How Impoverished Nations Become Prosperous: Dr. Rainer Zitelmann

[FULL TRANSCRIPT BELOW] Dr. Rainer Zitelmann is a German historian, sociologist, and the author of several books including, most recently, “How Nations Escape Poverty: Vietnam, Poland, and the Origins of Prosperity.”  

Why do certain countries that previously suffered under totalitarian regimes emerge stronger, economically, than others? What factors contribute to a nation’s financial success? And what holds it back?

Views expressed in this video are opinions of the host and the guest, and do not necessarily reflect the views of The Epoch Times.

FULL TRANSCRIPT

Jan Jekielek:
Rainer Zitelmann, such pleasure to have you on American Thought Leaders.

Rainer Zitelmann:
Thank you for inviting me.

Mr. Jekielek:
You recently made a documentary based on your book, “How Nations Escape Poverty: Vietnam, Poland, and the Origins of Prosperity.” There have been significant changes that occurred in Poland after 1989. You argue that Poland did something unique, which contributed to its success during the transition phase. Please explain to us what happened.

Mr. Zitelmann:
Poland was one of the poorest countries in Europe in the 80s, even poorer than Ukraine. The GDP per capita was only half that of the Czech Republic, so it was a very impoverished country. People had to wait in long lines for hours, and sometimes even days, to get basic products.

Mr. Jekielek:
As a child, I actually spent a year in Poland, and I remember standing in those bread lines. The bread was fantastic.

Mr. Zitelmann:
Yes, and it’s important to note that this was happening in the 80s, not the 50s or 60s. At that time, Poland was one of the poorest countries in Europe. Then, in 1990, a remarkable man named Leszek Balcerowicz came along. I believe more people should know about him and I call him the Maggie Thatcher of Poland. In my opinion, he was one of the greatest politicians of the 20th century.

He is responsible for transforming Poland from one of the poorest countries in Europe to Europe’s growth champion. For three decades now, Poland has been Europe’s growth champion, and it all started with economic reforms. These reforms involved allowing private property, opening up the economy, and welcoming foreign investors, instead of seeing them as enemies. Balcerowicz understood that they would help Poland.
Before these reforms, Poland had a significant amount of debt owed to foreign countries, and the inflation rate was around 100 percent. The biggest challenge at that time was recognizing that with free market reforms, things usually become worse before they get better. For instance, hidden unemployment becomes visible unemployment.

Mr. Jekielek:
When you mention hidden unemployment, what you mean is that in many communist countries, they claimed to have zero unemployment, but the reality was different.

Mr. Zitelmann:
Exactly. Initially, the GDP declined for two years, which was the case in all these countries. The same happened when Maggie Thatcher implemented her reforms in the UK during the 80s. When starting such reforms, things tend to get worse before they improve.

The primary issue was that under socialist regimes, there was no freedom of the press. If you read their newspapers, everything seemed great most of the time, and there were no other political parties. The transition not only involved an economic transformation, but also a political change. With the new system, political parties were allowed to be formed, and there was freedom of the press.
He promised that things would get better, but what actually happened? They got worse. Then people wanted to revert back to a more stable state and a stronger government. Besides being a skilled economist, Balcerowicz was also adept at communication, which is incredibly important. I believe people in Argentina can learn a lot from the Polish experience.

Next month, I will be promoting this book in Argentina. The spokesperson for Javier Milei, the president of Argentina, has written the foreword for the Spanish edition of the book. I told people in Argentina that they can learn two things from Poland.
First, these economic reforms truly work. Balcerowicz and Milei are both professors of economics and both strongly believe in Austrian economics, following the teachings of Hayek and Mises. They may have different personalities, but they share the same beliefs. The first lesson for people in Argentina is that this approach works.
The second lesson is that before it works, they need to accept that they can’t fix decades of problems in just six months. Some things may get worse before they get better. My message to the people in Argentina is to be patient and learn from the Polish people.
Of course, the Peronists are against it now, claiming that people are poorer now, but they were poor before. Maybe some will become even poorer. That’s why I believe this book is so important, not just for Poland, but for other countries and nations striving to escape poverty.

