Why Nations Prosper: A Personal Exploration by Henrik Ekelund

Tran Si: I came back to Vietnam in 1992.

Sekoka: I'm born in a tribe.

These people were the hunters and gatherers.

Nguyen: I lived inside the hotel until I was about 5 to 6.

Mangwegape: I'm born in a family of 10.

Heiss: I'm an associate professor at the Faculty of Government.

Tin: I started working very early in a state-owned company.

Lan: I applied for Economics University.

Ekelund: I want every person in every nation to have a chance to have a good home, good education, good healthcare, and safety.

Urzua: I am happy.

Vargas: [ Laughs ] Yeah.

I love my job.

Lan: I love my country.

I love our people.

Ekelund: I'm also passionate about the question of prosperity and economic growth.

Nguyen: People have to have a good life.

People have to feel like they can afford their life.

Ekelund: That's why a nation's wealth is important.

It creates prosperity for all of us.

But we are seeing threats to our democracy.

Heiss: You cannot have a democracy without participation.

Ekelund: The rule of law is wobbling.

We are overregulating our markets.

Gonzalez: Today we have a lot of challenges.

Nguyen: If we don't move fast enough, then we are going to run behind.

Ekelund: Growth in the Western world is slowing down.

The cost of living is going up.

Young families cannot afford to buy a home.

People are worried about their future.

Why are some nations and their people prosperous while other nations and their people remain poor?

Narrator: Across five continents, we explore three nations chasing prosperity and one entrepreneur's formula for achieving it.

From Europe's great success story in the 1600s to today's richest nation, we ask what happens when the drivers of prosperity are followed or forgotten?

Announcer: Major funding for this program was provided by Sarah Scaife Foundation.

Additional funding was provided by Ron and Connie Muhlenkamp, Elizabeth Rose.

Narrator: Muiderslot Castle was built in 1285.

It evokes a lifestyle of opulence and power.

But were the people who lived here truly prosperous?

Ekelund: Can you imagine living in a castle like this?

The people who once called it home weren't kings and queens, just ordinary nobles.

Still, their lives must have been extraordinary -- luxury, abundant food, and grand parties.

A world of elegance and privilege.

Narrator: 13th century nobles were the wealthiest people in the land.

Still, they ruled a world that lacked the common comforts that we have today.

There was no running water, no heat, cold floors.

Disease hid in the shadows.

Medicine was rudimentary.

Ekelund: This is the toilet.

Narrator: And daily hygiene was a challenge.

Ekelund: Not quite what we're used to.

Narrator: A stark reminder of how harsh life really was.

Ekelund: You and I would probably be poor, working six days a week, 10 to 12 hours a day, with little time for family and friends and hardly any education.

While the average life-span was 37 years, you could live to 60 if you made it through childhood.

Still, a staggering one-third of all children died before the age of 5.

Today, the world is vastly richer.

How did this happen?

The story of humanity is a story of very, very slow growth and then an explosion of wealth.

For most of our history, we were poor, poor, poor.

Then suddenly rich.

Narrator: Henrik Ekelund is the author of "How Nations Win."

He is the founder and chairman of a global consulting company, and has advised major organizations across six continents, traveling to over 120 nations.

Ekelund: A nation's wealth is our assets, the resources we have -- like infrastructure, factories, and human capital -- minus our liabilities, the debt we have.

and prosperity is created by how we use these assets and the incomes we generate.

What does prosperity mean for you and me?

Hopefully it means a good home to live in, a job that we like, food on the table, education, healthcare, and the knowledge that our children will have the chance for this as well.

Did any nations have wealth before the present day?

In fact, there wasn't a clear standout, prosperous nation with a large middle class until the Netherlands took off during the Dutch Golden Age.

These houses were built in the 1600s, when Amsterdam was the wealthiest city in the world, just become independent of Spain, and it was prospering.

Narrator: Government was stable.

Property rights were secure.

The rule of law was well established.

Entrepreneurs were backed by a developed financial sector, and free trade was booming.

Ekelund: The Netherlands was one of the first countries where people were relatively free, lived in an orderly society, and embraced and funded innovation.

Remember those three words -- freedom, order, and innovation.

This is what successful nations are doing today.

Narrator: Despite the Netherlands' success, economic theory still held that a nation built its wealth and power by increasing exports, buying little from abroad, and accumulating precious metals.

This was called mercantilism.

Ekelund: Then, in the 1700s, along came the Scottish Enlightenment.

Adam Smith was the first person to really ask the question, "Why does a nation prosper?"

Narrator: In "The Wealth of Nations," Smith wrote that a nation's wealth consists not in its stockpile of precious metals.

Man: But in "the annual produce of the land and labor of the society."

