The winner of the last book “Living Well in a Down Economy” is Just Eloped.  Just Eloped please email me at livingalmost at gmail dot com.  Thanks!

This week I’m reviewing the book “Birth of Plenty” by Dr. William Bernstein.  His excellent book previously reviewed “4 Pillars of Investing“.  As usual if you leave a comment I will enter you in a drawing to win the book next Wednesday 11/12/08 @ 10 pm.  I will announce the winner next Thursday 11/13/08.  But onto a review of the book

This book is a discussion of how wealth was created in the modern world.  It looks at the historical aspects of wealth and what contributed to our current economic societies and norms.  This book is extremely dense, so forgive me for not giving it as in-depth a review as it deserves.  There are three sections of the book – sources of growth, nations, and consequences.

Section I focused on the sources of growth.  This was explained in Chapter 1-6.  Chapter 1 talked about the hypothesis of wealth.  The suggestion is that to create wealth there are four things absolutely necessary to economic growth.  The four factors are property rights, scientific rationalism, capital markets, and fast and efficient communication/transportation.  Each of these factors were examined in their own successive chapters.  This chapter also explained the four different stages of human life – hunter/gatherer, agricultural, industrial, and postindustrial.  While the majority of our existence of earth has been hunter/gatherer, we’ve quickly moved from agricultural/farming lifestyle to industrial and finally postindustrial lifestyle.

Property rights was the next chapter.  It was the first factor to evolve.  It started out as land rights, as explained in ancient times when Abraham bought a burial plot for his wife Sarah from Ephrom.  This was well documented in front of others so it couldn’t be revoked.  The chapter further examines property rights throughout time like Roman, medival England, and early American property rights.  The chapter wraps up with a short discussion about intellectual property rights and it’s emergence in parallel with industrialism.

The third chapter looks at reason or scientific rationalism.  It looks at how science emergenced from Copernicus to Isaac Newton.  How science and investigation created the platform for industrialism.  It allowed people to become inventors and start creating new ideas.

These ideas however had to be funded, and that’s where the idea of market capitalism came in.  Capital is the financing of these ideas.  The fourth chapter talked about the creation of capitalism.  Where businesses began to borrow money, which they had to pay back to the lenders with interest.  This is financing for their business.  Without this capital businesses would not be able to buy equipment and supplies to create goods and services. The chapter also discusses the risk involved with the lending of money to start businesses.

Finally the last factor was the communication and transportation of goods.  It’s the basic idea of marketing.  The idea that you have to be able to sell your goods, and figure out how to deliver them.  And this century has made the transportation of goods amazing.

These four factors are essential to building wealth.  Without these factors there would be no modern prosperity.  The second section looked at the winners and losers of this race to propsperity.

Chapter 7 declares the countries winning the prosperity battle are England and Holland.  This was based on the 1500s to the early 20th century.  I could easily understand England which had an empire that stretched around the world but Holland?  England colonized India, Canada, Australia, Hong Kong. The empire was made because of their seafaring skills and techology adaptations.  Holland was supposed to be great also beacuse of their trading skills.  But I’m not if I would place them in the same category of England versus the runner-ups.

Chapter 8 talks about the rest of Europe and Asia. One of the biggest parts of the chapter focused on Japan’s growth.  Japan tolerated it’s break with isolationism in the 1800s.  And it’s amazing growth and rebuilding after World War II is to be admired.  It is actually however attributed to General MacArthur for reforming landownership, instilling democracy, and breaking down of previous economic powers. I think if anything Japan rapid ascent should have placed it with England instead of Holland.

Chapter 9 examines the nations left behind.  These nations were two specific regions, Latin America and the Middle East.  So why did these two areas fall behind?  Especially since Muslims had been leaders in education and culture previously.  The chapter says it’s because the did not have as progressive movements in property rights, stunted it’s previous intellectualism, stifled capital, and did not develop transportation and communication.  While Latin America was supposed to be due to a lack of a stable government to lead and develop the four factors above.

Section III talks about consequences.  It starts out asking why are Protestants wealthy but the poorest countries are Muslim?  Why does religion play a role in prosperity?  It suggest that the division of class within religion is what contributes to this “handicap”. Then it goes on to ask the question why does it matter?  Does wealth by happiness?  And as we know, it depends on what your personal definition of happiness is.  They next two chapters examines more about wealth, responsibility, and happiness.

This book is very well written and examines the history of wealth from an unusual perspective.  I greatly enjoyed the way it explains our history of wealth, science, and capitalism.  Also I think the last section really questions how to help people reach the same level of prosperity.  It really asks the question if it’s best to give money to poorer countries versus instituting different policies

Leave a comment for a chance to win.  I think it will be well worth the time.