147 The Cornucopia of Capitalism

 

 

 

THE CORNUCOPIA OF CAPITALISM

                As an adolescent, growing up in Stockholm, Sweden, Johan Norberg espoused anarchism, tried (with John Lennon) to “imagine there’s no countries,” and decried multinational capitalism. He longed for a world wherein folks would be free. Fifteen years later, having seriously studied economics and become a professor of that discipline, he’s still fervently committed to freedom–particularly the small but critical daily liberty to “pick and choose” what one eats, where one lives, how one works. But he’s changed his mind as to how best to extend it and written In Defense of Global Capitalism (Washington, D.C.: Cato Institute, c. 2003). Originally published in Sweden, the book was picked up by the Cato Institute (well known for its “libertarian” economic ideals), translated into English and published. Graphs and charts, footnotes and citations, references to trustworthy sources, indicate the book’s research foundations, but it’s engagingly written and quite understandable for anyone concerned with economics. 

            Contrary to the slogans shouted by today’s anarchists protesting “globalization” (the World Bank and International Monetary Fund, multinational corporations and international trade agreements), despite doctrinaire leftist claims that exploitation and deprivation are spreading everywhere, Norberg demonstrates that during the past three decades a transformation has taken place around the world.  People in countries such as India and China have made startling, unprecedented economic gains.  “Consumerism,” so often labeled evil by Western critics, appears to have stimulated developments that have dramatically raised the standard of living.  This took place not as a result of a socialist revolution, “but rather from a move in the past few decades toward greater individual liberty” (p. 23).   Attuned to an ancient Chinese proverb, “When the wind of change begins to blow, some people build windbreaks while others build windmills,” Norberg wants us to flow with the wind of free enterprise and make the world a better place. 

            Dealing with facts, rather than utopian fantasies, leads one to discover that “between 1965 and 1998, the average world citizen’s income practically doubled, from $2,497 to $4,839, adjusted for purchasing power and inflation” (p. 25).  Amazingly, though one would never expect it if one listened to leftist pundits and social gospel preachers, “world poverty has fallen more during the past 50 years than during the preceding 500” (p. 25).  Population has, indeed, soared during these decades, but “the number of absolute poor has fallen by about 200 million” (p. 26) because of rapid economic development.  Poverty in Asia declined from 60 to 20 per cent in 20 years!  Economic growth erases poverty. 

            There’s far less hunger in the world today because “we have never had such a good supply of food” (p. 31).  This results, primarily, from the “green revolution” once strongly opposed by environmentalists who issued dire warnings as to its long-term impact.  Germ and insect resistant crops, better sowing and harvesting methods, more efficient use of available water, have resulted in an amazingly productive agricultural system.  Though best illustrated in the United States, the same pattern is evident world-wide.  Famines now occur less often, in large part Norberg says, because democracies (and their freedoms for individuals) seem never to experience such.  Famines strike places like North Korea, the former Soviet Union, Cambodia, Ethiopia–all ruled by tyrants.  Dictatorships, not agricultural failures, not ecological abuses, cause famines. 

            China especially reveals the positive impact of global capitalism.  In the 1970s Deng Xiaoping “realized that he would have to distribute either poverty or prosperity, and that the latter could only be achieved by giving people more freedom” (p. 47).  Peasants were allowed to lease land, to grow and market crops for themselves.  They did so “to such a huge extent that nearly all farmland passed into private hands in what may have been the biggest privatization in history.  It paid off, with crop yields rising between 1978 and 1984 by an incredible 7.7 percent annually.  The same country that 20 years earlier had been hit by the worst famine in human history now had a food surplus” (p. 47).  Half a billion Chinese–nearly twice the American population!–climbed out of poverty simply because they could participate in a capitalistic economy.  “The World Bank has characterized this phenomenon as ‘the biggest and fastest poverty reduction in history'” (p. 48). 

            Vietnam, surprisingly, shows the same trend.  Though impoverished by its Marxist straightjacket for several decades, “Vietnam since the end of the 1980s has introduced free trade reforms and measures of domestic liberalization” (p. 133).   Exports, especially rice, have boomed.  “This has resulted in rapid growth and a uniquely swift reduction of poverty.  Whereas 75 percent of the population in 1988 were living in absolute poverty, by 1993 this figure had fallen to 58 percent, and 10 years later had been reduced by half, to 37 percent; 98 percent of the poorest Vietnamese households increased their incomes during the 1990s” (p. 133).   Similar currents have streamed through India and South Korea.  In the 1960s South Korea was poorer than Angola, but today it’s the world’s 13th largest economy.  Conversely, North Korea, sentenced to the nightmare endemic to Communism, sunk even deeper into the pit of deprivation and desperation. 