Ekelund: As the father of economics, he wrote about free markets, about the invisible hand, about the division of labor.

Man: "Little else is requisite to carry a state to the highest degree of opulence but peace, easy taxes, and a tolerable administration of justice, all the rest being brought about by the natural course of things."

Ekelund: And he had a keen sense of morality.

Narrator: In his first book, "The Theory of Moral Sentiments," Smith argued that morality must go hand in hand with economic theory.

He believed that morality was a necessary virtue for a modern commercial society.

Ekelund: Adam Smith was revolutionary for his time, and most of his ideas are relevant for today.

If you don't understand how prosperity is created, it's kind of natural that you see the world as a zero-sum game.

If China is winning from trade, America must be losing.

Now, is that true, or is it a myth?

That's not true.

We can grow the pie.

We have grown the pie for hundreds of years, and we can continue to do that.

Some say economic growth is bad.

It destroys our planet, and it leads to overconsumption and consumerism.

I really want to challenge that.

I've only heard that comment in rich nations, and I only heard that comment from people who are well off.

Let's say we had listened to the no-growth movement 30 years ago.

Where would we be today?

We would have one billion more poor people on the planet.

There's been a lot of research, a lot of books written about prosperity, and most of them are looking for that one silver-bullet idea that explains everything.

What I've found is that there is a multitude of drivers that together create the conditions to develop prosperity in a nation.

I actually studied in depth every growth revolution over the last 2,000 years, looked at every pair of neighboring countries where one is prosperous and the other is not, and I saw a pattern that there were three main forces that could explain prosperity -- freedom, order, and innovation.

And if you look a little deeper, you'll find that there are a number of underlying drivers for each of the three forces.

Narrator: The first country to truly harness these drivers was the Netherlands.

It's where our investigation begins and the benchmark we'll return to for every nation we visit.

Ekelund: This fortress city was a major battleground during Netherlands' 80-year war with Spain.

Spain occupied the southern part of the country, which roughly corresponds to the Belgium and Luxembourg of today.

Protestants in the occupied south had to convert and become Catholics, or simply leave.

Many merchants and tradesmen from cities like Antwerp, Bruges, and Ghent moved to Amsterdam.

Jewish people from Spain and Portugal and Protestants from France also moved to Amsterdam, drawn to the religious freedom of the city.

These new immigrants and the people of the Netherlands created the free markets and the free trade that set off the Dutch Golden Age.

Narrator: Could the ideas that inspired Adam Smith and fueled the Dutch Golden Age offer a roadmap for nations in transition?

Ekelund: It's in countries going through major change and in the process, reshaping people's lives where we find the most compelling stories.

Narrator: Vietnam stands as one of the clearest examples, and, like the Netherlands, a nation once defined by war is now defined by trade.

Nguyen: This is house number 79.

This is the location of our first hotel.

Narrator: Sylvia Nguyen's family real estate business started on this side street in Hanoi.

Nguyen: It started with only 12 rooms, and it was a very small, humble building.

However, back in 1992, it was the biggest building on the block.

There wasn't any space for foreign people to stay, and that's why we wanted to start the business.

30 years ago, we started with a four-floor building.

Today we're in a building that is 45 floors and about 600 rooms.

Narrator: Vietnam is a Southeast Asian country known for its vibrant culture, lush landscapes, and long coastline.

Its rich history has been shaped by ancient kingdoms, colonial influence, and two brutal wars.

Ekelund: Today, Vietnam is a blend of tradition, modernization, and rapid economic growth.

But to get here was a long and difficult journey.

After almost a century of French colonization, Vietnam fought for eight years what they call a resistance battle for independence.

Narrator: The war ended in 1954 with a decisive victory over the French at Dien Bien Phu.

It was followed by the 20-year American war, as the Vietnamese called it, which ended in the spring of 1975.

Ekelund: Devastated by these wars, three million Vietnamese lost their lives and the country suffered immense destruction.

Narrator: Today, Vietnam is one of the world's fastest growing economies.

Over the past three decades, they have built a modern highway network and the first metro in Hanoi.

Deep-water ports have enabled Vietnam to accommodate larger ships.

Electricity generation capacity has grown enormously.

These advancements have reshaped the way people and goods move, connect, and power the economy of Vietnam.

Sylvia Nguyen, the daughter of Alphanam's founder, Mr.

Nguyen Tuan Hai, is vice chairwoman for Alphanam Group and CEO of Alphanam Real Estate.

Nguyen: We're at the Hanoi Opera House, where in 1997, we were commissioned by the French government to revamp the building, and we took part in the mechanical electrical engineering contract.

30 years after, we are still running strong with the mechanical electrical engineering industry.

