The Capitalist Manifesto E-Book

Johan Norberg

• Herausgeber: Atlantic Books
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2023

Seitenzahl: 439

Beschreibung

'This book is an excellent explanation of why capitalism is not just successful, but morally right' Elon Musk 'A joyful counterblast... packed with vivid examples... decisive' The Economist 'Compelling... Masterful' Daily Mail 'A timely reminder of the benefits of free and open trade' Financial Times A vital exploration of capitalism and the benefits it brings to global society. Marx and Engels were right when they observed in The Communist Manifesto that free markets had in a short time created greater prosperity and more technological innovation than all previous generations combined. A century and a half later, all the evidence shows that capitalism has lifted millions from hunger and poverty. Nonetheless, today's story about global capitalism, shared by right-wing and left-wing populists - and by large sections of the political and economic establishment - accepts that prosperity has been created, but says it ended up in far too few hands. This in turn has made it popular to talk about the global economy as a geopolitical zero-sum game, where we must fight to control new innovations, introduce trade barriers and renationalize supply chains. More generally, capitalism is also accused of fuelling glaring inequality, populist revolts, climate change and China's global conquest. In this incisive and passionate investigation, Johan Norberg instead restates the case for capitalism and the vital role played by the free market in today's uncertain world. Ultimately, he argues that a move away from global capitalism would not only squeeze the growth out of the economy but also deepen an already large social exclusion for the vulnerable - for the world's poor, it would be a killing blow.

Leseprobe

The Capitalist Manifesto

Johan Norberg is a historian, lecturer and commentator. His books, which have been translated into thirty languages, include the international bestseller Progress, and Open, which was a Book of the Year in The Economist. Norberg is a senior fellow at the Cato Institute in Washington DC and regularly writes for publications such as the Wall Street Journal, Reason and Spectator.

‘Norberg’s paean of praise for the market economy is compelling. With masterful command of statistics, he demonstrates just how much the global switch away from state domination... has led us to as rapid a decline in levels of absolute poverty as has been witnessed in history.’ Dominic Lawson, Daily Mail

‘A joyful counterblast... packed with vivid examples... decisive’ The Economist

‘A timely reminder of the benefits of free and open trade’ Financial Times

‘Updates the case [for capitalism] in an utterly convincing way’ Fraser Nelson, Daily Telegraph

‘A vigorous and persuasive defense of capitalism… Norberg’s elegant manifesto has much to commend it’ Spectator

‘This book is an excellent explanation of why capitalism is not just successful, but morally right.’ Elon Musk

‘The Capitalist Manifesto is essential reading for everyone that wants to understand global capitalism. You may not agree with everything in the book, but you have to understand and confront the arguments Norberg makes. This is a book that people will be debating not just in a year’s time, but a decade’s time.’ Andrew O’Brien, Director of Policy and Impact, Demos

‘Makes the definitive case for capitalism and repudiates common arguments offered against the system.’ Commentary

Also by Johan Norberg

OpenProgress

First published in hardback and trade paperback in Great Britain in 2023 by Atlantic Books, an imprint of Atlantic Books Ltd.

This paperback edition published in 2024 by Atlantic Books.

Copyright © Johan Norberg, 2023

The moral right of Johan Norberg to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act of 1988.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of both the copyright owner and the above publisher of this book.

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Every effort has been made to trace or contact all copyright holders. The publishers will be pleased to make good any omissions or rectify any mistakes brought to their attention at the earliest opportunity.

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A CIP catalogue record for this book is available from the British Library.

E-book ISBN: 978 1 83895 791 9

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To classical liberals of all parties

CONTENTS

Preface: What happened to Reagan and Thatcher?

1. Life under savage capitalism

2. At each other’s service

3. The silence of the factory whistle

4. In defence of the 1 per cent

5. Monopoly or Minecraft?

6. Picking losers

7. China, paper tiger

8. But what about the planet?

9. The meaning of life

Epilogue: The Emperor’s singing contest

Notes

Index

Preface

WHAT HAPPENED TOREAGAN AND THATCHER?

‘No one is particularly keen on globalization now, except possibly Johan Norberg.’

PO TIDHOLM, SWEDISH PUBLIC RADIO, 29 MAY 2020

Twenty years ago I wrote a book in defence of global capitalism. I never thought I would do that. Capitalism, I had thought, was all about greedy monopolists and mighty landlords. But then I began to study the world and realized that it was in the least market-based societies that such elites were protected from the free choice of citizens and therefore had the greatest power. Paradoxically, it was capitalism – in the form of free markets and voluntary agreements based on private ownership – that threatened the powerful. The argument for capitalism is not that capitalists always behave well – if that were the case, we could safely give them monopoly power – but that they often do not behave well unless they have to. And it is freedom of choice and competition that force their hands.

In fact, Marx and Engels were right when they observed in that other manifesto, the communist one of 1848, that free markets had in a short time created greater prosperity and more technological innovation than all previous generations combined and, with infinitely improved communications and accessible goods, free markets had torn down feudal structures and national narrow-mindedness. Marx and Engels realized much better than socialists today that the free market is a formidable progressive force. (Unfortunately, they were not sufficiently dialectically minded to understand that communism was a reactionary counterforce that would bring societies back to a kind of electrified feudalism.)

