23 Things They Don't Tell You About Capitalism
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Free market dogma has dominated western economies since the 1980s and came to a spectacular end in 2008.
In his book, 23 Things They Don’t Tell You About Capitalism, Ha-Joon Chang explains why this has been a mistake and warns of 23 problems with the system.
Many of the ideas are left-wing and anti-globalisation, and there is more than a hint of schadenfreude in the gloating that takes place over the financial crash.
One gets the impression Chang would be comfortable among the anti-capitalist protesters outside St Paul’s cathedral. He insists he is not anti-capitalist however, but simply wants to improve the system. It is hard to dispute it needs improving.
While the argument is familiar the book does have some original ideas. One is that short-termism is inherent in the stock market and that this transient model of business ownership is damaging. Shares can be traded at speed which means there is no interest in the long-term prospects for a business. Chang believes the fast buck culture is a major weakness of capitalism.
He also rejects the idea that globalisation can lift millions out of poverty and that wealth inevitably trickles down to the bottom of society. This orthodoxy has been dominant for 30 years, with Peter Mandelson famously noting that he is intensely relaxed about people becoming filthy rich.
There are other left-wing ideas in the book, with questions on equality and the morality of businesses, and critiques of high pay. Big government intervening in markets is also heavily praised, with Chang claiming the government can pick winners and intervene to make society more open to change.
In a similar vein he criticises the insistence on free trade and the removal of tariffs and trade barriers by the richest countries. He specifically targets perceived hypocrisy by the US when it demands emerging economies open their borders to foreign trade.
The case of the first US Treasury Secretary Alexander Hamilton is highlighted. Hamilton claimed infant industries in emerging economies need to be nurtured by government. The US Tea Party movement may not want to acknowledge it but the first US politicians used government to intervene and grow their nation’s wealth.
Now it is China that has a relatively infant capitalist system and the Chinese want to protect their economy. The US is unhappy about, for instance, artificial devaluation of the renminbi, which helps China export goods more cheaply.
Chang believes the US is encouraging free trade to benefit itself rather than using globalisation to alleviate poverty.
In another section he highlights western protectionism in the form of immigration controls that artificially act to inflate wages in rich economies. If immigrants could flood in to undercut workers, wages would decrease.
In the developed world the rewards for individuals are determined not by productivity levels but because their country’s laws favour them.
Overall, the book is a stinging critique of free markets and unchecked globalisation, which it claims benefits no-one.
Before 2008 the free market consensus was so strong this book would have been trashed as loony left. Now protectionism is back, governments are intervening and high pay is criticised. It is a timely analysis of capitalism’s ills and even if you disagree, it is worth a read.
By Samuel Dale
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