04 Mar 2021 Hayek Prize Finalist: Johan Norberg
Brian Anderson: Welcome back to the Ten Blocks podcast. And hello again, if you’re watching on the Manhattan Institute to YouTube channel, I’m Brian Anderson, the editor of City Journal. I’m honored to be joined today by Johan Norberg. Johan joins us from Sweden, he’s well-known to an American audience as an author, lecturer, documentary filmmaker. He writes on a numerous range of topics, globalization, popular science, a lot more economic growth. He’s a senior fellow at the Cato Institute in Washington DC, and at the European Center for International Political Economy in Brussels.
Johan is here today to discuss his terrific new book, Open: The Story of Human Progress, which is a finalist for this year’s Manhattan Institute Hayek Book Prize. The Hayek Prize is an award that we give out every year to an author whose book reflects Friedrich Hayek’s vision of economic and individual liberty. I’m proud to be a member of the jury for the award, and I’ll be interviewing all of the finalists this year on the podcast and for our YouTube channel. I know Johan is honored to have been nominated. He actually opens his book with a quote from Hayek, which I’ll ask you about later in the interview. So Johan thanks very much for joining us.
Johan Norberg: Thank you, Brian. I’m glad you liked the book.
Brian Anderson: As revealed in the title of the book. You identify openness as the key fundamental ingredient that explains what you call the story of human progress. And in your view, this is more true than habits, culture, ideas, any of the other explanations that are often put forward to describe progress and history. Can you give the nickel version of your thesis of this book to start us off?
Johan Norberg: Well, it is very high akin perspective, which goes something like this. There are specific cultures, and attitudes, and systems, and institutions that are particularly useful, helpful to encourage innovation, growth and decent societies, but we just don’t know which ones. So we have to experiment and we have to learn. Civilization is a learning process and openness is the basic institution that helps us to do it because it gives us access to more eyeballs looking at the world’s problems and more brains, hard at work, trying to come up with new solutions. And most will be bad probably or useless, but some will improve the world for all of us. So that’s why if we want civilization and continuous progress, we need openness.
Brian Anderson: You speak to get more focused on the thesis of the book about the importance of being open to particular things, goods, people, and ideas. I wonder if we could just walk through each of those. So starting with goods, what is your view of the role that trade has played in the development of humanity?
Johan Norberg: Well, it’s not an exaggeration to say that it’s not just mankind does trade, but trade created and developed mankind. And because we can see some 300,000 years ago, homo sapiens started to appear in Africa. And at the same time, we can see the first science archeologists find the first sign of long distance trade. So we find goods, tools made out of material that came far away. And archeologists say that this is probably a proof of long distance trade. And it tells you that being a trader, constantly exchanging favors, no hi or ideas, goods, and services, that’s part of human nature. That’s a reason why we came this far because trade functions like a machine into which we will put anything you’re able to create or anything you happen to have close by.
And on the other side of the machine, you can take all the things that you need. So it creates this increase obviously then in goods and services that you need, but also an ongoing specialization whereby we become experts in what we do locally. We can invest more time, energy, and capital in doing that. And in exchange, we get the best that others can create.
Brian Anderson: Second of those themes, people, the flow of people, and how does that fit into your hypothesis?
Johan Norberg: Well, oftentimes new innovations are the result of combinations of different perspectives and different technologies that already existed. But you need that kind of serendipity, whereby new things meet. It’s like hardware and software to create steel. You need both [inaudible 00:05:43], and you need the technological process. You need combinations of the rail and the train to make that work. We need combinations as Matt Ridley puts it, new ideas, that’s the result of old ideas having sex and creating something new. A new mutation in a way, and people moving across borders, moving between different societies and cultures, they carry those ideas. And that know-how, which is often not even verbalized. It’s just something that you do. But when you end up in a new place in another culture with other forms of know-how something new happens.
I don’t think it’s a coincidence that one of the first vaccines against COVID-19 came when you had Turkish migrants ending up in Germany, meeting that university system and the state of biotechnological knowledge in Germany. Combining that with the technology and the capital of an American pharmaceutical company like Pfizer, then suddenly you get something new, the first successful vaccine against COVID-19.
Brian Anderson: So the people bring the ideas and this proliferates across borders, but these three things work together, goods, the exchange of goods, the flow of people and the cross-fertilization of ideas.
Johan Norberg: That’s right.
Brian Anderson: One of the questions that you really tackle in this book is to the rise of the West and Western civilization as the dominant kind of global force for at least three or four centuries now. That may be starting to change with the emergence of China and other Asian societies as major economic players. But I wonder what explains the rise of the West. At one point, you say it was just in a way, partly out of luck, but it was also, I imagine part of a priority is openness, right?
