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Wednesday, October 18, 2006

You don't know Johan? - well you should

Writer and thinktank fellow Johan Norberg recently had this article published in the WSJ. He is a very articulate spokesman for the role of globalization and free market capitalism in raising untold numbers of people out of poverty.

We tend to take our opportunities for granted, but our ancestors could not have imagined what we now have. In the last 100 years, we have created more wealth than in the 100,000 years before that, and not because we work more.

The people we should thank are the innovators and entrepreneurs, the individuals who see new opportunities and risk exploring them -- the people who find new markets, create new products, think out new ways to handle commodities commercially, organize work in new ways, design new technology or transfer capital to more productive uses. The entrepreneur is an explorer, who ventures into uncharted territory and opens up the new routes along which we will all be traveling soon enough. Simply to look around is to understand that entrepreneurs have filled our lives with everyday miracles.

Entrepreneurs are serial problem-solvers who search out inefficiencies and find more practical ways of connecting possible supply with potential demand. In that way, they constantly revolutionize our economy, and have made it possible for average people today to live longer and healthier lives, with more access to technology than the kings had in previous generations.

Change is very disruptive. People want the benefits but not the cost of such disruption.

The ingratitude toward those who have given us almost everything seems strange. But perhaps there is a historical explanation. Wealth and innovation are recent phenomena. During about 3,999,800 of the perhaps 400 million years that hominians have existed, life has been a zero-sum game for most people.
Actually, with economic freedom and the industrial revolution innovation accelerated dramatically.

Today we live in a very different world. The system of reward in the free market is the complete opposite. You don't gain by stealing from others, but by giving them goods and services that they want. Our suspicion and our envy, however, remain the same. What was once a way to avoid being exploited by brutes, kings and knights now becomes a way of exploiting those who create new value.

So we are probably not well adapted to understand the modern economy. Whenever we see wealth we have gotten used to thinking that someone somewhere else has lost out. The history of socialism can be interpreted in this light. Marx said that the wealth of the capitalists came at the expense of the workers.

That the anticapitalists' particular concerns have been proven wrong again and again doesn't help for long, because soon they find a new excuse to condemn free markets. The latest variety is Marx on his head: He said that capitalism is bad because it actually creates poverty and slavery. Today, critics say that capitalism creates wealth and freedom -- but this is bad for well-being because we become stressed up, frustrated by the constant demand to choose, working too hard and consuming too much to keep up with the Joneses.

Don't expect the critics of capitalism to change their minds any time soon. As long as they don't believe in the creative ability of mankind or that the market is a plus-sum game, they will continue to think that someone, somewhere, is victimized whenever and wherever we see growth and innovation. Unless this disparagement of entrepreneurs is tamed, people will allow government, with its arsenal of taxes and regulations, to take their place.

You might also check the podcast linked to on this page. In it Norberg covers a lot of ground and demonstrates a tremendous range of knowledge including several little gems.

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