What huge investments in “foreign aid,” what highly touted “compassionate Christian ministry” endeavors failed to significantly impact, an unleashed free enterprise capitalism accomplished in two decades!  There are, manifestly, many global inequities.  But “the fantastic thing,” Norberg says, “is that the spread of democracy and capitalism has reduced them so dramatically” (p. 61).  Wherever government steps aside and lets individuals flourish, they freely invest and innovate and forge associations that precipitate prosperity.  In such free systems, folks like Bill Gates will, of course, become fantastically wealthy.  But the system that sustains them also provides a rising tide that lifts everyone’s boat.  If my income doubles in two decades, while Gates’ quadruples, why should I complain?   Unless I’m consumed by envy, I won’t!    In a capitalist system, the “poor benefit from growth to roughly the same extent and at the same speed as the rich.  They benefit immediately from an increase in the value of their labor and from greater purchasing power” (p. 81).  It’s obvious that capitalism accentuates inequalities.  But this occurs not because capitalism makes some folks poor, but because it makes “its practitioners wealthy.  The uneven distribution of wealth in the world is due to the uneven distribution of capitalism” (p. 154). 

            Such a capitalistic order “requires people to be allowed to retain the resources they earn and create” (p. 66).  Private property, so demonized by socialistic thinkers, proves to be the essential lynchpin for widespread economic development.  The folks at the bottom benefit the most from private property.  “The Peruvian economist Hernando de Soto has done more than anyone else to show how poor people lose out in the absence of property rights” (p. 91).  Conversely, public spending–even on behalf of the poor–ultimately harms its intended beneficiaries.  Taking from the rich to enrich the poor harms the poor.  Do-gooders, especially the enlightened elites who direct the welfare state and feel highly righteous in distributing the dole, feel good about themselves but actually do little good!  In Asia, where poverty has declined so rapidly, there has been almost no “redistribution” of wealth, no “social justice.”  Only millions of free people lifting up themselves!  East Asia’s “miracle shows an open, free-enterprise economy to be the sine qua non of development” (p. 103).   Several  million ordinary people, pooling their wisdom in the marketplace, working and saving, buying and selling, investing and losing investments, prove far more prescient and trustworthy than a few dozen bureaucrats orchestrating a planned economy. 

The division of labor basic to capitalism means that “one hour’s labor today is worth about 25 times more than it was in the mid-19th century.  Employees, consequently, now receive about 25 times as much as they did then in the form of better pay, better working conditions, and shorter working hours” (p. 68).  The alleged “victims” of multinational corporations, workers in “the poorest developing countries” employed by American-affiliated companies like Nike, earn “eight times the average national wage!” (p. 217).  Unlike the “sweatshops” denounced by Leftists marching in the streets, American factories in the Third World pay their employees handsomely and contribute to the rapid development of once impoverished lands. 

In short:  the world is, in fact, much better than it was a century ago.  And it’s almost exclusively the result of the spread of democracy and free enterprise. 

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Norberg’s work confirms the portrait painted in It’s Getting Better All the Time:  100 Greatest Trends of

the Last 100 Years by Stephen Moore and Julian L. Simon (Washington, D.C.:  Cato Institute, c. 2000).  Moore took the economic data collected by the late Julian Simon, a noted economist, and distilled it (with colorful charts) to illustrate the book’s thesis:  “Freedom works” (p. 12).   Simon became somewhat notorious for publicly challenging various “doomsayers,” most notably the alarmists trumpeting the environmental crisis.  In 1980 he challenged Paul Ehrlich to put his money where his mouth was:  to wager $1000 on his pessimistic  predictions.  “A few years before that Ehrlich wrote:  ‘I would take even money that England will not exist in the year 2000.’  He wrote in 1969, on the eve of the green revolution, that ‘the battle to feed humanity is over.  In the 1970s the world will undergo famines.  Hundreds of millions of people will starve to death.’  Although Professor Ehrlich continues to make dimwitted statements like this, he is still taken quite seriously by the American intelligentsia.  He even won a MacArthur Foundation ‘genius’ award after he made these screwball predictions” (pp. 20-21). 

