That was a nice recap of capitalist ideology.
At the same time, it's hopelessly over-optimistic. I think it's appropriate to call it naive, too.

I can consider your take on the role of government-run social services only as typical "American". You'd be laughed at the average German forum for such a text due to its typical American social=socialist=fear!!! slant.
No dictator has ever followed such a long-winded and slow path. They simply set up a domestic intelligence service, round up potential opposition and then they have control. No major economic changes are necessary.


Without rule of law and security, resources are distributed by banditry and allocated by the whim of thugs and thieves. No sane person invests capital or personal effort in such a place.
Except those who recall that you can hire guns, of course.
Actually, Europe lacked the rule of law until a few decades, up to about a century ago.
The pre-19th century systems didn't even come close to today's understanding of "rule of law" and the 19th century systems badly discriminated in favour of the establishment (thus providing no universal rule of law either). Much of Western Europe was under authoritarian or outright dictatorial control will the fourties, Spain even till the death of Franco.
How did we get to this point without ever investing till the 20th century?
We didn't - people don't consume everything just because investments are risky. They still save much, and savings~investments in macroeconomics.
Such a new thing as "rule of law" can hardly have been a condition for more than "minimal economic development".

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Many conditions need to be met for a rapid economic growth or industrialisation along the market economy model. Few countries meet these and many of those who once met them don't meet them any more for perfectly normal reasons.
Planned economy coupled with central dictatorial authority proved able to lead to rapid economic growth, even with little (yet crucial) outside help.

In either case you get the most growth if the country has a much higher potential than actual economy. A well-educated, experienced, healthy population with a minimum of security & stability and a useful monetary system can produce extreme growth.
See Solow and Ramsey growth models: http://en.wikipedia.org/wiki/Ramsey_growth_model http://en.wikipedia.org/wiki/Solow_growth_model
Examples are post-WW2 Italy, Germany and Japan as well as developing countries that industrialised based on a sound education & health basis - Taiwan, South Korea, PR China post-'80.
The planned economy approach on the other hand managed to pull off strong growth and rapid initial industrialisation even without meeting all those conditions - examples are the inter-war Soviet Union (especially during the 30's) and PR China (pre-'80). Nevertheless, it requires some conditions be met; see the failure in Tanzania and many other small developing countries.

Cuba with its health and education system is an economy miracle in the waiting queue. It lacks the resources and export markets for a planned economy economic growth, but it has the right ingredients for a market economy growth (less the entrepreneurship middle class).

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"Efficiency" is a poor metric in regard to economic growth. You cannot measure it. You can measure rapidity, though - and the rapidity of growth depends more on the variables than on the system.

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Just in case someone thinks that I'm a covert commie from Eastern Germany; I was born in Western Germany and did my economics degree at a Western German University.