Den svenske forfatteren av bestselgeren «In Defence of Global Capitalism», Johan Norberg, holdt i høst dette foredraget om hvordan markedsøkonomi og større frihet har forandret verden. Norberg mener det er all grunn til optimisme og fremtidstro. Vi har aldri hatt det bedre, sier Norberg og forklarer hvorfor. Foredraget ble holdt hos den australske tankesmien The Center for Independent Studies. Norberg vil gjeste CIVITA i 2006.
The Sofitel Wentworth, Sydney
Tuesday 11 October 2005
Langham Hotel, Auckland
Thursday 13 October 2005
The Wealth of Generations:
Capitalism and the Belief in the Future
Ladies and Gentlemen. First of all, I would like to thank the CIS for getting me here toAustralia and New Zealand for the first time in my life. I am deeply honoured to be giving the annual John Bonython lecture, following in the footsteps of many of my favourite thinkers. I appreciate the opportunity to talk to such a distinguished audience about one of my favourite subjects – why almost everything is getting better, but why no one believes me when I say so.
Belief in the future is perhaps the most important value for a free society. It is what makes so many interested in getting an education, or investing in a project, or even being nice to their neighbours. If we think that nothing can improve or if we think that the world is coming to an end, we don’t work hard for a better and more civilised future. And we will all be miserable.
Enlightenment philosophers created the belief in the future in the 17 th and 18 th centuries, by letting us know that our rational faculties can understand the world, and that with freedom we can improve it. And economic liberalism proved them right. When Adam Smith explained that it’s not from the benevolence of the butcher that we expect our meat, but from his self-interest, it was much more than an economic statement, it was a world view. It was a way of saying that the butcher is not my enemy. By cooperating and exchanging voluntarily, we both gain, and make the world a better place, step by step.
Since those days, mankind has made unprecedented progress, but astonishingly most of us don’t see that, because of ancient mental mechanisms that were developed in much more dangerous days, when one man’s gain was often another man’s loss. Tonight I will discuss what they are and how to deal with them, and I think that a good place to start is with an ideology that has made the most of those mental mechanisms: Socialism.
Karl Marx explained that capitalism would make the rich richer and the poor poorer. If someone was to gain, someone else had to lose in the free market. The middle class would become proletarians, and the proletarians would starve. What an unlucky time to make such a prediction. The industrial revolution gave freedom to innovate, produce and trade, and created wealth on an enormous scale. It reached the working class, since technology made them more productive, and more valuable to employers. Their incomes shot through the roof.
What happened was that the proletarians became middle class, and the middle class began to live like the upper class. And the most liberal country, England , led the way. According to the trends of mankind until then, it would take 2 000 years to double the average income. In the mid-19th century, the British did it in 30 years. When Marx died in 1883, the average Englishman was three times richer than he was when Marx was born in 1818.
The poor in Western societies today live longer lives, with better access to goods and technologies, and with bigger opportunities than the kings in Marx’ days.
Ok, said Marx’s evil apprentice Lenin. We might have been wrong about that. But the working class in the West could only become richer because they are bribed by the capitalists. Someone else would have to pay the price for that bribe – the poor countries. Lenin meant that imperialism was the next natural step of capitalism, whereby poor countries had to give up their work and resources to feed the West.
The problem with this argument is that all continents became wealthier, albeit at different speeds. Sure, the average Western European or American is 19 times richer than in 1820, but a Latin American is 9 times richer, an Asian 6 times richer, and an African about 3 times richer. So from whom was the wealth stolen? The only way to save this zero-sum theory would be to find the wreckage of some incredibly advanced spacecraft that we emptied 200 years ago. But not even that would save the theory. Because we would still have to explain from whom the aliens had stolen their resources.
It is correct that colonialism often was a crime, and in some instances led to horrible acts. But globalisation in the last decades shows that the existence of wealthy, capitalist countries facilitates development for poor countries if they participate in a free and voluntary exchange of ideas and goods. Globalisation means that technologies that it took wealthy nations billions of dollars and generations to develop can be used straight away in poorer countries. They can sell to wealthier markets and borrow capital for investments. If you work for an American company in a low-income country, you receive about 8 times the average income in that country. Not because multinational companies are more generous, but because they are globalised, and bring machines and management that raise the productivity of the workers, and consequently also their wages.