But Simon, unimpressed with Ehrlich’s Stanford credentials and bombastic assertions, dismantled his façade.  Setting forth the terms of his wager, he allowed Ehrlich to choose any five natural resources that he thought would become more expensive in the next 10 years.  “By 1990 not only had the optimist (Simon) won the bet, but every one of the resources had fallen in price, which, of course, is another way of saying that the resources had become less scare, not more” (p. 20).  Things were, by every measurable indice, getting better.  The 20th century also witnessed incredible economic and political advances.  The authors contend, “there has been more improvement in the human condition in the past 100 years than in all of the previous centuries combined since man first appeared on earth” (p. 1).  Blessed with such improvements, many of us fail to realize how significant they are.  “No mountain of gold 100 years ago could have purchased the basics of everyday life that middle-income Americans take for granted in 1999” (p. 6).  Underlying this spectacular development, and largely explaining it, are three things:  electricity; modern medicine; and the microchip. 

Of the 100 positive trends the book highlights, increased longevity is one of the most impressive.  Since the beginning of the industrial revolution, life expectancy has doubled, perhaps “‘the greatest miracle in the history of our species'” (p. 26).  Americans live 30 years longer than they did in 1900.  In China, in 1950, life expectancy was 40 years; today it’s 63, an amazing 50 percent gain in 50 years.  Infant mortality has sharply declined.  Deadly diseases, such as tuberculosis, smallpox, and diptheria, have been largely eliminated.  Miracle drugs, cures for cancer, treatments for heart disease all make for longer lives, freedom from killer diseases. 

Contrary to Malthusian predictions, we now have more food and less threat of famine than ever, despite the globe’s population growth.  Today’s farmer produces 100 times as much food as did his counterpart a century ago.  Prices for food have declined steadily.  Wealth, rather than shrinking as more people share the planet, has dramatically increased.  The true “wealth” is human ingenuity.  The world’s resources are not a finite pie, demanding that it be cut and divided in ever-smaller portions.  True wealth is the result of creative persons finding ever better ways to live.  So more and more people have been getting more and more wealthy. 

            For all the good news contained in the book, it’s also obvious that the 20th century was, in some respects, the worst of all centuries.  Multiplied millions of people died in wars–and four times as many were liquidated by totalitarian governments.  Somewhere between 150 and 200 million innocent folks were sacrificed on the altars of (largely socialist, whether fascist or communist) ideology (p. 16).  These ghastly evils were done, almost exclusively, by regimes that deprived people of individual freedom.  Despots determined to dictate economic systems, always for “the good of the people,” launched their programs by confiscating guns and restricting free speech, by stamping out the free press and restricting the opportunity to worship God.  Virtually “every great tragedy of the 20th century has been a result of too much government, not too little” (p. 15). 

The book’s succinct, clear, persuasive.  As Lawrence Kudlow, the chief economist for CNBC, writes:  “This book is so chock full of good news that it’s virtually guaranteed to cheer up even the clinically depressed.  Moore and Simon dismantle the doomsday pessimism that’s still so commonplace in academia and the media.  The evidence they present is irrefutable:  Give people freedom and free enterprise and the potential for human progress is seemingly limitless” (back cover). 

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The libertarian humorist P.J. O’Rourke provides much the same evidence in Eat  the Rich (New York: 

Atlantic Monthly Press, c. 1998).  “I had one fundamental question about economics,” he says, beginning his book:  ‘Why do some places prosper and thrive while others just suck?  It’s not a matter of brains.  No part of the earth (with the possible exception of Brentwood) is dumber than Beverly Hills, and the residents are wading in gravy.  In Russia, meanwhile, where chess is a spectator sport, they’re boiling stones for soup” (p. 1).  Why?  It’s a good question!  And it’s a question O’Rourke clearly answers:  free people, under the rule of law, prosper. 

            Reared in a privileged American home, O’Rourke went off to college, where he and his peers imbibed the intellectual currents of the ’60s, posed as hippies, and styled themselves “Marxists” without much of a clue as to what that entailed.  In time, he became a journalist, started thinking like an adult,  and began to notice, as he traveled the globe in the 1990s, the importance of economics.  Curious, he pulled out the economics textbook he’d been assigned in college, Samuelson and Nordhaus’ Economics, widely used throughout the country for 40 years.  “Professor Samuelson,” O’Rourke discovered, “turns out to be almost as much of a goof as my friends and I were in the 1960s” (p. 8).   To Samuelson Karl Marx was “the most influential and perceptive critic of the market economy ever” (p. 8) and blessed his memory by embracing his theories, arguing that socialist improvements to the American economy would make life better for all concerned.   

