Rainer Zitelmann: “Capitalism is not the problem, it is the solution”

In his new book, “Capitalism is not the problem, it is the solution” (released in Brazil by the Liberal Institute), the German historian and sociologist Rainer Zitelmann makes an impassioned defense of the economic system that has lifted billions of people out of poverty over the past two centuries. “100 years before capitalism, 88 % of the world population lived in extreme poverty, 90%. Today, this percentage is less than 10% But what is more important: half of this reduction occurred in the last 45 years. It’s a wonderful time”, says Zitelmann enthusiastically.

Passing through Brazil in early June to speak at the “I International Conference on Freedom”, held by the Liberal Institute in partnership with Rede Liberdade, in São Paulo, which also had the participation of the former president of Brazil Michel Temer and former Argentine President Maurício Macri, Zitelmann spoke with Gazeta do Povo2800 about why capitalism, despite being successful, he is still considered the villain by many people. “Socialists compare their utopia to the real world. It’s as if I compared a real wedding to romance stories, in which the characters kiss each other every morning.”

Check out the interview below:

Gazeta do Povo — What would be the reason? why has capitalism become, for some people, a “villain”?

Rainer Zitelmann — I believe it is related to religion, purely to religion. You know, in past centuries, religion was quite strong. Today she is still strong, but not as strong as before. Some people hoped for paradise after death. Starting in the 20th century, capitalist thinking began that people want paradise on earth. And I believe this thinking fills the gap that was once filled by religion, of giving people hope for better things.

Another reason for this negative image it would be because socialists and/or anti-capitalists do not compare real-life examples. For example, in my book, I compare North and South Korea, Sweden, West and East Germany, Chile and Venezuela, before and after the reforms. That’s what I do in the book, but socialists do something else. They compare their utopia to the real world. It’s like I compare a real wedding to romance stories, characters kiss every morning, etc. Imagine that one day your wife comes in and says, “Oh, we need to talk,” because she started reading romance novels and is now comparing these stories to her marriage. I think you’d say it’s pretty unfair to compare these stories or your friends. That’s what socialists do: they compare real, existing societies with a utopia, and utopia is always better.

The last reason, especially with the young people is that, in many cases, they don’t know much about history. For example, I begin the book with the greatest socialist experiment in history, the Great Leap Forward, in the period of Mao Zedong, from 500 to 1962. 30 Millions of people died, and I consider it worth mentioning that part of the story. However, I travel all over the world to talk to young people and ask, “Did your teachers teach you about the greatest socialist experiment, where 88 million people died? Did you hear about it at school?” And, in almost every country, if I talk to 100 people, maybe one or two will raise hand, but others haven’t heard about it. I believe this is a problem, that people don’t know enough about history.

So, what would be the way for capitalism to be the hero of history? Especially with the constant criticism of the system, coming from experts and opinion makers.

I believe that capitalism needs more people to defend it, there are very few who do. I am one of them, I travel the world to talk about this topic, but there are few advocates of this thinking. And also people who can make it attractive, especially for young people. For example, in the United States, there are many young people who are anti-capitalist.

But there are exceptions. I was in Argentina and met many young people who are pro-capitalism, especially people s poor. They understand that all of the country’s problems are caused by excessive government bureaucracy, but these people are the exception. This may be because, in Argentina, there are now people and parties who know or understand better how to publicize the system well.

In most countries there aren’t enough people to defend it. And this also goes for business people, they should understand and defend capitalism. They should understand why the free market is better, but they don’t. So anti-capitalists are much better at advertising, and we should learn something from them.

With the pandemic , we saw a scenario in which the rich got richer, and the poor got poorer. This move intensified criticism of the system. In your view, does the capitalist system have mechanisms that favor the reduction of inequalities? If so, are they being applied?

To begin with, the question here is: “What is more important: inequality or poverty? In my view, inequality is not that important, poverty is the real and most important issue. I will tell you why. 100 years before capitalism, 90 )% of the world population lived in extreme poverty, 90%. Today, that percentage is less than 10%. But more importantly, half of this reduction has occurred in the last 45 years. It’s a wonderful time!

And these are the same years that, according to anti-capitalists such as Thomas Piketty, are very, very bad times, for account of rising inequality. Piketty, a French left-wing economist, looks at these last few years and sees inequality increasing, while I see poverty reduction.