Johan Norberg: Yes. And I would say that the origin… And there are many factors here involved, but the real origin of the lasting impact of the enlightenment, the industrial revolution and liberal democracies in the Western world was the result that we were by accident, more open than other continents. Because you had those attempts of more open ideas, of ideas about individual liberty and free markets on all continents in different cultures. But they were defeated because there’s often this tension within cultures between those who are open, those who are close, those who want to innovate and disrupt. And those who want to keep the status quo because often they are incumbents in politics and intellectuals sphere or in economics.
Well, the difference is that those leaders, those authoritative figures, they’ve failed in Western Europe, because it was a more fragmented continents. So different experiments and innovations, and eccentrics, they could often go elsewhere where there a new, strange idea about how the world works or how to produce more of the textiles in a more efficient way. Those ideas were often defeated. Monopolists, guilds, religious elites, emperors, they were defeated in other continents, but with some 500 different political entities, independent cities, independent universities, and different churches in Europe. They could often go somewhere else. And those who were in charge there realized that if they were a little bit more open to these strange new ideas, they suddenly became powerful. They got more wealth. They got more thriving intellectual atmosphere, and therefore they could also defeat others in more efficiently.
So in a way, it was this fragmentation, this competition, partly because of geographical circumstances, I think that explains much of what happened in the Western world.
Brian Anderson: Well, moving forward to the contemporary situation, it’s been basically a year now, since countries began closing their borders in response to the COVID-19 outbreak. And we’ve read a lot in the subsequent months that this might be a negative turning point for the global economy, that we’re now entering a new era of much more restricted borders. What’s your view about how the world has responded to the pandemic and how does that have an impact on your hypothesis?
Johan Norberg: Well, historically, we tend to open up and fine new possibilities of mutual gain in cooperation and exchange with others when we feel safe. But when we don’t, we retreat back to our tribe or to our nation. And because it feels like that’s more safe and those threats could be looking at it historically, economic depressions, natural disasters, military conflict, but often pandemics. Pandemics come, viruses, microbes come from elsewhere. So we tend to become a bit frightened and we could become afraid of being dependent on international supply chains. So often instinctively, we have this almost societal fight or flight instinct when there is a pandemic. And I think we’ve seen that now as well. We’ve retreated from globalization. It’s like a terrible nightmarish combination of kind of a Steve Bannon ish, nationalism and Greta Thunberg’s Environmentalist’s. No one is moving around. No flights take off. We’ve put global capitalism on hold, basically.
So that was expected. But I think the result is already in that this has been a disaster. This was a global test of what would a non open-world look like. And we’ve seen that just in doesn’t take many months before we have a global depression. Another 100 million people are thrown into extreme poverty because of this. So I also think that we have realized that the benefits, all the things that we took for granted when it comes to just the making sure that the globalization worked in 100s of different companies, on different continents. Putting food and goods on our shelves, we take that for granted, but when it’s not there, the result is a disaster. And we have also seen that it’s not just viruses coming from other places, also vaccines do. We’ve never been seen this kind of impressive cooperation between hospitals, pharmaceutical companies and researchers in real time, looking at the virus from different angles and constantly sharing knowledge about how to deal with it.
And the result is that the mind boggling pace of technological advance. It took us 3000 years to find a vaccine against smallpox, but it took us three months to have four different vaccines in clinical trials. And within a year we started to vaccinate people.
Brian Anderson: Yes, it’s quite remarkable, beyond the pandemic, where do you see the major threats to openness today? Certainly here in America, we’re seeing the emergence of what’s been called, woke culture. So a new kind of spirit of censorship and de-platforming people who might be saying things that offend certain other people. Is that a major threat in your view to this spirit of openness? And what other causes? You mentioned nationalism, bureaucratic growth. What do you see as the major threats to the free society, which is basically what you’re defending?
Johan Norberg: Unfortunately, there are lots of threats right now, and that’s the reason why I wrote this book, especially in times of trouble, of crisis, recessions, pandemics, and social media, that scares us every day. We tend to become worried and we long for some kind of a structure or a strong man or big government to basically control the process and keep us safe. And that’s dangerous because what really keeps us safe is millions of people cooperating in civil society and in our markets. I think that the new identity politics on the left and on the right, I think there are two sides of the same coins going basically. They just pick different tribes. That is a threat. And if we learn anything from history is that we become successful and strong in our own group if we learn from the other groups.