Therefore, opportunities for a poor country with open, market-friendly institutions increase as the rest of the world becomes more developed. It took England 60 years to double its income from 1780. 100 years later, Sweden did the same in just 40 years. Another 100 years later, countries like Taiwan , South Korea , China and Vietnam did it in no more than 10 years.
During the 1990s, poor countries with about 3 billion inhabitants have integrated into the global economy, and they have also seen their annual growth rates increase to almost 5 percent per capita. It means that average income doubles in less than 15 years. Compare this to the much slower growth in rich countries, and the negative growth in developing countries where 1 billion people live. These countries, especially in sub-Saharan Africa , are the least liberal, the least capitalist and the least globalised. It seems Lenin had it upside down – poor countries that are connected with the capitalist countries with trade and investment grow faster than those countries, those that don’t become poorer.
Let’s have a short look at the statistics to see the greatest untold story ever. The proportion in absolute poverty in developing countries has been reduced from 40 to 21 percent since 1981. Almost 400 million people have left poverty – the biggest poverty reduction in mankind’s history. In the last 30 years chronic hunger has been halved, and so has the extent of child labour. Since 1950 illiteracy has been reduced from 70 to 23 percent and infant mortality has been reduced by two-thirds.
So the rich get richer, and the poor get richer even faster than the rich. Both Marx and Lenin were wrong. Enter a modern socialist like economist Robert Heilbroner. In 1989 he famously admitted:
“Less than 75 years after the contest between capitalism and socialism officially began, it is over: capitalism has won. The tumultuous changes taking place in the Soviet Union , China , and Eastern Europe have given us the clearest possible proof that capitalism organizes the material affairs of humankind more satisfactorily than socialism.” (New Perspectives Quarterly, Fall 1989)
But Heilbroner did not make peace with capitalism. Zero-sum mentalities don’t die easily. Someone has would have to pay for this success, right? Right. Heilbroner said that he was still opposed to capitalism, but now because it would result in heavy cost to the environment. After having been opposed to capitalism because it would create waste, inefficiency and poverty a socialist could now be opposed to capitalism because it was too efficient and created too much wealth, because that would destroy nature.
This argument is as popular as it is false. First of all, the worst environmental problems in the world are not smokestacks. Much worse is that so many people burn wood, coal, crop waste and dung indoors for heating and cooking. Respiratory diseases kill about 1.6 million people every year. Sure, the modern production of energy creates environmental problems, but it doesn’t kill someone every 20 th second, as this killer in the kitchen does. And diseases transmitted by water kill another 5 million people every year. Just the number of people who die from these two traditional environmental problems is 300 times the number of dead in war every year. These diseases also happen to be eliminated in every industrialised nation on earth.
But furthermore, when we get richer we can also deal with the new environmental problems that new industries create. When we have the resources to both save our children and our forests we begin to care about saving nature, and economic and technological progress gives us the means to do that. The environmental movement is a result of this shift in preferences.
In the last 25 years air pollution in Europe has declined by 40 percent and in the US by 30 percent. We have detailed studies of the air quality in London since the 16 th century, and it deteriorated until 1890, but since then it has constantly improved, and today it is as clean as it was in the Middle Ages. Forests have been growing every decade in the US and the EU since the 1970s. Lakes and rivers are becoming less polluted. The amount of oil that is spilled in the world oceans has been reduced by more than 90 percent since 1980.
Sure, we have big environmental problems ahead of us. But we have even bigger problems behind us, and we managed to deal with them thanks to more wealth, knowledge and technology, and I see no reason why we wouldn’t be able to continue doing that.
So, have we finally seen the benefits of liberalism and capitalism? Well, almost. One of the socialists who has had to see many of his visions failing is the Marxist historian Eric Hobsbawm. He has said reluctantly that capitalism has proven its value when it comes to almost everything. But he has one final objection: Does it make us happy? What about the quality of life? This is the latest stand against free markets.