A century and a half later, global capitalism made it possible for ever more people to free themselves from lords and monopolies. The growth of markets gave them the opportunity to choose, to bargain and to say no for the first time. Free trade gave them cheaper goods, new technologies and access to consumers in other countries. It lifted millions and millions from hunger and poverty.

However, at the turn of the millennium capitalism was under fierce attack. An international anti-capitalist movement wanted the government to take more control of the economy with a barrage of tariffs, regulations and taxes. Huge demonstrations took place against the World Trade Organization’s negotiations for more open markets. Free trade, foreign investment and multinational corporations were accused of making the poor poorer. Attac, a French left-wing protectionist movement, spread rapidly throughout Europe. I saw them as a reactionary counterforce that would deprive poor societies of the freedoms they had just begun to take.

I compiled my arguments against them in the book In Defence of Global Capitalism, published in 2001. It was a classical liberal manifesto about why global justice takes more capitalism, not less. Timing is everything and the book became an international bestseller, translated into more than twenty-five languages, including Arabic, Persian, Turkish, Chinese and Mongolian.

And eventually, the globalization debate began to change. Supporters of open economies started fighting back. The critics were often driven by sincere anger about global poverty and injustice. We free traders could start from this common ground and show – with realistic explanations and clear statistics – that we needed freer markets to fight poverty and hunger. The more we discussed, the more it felt as if the opponents realized that it was not as simple as they had assumed, and parts of the audience began to change their mind. They had associated globalization with the status quo, the EU, the World Bank and the IMF, and were taken aback when challenged by opponents who were equally dissatisfied with today’s injustices and offered radical solutions. Soon, the most common position in the debate was that poor countries need more trade, investment and entrepreneurship to develop economically and socially. As UN General Secretary Kofi Annan stated, the problem was too little globalization, not too much.

Soon, Attac lost its popular appeal and faded away. The British anti-capitalist George Monbiot apologized for his protectionism with an article in the Guardian: ‘I was wrong about trade’. There he explained that a world without the WTO would probably be more unfair. And soon, a major campaign against the EU’s agricultural protectionism was launched by the British charity Oxfam, which usually leans left and has been a critic of free markets.

‘I’ve had an epiphany in recent years about commerce. It has upended everything for me,’ declared Bono, the Irish rock musician and activist against global inequality. ‘In dealing with poverty here and around the world, welfare and foreign aid are a Band-Aid. Free enterprise is a cure. Entrepreneurship is the most sure way of development.’ It was a conversion that surprised not just his fans but himself too: ‘Rock star preaches capitalism. Sometimes I hear myself and I just can’t believe it.’1

It goes without saying that this was not just my doing. There were many others who fought day and night and there were many other factors that came into play, especially the simple fact that globalization delivered. Poverty declined in countries that integrated themselves into the global economy, faster than ever before. Oxfam even publicly denied that their new stance was a result of having been converted by me. And Bono has surely listened to me less than I have listened to U2.

The end of globalization was called off, but there was to be no happy-ever-after ending. The twenty years since I wrote my book have been a rough ride for the planet. We experienced the greatest financial crisis of modern times in 2008–9, a major pandemic that shut down the world and killed millions, chaos in the Middle East, terrorist attacks, the migration crisis, geopolitical tensions and the return of large-scale wars of aggression, as Putin invaded Ukraine. During the same period, global warming’s calamitous effects on the planet began to make themselves felt for real.

This has all contributed to a new sense of vulnerability and a renewed suspicion of an open world economy. It inspired a longing for strong men and big governments to protect us from a dangerous world. WTO negotiations stalled completely, its dispute settlement mechanism was undermined by the US and, after the financial crisis, trade’s share of GDP stopped increasing for the first time since World War II. Global economic freedom stagnated and the wave of democratization was ended by an authoritarian backlash.

In China, a thirty-year reform process was reversed, and the state began to regain lost ground. In the Western world, once again it was said that globalization has gone too far and that businesses must be controlled. Where international summits previously talked about opening up, deregulating and liberalizing (even though it was not always translated into action), language was suddenly blurred and fuzzy code words such as inclusivity, sustainability, strategic autonomy and ‘partnership’ between this and that pushed out concrete reform agendas.

Shortly afterwards, a peculiar intellectual swap took place. After the leftist offensive against globalization stumbled, the opposition suddenly migrated to the right. Fighting protectionism is like fighting a skin disease, as the US economist Paul Samuelson once said: no sooner do you cure it in one place than it appears somewhere else. A new generation of conservative politicians now sound very much like Attac did in 2001: the world is dangerous, there is no longer anyone in charge and free trade is destroying local traditions and good jobs. A ‘globalist’, US president Donald Trump explained, is a person ‘frankly not caring about our country so much’.

The rapid progress in poor countries may have shown the West that those countries could benefit from globalization, but since the myth persists that the economy is a zero-sum game that assumes that someone’s gain is always another one’s loss, many have concluded that we in the rich world must be the losers. The worldview is the same, the roles are just reversed – twenty years ago free trade was considered bad because we exploited them, now it is considered bad because they exploit us. Twenty years ago, capitalism was wrong because supposedly it made the world’s poor poorer. Now it is wrong because it makes the poor richer.