Mr. Jekielek:
Before all these reforms took place in 1986, you published an important book about national socialism, the Nazi party’s system.

Mr. Zitelmann:
I studied history and political science. Currently, I hold a PhD in history, focusing on this topic and I will expand on this further. I obtained my second PhD in sociology, only eight years ago, which was about a different subject. The first PhD was in history, and the book I mentioned earlier titled “Hitler’s National Socialism” discusses Hitler’s worldview.
It’s not a biography, but it delves into how he thought, particularly about the economy. I highlighted that he was much more socialist and anti-capitalist than most people would think. I analyzed both “Mein Kampf” and another unpublished book he wrote in 1928. He also composed numerous essays and delivered hundreds, perhaps even thousands of speeches.
At that time, I had to go through all of his archives and make copies of speech transcriptions and newspaper articles. Josef Goebbels, Hitler’s minister for propaganda, had diaries about their conversations, and I read them all. What was particularly important are the two editions of Hitler’s “table talks” or monologues at his headquarters.
The daily schedule went like this. Hitler would go to bed very late, around two or three in the morning. Before that he would sit at a table with his staff, assistants, and friends, and speak about everything—politics, war, history, and the economy. Everyone had to listen and no one else spoke. There were times when people were tired due to the late hours, but they couldn’t just say, “I’ve heard all of this, I’m tired, I’m going to sleep.”
No, if Hitler was speaking, you had to listen, even if you were exhausted. One person would take notes, allowing us to know what he talked about. This was significant because sometimes it matched what he wrote in his speeches and books, but other times it differed.
Let me give you an example. Hitler increasingly admired the Soviet planned economy and believed it to be superior to capitalism. In one of his table talks, he praised Stalin, calling him a genius. He said that Stalin understood his role models like Genghis Khan, and that what he had achieved was remarkable. Hitler expressed his desire to transform the German economy towards a planned economy after winning the war, as he believed it to be better than capitalism. I analyzed all of these things, and that is the content of my book, “Hitler’s National Socialism.”

Mr. Jekielek:
One thing that set Poland apart from the Soviet Union was that they were never able to nationalize the farms due to strong resistance from the farmers.

Mr. Zitelmann:
I admire the Polish people for this. About 70 percent of the farmers remained private owners. Let me give you an example from the Soviet Union. Only a small percentage of land, around 5 percent, was privately owned. Whereas, the remaining 95 percent was state-owned. Surprisingly, more was produced on this 5 percent of private land than on the 95 percent held collectively.
This system did not work, and even Stalin came to understand it. He advised Mao Zedong in China to be patient with collectivization, but unfortunately, Mao did not heed this advice, which led to similar disasters in China. The Polish people were wise to resist such policies.

Mr. Jekielek:
You argue that the most important indicator to note is the relative growth in economic freedom.

Mr. Zitelmann:
Absolutely. You may already be familiar with the Index of Economic Freedom from the Heritage Foundation. However, not everyone listening may be aware of this index. You can find it for free on the internet. It is published annually and provides rankings for approximately 180 countries based on their level of economic freedom.

At the top of the index, you will find Switzerland and Singapore, while Cuba, Venezuela, and North Korea rank at the bottom. Currently, the United States is positioned at 25. When considering relative changes, it is worth noting that since the index was first published in 1995, the United States has dropped seven positions. Consequently, it currently holds its lowest ranking since the introduction of the index.
On the other hand, Vietnam and Poland have made significant gains, with each country moving up approximately 20 positions. Although there may be smaller countries with fewer inhabitants that have made even greater progress, I am referring specifically to larger countries. Interestingly, many people are unaware of the population size of Vietnam or Poland.
If I were to ask people about Vietnam’s population, they often guess numbers like 20 or 30 million. However, Vietnam actually has a population of 100 million, making it one of the largest countries in the world, even surpassing the size of Germany and other European countries. Poland, on the other hand, has a population of approximately 40 million.