The argument has been popularised by the British economist Richard Layard and goes something like this:
Economic growth will not contribute to more happiness, because we are most interested in our relative position. T he fact that someone else earns a higher income – which makes them happy- makes others less happy, which forces them to work harder to retain their relative position. In the end we are all richer, but we are no more happy than before, since we cannot all be richer than other people. In other words, a better future will not result in a better future.
We know that there is a dramatic jump in citizens’ reported wellbeing when countries move from a national per capita income of about US$5,000 to $15,000 a year. But then satisfaction levels off, from which Layard concludes that we shouldn’t care as much about growth in rich countries. In fact he wants less restructuring and mobility, and to discourage hard work with high taxes, to give us more time to the things that really make us happier – family and friends.
But is that the right conclusion? Imagine that you are happy because you have a nice party to look forward to next week. After the party, Layard would interview you and see that you are no happier after the party than you were before. And so he would probably encourage you to stop devoting a lot of time and energy to parties, because apparently this doesn’t increase your happiness.
That is a bizarre conclusion. You wouldn’t have that sense of joy and happiness in the first place if you didn’t have nice things to look forward to, interesting dinners and nice parties, for example. Isn’t it possible that the same goes for wealth? The fact that growth does not increase happiness much does not mean that it is useless – it might be the fact that growth continues that makes it possible for us to continue to believe in a better future, and to continue experiencing such high levels of happiness.
From surveys we know that hope correlates strongly with happiness. If you want to meet a happy European, try someone who thinks that his personal situation will be better in five years from now. And we see the same when we compare Americans to Europeans. According to a Harris Poll, 65 percent in the US but only 44 percent in the EU think that their situation will improve in the next five years. Accordingly, 58 percent of Americans are very satisfied with their lives, but only 31 percent of Europeans.
In poor and badly governed countries entire societies suffer from hopelessness. You have few opportunities, no hope that tomorrow will be a better day. Belief in the future grows when poor countries begin to experience growth, when markets open up and incomes increase. That could help explain why happiness reached high levels in the West after the Second World War . With economies growing rapidly, people began to think that their children would enjoy a better life than they had.
Raising taxes to discourage work, and reduce economic growth would be a way of cutting off that progress. Almost all studies show that loss of income and opportunity reduces happiness.
In fact, happiness hasn’t stopped increasing. According to the World Database of Happiness, directed by the leading Dutch researcher Ruut Veenhoven, satisfaction has increased in most Western countries where we have surveys since 1975. There are diminishing returns , but even at our standard of living people do get happier when societies grow richer. And the happiest places are the most individualist – North America , Northern Europe and Australasia .
Another reason for this happiness is that a liberal and market-oriented society allows people freedom to choose. If we get used to it we will get increasingly better at choosing to live and work in ways we like. And if you don’t think you get happier by hard work and mobility, just skip it. A survey showed that 48 percent of Americans had, in the last five years, reduced their working hours, declined promotion, lowered their material expectations or moved to a quieter place. Fast-food or slow-food, no logo or pro logo? In a liberal society, you decide.
That is, as long as we are free to make the decisions ourselves. Those who use happiness studies to put forth an anti-market agenda would deny us that freedom. They would tell us how to live our lives, and therefore they would reduce our ability to make such decisions in the future.
Despite Layard’s criticism against individualism and materialism even he admits that “we in the West are probably happier than any previous society”. Well, in that case, please, please, please, don’t undermine that society.
We are wealthier, healthier and happier than we have ever been. We live longer, we live safer and we live freer than ever. For every successive generation, we have been able to build upon the knowledge, the technology and wealth of the earlier generations, and add our own. We have reduced poverty, created more wealth and increased life expectancy more in the last 50 years, than we did in the last 5 000 years.
I am not just saying that the glass is half-full rather than half-empty. I am saying that it used to be empty. Just 200 years ago slavery, feudalism and tyranny ruled the world. By our standards even the richest countries were extremely poor. The average chance of surviving your first year was less than the chance of surviving to retirement today.
The glass is now at least half-full, and it is being filled as we speak. And if I had it here before me, I would propose a toast to the creativity and persistence of mankind.