            Having personally witnessed Marx’s influence in various world areas, O’Rourke resolved to discard Samuelson–and fellow travelers like of John Kenneth Galbraith–and find better answers to his questions in countries that have embraced either capitalism or socialism.  He discovered that there can be “good capitalism,” like that found on Wall Street, largely responsible for America’s amazing prosperity.  There can be “bad capitalism” such as developed in Albania following the collapse of Enver Hoxha’s tyranny.  Albanians in the 1990s were “free,” but not doing well.  “The Albanian concept of freedom approaches my own ideas on the subject, circa late adolescence.  There’s a great deal of hanging out and a notable number of weekday, midafternoon drunk fellows” (p. 47).  But not much productive labor!  Lots of freedom, but little enterprise!

            In Sweden, O’Rourke checked out what’s often called a “good socialism.”  One can do very little and get quite a lot in this workers’ paradise.  A mere 2.7 million of the 7 million Swedes work to pay for folks getting benefits or working for the government.  Unfortunately, bills come due in time.   The nation’s economy is slowly shrinking.  In 1950 the nation was among the richest on earth.  Swedes were taxed at about the same rate as are Americans today, with the government spending 31 percent of GDP.  Then came the socialist takeover, when the welfare state replaced capitalism.  Productivity slipped.  Crime boomed.  The Swedes mortgaged the future and bought momentary comfort.  But the good times will end, O’Rourke predicts, and cracks in the social fabric indicate that the end may be near at hand.

            Checking out Cuba, O’Rourke found a “bad socialism.”  Everything seems shattered by Castro’s revolution.  Simply looking out his hotel window, he saw “holes in everything:  holes in roofs, holes in streets, holes where windows ought to be” (p. 77).   The island looks war-ravaged, and the people seem shell-shocked into silence.  The fading beauty of Havana, where folks were in fact rather free under Batista, gives witness to the losses Cuba has suffered.  The inescapably totalitarian aspects of socialism manifest themselves in Castro’s “paradise.”  The residue–or the debris–of socialism now litters Russia a decade after the “collapse” of communism.  O’Rourke noted that Russians were certainly more active and alive than in the 1980s, but the “system” still hardly works.  Notably absent, he says, is the rule of law.  So “businessmen” behave more like thugs than entrepreneurs.  “What would be litigiousness in New York is a hail of bullets in Moscow.  Instead of a society infested with lawyers, they have a society infested with hit men.  Which is worse, of course, is a matter of opinion” (p. 129).  The rampant corruption, he believes, is directly tied to Marx and Lenin, the men who laminated their amoral, nihilistic worldview onto the nation. 

            The African nation of Tanzania, O’Rourke says, illustrates “how to make nothing from everything.”  It’s one of the world’s truly impoverished nations.   By comparison, “Papua New Guinea is almost ten times more prosperous, never mind that some of its citizens have just discovered the wheel” (p. 166).   There’s plenty of  arable land and abundant natural resources.  The people were little affected by European colonialism and have suffered few wars.  What went wrong is attributable to Julius Nyere, the celebrated “teacher” who led the nation for nearly three decades.  He imposed a stern, rigorously egalitarian collectivism, styled “familyhood,” designed to make Tanzania a peoples’ paradise.  Everything’s regulated, everything’s prescribed by government.  To be blunt:  Tanzania is poor because Nyere and his socialistic enthusiasts “planned it” (p. 175). 

            By contrast there’s Hong Kong, which demonstrates “how to make everything from nothing.”  One of the best examples of laissez-faire economics, Hong Kong’s British colonial government did little but “keep the peace, ensure legal rights, and protect property” (p. 199).  Individuals took the initiative and fueled an economic “miracle.”  “With barely one-tenth of 1 percent of the world’s population, Hong Kong is the world’s eight-largest international trader and tenth-largest exporter of services” (p. 205).  What will happen with its absorption by mainland China, of course, remains to be seen.

            Summing up his discoveries in economics, O’Rourke admits it’s pretty much what his parents told him before he went off to the university: “Hard work, Education, Responsibility; Property rights; Rule of law; Democratic government” (pp. 233-34) insure economic prosperity.  Especially important is the rule of law, for rampant freedom (as in Albania) or rampant crime (as in Russia) prevent economic development.  People will work hard, save, invest, risk and innovate only when the law protects their property.  All in all–professor Samuelson notwithstanding–Adam Smith was right:  the free market provides the best for the most. 

            Discerning, clear-headed, witty and understandable, O’Rourke’s treatise provides a remarkably astute world tour of diverse economies, locating their sources and detailing their consequences.  Fun to read, but memorable in its message! 

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