Both Vietnam and Poland have experienced significant economic freedom gains. In my analysis, which is detailed in this book, I highlight the similarities between these countries. One commonality is that both nations have been victims of devastating wars. Vietnam, for instance, faced conflicts not only with the United States, but also with China, Japan, and France. Following these wars, both Vietnam and Poland implemented planned economies, which further hindered economic growth.
However, they later initiated free market reforms, with Vietnam starting in 1986 and Poland in 1990. As a result, both countries experienced remarkable economic growth. It is worth noting that my personal experiences and relationships with girlfriends from Poland and Vietnam also influenced my interest in these nations. Having a deeper understanding of their culture and mentality has provided valuable insights.

Mr. Jekielek:
Why did Poland fare better than East Germany?

Mr. Zitelmann:
Although East Germany received substantial aid, including support from the European Union, it is my belief that circumstance played a significant role. The people of East Germany faced unique challenges. Some may argue that they had a head start due to West German support, but I believe that mentality played a role in shaping the outcome. They have an inferiority complex towards West Germany, with the belief that the West Germans took over East Germany. This has created an issue between the two countries today.
Additionally, there is a significant difference in the attitudes of Polish people towards Russia. Polish people generally do not have a positive view of Russia, especially after their support of Ukraine during the war. However, the situation is different in East Germany, where there is a stronger pro-Russia sentiment. It is unclear why this is the case, considering the oppressive history of living under Russian influence.
Despite some arguments suggesting that Poland receives significant funding from the European Union, I do not believe this is the primary reason for the differences in sentiment. Each country’s outlook is shaped by various factors, and it is up to individuals to form their own opinions.

Another aspect that I find appealing about Poland is its attitude towards capitalism and wealthy individuals. I conducted a large-scale poll on the opinion of capitalism, in which Poland ranked number one as the most pro-capitalist country among the 35 surveyed. This is an important aspect often underestimated by economists. I also conducted a separate poll on the image of wealthy people in 13 countries.
The results of these surveys are discussed in my books “In Defense of Capitalism” and “The Rich in Public Opinion,” which shed light on the prejudice against wealthy individuals. Poland’s support for capitalism is unique, surpassing even the United States, South Korea, Japan, and the Czech Republic. In contrast, the majority of countries, including France, Spain, Germany, and Italy, tend to have an anti-capitalist sentiment. There are only six out of 35 countries where the population is positive towards capitalism, with Poland leading the way.
To access more information on these surveys, you can search my name in Economic Affairs, a prestigious economic journal in the UK, where I frequently publish my scientific research. I asked the people numerous questions about wealthy individuals, and there are significant contrasts between Poland and Germany. In Germany, rich people are considered scapegoats and there is a general dislike towards them due to envy.
However, in Poland, while there are still envious individuals present, it is not as prevalent as in France or Germany. People in Poland and Vietnam tend to admire wealthy people, viewing them as role models and successful entrepreneurs. On the other hand, in France and Germany, wealthy individuals are seen as scapegoats, and they are blamed for various negative events.
This difference in attitude is noticeable between Poland and East Germany, where anti-capitalist sentiments are widespread. Germany, as a whole, has a negative view of rich people, while Poland differs in this regard. These findings are based on the survey responses from Polish and German participants, comparing their views on statements such as “Rich people are ruthless.” In Germany, approximately 50 percent agreed with this statement, whereas in Poland, only 25 percent agreed. This demonstrates a significant difference in perspective.
The survey also found that French people displayed the highest levels of envy among all the countries surveyed. Recently, they elected a Leftist government with a proposal to introduce a 90 percent tax rate for individuals earning over €400,000. It is clear that they have a deep-seated love for the state, government, and taxes. This sentiment is reflected in their aversion towards books such as mine that promote capitalism.
Despite being published in 35 countries worldwide, my books have not found a publisher in France due to their strong opposition to capitalist ideas. Our survey on social envy was only conducted in 13 countries, while the survey on the opinion of capitalism was conducted in 35 countries. This difference in coverage is purely due to financial reasons, as I personally funded the entire survey with $660,000 from my own pocket.
I was able to afford it, because besides being an author, I have also been a successful entrepreneur and investor in Germany. For every country, I need someone to support my books in the future. Otherwise, if I spend all my money on surveys, I won’t have any money left to write my next book. I’m not sure if people want to read a book about promoting capitalism and about scientific research on envy.