Recently, our team finished a very big project by the government, and we were commissioned with about 30% of the workload in constructing this 500-kilometer grid line connecting the north and the middle region, and we were able to finish it in a total of three months.

My father, when I was around middle school, high school, decided that Sylvia would be a good fit to continue the hotel business.

Fast-forward 8 to 10 years later.

We're developing with Marriott, with Intercontinental Hotels Group, and with a core total of about a dozen hotels.

Ekelund: Vietnam is home to a rapidly growing ecosystem of startups, driven by a young population, an increasingly digital economy, foreign investments, and a new promising generation of entrepreneurs.

Tin: Unigroup is now 81 companies that are divided into eight operating groups, and logistics is one of those groups.

Narrator: Mai Huu Tin founded Unigroup in 1998.

Tin: And I was one of the early entrepreneurs in the country.

Ekelund: And whatever research you look at, entrepreneurs drive innovation and drive economic growth.

They're the catalysts of economic development.

Tin: About 10 years ago, we saw the need of a lot of U.S.

retailers to use bonded warehouses in Vietnam.

Now we have more than 600,000 square meters under operation.

Ekelund: It's remarkable how far Vietnam has come and where the nation stands today.

But this journey has required the government to innovate and the Vietnamese people to participate.

Narrator: After reunification in 1975, Vietnam formed a socialist government with a dominant Communist Party and began a period of centralized economic planning.

While achieving some success in education and healthcare, economic challenges in production and supply persisted.

Lan: I was born in the Mekong Delta region of Vietnam in 1943.

But I grew up in Hanoi, so people at my age can never forget how we lived during the war time.

Narrator: Madame Pham Chi Lan is a Vietnamese economist.

She focuses on economic policy innovation and Vietnam's international integration.

Lan: I studied at the Economics University in Hanoi.

I thought that economic development could help the country to develop and have improvement of the life of people.

Narrator: She studied the economics of both the socialist and market systems.

Lan: Immediately recognized that, oh, most of the richest countries in the world were in the market system, not in the socialist system.

So, for economic development, the market system is much better.

Ekelund: In fact, the early winners, the nations who became prosperous first, were the ones who freed up their markets.

Tran Si: By the mid-'80s, countries saw food shortages, rampant inflation, and the state-owned enterprises collapsing.

Narrator: Chuong Tran Si is an economist and corporate strategy adviser.

Tran Si: Agricultural output collapsing, inflation rampant, and the state-owned enterprises mostly inefficient and draining public resources.

Narrator: Most Vietnamese were farmers, but they couldn't produce enough to feed their own people.

They had to import rice.

Lan: The only thing we can do to change is to change our own system.

Tran Si: The leadership had no choice but to act, and they acted decisively.

Ekelund: By the mid-1980s, Vietnam made a change in policy called "Doi Moi."

Tran Si: Doi Moi literally meant innovation and trusting the people to create value, and the result was historic.

Ekelund: The goal was to create a socialist-oriented market economy.

Private ownership of land was introduced, and the agricultural collectives were phased out.

Lan: And since then, things changed so fast in Vietnam.

Two years after reform in 1988, we exported the first one million tons of rice to the world, and we became very suddenly the third largest exporter of rice in the world.

It's really amazing.

Amazing.

Narrator: Before Doi Moi, Vietnam's private sector was virtually non-existent.

Today, it accounts for over 50% of the economy, employs nearly 85% of the workforce, and represents the majority of active enterprises.

Ekelund: Vietnam opened up to trade, to foreign investment, and the country joined the World Trade Organization.

Tran Si: Doi Moi enabled millions of people, from entrepreneurs to workers and farmers, to participate in global market.

Ekelund: Nations that open up their borders achieve prosperity.

Nations that raise protectionist walls around their borders, much less prosperity.

Tran Si: Doi Moi, to me, was a radical shift in mindset from control to enablement, from ideology to pragmatism, from isolation to engagement.

Ekelund: Vietnam's economy has remained impressively stable and resilient.

This economic stability has been critical to Vietnamese businesses competing in a global marketplace.

Tin: The stability of the economy is a very important factor, and that helps Vietnam attract a lot of foreign investment.

And that's also the reason why people like me want to do business here.

Ekelund: Economic stability is absolutely essential to sustained economic growth.

And it's about four things -- low and stable inflation, it's about interest rates that maintain price and financial stability, it's about keeping the growth of debt and the economy under control, and it's about letting the market set the price of your currency.

Tin: Eight years ago, we had the chance to buy into a listed company in the furniture space.

Trong: Our company is Truong Thanh Furniture Corporation.

Narrator: Hieu Nguyen Trong is the CEO of Truong Thanh Furniture.

