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REEDINGS . . .
Notes on Books by Gerard Reed
March 2004
Number One Hundred Forty-seven ************************************************************************
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.
*
* * * * * * * * * * * * * * *
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).
*
* * * * * * * * * * * * * * * *
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!