Mr. Jekielek:
How did Canada and the United States fare on the capitalism side?

Mr. Zitelmann:
Canada was not part of our survey. The United States is not as envious as most European countries. However, there is a significant difference in the United States. Americans older than age 60 love rich people and entrepreneurs, while those younger than age 30 are not as positive. They were not extremely negative, but rather a mix of positive and negative, and somewhat neutral.
This is the biggest contrast among all the countries. For example, in Italy, it is exactly the opposite. The older generation is negative towards rich people, whereas the younger generation is more positive. When you sum it up, the United States ranks number two after Poland in terms of being pro-capitalism.

Mr. Jekielek:
There is some work to be done on the impact of education and comparing different countries. This is very exciting work that you are doing. One thing that struck me when comparing Poland and Germany is that the significant amount of aid received was actually problematic for East Germany. I’m curious if you have any thoughts on how development aid impacts countries in terms of moving from poverty to prosperity.

Mr. Zitelmann:
One reason to read this book would be chapter two. Chapter one is about Adam Smith, because he wrote in his book, “The Wealth of Nations,” about how nations can escape poverty. This was his main question, and his answer was economic freedom. He believed that economic growth is the only way to escape poverty, and this can only be achieved through economic freedom. I have read a lot about Adam Smith and I had the honor of writing a big article about him in the Wall Street Journal last year for his 300th birthday, and I was very proud of it.
Chapter two is about development aid. I have read numerous studies on development aid, and the conclusion is crystal clear—development aid does not help. In fact, in many cases, it does more harm than good. It only benefits the corrupt elites and seldom reaches the truly poor people. There are scientific studies that support this claim.
Two countries spend more money on development aid than any other countries in the world. One country is the United States, and the other country is Germany. We are fascinated with providing development aid to alleviate poverty and refinance various projects. However, I believe we should stop this practice, excluding humanitarian aid during natural disasters, for instance, which undoubtedly requires financial assistance. I am referring to development aid specifically.

If we compare Africa and Asia, it becomes evident that Africa has received significantly more development aid than Asia. Surprisingly, Africa remains the poorest continent, while Asian countries have seen considerable improvement in living standards. The reason for this difference lies in their implementation of economic reforms. Vietnam, Taiwan, Singapore, Hong Kong, and even mainland China have embraced economic reforms.
Despite being a one-party system and a dictatorship, China embarked on economic reforms under Deng Xiaoping in 1981, when 88 percent of its population lived in extreme poverty. These reforms resulted in a decrease in poverty rates as they adopted more market-oriented policies and reduced state interference. Regrettably, the current Chinese leader, Xi Jinping, seems to be reversing these positive reforms by increasing state control and limiting the market’s influence. Returning to a more state-centric approach is detrimental and goes against the progress initiated by Deng Xiaoping. It is crucial to note that their escape from poverty was primarily initiated by economic reforms and the introduction of private property, rather than relying solely on development aid.

Mr. Jekielek:
Additionally, they have successfully persuaded the U.S. to invest heavily, while also engaging in intellectual property theft worth trillions.

Mr. Zitelmann:
Let me explain how misguided Europe and possibly the United States have become. The European Commission has recently banned the registration of new cars with combustion engines by 2035. This means that no new cars with combustion engines can be registered. Instead, they are pushing for electric vehicles. China is pleased with this decision as they can manufacture electric vehicles at a lower cost.
Consequently, they export these vehicles to Europe, leading to the implementation of higher tariffs. It’s absurd that we voluntarily restrict our own successful products like Mercedes Benz and Volkswagen. It raises questions about the government’s decision-making process. On the other hand, the Chinese are much smarter. They continue to produce electric vehicles at a lower cost while still manufacturing cars with combustion engines. This divergence in approach is perplexing.

Mr. Jekielek:
Western nations have essentially outsourced their environmental degradation to China, giving rise to the phenomenon of production occurring there while we maintain the appearance of cleanliness. It’s an intriguing strategy and has become a strong industrial policy.

