Johan Norberg is a Swedish author and economic historian famous for his views in favour of economic liberalism and long-time staunch defence of globalization. Currently, Mr. Norberg is a Senior Fellow at the Cato Institute. His most recent book, Progress, provides ten reasons to look forward to the future. Curious about the ramifications of his work in today’s political climate, fellow Swede and Gate Staff Writer Carl Sacklen spoke with him about the state of global politics and economics today.
The Gate: What’s the biggest issue in global economics and politics today?
Johan Norberg: I would say that there are two. One is how we handle the backlash against the international liberal order. This openness for innovation and trade has resulted in the greatest improvement in living standards ever. 138,000 people have risen out of extreme poverty every day during the last twenty-five years. If we start building barriers, it is a direct attack on this development, at a great cost in human lives. And also, I am sure, to international political stability. Countries in chaos do bad things.
The other issue is how we handle the next financial crisis. We solved a crisis created by low interest rates and massive debt by lowering interest rates more than ever and borrowing even more. We are certain to have made tons of stupid decisions that looked sustainable in this environment of excess liquidity, and we always pay for it later. It is only when the tide goes out you discover who's been swimming naked.
Gate: In your book Progress, you present ten reasons why we should look forward to the future, however just in the past year we’ve seen tides of isolationism sweep over Europe and America. How do you maintain your optimism?
Norberg: By looking at the data. The proportion in poverty, hunger, illiteracy, and child mortality was halved during the last twenty-five years when we all just complained that the world was going to hell in a handcart because people do things a little better and a little smarter today than yesterday.
But I am a qualified optimist in this sense: I am an optimist about what people do in science, technology, the economy, and culture when they have the freedom to experiment, create and exchange the results of this, across borders as well. The more eyeballs who look at our problems, the more problems we will solve, and the incentives are strong to come up with useful solutions.
But I am not necessarily an optimist about whether they will have that freedom. Unfortunately, politicians often have the incentive to ruin it, since they want to present their own solution to our problems—or just look strong—which is a way of replacing millions of experiments and attempts with just one. We have made huge political mistakes historically and ruined this progress. It can happen again. One of the reasons why I wrote this book is that I wanted to warn people about this. Don’t take progress for granted; we have to defend it.
Gate: You make a case for the use of free markets instead of interventionist policies, yet a lot of the public seem to be voting for the antithesis of these values. Do neoliberals and globalists need a change of message? What can we learn from events like Brexit and the election of Donald Trump?
Norberg: First, I don’t think we should exaggerate the material base of these discontents. When you look at the studies it seems more like it’s the culturally insecure rather than the economically insecure who vote for populists and protectionists. It just so happens that those attitudes are stronger in rural areas where people do worse. In some sense I think the greatest problem is this narrative that the world is on fire. Everybody thinks that the world is going to hell and that everybody is out to kill us and destroy our culture, not because the problems are new, but because the cell phone camera is, so there is always someone there to document horrors nowadays. And if you combine this with populist parties who want to stoke that fire and keep us terrified, there you have a recipe for fear, and frightened people are not tolerant and do not act long-term. They are more tribal and want strong leaders to protect them.
That being said, I think we have to take it seriously that some people have lost out in the modern economy, and the fact that people do not move to jobs like they used to. Part of the problem is welfare and disability benefits that encourage people to stay, zoning that makes it more expensive to move to new places and occupational licenses that stops people from getting jobs. But there is also room for retraining for the new jobs. It should be easier to arrange it than ever, with all our digital tools.
Gate: How do you justify to the steelworker or the textile worker who lost their job that globalization is good?
Norberg: First I would tell them that they didn’t lose their job because of trade. Around 88 percent of manufacturing jobs lost in the US recently have been lost due to automation. American factories produce more manufactured goods than ever, they just don’t need as many workers to do it. So building tariffs would not help them get their jobs back, they need to retraining and mobility to get the new jobs.
What trade has done for them is that it has cushioned this fall, since it has increased their purchasing power by reducing the price of all the goods and services that they need. This is most important for the poorest because they consume relatively more of goods that are traded internationally. The richest tenth of US households would lose less than 10 percent of their purchasing power without international trade, the poorest tenth would lose 60 percent.
