In a conversation with Johan Norberg, we discuss the forces shaping economic progress in an era of renewed skepticism toward globalization and free markets. The discussion looks at what drives rising living standards and how common assumptions about prosperity often diverge from economic reality.
About the Guest
Johan Norberg is a senior fellow at the Cato Institute and an author and documentary filmmaker with Free to Choose. His work focuses on globalization, economic history, and human progress, and includes books such as Peak Human, The Capitalist Manifesto, Open, and Progress.
Interview
Simon Sarevski: Your latest book carries an intriguing title, “The Capitalist Manifesto.” What is the inspiration behind this choice, and what do you hope to accomplish through the 350 pages?
Johan Norberg: I think too many people have apologized for capitalism and globalization in recent years. Facing a backlash, they have moderated their stance or even backtracked. But my reading of the global free market’s incredible ability to adapt to shocks like the pandemic and the Ukraine war is that it is underrated, not overrated. And then we must say so, proudly and self-confidently, and that is what my title reflects and what the book is about.
While I encourage readers to explore the book thoroughly, could you provide a concise summary of what the capitalist manifesto represents in a single paragraph?
Johan Norberg: The world has faced major shocks and difficulties in recent decades, and yet, through the innovation and adaptation of millions and millions of people, capitalism has continued to help to improve our lives, faster than ever before. We mustn’t take that for granted, because it is easy to forget the amazing gifts it brings, and then we could undermine it completely, which would be worse for those who are worst off. Instead, we need to deepen it and extend it to places that have been deprived of those freedoms.
In the book, you mention that, unlike today, those opposing free trade were predominantly associated with the Left. What factors have contributed to the convergence between Left and Right on trade issues in recent decades, especially since free trade made us richer?
Johan Norberg: The myth of the zero-sum game is the explanation. 20 years ago, people thought that multinational companies and free trade benefited rich countries, and since they thought that someone must lose, they thought low- and middle-income countries would. So the Left opposed free trade in the name of poor countries. In the past 20 years, they have seen that poor countries like India, Vietnam, China, and Bangladesh have prospered like never before, but many people still think that someone must have lost from this, and so they think it is us. So the new populist Right opposes free trade in the name of rich countries. And the common denominator is that they don’t understand that in a free market, no deal ever happens unless both parties think that they benefit from it. And that markets create more wealth overall, for everyone who participates.
Similarly to trade, the gap has narrowed between the Left and the Right when it comes to inequality as well. You use Schumpeter’s hotel room example in which “the rooms are nicer the higher up you get,” pointing out that similarly to the room distribution in the hotel “people rarely live on the same floor all their lives.” Why can’t people wrap their heads around the idea of income mobility?
Johan Norberg: Comparisons are always a snapshot of the world, the way it is right now. I think it is for evolutionary reasons. We compare ourselves to others, and then we think of here and now, not of where we will be in ten or twenty years’ time. That probably made sense in a world with little growth and innovation, but it means that those comparisons are completely outdated in a world where we can all expect major positive changes over our lifetime unless things go wrong. And if we don’t understand this instinctively, we have to understand it intellectually.
On many occasions throughout the book, you mention the systemic problems the “free” capitalist societies of today face like lobbying that leads to subsidies, regulations, and advantages that lead to unfairly amassing wealth, bailouts, and tariffs, to name a few. How do we tackle these problems? Where do we start, besides writing a book about it?
Johan Norberg: This takes a constant struggle, since the benefits are concentrated among a few who have an overwhelming incentive to fight for it, and the costs are dispersed among millions of taxpayers, consumers, and other potential business models that don’t get the advantage, and each of them only stands to lose so little that they barely notice. The good thing is that people get mad when they learn about it – socialism for the rich is, in fact, not popular. So, educating the people and letting them know is the key. Therefore, writing a book about it is a start. I also made a documentary about it, Corporate Welfare: Where’s the Outrage? If people notice what’s going on, the policy solutions should be obvious.
It has been three decades since the dissolution of the USSR and the de facto failure of socialism in practice, yet the philosophy of liberalism struggles to resonate with the general public. Have we perhaps pushed the boundaries of liberty too far? Are we demanding too much? Or does it come down to ineffectively communicating the message of liberty?
