BOOK REVIEW: 'The Capitalist Manifesto: Why the Global Free Market Will Save the World,' by Johan Norberg

The IEA's Kristian Niemitz reviews Johan Norberg's important new book.

I first came across Johan Norberg almost exactly 20 years ago, when the German translation of his book In Defence of Global Capitalism came out. The book argued that globalisation was a success story. In large parts of the developing world, poverty, infant mortality and illiteracy were falling, life expectancy was rising, nutrition was improving, and democracy was spreading. These positive trends were, according to the younger Norberg, likely to continue, and they were not a product of chance. They were a result of the spread of capitalism.

At the time, this was considered an outrageous thing to say.... The almost universally accepted conventional wisdom of the day was that “globalisation” meant the exploitation of poor countries by multinational corporations, and that the world was going from bad to worse. ...

With his most recent book The Capitalist Manifesto: Why the Global Free Market Will Save the World, Norberg goes back to the beginning.... The era of “globalisation” is generally said to have started around 1990, so when In Defence of Global Capitalism came out, it was still in its relatively early stages. We now have three decades to go by. What happened in those three decades?

Quite a lot. 

• Extreme poverty fell from 38% of the world’s population to less than 10%, 
• child and infant mortality fell from 9.3% to 3.7%, 
• global life expectancy increased from 64 years to over 70 years, 
• illiteracy dropped from 25.7% to 13.5%, 
• child labour decreased from 16% to 10%, and so on, and so forth. 

The countries and regions which performed best are the ones which did precisely the opposite of what the anti-globalisation movement wanted them to do, while the most spectacular counterexample is the movement’s erstwhile poster child of Venezuela. ...

There are genuine problems, though. In some Western countries, NIMBYism is driving up the cost of housing. This makes it harder for people to move to where the best job opportunities are, and it gives younger generations a worse deal. In addition, the extension of occupational licensing is erecting market entry barriers. None of this has anything to do with “neoliberalism” or “hyperglobalisation”, though – quite the opposite....

But have classical liberals benefited from this, in any way? Has being right made us more successful in winning over hearts and minds? Are there more people now who embrace free-market capitalism, or who at least accept that, even if they don’t like it, it is the most powerful motor of economic and social progress known to man?

Very far from it ... in addition to the anti-capitalist Left, we have also seen the rise of an anti-liberal Right. ... Where In Defence of Global Capitalism was able to concentrate on one enemy, The Capitalist Manifesto has to fight a two-front war. Some chapters are primarily aimed at the anti-capitalist Left, others are primarily aimed at the anti-liberal Right, and some could apply to both in roughly equal measure. ...

• Chapter 3 concentrates on the ... misplaced nostalgia for the economic structure of the postwar decades ... Norberg shows that automation and productivity improvements have contributed far more to job losses in the manufacturing industries than free trade, and that ... the same processes that make some jobs redundant also lower consumer prices and thereby make us richer, [creating] demand for new jobs in other sectors ...
• Chapter 4 addresses the old Marxist idea that wealth must be built on exploitation, but also some of the more recent literature on inequality, such as Thomas Piketty’s Capital in the Twenty-First Century and The Spirit Level by Kate Pickett and Richard Wilkinson. In market economies, people do not get rich by exploiting others. They get rich because they offer something that lots of people are prepared to pay for. Left-wing celebrity authors like Michael Moore and Bernie Sanders understand that perfectly well when it comes to their own book sales, but they are not capable of extending that logic to entrepreneurial activities. ...
• Chapter 5 picks up another perennial Marxist theme: the idea that capitalism supposedly leads to greater and greater industry concentration over time. ... The best antidote to worrying too much about market concentration, though, is to read an article from 20 or 30 years ago that was worrying about the same thing. This is because a lot of the behemoths of yesteryear have since faded into obscurity. ...
• If there is one thing those of us on the pro-globalisation side were wrong about 20 years ago (and in Chapter 7, Norberg is very open about that), it was our belief that freer trade and freer markets would lead to the spread of Western liberal values, and Western-style liberal democracies. In China, this has clearly not happened. Under Xi Jinping, China has gone into reverse, both in terms of economic and political liberty. However, none of this means that economic nationalists, who seek to decouple Western economies from China, are right.... 
• One of the weirder phenomena of the past five years or so was the rise of a new wave of militant, anti-capitalist eco-movements: the Greta Thunberg movement, Extinction Rebellion, Just Stop Oil, and their various offshoots and counterparts in other countries. It is weird because it happened after the environmentalist side had already won the debate on climate change. ... On green issues, anti-capitalists are as wrong as they are about everything else. As Norberg shows in Chapter 8, market economies can and do address environmental problems very effectively.

