Rainer Zitelmann was in turn a Marxist student, a doctorate in history, a journalist at Die Welt and a successful entrepreneur. Now, in his fifties, he has written a second thesis on the super-rich and is a resolutely liberal essayist. His new book, In Defense of Capitalism, is a vibrant plea for capitalism.
Contradicting ten “myths” about poverty, consumerism, inequality or monopolies, Zitelmann defends the record of liberalism and argues that what has repeatedly failed for a century are anti-capitalist experiments, from the USSR to Venezuela. The book also contains unpublished data on the perception of capitalism in different countries around the world. Not surprisingly, France stands out for its opposition to economic freedom.
You are publishing In Defense of Capitalism at a time when we seem to be threatened by a new financial crisis. Aren’t crises like the one in 2008 proof that capitalism has to change?
Rainer Zitelmann: One of the reasons I did this book is that I expected another such crisis. In 2019, in The Power of Capitalism, I wrote: “The financial crisis was caused by excessively low interest rates, heavy-handed market interventions and over-indebtedness. Are we seriously going to believe that the right therapy involves even lower interest rates, stronger market interventions and more debt?
These measures may have short-term effects, but markets are becoming increasingly dependent on low interest rates. Low interest rates do not solve the underlying problems, they only suppress the symptoms and push them into the future. The current combination of over-regulation and zero interest rates will lead to considerable problems for many banks in the medium term and is a breeding ground for further and more severe crises.
With their policies, central banks have trapped themselves: first they caused inflation, and now that they have to raise interest rates to fight this inflation, they are putting the banks in trouble. The economist Ludwig von Mises [1881-1973] called this “the interventionist spiral”. In my new book, I show that the 2008 financial crisis was by no means a crisis of capitalism or the result of too much deregulation, but rather the opposite: it was the result of too much state intervention and misguided policies by central banks.
Inequality is growing in countries like the United States, and the issue of the “1%” is increasingly becoming a political issue. Shouldn’t we be concerned about this?
First of all, inequality in the US has grown much less than we think. I recommend the excellent recent essay The Myth of American Inequality, which shows how statistical manipulation massively distorts inequality data.
Secondly, it is not inequality that interests me, but poverty. Thomas Piketty argues that for most of the twentieth century, inequality has been falling. For him, the bad period starts in 1990 – since then, inequality has been rising. Yet this is the best period in human history, as poverty has never fallen as much as in the last thirty years. Before the emergence of capitalism, most of the world’s population lived in extreme poverty. In 1820, almost 90% of the world’s population was in absolute poverty. Today, this figure is less than 10%.
Even more remarkable is the fact that in recent decades, since the end of communism in China and other countries, the decline in poverty has accelerated at a rate unprecedented in human history. In 1981, the share of the population living in extreme poverty was still 42.7%. By 2000, it had fallen to 27.8 per cent, and by 2021 it was less than 10 per cent. People like Piketty are interested in inequality, I am interested in how to fight poverty. In China, Vietnam and Poland, inequality has increased, but I haven’t met anyone who wants to go back to a time when people were more equal, but poorer.
“Capitalism is the greatest enemy of monopolies”
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The big technology companies (Google, Amazon, Apple) are perceived as growing threats because of their power and fears of monopolies. You say this is an old story.
Yes, capitalism can lead to the formation of temporary monopolies, but above all, capitalism destroys monopolies. In 2007, Britain’s leading left-wing newspaper, The Guardian, asked the question: “Will Myspace ever lose its monopoly? In 2008, Forbes magazine ran a feature on Nokia, with the cover headline, “1 billion customers. Can anyone catch up with the king of mobile phones?” Who still uses Myspace or a Nokia phone today? Xerox, which invented the first photocopier in 1960, dominated the market in 1970, with a market share of almost 100%, compared to 2% today. There are many other examples that prove that capitalism is the greatest enemy of monopolies.
The most dangerous monopoly is that of the state. The great paradox in the criticism of monopolies by anti-capitalists is that they are the same ones who so often advocate nationalisation, even though state monopolies are the most durable and solid of all. Isn’t it absurd that anti-capitalists blame big business for restricting competition, while advocating more public enterprises that eliminate competition not just temporarily and partially, but permanently and completely?
Isn’t Capitalism also accused of being the main cause of environmental destruction such as global warming?
In her new book, Greta Thunberg rejects all the pragmatic and technical proposals for tackling climate change, with one exception: abolishing capitalism. She and other anti-capitalists, such as Naomi Klein, do not call it by its name, but what they are calling for is, in effect, a planned economy. Naomi Klein admits that initially she was not particularly interested in global warming. Then, in 2014, she wrote Everything Can Change: Capitalism and Climate Change. Why did she suddenly become interested in this issue, when before Klein was mainly concerned with fighting free trade and globalisation? She said it openly: ‘I was driven to become more involved in this area in part because I realised that it could be a catalyst for forms of social and economic justice that I already believed in’.
