A Quarterly Message on Liberty

Winter 2007Volume 5 Number 1

Johan Norberg is the author ofseveral books on human rights,economic freedom and the his-tory of liberalism. His book In Defense of Global Capitalism(Cato, 2003) received the goldmedal from the German HayekFoundation and the AnthonyFisher Memorial Award fromthe Atlas Foundation. Norbergis a senior fellow at the Centrefor the New Europe. He gavethis keynote speech at the CatoClub 200 Retreat in 2006.

Entrepreneurs Are the Heroes of the WorldEntrepreneurs Are the Heroes of the World

think of a paragraph in Ludwig von Mises’ book HumanAction, where he says that the market economy does notneed apologists or propagandists. The best argument forthe market economy can be found in the epitaph of Sir

Christopher Wren, the architect who built and is buried in St.Paul’s Cathedral: “si monumentum requiris, circumspice” (if youare looking for a monument, look around you). Look at what hebuilt. Look at his vision. You are standing in it right now.

That, I think, is the best defense that the market economy canever hope for—that people look around and ponder the amazingthings and opportunities that entrepreneurs and businesseshave given the world during the last 200 years. Just look aroundat the health, the wealth, the technologies, the opportunities, andthe food on your plates. Could any of that have been possible fora king or a queen 200 years ago?

JOHAN NORBERG

I

2 • Cato’s Letter WINTER 2007

The amazing fact is that entre-preneurs and innovators andbusinesses have turned luxu-

ries that not even kings could affordinto low-priced everyday items at yourlocal store. That is the best defense of capitalism.

In a very short time, the world hasexperienced an extreme makeover.And that is what my recent book,When Man Created the World, is about.The interesting thing is that historyshows us that freedom works. During1,000 years of absolute monarchy, feudalism, and slavery, mankind’s average income increased by about 50 percent. In the 180 years since 1820,mankind’s average income has in-creased by almost 1,000 percent.

During the last 100 years, we havecreated more wealth, reduced povertymore, and increased life expectancymore than in the previous 100,000years. And that happened because of people like you—entrepreneurs,thinkers, creators, innovators—whohad new ideas, who traveled geo-graphical distances and, more impor-tant, mental distances to create newthings and who saw to it that old tra-ditions, which would have stoppednew creations, would not stop themfor long.

That is why we have all this wealth.That is why our son, who will be bornin January, has a greater chance of

reaching retirement age than childrenin all previous eras had of experienc-ing their first birthday.

Global SpreadIn the last few decades of globaliza-

tion, when new opportunities, tech-nologies, and means of communicat-ing and producing have spread acrossthe world, we have witnessed anamazing phenomenon: developingcountries are growing faster than therichest countries on the planet. Ittook us something like 40 years todouble our average income. It takes10 to 15 years today for China, India,Bangladesh, and Vietnam to do thesame thing. They can use the ideasand technologies that it took us gen-erations to develop right away. That iswhy poverty in the world has been cutin half in the last 20 years.

Every minute I speak, 13 childrengo from work, toil, and sweat onfarms or in factories into schools foreducation, to have a better life later onand to increase their opportunities.

And every minute I speak, your lifeexpectancy is increasing by about 15seconds because of the increase ofwealth and new medical technologies.

All of this is dependent on innova-tors and entrepreneurs. The entrepre-

neur is an explorer whotravels into uncharted ter-ritory and opens up newroutes along which we willall be traveling pretty soon.

Nothing has existed“from the beginning.” Noteven natural resources arenatural in any meaningfulsense— something that alot of governments haverealized when they have

nationalized oil and gas resources andother things. They had failed to un-derstand that we also need the entre-

“ “

During the last 100 years, we have createdmore wealth, reduced poverty more, and increased life expectancy more than in theprevious 100,000 years. That happened be-cause of entrepreneurs, thinkers, creatorsand innovators.

WINTER 2007 Cato’s Letter • 3

preneurial spirit—the abilityto see how to use a resourceand how to invest in it in apositive way to make surethat it is used efficiently.

The OPEC countries grewby about 4 percent every yearbecause of their oil resourcesuntil 1973, when most ofthem had nationalized their oil indus-tries. Since then, they have grownpoorer by about 1 percent every year.

Fifty years ago a North Caroliniantruck driver, Malcolm McLean,thought that there must be a more efficient way of transporting goodsand components all over the world.Back then, people would take theirtrucks down to the harbor. The boatwould sit there for a week or so whilethe unionized work force slowly andsteadily loaded every single piece ofcargo on the boat. The reverse wouldhappen in the destination harbor.

