achieve very high living standards simply because their governments got out of the way, especially compared to the rest of Europe.

It’s the same story in places like Hong Kong and Singapore… not to mention the multitude of examples throughout history.

Venice, for example, introduced something called the commenda in the 10th century; this was a sort of limited partnership in which one person (the commendator) was the passive investor in the arrangement, and the other (the tractator) was the trader who would go overseas and try to make a fortune.

When the commenda expired, the tractator would return home with a full accounting of the trip and split the profits in the way that was designated in the contract.

A lot of people became very wealthy through this system… and by extension, Venice became the richest place in Europe.

It didn’t happen because of government regulation, currency inflation, or spending intitatives. People prospered because the government got out of the way; they had the economic freedom to work hard and succeed from their own sweat, not handouts.

Of course, after a few hundred years, Venice managed to screw it up.

By the 13th century, a political elite had formed. They began to heavily regulate trade, nationalize some routes, impose heavy taxes on merchants, and even introduce a police force to do their bidding.

Devoid of the economic freedom they once had, Venice shrank into a shell of its former self.

This is, by far, one of the most important lessons from history: freedom and prosperity are inextricably linked. Free societies prosper… and as freedom declines, so does prosperity.

And it’s a very slippery slope: the more prosperity declines, the more politicians try to regulate the economy through wage controls, price controls, capital controls, etc. And the more they regulate the economy, the faster prosperity declines.

This is from the Sovereign Man's Simon Black debunking the quack solutions peddled by the mainstream especially by a Nobel Prize winner.