Wishful thinking | 19 May 2016

Deirdre McCloskey has been at work for many years on a huge project: to explain why the world has become so much richer in the past two centuries, and at an accelerating rate since 1945. This is the third and final volume in the series. In it she argues that ‘our riches were not made by piling brick on brick, bank balance on bank balance, but by piling idea on idea’. The Great Enrichment, which she dates from 1800 to the present, depends on the spread of ideas of liberty, seeded in a series of ‘egalitarian accidents’ in European politics between 1517 and 1789.

The liberalism she describes operates in a very narrow free zone, hemmed in by what she calls the ‘clerisy’ — critics on left and right alike who do not accept a full version of liberalism — and roughly a third of the text sees McCloskey, vorpal sword in hand, slaying the dragons of the state. But she’s fighting enemies from the past: her side has won the battle. Globalisation, neo-liberalism, the expansion of monetary assets and instant internet communication have spawned a new world order without any state powerful enough to contain it.

The transfer of Russian and Chinese billions to safe havens in western cities has caused housing crises in many of them. An Indian family business buys the British steel industry for £6 billion, loses lots of money and simply closes it. The UK state can do nothing. This is not the benign progress that McCloskey describes, and nothing like it has happened before. The Financial Times reported recently that at the end of February there were $267 trillion dollars in exchange traded derivatives — and that’s just one class of asset. For comparison, the gross domestic product of the USA is a mere $17 trillion.