Trong: 70% of our export is to U.S., then Europe, UK, Australia, a little bit Japan, and China.

Tin: We import roughly about $6 million of materials from other places, but then we ship $16 million out, and that helps a lot, providing jobs to the local people.

Then the other business that I would like to introduce to you is the best banana plantation in the world.

Liem: My name is Pham Quoc Liem.

I am the chairman and CEO of the company.

Narrator: Unifarm is a globally recognized high-tech farming company.

Liem: You know, every day, you eat banana, but maybe you don't know that here is the place where the banana come from.

Tin: In the banana industry, one of the biggest problems is the Panama disease.

That can kill the whole farm in a few days.

With a lot of efforts, we managed to come up with the best disease-resistant variety in the world.

Narrator: In addition to exporting bananas, Unifarm ships their disease-resistant seedlings to growers all over the world.

Ekelund: Vietnam's economy has grown very rapidly since the 1990s, with an average GDP growth of 6.5% per year.

Tin: Vietnamese businesspeople feel optimistic that we can compete with anyone in the world, and the purpose is to get Vietnam to where our population deserves.

That means getting Vietnam into the top 20 economies in the world.

Narrator: Den Haag, or The Hague, as it's known in English, is recognized as the City of Peace and Justice.

Ekelund: To the Dutch, Den Haag is about government.

It houses the Parliament, the official residence of the Royal family, and many embassies.

It's been the political center of Holland since the 1500s.

The Dutch government exercised a limited but positive control over the country.

This created a more favorable environment for investments and for entrepreneurs.

Reasonable taxation was financing the building of infrastructure.

The rule of law and property rights were enforced.

The Netherlands was a well-run nation.

Narrator: Across much of Africa, well-run nations are rare, but Botswana stands apart.

An effective government protects its people, its mineral wealth, and, crucially, its wildlife and wilderness areas.

Located in northern Botswana, Xugana Island Lodge is set on the Okavango Delta, a UNESCO World Heritage site.

All: Welcome to Xugana You are welcome to Xugana Enjoy, enjoy your stay Andreck: Most people come here not knowing much about Botswana, but when they get here, it's always a wow.

Narrator: Desert & Delta Safaris' Xugana Island Lodge overlooks a tranquil lagoon where hippos, crocodiles, and vibrant bird life are part of the everyday scene.

Sekoka: My real name is Tshengofatso Sekoka, but commonly known as Taylor.

I live a very simple life.

I came from a family -- They are farmers at the moment.

They started as hunters and gatherers.

Andreck: Taylor, your lead guide, he's from the Okavango Delta.

He's from the Bushmen tribe.

Sekoka: These are people who were all over the Delta.

Staff: [ Singing in global language ] Narrator: Visitors explore the surrounding islands on foot, bringing much-needed tourism revenue to the lodge and the local people who work here.

Staff: [ Singing in global language ] Ekelund: Desert & Delta Safaris is very dependent on -- just like any other business -- the rule of fair law and strong property rights.

Both citizens and foreigners enjoy security.

Generally, people in the country tend to follow the rules, and so does the government.

You know, the rule of law.

It protects us against crime, against corruption.

We know the rules of the game.

We know that they will be enforced.

Therefore, we will invest more in the future, and we will create more growth.

Narrator: Many African nations are rich in resources, yet their people remain poor, undermined by corruption, but Botswana chose a different path.

Stable, accountable governance that values its citizens and their natural resources, especially the country's wildlife.

Ekelund: Botswana was a protectorate of Britain for 80 years.

Narrator: In 1966, Britain formally recognized Botswana's independence, transferring power and authority to the country's new national government.

Ekelund: Botswana was one of the poorest countries in the world at the time of its independence.

Its economy was primitive agriculture, and it got by because of a lot of foreign aid.

The independence in 1966 brought democracy and a good government that freed up the economy and welcomed foreign investments.

Fast-forward until today, and Botswana is a solid, successful country, one of the richest in Africa.

Botswana has maintained a stable democracy since independence.

It has a credible, capable, and relatively non-corrupt government.

We want a government that is, on the one hand, strong, so that it can safeguard the economy and the society, and on the other hand, we want it to be non-bossy, so it doesn't micromanage or overregulate.

Andreck: Our government believes in zero tolerance to corruption.

The government is there for the people and not for top government officials.

Narrator: Major diamond deposits were discovered in Botswana in 1967.

Fearing that competition among tribal groups could spark internal disputes, the government chose to partner with the privately owned British company De Beers to explore and mine the diamonds.

In return, Botswana would share in the benefits while avoiding the trap of nationalization, and the result has been stunning.

Ekelund: Botswana is richer than its neighbors, Zimbabwe and Zambia.

All of these three nations have vast mineral resources.