So this is what made the enlightenment such a remarkable revolution in human history, because it was the result of opponents and people who didn’t like one another, who came from countries that were even at war with one another. Starting to listen to one another and learn from others, not because they felt like this was a nice, warm, fussy, altruistic way of moving through life. But because they learned that it wasn’t their own self interest. Other people who look at the world from another angle, they’ve seen something else than you have. And if you want to accumulate more knowledge, if you want to learn more, you should listen to them rather than cancel them. So this whole search for purity that we’re seeing in many places, keeping outside as a way, and not trying to cancel those who think differently. That is a major threat to openness, I think.
Brian Anderson: One of the arguments that is now powerful on both the right and the left in the US is that a trade is really responsible for the loss of manufacturing jobs in the United States, which has created a lot of problems in many communities. So both Republicans and Democrats these days have grown increasingly skeptical of free trade. And we see this. The Biden administration is not going to roll back the tariffs that the Trump administration put in place. I wonder though, what is your view of the effects of free trade when it does have this kind of an impact on manufacturing, or perhaps you disagree with that hypothesis, that there may be other reasons that manufacturing has been disrupted to summit in the United States?
Johan Norberg: Yes, I do disagree because it’s not like we have a manufacturing crisis in the US. We increase manufacturing constantly, putting out more and high value added goods constantly more than ever before. It’s just that we don’t need as many workers in the factories anymore to do it. So when you look at jobs lost, trade can explain perhaps one out of 10 manufacturing jobs. The rest is all about technology and automation. But I guess it’s more difficult to pick on the machines as the scape goats. It’s easier to talk about other countries and their exports, but they are also losing manufacturing jobs, because if they want to stay competitive, they also have to automate and make sure that more of the jobs are in the most value added sectors. When it comes to the design of the products, when it comes to the marketing of the products, when it comes to constantly tweaking the process to make it more efficient.
So, that’s more important and the more important change, and the fact that consumers change behavior and they demand more service goods. So things are changing constantly. And what we have to do if we want a strong manufacturing sector, and if we want new competitive businesses that expand and hire people is that we constantly have to move towards those jobs and make sure that we don’t devote too much resources and capital to old businesses producing things in old ways, but the new ones. And I think many of the worst examples that we have from the US and from Europe, when it comes to an industrialized areas. It’s not that they were too open. It was more that they had a closed mindset. If you look at the American Rust Belt, so to speak, it lost more manufacturing jobs between 1950 and 1980, than after 1980, when they faced foreign competition. And that was when you look at it, it was because they were too self-confident.
They didn’t think anybody could threaten them. So there was no competitive pressure. They did not adapt to the new technologies. Instead, they tried to keep old ways of doing business. The only pressure came from trade unions, trying to keep everything the way it was. So after awhile, labor costs and basically the cost of every product was 20% higher than it could be produced in other parts of the United States. So they lost jobs to Southern states that were more open and flexible and had right to work laws and other things. So whatever happens, you will lose old jobs and you can create new jobs. The only question is, are you going to lose those jobs from a position of strength where you’re also creating the new ones that expand and can hire. Or are you going to lose them like the rust belt did, losing it because they failed to adapt? Well, in that case, it’s not just the old jobs that disappear. It’s also much of the economy and of the culture surrounding them.
Brian Anderson: You open your book appropriate early enough for this context, with a quote from Hayek, as I mentioned earlier. Has Hayek been an influence on your work? And what in your view is his relevance to the world today?
Johan Norberg: Oh, certainly. He’s a great influence. And in many ways I’m thinking of this book as an attempt to update his insights into the battles that we’re facing today, when it comes to the open society and free markets. And the quote that I’m thinking of there. And what I use there is the insight of how many of our attempts are discontent with living in an open world and open society comes from instincts and attitudes that were developed in another situation in small-scale societies. Where we often only cooperated with kin and within the tribe. And as I tried to update his insight, if you’re thinking about the homo sapiens over the last 300,000 years as just 24 hours, well, then these past 200 years where almost everything happened. Modern industrialized civilization, where we reduced extreme poverty from 90% to 9%, increased life expectancy from 30 years to 72 years, that is just the last minute of those 24 hours.
And that’s an astonishing minute. It’s the minute that we should be all grateful for it, because that’s the reason why we couldn’t lead the kind of lives in this kind of way. So more better health, wealth opportunities than ever before. It comes from that one minute, but our instincts and our attitudes do not come from that minute. They were developed over the past 86,400 seconds, not those past 60 seconds. So we have all those fears of, for example, trading exchanging with strangers. We have developed many instincts in a zero sum game because when someone got rich in the previous 86,400 seconds, it was often because they stole it from you. They were raiders or free riders, because few people live to see economic growth, innovation over their own lifetime.