All in all, the slightly older Norberg skewers the bad of ideas of the 2020s as effectively as the young Norberg skewered the bad idea of the early 2000s.

>> FULL REVIEW HERE: PART ONE  AND PART TWO.

British “researchers” promoting envy in NZ [updated]

“The time has surely come when we should stop
behaving as though the envious man were the
main criterion for economic and social policy.”
– Helmut Schoeck, Envy: A Theory of Social Behaviour.

Two British “health researchers” will be coming to New Zealand soon to whip up more hysteria about inequality because, they argue, NZers are insufficiently angry about this alleged “social evil.”

Professors Richard Wilkinson and Kate Pickett, whose book The Spirit Level was subtitled "Why more equal societies almost always do better", will present this year's Sir Douglas Robb Lectures at the University of Auckland from May 19-23.
    Economist Tim Hazledine says the book "has made a huge impact on just about every field of social science and policy analysis" since it appeared in 2009…
    But in New Zealand, the Labour Party is struggling to get inequality off the ground as an election issue. Professor Hazledine points to a 2006 survey of 32 countries which found New Zealanders were less supportive of redistributing income from the rich to the poor than people in any other nation…

Suggesting the timing of their visit is party political?

In any case, I take the survey they reproach rather differently than they do.  I say it’s good to see research suggesting NZ less envious than other places of other people’s success.

Asked [in the survey], "Do you think it should or should not be the government's responsibility to reduce income differences between the rich and the poor?" only the barest majority of Kiwis, 50.1 per cent, said yes - behind even Americans (52.2 per cent), and little more than half of the 90 per cent-plus support for redistribution in Portugal, Chile or Slovenia.

Great news! But a surprising result, especially since (as I’ve argued before)

envy is the leitmotif of much of what passes for public discourse in New Zealand, as evident on talk-back shows and in Letters to the Editor; in the clamour for knocking down tall poppies and looking for feet of clay in the greatest of heroes.

If that’s diminishing, that’s a great thing – not something for which two Brits with a political agenda should be telling us off.

Because these two assuredly have a political agenda, and don’t care what data they have to torture to advance it.

Take  the way they so-so conveniently exclude data that doesn’t fit their agenda.

Here, for example, is a graph that is central to their thesis, purporting to show how much better off our life expectancy would be if we all copied “the workers’ paradises of Scandinavia and the egalitarian nirvana of Japan.” See how the culturally egalitarian Japan and Sweden skew the left side up, and the culturally meritorian USA skews it down?

And here it is again, this time with the many elephants in the room they neglected to include because they inconveniently contradict their thesis, charted using figures from that bastion of inequality, the UN. See how the addition of Hong Kong alters the right-hand side, and the additions of the likes of South Korea and the Czech Republic give a more “realistic” level to the left-hand end.

Adding in the countries that contradict their thesis shows that there really is no significant trend at all (maybe one month, or two?), which means their much-hyped thesis is basically bosh.

The Spirit Level delusion: It’s not about the evidence

Whether you’ve noticed it or not, the chattering classes have been all abuzz over recent months about a book called The Spirit Level purporting  to demonstrate, by statistics aplenty, that places with less difference between the “haves” and the “have-nots” are happier places—where everyone lives longer, has better health and happiness, and has far more sex on Sundays.

The conclusions have been embraced here in EnZed.  “An unequal society is a sick society. It’s a simple, powerful idea,” enthuses the Double Standard: “These people’s work can not be dismissed,” says a hopeful Grant Robertson at Labour’s other blog. “It is important!” pontificates Scott Yorke at his. “It's to ideological politics what An Inconvenient Truth is to climate change,” assesses Tim Watkin accurately at the Pundit blog.   And Colin James, the country’s most stale pundit, wonders if the 300-page tome might not become  “a sort of guidebook for the next Labour ministry,” should there ever be one.

Now, the figures on which these hopeful conclusions are based have been solidly debunked as cherry-picking in books and reports like The Spirit Level Delusion: Fact Checking the Left's New Theory of Everything,  When Prophecy Fails: The Spirit Level and the Illusion of Scientific Socialism, The Spirit Illusion and Beware False Prophets.  As Luke Malpass  at Australia’s Center of Independent Studies point out,

the income statistics are faulty … the authors ignore some key countries which don’t fit their hypothesis … [and] ignore social indicators where equal countries tend to perform badly…
    The authors present a series of graphs plotting the income distribution in each country against selected social indicators, and in each case they claim to show problems getting worse as we move from less to more unequal countries.  In fact, however, most of their graphs show no such thing.

Despite the huge disparity however between what the authors claim and what they can actually prove, the book has taken the whole world by storm, with one uncritical Guardian journalist, Polly Toynbee, calling co-author Richard Wilkinson “the 21^st Century’s equivalent of Charles Darwin.” Charles Darwin!