The difference has been the free market system and the good governance in Botswana.

Narrator: The government invested in roads and infrastructure, public services, healthcare, and education.

Sekoka: I thought maybe going to school is only to learn to become maybe a scientist, to become maybe a nurse, a doctor, a pilot, or something else.

I graduated from the high school and then I was sponsored by the government.

So I got my certificate and then became a guide.

Seforo: If you're sponsored by the government, they sponsor your semester and you get a living allowance and book allowance, as well.

I'm doing my bachelor's of engineering in electrical and electronics engineering.

Narrator: New ERA College is privately owned and operated and offers a wide range of programs, Scholarships and government sponsorships are available to students who qualify.

Seforo: I want to introduce technology and electronics to rural areas, especially where I'm from.

Narrator: Boitekanelo College prepares students for careers in business, education, information technologies, and health sciences.

[ Indistinct conversations in a global language ] [ Flatline ] Woman: One.

Two.

Three.

Four.

Five.

Six.

Maikano: We have a good education system in Botswana.

The government is supportive so that everyone can go to school and go back home with their degrees or diplomas or higher diplomas.

Narrator: These programs include practical labs, simulation exercises, and clinical internships.

Maikano: That machine is called a Digital Human Anatomy Table.

This is the only machine in Botswana.

There are only two machines in Africa and the other one is in Cape Town.

Narrator: These young men and women will soon join the rapidly growing healthcare workforce in Botswana and neighboring countries.

Seforo: I do think I've had a pretty great education, and around campus, you can see women are starting to be part of the industry, as well.

Narrator: Botswana has embraced gender equality.

Today, there are more women than men in higher education, and they are making inroads into fields once dominated almost exclusively by men.

Kayoka: We all know that women were not really empowered much when it comes to some jobs.

Diphupu: For one to be a guide, you need to have a guide license.

Mangwegape: I applied to join the Botswana Wildlife Training Institute to become a guide.

As long as we have the head, the mind to think, the hands to work with, we all can do this now.

Ekelund: When Botswana became independent, it embraced many of the drivers of prosperity.

One of them was to build a well-functioning banking and financial sector.

Narrator: Blessing Lechane is a sales and marketing executive at Desert & Delta Safaris.

Lechane: Desert & Delta Safaris is part of a holding company that is the only tourism entity listed under the Botswana Stock Exchange, which is locally owned.

Ekelund: It enables locals to invest and own property.

Lechane: It gives the local people, which is us, the opportunity to have a stake in the company.

Ekelund: And it makes investment into the country from foreigners much more attractive.

Lechane: That is actually a game changer to us as the local people.

Ekelund: No country has ever made it from poor to middle or high income without a well-functioning bank and financial system.

Why is that?

It's because growth requires investments, and investments require capital.

Woman: Beautiful Africa Group: Africa Diphupu: Tourism is a good thing for Botswana.

It's generating a lot of revenue for the country.

Narrator: Botswana turned a resource often squandered by other African nations into a powerful economic engine.

Woman: Beautiful Botswana Narrator: Chobe National Park is one of the country's most important conservation areas.

Kayoka: We only get this chance once of taking care of Mother Nature.

If we lose that, we'll never get another chance.

Narrator: Chobe Game Lodge is renowned for exceptional wildlife viewing and for its pioneering team of all-women safari guides.

Diphupu: We have an all-women guiding team that goes by the name Chobe Angels.

Daniel: So Chobe Angels is a team of ladies.

We are about 20 in total.

My name is Botho Daniel.

I'm working as a tour guide in Chobe Game Lodge.

See the lion, Barbara?

Child: Yay!

Kayoka: Chobe Game Lodge is unique for many reasons -- first of all, being a full ladies team when it comes to guiding.

And then we are the only lodge inside the national park.

Narrator: On the banks of the Chobe River inside the national park, the lodge is privately owned by locals through Botswana's Chobe Holdings.

Here, wildlife is an economic asset generating tourism income for the local owners and the people who work here.

Ekelund: Botswana is different than many other African nations in that it has a strong legal framework protecting property rights.

Narrator: About 2/3 of the country's property is still controlled by tribes, who manage it on behalf of their communities.

The government and the tribes lease plots of land for commercial, residential, farming, and tourism use.

Kayota: We are one of the countries that easily gets land.

We have that advantage in Botswana.

Narrator: In many African countries, people live on land they don't legally own.

Most of these homes belong to the people who live in them.

Kayoka: Just that, having it being yours -- It brings joy and makes you treasure it.

Ekelund: When people and businesses have an unconditional, safe right to their property, which might be land or a business or a product, they will invest more and they will use that resource much better.

Narrator: Botswana has an emerging middle class.

