23 Things They Don't Tell You about Capitalism


Thing 1: There is no such thing as free market.
Thing 4: The washing machine has changed the world more than the Internet.
Thing 5: Assume the worst about people, and you get the worst.
Thing 13: Making rich people richer does n't make the rest of us richer.

If you 've wondered how we did not see the economic collapse coming, Ha-Joon Chang knows the answer: We did n't ask what they did n't tell us about capitalism. This is a thoughtful book with a serious purpose: to question the assumptions behind the dogma and sheer hype that the dominant school of neoliberal economists-the apostles of the freemarket-have spun since the Age of Obam.

Chang, the coauthor of the international bestseller Bad Samaritans, is one of the world 's most respected economists, a voice of sanity-and wit-in the tradition of John Kenneth Galbraith and Joseph Stiglitz. 23 Things They Do n't Tell You About Capitalism equips readers with an understanding of how global capitalism works-and does n't. In his final chapter, " How to Rebuild the World, " Chang offers a vision of how we can shape capitalism to humane ends, instead of becoming slaves of the market.

Ha-Joon Chang teaches in the aculty of Economics at the College of ambridge. His anthologies include the bestselling Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. His Kicking Away the Ladder received the 2003 Myrdal Prize, and, in 2005, Chang was awarded the Leontief Prize for Advancing the Frontiers of Economic Thought.
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Published January 2nd 2011 by Bloomsbury Publishing PLC (first published March 10th 2010
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23 Things They Don't Tell You About Capitalism
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gave it

The basic tenet of the books is that the USA and UK have been practising free market capitalism ( neo-liberal policies) for the first 30 years, and whilst he supports economies based on ideolog, he feels that the free market version has done much to lower people 's quality of life, both in Western countries that practice it, and in developing countries, who have it foisted upon them by the IMF and World Bank, ( and the wealthy countries behind these institutions.) The biggest surprise in the novel for me?

No wonder Chang argues for government regulations to simplify financial dealings.

Credit default swaps ( CDSs) were created to protect you from default on the CDOs. And there are other more financial derivatives that make up the alphabet soup that is modern finance.By now even I am getting confused ( and, as it turns out, so were the people dealing with them), but the point is that the same underlying assets ( that is, the building that were in the original mortgages) and economic activities ( the income-earning activities of those mortgage-holders) were being used again and again to 'derive' new assets.

( hide spoiler) ] Rather than trying to provide any sort of overall synopsis of the bestselling and his rguments, I will just list some of Cho 's ideas that I found interesting.

Just because the rich get richer, it does n't mean that the poor get richer too.* The free market economy is responsible for all kind of society ills:- the 2008 financial crisis- stagnating wages for ordinary workers- longer working hours- horrendously inflated salaries for the managers of big companies- greater job insecurity- shorter term contracts- an ever-increasing pressure on suppliers to provide cheap products.- Inequality in societies.- the encouragement of borrowing at unprecedented rates- the huge ballooning of the financial investment sector, and it 's dangerously unregulated behaviours, which threaten the rest of the economy.* Wages in rich countries are determined more by immigration control than anything else.

" What is a starvation wage in the US is a handsome wage in China, and is a fortune in India " .Chang feels that immigration controls are necessary though, for a multitude of reasons.* Western countries stop developing countries from realising their potential by foisting free market regulations upon them, when they are at a stage of needing different, perhaps more protectionist policies.

Why should they have to try and develop differently from the pat that we did?* Shareholders have in many instance been given far too much power in the companies they invest in.

In some countries there are regulations ensuring that shareholders can only have a limited powers in the companies they invest in, and that other share-holding bodies ( the government, or banks, or founding families of companies), ensure that company managers put the long-term well-being of the company first. *It is much easier for entrepreneurs to become successful in wealthy countries, because we have things like good infrastructures, better technologies, better institutions and better organised firms.

In developing countries they have things like power cuts that mess up productions schedules, or Customs wo n't clear spare parts needed to fix machinery, or payments are delayed due to problems getting a permit to buy US dollars.

De-industrialization also has an effect on a country 's balance of payments- because services are inherently more difficult to export than manufactured goods.