When I originally presented my pro-market, pro-trade and pro-immigration arguments I was often attacked for being on the ‘crazy right’. When I express the same arguments today, I am sometimes accused of being ‘woke left’. I’m not the one who’s changed. But since right-wing nationalists do not have much more of an economic agenda than the urge to stop the world so that they can get off (and to throw out immigrants), their rage against globalization has created a new front for what used to be a classic left-wing programme of government intervention. To provide us with a false sense of security, governments have made trade, migration and construction more difficult, all but ensuring slower growth, hurting the very people politicians claim to be protecting.

Today’s dominant narrative about global capitalism – shared by right-wing and left-wing populists but now also, in a milder form, by large sections of the political and economic establishment – does not deny that prosperity has been created during these twenty years, but it says it did end up in far too few hands and that those hands belong to the wrong people. The big global winner is China, they argue, which took our factories and our jobs – and it is a dangerous winner, stealing our technology and undermining our national security. This in turn has made it popular to talk about the global economy as a geopolitical winner-takes-all game, where we have to introduce trade barriers and renationalize value chains.

According to this narrative, growth in the West benefited mainly the rich, while the wages of the general public have stagnated for decades. Inequality has skyrocketed and employees have become a new precariat that has to drag itself along, insecure and stressed out. The factories have closed and the working class has been wiped out, sometimes even physically, by ‘deaths of despair’ (a term we’ll look at in chapter 3). In the market, monopolies have returned, predominantly in the form of a small circle of untouchable tech giants that have entered more and more areas and crushed the sympathetic mom-and-pop stores.

Apparently, it’s that bad. And that is before we factor in global warming’s effects on the planet. To counteract all this, we are told that big government must now return, to regain control, redistribute resources and, with enlightened industrial policy, steer resources to particular national industries and green technology.

This is what the debate looked like even before the pandemic. When the new coronavirus ravaged the planet, suspicion of the outside world and free trade exploded. Governments began to close their borders and demand that supply chains be repatriated. ‘I don’t want to talk about a victory lap,’ Trump’s rather enthusiastic business secretary said about the ravages of the virus, but ‘I think it will help to accelerate the return of jobs to North America.’ Financial Times’ global business columnist Rana Foroohar declared that ‘Globalisation as we’ve known it for the last forty years, has failed.’

Governments, meanwhile, decided that the way to protect the economy was bailouts for everyone – first for the financial sector, then for everybody else. People got used to the idea that gains are to be privatized but a growing share of losses are to be covered by taxpayers or central banks. When they run out of money, they just print more and when this creates inflation, people need another round of bailouts to compensate for higher prices. And so on. The pandemic, explained the Swedish Prime Minister Magdalena Andersson, was the definitive ‘end of the neoliberal era inaugurated by Thatcher and Reagan’.

We don’t just hear that from Social Democrats these days. Now right-wing populists, journalists and economists also claim that ‘the Reagan/Thatcher era is over’. These two leaders are often used as symbols of the era of economic liberalization in the early 1980s, and I agree that it feels an awful lot like that era has come to an end.

Donald Trump’s advisor Stephen Moore declared that the Republicans are no longer Reagan’s party but Trump’s, and that’s exactly how the party comes across in their recent agitation against free trade, immigration and tech companies, not to mention lies about election fraud. (Reagan once called the peaceful transfer of power the ‘magic’ of the free world.) Thatcher’s Tories have abandoned the European single market she was once instrumental in developing, and have simultaneously abandoned many other economic orthodoxies, toying with more active industrial policies and ‘Buy British’ slogans – a new attitude that Boris Johnson in an unguarded moment happened to summarize as ‘fuck business’.

His short-lived successor, Liz Truss, who famously declared that large-scale imports of cheese were ‘a disgrace’, tried to invoke the Iron Lady, albeit through her boldness rather than her policies. Instead, Truss railed against the ‘consensus of the Treasury, of economists, with the Financial Times’ that budgets should be balanced and went on to doom her premiership with a massive, unfunded package of energy subsidies and tax cuts, which markets refused to finance.

Reagan and Thatcher are not usually declared dead as part of an objective assumption about which way the winds are blowing. These declarations are formulated as if their era was some kind of ideological deviation, when wild theorists and radicals dragged politics in a dogmatic neoliberal direction, and as if now we can finally return to common, interventionist sense. That is not what the reform era was about. Although liberal economists inspired many of the changes associated with Reagan and Thatcher, their era was never an ideological experiment but a pragmatic attempt to deal with the fact that an earlier model of inflation and regulation, along with a constantly expanding government, was in free fall.

One sign of this is that the ‘Reagan/Thatcher era’ started before Reagan and Thatcher. It was actually initiated by their political opponents. It was Reagan’s Democratic representative, Jimmy Carter, who in his first State of the Union speech in 1978 declared: ‘bit by bit we are chopping down the thicket of unnecessary federal regulations by which the government too often interferes in our personal lives and personal business.’2 It was the Carter administration that deregulated aviation, railways, trucking and energy (and craft beer! Before him you would not have been allowed to drink a Samuel Adams). It was Carter who appointed Federal Reserve chairman Paul Volcker, who declared war on inflation in October 1979.