McLean thought, “What if I usewheel-less boxes and just put all thegoods in the boxes and hoist themonto the trucks, drive down to theharbor, and then just put the un-opened boxes on the ship?”

In one night, McLean createdmodern container traffic. He reducedthe cost of sending goods and compo-nents across the oceans by somethinglike 97 percent. It is possible for us tohave a particular kind of computer,with components from all major con-tinents on the planet, the clothes wewear, the food on our plates becauseof one man and his dream and a cul-ture that did not try to stop him butinstead encouraged his dreams andhis visions. And developing countriesall around the world suddenly haveuse for their talent and their hardwork—to produce what they can pro-duce best, put it into containers, andsend it somewhere else.

But technology is not enough. Wealso need freedom for new technology.Unless governments step out of theway and allow entrepreneurs to dotheir thing, none of this will happen.We know that, because there are placeswhere modern technologies are notused because of regulations, corrup-tion, and government intervention.

If you are sending one truckload offruit from South Africa to Zimbabwe,it costs you more in time, bribes, feesto the government, and taxes than itwould cost to send the same truck-load of fruit from South Africa all theway to the United States.

Our HeroesThere is a classic work by Joseph

Campbell, a book on cultural historycalled The Hero with a Thousand Faces,about heroes in different cultures. Because Campbell traveled the worldby reading books from other conti-nents, he could see that there are he-roes in all cultures, in all books, in alleras. We need heroes, because they saysomething about what our values are,what is good, what is great, what isbad, what we should strive for, andwhat we should try to avoid.

He saw a common pattern. Hethought that in most cultures and inmost eras the same kinds of things areseen as heroic.

Something big happens, and ourhero is forced to go on a journey tofight hostile enemies against all oddswith a lack of knowledge of what to

Entrepreneurs are the heroes of our world. Despite the risks, the hard work, the hostility from society, the envy fromneighbors, and state regulations, they keep on creating, they keep on pro-ducing and trading. Without them, nothing would be there.

“

“

do and when and how. But along theway he makes some friends who helphim along and give him the knowl-edge and the inspiration to do what is right.

Think about that heroic journeyonce again, and think of the persons Ijust talked about—people like you,thinkers, innovators, entrepreneurs.What makes it possible for us to buyequipment and goods from the otherside of the world? Entrepreneurs face ancient traditions, political ob-stacles, taxes, and regulations, butthey also have friends—people withaccess to capital, to knowledge, toother businesses.If they are lucky,entrepreneurs suc-ceed. If not, theylearn somethingnew, make it evenbetter the nexttime, and bringto the communi-ty something newthat changes livesforever.

That is the hero-ic epic. The entrepreneur is the hero ofour world. We do not really need theFrodos, the Luke Skywalkers, or theBuffy the Vampire Slayers. We havethe Malcolm McLeans of the world.

But as you all know, that is not really what popular culture thinks of capitalists and entrepreneurs to-day. If you go to an average Holly-wood movie, the hero is someonequite different.

The scientist and the capitalist arethe enemies in most Hollywood pro-ductions. That is a bit ironic, becausewe would not have film technology ifthere were no scientists, and we wouldnot have a film industry if it were notfor the capitalists. But they are pre-sented as villains.

Some anti-globalists and peopleopposed to free trade are now well-paid consultants who sit on theboards of big companies and tell themthat what they do is really a bad thingand that they must accept much morecorporate social responsibility. In theirterms, corporate social responsibilitymeans that what you have done so faris not social. It is not enough to creategoods, services, and technologies thatincrease our life expectancies and savethe lives of our children. No, you needto do something more. After makingyour profit, you need to give some-thing back to society.

Give somethingback to society?As if the entrepre-neurs and capi-talists had stolensomething thatbelonged to socie-ty that they haveto give back!

Profit is notsomething that wehave to apologizefor. Profit is proof

that the capitalist has given some-thing to society that it cherishes morethan the material wealth it has givento the businessman.

I must emphasize that entrepre-neurs should never be grateful for asociety that gives them license to act,to dream, to innovate, and to create. I think that we, the society, should be grateful to the entrepreneur and to the businessman for what they do. Entrepreneurs are the heroes ofour world—that despite the risks, the hard work, the hostility from soci-ety, the envy from neighbors, andstate regulations, they keep on creat-ing, they keep on producing and trad-ing. Without them, nothing would be there.

