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.

"At first we all felt he was frightfully exaggerating and even offensive in tone. You see, he hurt all our deepest feelings, but gradually he won us around" Hayek, the free-market man who we learned influenced Margaret Thatcher’s opinions on politics, spoke these words in an interview. Hayek used to be a democratic socialist; but, like many others, he radically changed his views to become a free market capitalist after reading Mises’ work.

Ludwig Von Mises was born in Austria in 1881, and served as Austria’s top public economic adviser during the 1920’s, and effectively controlled Austria’s inflation rate. During this time, Mises organized economic seminars that drew people throughout Europe. Mises founded the “Austrian school of economics,” and he came to the United States in 1940. To offer a perspective on the paradigm shift brought upon by the resurgence of neoliberal ideas in the 1980’s; Mises had extreme difficulty finding a paid academic position at any university when he moved to the United States in the 1940’s due to his free market capitalist views.

Mises wrote Liberalism: A Classical Tradition to provide a sweeping argument supporting liberal policy. It is important to understand that the term “liberal” Mises used when he wrote this book in 1929 means something very different than what it means to Americans today. When he wrote this text, the word “liberal” meant someone who supported a small government, similar to how modern day “libertarians” want to reduce the size of the government. Nowadays, those who identify as liberals in the United States tend to support concepts such as social justice or equality of opportunity.

This book is composed of five separate chapters:

1. The Foundations of Liberal Policy- Mises seeks to provide a compelling base that supports liberalism for not only its economic significance, but also on the basis of human rights and culture.

2. Liberal Economic Policy- Mises points out the central tenants of liberal economic policy, providing strong support for private property, private ownership of capital, and the undesirability of socialism.

3. Liberal Foreign Policy- (I had to grab some popcorn for this chapter; it was quite interesting) Mises uses a single word to describe liberal foreign policy: peace. In addition, he provides convincing economic arguments supporting peace and explains that liberal societies will produce a peaceful world due to economic interdependence.

4. Liberalism and Political Parties- Mises outlines the significance that political parties will have in a liberal society, mentioning that current political parties are composed of special groups that have a vested interest in fighting liberalism.

5. The Future of Liberalism- Mises makes some wishes for the future, stating that although liberalism misses the colors and culture associated with political parties, the liberals still have arguments on their side.

A reader can succinctly narrow this text into a few points:

–  Liberalism seeks to minimize human misery while maximizing human happiness

–  Liberal policies aren’t only the most morally justifiable, but they produce the best results

Mises covers the topics of standard of living and income inequality, which we’ve also learned about in class:

Mises blames the variance of the standard of living between countries on trade barriers and immigration controls. He goes on to explain that more European workers (in 1929) would like to move to the U.S. to increase their wages, but the U.S.’s strict immigration laws make this very difficult. Therefore, Mises believes that the U.S. has strict immigration laws to serve to increase their own wages at the expense of European workers’ wages. I agree with Mises’ view that immigration should have minimal regulation, but I disagree with his assertion that allowing more immigrants will decrease an area’s wages. His assertion assumes that allowing more immigrants will increase the labor supply and decrease wages. This assertion ignores that immigrants not only take employment, but immigrants are also business owners and provide employment.

When we read or hear about income inequality, we often hear about how much better off the poor would be if we only redistributed wealth from the rich to the less fortunate. While I still believe that income inequality is an imperative problem, Mises offers information on this issue that most people ignore when discussing income inequality. He points out that economists cannot assume that wealth in a society will remain constant after modification in the economy. It is difficult to accurately calculate how much better off a section of society would be after redistribution, because this distribution modifies the incentives present within the society.

One thing Mises could have included in this book is his view on intellectual property. He effectively defends the right for private property in this text, but he fails to mention intellectual property. I was hoping for Mises to offer his view on IP because (at least, from what I have read) he doesn’t offer his viewpoint on intellectual property in any of his other texts. He discusses it, but doesn’t offer his perspective. This would have been an excellent addition to this text because intellectual property is something that divides Austrian economists and is one of the questions that needs answering in a liberal society.

This book changed some of my views, because Mises expressed some opinions in this book that I was surprised to hear. One of these is his opinion on democracy. Many liberals usually reject the concept of democracy, believing that a person’s rights are not something that should be determined by a vote. Instead, these liberals favor a constitutional republic or constitutional monarchy that guarantees the rights of citizens. Mises states that democracy is a means of decision-making that controls dissatisfaction or the uprising of the citizens, and can have a place in a liberal society. Although this text didn’t change my view on fascism, he took a neutral tone when describing fascist leaders in Europe. He described fascism as a last resort against the threat of the violent spread of communism.

Bibliography:

Photo of Mises from: Wikimedia Commons

Introductory quote borrowed from: Internet Archive

Biographical information from: Mises Biography

The entire text for this book can be found here: Liberalism: In the Classical Tradition