Another example, in 1981, 88% of Chinese lived in extreme poverty. So they introduced intense reforms, private property, more markets, and as a result, more capitalism. Today, the number of people living in extreme poverty in China is less than 1%. So, poverty was reduced from 88% to less than 1%. Of course, inequality is greater today than it was in the time of Mao Zedong. We now have 700 billionaires in China as well as the United States. even in Beijing , there are more billionaires than in Manhattan [distrito de Nova York, nos Estados Unidos], many people don’t know that.

So inequality is increasing in China, but poverty it is decreasing. What is the real problem? I’ve been to China several times and I’ve talked to the Chinese, nobody said to me: “Let’s go back to the times of Mao Zedong because we were more equal”, nobody says that, they are happy to escape poverty. This is the reality! So the real question is, should we care more about inequality or about poverty?

Socialists always talk about inequality, and I talk about poverty . Socialists believe in something I call the Zero-Sum Theory. They believe that the rich only became rich because they took something from the poor. This is the central belief of socialists. Thinking this way, the conclusion is that we should take something from the rich and give it to the poor, but this is not true! This belief of all anti-capitalists is totally wrong. I gave the example of China, but you can observe this movement all over the world, since before the pandemic. According to Forbes, in 1962, there were 500 billionaires. Today, we have 2800 billionaires, about six times more than we had in 1962. At the same time, the number of people living in extreme poverty was reduced by 30% in 1962 for less than 10 % nowadays. This symbolizes that there are two sides of the same coin, capitalist globalization. And that’s why I think it’s so important to explain why the Zero-Sum Theory is wrong.

One of the main themes on the current economic agenda is ESG. In this scenario, large companies, such as BlackRock, manage to force other companies to adopt these practices, even if they have nothing to do with national laws, such as quota policies. Wouldn’t that be a parallel power within capitalism? How do you see this one-sided application?

Let’s talk about environmental degradation, climate change and what it is It has to do with capitalism. I bring in the book data from the Heritage Foundation’s Index of Economic Freedom. There is also another survey called the Environmental Performance Index, from Yale University. If you compare these two indices, you will see that the conditions for preserving the environment are much better in countries with a free economy than in places where the economy is repressed. It is a clear correlation if you compare these two indicators.

Thus, it is the opposite of what many say, that more capitalism brings more problems to the environment environment. In socialism, conditions for the environment are much worse than in capitalist countries, we can compare West and East Germany, for example. Carbon emissions, which are responsible for climate change, were three times higher in East Germany than in West Germany. You had a lot more air pollution and environmental problems in socialist countries. Like the Soviet Union, there is no other country in the world that has had so many environmental problems. Why do I say this? Because if people think that more governments and maybe a softer economy would be the solution to climate change or other environmental problems, that’s a big mistake, it would only make things worse.

I read a book by Naomi Klein on globalization, climate change and capitalism. All her proposals for other economic systems need more state, that’s what I call socialism. So, I believe that the solution to environmental problems is also capitalism! For example, here we have a cell phone. I saw an image that said that this device includes 30 different devices such as phone, camera, calculator, among others . Before, there were 30 different devices, which means you needed a lot more commodities, more energy, to build all these gadgets than to build just one cell phone. This is a typical capitalist innovation: the cell phone is good not only because it is cheaper, but it is also better for the environment.

Another example, when I was young, I spent all my money on books and vinyl records. Today my girlfriend, who is much younger than me, laughs at me because she uses apps like Spotify, and you don’t need commodities for that. With books, I have thousands of paper books at home, I’m old-fashioned. My dad is 88 years old, but he uses Kindle — meaning less paper and less commodities for it.

With these examples, I want to show that some people say: “If we grow more, it automatically means more problems with climate change and more degradation of the environment”. I say no, that’s not true. It is true that, in the beginning, when countries started the process of capitalism, like China, there was a correlation with more problems for the environment. But then the scenario is reversed.

Many people think that more power for the state, or even a milder economy, could solve the problem of climate change, but I don’t believe it. I believe that capitalism is not the problem for the environment, but the solution. But I do not say that the State is not necessary, of course it is! You have to have some rules, but not as anti-capitalists think, what more power for the East? ado is better for the environment. Decades ago we had problems with the ozone layer, and the truest capitalists we had in the 20th century, Ronald Reagan and Margaret Thatcher, invited other nations, made a conference and international laws that were successful.