In Britain, Thatcher’s predecessor, Labour’s James Callaghan, explained to party members in 1976 that they used to believe recessions could be ended through higher spending and more inflation: ‘I tell you now, in all candour, that that option no longer exists,’ and in so far as it ever did exist, it was only by ‘injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.’3 Thatcher’s fight against the unions to close 115 loss-making and environmentally damaging coal mines made her admired and hated, but did you know that the two previous Labour prime ministers, Callaghan and Harold Wilson, closed no less than 257 coal mines in total?4

It was not libertarian ideologues that carried out the great liberalizations of the 1970s, 80s and 90s. Socialist parties began to de-socialize India, Australia and New Zealand. Protectionist parties opened the economies of Brazil and Mexico. In China, Vietnam and Chile, economic liberalization was carried out by dictators, whose hearts did not in any way beat for liberal values. In most cases, these were parties and leaders who would have loved to be able to continue to control their people and the economy. But the idea of big government had an annoying problem that they could not escape – a problem that the Swedish Social Democratic Minister of Finance Kjell-Olof Feldt once summed up when speaking of the dreams of democratic socialism in his country: ‘To put it simply, it just turned out to be impossible.’

And that’s the point. It may sound irresistibly appealing. It is always popular when someone promises us the world, bailouts and free stuff. But it just does not work. Still doesn’t. There are no free lunches, and wealth has to be created before it can be distributed. Sooner or later you always run out of other people’s money, as Thatcher put it, and if you print more then sooner or later you’ll ruin its value. And, as Liz Truss learned, sooner or later you’ll run out of Thatcher quotes to defend everything-to-everyone budgets that just don’t add up. Debts pile up and inflation rises, and you are going to have to start thinking instead about how wealth is created.

That will not stop new generations of politicians from repeating these mistakes. As memories of previous failures fade, the temptation to try again is often overwhelming. And with the simmering hostility towards foreigners and businesses, it might come in the form of outright irrational attempts at protectionism, top-down industrial policy, clumsy regulations and confiscatory taxes. It would squeeze growth out of the economy and hurt the most vulnerable. It would sabotage a global economy that has turned out to be the best hope for human progress.

Yes, we have had twenty terrible years, full of shocks, pandemics and war. And yet, in terms of human well-being, they have been the best twenty years in human history. Extreme poverty has been reduced by 70 per cent. This means that we got more than 138,000 new arguments for global capitalism every day since I wrote my first defence of it. That’s how many people have risen out of poverty every day during these two decades: 138,000 men, women and children. Every day. Despite all these shocks and obstacles and despite the increase during the pandemic. That’s progress worth fighting for, and encouraging in more places.

That is why these lessons have to be relearned, and the arguments against a reversal have to be restated. At least every twenty years we need a capitalist manifesto that makes the case for economic freedom, applied to the problems and conflicts of the present era. That’s why I wrote this book. For all these reasons – and one more: some time in the last decade, economic issues stopped being a priority. Obviously, the debate continued, but it became a sideshow. Something else has captured hearts and minds and tweets. When the Cold War conflict between capitalism and communism was over, many felt that economic policy could disregard ideas and be reduced to a question of which party has the right set of skills and administrative dexterity. Instead of the struggle for freedom or class war, we got culture wars. Where we once discussed where we were going, everyone suddenly started asking themselves who we are – and who does not fit in. Both the statist left and the nationalist right started engaging in some sort of purge of everything that does not fit into their pure, safe world. Borders would be closed, statues toppled, dissenters cancelled, ‘woke’ businesses threatened into silence.

The culture war is a zero-sum game about what kind of homogeneous identity should be imposed on everybody else. Capitalism, on the contrary, is a positive-sum game that creates growing, dynamic societies and so gives greater opportunities for all groups to live according to their identity and realize their visions and projects. Instead of ‘victory or death’ or ‘silence is violence’, the liberal capitalist puts ‘live and let live – as long as you do not pick my pocket or break my leg’.

This book is an attempt to distract you from the culture war and get you back to the issues that are decisive for our future.

Why ‘capitalism’? Words have an unfortunate tendency to confuse. Free market capitalism is not really about capital, it is about handing control of the economy from the top to billions of independent consumers, entrepreneurs and workers, and allowing them to make their own decisions about what they think will improve their lives. So careless talk about ‘taking control of capitalism’ actually means that governments take control of citizens.

But it doesn’t sound like it, does it? One of my intellectual heroes, Deirdre McCloskey, complains that the word capitalism gives the misleading impression that it is about the rule of capital, rather than liberating people to make their own economic decisions, which is really what the free market is about: ‘“Capitalism” is a scientific mistake compressed into a single word, a dramatically misleading coinage by our enemies, and still used by the sadly misled among our friends.’5 So why do I use it? Because, no matter what we think of it, and no matter which word we would prefer for a system of private property and free markets, this is the word that has become inextricably linked to it, and if its supporters don’t fill that word with meaning, its opponents will.

It will become clear in the following pages that the market economy is not primarily about competition and rivalry but about cooperation and exchange. It’s about being able to do something with others that you would not be able to do on your own. Similarly, neither did this book emerge from my brain as Athena out of Zeus’s head, fully grown, in shining armour. It is the result of people I have met and books I have read, of researchers who have broadened my knowledge and opponents who have helped to correct my mistakes. This book is the product of the efforts of an incredible number of people, just like every product and service on the market, even if any mistakes are of course mine.

In that spirit of cooperation and solidarity, I would like to thank Mattias Bengtsson, Andreas Birro, Christian Sandström, Fredrik Segerfeldt, Patrik Strömer, Mattias Svensson and Daniel Waldenström for ideas, inspiration and data. I am deeply grateful to Caspian Rehbinder for useful comments and suggestions, in both form and substance. Thanks also to Benjamin Dousa and Andreas Johansson Heinö for their role in bringing this book about, to my literary agent, Andrew Gordon, for being such a reliable champion for my work, to my editor at Atlantic, James Nightingale, for careful editing and valuable comments, and my copyeditor, Charlotte Atyeo, for her attention to detail.