But over the past hundred years, the planned economy has never solved anything, it has only caused enormous problems, especially in the environmental field. CO2 emissions in the socialist GDR were three times higher than in the capitalist West Germany in relation to GDP. If the proposals of the anti-capitalists were implemented, billions of people in the world would starve and the environmental problems would not be solved, but made worse.
From your German perspective, how do you judge the strong opposition in France to Emmanuel Macron’s pension reform, which raises the retirement age from 62 to 64?
In Germany, there is no desire to raise the retirement age either. But logic tells us that we have no choice. People are getting older and older, which is good. But this means that the pension system, which was created at a time when people were living shorter lives and the demographics were completely different, no longer works. I don’t understand why someone who has mastered the four basic arithmetic operations cannot understand this…
Your study shows that France is one of the countries most opposed to economic freedom, just ahead of Turkey, Bosnia-Herzegovina or Russia…
Anti-capitalism is stronger in France than in almost all the other countries surveyed. The French left is obsessed with anti-capitalism, but so is part of the right, like Marine Le Pen.
I conducted another survey on social jealousy in thirteen countries. In no other nation is social jealousy of the rich as strong as in France. A country like Poland is now the complete opposite of yours, with the most positive view of capitalism and the least social jealousy.
“True socialism has supposedly never existed anywhere…”
Isn’t China, run by a party that is still officially communist, proof that you can succeed economically with an authoritarian, dirigiste state?
As my friend Weiying Zhang of Peking University says: “Our economic success has not been achieved because of the state, but in spite of it. In the late 1950s, 45 million Chinese starved to death as part of the largest socialist experiment in history, Mao’s “Great Leap Forward”. In 1981, 88% of the Chinese population was still living in extreme poverty. It was then that Deng Xiaoping launched his market economy reforms and introduced private ownership. Today, the extreme poverty rate in China is less than 1%. The advantage of capitalism is that you don’t need a pure form. Even a simple dose of capitalism, like in China, helps a lot.
How do you judge the evolution of Xi Jinping’s regime, which seems to be returning to a much stricter Marxist-Leninist ideology?
In recent years, it seems that the Chinese are forgetting the reasons for their incredible success, reverting to more statehood. If this path is not rectified, it is not only dangerous for China, but for the whole world. The Vietnamese are not making the same mistake. Over the past twenty-five years, Vietnam, supposedly socialist, has gained more economic freedom than any country of comparable size.
“All socialist systems that invoke or have invoked Marx have failed without exception,” you write. But, to listen to the anti-capitalists, this would only be because of a bad application of Marxist theories in the USSR or North Korea.
This is the greatest sleight of hand of the anti-capitalists. When socialist experiments started in the Soviet Union, China, Venezuela and other countries, anti-capitalist intellectuals were enthusiastic. Stalin and Mao were heroes, even for Sartre or Henri Barbusse. Left-wing intellectuals around the world were also enthusiastic about Hugo Chavez when he was elected in Venezuela in the late 1990s.
There have been about twenty-five socialist experiments in the last hundred years. After each failed experiment, the anti-capitalists systematically tell us: “that was not real socialism”. True socialism has supposedly never existed anywhere. Marx has always and without exception been misunderstood. This is, of course, absurd. Marx never explained his vision of socialism and communism in detail, but one thing is clear: it is based on the abolition of private property. On this central point, socialists and communists have understood Marx very well.
Despite this calamitous record, you say we are in a period of “rebirth” of socialism, especially among young people in the West.
This is the fault of the defenders of capitalism, and in particular the entrepreneurs. They have never been able to explain to the masses the advantages and functioning of capitalism. They have handed over the media, schools and universities to the anti-capitalists. The pro-capitalists should learn from the marketing and communication of the anti-capitalists, because the latter are obviously much better at it.
Why describe anti-capitalism as a “political religion”?
In the late 1930s, Raymond Aron used the term “political religion”. Following Marx’s description of religion as the “opium of the people”, Aron referred to communism as a “religion of intellectuals”. Political religions respond to human needs and aspirations that were previously met by religions. Aron described these doctrines as “secular religions which take the place of vanished faith in the souls of our contemporaries and place here below in the distant future, in the form of a social order to be created, the salvation of humanity”. This is why it is so difficult to convince anti-capitalists with facts, because their beliefs are religious in nature, relying much more on emotions than facts.
But why do so many Western intellectuals oppose capitalism?
The answer is complex, but here is one explanation. Intellectuals think that whoever reads the most books and has the best academic education should be at the top of the ladder, which is themselves. They value so-called ‘explicit knowledge’, and do not understand that ‘implicit knowledge’ is at least as important, if not more so, for an entrepreneur.
Intellectuals thus cannot understand that someone with “inferior intelligence”, someone who may not even have an undergraduate degree, can end up earning much more money, having a much bigger house, and even a much more attractive spouse. They feel this to be an injustice, and take revenge through their belief in a capitalist or market failure that should be ‘corrected’ through massive redistribution. By stripping entrepreneurs of some of their “undeserved wealth”, intellectuals console themselves with the fact that even if they cannot abolish capitalism, they can at least “correct” it to some extent.
This article was originally published on L’Express.
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