Herausforderungen des Kapitalismus und der freien Märkte

This episode fits perfectly into my longer-lasting quest to understand complex societies and how to handle it. I am thrilled about the opportunity to have a conversation with Johan Norberg. The title of our conversation is: How to organise complex societies?

Johan Norberg is a bestselling author of multiple books, historian of ideas and senior fellow at the Cato Institute. I read his last two books, Open, The Story of Human Progress and The Capitalist Manifesto. Both are excellent books, I can highly recommend. We will discuss both books in the wider bracket of the challenge how to handle complex societies.

The main question we discuss is, how can we handle complex societies? Which approaches work, give people opportunity, freedom and wealth, and which do not work. The question can be inverted too: When systems are more complex, is also more control and commands needed, or the opposite?

»The more complex the society, the less it can be organised—the more complex society gets, the more simple rules we need.«

Knowledge and power behave differently, as Tom Sowell puts it:

“It's much easier to concentrate power than knowledge.”

The consequence seems to be:

“If we centralise power we loose knowledge”

We talk about the historic background of the idea of liberty, for instance John Stewart Mills On liberty, Friedrich Hayek Road to Serfdom. Did we lose our desire for liberty? The Austrian philosopher Konrad Paul Liessmann observes:

“Dass das Volk nicht herrschen kann, sondern erzogen, belehrt, bevormundet und mehr oder weniger sanft in die richtige Richtung gedrängt werden soll, ist überall spürbar. Die ubiquitäre pädagogische Sprache ist verräterisch.”

“The fact that the people cannot rule, but are to be educated, instructed, patronised and more or less gently pushed in the right direction, can be felt everywhere. The ubiquitous pedagogical language is treacherous.”

How then, should we think about liberty and responsibility? 

“There is only one basic human right, the right to do as you damn well please. And with it comes the only basic human duty, the duty to take the consequences.”, P. J. O'Rourke.

That might be an uncomfortable truth for some, though. Freedom has consequences and responsibilities! The trend of the last decades points to a different direction. Every minute detail seems to be regulated by someone who allegedly knows better:

“Large projects are essentially illegal in California and in Europe”, Elon Musk

The consequence is, as I have discussed in previous episodes, stagnation since many decades. Follow the links below to other episodes. Now, did we become an old, risk-averse, dying society? This would not be good news because: 

“With innovation comes the risk of failure”

And the uncomfortable truth is: Our desire to reduce risks might actually increase risks. 

“If we are saying that we should not accept anything until it is perfectly safe, that’s the most unsafe and risky bet we could do.”

How can we muddle out of this mess?

“Nothing comes from a committee, nothing from a single genius fully developed. Innovation comes from a process of experiments, trial and error, feedback and adaptation, changes and more people getting involved.” 

There is no such thing as an immaculate conception of a new technology.

But what about volatility? Is volatility a risk? For whom? The individual, society? Is societal risk decreasing when we reduce volatility? 

What does Johan mean by openness, and why is it Important?

“Openness for me means openness to surprises. This is the only way for societies to thrive and function long term. […] Historically, life was nasty, brutish, and short. We need new things. We need new knowledge, new technological capacity and wealth.”

So why did the industrial revolution happen in the West? What is the connection to openness? What can we learn about control in societies?

“Societies have to be decentralised not top down controlled.”

But Mervyn King discusses in his excellent book Radical Uncertainty the fact, that we cannot predict the future. What happens with innovation that we cannot predict?

“Under open institutions, people will solve more problems  than they create.”

Moreover, the opposite is not true. Not innovating does not reduce risk:

“If we would do nothing, we would also be surprised by unpredictable developments. […] We solved the problems that were existential and created better problems and level up. […] I prefer those problems to the ones that made life nasty, brutish and short.”

In Europe, the precautionary principle is in high regard. Does it work, or is it rather a complete failure of epistemology?

But what about capitalism? Has it failed us or is it the saviour? Does the Matthew principle speak against capitalism?

“Elites have an interest to protect the status quo” which is a reason why free markets were blocked in many societies. This does not speak against free markets, but rather is an argument for free markets.