In a sense however, Polly is right. Darwin used the evidential methodology of his day (observation and integration) to replace previous bogus theories with sound science. And now Wilkinson and his co-author are using the methodology of the post-modern age (fiddle and fudge)  to do the reverse.  As Chris Snowdon points out in his own book on the delusion, both Spirit Level authors have prior form in generating crap statistics to bolster shoddy politically-driven arguments. About which, and about the bogus figures, the chattering classes have no apparent interest.  Which is really the leitmotif of our postmodern 21^st Century age, isn’t it: never mind the quality of the research as long as your conclusions are supported by those who can shout the loudest.  (Of such “research” are this century’s “Charles Darwins” undoubtedly going to be made.)

Or to put it bluntly, it’s not about the evidence. Because if it were, a few other things would arise.

Just consider for a moment an observation made by Ludwig von Mises:

"The European worker today lives under more favourable and more agreeable outward circumstances than the pharaoh of Egypt once did, in spite of the fact that the pharaoh commanded thousands of slaves, while the worker has nothing to depend on but the strength and skill of his hands."

Now any honest commentator would notice that, wouldn’t you think?  And anyone truly concerned with lifting up the “have-nots” would be trumpeting the system that raised from them and all of us from dirt-poor slavery to a time when virtually anyone can live better than the kings, pharaohs and pashas of the past ever did.  Even a day labourer these days has the capacity to live well, eat well, and have at his or her command a library of the world’s greatest books, a collection of the world’s greatest music, access to enjoy the greatest sporting contests on the planet, and the ability to sip ice-cold martinis while flying at enormous speeds ten-thousand feet above the Tasman. And that process didn’t happen because Karl Marx and his confreres got hold of the economy’s commanding heights.

So if its not about evidence or helping the “have-nots,” then what is it all about?

Simple. It’s about politics. And morality. It’s about using sacrifice to power politics, and the have-nots to build a power base.

The point was made by Andy Kessler in an interview about his book Eat People, when asked to explain why he repeatedly slams Obama’s hero Saul Alinsky:

Saul Alinsky was a community organizer who, in the early 70s, built a movement based on the disparity of the haves and have-nots, then have them elect someone to office who would take from the haves and give to the have-nots.

It’s not complicated. It’s not about evidence; it’s not about research; it’s certainly not about facts: it’s about building a power-base on the morality of sacrifice. (And as Yaron Brook and Don Watkins argue, “no system that treats you as other people’s servant can be called moral.”)

Because if it were really about helping the “have-nots,” the chattering classes wouldn’t be so excited about fudging figures about haves and “have-nots,” they’d be asking instead how someone becomes a “have” in the first place—which, if he does it right, is by driving productivity and thereby making us all wealthier—and doing everything they can to turn today’s “have-nots” into tomorrows “haves.”

But we see, however, by their embracing of bad statistics and their resolute intent to keep educational standards low (“Labour would ditch national standards” is this morning’s unerringly accurate headline), that helping have-nots become haves is not any part of their project.

Because if they got rid of the “have-nots” altogether, what then would happen to their power base?

Off the ‘Spirit Level’ [update 4]

The authors of the British book The Spirit Level have a political agenda, and they’ve got it talked about everywhere. Even here. The NZ Labour MPs’ blog Red Alert for example is so excited it even has a ‘Spirit Level’ “tag”, and breathless comments from the likes of Grant Robertson that “These people’s work can not be dismissed.” And Colin James, the commentator on the tired and the bleeding obvious, wonders if the 300-page tome might not become  “a sort of guidebook for the next Labour ministry,” should there be one.

So what’s their work, and why are Grant Robertson and his comrades so excited about it? It’s a “revolutionary” thesis overturning all previous research: that societies with more “equal” incomes do better than those that don’t.

So how did they do what no other researchers before them have managed to do? Simple, They fudged the figures.

Here, for example, is a graph that is central to their thesis, purporting to show how much better off our life expectancy would be if we all copied “the workers’ paradises of Scandinavia and the egalitarian nirvana of Japan.” See how the culturally egalitarian Japan and Sweden skew the left side up, and the culturally meritorian USA skews it down?

And here it is again, this time with the many elephants in the room they neglected to include because they inconveniently contradict their thesis, charted using figures from that bastion of inequality, the UN. See how the addition of Hong Kong alters the right-hand side, and the additions of the likes of South Korea and the Czech Republic give a more “realistic” level to the left-hand end.

Adding in the countries that contradict their thesis shows that there really is no significant trend at all (maybe one month, or two?), which means their much-hyped thesis is basically bosh.  [Further clarification on the graphs below.]