I am especially grateful to you, Frida, for your love, patience and courage. I love capitalism, but I love you even more.

May the market force be with you – always.

Johan Norberg

1

LIFE UNDER SAVAGE CAPITALISM

‘[After 1990] capitalism was suddenly free to lapse into its most savage form.’

NAOMI KLEIN1

Twenty years ago, I began In Defence of Global Capitalism with a chapter about how the world was improving faster than ever. I attacked the popular perception that the world was getting worse, more dangerous and unfair, and that the poor were getting poorer. In 1999, the World Bank claimed that ‘world poverty has increased and growth prospects have dimmed for developing countries’. The famous American activist Ralph Nader declared: ‘The essence of globalization is a subordination of human rights, environmental rights, democracy rights to the imperatives of global trade and investment.’ Or as Sweden’s archbishop summarized the state of the world: ‘our journey leads straight to hell’.2 In contrast, I talked about the strangely unheralded progress that I saw in poor countries that had begun to liberalize their economies, which now had better incomes, agricultural production, nutrition, health, vaccination and education.

It was not easy to get such information back then. For some strange reason, tax-funded international organizations still preferred to keep secret the data they had collected. It was four years before Gapminder was founded and Hans Rosling began to fill the gaps in our knowledge about world progress in a fun and easily accessible way, and ten years before Max Roser started Our World in Data, which compiles an incredible amount of user-friendly statistics.3 But what I did find was enough to impress me and completely change the worldview I grew up with.

I was especially fascinated by the fact that global extreme poverty, contrary to the World Bank’s claims but according to its own data, seemed to have decreased from 38 to 29 per cent in the 1990s.4 I explained that poverty continued to decline rapidly and presented an extremely optimistic forecast that this could be halved by 2015. It was far exceeded. In 2015, extreme poverty was around 10 per cent.

Between 2000 and 2022, extreme poverty decreased in a way we have never seen before – from 29.1 per cent of the world’s population to 8.4 per cent. (As recently as 1981, the figure stood at more than 40 per cent.) For the first time in history, fewer than one in ten people were poor. Despite the fact that the world population increased by more than 1.5 billion people during this period, the number of poor decreased by more than 1.1 billion. That is the greatest thing that has ever happened to mankind. The relentless hardship that most of humanity has suffered throughout its existence has been pushed back faster than ever in more places than ever. It is such a remarkable development that I must admit that I find it difficult to take writers and pundits seriously who do not take it as a central point of departure when analysing our time.

A common objection is that this poverty reduction is not real because it ‘is just China’. It is a little strange to dismiss a country that holds one in five of the world’s inhabitants when talking about global development. Furthermore, it’s wrong. Even if China is removed from the 1990–2019 dataset, global poverty has been reduced by almost two-thirds, from 28.5 to around 10 per cent.

During the era of globalization, the development of the world’s poorest countries has been so strong that extreme poverty in East Asia, South Asia, Latin America and the Middle East today is actually lower than it was in Western Europe in 1960, a time we remember today as the post-war boom. Only in sub-Saharan Africa is poverty higher than it was in Western Europe in 1960.5

The economist and Nobel laureate Angus Deaton has written: ‘Some argue that globalization is a neoliberal conspiracy designed to enrich a very few at the expense of the many. If so, that conspiracy was a disastrous failure – or helped more than a billion people as an unintended consequence. If only unintended consequences were worked so favorably.’6

Other indicators that I looked at have continued to show very rapid improvements, partly because technology has become cheaper and because local purchasing power has increased.7 Between 1990 and 2020, the proportion of children who die before the age of five decreased from 9.3 per cent to 3.7 per cent. Despite a significantly larger population today, this means that almost 7.5 million fewer children die annually compared with the early 1990s.8 During the same period, maternal mortality decreased by more than 55 per cent.

Global life expectancy increased from 64 years to almost 73 years between 1990 and 2019. The proportion of the world population receiving basic education has skyrocketed and the illiteracy rates have almost halved: from 25.7 per cent to 13.5 per cent. In the age group 15–24, illiteracy is now just over 8 per cent. Between 2000 and 2020, child labour in the age group 5–17 decreased globally from 16 to just under 10 per cent.9

Global Progress: 1990–202010

The three decades after 1990 – when capitalism, according to Naomi Klein, enveloped the planet in its ‘most savage form’ – have seen greater improvements in human living conditions than the three millennia before that combined. It has also been three difficult decades, full of wars, crises and injustices. I am not saying that the era has been unequivocally good, only that it has been better than any other era humanity has experienced.

The pandemic reversed some gains – when the world was closed and trade, migration and education were blocked. It seems like life expectancy was pushed back to seventy-one in 2021, and the number of people in extreme poverty probably increased by almost 70 million during the first year of the pandemic. Based on various estimates of income, poverty and health, the world was thrown back in time by two to three years as a result of the pandemic. It is difficult to imagine a stronger and more tragic proof that progress depends on open societies and economies than the disaster of a global lockdown. As soon as 2021, as the world began to open up, extreme poverty started declining again – in that year, by 30 million people.

