rtI don’t think that colonialism and slavery would have been necessary for Europe to prospe. The norwegian countries (e.g. Sweden) have never had any colonies to my knowledge. However, they’re far more prosperous than former colonialist countries such as Portugal and Spain. You could also mention the example of Hong Kong, which was a british colony until 1994 but prospered anyway. Thus, I don’t think that there has to be a connection between colonialism and prosperity.
Hospitals, schools, roads, trains etc. have been provided by the private sector.
Tom Dilorenzo on trains:
http://mises.org/daily/2317#1
Walter Block on roads:
http://mises.org/document/4084
Andrew Coulson on schools:
http://www.amazon.com/Market-Education-Unknown-History-Philosophy/dp/1560004088
Terence Kealey on science funding:
http://www.amazon.com/Economic-Laws-Scientific-Research/dp/0312173067/ref=la_B000AQ3Y2A_1_1?ie=UTF8&qid=1350804865&sr=1-1
As long there is demand for a product or service, companies can make a profit by providing them. It does not really matter whether profits will be earned in the short of long run.
In a free society, roads would be privately owned. People want to see in the dark when walking or driving on the street, hence companies will provide them with light. If they did not, another company would see the opportunity to make a profit and provide lampposts. Competition would ensure lampposts etc. Shop owners along a street might also install lampposts to attract customers etc.
Think about Felix Baumgartner and RedBull! The whole mission was privately funded:
http://www.uncmirror.com/opinions/column-red-bull-continues-to-give-private-sector-wings-and-profits-1.2931972#
Think about all the cool stuff the private sector provides: computers, smartphones, airplanes, trains, cars, etc. But your friend wants you to beleive that it’s incapable of installing some lampposts?! If we get government out of the creativity of millions of profit seeking individuals will accomplish awesome things!
Of course competition increases quality and reduces prices over time. Why else are our computers, smartphones, cars etc. a lot better and cheaper than a couple of years ago?
The financial crisis was not a market failure but the cause of government interventionism (Federal Reserve Monetary policy and to a lesser degree housing policies). I recommend Tom Woods’s book Meltdown which deals with the recent financial crisis:
http://www.amazon.com/Meltdown-Free-Market-Collapsed-Government-Bailouts/dp/1596985879
The raw footage videos of ‘The Bubble’ film are great as well:
http://thebubblefilm.com/video-clips/
I also recommend Tom Woods’s book “Rollback”:
http://www.amazon.com/Rollback-Repealing-Government-Before-Collapse/dp/B005CDT7WM