Mr. Zitelmann:
Despite the effectiveness of this industrial policy, I have my doubts. I have a friend who teaches at Beijing University, and he faced some challenges due to his belief in the principles of Hayek and Mises. It’s not an easy position to hold in China today. His name is Wang Chang, and he wrote a great book published by the Cato Institute called “The Logic of the Market.” He always told me not to think that their success in China was due to the state. No, they were successful in spite of the state. It was because they had introduced private property.
I mention this for one reason, as you asked about development aid. I compared Africa on one hand to Asia on the other. What was Asia like 50 years ago? It was very, very poor. China was so poor. South Korea was poor as well, even in the 1960s. Development aid doesn’t help. What helps is economic freedom. This is what my book is about.

Mr. Jekielek:
This is very true with the economic reforms that Deng Xiaoping brought in. The Chinese people are very industrious and entrepreneurial, and those qualities were just waiting to be unleashed. The regime’s industrial policy is to provide giant subsidies for companies like Huawei. Why is Huawei in so many countries? Because it’s a national security priority for the regime to have a presence in those countries.

Mr. Zitelmann:
Maybe it helps in the short term, but in the long run, it will cause a lot of problems for China. Some people are so crazy, like the Minister for Economy in Germany. Before he had this role, he wrote books for children. He’s from the Green Party and believes 100 percent in the Green ideology. He thinks that this industrial policy in China is very successful and wants to copy it in Germany. That is absolutely crazy.
I have given lectures in China, not about my books, but about capitalism.
I have other books, such as “The Wealthy Elite” and “Dare to be Different and Grow Rich.” These books are very successful in China and they love these books over there. I gave some lectures there and people were very interested. I love the Chinese people.

They are very industrious, as you said. Sometimes I mentioned the name of Deng Xiaoping. After one lecture, a man, maybe from the party, came to me and said, “Everything was great, but please don’t mention Deng Xiaoping too often. You can mention him, but not so often.” I think they should be proud of what he did there, not in politics, but in the economy. He implemented these economic reforms, but they are not proud of him.
Now, they have to say that Xi Jinping is the greatest, and Deng Xiaoping was not.

Mr. Jekielek:
That’s a very interesting insight.

Mr. Zitelmann:
They were partly heading in the right direction when Deng Xiaoping started, but this happens in many countries. They revert back to more government control, more state involvement, and less market freedom. This is dangerous not only for China, but for the whole world, as we depend a lot on the economic situation there.

Mr. Jekielek:
In China, there is a significant market and an opportunity to make a lot of money. However, the expectation was that economic investment in China would bring about greater political and economic freedom for the population, which did not happen.

Mr. Zitelmann:
No. Milton Friedman, who was one of the first to visit China several times. I wrote an article about it called “Milton Friedman and China.” He was a visionary who saw that economic reforms would help China grow. However, he also had hopes that political freedom could potentially follow, as it did in Chile.
In Chile, they started with capitalist reforms under the dictatorship of Pinochet, but then they managed to transition to a democratic country after getting rid of Pinochet. However, this did not happen in China or Vietnam. Both countries have one-party systems and lack press freedom. In Vietnam, there is comparatively more freedom. Their economy also has more trade agreements with other countries.

Interestingly, we conducted a poll in Vietnam and asked people which economic system they admire. We presented around 10 or 12 countries for them to choose from, and Japan came out on top, followed by Singapore and South Korea. For young people in Vietnam, the United States ranked second, whereas North Korea was at the bottom, and China second to last. This reveals that people in Vietnam admire and prefer capitalism, even if they identify with the communist party.

I was invited to several prestigious universities in Vietnam, such as Foreign Trade University, where my books were translated, published, and discussed in workshops. One topic that intrigued them was how to improve the perception of wealthy individuals. Surprisingly, the image of wealthy people in Vietnam is more positive than in any other country. Their desire was to enhance it even further.
On the other hand, I have never been invited to discuss such matters in universities in the United States or Europe. One recent panel discussion I participated in Berlin was focused on how to tax the rich more or take money away from them, instead of discussing ways to improve the image of wealthy people, which captured the interest of the Vietnamese.

Mr. Jekielek:
Indeed, Vietnam is much more liberated than communist China and North Korea, but certain individuals still enjoy privileges. The communist cadres have more opportunities to become rich.

