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Freeman Essay #87: A Review of Johan Norberg’s ‘In Defense of Global Capitalism’

In the March 2003 Freeman I reviewed a book that I still regard to be one of past quarter-century’s best defenses of free trade and globalization, Johan Norberg’s In Defense of Global Capitalism.  My review is below the fold.

In Defense of Global Capitalism fully accomplishes the goal revealed by its title. Here, Swedish historian and political writer Johan Norberg adeptly explains why free trade and free markets achieve not only “economic” successes (such as improved living standards for everyone) but, also, successes in areas not typically regarded as economic (such as cultural enrichment).

Remarkably compact given the amount of material covered, Norberg here engages almost every argument against free trade. And he does so with admirable fairness, giving each anti-trade argument its best possible rendition.

Norberg corrects several misunderstandings and exposes many canards. Among these are the following:

Globalization increases the wealth of already-rich nations by impoverishing poor nations. Norberg reports that between 1965 and 1998 “the richest one-fifth of the world’s population increased its average income from 8,315 to 14,623 dollars, i.e., by roughly 75 per cent. For the poorest onefifth of the world’s population, the increase has been faster still, with average income rising during the same period from 551 to 1,137 dollars, i.e., more than doubling. . . . [W]orld poverty has fallen more during the past 50 years than during the preceding 500.”

Globalization promotes increasing inequality of wealth. He points out that the Gini coefficient — a widely accepted means of measuring wealth inequality — has, for the whole world, fallen by ten percent between 1968 and 1997. Wealth inequality across the world has declined with globalization’s advance. But Norberg makes a more basic and vital point: “Only those who consider wealth a greater problem than poverty can find a problem in some [people’s] becoming millionaires while others grow wealthier from their own starting points.”

Globalization threatens democracy. He presents data showing that, while in 1950, 31 percent of the world’s population lived in democratic societies, today 58.2 percent do. More fundamentally, he astutely recognizes that what the antiglobalization crowd “really see threatened is the use they would like to make of democracy, namely as a means of augmenting governmental power.”

Globalization is both desired and promoted by giant, multinational corporations. Norberg answers this pet allegation of the anti-free-trade crowd by calling attention to the obvious: “What free trade has done is to expose corporations to competition. It is above all consumers that have been made freer, so that they can ruthlessly pick and choose even across national boundaries, rejecting those firms that do not come up to scratch. Historical horror stories of companies de facto governing a society always come from regions where there has been no competition.”

Western corporations mistreat their employees in developing countries. Norberg again reports revealing facts: “In the poorest developing countries, someone working for an American employer draws no less than eight times the average national wage! In middle-income countries, American employers pay three times the national average. Even compared with corresponding, modern jobs in the same country, the multinationals pay about 30 per cent higher wages. Foreign firms in the least developed countries pay their employees, on average, twice as much as the corresponding native firms. . . . The same difference applies to working conditions. ILO, the International Labour Organization, has shown that it is the multinationals, especially in the footwear and garment industries, that are leading the trend towards better workplace and working conditions.”

Globalization hurts the environment. Relying heavily on the data-rich researches of Julian Simon and Bjørn Lomborg, Norberg summarizes the empirical data on environmental quality: the doomsayers are not only wrong; they are spectacularly wrong. Indeed, the only places in the world where pollution is a growing problem are countries that refuse to integrate themselves into the market. He also makes the significant point that pollution is not the product only of commerce and industry. Pollution exists, in much more devastating concentrations, in noncommercial and nonindustrial countries.

My only complaint is that the book’s production quality is mediocre. I encourage an American publisher to bring out a higher quality version of this truly excellent case for freedom and free trade.  [DBx, Feb. 15, 2018: In 2003 the Cato Institute did indeed bring out such a version.]