June Arunga’s introduction to ‘In Defense of Global Capitalism’

My experience is that the great bulk –maybe 90% — of disagreements stem from lack of information on one side or the other. That’s especially important when people move from one cultural space to another. We are seeing a great surge of trade in Africa, among Africans, after a long period of isolation from each other, due to protectionism, nationalism, and misunderstanding. I think we should celebrate that growth of trade. Some fear the increase of trade, I think that they need more information.

 Globalization is happening. And I think we should welcome it. It’s created transfers of skills, access to technology from around the world, and much more. But many have been kept out. The question is why?

 I met the Swedish economist Johan Norberg in 2002 and I was struck by how he dealt with information. He listens to the people who are against trade and he doesn’t dismiss them. He asks if what they say is right and how we could check the facts. And that’s what he then does. He’s interested in information.

 Remarkable he takes the perspective of the people most affected: the poor. Norberg has traveled the world asking questions. He doesn’t tell people what they ought to think. He asks them what they think. And asking the poor who have been given opportunities to engage in trade, either as traders or merchants or as employees of enterprises involved in international trade, reveals things that the official pontificators miss. Did that job at new factory make your life better or worse? Did your first cell phone make your life better or worse? Has your income gone up or down? How do you travel? By foot, by bicycle, by motorbike, by car? Do you prefer a motorbike or walking? Norberg insists on looking at the facts on the ground and asking the people involved what they think and whether trade has improved their lives, from their own perspectives.

In Defense of Global Capitalism shows us what our governments are doing to us, not just for us. Our own governments are hurting us. They steal from us. They stop us from trading. They keep the poor down. Local investors are not allowed to compete because of the lack of the rule of law in low-income countries. Maybe that’s why they’re low-income countries –because the people are not respected by their own governments.

 Governments are so focused on attracting “foreign investors,” but they don’t let their own people into the market. Opening up the market and competition to local people is not on their agendas. Local people have the insight, the understanding, and the “local knowledge.” But our own governments in Africa keep their own people out of the market, in favor of foreign or local special interest groups.

 For example, heavy restrictions that stifle local competition in services, such as banking and water provision, ignore the abilities of our own people to use their local knowledge of technology, preferences, and infrastructure. It’s not “globalization” to give special favors to “foreign investors,” when the locals are swept away and not allowed to compete. If the “special economic zones” that governments set up to attract “foreign investors” are a good idea, why can’t the bulk of our people benefit from them? Why are they considered special zones of privilege, rather than a part of the freedom of trade for everyone?

 Freedom of trade should be about free competition to serve the people, not special privileges for those who can get the president’s ear, whether local elites who don’t want competition, or foreign investors who get special audiences with ministers.
 It’s not “free trade” when international companies can get special favors from governments and it’s not “free trade” when local firms are blocked by their own government from the market. Free trade is about the rule of law for all and freedom for all to engage in the most natural of actions: voluntary exchange.

Our prosperity won’t come from “foreign aid” or “easy money.” We’ve had lots and lots of that in Africa, but it hasn’t had a positive impact on the lives of the poor. That kind of “aid” creates disincentives for the rule of law. It comes tied to purchasing services from specific people in the countries that are sending the aid. That’s distortive of trade relations. But worst of all, “aid” disconnects governments from their own people, because the people who are paying the bills are not in Africa, but in Paris, Washington or Brussels.

Trade can be distorted and made unfree by local elites who get the minister’s ear through, well, you know how. It can be distorted by granting monopoly rights to the exclusion of both local and foreign competitors. Second, trade is distorted and made unfree when foreign elites get monopoly rights from local governments through tied-aid deals in collusion with their own governments, deals that exclude both local and foreign competitors since the deal is fixed. All of that makes our markets unfree, and that makes us unfree. All of that leaves us purchasing goods and services that may not be of the highest quality or the best price, because we don’t have freedom of choice. And that lack of freedom keeps us down and perpetuates poverty.

We aren’t just robbed of lower prices and better quality, though. We are robbed of the opportunity to innovate, to make use of our minds, to improve our situations through our own energy and intellect. In the long run, that is the greater crime against us. Protectionism and privilege perpetuate not only economic bankruptcy, but stagnation of intellect, courage, character, will, determination, and faith in ourselves.
 This book is also about information. Norberg talks to people on the ground. He also goes to publicly available data to check large claims. Anyone can check the same facts. They’re not secrets. What I liked about this book is that Norberg really thinks about the claims, anecdotes and theories of other people. But he does what an informed person does. He goes and finds the facts and checks them against the claims. It’s all public record. But so few bother to look.

 After reading this book, I really encourage people to read the work of the Peruvian economist Hernando de Soto, in his book The Mystery of Capital. There, de Soto shows how poor people can convert “dead capital” into “living capital” to improve their lives. Lack of capital is not inevitable. We in Africa have so much capital, but most of it cannot be put to use to improve our lives. It’s “dead.” We need to improve our property rights to make our abundant capital the “living capital” that generates life.

June Arunga
Corporate Affairs Director, BSL Ghana Limited
June 25, 2008