Monday, October 02, 2006

Humanity's Greatest Achievement

October 2, 2006; Page A11

Think for a moment about what this morning would have looked like if it were 150 years ago. You wouldn't have had electric light, running water or indoor sanitation. You couldn't have gone to work by car, bus or train. You couldn't have used a computer, which performs calculations in seconds that would take decades with pen and paper. In short, you would probably not have found this morning very comfortable or enjoyable -- if you had been alive to experience it. Back then, the global average for life expectancy was around 30 years.

We tend to take our opportunities for granted, but our ancestors could not have imagined what we now have. In the last 100 years, we have created more wealth than in the 100,000 years before that, and not because we work more. To the contrary: In the last century, work hours have been halved in the Western world. It is because new ideas have made it possible for us to work smarter and find easier ways to satisfy our needs and demands.

The people we should thank are the innovators and entrepreneurs, the individuals who see new opportunities and risk exploring them -- the people who find new markets, create new products, think out new ways to handle commodities commercially, organize work in new ways, design new technology or transfer capital to more productive uses. The entrepreneur is an explorer, who ventures into uncharted territory and opens up the new routes along which we will all be traveling soon enough. Simply to look around is to understand that entrepreneurs have filled our lives with everyday miracles.

Entrepreneurs are serial problem-solvers who search out inefficiencies and find more practical ways of connecting possible supply with potential demand. In that way, they constantly revolutionize our economy, and have made it possible for average people today to live longer and healthier lives, with more access to technology than the kings had in previous generations.

Had this radical improvement of our lives been accomplished by political leaders and central planning, it would have been celebrated as humanity's greatest achievement. But that is not how entrepreneurs are perceived, to say the least. For a hint of how the popular culture thinks of the innovators, take a look at any Hollywood film. Chances are that the villain is either a mad scientist or a greedy businessman. That is slightly ironic, since we would have neither film technology without scientists nor a film industry without businessmen. This is to say nothing of our political culture.

The ingratitude toward those who have given us almost everything seems strange. But perhaps there is a historical explanation. Wealth and innovation are recent phenomena. During about 3,999,800 of the perhaps 400 million years that hominians have existed, life has been a zero-sum game for most people. The invention of new technology was extremely slow and there was no surplus to invest, so the average homo habilis or homo erectus didn't see an increase of wealth during his lifetime. What other tribes hunted or gathered, you lost. If someone gained, it was reasonable to be suspicious of him -- because he probably did it at your expense. Under such circumstances, human nature, our instincts and our attitudes, developed.

Today we live in a very different world. The system of reward in the free market is the complete opposite. You don't gain by stealing from others, but by giving them goods and services that they want. Our suspicion and our envy, however, remain the same. What was once a way to avoid being exploited by brutes, kings and knights now becomes a way of exploiting those who create new value.

So we are probably not well adapted to understand the modern economy. Whenever we see wealth we have gotten used to thinking that someone somewhere else has lost out. The history of socialism can be interpreted in this light. Marx said that the wealth of the capitalists came at the expense of the workers. But even in his lifetime, the average worker in Britain increased his income threefold. Then Lenin saved socialism by saying that the original hypothesis might be wrong, but only because someone else had to pay the price -- poorer countries that were exploited by trade and investments. Today, once again, we know that the opposite is true. Since 1950, extreme poverty has been reduced to 20% from 60% in developing countries. The reduction has been led by the countries that have the most trade and investment links with us, whereas those that have been shut out, such as sub-Saharan Africa, have stagnated.

Later, socialists like the economist Robert Heilbroner admitted that capitalism and trade were superior for creating wealth, even for developing countries, but stood by the basic conclusion that someone or something must lose. Heilbroner thought the environment would. Today most people realize that wealth and technology give countries both the will and the means to deal with environmental problems, and that the worst problems are those in poor nonmarket economies -- the fact that five million people die every year from unsafe water, for example.

That the anticapitalists' particular concerns have been proven wrong again and again doesn't help for long, because soon they find a new excuse to condemn free markets. The latest variety is Marx on his head: He said that capitalism is bad because it actually creates poverty and slavery. Today, critics say that capitalism creates wealth and freedom -- but this is bad for well-being because we become stressed up, frustrated by the constant demand to choose, working too hard and consuming too much to keep up with the Joneses.

Don't expect the critics of capitalism to change their minds any time soon. As long as they don't believe in the creative ability of mankind or that the market is a plus-sum game, they will continue to think that someone, somewhere, is victimized whenever and wherever we see growth and innovation. Unless this disparagement of entrepreneurs is tamed, people will allow government, with its arsenal of taxes and regulations, to take their place.

Mr. Norberg, a senior fellow at the Center for the New Europe, is author of "In Defense of Global Capitalism" (Cato, 2003).

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