Mr. Zitelmann:
Yes, of course. There is corruption. There is a very close link between politics and old money in the financial and banking industry. But you also have entrepreneurs with a lot of entrepreneurial spirit, like Jack Ma. However, the moment they become very successful, it becomes difficult for them.

In Vietnam today, there are also billionaires. For example, there is even a female billionaire in Vietnam who became wealthy with an airline, and she had a lot of unusual marketing ideas. One of those ideas was having stewardesses in bikinis. This was their marketing strategy, although I don’t think that would go over well here. They think that there are a lot of beauty contests in the world.
They think, “It looks beautiful, and if our guests enjoy it, why not?” I asked people in Vietnam about their views on gender ideology and all the crazy stuff we have here in Europe and the United States. They don’t have it over there. Only if people study in the United States and come back, they sometimes will bring it.

Regarding freedom of speech, I also have to mention one thing. I had a discussion with a think tank member in China. He was not a member of the communist party, but we discussed it. I told him that I admired their success, but they can never convince me about a system where there is no freedom of speech. He said that he understood what I meant.
When you speak to them, they are honest. He said that he knows what I mean. He told me that when he was a professor in Chicago in the United States, he always feared being alone in an elevator with a female student or in a room alone. He always feared saying anything that could be considered sexist or racist in his lectures.
He said that they don’t have those problems in China. He said, “As long as I don’t say something against Xi Jinping, I have no fear of being labeled sexist or racist.” It’s interesting to travel to many countries and learn about different cultures. You see and learn a lot.

Mr. Jekielek:
I recently interviewed Ryszard Legutko, a Polish professor emeritus at the University of the Aegean who wrote “The Demon in Democracy.” He looks at the similarities between liberal democracy and communism. He says that liberal democracy is a better system, but the ways in which speech is controlled in liberal democracies is similar to communism.

Mr. Zitelmann:
Yes, it is. I even motivated a friend of mine to write a book about regressing back to the GDR (German Democratic Republic), which was East Germany. She now sees things in the reunited Germany that remind her of the GDR, especially concerning freedom of speech. But when people say it’s the same, no, it’s not actually the same.
In the GDR, you would go to prison or get shot if you tried to travel to another country. In present-day Germany, no one will shoot you or send you to prison for wanting to travel. Yes, there are some similarities, but it is different if you’re canceled by crazy people at the university or if you are sent to prison for 10 years.

Mr. Jekielek:
There is a message here that we can learn from. This has been a wonderful conversation. Any final thoughts as we finish up?

Mr. Zitelmann:
Just an advertisement, but not for this book. I want to mention another important book, “In Defense of Capitalism,” where I debunk the 10 most important myths about capitalism. I have a chapter that debunks the myth that capitalism is to blame for hunger, poverty, inequality, climate change, environmental destruction, monopolies, greed, fascism, and war. I’m proud that “In Defense of Capitalism” has been published in 30 countries in English.
Last year, I had more than 100 interviews with American radio stations. Someone asked me, “Do you think you can convince anti-capitalists with your books?” I said, “No, I don’t think so.” He asked, “Why do you write books when you don’t think you can convince them?” My answer was that I know they will not buy or read them. When I post it on Twitter, all I get back is nonsense. Then I asked him, “Have you read the book?” He said, “No, I would never read a book like that.”
I write my books for people who are pro-capitalism and pro-free market. I read a lot of books to research for my writing. For my book “In Defense of Capitalism,” you’ll find 360 books and scientific papers in the bibliography. Not everyone has time to read that many books, so I give you all the facts and arguments. If you have a discussion with anti-capitalists, maybe at the university, you will have all the arguments and facts you need to win every single discussion. That’s why I hope people will go on Amazon, look up my name, and find some of my books.

Mr. Jekielek:
Some people are very accepting of mainstream narratives. But there are things happening in the world making them wonder, “Was everything that I believed true or not?” Here at The Epoch Times, we’re looking to speak to those people. Perhaps your books can help with that too. Rainer Zitelmann, it’s such a pleasure to have you on the show.
Mr. Zitelmann:
Thank you. I appreciate it.

This interview has been edited for clarity and brevity.