He believes that inflation at 8-10%, or even up to 20% or 40%, can be compatible with a country have a good growth rate, with a fast-growing economy.

He believes that too much inflation control can result in reduced investment, and that our obsession with it has affected long term stability, economic growth and human kindness. *Most transnational corporation are in fact largely based in their mother countries.

Most importantly, they have used their political and economic influence to spread the free-market ideology that says whatever exists must be there because it is the most reliabl. *'Purchasing power parity' and the 'international dollar'= a way of measuring a country 's living standard.

Africa does have some serious problems, but they have problems that many Western countries also had when they were developing, and hopefully African countries can work through them too. *Microfinance in developing countries does not workOften these loans are given with high interest rates, and few businesses can make the necessary profits to repay these loans.- The people who take out the loans often have limited skills.- They only have a arrow range of technologies available to them.- They can only get hold of a limited amount of finance via microfinancing schemes.- If people have a ood idea- other people often quickly copy it, and the market becomes too full. *We need to bring regulations to the free market.The world is too complex for our limited intelligence.

They create informal rules that deliberately restrict people 's freedom of choice ( eg queueing means we do n't constantly have to calculate and re-calculate our positions at a crowded bus stop.) The financial rises of 2008 was due to the free-for-all complexity of the market- even financial experts did not fully understand the financial instruments being used and offered.

If we are to avoid similar financial crises, we need to severely restrict freedom of action in the financial market. *More education is not in itself going to make a country richer.

This suggests that it is the ack of a basic income guarantee that is preventing poor kids from making use of the equality of opportunity provided by schooling. *A good safety-net, in terms of a robust welfare state, gives people more incentive to be mobile and flexible, because it wo n't be the nd of the world if they lose their jobs.

The economies of Scandinavian countries, with high welfare support, have performed just as well as the US. *Financial markets are HUGE, and they need to become less, rather than more efficient.

This makes it possible for real-sector companies to secure the 'patient capital' that they need for long-term development.

But then everything went bang in 2008 ... .and this was all due to privatization and de-regulation of Iceland banks, which set them on a roller-coaster of borrowing and investment.The financial sector has become hugely more powerful in many countries, following financial deregulation in the 1980s.In the UK and France, the profit rate of the non-financial sector was higher than the profit rate of the financial sector ... ..

but after deregulation, the profit rate of the financial sector was higher than the non-financial sector.In the US, the financial sector became so attractive to people that even many manufacturing companies have turned themselves essentially into finance companies.eg General Electricity, General Motors and Ford- once all symbols of American manufacturing prowess, now make most of their money through their financial activities.Things that could help slow down financial markets ... Taxes on transactionsRestrictions on cross-border movement of capital ( especially movements in and out of developing countries) Greater restrictions on mergers and acquisitions.

gave it

Well, I say personal recommendation but what I mean is that I listened to this podcast in which Ha-Joon Chang talks through three of the twenty-three things that he discusses in this novel.

Ha-Joon Chang tries to prise off those neo-liberal sunglasses by looking at twenty-three things asserted by people with a neo-liberal economic viewpoint and discusses each in turn over about ten pages.

Ha-Joon Chang writes ( view spoiler) [ and this gives a good idea of his general approach ( hide spoiler) ]: " even though they were not trained as economists, the economic officials of East Asia knew some economics.