4 • Cato’s Letter WINTER 2007

WINTER 2007 Cato’s Letter • 5

Magic Is AliveMax Weber, the German

sociologist, thought that the modern world experi-enced a demystification thatwas very problematic. Therewas no magic left in theworld, with science explain-ing everything—life, nature,disease.

Excuse me very much. No magic?That is nonsense. I flew here. In 1901 we heard from a very insightful commentator who said that that wasimpossible. We could not fly. Wewouldn’t be able do something likethat for at least the next 50 years. Thatcommentator was Wilbur Wright,one of the two Wright brothers, whotwo years later took the first flight, be-cause he wanted to explore. He tookthat risk and made it all happen. Thatis magic.

I have in my computer more powerof calculation than existed in mostcountries 40 years ago. My thoughtsare being turned into ones and zeroesthat are transmitted through fiberoptics, optic cables of glass, thin as a hair, and they come to the other side of the planet a tenth of a secondlater. And by the click of the mouse, I can order just about any kind ofknowledge that exists anywhere in the world.

Above us there are satellites thatguide our navigation. And beneath uswe have robots that mine metal fromrock. We have traveled out in space,and we have read the genetic codewithin us. We have conquered hungerand disease. So I will say to you: we live in an enchanted world, in a magicworld, and it is even more enchantedbecause the creators and the innova-tors make it so.

There is vision. There are intelli-gence, ingenuity, and hard work in

every good, in every service, and inevery technology that we use everyday. And we are just barely gettingstarted. We have more scientists alivetoday than existed in all previous eras combined.

Imagine what free individuals andcreators can do with the new break-throughs in nanotechnology, biotech-nology, and robotics. I am sure it willsurprise us just as much as flight andcomputers would have surprised ourforefathers. If people take these thingsfor granted, it is only because oureveryday lives have become fantastic.

Well of FreedomYou know the old proverb, “He

that has satisfied his thirst turns hisback to the well.” Well, that is why wemeet and that is why we share lunch.That is why we work and that is whywe fight—to remind people of thatwell of freedom and of individualism,to keep that well from running dry,and to remind people of the reasonsmore people live longer lives and rich-er lives than ever, in countries that arefreer than ever.

It is customary at the end of a talkto say thank you to signal that it is theend of the talk. I do it when I speak toanti-globalist and Marxists and so on.But this time I really mean it.

I must say thank you for creatingthis fantastic world. And thank you sovery much for your support for theideas that make it possible.

“

“

That is why we work and that is why we fight—to remind people of the well of freedom and of individ-ualism, to keep that well from run-ning dry, and to remind people of the reasons more people live longerlives and richer lives than ever, incountries that are freer than ever.

6 • Cato’s Letter WINTER 2007

What drew you to Cato from the land down under?The sort of serendipitous event that makeslife wonderful. I was not actively looking fora new job when I found out that the Centerfor Trade Policy Studies was seeking a policyanalyst. After exchanging a few e-mails andtelephone calls with Dan Griswold, the jobjust sounded better and better. I had heardof Cato before, because I am a long-timedevotee of P. J. O’Rourke and because I hadattended, as a student, a conference held bythe Centre for Independent Studies, a Syd-ney-based libertarian think-tank. So I knewI was coming to a place where there is a seri-ous commitment to scholarship, and tosound principles. I miss my family andfriends, of course, but I love America and Ilove working at Cato.

How will the recent dramatic changes in Congress affect trade policy?It is a little difficult to tell at this point. Cer-tainly we heard ominously protectionist rhetoric during some individual campaigns,particularly from the Democratic side, butone has to hope that it was partly campaignbluster and that good sense will prevail whenthe votes are cast. I do think that we can ex-pect stronger language on labor and environ-mental standards in future trade agreements,and that may make some trade partners re-luctant to sign those agreements with theUnited States. We at Cato will be making allpossible efforts to remind policy-makers,whatever their party affiliation, of the bene-fits of freer trade and the costs to the UnitedStates of trade restrictions.

How will your work focus on the upcomingfarm bill debate?Dan Griswold and I released studies on specific commodity policies late last year,and soon this year we will unveil our ideasfor a new farm bill. The current farm bill ex-pires in September, and we’re hoping that byexposing the costs of current U.S. agricultur-al policies and the benefits to the country asa whole by reforming them, that we will seefarm policy shift in a new, more market-ori-ented direction. U.S. agricultural policies arepartly responsible for the failure so far toreach an agreement on the current round ofWorld Trade Organization talks, which ofcourse has much broader implications thanjust for agriculture.