In other words: Don’t worry – be happy!
But despite the fact that we are happy, we don’t seem to notice, and we do worry.
When we ask people about what has happened in the world, the majority say that things get worse, poverty is on the increase and nature is being destroyed. Last week I published a survey showing that Swedes think that all the indicators of living standards and the environment that are improving rapidly are in fact deteriorating. When we read the papers we see problems, poverty and disasters. Powerful, international movements oppose globalisation and capitalism because they think they increase misery and hunger. And scholars write books saying that we are all sad and depressed.
If there is something that does not get better in the world, it is our world view. Why? If the adventure of mankind is such a triumph, why don’t we know that? Why do we have a tendency to think, like Marx, Lenin, Heilbroner and Hobsbawm that the progress we witness must result in some other form of problem? I will attempt to give you a few explanations for this amazing and disturbing fact.
The problem of bias
The first and most obvious villain in this story is evolution. Natural selection has turned mankind’s focus towards problems. It’s easy to understand that early human beings who sat down after a good meal and relaxed and enjoyed life might not find enough food to make it through the next day, and that they ran the risk of being eaten by a lion. Whereas those who were always stressed and looked for problems, who always hunted and gathered food a bit more just in case, and who always kept looking suspiciously at the horizon were the people who found shelter before the storm or before the lion struck. So they survived, and passed on genes full of anxiety and stress to us.
It’s important to be aware of problems, because problems mean that we have to act. If my house is on fire, I need to know it now. The fact that my house is nice is not as important. If I hear information that there is something in the food that could kill my children, I need that information now. The fact that there are some nice, new dishes on the market is not as important.
Mankind is a problem-solving species. Those who solved problems survived. And it means that we just keep looking for them. The moment we solve an old problem we don’t stop and enjoy the fact that we triumphed, we look for the next worse problem, and begin to work to solve it. We don’t lie awake at night and contemplate the fact that we have been able to deal with polio and tuberculosis, we lie awake at night and think about how to deal with HIV/AIDS, and worry about what bird flu might mean in the future. We don’t think about how great it is that we have eradicated malaria from the developed countries, we think about how horrible it is that so many people die from malaria in developing countries every day.
The American writer Gregg Easterbrook has pointed out the fact that old problems, horrible as they were at the time, seem less threatening in retrospect, because we know that we solved them. But the problems of today are uncertain and unsolved, and so stay in our mind.
A few weeks ago, the first story in the leading news shows on television was that there is a “growing environmental threat” in Europe . The problem was shipping, which is rapidly becoming the biggest emitter of sulphur dioxide in Europe .
However, if you listened closely to the report, you understood that this was not because of growth of emissions from shipping – it did grow but very modestly – but because of a rapid reduction in emission from other sources. Total sulphur dioxide emissions in Europe (including shipping) have been reduced by about 60 percent in 15 years. So the real story was one about a dramatic improvement in environmental conditions – but shipping was now the thing we have to deal with, and so it was news.
I am an optimist. I happen to believe that this perceptual bias is a good thing. That’s what keeps us alert, so that we solve problems, and improve the world. But we have to understand that this also means that our minds are constantly occupied by problems. And therefore we think the world is worse than it is.
Progress also always creates some new challenge, and problem-solvers think more about the challenges than the progress. We live longer than ever. Isn’t that fantastic? No, because it results in higher costs for pensions and health care. At last poor countries make economic progress. Isn’t that wonderful? No, because we are now afraid that Polish plumbers and Indian programmers will take our jobs. There is always something to be scared about. In the 1970s, when temperatures were declining, we worried about a new ice age. Now they are increasing and we worry about global warming. We used to worry about everybody who was depressed, now new anti-depressant drugs have reduced suicide in rich countries by a fifth. And so we worry about so many people taking pills.
The media bias
The media exploits this interest in problems and disasters. We want to hear the latest, horrible stories, because our stone-age brains think that this is important information upon which we must act. At the turn of the Millenium, a survey from New York University made a list of “Journalism’s Greatests Hits”. Would you expect news stories about new vaccines, fantastic inventions, the rise in living standards, or the spread of democracy from 0% of the countries 100 years ago to 60 % today? You would have been disappointed. The greatest hits were all about war, natural disasters, dangerous chemicals and unsafe cars.
