on 28 November 2010
Ha-Joon Chang delivers 23 well-aimed shots at dodgy doctrines of free-market capitalism. The questions he raises and the answers he gives are about fundamentals of economic theories that have deeply and disastrously influenced governments the world over, leading to the current series of crises. Each "thing" the free-marketeers do tell you is matched by a brief, brilliantly supported and illustrated debunking. He himself is an example of an all too rare thing: a deeply knowledgeable economist who knows how to cash out theory in properly down-to-earth terms, writing with great clarity and humour. You may be left wondering how anyone was taken in by all that shaky free-market stuff. Here's the answer he doesn't quite state explicitly but implies. Governments are not so much of the people, by the people and for the people. Instead they are too much of corporations, by corporations and for corporations. Free-market dogmas and propaganda suit corporations and their political cronies, even as the latter are rigging things in favour of the former.
on 16 September 2010
The financial crisis has sparked renewed debate about the free-market orthodoxy of the last 30 years, particularly in the so called Anglo-Saxon economies (US and UK), but also through international institutions like the WTO and World Bank. The crisis has even brought the debate to popular science magazines, asking if our current economic models should be torn up and re-formulated in exactly the same way as any other scientific theory doesn't agree with the results. Climate change is forcing us to face up to the unintended consequences of industry and consumption, forcing us to consider the 'true costs' of our activities and their effects on the wider environment. Many people are left to wonder if complex financial instruments created by hedge funds and banks, have ended up doing more damage to the real economy they were meant to benefit. Capitalism, in the form encouraged for three decades, appears to have turned on itself.
Ha-Joon Chang's book, brings these issues into lucid focus. This however isn't a socialist pamphlet - Capitalism is argued to be the least worse economic system we have invented (he doesn't trumpet for its superiority or inevitability). Like Nassim Taleb's 'Black Swan', the tendency is to go beyond 'what they tell you' (theory) and wish to explore what's really happening.
The 23 things brilliantly de-mythologize tenants of 'free market' ideology, through wonderfully lucid examples and lively discussion of the issues. The style isn't cold or academic (he's actually quite an amusing writer), so it's a lot of fun to read and lands its punches with strong arguments over slogans or empty rhetoric. He's not saying we shouldn't have a market, but he is saying our ideas about their development and nature are often idealised, lead to the opposite of what we wish to achieve, or don't match the facts.
The puritanical conversation about capitalism we have suffered from up to now is wonderfully dispelled in this book, leading to some startling conclusions and eye opening historical examples. My feeling having read it is of optimism, as it seems we finally have economists that can write books for mere mortals to read, but also have a more sceptical and perhaps practical outlook on our economy (on what works and what demonstrably doesn't, the limit of markets and of governments, with an eye on greater social aims and values).
It's a book that more than makes up for its unpromising front cover. I can't recommend it enough.
on 6 November 2010
Ha-Joon Chang, economist at Cambridge University, is a familiar author to many in the general public by now for his persistent and eloquent efforts (when writing) to combat the economic orthodoxy on several major policy points. In particular, he is known for his defense of protectionism as a means to promote economic growth and for his rejection of the idea that 'free trade' and 'free markets' lead to better outcomes than alternatives such as government dirigisme. In "23 Things They Don't Tell You About Capitalism", he attempts to make the lessons of heterodoxy familiar to as wide a public as possible, addressing 23 orthodox economic clichés that are often accepted by a skeptical general public only because they seem to be supported by all in the economic field. In making the counterarguments accessible and generally known, Chang has done the English-speaking world a great service.
The 23 things he discusses can be roughly clustered into a number of groups: he discusses the orthodoxies of free trade as against protectionism, the orthodoxies of free markets as against government intervention, the orthodoxies of wage policy (particularly the idea that wages are infallibly determined by individual marginal productivity), the orthodoxy that inequality of income and outcome does not matter, and finally the idea that financial managers and economists know best. On all of these points, he has very important lessons to convey to policymakers, civil servants, and the general public to show that these things should either be rejected out of hand or be taken with a large truckload of salt. Using the strengths of economic history, he accessibly shows in each of these cases how the cliché is either refuted by the facts or itself an incoherent idea, or both.