Major towns and cities have an array of shopping options.

People are investing in their properties, renovating and upgrading their homes.

Ekelund: Botswana's tax system is business friendly and balanced, with additional incentives for companies in finance, innovation, and manufacturing.

Taxation is very important for the economy so that we can make public investments in education, health, and infrastructure.

They are all critical to prosperity.

But if those taxes become too high, we will have too little resources in the private sector, and we will kill some of the incentives among people and businesses.

In some countries, businesses and people are totally overtaxed, and in others, it's the opposite.

Economic growth and incomes are connected to happiness.

We see that when we compare countries and when we compare income groups within countries.

And as we walk through this city in Botswana, we meet a lot of happy people... possibly because they have food, they have housing, good education, and good healthcare.

Narrator: Dutch windmills.

They're iconic, but also a key part of Netherlands' history.

Famously, the Dutch harnessed the power of the wind to pump the water out of their lowland country, creating fertile fields for farming.

Ekelund: But they also harness the wind to power sawmills, which helped them to build a large fleet of trading ships.

These innovations were important to the success of the Dutch.

The use of windmills spread all across the Netherlands because their society and economy were set up for innovation.

Innovation -- It's about inventing and adopting, putting new products and services to use that meet the needs of the society and the market.

And that's what the Dutch did.

Narrator: In Chile, that same spirit of innovation is shaping the wine industry today as growers adapt to a changing world.

These vineyards are among the more than 70 owned by Chile's most famous wine company, founded in 1883 and known for winemaking innovation.

Gonzalez: Via Concha y Toro is the fourth largest wine company worldwide.

Narrator: They began exporting wine in 1933 to the port of Rotterdam, the Netherlands.

Gonzalez: We are selling more than 33 million cases of wine to, like, 140 different countries.

Narrator: As tastes change and global wine consumption declines, winemakers are searching for new ways to connect with consumers.

Ekelund: Ah, I see.

I see.

Narrator: The new Centro del Vino explores the natural forces shaping Chile's wine region and the company's evolving direction.

Legend has it that the estate's wines, aged in this cellar, kept disappearing.

Founder Melchor Concha y Toro spread a rumor that the devil lived down here.

[ Animal howling ] And the thefts stopped.

The legend of Casillero del Diablo -- the Cellar of the Devil -- lives on today.

Just to the north and about 60 miles inland from the Pacific, at the foot of the Andes Mountains, Chile's capital, Santiago, lies in the country's Central Valley.

It's the political, cultural, and economic hub.

Ekelund: Today, Chile is widely seen as one of the most stable democracies in Latin America.

Since democracy returned in 1990, economic growth has been strong, and with that, rising living standards and a dramatic reduction in poverty.

Narrator: Much of Latin America still swings between far-left socialism and right-wing military rule.

[ Crowd chanting in Spanish ] But since 1990, Chile has followed a different path, building a stable democracy that protects economic freedom and fuels innovation, making it one of the region's richest nations.

Heiss: Chile has a very, very strong democratic history.

Narrator: Claudia Heiss is an associate professor at the Faculty of Government at the University of Chile in Santiago.

Heiss: Under the 1833 Constitution, we have a very strong authoritarian period in the first years.

After the reforms of 1874, we started building a system of checks and balances, a rule of law.

It was very, very stable compared to most of Latin America.

Ekelund: Democracy is a very fragile thing, and Chile's political trajectory has been anything but smooth.

Narrator: Chile's modern political turning point began with the democratic election of socialist Salvador Allende in 1970, during a time of political polarization and economic strain.

Heiss: I think the Cold War in Chile played a very important role in polarizing society and it was a very tense political period.

Narrator: As Allende expanded the nationalization of farms and major industries, Chile descended into a severe economic crisis.

Inflation approached 600%, and shortages of consumer goods spread across the country.

The military lost faith in Allende's government.

Heiss: When the military are active in politics, that's very damaging for democracy.

[ Explosion ] Narrator: In 1973, General Augusto Pinochet seized power in a coup, ending decades of democratic rule.

For 17 years, Pinochet's military regime carried out a systematic campaign of repression.

Thousands were detained, tortured, executed, or forcibly disappeared.

[ Crowd chanting in Spanish ] At the same time, the government introduced sweeping market-oriented economic reforms that would later reshape Chile's economy.

[ Group shouting in Spanish ] After growing domestic and international pressure, Chileans voted in a referendum leading to the peaceful return to civilian democracy.

Ekelund: Chile held presidential and parliamentary elections in December of 1989, and democracy was formally restored in March of 1990.

Heiss: The price, you could say, to pay for that peaceful transition was to maintain many elements of the dictatorship.

So, for instance, Pinochet remained commander in chief for many years, and then he became a senator for life.

