Book Review #2: 23 Things They Don’t Tell You About Capitalism

In this video, Ha-Joon Chang talks about the concepts featured in his book.

Book: 23 Things They Don’t Tell You About Capitalism

Author: Ha-Joon Chang

Publisher: Bloomsbury Press

ISBN: 1608193381

More Info: http://hajoonchang.net/
Chang’s personal info referenced from: http://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/Ha-Joon%20Chang%20bio_EN.pdf

 

Ha-Joon Chang was born in South Korea in 1963. He has a Ph.D from the University of Cambridge where he is currently teaching, and has contributed to the Cambridge Journal of Economics. In addition to working with UN agencies such as FAO and ILO, Chang has worked as a consultant for numerous governments including the Canadian and Japanese governments. Publishing nine edited books and twelve authored books, Chang writes on a diverse selection of topics including East Asian economies, globalization, and trade policies.

As soon as I spotted this book in the book list, I knew I had to read it. This isn’t the first book I’ve read by Chang; I had the pleasure of reading Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism a few years back. Perhaps the most memorable part of that text was his view on how South Korea developed. Many free-market economists assert that todays developed economies developed because of state-supported free trade. Chang, living in South Korea during stages of rapid development, offered a firsthand account of the aggressive protectionist state programs that arguably shaped South Korea into the developed economy that they are today.

This text has 23 “chapters.” Each chapter is dedicated to refuting a commonly held misconception that pro free-market economists have. Chang offers some back story and evidence supporting his statements. The topics of these 23 chapters are as follows:

–          A free market has never existed nor can exist. Every market has boundaries.

–          It is bad for society when companies operate in the interest of their owners.

–          Individuals in rich countries have artificially high salaries.

–          The washing machine has had a greater impact on the world than the internet has (this one should sound familiar to us).

–          Humans are not entirely self-interested beings

–          More macroeconomic stability (through more stable currencies) has not made the world’s economy more stable.

–          Free markets have failed at making many poor countries rich.

–          “Capital has a Nationality” In this chapter, Chang explains the myth that are multinational corporations, saying that they are national corporations that outsource some tasks to other countries. Thus, the nation where these corporations originate benefits the most from these corporations.

–          Industry still plays a large part in the economy

–          There are many countries with a better standard of living than the United States.

–          Africa’s poor geography and climate does not necessarily mean that it must remain undeveloped.

–          The government can sometimes choose winners better than market signals can.

–          Increasing the wealth of the wealthy doesn’t necessarily help out a nation’s poorest individuals.

–          Managers’ salaries in the U.S. are too high.

–          Citizens in poor countries are more business-minded than those in rich countries.

–          Individuals are not intelligent enough to leave things to the market.

–          Increased education is better at allowing individuals to lead independent lives than it is at increasing economic development.

–          What helps business doesn’t always help society.

–          Capitalist economies have significant central planning.

–          Equal opportunities can still have unfair outcomes because people compete under different conditions.

–          Government programs, such as welfare, encourage risk taking and make people more open to change (This is a familiar concept that Jim mentioned in one of his lectures about how Canadians might be more willing to start a business because if it fails, they have their single-payer healthcare to fall back on.)

–          Today’s financial markets are too efficient.

–          Effective economic policy doesn’t require good economists. The best economic years in Japan and South Korea had economic policies written by lawyers, while China and Taiwan has engineers write their economic policies.

The previous 23 facts work to support a few main points of the text. Chang mentions in the book’s conclusion that this text was not a criticism of capitalism, but a criticism of free-market capitalism. He believes that capitalism is the least bad economic system, but it requires proper regulation to run properly. Another central point Chang makes is that a free market system does not and never has existed. Any time there were markets in history, there were constraints against those markets.

Much of what Chang discussed in this text was relevant to our class discussions. Chang offered a particularly interesting view on the U.S.’s standard of living compared to other countries. The commonly held misconception is that the U.S. has the highest standard of living in the world. While this assertion holds true when looking at the U.S.’s total wealth, this belief fails to consider the high levels of inequality present in the United States. The poor health and high crime in the United States is a symptom of this inequality. In addition, Americans work far more hours per person each year than Europeans do.

Unit 6 of our course focuses on the issue of inequality. Chang dispels the myth that inequality is good as it allows the rich to grow the economy, which will trickle down to the nation’s poorest individuals. These beliefs fail to consider that the economy has not experienced large growth in three decades of policies supporting the rich, and that trickle-down does happen, but only in small amounts when it is left to the market.

A few facts stood out to me while I was reading this text. Perhaps the most surprising was Chang’s belief that there is no such thing as a true free market. Most of us have been told that the U.S. is a “free-market” economy, so why is Chang saying that there is no such thing as a free market? The truth is that every market, including the U.S., has set rules and boundaries that businesses within an economy must follow. For there to be a true “free-market” requires an entire separation of economy and state, which is not present anywhere in the world. This fact fits in with the rest of the text because it refutes the belief that a certain country is successful because of “free-markets.”

Chang claims in this text that free-market policies rarely make poor countries rich. If you can recall Chile’s transformation from a military dictatorship to a market economy with low inflation, it seems like Chile’s economy would have comparable success to most western democracies if free-market rhetoric were true. While Chile has had economic growth due to liberalization, it wasn’t enough to make Chile rich.

Chang only mentions healthcare briefly a few times throughout the text. One of these times, he says that the U.S. healthcare system is inefficient. This leads me to believe that Chang favors a single-payer healthcare system over a private, insurance-based system which the U.S. resembles. It would have benefitted this text for Chang to expand on the shortcomings and inefficiencies present in the U.S. healthcare system. In fact, he could have used this comparison to demonstrate a shortcoming of capitalism.

When explaining the thought process of free-marketers, Chang states that they think the following:

“This is why other countries seek to emulate the US, illustrating the superiority of the free-market system, which the US most closely (if not perfectly) represents.”

However, Chang fails to state who considers the U.S. to most closely represent a free-market system. Most think tanks who offer a ranking of economic freedom, such as the Frasier Institute or the Cato Institute, rarely rank the U.S. in the top ten freest economies. Chang’s argument would have been more convincing and powerful if he would have substantiated by what standards the U.S. most closely represents a free-market system.

This text offered me new insights to topics, including the topic of Africa’s development. Like many people, I accepted the theory of environmental determinism, and believed Africa will remain undeveloped due to geography. However, Chang countered my misinformed view by offering examples of economic growth in Africa and explaining that many other countries have developed in the face of unfavorable environmental conditions. In addition, Chang refuted my commonly held misconception that increased education makes a country richer by comparing the levels of education of rapidly developing economies to stagnant economies. In many instances, economies with lower levels of education are capable of developing faster than those with higher levels of education.

1 thought on “Book Review #2: 23 Things They Don’t Tell You About Capitalism

  1. Joshua Parsons Post author

    South Korea’s steel production industry is privatized and is currently is the fourth largest producer of steel in the world.

Leave a Reply