The distribution of capitalism

It could be argued that a person who is near-sighted in one eye and far-sighted in the other has, on average, perfect vision. All figures above are averages and include countries that have lagged behind or even collapsed due to war or dictatorships. This means that progress has been even higher elsewhere. These successful countries are found on all continents and in all cultural spheres. The only common denominator is that, for one reason or another, they have given their citizens a little more freedom to innovate, create, work, buy and sell.11

We can see this by looking at when and where economies took off historically. During the first 1,800 years of the Common Era, global average income barely budged. But 200 years ago, something suddenly happened in Britain, which was then the world’s freest economy. The Industrial Revolution began to create rapid growth and Britain’s extreme poverty rate was halved between 1820 and 1850, which was something completely unprecedented. Then Britain was followed by Western Europe and the United States, which began to take over the position as the freest economy. The Scandinavian economies started to be liberalized in the middle of the nineteenth century and then had a hundred years of faster economic development than any other country, with the exception of Japan, which opened its economy after the Meiji Restoration of 1868 and reduced poverty from 80 to just over 20 per cent in half a century.12

But most of the south and east, which were subjected to authoritarian leaders and colonial masters with command economies, stagnated. The famous sociologist Max Weber felt compelled to write books on why Confucianism and Hinduism make it difficult to modernize societies and economies. We got used to dividing the world into industrialized countries and developing countries – rich and poor.

Global GDP per capita between the years 1–202013

However, four East Asian tigers would soon disrupt our worldview. The British colony of Hong Kong and the city-state of Singapore did the opposite of all other countries, and opened their economies wide, without trade barriers. The experts claimed that free trade would knock out the small manufacturing sectors they had, but, on the contrary, they industrialized at a record pace and shocked the outside world by becoming even richer than the old colonial master, Britain.

Taiwan and South Korea learned from this and began to liberalize their economies with amazing results.14 Their rapid growth took them from being some of the poorest countries in the world to some of the richest in a few generations. It was a global wake-up call because it was so easy to compare what the Chinese in Taiwan achieved compared to the Chinese in Mao’s China, and what the Koreans in the capitalist south created compared to the Koreans in the communist north. In the mid-1950s, Taiwan was only marginally richer than China. In 1980, it was four times richer. In 1955, North Korea was richer than South Korea. (The north was, after all, where mineral resources and power generation were located when the country was partitioned.) Today, South Korea is twenty times richer than North Korea.

It was no longer possible to say that only the Western world could become rich through capitalism, so a new narrative took hold: although a few developing countries might be able to enter global markets from the periphery, it is only because they are very small, almost insignificant. Strangely enough, today you sometimes hear the opposite: that developing countries might make it, but only if they are very large.

This is due to the transformation of two giants, China and India, which for decades were held back by, in one case, a communist despot, and in the other a democratic but strictly protectionist command economy. Therefore, people said that Chinese and Indians will be successful all over the world – except in China and India. But then, in 1976, China’s dictator Mao Zedong, as the US economist Steven Radelet put it, ‘single-handedly and dramatically changed the direction of global poverty with one single act: he died’.

His successor, Deng Xiaoping, began to accept the private enterprise that peasants and villagers secretly engaged in and extended it to the entire economy. All the restrained creativity and ambition was finally let loose and China grew at record speed. Ironically, intellectuals around the world – modern-day Max Webers – soon explained that this is itself not that strange, as Confucianism made it easy to modernize the economy.

India held back a little longer, but an Indian economist, Parth Shah, tells me that the country started looking at what was happening around them, in Taiwan, South Korea and now also China: ‘We saw that they actually changed their model and they did succeed in what they had done, and it was time for India to learn the lesson.’15

That was decisive in 1991, when a debt-financed boom crashed and the foreign exchange reserve had shrunk to such a level that India was three weeks from running out of money. The crisis prompted the Minister of Finance Manmohan Singh to quote the nineteenth-century romantic Victor Hugo in parliament: ‘No power on earth can resist an idea whose time has come.’ The idea was to dismantle trade barriers and stifling regulations that held India back and kept half the population in extreme poverty.

In the past, economists spoke condescendingly of the ‘Hindu growth rate’ as if there was some kind of complacency built into the country’s tradition that stopped the economy from growing faster than the population. After the reforms of 1991 and those that followed, this culture changed as if by magic and growth took off. Today, average income is three times greater than before reform and extreme poverty is only one-fifth of previous levels.

Around the same time, communism in Central and Eastern Europe finally fell, but its economic rivalry with capitalism had, of course, long since been decided. It’s easy to think that these countries were never close to the market economies, but in 1950 countries such as the Soviet Union, Poland, Czechoslovakia and Hungary had a GDP per capita about a quarter higher than poor Western countries such as Spain, Portugal and Greece. In 1989, the eastern states were nowhere close. The eastern part of Germany was richer than West Germany before World War II. When the Berlin Wall fell on 9 November 1989, East Germany’s GDP per capita was not even half that of West Germany’s.16

Of these countries, those that liberalized the most have on average developed the fastest and established the strongest democracies. An analysis of twenty-six post-communist countries showed that a 10 per cent increase in economic freedom was associated with a 2.7 per cent faster annual growth.17 Political and economic institutions have improved the most in the Central and Eastern European countries that are now members of the EU, not least the Baltic countries, Estonia, Latvia and Lithuania. Today, they are some of the freest countries in the world and have more than tripled average incomes since independence. But one can also observe a recent reformer like Georgia. It was seen as an economic basket case, but after the Rose Revolution in 2003 it increased per capita incomes almost threefold and cut extreme poverty rates by almost two-thirds.