Risks, horrible acts and disasters are easily dramatised and cheap to produce. That is why crime is such a popular theme on the news. Studies from the US show that the more time people spend watching the TV news, the more they exaggerate the extent of crime in their cities. A fascinating study about Baltimore showed that 84 percent feared that criminals will harm them or their loved ones, but at the same time almost everybody, 92 percent, said that they felt safe in their own neighbourhoods, of which they have first-hand knowledge. They all think that there is a lot of crime in Baltimore , but they all think that it takes place somewhere else in the city, in the places they only know about from the media.
These results appear again and again in surveys. People think that the environment is being destroyed, that the economy is going to bits and Germans think that the reunification of Germany was bad for most people. But they also think that their local environment is good, that their personal finances are improving, and that German reunification was good for their own personal situation. Problems and disasters are always somewhere else. And if we all think so, we must all be wrong.
The problem with a globalised world is that there is always a flood somewhere, there is always a serial murderer somewhere, and there is always starvation somewhere. And therefore there is constant supply of horrors to fill our TV screens. If you don’t know the background or study the statistics, it’s tempting to conclude that the world is getting worse.
In a way, I think that the anti-globalisation movement is a result of this globalisation of information. At the same time that extreme poverty has been cut in half in developing countries, so many people think that poverty is on the increase, because they see the poverty for the first time, on television. And partly we care about it now because poor Vietnamese and Chinese make the shirts we wear. If you don’t understand the context, you think that it is the fact that they make our shirts that made them poor. Despite, as I’ve said, the fact that people who work for an American multinational in a low-income country earn eight times more than the average income in that country.
Exceptions more interesting than the rules
Another perceptual bias strengthens this focus on problems, in our minds and in the media. Whatever is new is news. We are interested in exceptions. We don’t see the things that surround us every day. We see the new things, the strange, the unexpected. It’s natural. We don’t have to explain and understand normal, everyday things, but we need to understand the exceptions. We don’t tell our families about how we got back home from work – unless something really strange happened on the way back.
This means that we always have a cognitive bias that distorts our world view. We notice the things that stand out. In a world that is getting better, we tend to emphasise the problems that remain, even more. We don’t read in the papers that a train arrived safely on time. We read about it when there is a train crash. We don’t hear about someone who walked home from a pub. But we hear about it if he is beaten and mugged.
That a plane landed safely was news in 1903, when the Wright Brothers’ succeeded for the first time. But since December 1903, it has only been news when a plane crashes. Therefore, we exaggerate the frequency of crashes. Since the Second World War we have never seen as few plane crashes as we did in 2004, despite a dramatic increase in the number of flights. The number of crashes in the 1970s was four times the number today, despite the fact that we have four times more flights today. But don’t expect to learn this in the media. Expect instead huge reports the few times a crash happens. That a dog bites a man is not news, that a man bites a dog is.
The French liberal thinker Tocqueville observed this mental mechanism in the early 19 th century when he noticed that people began to discuss the problem of poverty during the industrial revolution. At first he thought that this was strange, since the growth of the manufacturing system meant higher wages and cheaper goods. Poverty was decreasing, but at the same time it was seen as a worse problem than before.
His conclusion was that this happened not despite but because poverty was being reduced. In earlier times, poverty was seen as something given. Something that was everywhere, and something that we just had to learn to endure. Religions evolved that explained the virtues of poverty. But in the 18 th and 19 th centuries, industrialisation created unprecedented wealth and millions were lifted out of poverty. The result was that the poverty that remained was perceived as so much worse. Now that people could see that the poor aren’t always with us, they began to wonder why we should put up with it. It wasn’t necessary, it could – and should – be changed. Poverty was not a given any more, it was now a social problem.
This created the impression for a long time that the industrial revolution created bigger social problems. Well, in a way it did – by making poverty an exception it created poverty as a problem in the minds of people.