Ekelund: Since then, the country has rebuilt itself as a working, stable republic.

Heiss: I think that Chile did very well after the return to democracy.

We grew at 7% rate.

Ekelund: Political institutions are strong with peaceful transfers of power from one party to the other.

Heiss: You cannot have a democracy without participation.

Participation should go hand in hand with good representative institutions.

Ekelund: You know, today, there are quite a lot of people who question if democracy is the best system to create prosperity.

However, when you look at the data across all nations, you will find on average that the countries that have systems where a large part of the population have influence, those nations do much better economically.

Narrator: And Chile has been doing better economically, opening itself to global markets.

Ekelund: Chile has embraced a stable and business-friendly climate and policies that attract talents from across the world.

This has helped fuel a wave of innovation.

That shows up big-time in sectors like technology, renewable energy, and agriculture.

Narrator: Water scarcity threatens vineyards around the world.

Though Chile has endured droughts for centuries, the entire region faces greater challenges today.

Vargas: We used to do soil pits a lot, so it was touching the soil to see how much water is holding, how the roots are growing, if everything is healthy.

Now we have real numbers that tells you, "Hey, this much liters are being used by the plants."

That's way more efficient.

Narrator: The practical solutions that they're developing here can work anywhere.

Vargas: So this is a flux tower, measuring CO2 emissions and also water vapor.

This is the gold standard to measure water use by crops.

Any crop.

Narrator: With this information, the digital platform can make recommendations for efficient irrigation.

Vargas: I am a scientist.

[ Chuckles ] I'm a viticulture scientist.

Narrator: Alvaro Gonzalez is the director of Concha y Toro's Center for Research and Innovation in Talca, Chile.

Gonzalez: Innovation is the opportunity to have a disruption on all the things here, from the production of plants in the nursery, to the understanding of the consumer.

Narrator: Teams of scientists and researchers develop and share solutions for the challenges facing the wine industry today.

Gonzalez: So we identify viruses and fungi that impact our grapevines and our vineyards.

And this is where we analyze different molecules that we have on the wine, which are related to the quality.

So, Henrik, what we've been doing is to develop this extract.

This wine has a double amount of polyphenols.

We can taste it.

Vargas: We have this research center that is 100% dedicated to solve practical problems on the -- on our operations.

That's the way that we work.

They tell us a problem and we start working on it.

Ekelund: Market-based, bottom-up innovation happens when companies are trying to solve important problems.

Successful innovations cannot be determined in advance.

They have to be found through trial and error by many actors in an efficient marketplace.

That's market-driven, bottom-up innovation.

Urzua: My title is winemaker and I make the wine of the cellar.

[ Laughs ] Narrator: The Lourdes Wine Cellar, one of 11 owned by Concha y Toro, has reactors ranging from 50 to 100,000 liters.

Urzua: The total capacity of this cellar is 35 million bottles each year.

Narrator: In the past, wine was made here in the traditional way -- grapes harvested by hand and aged in wooden barrels.

Not anymore.

Urzua: Today we have reactors with all the process controlled -- temperature, extraction, maceration, oxygen, nutrition.

Luna: This is a new control room.

So here, the winemakers and the team generate the protocols of the fermentation process.

Urzua: This situation is very good for innovation and for the future of the company.

Luna: We need to generate the high quality of wine, a high quantity of wine in less time.

Ekelund: And by turning winemaking into high tech, they can now control the quality of the wines much better.

And they've multiplied productivity several times.

Urzua: I think today is a very good combination between experience and control of our process.

Ekelund: Concha y Toro, a large global wine business, has the resources to innovate.

Now, start-up and growth companies -- We're seeing more of them in Chile, but they're facing a major barrier.

There's not enough capital.

There's not enough early-stage investors for them to truly innovate.

Innovation needs capital, and innovation is risky and difficult.

This is why it's critical that we have people with insight and experience who can spot the right entrepreneurs, the right business plans, and fund those.

Narrator: Innovation begins with openness to new ideas, new markets, new ways of thinking.

Civil society survives by the same principle.

Ekelund: In Chile, political freedoms and civil liberties are generally respected.

The country has an independent media, an active civil society, and laws that protect the freedom of speech and the right to assemble.

The people of Chile have had to fight for their culture of freedom, and while that struggle hasn't been easy, today, freedom of speech and modern social rights are important parts of the Chilean society.

Heiss: Inclusion and rights are what give societies and institutions stability and are good for business, are good for prosperity, are good for economic growth.

Ekelund: Research has shown that countries where people have more individualism, there is more initiative, combined with trust between people.

That is better for prosperity than a situation where you have a very hierarchical culture with a lot less trust.

