The psychology of success and wealth, the power of capitalism
My cmnt: slight editing for clarity and accuracy
How the world was
In 1820, 94% of the world’s population was living in extreme poverty. By 1910, this figure had fallen to 82%, and by 1950 the rate had dropped yet further, to 72%. However, the largest and fastest decline occurred between 1981 (44.3%) and 2015 (9.6%). Reading these figures, which were compiled by Johan Norberg for his book Progress, is enough to make anyone rub their eyes in disbelief. For according to leftist anti-capitalists, these were the very decades in which so much went so wrong in the world. In his book Capital in the 21st Century, the left-wing French economist Thomas Piketty writes that it is precisely this period that is allegedly so problematic. He bemoans a widening of the gap between the rich and the poor in terms of income and wealth in the period from 1990 to 2010. But what is more important to these hundreds of millions of people—that they are no longer starving, or that the wealth of multi-millionaires and billionaires may have increased to an even greater extent than their own standard of living?
According to Norberg, 200 years ago, at the birth of capitalism, there were only about 60 million people in the world who were not living in extreme poverty. Today there are more than 6.5 billion people who are not living in extreme poverty. Between 1990 and 2015 alone (in Thomas Piketty’s view the devastating years in which social inequality rose so sharply), 1.25 billion people around the world escaped extreme poverty—50 million per year and 138,000 every day.
Norberg used to be a Leftist
Johan Norberg himself used to be a left-winger and an anti-capitalist. In his book, he admits that he never thought about how people lived before the industrial revolution, when there was no medicine, no antibiotics, no clean water, nowhere near enough food, no electricity and no clean water. He confesses that he pretty much imagined this epoch of humanity as a trip to the countryside. But the reality of the past was quite different. In the early 19th century, poverty rates were higher even in the richest countries then than they are today in the world’s poorest countries. In the United States, Great Britain and France, between 40% and 50% percent of the population lived in conditions that we now describe as extreme poverty. Today, the only countries with such high poverty levels are all in sub-Saharan Africa. Across Scandinavia, Austria-Hungary, Germany and Spain, roughly 60% to 70% of the population lived in extreme poverty. And between 10% and 20% of Europeans and Americans were officially described as beggars and vagabonds.
It is estimated that 200 years ago some 20% of the inhabitants of England and France were unable to work at all. At most they had enough strength to walk slowly for a few hours each day, which condemned them to begging for the rest of their lives. Karl Marx foresaw the impoverishment of the proletariat, but when he died in 1883, the average Englishman was three times richer than in 1818, the year in which he was born.
Progress over recent decades is particularly evident in terms of life expectancy gains. Life expectancy at birth has increased more than twice as much in the last century as in the 200,000 years before. The probability that a child born today will reach retirement age is higher than the probability of previous generations ever celebrating their fifth birthday. In 1900, the average life expectancy worldwide was 31 years; today it stands at 71 years. Of the roughly 2,400 generations of Homo sapiens since our species appeared approximately 60,000 years ago, only the last four have experienced massive declines in mortality rates.
In the last 140 years there have been 106 major famines, each of which has cost more than 100,000 lives. The death toll has been particularly high in socialist countries such as the Soviet Union, China, Cambodia, Ethiopia and North Korea, killing tens of millions of people through the forced transfer of private means of production to public economies and the use of hunger as a weapon. The book The Power of Capitalism describes in painful detail the biggest socialist experiment in history, Mao’s “Great Leap Forward” at the end of the 1950s. About 45 million Chinese died at that time.
The annual number of deaths due to major famines fell to 1.4 million in the 1990s—not least as a result of the collapse of socialist systems worldwide and China’s move toward capitalism. As late as 1947, the United Nations stated that around half of the world’s population was chronically undernourished. By 1971, this had fallen to 29%, ten years later it was only 19%. By 2016, the proportion of people suffering from malnutrition worldwide had fallen to 11%.
Prophets Of Doom Have Always Got It Wrong
If there is one thing we can learn from history, it is that doom-mongers have always been wrong. In 1968, a highly acclaimed book was published with the provocative title The Population Bomb. The book stated that the 1970s would see the world plagued by numerous famines, which would result in hundreds of millions of people starving to death. Another book, Famine 1975!, predicted that famine would reach catastrophic proportions within 15 years. While anti-capitalists frequently glorify the past, they always regard the future with a strong sense of doom and gloom. In 1972, for example, the highly influential Club of Rome warned that emissions of practically every pollutant now seemed to be rising exponentially. In fact, in the decades to come, pollution would not only stop growing, but actually decrease. And drastically so. Total emissions from the world’s six leading air polluters fell by more than two-thirds between 1980 and 2014.
Norberg also confirms the extent to which environmental conditions have improved over the last few decades. While acknowledging the impact of climate change, he also points out that the amount of energy needed to produce one unit of prosperity in the Western world has decreased by 1% per year every year over the past 150 years. As he demonstrates, there are ways and means to cut CO2 emissions without reducing growth, trade and access to energy. These include more efficient production processes, less energy-intensive construction methods, new energy sources and fuels. As he also explains, scientists and companies are now working on fourth-generation nuclear power plants, all of which have passive safety systems, that can generate hundreds of times more energy from the same resources and do not have the same waste problems as their predecessors. Stephen Pinker, in his book Enlightenment Now!, also confirms that all manner of environmental problems have declined sharply in recent decades, despite the fact that most people believe they have actually increased. Pinker also sees nuclear energy as the most important means of combating climate change. In the past, according to Pinker, people’s innovative power to solve problems has repeatedly been underestimated—but a departure from progress and growth, he warns, will lead to the opposite of what environmental and climate protectors hope for.
In his book, Norberg cites a seemingly endless array of facts that prove the benefits of economic progress. The weekly hours worked by the average American are now 25 hours less than they were in 1860. At the same time, people enter the world of work later in life, retire earlier and live longer after retirement. All of these positive developments are the result of technical progress and an economic system that made this progress possible in the first place. A study of 180 countries over four decades shows that the increase in income for the poorest in a society is primarily due to growth rather than redistribution: 77% of income growth for the poorest 40% of a population are directly linked to the average growth of a country. Capitalism is not the problem, as anti-capitalists tell us. In fact, it is capitalism that has very successfully solved many of the world’s most serious problems over the last two centuries.
I was awarded my first doctorate in history in 1986 and my second, this time in sociology, in 2016. I started my career at the Central Institute for Social Sciences Research at the Free University of Berlin and went on to become department head at one of Germany’s leading daily newspapers, Die Welt. In 2000, I founded my own company, which I established as the market leader in the field of communication consultancy for real estate companies in Germany, with a roster of clients that included Ernst & Young Real Estate, CBRE and Jamestown. I sold the company in 2016 and have focused on academic research and writing books ever since. In total, I have written and edited 24 books, the most recent of which are “The Wealth Elite”, “The Power of Capitalism” and “The Rich in Public Opinion”. My books on the psychology of success and wealth have been translated into a host of languages and have enjoyed notable success in China, India and South Korea. I am also a regular contributor to numerous prestigious European media outlets, including the Le Point in France, Il Giornale in Italy, Neue Zürcher Zeitung in Switzerland, The Daily Telegraph in the UK and Die Welt in Germany.