So they had to be suspicious of other groups and of the rich, of the 1% and so on. And we still carry those fears and those attitudes and instincts today, which is a shame because now we’ve developed a situation where for the first time in free-market societies with rule of law, you can only get rich by enriching others. So those same instincts that use to protect us against being exploited are now being used to attack those who are enriching society and ourselves every day.
Brian Anderson: Your view, I wonder about China. How do you see China emerging as a global power? That certainly in everybody’s mind these days as a kind of rival to Western society, but yet at the same time, we have an enormous amount of exchange with China, including trade. I wonder how you see the potential conflict growing, how you see China evolving as a society. Will it become a more open society?
Johan Norberg: That is yet to be seen. And this is something that worries me a lot. What we have to keep in mind. And when I think that the Chinese Communist Party has to keep in mind is that China got rich and powerful now because it opened up. Because it opened up the economy and made it possible to experiment with foreign trade, with foreign investments, with entrepreneurship in the economy. If they don’t understand that. And why would they, because we in the West don’t understand that. If they assume, which many people do in the Western and China, that this was somehow a command and control model that created all this wealth, that is going to lead them into major difficulties in the future. That’s not the case. It happened because of grassroots changes, secret privatization of land to go from starvation to the food surplus, village enterprises that worked in the informal sector.
The only thing that the communist party did in the ’80s, was to put their stamp on approval on this afterwards, rather than sending those entrepreneurs to labor camps, because they saw that it worked, and then they imitated it on a large scale. That’s the key to their success. And if they think that command and control is going to be the model for the future, which seems to be changing things model, I think that they will fail big time because after a while you exhaust your ability to imitate and to steal intellectual property from other places. You have to develop innovation and from strange new places within the economy. And a dictatorship that suddenly explains to their successful entrepreneurs, that now you have to apologize or abandon this IPO or this kind of technology, they will never be open to the strange, crazy ideas that people come up with in a garage.
Short-term, I think they can continue to be successful because there is lots of entrepreneurship going on in the economy. And oftentimes ironically, they are more deregulated if the politburo knows that people are doing something that they want to accomplish. They’re more deregulated in those areas than we are in the US and in Europe. But when it comes to finding the new innovations, the strange new business models, they are just not open to it because authoritarians are not open to surprises. And that will come back to haunt them in the long run. And I’m not saying that they will understand that and that they will necessarily go and move towards a more open model. It could very well result in stagnation or even a major crisis and a collapse.
But the one thing that history tells us is that in the long run, a closed authoritarian model, based on command and control will not be a successful, innovative economy in the long run.
Brian Anderson: A final question to wrap up. And this more personal question, just about the reception to the book. I’m wondering what it’s been like, and what kind of questions have arisen that may have surprised you. How’s the book doing?
Johan Norberg: Its doing very well. Thank you. And lots of translations are coming online soon. The weird thing is that it’s the first time I publish a book in a pandemic.
Brian Anderson: I see.
Johan Norberg: So my world’s book tour has been done from my living room. So I’m grateful for the fact that the worldwide web exists and all these fancy technologies from Silicon Valley, obviously. It’s also interesting and this is one thing that people talk about when it comes to the book all the time. It is about the pandemic. I didn’t write it. I actually finished it before we had the new coronavirus out there, but it fits the model of open closed in so many ways. I write about historical pandemics and how they’ve affected, how we deal with these things. And so sometimes when you write something, you wish that it will be seen as very much in line with current events. But not when you write about the potential end of openness and of civilization. So this whole world of lock downs and basically shutting down global capitalism for six months has been horrible for the world, but actually it’s been good for the book because now people are talking about open and closed all the time.
Brian Anderson: Well, thanks very much Johan. Don’t forget to check out Johan Norberg’s latest book. It’s called Open: The Story of Human Progress. It’s a finalist for this year’s High Book Prize, and you can find it on Amazon and wherever books are sold. You can follow Johan on Twitter. His handle is @johanknorberg. And to learn more about the High Prize and see our other finalists, we will have a link to it on the Manhattan Institute, a website in the description for this episode. If you’re listening on the podcast, we hope you leave us a review on iTunes. And if you’re watching this on YouTube, we hope you subscribe to the channel and check out the other interviews, which will be coming. So thanks again, Johan for joining us and thanks all for watching and listening.
Johan Norberg: Thank you so much, Brian.
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