Is the idea of capitalism and free markets more difficult to grasp on a psychological level? Socialist ideas sound nice (when you are in a family or small group) but they do not scale. And even worse, if you try to scale them, do they create the opposite of the desired effect? In a society, we are the kids, and we have other ideas than some authoritarian figure, and we have the right to our ideas. 

“The only way to organise a complex society of strangers with different interests and different ideas and different vantage points on the world is not to control it, but instead give them the freedom to act according to their own individual creativity and dreams.  […]  You can get rich that way, but only by enriching others.”

Moreover, the distribution problem evidently is not solved by top-down political concepts. In authoritarian systems, poverty is equally distributed, but the elites still enrich themselves. 

But is trade and economy not used as a weapon on an international scale? How does that fit together, and does that not open up massive risks when we stick to free markets?

“If goods don't cross borders, soldiers will.”

Why is diversification, important, and how to reach it? What happened in Argentina, a very timely question after the new presidency of Javier Milei.

“Argentina should be a memento mori for all of us. […] 100 years ago, Argentina was one of the richest countries of the planet. It had the future going for it”. […] If Argentina can fail, so can we, if we make the wrong decisions.”

There are countries on every continent that make rapid progress. What do they have in common?

At the end of the day, this is a hopeful message because wealth and progress can happen everywhere. Since the turn of the millennium, almost 140,000 people have been lifted out of extreme poverty every day. For more than 20 years. Where did that happen and why? What can we learn from Javier Milei?

“I am an incredible optimist once I gaze away from politics and look at society.”

How can we repay the debt to previous generations that gave us the living standards we enjoy today?

References

Other Episodes

• Episode 103: Schwarze Schwäne in Extremistan; die Welt des Nassim Taleb, ein Gespräch mit Ralph Zlabinger
• Episode 101: Live im MQ, Macht und Ohnmacht in der Wissensgesellschaft. Ein Gespräch mit John G. Haas.
• Episode 96: Ist der heutigen Welt nur mehr mit Komödie beizukommen? Ein Gespräch mit Vince Ebert
• Episode 90: Unintended Consequences (Unerwartete Folgen)
• Episode 89: The Myth of Left and Right, a Conversation with Prof. Hyrum Lewis
• Episode 77: Freie Privatstädte, ein Gespräch mit Dr. Titus Gebel
• Episode 71: Stagnation oder Fortschritt — eine Reflexion an der Geschichte eines Lebens
• Episode 70: Future of Farming, a conversation with Padraic Flood
• Episode 65: Getting Nothing Done — Teil 2
• Episode 64: Getting Nothing Done — Teil 1
• Episode 44: Was ist Fortschritt? Ein Gespräch mit Philipp Blom
• Episode 34: Die Übersetzungsbewegung, oder: wie Ideen über Zeiten, Kulturen und Sprachen wandern – Gespräch mit Prof. Rüdiger Lohlker

Johan Norberg

• Johan Norberg is Senior Fellow at the Cato Institute
• Johan Norberg on Twitter/X
• Johan Norberg on LinkedId
• Johan Norberg, Open. The Story Of Human Progress, Atlantic Books (2021)
• Johan Norberg, The Capitalist Manifesto, Atlantic Books (2023)

Literature, Videos and Links

• John Stuart Mill, On Liberty (1859)
• Friedrich von Hayek, The Road to Serfdom, Routledge (1944)
• Thomas Sowell, intellectuals and Society, Basic Books (2010)
• Johan Norberg, A Conversation with Elon Musk, The Cato Institute (2024)
• Reason TV: Nick Gillespie and Magatte Wade, Don't blame colonialism for African poverty (2024)
• Jason Hickel, The Divide – A Brief Guide to Global Inequality and its Solutions, Windmill (2018)
• Victor Davis Hanson on subsidies and tarifs (2024)
• Konrad Paul Liessmann, Lauter Lügen, Paul Zsolnay (2023)
• P. J. O'Rourke, The Liberty Manifesto; Cato Institute (1993)