Now, apply Tocqueville’s discovery on the fact that poverty is being reduced rapidly in the developing countries, and the fact that people suddenly devote so much attention to the problem of poverty in developing countries.
Of course, several groups, institutions and special interests from both the left and the right use our mental bias to further their agenda. If they can show that there is a problem or a possible disaster somewhere, they can catch our interest and get us to act, NOW.
Would schools be a little bit better with extra money? Who cares? Will they fail miserably and our children become criminals without the extra money to schools? Ok, let’s act now! Do the new taxes to finance this cause marginally lower investment and margins for tax-payers? Who cares? Do they destroy the economy and force people from their homes? Abolish them now!
All sides have an interest in exaggerating the problems in our world. The same goes for scientists, scholars and public authorities. If they want more money for their research, they have to show that there are great risks in the field that they study, and that it would be very dangerous not to study their specific subject more closely.
The same goes for global institutions. In September the United Nations Development Program, UNDP, released its annual report on human development. The press statement talks about the places with growing problems and about the 18 countries that have lagged behind. The report summarises the worldwide situation with statements like ”the overall report card on progress makes for depressing reading” and ”the world is heading for a heavily sign-posted human development disaster”.
But how has the poor countries developed as a whole? Hidden away in another place of the report, with much less dramatic wording, the UNDP concludes:
”Looking back over the past decade the long-run trend towards progress in human development has continued. On average, people born in a developing country today can anticipate being wealthier, healthier and better educated than their parent’s generation.”
It goes on to say that the last 15 years in poor countries have seen less poverty, reduced infant mortality, better access to clean water, less illiteracy, fewer conflicts and more democracies. This is what they summarise as a “human development disaster”!
They can do that because it is a disaster compared to hopes for even faster progress in even more places. But if you are not a very attentive reader, you get the perspective that everything is getting worse, and of course that is the impression the UNDP wants to create. Because it thinks that only the prospect of worldwide disaster will force us to act.
I happen to believe that the opposite is true. If we constantly spend more time and resources to deal with world problems and the UNDP tells us that it hasn’t had the slightest effect, then why should we continue?
But that is not the point I am interested in, the point here is to understand the kind of threats and warnings that special interests engage in, and how this distorts our worldview. Some reveal this openly. In an interview in Discover Magazine in October 1989, an often quoted environmentalist scientist and an expert on climate change, Professor Stephen Schneider, explained that:
”To [save the planet] we need to get some broadbased support, to capture the public’s imagination. That, of course, entails getting loads of media coverage. So we have to offer up scary scenarios, make simplified, dramatic statements, and make little mention of any doubts we might have… Each of us has to decide what the right balance is between being effective and being honest.”
Here is a thought-experiment to highlight the process. Imagine that my conclusion in this lecture is that this mental bias is a bit problematic, but we can probably live with it. Do you think my lecture would get more or less attention than if my conclusion would be that this is horrible, and it will lead us all to disaster?
Creative destruction looks destructive
As if this wasn’t enough – this cognitive bias towards problems and exceptions, and that the media and interest groups exploit it to the full, there is another problem: We focus on the short term and the personal, rather than the long-term and universal. There are things that we see, and there are things that we don’t see, to use the formulation of the 19 th century French economist Frédéric Bastiat.
Let me exemplify this with an American documentary that I recently discussed in a television debate. The film, produced by the Public Broadcasting Service, was about the fact that Wal-Mart buys most of its goods from China . This was portrayed as a disaster for America , and for almost an hour it interviewed workers and factory owners who lost their jobs and businesses because of cheap Chinese imports. 1-0 to the anti-globalists.
It is true that an American manufacturing worker might lose his job because of this, but there are other effects that the film didn’t show. A Chinese worker gets a job, of course, and if he does he will spend his new income somehow, which means more jobs for export companies and/or Chinese companies. American consumers get cheaper prices, and when they do they can spend their extra purchasing power on new goods and services, and so an unemployed American can get a new job in a new sector. Chinese worker – export company –consumers – new sectors develop: Four good results, in other words 4-1 to the globalists and free-traders.