Johan Norberg: I don’t think that we have to search for a higher meaning to our defeats. It does not necessarily mean that we have made some terrible blunder, or that we demand too much. It just means that this battle is never-ending. Freedom is counterintuitive because it always seems like we are offering nothing. It is difficult for us to wrap our heads around the concept that only experiments and voluntary interaction create the incremental improvements and innovations that actually achieve prosperity, innovation, and a culture of flourishing. Populists, socialists, and authoritarians, on the other hand, can promise anything, and this will always be popular. Only after a while does it become obvious that those promises were empty and that centralization and control fail, and then liberalism has a chance again, and so the battle begins anew. It is not linear; it is cyclical, and we always have to keep fighting for a culture of liberty.
People often overlook the progress we experience daily, and more disappointingly, they fail to recognize the extent of our current prosperity. How can we bridge this gap in understanding?
Johan Norberg: I absolutely agree. To see what’s in front of one’s nose is a constant struggle. It is so incredibly easy to take it for granted, and this is one reason why countries often turn to populists and socialists as they grow richer. “He that has satisfied his thirst, turns his back to the well,” as the old saying goes. This is why I think it’s so important to constantly remind people of the revolution in living standards in the past 200 years, why it is an anomaly historically, and why it depended on open societies and free markets. We have to make people fascinated with innovation and growth, because otherwise, they will be obsessed with comparisons and redistribution.
When it comes to progress and inequality, many will ask why: should we even care about progress in a “post-scarcity” world? Aren’t we rich enough to focus on redistribution instead of economic growth (or perhaps, both)?
Johan Norberg: We are never rich enough. I don’t think there is a limit to how much leisure we want, or how much health, knowledge, excitement, recreation, entertainment, or better working and living conditions we want. But there is another and deeper reason why we must move forward or move backward. The reason is that there is always pushback. Every time we solve a problem, we create side effects and unintended consequences. We invent antibiotics, but then some bacteria develop resistance. We defeat hunger, but then we get obesity. We defeat poverty with fossil fuels, but then we get global warming. And then we have to acquire the capabilities to solve the new problems. When we do, we will face new problems – besides the normal surprises nature will throw at us. Therefore, we have to move forward or fall backward. Standing still is not an option.
And we do this with growth. With a 2 percent growth per capita, we double our prosperity in some 35 years. Next to that, any kind of redistribution is trivial in terms of improving anyone’s wealth. But more than trivial – it’s dangerous, if it becomes so expensive that it destroys the incentives to take the risks and make the investments to create this wealth.
In 2017, in Progress, you wrote about the reasons to look forward to the future. With all that has been happening in the six years in between, are you still optimistic about the future?
Johan Norberg: Oh yes, I am. Kind of. Look, the past 20 years have been awful, it has brought us financial crises, populist revolts, Covid-19, and Putin’s invasion of Ukraine. But from another perspective, those 20 awful years have also been the best 20 years in human history. Measured by real GDP per capita, roughly half of all the wealth that humanity has ever attained was produced in the past two decades. Global extreme poverty was reduced by around 100,000 people every day. The child mortality rate almost halved, so 4.4 million fewer children died in 2022 than in 2002. Despite all the setbacks associated with war and the pandemic. And this tells us that people are problem-solvers and markets are resilient, as long as they are free to adapt to those shocks.
At the same time, my optimism is qualified. I think that free people will continue to make incredible progress, but will they have that freedom? Many would try to deny them this, and that is why we can’t relax; we have to wake up every morning and fight for it.
Is there room for (global) economic and political optimism in the short-to-mid-term?
Johan Norberg: In the short term, anything can happen. There are always swings in the short term, and I for one expect much more of a financial crisis after the wild decade-long experiment with easy money. But in the longer term, we will see astonishing progress, not least associated with AI, biotechnology, and personalized medicine. We will also see authoritarians trying to undermine that progress and free societies generally, but I think they will have bigger problems keeping control of their own societies, for example in China, Russia, and Iran.
Finally, even though not directly related to the general topic of today’s conversation, I always end my interviews with this: How to find freedom in an unfree world?
Johan Norberg: What a great question! Please let me know if someone gave you the right answer. To me, this is both about finding independence in your own life and in your attitude to politics. In the first instance, it is about not being dependent on any one source of opportunity, career, finance, or joy, but in being a source of these things yourself. How to do that is all dependent on personal circumstances, of course. When it comes to politics, it is important never to despair. There will be bad times and there will be horrible zeitgeists. But that does not necessarily mean that you have failed, or that everything is hopeless. Perhaps you improved things marginally, perhaps you contributed to turning awful into just bad, or bad into the middle of the road. The important thing is that you did not stand aside, but did what you could. And every little crack in the wall is enough for some innovation, progress, and hope to slip through.
This interview first appeared in Austrian Economics Center.