VOLUME 13 ISSUE 2 | SPRING 2019 inFOCUSQUARTERLY Money Makes the World Go ‘Round Marian L. Tupy on Our Pessimistic Outlook | Adam Reuter on Israel’s Economic Development | Daniel Ikenson on North America’s New Trade Agreement | Anders Åslund on Russian Economic Stagnation | Steve H. Hanke on Venezuela’s Hyperinflation | Casey Pifer on Aid and Open Markets in Africa | Aaron Friedberg on the Challenging China | Dan Mitchell on Chile’s Privatized Retirement Program | Jeffrey Dorfman on the Nordic Economic Model | Shoshana Bryen reviews I Love Capitalism Featuring an Interview with Peter G. Morici LETTER FROM THE PUBLISHER hen I was a child, my mother high-tech prosperity is the purview of told me to eat my vegetables Adam Reuter. If you think the Nordic inFOCUS VOLUME 13 | ISSUE 2 because children were starv- countries have something on us, Jeffrey ing in India. Or was it China? Dorfman reminds us – and Democrat Publisher W Matthew Brooks Either way, I couldn’t figure out how candidates for office – that they are not eating my broccoli helped, but I under- socialist. Property rights are the key Editor stood that there were children literally to prosperity in Africa, writes Casey Shoshana Bryen Associate Editors dying in other places for lack of food. Pfifer. Dan Ikenson explains why free Michael Johnson And I wasn’t. trade with Canada and Mexico are in Eric Rozenman The introduction of America’s interest. Copy Editor capitalism and markets Some countries are Shari Hillman to China, India and else- gloomy – with cause. Ven- where has proven to be the ezuela, Russia, and China Published by: Jewish Policy Center biggest lever in the history are stuck and likely to 50 F Street NW, Suite 100 of mankind for prying remain so, according to Washington, DC 20001. people out of the morass of Steve Hanke, Anders Ås- poverty and into a safer, healthier, better lund and Aaron Friedberg. (202) 638-2411 educated, and more self-fulfilling way of Ken Langone positively sings his life. Certainly not everyone has every- ode to markets and risk-taking capital- Follow us on JewishPolicyCenter @theJPC thing, but a lot more people have some- ists in I Love Capitalism, reviewed by thing today than during my childhood. Shoshana Bryen. The opinions expressed in inFOCUS do not This issue of inFOCUS is a cheer for If you appreciate what you’ve read, necessarily reflect those of the Jewish Policy capitalist economics. I encourage you to make a contribution Center, its board, or its officers. Start with our interview with Pro- to the Jewish Policy Center. As always, To begin or renew your subscription, please fessor Emeritus Peter Morici to under- you can use our secure site: http://www. contact us: [email protected] stand where capitalism is taking us, our jewishpolicycenter.org/donate. friends, and some of our competitors. Essayist Marian Tupy points out, Sincerely, © 2019 Jewish Policy Center “Things are getting better – so why are we so gloomy?” Chile’s successful priva- www.JewishPolicyCenter.org tization of Social Security is addressed by Dan Mitchell, and Israel’s dizzy- Matthew Brooks, ing climb from socialist stagnation to Publisher MARIAN L. TUPY, Ph.D., is senior policy analyst at the Cato PETER G. MORICI, Ph.D., is Professor Emeritus of eco- Institute’s Center for Global Liberty and Prosperity. (3) nomics at University of Maryland. (20) ADAM REUTER is chairman of Financial Immunities and CASEY PIFER is Director of Institute Relations for Featuring co-author of Israel - Island of Success. (5) Atlas Network. (25) DANIEL IKENSON is director of the Cato Institute’s AARON FRIEDBERG, Ph.D., is Professor of Politics and Herbert A. Stiefel Center for Trade Policy Studies. (9) International Affairs at Princeton University. (28) ANDERS ÅSLUND, Ph.D., is a senior fellow at the Atlan- DAN MITCHELL is co-founder of the Center for Freedom tic Council and author of the forthcoming book Russia’s and Prosperity and chairman of the board. (32) Crony Capitalism: The Path from Market Economy to Kleptocracy. (12) JEFFREY DORFMAN, Ph.D., is a professor of economics at The University of Georgia and author of Ending the Era STEVE H. HANKE, Ph.D., is Professor of Applied Econom- of the Free Lunch. (35) ics at the Johns Hopkins University and is a Senior Fellow and Director of the Troubled Currencies Project at the Cato SHOSHANA BRYEN is Editor of inFOCUS Quarterly and Institute. (16) Senior Director of the Jewish Policy Center. (41) Things Are Getting Better – So Why Are We So Gloomy? by MARIAN L. TUPY t the end of last year, I docu- impending water wars, inevitable oil scenarios that virtually never materialise? mented the constant stream of exhaustion, mineral shortages, fall- The chairman of the X Prize Foun- technological, scientific and ing sperm counts, thinning ozone, dation, Peter H. Diamandis, offers one Amedical breakthroughs that are