Are there any good prospects for reform of the U.S. farm subsidy program?I think we can expect to see a move away fromthe most trade-distorting policies, those thatlink payments to the production of certaincommodities, for example, or government in-terventions that artificially inflate prices. TheUnited States simply cannot afford to contin-ue the farm welfare programs as we knowthem today. They are hugely expensive, bothin budgetary terms—over $20 billion in2005—and for the damage that they do to thebroader interests of the United States. Con-sumers and food processors frequently payabove-market prices for some commodities,and the support given to U.S. farmers is a realoffense to the rest of the world, particularlydeveloping countries. We’re encouraged,though, by the extent and breadth of the op-position out there to the current system.

Cato Scholar Profile:SALLIE JAMESSallie James is a policy analyst with Cato’s Center for Trade Policy Studies.James writes and speaks on a variety of trade topics, with a research ephasison agricultural trade policy. James holds a Ph.D. in agricultural economicsfrom the University of Western Australia in Perth.

WINTER 2007 Cato’s Letter • 7

Your gift to the Cato Institute is put towork to restore liberty today and forthe generations to come. There are

several ways to support Cato’s vital work forfreedom, including■ Gifts of cash – Use the detachable enve-lope to become a Cato Sponsor or make abonus contribution to Cato. There is no limiton the amount of your contribution, and it may be made as an individual, or througha corporation, partnership or foundation.

Gifts may be eligible for corporate matchinggrants. ■ Gifts of appreciated securities – Manyindividuals have stocks, mutual funds orother securities that have appreciated suchthat tax consequences of sale would be signif-icant. Your gift of appreciated securities is notonly tax-deductible, but allows you to avoidcapital gains taxes.

Gifts of appreciated securities may bemade by having your broker or mutual fund

company wire the securities directly to Cato’saccount at Charles Schwab & Company. Theaccount name is “Cato Institute,” AccountNo. 2170-8366, DTC No. 0164, Code 40.Please notify Cato of the number of sharesand company name or symbol by e-mail:ydavis@cato.org.■ Gifts of life insurance – Naming Cato asa beneficiary of a life insurance policy is anoption many have chosen for makingplanned gifts to the Institute.■ Other planned gifts – Several other plan-ned giving options are available. For a freebooklet describing these options, check the box labeled “Please send me informationabout planned giving” on the detachablereply envelope.

Before making a planned gift, please con-sult your financial adviser. Contributions toCato can also be made online at www.cato.org.Cato is a 501(c) 3 nonprofit, nonpartisan ed-ucational institution.

Givingalegacy ofliberty

Send us your lists.

W hen you’re signing up family, friends, or associates for free subscriptions to

Cato’s Letter—using the detachable envelope—you may send as many names as you wish. Consider enclosing your holiday card list or anysimilar list of individuals who may appreciatereceiving Cato’s Letter. Share the gift of libertywith your family and friends with free subscrip-tions to Cato’s Letter. Subscriptions may also bemade online at www.cato.org.

1000

Mas

sach

uset

ts A

ve.,

N.W

.W

ash

ingt

on, D

.C. 2

0001

ww

w.c

ato.

org

Non

prof

it

Org

aniz

atio

nU

.S. P

osta

ge

PAID

Cat

o In

stit

ute

Available at bookstores nationwide, online at www.cato.org, or by calling toll-free (800) 767-1241.Cato Institute, 1000 Massachusetts Avenue, N.W., Washington, DC 20001 ● www.cato.org

Leviathan on the Right: How Big-Government ConservatismBrought Down the Republican Revolution By Michael D. TannerLeviathan on the Right is an uncompromising analysis of how the policies of pro-biggovernment neoconservatives have undermined the legacy of traditional conserva-tives such as Barry Goldwater and Ronald Reagan. Tanner documents how 12years of Republican control of Congress brought about a federal government thatspends more, regulates more and meddles more in individual lives than ever before.Leviathan on the Right warns that conservatives must return to their small-govern-ment roots, or the electoral defeat of 2006 could be just the beginning.

$22.95, hardback, 1-933995-00-9

The Improving State of theWorld: Why We’re Living Longer,Healthier, More Comfortable Lives on a Cleaner Planet By Indur M. GoklanyA superb guide to how human well-being has improved steadily over the past twocenturies with economic growth, technological change, and free trade combiningto power a “cycle of progress” that has led to unprecedented improvements inevery objective measurement of human well-being.

$19.95, paperback, 1-930865-98-8

New fromthe