In some cases, we need the State, and even the most supportive politicians of capitalism agree with this, but it is not how anti-capitalists think. In most cases, what helps the most is using innovation, technological innovation. What is most important for capitalism is to reduce costs. So we need less commodities. There is also another contradiction between protecting the environment and the interests of companies. Sometimes there is a contradiction, I agree. But in many cases it is the post because they want to save costs. And, to reduce costs, they have to produce more using fewer commodities. To make the answer short: yes, sometimes we need some state regulations, but the main thing is the market, the capitalists, not the state.

With capitalism, we are seeing the expansion of large companies, especially in the technology area, such as Google, Amazon, Meta/Facebook. These companies manage to be more powerful than some countries and directly influence people’s lives, including content censorship. What is your analysis of the power of bigtechs?

This is a very good question, very important . I don’t like the censorship imposed by Facebook, Twitter, or other companies. But in most cases, censorship is imposed because the state has told them that if they don’t do that, they’re in big trouble. So, in most cases, censorship is not their idea, but they are obliged to act according to the laws and rules that the state imposes.

The next point is that people think monopolies will last forever, but the biggest enemy of monopolies, like these tech companies, is capitalism. A few years ago, Kodak had a near monopoly on cameras and photographic film. With innovation, they lost. What destroyed their monopoly was capitalist competition. This also happened with Xerox, MySpace and Nokia.

The lesson of all this is that when a monopoly is at the top, most companies people think it will be forever. However, history teaches us that monopolies are not forever. The only monopolies that are very difficult to tackle are state monopolies, that’s the worst kind of monopoly. The other monopolies, the ones that arise as a result of competition, get too big, too bureaucratic, then new companies appear, with better ideas, and then the previous ones lose their monopoly. This is what always happens in history and it will be the same with Google, Facebook.

Even Facebook today if they hadn’t bought Instagram and Whatsapp, I believe they would have a lot of problems because young people say: “Oh, Facebook is something my mother uses, but I don’t use Facebook”. They use Instagram, maybe they use TikTok or another network, these things change.

What I don’t understand is that sometimes anti-capitalist critics always talk about monopolies, but what is their solution? The most staunch anti-capitalists are in favor of nationalization, but then they would have a state monopoly, and I don’t understand. You are against monopolies, but are you in favor of the biggest monopoly of all, the one that lasts the longest, the state monopoly? Monopolies always lose their advantages because of capitalist innovation, competition with other companies, and because people are smarter than they are.

One of the chapters of your book deals with the Brazilian scenario. How do you analyze the capitalism exercised in Brazil? Do you see areas for improvement?

If you look at the Index of Economic Freedom, Brazil occupies the 143 th place. It’s a bad place because it means you have a lot of high taxes, a lot of regulations in the job market. In many cases, very high regulations.

Many companies could be privatized, and I believe that Minister Paulo Guedes has some good ideas, but he cannot put them in practice because it does not have a majority in Congress. I believe he performed some interpretations, but no tax cuts and just a few deregulations. However, if you look at the Index of Economic Freedom, Brazil has not improved in recent years, despite having a free-market Minister of Economy.

Of course, he doesn’t have a majority in Congress, and he has [presidente Jair] Bolsonaro, who I’m not a big fan of. I believe he had very bad policies to deal with the pandemic. You know, if I lived in Brazil, I wouldn’t want to have to make a decision between Lula and Bolsonaro, but maybe between Lula and Guedes. It would be much better for me, but I don’t know if people would choose Guedes. I’m not in favor of Bolsonaro, Guedes would be my favorite president, someone like him. I think he could make some reforms, economic reforms.

I believe that Brazil’s decision today is: do you want to go more in the direction of Argentina or even from Venezuela, or they want to go in the direction of Uruguay, to set a positive example. I’ve been to Uruguay, of course you can’t compare it with Brazil because it’s a very small country, but I really like the system adopted there. They are not perfect but, if you compare them, they have more decision-making power to live better.

Another example, in recent decades, Chile has improved a lot , but perhaps now they are heading in another direction with President Gabriel Boric. I think the free market economy has been very successful in Chile, which is the most successful country in Latin America. I don’t think it’s that complicated for Brazil to make a decision. Should we follow a model similar to that of Chile in recent decades?

