The United States is an outlier in the distribution of prosperity. As figure 1 shows, there is a small group of countries with per capita incomes above $40,000 that stand out from all the others—and the United States, with a per capita income of nearly $66,000, stands out even within this small group. How can it be that the United States has a per capita income roughly 50 percent higher than that of Britain, its former colonizer? 

The world is on a hinge of history. The future is going to be different from the past in major ways. At the end of the Second World War, people such as Dean Acheson, George Marshall, and Harry Truman sat atop another hinge of history, though they may not have realized it at the time—you can know something is important without knowing exactly what it is that you are dealing with. But when they looked around at the devastation that had been wrought across the globe, with tens of millions of lives lost and the economies of allies and adversaries alike in ruins, they saw how the United States could work with both to help. 

In a book that George Shultz and I published this year, we explained why one must choose economic freedom, meaning basically the opposite of socialism. Economic freedom, or free-market capitalism, the term of art used in this important Human Prosperity Project, means a rule of law, predictable policies, reliance on markets, attention to incentives, and limitations on government.

Justice Oliver Wendell Holmes famously described the US Constitution as “made for people of fundamentally differing views.” (Lochner v. New York dissent) By that, he meant that the Constitution does not commit the nation to any particular ideological or economic theory, including laissez-faire capitalism. Instead it leaves decisions about national policy to the democratic process, subject to the constraints of the Bill of Rights. Within the range of ordinary politics, Holmes was correct: Americans can decide, through their elected representatives, to have high taxes or low, generous welfare payments or a basic social safety net, government-owned enterprises or privatization, heavy-handed or light-touch regulation. That is the difference between democratic socialism and a largely free-enterprise economy.