Nov
23

23 Things They Don't Tell You About Capitalism

Ha-Joon Chang has written a number of excellent books, I've only covered one (Kicking Away the Ladder) on this blog so far. Another of his books – also very accessible and clearly written for non-specialists, is "23 Things They Don't Tell You About Capitalism" (2010). This argument has become more mainstream since Chang started to provide counter narratives a couple of decades ago (Kicking Away the Ladder came out in 2003). A few quotes:

"what we are told by the free-marketers - or, as they are often called, neo-liberal economists - was at best only particularly true and at worst plain wrong. As I will show you throughout this book, the 'truths' peddled by free-market ideologies are based on lazy assumptions and blinkered visions, if not necessarily self-serving notions. My aim in this book is to tell you some essential truths about capitalism that the free-marketers won't." (p. xv)

"The free market doesn't exist. Every market has some rules and boundaries that restrict freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them. How 'free' a market is cannot be objectively defined. It is a political definition. The usual claim by free-market economists that they are trying to different the market from politicly motivated interference by the government is false government is always involved and those free-marketeers are as politicly motivated as anyone." (p. 1)

"The wage gaps between rich and poor countries exist not mainly because of differences in individual productivity but mainly because of immigration control. If there were free migration, most workers in rich countries could be, and would be, replaced by workers from poor countries. In other words, wages are largely politically determined." (p. 23)

"When reminded of the protection past of the US, free-market economists usually retort that the country succeeded despite, rather than because of, protectionism. They say that the country was destined to grow fast anyway, because it had been exceptionally well endowed with natural resources and received a lot of highly motivated and hard-working immigrants. It is also said the countries large internal market somewhat mitigated the negative effects of protectionism, by allowing a degree of competition among the domestic firms. But the problem with this response is that, dramatic as it may be, the US is not the only country that has succeeded with policies that go against the free market doctrine. In fact, as I shall elaborate bellow, most of today's rich countries have succeeded with such policies" (p. 69)

"Even when it comes to higher education, which is supposed to matter more in the knowledge economy, there is no simple relationship between it and economic growth. What really matters in the determination of national prosperity is not the educational levels of individuals but the nation's ability to organize individuals into enterprises with high productivity." (p. 179)

"Capitalist economies are in large part planned. Governments in capitalist economies practice planning too, albeit on a more limited basis than under communist central planning. All of them finance a significant share of investment in R&D and infrastructure. Most of them plan a significant chunk of the economy through the planning of the activities of state-owned enterprises. Many capitalist governments plan the future shape of individual industrial sectors through sectoral industrial policy of even that of the national economy through indicative planning. More importantly, modern capitalist economies are made up of large, hierarchical corporations that plan their activities in great detail, even across national borders. Therefore, the question is not whether you plan or not. it is about planning the right things at the right levels." (p. 199-200) 

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