As the author of The Spirit Level Delusion, Christopher Snowdon, explains at Spiked, (from whom I stole those graphs) this sort of statistical legerdemain exposed here cannot be unintentional. Which means, to put it bluntly, that the authors have lied—and if you have to lie to make your point, that probably means you haven’t got one. Nonetheless, it’s a lie perfectly calculated to get the chattering classes talking; so after tearing apart their “research,” Snowdon draws the only conclusion about their thesis and its widespread acceptance that you could:

The only real difference between ‘less equal’ and ‘more equal’ countries is the size of the government and the amount it takes in tax, rising from less than 15 per cent of gross domestic product in Singapore to almost 50 per cent in Denmark. The fact that Singapore outperforms Denmark under almost every measure of what makes a country ‘do better’ only serves to underline the folly of The Spirit Level and, by association, the futility of its political agenda.
    That this agenda takes the form of zero-growth economics and eco-authoritarianism perhaps explains why journalists at the New Statesman and the Guardian have been so willing to suspend disbelief when confronted with such an improbable explanation for the problems of all mankind. It seems not to have struck them as odd that two left-wing epidemiologists were able suddenly to unearth a ‘theory of everything’ which had eluded the world’s finest minds for generations.
    To The Spirit Level’s legion of admirers, this uncanny turn of events is only proof of Wilkinson and Pickett’s unique genius. A more prosaic explanation is that the grand unifying theory had not been unearthed because it was never there.

As Ayn Rand used to say,

If there were such a thing as a passion for equality (not equality de jure, but de facto), it would be obvious to its exponents that there are only two ways to achieve it: either by raising all men to the mountaintop—or by razing the mountains.

And naturally, the exponents of forced equality always end up advocating the latter. That the talk about this book and its recommendations at the Red Alert blog usually ends with a recommendation to soak the rich is proof once again that this thesis is still fundamentally correct. But don’t expect them to change that one big idea in their policy manual—because it’s the only “big idea” they’ve actually got.

UPDATE 1: Phil Sage has some complementary comments over at the No Minister blog, concluding,

Redistribution … is useful for solving short term problems but ultimately does not make a community more cohesive or happier; it just drags back the wealth creators, to the detriment of all.

Phil links to two excellent reports on the central thesis of The Spirit Level, which I hope he won’t mind me linking here; first, from the UK Taxpayers’ Alliance:

Before policymakers rush to enforce the income equality that the authors suggest is so vital to improve public health and general wellbeing, it is important that we properly scrutinise its claims. 
    The new report published today by the TaxPayers' Alliance does just that.  The Spirit Illusion looks at whether the most important correlations established in the book can be replicated.
The findings are stark.  On almost no measure does the central claim of the Spirit Level, that income inequality decreases life expectancy, stand up to scrutiny…
    [The report’s] main point is that the most important statistical correlation between countries that the authors claim to have established – the connection they point to between life expectancy and income inequality in different industrialised nations – is simply wrong…

I recommend the report. It’s free. And the UK Policy Exchange has produced its own report on the phoney tome, Beware False Prophets, in which “Wilkinson and Pickett’s empirical claims are critically re-examined using (a) their own data on 23 countries, (b) more up-to-date statistics on a larger sample of 44 countries, and (c) data on the US states. Very few of their empirical claims survive intact.”  The hardback costs you £10 + £3p&p—but you can download the PDF free.

UPDATE 2: If you think those “dots” have moved in the two charts above, you’re right.  Chris Snowdon clarifies in the comments:

The two graphs are from exactly the same UN source, but are from different years. The first is from the 2004 UN Human Development Report, the second is from the 2006 report.
The reason I mention this is that, if you own a copy of The Spirit Level, take a look at references 2 and 6. Reference 2 is the 2006 report and is for their graph showing no relationship between life expectancy and GDP. Reference 6 is the 2004 report, and that's used to show there IS a relationship between life expectancy and inequality.
    Why use two different data sets? We can only speculate, but I would speculate that its because, even if you exclude places like the Czech Republic, the 2004 data fits their hypothesis better than the 2006. This, from two researchers who insist they took their data "warts and all."

UPDATE 3: Dinther sums it all up perfectly. At the end of the day, even if the research were true …

I’d rather live a shorter life in freedom … than a longer and no doubt boring life in captivity.

UPDATE 4:  Spirit Level authors Wilkinson and Pickett's responded to the Spirit Level Delusion author’s 20 Questions to them. Hong Kong was excluded because, apparently, it’s not “an older, rich, developed, market economy.” Presumably because it’s a young, poor, undeveloped, communist state like Cuba?  I guess this gives you a taste of Wilkinson & Picket’s acumen.
Snowdon’s response to them is here. It’s good.
Some of the graphs from The Spirit Level Delusion are here. And Snowdon’s Spirit Level Delusion blog is here.