All over the world this connection is discernible. Economic and social progress does not happen because a country is small or because it is big, and it has much less to do with religion and tradition than we think. (Religions and traditions are complex things and societies constantly reinterpret them in order to fit into the prevailing culture and economy.) It has to do with freedom. Where people are given a little bit of freedom, they begin to develop their countries and make great progress. The unequal distribution in the world is due to the uneven distribution of capitalism: people who have it become rich; those who do not have it stay poor.

Why not Latin America?

Latin America has long suffered from a phenomenon that can be called growth without development – when the economy and export revenues grow without the population as a whole getting better off. This was the result of a colonial legacy that was not uprooted but in many ways deepened by domestic elites after the independence of Spain and Portugal. The economies were semi-feudal with a small, protected landowner class with colossal lands and a huge class of poor and uneducated farm workers.

Landowners were able to expand their production by taking more land from the indigenous population and exploiting the abundance of labour. Therefore, there were never any incentives to invest the proceeds in better technology and more highly productive agriculture. At the same time, discrimination, business regulations and a lack of education stopped entrepreneurship in other sectors. Latin American intellectuals of the 1950s and 1960s who were rightly appalled by this hacienda economy based on raw materials and agricultural products developed the ‘dependency theory’, which declared that the way out was to invest in ‘import substitution’, where the state kept imported goods out with high tariffs and instead supported domestic industrialization with subsidies and regulations. The cruel irony is that this policy reinforced every problem these intellectuals had warned about.

Inefficient, protected industrial companies could now enrich themselves at the expense of poor consumers and small businesses, so inequality increased even further. In the early 1960s, average tariffs could reach a few hundred per cent and were supplemented by quotas and other trade barriers. An Argentine truck, which in fact was mostly an imported truck disassembled at the border and then reassembled, cost almost one and a half times more than the world market price. A Chilean car could cost three times as much. Instead of focusing on specialization and economies of scale, companies began to do just about any product in small series at a very high cost per item.18

As companies became politicized, those who wanted to thrive had to get involved in politics, with even more corruption as a result. Since domestic businesses were not pressured by competition to modernize technology and knowledge, governments had to attract multinational corporations that could do so, lured there by promises of new protections and privileges. And absurdly, these economies became even more dependent on the export of raw materials and agricultural goods since it was the only way to finance the import of machinery and inputs for closed economies with small domestic markets.

Industries could still expand, but it was a growth of inefficient and expensive production, increasingly funded with loans from global financial markets. That road closed when international interest rates rose sharply and Mexico declared bankruptcy in August 1982. The whole region suffered a devastating economic collapse that has been summarized as ‘the lost decade’. Almost in a state of panic, country after country had to abandon its economic models, clean up inefficient structures and open up to the outside world. As a final, spectacular irony, it was one of the pioneers of dependency theory, the sociologist Fernando Henrique Cardoso, who began liberalizing Brazil in the role of president between 1995 and 2002. ‘To fight hunger effectively, aid is necessary – especially in famine-ridden countries. But the fact remains that international trade, as defined by a fair, rules-based system in the WTO, is much more important, not only to fight hunger, but also to foster development worldwide’, the old protectionist eventually explained.19

Since 1990, Latin America’s economies have begun to grow again, albeit with a legacy of commodity dependence and political instability that creates vulnerabilities and volatility. The region’s inequality has finally begun to diminish. In countries such as Brazil, Chile and Peru, income inequality has decreased by around 10 per cent. Extreme poverty has decreased by three-quarters.20

Latin America’s freest economies are Chile and Peru, which have also been the most successful ones in recent decades. In the mid-1970s, Chile was poorer than the Latin American average, but after market reforms – first under the brutal dictator Pinochet, but then under democratic left- and right-wing governments – the country grew so fast that it is now almost twice as rich as the average.

Peru’s policies are chronically chaotic and the country has had eleven presidents since the turn of the millennium, but since economic liberalization in the 1990s, the economy has grown 150 per cent under nationalists and populists, technocrats and left-wing radicals. Extreme poverty has decreased by 85 per cent. Such progress creates new forms of discontents, as those who have been left behind want to join in, and those who get ahead raise their expectations. Riding this wave, left-wing radicals were recently elected presidents in both Chile and Peru. But the most fascinating aspect of the leftist populist Pedro Castillo winning Peru’s presidential election in 2021 was his campaign message: ‘No poor people in a rich country.’ No one would ever have thought of describing Peru as a ‘rich country’ in 1990, when it was as poor as Congo-Brazzaville.

Why not Africa?