Gate: As a European, what are your thoughts on Brexit—how do you feel about the alternative to the EU?
Norberg: I think it was a mistake. I can certainly understand why the British hate the centralization and the regulation. I do too. But the problem is that the alternative seems to be national centralisation and regulation—some of that standardisation in Brussels is there to stop local regulation that might be even more stifling and would hurt trade.
The greatest accomplishment of the EU is very Thatcherite: the common market and free movement within Europe. Now the British want to abandon that and ruin their own financial industry. For what? For potential trade agreements with markets that are less important for the British, and where Britain, as a smaller country, has much less leverage to get markets opened than they would as an EU bloc.
But of course, as a Swede, I am partial. We don’t want to be left alone in the EU. Britain used to be our best friend in the EU in championing decentralization and free trade. The risk is that Brexit will result in a less open and liberal EU.
Gate: What will be the downfall of the EU in your view?
Norberg: If it doesn’t bend it will break, so the great risk is centralization. If you want twenty-eight countries in a union you have to allow for diversity and experiments—they all have to do certain things to keep markets open and cooperate on international matters, but apart from that twenty-eight different solutions must be accepted. The more Brussels wants to dictate what every country does, the greater the risk that some will jump ship.
I think the euro has introduced a terrible dilemma there. We now have explicit guarantees of the financial systems of all the member states, and without controls, this will result in financial recklessness and over-indebtedness. Since the EU leaders know this they want to counteract it with lots of fiscal controls on the member states. But do member states really want their budgets controlled by Brussels? There is a big risk that this will result in tensions and nationalism and hostility.
Gate: In your view, is French President Emmanuel Macron the icon of liberalism in the West right now? Will he succeed with his reforms?
Norberg: Well, yes, perhaps he is—but only because he doesn’t face any competition. I don’t at all agree with him in everything, and in some areas he is going in the wrong way, like several EU areas where he wants more centralization, and in some areas he is a traditional French protectionist. But it is fascinating that he managed to unite the forces that are relatively pro-market, pro-globalization and pro-Europe from the right and the left right in the middle of a major anti-globalization backlash from other parts of the right and left, and he did it with an optimistic message when people were afraid. He even managed to get a majority in parliament.
At least he’s off to a good start, and he has already started deregulating the French labour market, and I think he did it in a clever way, he neutralized the radical unions by involving the moderate ones in the decision. Of course, there is limited patience with him on the part of a more statist and protectionist electorate, but I think he has a chance to show results of these reforms before the next election since he started early. At least he has a fighting chance, and that’s impressive by French standards, and will inspire others.
Gate: What effect has Trump had on America’s place in the world?
Norberg: Gosh. He is really doing everything in his power to undermine America’s standing in the world. I don’t think anyone with a conscious plan to undermine the US would have done much better. This is the case in several ways. His protectionist trade policy is creating enemies everywhere, since he is unravelling win-win deals with some of America’s best friends around the world. He needs the Mexicans, but constantly threaten to leave NAFTA. At the moment that he needed South Korea against the North, he threatened them with new tariffs, and so on.
Furthermore, his lack of conviction to alliances like NATO results in confusion and in allies close to rivals like China and Russia beginning to hedge their bets. If the US will not be there for the long run, perhaps we have to appease with those who will.
And we can’t escape the personal side of things. One reason why the US has such a power to influence is that everybody wants to be seen with the US President. Today, lots of people around the world would be embarrassed to be seen in Trump’s company.
Gate: You’ve criticised Obamacare in the past. What healthcare system would be achievable and in your mind optimal for the US?
Norberg: Oh dear. Let me just use the outsider’s privilege to avoid giving recommendations. “Nobody could believe health care was this complicated,” as Donald Trump put it. I think the US has to go towards free markets in health care, including tort reform, abolishing deductions and allowing competition, or a single-payer health care voucher system. This current, unstable mix combines the worst from both worlds.
This article has been edited for clarity and conciseness. Image licensed under Creative Commons; original can be found here.