That said, sometimes his critique does not go quite far enough, and this shows the limitations of Chang's own economic theory standpoint. As he makes clear, the book itself is intended to criticize the orthodoxies of 'free market' capitalism, but not capitalism itself. As a result, his critique is not as powerful and does not convey as many important popular lessons as it could. For example, although he is quite right about the relation between protectionism, government intervention, and growth, he does not criticize the concept of growth itself as the only goal in economic policy, nor does he point out the essential fact that growth can in fact be bad for the median living standard if it causes the distribution of wealth to be more unequal. He also, because of his market economy predilections, vastly understates the success of planned economies historically, despite referring at one point of the book to Robert Allen's excellent research on Soviet industrialization policy. He also does not point out that the strong capitalist investor state he favors itself historically has tended to impede the development of more egalitarian outcomes and tends to be repressive of unions and collective action. Finally, he does not critique any of the assumptions of microeconomics, only macroeconomics.
Nonetheless, most of the 23 lessons are well taken and although I have some disagreements with a number of them, they are exceedingly well formulated for public understanding and indeed much closer to a real picture of how capitalist economies work than any of your average macroecon textbooks. It is therefore to be hoped that this book will have a wide audience.
on 16 September 2010
This isn't any old attack on the neo-liberal economic policies that have prevailed for the last few decades - it is devastatingly precise and uses quality evidence to back up all its claims. Having said that it is also very readable (having never studied economics, none of it felt too technical), without feeling like there's not enough detail for you to be getting the whole picture.
It takes apart free market ideology with panache, but gives only an outline of what is needed to take its place. Having said that, the principles he outlines in the conclusion are, you feel, extremely well targeted to reform capitalism in light of the evidence he mounts against neoliberal policies in the main part of the book. The conclusion is the only part where I would have preferred a little more from the author, on his ides for a better type of capitalism to replace the current system, but perhaps that is the next project he has in mind (I hope so!).
on 26 October 2011
A South Korean economics academic working in Cambridge has written this very useful book that arms you for arguments you may have with yourself (!) or friends about how economics actually works. He has the intellectual self confidence (teaching at Cambridge) and the independence of mind (an Asian living in Europe) to be more objective about economics than anything else I can think of. We are all blinkered in our outlook, but he is far less so. This book explodes many right wing ideological myths that have become accepted.
Let's face it, a lot of gunk we hear from people objecting to capitalism is even more nonsensical than the self-serving quasi-religious beliefs in the free market you get from people "earning" (well more accurately "being paid") hundreds of thousands a year for moderate work.
We need academics who can think independently and objectively, and explain their work. This book does just that.
on 18 October 2010
Ha-Joon Chang, Reader in the Political Economy of Development at Cambridge University, has written a fascinating book on capitalism's failings. He also wrote the brilliant Bad Samaritans. Martin Wolf of the Financial Times says he is `probably the world's most effective critic of globalisation'.
Chang takes on the free-marketers'' dogmas and proposes ideas like - there is no such thing as a free market; the washing machine has changed the world more than the internet has; we do not live in a post-industrial age; globalisation isn't making the world richer; governments can pick winners; some rules are good for business; US (and British) CEOs are overpaid; more education does not make a country richer; and equality of opportunity, on its own, is unfair.
He notes that the USA does not have the world's highest living standard. Norway, Luxemburg, Switzerland, Denmark, Iceland, Ireland, Sweden and the USA, in that order, had the highest incomes per head. On income per hours worked, the USA comes eighth, after Luxemburg, Norway, France, Ireland, Belgium, Austria and the Netherlands. Japan, Switzerland, Singapore, Finland and Sweden have the highest industrial output per person.