Hav of the guys that the East Asian government officials did in the miracle years- protecting infant industries, forcefully mobilizing resources away from technologically stagnant agriculture into the dynamic industrial sector ... derive from such economic views, rather than the free market view ... The conomics of Herbert Simon& his followers has really changed the way we understand modern firms, and, more broadly the modern economy ... When we understand that the modern economy is populated by people with limited rationality& complex motives, who are organised in a complex way, combining markets, ( public and private) bureaucracies& networks, we begin to understand that our economy can not be run according to free-market economics ( pp249-250) The choice of twenty-three things ( view spoiler) [ 1- There is no such hing as a free market 2- Companies should not be run in the interest of their owners 3- Most people in rich countries are paid more than they should be 4- The washing machine has changed the world more than the internet has 5- Assume the worse about people& you get the worst 6- Greater macroeconomic stability has not made the world economy more stable 7- Free-market policies rarely makes poor countries rich 8- Capital has a nationality 9- We do not live in a post-industrial age 10- The US does not have the highest living standard in the world 11- Africa is not destined for underdevelopment 12- Governments can pick winners 13- Making rich people richer does n't make the rest of us richer 14- US managers are over priced15- People in poor countries are more entrepreneurial than people in rich countries 16- We are not smart enough to leave things to the market 17- More education in itself is not going to make a country richer 18- What is ba for general motors is not necessarily good for the United States 19- Despite the fall of communism we are still living in planned economies 20- Equality of opportunity may not be fair 21- Big government makes people more open to change 22- Financial markets need to become less not more efficient 23- Good economic policy does not require good economists ( view spoiler) [& for a touch of post modern fun Ha-Joon Chang suggests seven different ways to read the novel ( hide spoiler) ] ( hide spoiler) ] feels as a result a little arbitrary, there seemed to be no reason why he could not continue& discuss even more.

His recommendations for rebuilding the world economy are: ( 1) capitalism is the worst economic system except for all the others ( 2) we should build our new economic system on the ecognition that human rationality is severely limited ( 3) we should build a system that brings out the best, rather than the worst, in people ( 4) we should stop believing that people are always paid what they 'deserve' ( 5) we need to take 'making things' more seriously ( 6) we need to strike a better balance between finance and 'real' activities ( 7) government needs to become igger and more active ( 8) the world economic system needs to 'unfairly' favour developing countries ( pp253-262) Whether or not we will see a trend towards reality impinging upon the study of economics and upon economics in public discourse is something that will emerge in time " but unless we now abandon the the principles that have failed us& that are continuing to hold us back, we will meet similar disasters down the road " ( p263).

gave it

It may not sound like the most un book to read but Chang actually writes this for the " common person " to use somewhat problematic phrase.

gave it

One does n't have to agree with Chang 's argument that capitalism itself is not necessarily a bad thing to appreciate his well-founded critisms of the free market.

We must have some protection from full-on free-market dog-eat-dog neo-liberalism in the meantime ... It is not a bad strategy, and a far easier one to digest for a mostly pro-capitalist 1st world to at least survive with a little more dignity through state help, until what we can only hope is the inevitable revolution.

Now if you are ready to move even more left, ready for more revolutionary fare, may I suggest we move on to A Brief History of Neo-liberalism by the marxist David Harvey?

gave it

It often addresses straw men and commonly held misconceptions about how economists think ( rather than how economists actually think), and often fails to present opposing arguments fairly.For instance, in Thing 1, " There is no such hing as a free market ", Chang writes " Every market has some rules and boundaries that restrict freedom of choice ".

I do n't know which of those explanations tars him the worst.Later in Thing 1, Chang talks about child labour laws: " If you believe that the right of children not to have to work is more vital than the right of factory owners to be ble to hire whoever they find most profitable, you will not see a ban on child labour as an infringement on the freedom of the labour market " .Oh boy, where to start?

If child labour laws help children, why not prohibit all labour?

Also, given that the internet piggybacks on computers one-to-one communication enables many-to-many communication ( e.g. by each of us communicating one-to-one with Goodreads) in ways that are mindbogglingly cheaper than with faxes ( what the internet replaces, according to Chang) .Last point from me: in Thing 20, " Equal opportunity may not be fair ", Chang makes the point that when children of poor parents ca n't concentrate in school because they 're hungry, that 's not equal opportunities.

My thought got boggled.Chang goes on to write: " Fair competition can only be achieved when the child is given enough food -- -at home through family income support and at school through a free school meals programme. " If I grant Chang the first part, that fair competition can only be achieved when children have enough food*, it does n't necessarily follow that his way of doing it is the right ay.

gave it

This is a memoir that really does deserve to be read.

gave it

Despite the predictions of every free-market economist worth his Heritage Foundation research grant that government sponsored South Korean entry into the world steel market would be disaster, Korea went on to dominate the steel industry for decades.This recent article by Chang on the market turmoil in early 2015 is also well worth reading.

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