This is the third in a series of posts discussing themes from The Aid Trap by Glenn Hubbard and William Duggan. Chapter 2 attempts to provide a history of prosperity, starting with the earliest documented loans in Mesopotamia around 2,500BC. The ancient business sector was kept small because the amount of surplus agricultural produce was low and the extent of trade was small. Other factors included disease and war.
Prosperity spread to more people in the Roman Empire because of its relative political stability and peacefulness. According to the authors, the conditions were relatively business-friendly because most of the World Bank’s ten elements of Doing Business were present. They say that slavery was a negative factor, but they seem to say this on moral grounds, rather than on purely economic rationalist grounds.
The chapter goes on to discuss the fall of the Roman Empire, Charlemagne and the role of the Catholic Church during the middle ages, the Byzantine and Ottoman Empires, the conditions in Egypt, China and India, and the new commercial system, based on the old Roman one, which arose in Venice. According to the authors, there was a high degree of correlation all along the road between pro-business governmental regulation and prosperity.