Speaking of Congo-Brazzaville, in most discussions of global development, sub-Saharan Africa is mentioned as some kind of a synonym for hopelessness. That was not always the case. In the 1960s, most African countries were richer and had higher growth than Asian countries, and were blessed with more natural resources. Economists such as Gunnar Myrdal believed more in Africa than Asia, where they worried that governments were not strong enough to push industrialization and Confucian attitudes were thought to block innovation and development. In 1967, the World Bank’s chief economist listed seven African economies that he thought could grow by more than 7 per cent annually. Thirty years later, two other World Bank economists concluded that these seven countries had since registered negative growth.21

Sub-Saharan Africa is not the poorest part of the world because the region lacks the economic conditions needed for growth but because it has lacked freedom. Its economy is based on a centuries-old development. Long before colonialism, many Africans suffered from despotism and conflict, and before the transatlantic slave trade, they suffered from the indigenous slave trade and the trans-Saharan one. But as Ghanaian economist George Ayittey has shown, there is also a strong African tradition of private property and markets with free pricing. Most parts of the continent were integrated into vast trade networks where merchants, goods and currencies moved about freely.22

European colonizers undermined these markets in two ways: partly by dividing the continent and isolating the populations from each other, partly by creating centralized structures in each colony, where farmers and workers were plundered to enrich robber barons thousands of miles away. The next tragedy was that when African countries gained their independence after World War II, domestic elites did not dismantle colonial structures but took them over. Whether the new leaders called themselves liberation heroes, Marxists, nationalists or anti-communists, they became occupiers who continued to plunder their people. They seized natural resources to enrich themselves and forced the rural population to produce food at prices far below the market rate.

What Western economists thought of as strongmen who would enforce stability and development were, in fact, looters who vacuumed their lands for assets. In almost every country, strict government control, planned economies and import substitution were applied in weak domestic markets, isolated from neighbours through arbitrary borders. Often, even domestic tariffs were introduced to stifle spontaneous trade. Africa’s dictators had many conflicting aims, but the president of the Club du Sahel, Anne de Lattre, once summed up their common denominator: ‘Well, there is one thing we all agree on: that private traders should be shot.’23

Western countries made the situation worse by sending development aid to undemocratic, closed economies just because they were former colonies, which enriched the despots and prolonged the oppression. By handing over huge amounts of capital to the leaders of desperately poor countries, the West intensified a tragedy created by the nationalization of natural resources: the path to wealth for disadvantaged groups was to take up arms and invade the capital.

It became an orgy of corruption, aid dependence and underdevelopment. Major food exporters soon became dependent on imports for survival. State-owned companies that were supposed to bring glory and prosperity instead destroyed wealth as they turned every valuable resource into expensive, worthless products. The only thing that saved factories from destroying even more value was that mismanaged electricity companies caused constant power outages. Like Latin America, African states extended this death march by borrowing, and just like in Latin America, the debt crisis of the 1980s became devastating. Machines ground to a halt, the trucks stopped and deliveries of food and medicine failed to appear. In the mid-1980s, many of the countries with the richest lands and the greatest natural resources were poorer than they had been at independence – except, of course, the leaders whose ideology has sometimes been called Swiss bank socialism. A generation of children became shorter due to malnutrition, but the leaders’ cars and yachts only got longer.

In an attempt to get out of the quicksand, many African countries implemented reforms in the 1990s that made me write in In Defence of Global Capitalism that it was not impossible for the 2000s to become ‘Africa’s century’. The reforms have not continued in a way that makes this probable, but median growth per capita on the continent still increased from 0.2 per cent in 1980–99 to 1.6 per cent in 2000–19. Throughout this period, the African countries that opened their economies to the outside world grew three times as fast as those that did not. As a whole, Africa’s GDP per capita grew by 35 per cent between 2000 and 2019, faster than the world as a whole. Extreme poverty decreased from almost 60 per cent to just over 40 per cent. Industrial production nearly doubled and the share of the population working in manufacturing has increased.24

It is often said that Africa is doomed to underdevelopment due to history, geography, ethnicity, culture, climate, disease, drought or any other factor. But how do we know that it is not rather a matter of corrupt leaders destroying the possibilities of Africans with control, corruption and confiscation? Imagine that an African country had taken a different path after independence, had developed democracy, independent courts and freedom of the press, and had applied free enterprise, low taxes and free trade? Could it not have worked even there, even though the country may have lacked a coastline, mostly consists of desert and was hit harder than others by HIV/AIDS?

In fact, there is one such country: Botswana in southern Africa. How did it work? Very well, thank you. In fact, better than in any other country in the world. During the forty years after 1960, the Asian tigers and China grew annually between 5.2 and 5.8 per cent per capita. Botswana, on the other hand, grew by an incredible 6.4 per cent on average – more than ten times faster than the world average.25 Since 1985, extreme poverty has declined from 42 to 15 per cent, compared with 40 per cent in Africa as a whole.

Some would object that this is only because Botswana has diamonds. But valuable natural resources are more the rule than the exception in Africa, and are often something that creates conflict and stagnation. What distinguishes Botswana in the region is not the resources but the fact that it did not nationalize them. Instead it privatized them, and after independence from Britain in 1966 it created a stable regulatory framework that attracted foreign investment.26

There is another African country that has had a high degree of economic liberalism for a long time: Mauritius. In 1961, the Nobel laureate James Meade predicted that in such a small country, with ethnic divisions, without natural resources and dependent on a single commodity (sugar), the ‘outlook for peaceful development is weak’. But precisely because Mauritius was so small, it realized early on that it could not do without world trade, and import substitution was abolished as early as the 1970s. The country introduced export-processing zones where a deregulated textile industry could grow, and the economy has continued to diversify with a modern service sector. After uninterrupted high growth, Mauritius was classified by the World Bank as a high-income country in 2019. Even though it slipped back because of Covid-19, it will probably soon rise again. Today, Mauritius and Botswana have GDP per capita similar to a EU country like Bulgaria.