The Dutch and the Chileans are not the only innovators.

Over the years, many nations have contributed.

Since the early 1900s, the U.S.

has been the global leader in innovation.

One of the nations with a lot of individualism is the United States.

[ Explosion ] People dare to do what they want to do.

People dare to take risks.

Narrator: America's rise as an industrial powerhouse was driven by entrepreneurial risk-taking, mass production, technological breakthroughs... Woman: Operator.

Narrator: ...and a deep financial system that channels capital into innovation.

[ Horns honking ] [ Up-tempo music plays ] Woman: Now the dream cars of tomorrow!

Man: A magnificent Eldorado town car by Cadillac.

Woman: Ensemble by Christian Dior of Paris.

Narrator: For years, the pride of American manufacturing was the auto industry.

Vast supply chains tied innovation to scale and affordability.

Man: And here she is, the '58 Buick.

That's a real honey, isn't it?

And what's more, you can hear Buick quality, as well as see it.

[ Vehicle door opens, closes ] Ah!

Love that sound.

Narrator: Then, in the 1980s, the industry was faced with intense global competition, especially from Japan.

The U.S.

government responded with trade restraints, quotas, and other protective measures.

Ekelund: When you're trying to protect all your businesses, you're actually stopping them from learning and becoming better.

Narrator: But the automakers failed to innovate.

They kept making cars that Americans didn't want.

And hundreds of thousands of people lost their jobs and their benefits.

Ekelund: As the economy develops towards prosperity, there will be businesses that close down.

There will be plants that close down.

Where people really have a hard time to find a new job, we need to support them with training, with skills, with economic safety.

The most innovative place in the world is the Silicon Valley.

Narrator: Innovation took root here in 1939, when two Stanford graduates founded Hewlett Packard in a garage.

Fairchild Semiconductor helped ignite the Silicon Age and a culture of venture-backed start-ups.

Today, one in five of the world's billion-dollar companies is born here, fueled by risk, talent, and innovation.

Ekelund: Today, the United States presents a mixed picture.

On the one hand, it continues to excel in innovation as the global leader.

On the other hand, beneath that strength lies a growing problem -- the nation's rapidly increasing debt.

Possibly it's not my place to comment, but I've lived in the U.S.

and I love the U.S.

Shouldn't America build on the forces that made it so successful, like the tradition of free trade, and channel opportunities to all its people?

Shouldn't the focus be on creating new jobs, rather than clinging on to old, uncompetitive ones?

Freedom is absolutely essential to progress.

You can see that in every nation where people are set free, forces are unleashed that create prosperity.

When I looked deeper into freedom, I found four underlying drivers -- first, democracy; second, free markets; third, free trade; and finally, a culture of freedom.

So freedom is essential for prosperity, but it needs to be balanced and supported with order -- the second main driving force.

First of all, you need a strong, non-corrupt, non-bossy government.

Secondly, you need clear private property rights and the rule of fair law.

Thirdly, you need economic stability, and finally, balanced taxation.

There are four drivers that decide if a nation is successful in innovation or not.

First, that the innovation happens bottom up, that it's market-driven.

Second, that we have the capital from private investors.

Thirdly, that we have the entrepreneurs and the talent pool, and finally, the bank and financial system.

Those four together will create successful innovation.

You know, you might say that this is self-evident, but if it is self-evident, why are so many nations and so many governments going in the wrong direction?

Today, 250 years after Adam Smith wrote "The Wealth of Nations," and after a growth revolution that has increased our incomes and our standard of living many, many times, growth in the Western world is slowing down.

Many government leaders and policymakers turn towards populism to win votes.

They don't really understand what creates sustained economic growth.

Tran Si: You can't stand still.

Vietnam has to move quickly.

Nguyen: You have to innovate, but you also have to connect to the history that we were born with.

That is kind of the secret sauce for success.

Lechane: There are many, many, many opportunities that are coming forth and the excitement is really amazing.

Heiss: I think the task now for society and for everybody in Chile is to preserve the liberties and the freedoms that we have gained through time in a very costly and slow way.

Lan: We always believe that only when the majority of people could benefit, that the country can grow in a sustainable way.

Tin: I would say prosperity for all is what we are all after.

Ekelund: A prosperous nation is prosperous for everyone.

And in a nation where we have people that are homeless and poor, we create a nation that is more polarized and that is less safe.

We've come a long way since the days of kings and castles, nobles and peasants, but we still have far to go.

The path forward lies in harnessing the drivers of prosperity that have proven their power throughout history and will continue to shape our success in the future.

Announcer: Major funding for this program was provided by Sarah Scaife Foundation.

Additional funding was provided by Ron and Connie Muhlenkamp, Elizabeth Rose.