Free-market politicians, economists and media have pushed policies of de-regulation and pursuit of short-term profits, causing less growth, more inequality, more job insecurity and more frequent crises. Britain's growth rate in income per person per year was 2.4 per cent in the 1960s-70s and 1.7 per cent 1990-2009. Rich countries grew by 3 per cent in the 1960s-70s and 1.4 per cent 1980-2009. Developing countries grew by 3 per cent in the 1960s-70s and 2.6 per cent 1980-2009. Latin America grew by 3.1 per cent in the 1960s-70s and 1.1 per cent 1980-2009, and Sub-Saharan Africa by 1.6 per cent in the 1960s-70s and 0.2 per cent 1990-2009. The world economy grew by 3.2 per cent in the 1960s-70s and 1.4 per cent 1990-2009.
So, across the world, countries did far better before Thatcher and Reagan's `free-market revolution'. Making the rich richer made the rest of us poorer, cutting economies' growth rates, and investment as a share of national output, in all the G7 countries.
Chang shows how free trade is not the way to grow and points out that the USA was the world's most protectionist country during its phase of ascendancy, from the 1830s to the 1940s, and that Britain was one of world's the most protectionist countries during its rise, from the 1720s to the 1850s.
He shows how immigration controls keep First World wages up; they determine wages more than any other factor. Weakening those controls, as the EU demands, lowers wages.
He challenges the conventional wisdom that we must cut spending to cut the deficit. Instead, we need controls capital, on mergers and acquisitions, and on financial products. We need the welfare state, industrial policy, and huge investment in industry, infrastructure, worker training and R&D.
As Chang points out, "Even though financial investments can drive growth for a while, such growth cannot be sustained, as those investments have to be ultimately backed up by viable long-term investments in real sector activities, as so vividly shown by the 2008 financial crisis."
This book is a commonsense, evidence-based approach to economic life, which we should urge all our friends and colleagues to read.
on 11 February 2013
I am more familiar with Ha-Joon Chang's academic work than I am with his popular economics series. However, this book is ideal for introducing the harder debates of modern economics to the layperson. The book is laid out in a series of 23 short, topical chapters, each of which addresses a common misconception, ideological blind spot, or just plain wrong idea about capitalism and economics that is commonly held and promoted. Some of the things Chang talks about include the fallacy of post-industrialization, the notion that regulation makes countries less competitive, and the idea that Africa is structurally ill-suited for development. Chang is a heterodox economist and he makes this clear in his writing, but this is the main strength of this book - it challenges the assumptions of orthodox economics, many of which have done great damage recently. Overall, I'd highly recommend this for anyone interested in economics or modern hypercapitalism.
on 14 January 2013
There are several popular economics books about now, but this is one of the best. A Cambridge professor writes about the way the world is supposed to work, and shows how it actually works, and doesn't work, which is quite disturbing. The reasons for poverty in large parts of the world and why so much of what we are told about the way economics works is really just political opinion are salutory. When I first looked at it, I wondered if choosing 23 things to explain wasn't perhaps too much, or would seem too haphazard. As it is, it builds up, indirectly linking ideas, so that the reader becomes more and more involved, and eventually achieves some sort of understanding, even from a very low basis of knowledge. This is a book which needs to be read right now, by everyone who doubts what they are being told.
on 14 February 2012
Although I agree wholeheartedly with the author's message, that free-market capitalism needs keeping in check by regulation, I was unimpressed by the way he's chosen to give us this message.
To borrow from the title, here are three things I don't like about this book:
1) Although the author makes some very good points, many of them are really quite obvious, eg: Shareholders are not the best judges of how a company should be run, as they are mostly in it for short-term gain. Or this one: US managers (and many British ones too) are paid too much. Who would disagree with that, apart from US managers?
2) He devalues some of his more interesting points by exaggerating to an absurd level. For example, in saying that most people in the west are paid too much, in relation to workers in poorer countries, he tells us that a Swedish bus driver is paid 50 times as much as an Indian bus driver. Nowhere does he point out that the cost of living is about twenty times higher in Sweden than it is in India.