But we tend not to see those effects, because they aren’t as immediate and personal. We see a factory closure and a worker losing his job, that’s real, that’s visible, it’s flesh-and-blood, and we can relate to it. That other workers get new jobs, that purchasing power improves, that new sectors are created, that’s more abstract, it happens later on and the effects are widespread, and not as easy to portray as news, or to relate back to the fact that we have more free trade.
Capitalism works by creative destruction. We constantly create new and better goods and services and new methods of producing and trading. But to be able to do new things in new ways, we have to stop doing old things in old ways. The problem is that we tend to notice and report the destructive part of this, not the creative part. Americans have talked more about the one million jobs that they have lost in manufacturing since 1970 than about the 60 million better-paid jobs that they gained in other sectors in the same time.
This mentality is another reason why the world looks worse than it is, and why capitalism will always find its opponents. The more it creates and improves, the more we will see that it also undermines and destroys.
A few years ago a Swedish anti-globalist explained that he had been in a debate where the pro-capitalists had “constantly referred back to facts”, but the anti-capitalists had been more successful because they “used examples from reality”. Facts vs examples apparently. Aggregated statistics and broad abstractions vs flesh and blood. And I am not sure about who wins such a debate. We human beings like narratives and examples that we relate to. If an audience hears that there are almost 400 million fewer people in absolute poverty today than in 1981, but also hears a dramatic story about a specific individual who has fallen into poverty during this time – it’s not certain that they think that poverty has been reduced. And because of all the mechanisms and mentalities I have discussed, we don’t hear the first thing nearly as often as the latter.
Considering this mental and perceptual bias, I find it amazing that liberalism and free markets have been able to survive to the extent it has. It must produce even greater benefits than we think, to overcome all this unconscious opposition. But it is certainly an obstacle that makes liberalisation more difficult. What can we do about it? How can we learn to live in a world, and with a mind, that constantly exaggerates problems, disasters and risks? I think that our greatest ally is knowledge. Knowledge about our mental bias can teach us to bypass it. For example, every time we hear that a problem is getting worse, we should try to look at long-term trends to see if this is really true, or if this is just an exaggeration of a natural short-term variation. And every time we hear about risks and possible disasters it is just as bad to believe it completely as it is to ignore it completely.
But we also need knowledge about the things that improve our world. This is where even good thinkers fail. I mentioned Gregg Easterbrook. He has written a great book called The Progress Paradox, about the strange fact that people feel worse even though things get better. I’ve learned a lot from it, even though I have my reservations. One of his explanations for this mystery is a widespread sense of “collapse anxiety”. It is a sort of bad consciousness we get from leading a good life, a fear that our wealth is unsustainable, and that some sort of economic crash, environmental collapse or other disaster might end it any time. Perhaps Marx, Lenin, Heilbroner and Hobsbawm suffered from collapse anxiety?
But I don’t agree that this is some sort of psychological problem. I think it is a logical conclusion if you don’t understand where this wealth comes from. Unfortunately, I don’t think that Easterbrook’s book helps the reader understand this. It all seems like we’ve just happened to be lucky and struck gold, or that we have stolen this from someone else. If so, it’s not unreasonable to think that it might disappear any day.
To regain the belief in progress and the future, we have to understand what creates it. It is not a coincidence, it is capitalism. It is the fact that people who are free create, the fact that we are problem-solvers, and the more people alive who are free to think and innovate, the greater the chance that some of them will develop useful knowledge, technology and wealth, and if the incentives are correct, if people reap the rewards of their labour, they will use and implement this, to change our world for the better. And in a world where billions are free to create, the chances of a better world are greater than ever. And therefore, we should believe in the future. Not naively, not like determinists thinking that nothing can go wrong. We know that conflicts, terrorism, disease and natural disasters can and will cause enormous damage. But as a recognition that mankind is smart, and that a free flow of information and of markets make us even smarter. And that we deal with problems better if we are free and wealthy. Each generation builds on the achievements of the past, and so have we have constantly more to build upon. Therefore, the greatest progress is yet to be made.
The long-run prospects are amazing. Today we have more people living longer lives in freer societies than ever, and we have more scientists alive today than lived in all previous periods combined, and they all get an education that is almost as long as a lifetime in earlier periods. Biotechnology, nanotechnology and robotics will create massive improvements. We will be richer, we will live longer and we will be healthier. Continents that we thought were doomed to misery will soon have the living standards we have today.
