WEBVTT

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For thousands of years, the
world economy was stagnant.

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Most people lived in extreme poverty.

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Then suddenly, 200 years
ago, everything changed.

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New machines revolutionized
production, trade was expanded,

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and incomes skyrocketed.

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And today, the average person leads
a better, healthier, longer life

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with more access to
knowledge and technology

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than did the kings 200 years ago.

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So, what extraordinary event
took place around 1820?

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It was the birth...of capitalism.

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As the Austrian thinker
F.A. Hayek explained,

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capitalism wasn't invented. It
emerged over thousands of years,

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from small capitalist acts
between consenting adults

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in borderlands, marketplaces,
and independent cities.

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Traders, entrepreneurs and
moneylenders who found ways of

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making money by giving
others something they wanted.

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Those institutions proliferated because places that
accepted them prospered.

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And then, the world began to change

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when the 17th century Dutch
and the 18th century British

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embraced free markets and world trade to become
the richest nations on the planet.

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Capitalism is the combination of
privately-owned means of production,

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free labor, and market- based coordination.

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It's a remarkable set of institutions.

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Until then, wealth had mostly been achieved
by taking it from others.

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Slavery, feudalism, royal
absolutism, conquest, and war

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were all based on stealing
from the productive.

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Free market capitalism instead,
is built on mutual consent.

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You offer and you negotiate,

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and no deal ever happens unless both parties
think that they benefit from it.

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And since you have no captive
customers, you have to come up with

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better innovations and
business models all the time.

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As the Scotsman Adam Smith so
aptly described it in 1776,

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it's the first system where you
only get rich by enriching others.

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By the early 19th century,

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most of Western Europe and
North America was capitalist

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and saw a burst of innovation
and more efficient production.

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Steam engines and textile machines
spurred a manufacturing revolution.

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Railways, steamships, and freer trade
set off an explosion of global trade.

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Free markets were changing the world.

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In capitalist countries,
incomes have increased

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almost 3,000
percent since 1820.

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Extreme poverty declined from 80 to
90 percent of the global population

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to 8 to 9 percent of the population today.

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As even the system's
fiercest enemies

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Karl Marx and Friedrich
Engels admitted in 1848,

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capitalism unleashed more wealth than had all
preceding generations added together.

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Hey! Check out these other great
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