Ideas have consequences, but not in a social vacuum. There are no social vacuums.
Ideas that are held by a minority of fringe academics or polemicists sometimes become the foundations of victorious social movements after existing social institutions are undermined by a social crisis.
OPTIMISM AND SOCIAL REVOLUTION
There seems to be an inherent optimism in the thinking of most members of the human race. It is the source of men's sacrifice in the present for the sake of the future. We think the future is going to get better, and therefore it is worth sacrificing present consumption for the sake of future consumption. This is the basis of thrift. This is the basis of expanded capital in our society.
Basic to the success of every social revolution in the West since 1640 has been the doctrine of progress. Each revolution offers hope for the future. Usually, these have been short on details of the transition between now and the new utopia, but there is hope.
The free market was such an idea. Adam Smith was the major promoter. His disciples extended his vision of the wealth of nations. The timing was perfect: 1776. That was about the time that the Industrial Revolution began its transformation of the West and then the world.
Beginning around 1800, and limited to the Eastern shore of the United States and the British Isles, compound economic growth began. By 1820, the economic transformation was leaving irrefutable historical evidence of this transformation. Economic historians debate as to the causes of this growth, but it had never been seen before. By 1850, the world was very different. A series of inventions transformed modern agriculture, modern transportation, and communications. This was visible to everybody by 1851. That was the year of the great London exhibition. Anyone who attended that exhibition realized that the world had fundamentally changed since 1800.
We are now over two centuries into this process. It is almost impossible for us to think of a society made up of human beings who are systematically pessimistic about the future. What began in the English-speaking world of the Atlantic Coast has now spread into the villages of India and China. There is almost nowhere left on earth in which optimism regarding the economic future is not a fundamental presupposition of every village, every tribe, and every family. Economic reality finally caught up with human optimism, and then raced ahead.
There has been only one period in which economic growth has stagnated for more than a decade since 1800. That was the Great Depression, which was followed by World War II. Output of almost all goods and services declined in the 1930's, and then the war destroyed much of the output of the first half of the 1940's. This destruction was systematic: bombs, armies, and battles destroyed the output of military factories. Both sides were committed to the destruction of any economic growth on the other side. With the exception of the United States, all nations that were involved in the conflict suffered direct economic contraction as a result of the war. But there was full employment for the survivors -- at below-market wages. There was central planning on an unprecedented scale: the ration-book economy.
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