We know that our world will improve in ways and with technologies that are just as unpredictable to us as a computer or an airplane would have been to our ancestors. But at the same time, these perceptual and mental mechanisms mean that a lot of people will constantly complain, and say that things are getting worse. And every time we solve a problem, they will look for a new one.
But we don’t have to be like that. We can safely presume that when we read about a plane crash or a disaster in the papers, that despite the horrors of that particular story, the fact that this is news means that these are the exceptions and that the world is still fairly safe. When we see others complaining and focusing on difficulties, we can safely conclude that it means that these are the exceptions in this world, and that their focus and efforts mean that some problems are about to be solved.
Since I am an optimist, I would like to conclude with that comforting thought. That perhaps some sort of discontent is a precondition of progress.
It is worth giving the last word to one of the most insightful thinkers of all time, the 19 th century liberal historian and politician Lord Macaulay, whose Whig interpretation of history has been condemned as a naïve, Panglossian idea that things constantly improve, but which was actually a recognition of what individuals can create when free. When Macaulay wrote his history of England, he couldn’t believe why the English thought that the past was the good old days, and he warned later generations – us – not to romanticise his own time, which, despite being better than the past, was no utopia. And he wrote this:
“The general effect of the evidence which has been submitted to the reader seems hardly to admit of doubt [that living standards are improving]. Yet, in spite of evidence, many will still image to themselves the England of the Stuarts as a more pleasant country than the England in which we live. It may at first sight seem strange that society, while constantly moving forward with eager speed, should be constantly looking backward with tender regret. But these two propensities, inconsistent as they may appear, can easily be resolved into the same principle. Both spring from our impatience of the state in which we actually are. That impatience, while it stimulates us to surpass preceding generations, disposes us to overrate their happiness. It is, in some sense, unreasonable and ungrateful in us to be constantly discontented with a condition which is constantly improving. But, in truth, there is constant improvement precisely because there is constant discontent. If we were perfectly satisfied with the present, we should cease to contrive, to labour, and to save with a view to the future.”
Johan Norberg is the head of political ideas at Swedish think tank, Timbro, and the author of the award-winning and best selling book In Defence of Global Capitalism, which has been translated into several different languages and was the basis for the UK Channel 4 documentary Globalisation is Good. The Centre for Independent Studies is republishing In Defence of Global Capitalism for an Australasian audience to coincide with the Lecture.
The John Bonython Lecture Series
CIS established the annual John Bonython Lecture (named in honour of the Centre’s founding Chairman) in 1984 to examine the relationship between individuals and the economic, social and political forces that make up a free society. The JBL is delivered by leading thinkers from around the world and has become one of the most anticipated events on the Centre’s events calendar. Previous lecturers have included eminent American foreign affairs commentator Robert Kagan, Czech President Vaclav Klaus, Nobel Laureate James Buchanan, Francis Fukuyama and Rupert Murdoch.
The Centre for Independent Studies
The Centre for Independent Studies is Australasia’s leading independent public policy research institute or ‘think tank’. Founded in 1976 by Greg Lindsay, the Centre supports the principles underlying a free and open society by promoting individual liberty, a free market economy and democratic government. With a particular focus on Australia and New Zealand, the Centre’s research, publications and events encourage debate and provide practical recommendations for public policy reform.
CIS’ research agenda spans economic, social and foreign policy. The Centre’s work is regularly referred to in the media and discussed by academics, students, politicians, policymakers and the general public. As well as publishing books, papers and the magazine, Policy, CIS also hosts a range of events aimed at promoting debate of important policy matters.
Apart from the John Bonython Lecture, the Centre’s other annual events include: the Big Ideas Forum, The Acton Lecture on Religion and Freedom, Consilium and the CIS Lectures. The Centre’s Liberty and Society student programme brings together the brightest young minds and the leaders of to morrow for a weekend exploring the ideas surrounding a free society.
For more information on all CIS activities visit www.cis.org.au