acidifying rain, nuclear winters, plausible explanation. Human beings improving the lives of billions of ordi- mad-cow epidemics, Y2K computer are constantly bombarded with infor- nary people. Given all this good news, bugs, killer bees, sex-change fish, mation. Because our brains have a lim- the real question is why people are so global warming, ocean acidifica- ited computing power, they have to sep- unbelievably pessimistic. tion and even asteroid impacts that arate what is important, such as a lion Judging by a 2016 poll of close to would presently bring this happy in- running toward us, from what is mun- 20,000 people in some of the world’s terlude to a terrible end. I cannot re- dane, such as a bed of flowers. Because richest countries, you could barely call a time when one or other of these survival is more important than all overstate the extent of the gloominess. scares was not solemnly espoused other considerations, most information In response to the question “All things by sober, distinguished and serious enters our brains through the amygdala considered, do you think the world is elites and hysterically echoed by the – a part of the brain that is “responsible getting better or worse, or neither get- media. I cannot recall a time when for primal emotions like rage, hate and ting better nor worse?” just 10 percent I was not being urged by somebody fear.” Information relating to those pri- in Sweden, six percent in the United that the world could only survive if mal emotions gets our attention first States, four percent in Germany and it abandoned the foolish goal of eco- because the amygdala “is always look- three percent in France thought things nomic growth. The fashionable rea- ing for something to fear.” Our species, were getting better. Why? Because, it son for pessimism changed, but the in other words, has evolved to prioritise turns out, we are pessimists by nature. pessimism was constant. In the 1960s bad news. Over the last 200 years or so, the world has experienced previously un- imaginable improvements in standards of living. The process of rapid economic The negativity bias is deeply ingrained in our brains. growth started in Europe and America, The best that we can do is to realise that we are but today some of the world’s fastest growing countries can be found in Asia suffering from it. and Africa – lifting billions of people from absolute poverty. Historical evi- dence, therefore, makes a potent case for optimism. Yet, pessimism is everywhere. the population explosion and global The Harvard University psycholo- As the British author Matt Ridley noted famine were top of the charts, in the gist Steven Pinker has noted that the in The Rational Optimist: 1970s the exhaustion of resources, in nature of cognition and nature of news the 1980s acid rain, in the 1990s pan- interact in ways that make us think that The bookshops are groaning under demics, in the 2000s global warming. the world is worse than it really is. News, ziggurats of pessimism. The airwaves One by one these scares came and after all, is about things that happen. are crammed with doom. In my own (all but the last) went. Things that did not happen go unreport- adult lifetime, I have listened to the ed. As Pinker points out, we “never see a implacable predictions of growing Ridley raises a more specific point reporter saying to the camera, ‘Here we poverty, coming famines, expand- than general pessimism: Why are we as a are, live from a country where a war has ing deserts, imminent plagues, species so willing to believe in doomsday not broken out.’” Newspapers and other Money Makes the World Go ‘Round | inFOCUS 3 how much more miserable can you imagine yourself to feel? The answer to the latter question is: infinitely. Psycho- logical literature shows that people fear losses more than they look forward to gains; dwell on setbacks more than rel- ishing successes; resent criticism more than being encouraged by praise. Bad, in other words, is stronger than good. Finally, good and bad things tend to happen on different timelines. Bad things, such as plane crashes, can hap- pen quickly. Good things, such as the strides humanity has made in the fight against HIV/AIDS, tend to happen in- crementally and over a long period of time. As Kevin Kelly from Wired has put it, “Ever since the Enlightenment and the invention of Science, we’ve managed to create a tiny bit more than we’ve de- stroyed each year. But that few percent positive difference is compounded over decades in to what we might call civili- zation … [Progress] is a self-cloaking ac- tion seen only in retrospect.” In other words, humanity suffers from a negativity bias or “vigilance for bad things around us.” Consequently, there is a market for purveyors of bad news, be they doomsayers who claim that media, in other words, tend to focus on their rate of recurrence.