In other words, he totally ignores purchasing-power parity, which would probably make the Swede's pay about three times higher, not 50.
(Though he makes this very point when it suits his argument, like when he's telling us the US doesn't have the highest living standard in the world, another of his `things' that's hardly controversial).
Another exaggeration is the suggestion that the capitalist system works on the principle that all people are only out for their own gain. It works on the motivation factor, obviously, but it also works on the principle that most people behave decently most of the time, even if the reason for doing so is that decent behavior is ultimately in our own interest.
3) And some of his `things', or points, are rather pointless, such as devoting a chapter to telling us that some earlier inventions, such as telegraph and the washing machine, were more important than the internet. Is anyone arguing the point? And even if they are, so what?
There's a lot of this sort of thing - make a statement that most people would agree with anyway (eg: Making rich people richer doesn't make the rest of us richer, or that industry still matters), then go on to show why this is so, as if he's made an amazing discovery.
And I could add another `thing': the author takes political correctness to an absurd level, such as his habit of referring to everyone as `she', whether it be a garage mechanic, a senior manager, a company director ... Much as it might be good to suggest that such people could easily be female, we all know that they're usually male, so `he' would make a lot more sense, and also be a lot less annoying.
In fact, this is really quite an irritating book, even though there's some good stuff buried away amongst all the waffle and repetition. The problem here I think, as is often the case with these kind of books, is that the point can be made perfectly well in a 5,000-word article, but has to be padded out to 80,000 words to make a book.
The author sums up his main points quite adequately in the final chapter, adding to the repetitive nature of the book - anyone who doesn't have time for the whole thing could read this and still get 90% of the message.
So overall, of the 23 `Things They Don't Tell You About Capitalism', I'd say that a few of them are interesting, most are obvious, and too many are plain pointless.
And who are `they' anyway? Who is it who isn't telling us these things? Everybody, surely. Or should that be nobody?
on 12 November 2010
The stated aim of '23 Things' is to debunk the big myths of capitalism. The author goes about doing this in a clear and accessible way. The writing is pleasant to read, but nothing more, and sometimes feels a little too accessible. Some of the points he makes are simplistic, and could probably be left unsaid to avoid a vague sense of being patronised, albeit in a friendly and gentle way. (for example, when discussing why some African countries are not structurally disadvantaged by their geography, he points out that they cannot physically move their country, and can not feasibly invade Norway and occupy their land instead. One or two such observations may be taken as tongue in cheek, but there are too many)
However, my biggest problem with the book is that to believe most of the myths he debunks you would have to be the most die-hard, red-blooded free market capitalist in existence. Paraphrasing to emphasise my point, his myths include 'Poor people are poor because they are lazy', ' People behave entirely in their own self-interest all the time, no exceptions', 'The high pay of CEOs in the US is entirely justified' and 'For a market to work there should be absolutely no regulations or restrictions'. Does anyone whose opinion you respect really think these things?? A lot of what he does is take sweeping, absolutist statements - the kind that are always wrong, where the answer is always 'neither one nor the other but a little of both' - and show that the answer is indeed a little of both. Thus he busts the myth that 'Governments always make bad decisions' by giving a few examples of good decisions, while acknowledging bad ones, and busts 'We live in a post-industrial age' by showing that there is still some industry in the UK, albeit less than before.
Perhaps I am being harsh. My disappointment certainly stems in part from the high expectations based on other Amazon reviews. Also I have read a bunch of pop-economics books recently so some of the ideas in here aren't so fresh to me. He certainly makes interesting points - I particularly liked "The washing machine changed the world more than the internet" although, as he acknowledges, time could prove him wrong on that one. His various chapters on why free markets aren't all they are cracked up to be are also interesting.
All in all this is a worthwhile book, just don't expect all (or even most) of the chapters to be shocking exposes of capitalist myths.