We are close to the presidential elections, and the The latest polls have pointed out that the economy will have a decisive factor in the vote. However, the pre-candidates still do not discuss this issue, and Brazilians face a complicated financial situation with inflation and the loss of purchasing power. What should voters pay attention to in this election, when we talk about the economy?

I’m glad you don’t I need to vote here in Brazil! To be honest, I don’t like Lula or Bolsonaro. So it would be a very difficult decision to make. This is a problem present in some countries, it was the same in Chile, they had this candidate more on the right and the candidate on the extreme left, Gabriel Boric. It would be better if they had a liberal alternative between these two.

For example, in economics, I believe that not everything the government did was bad, but it was not enough. In the fight against the pandemic, what Bolsonaro did was crazy, and I understand that maybe this is a reason why many people say they can’t vote for him again.

But socialists, you don’t know what Lula is going to do. Whether he will adopt more socialist or more moderate policies is difficult to predict. Of course now he says he is a moderate, but don’t forget that Hugo Chávez said the same thing before being elected, he said: “I’m not going to nationalize anything”. Then he did. So sometimes socialists promise one thing and in the end the policy is different.

It’s too bad that there aren’t more alternatives. In Germany we have six or seven parties where you can choose which one is the best. You have the Green Party for ecology, you have a Conservative Party, a Left Party, among others. I know there are more parties here, but I think that, for the presidency, only these two have a chance, no one else.

The same thing happens in the United States. I’m not a Donald Trump fan, but I’m not a Joe Biden or Hilary Clinton fan either. And the same thing happened in Chile. Sometimes you have such big countries, so many people, don’t they have something better than that? I thought about it in the United States, and I also thought about it here in Brazil. There are so many people and these are the best ones I have to choose, really?

go back to the title of your book. If capitalism is not the problem, but the solution, what is it the solution to? For poverty alleviation, a better quality of life for people? What can be done for this solution to reach people’s lives?

First, we were talking about about poverty. It is quite clear that capitalism is the best solution to fight poverty. I mentioned this number, 90 % of the world population lived in poverty 1962 years ago and, today, less than 10% live in extreme poverty, then clearly capitalism is the solution.

I also think that capitalism will be the solution to other big problems, such as climate change. For that matter, capitalism will be much better than socialism, but something is also very important: capitalism means more freedom for everyone.

For the most part of socialist countries, you only have a soft economy, so people are not free. In capitalist countries, people can enjoy freedom. You can call it capitalism or liberalism, but I think if you want more freedom, then you should follow capitalism.

But it is not the solution for everything , this is very important, it is not a guarantee that you will be successful in life, it does not give you a meaning to live. That’s the difference between capitalism and socialism, religion. Religion says, “We give you a purpose in life.” Capitalism gives most people what they need. But in the end, everyone is responsible for their own success, there are no guarantees. The choice is with you. But I think that’s the real message of capitalism, don’t wait for the government to improve your situation.

Sometimes in Europe, some English speaking countries say: “We are from the government and we are here to help you”. Those are the worst! There was a very funny situation, I was in Argentina, in a very poor city, and I had a lecture for 30 young people . One of them was sitting in the front row, a young man, about 20 years old. So I asked him “Do you have a girlfriend?” and he said “no”. He didn’t look like someone who had a girlfriend, so I asked, “Would you like to have a beautiful girlfriend?” He replied, “Oh, yes, for sure.” [Perguntei:] “Would you expect the government to give you this beautiful girlfriend?”. He said no, of course he wouldn’t. But who is responsible for looking for this girlfriend? Him!

So that’s my liberal philosophy. Don’t expect the state to solve all your problems, that’s up to you. But of course that’s the mentality of some people, that the state should do everything for them. Maybe not bring a pretty girlfriend, but a lot of other things. I say: look for yourself, set bigger goals. And capitalism gives you the freedom to reach them, if you come from a very poor place, for example.

Let’s take the example of Starbucks. I think Starbucks founder Howard Schultz came from a very poor neighborhood. Oprah Winfrey was the first black woman to become a self-made billionaire, I think she has a net worth of $3 billion. She came from poverty and she is black, and it wasn’t easy in the United States, but capitalism gave her the opportunity to forge her path. Maybe if she had waited for society to change, for something to get better, [talvez não tivesse conquistado]. I think it’s a matter of philosophy, capitalism is the solution to many problems, but not to all your individual problems. Only the system gives you the freedom to walk your own path. You make your own choices, like Oprah Winfrey and Howard Schultz did.

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