23 Things they don't tell you about Capitalism

This book, by Cambridge professor of economics Ha-Joon Chang, is just excellent. I acquired it during a spate of book-buying during the early days of my economics A-level, when the subject was still academically (rather than just generally) exciting to me. Then - what, four years ago now, yikes - I breezed through it quite carelessly, but having read his more recent book (which was brilliant) and heard him speak at a Manchester conference for student societies campaigning for reform of economics education last month (which was also brilliant), I decided to give it a proper attempt. Also, my own branch of the student campaign for reform of economics education is hosting a talk by him (this Wednesday, actually), so I finished it considerably quicker than I usually do non-fiction books.

   It's a fantastic book. High depth of research, socially and pragmatically grounded, well-argued and critically thought, taking a pluralistic interdisciplinary approach to economic issues; he handles the subject as it should be handled.* He also writes extremely readably and accessibly, amusingly even (he does pepper his paragraphs with brief anecdotes or pop culture references, not to an annoying or distracting extent, but they are sometimes clumsy, but on the whole he writes with clarity, wit, and a vivacious charm), digesting fairly hefty socioeconomic issues into laypersons' terms without dumbing them down or misrepresenting their complexity. Like his other book (see *), it's great for those who are interested in economics but feel alienated by its impenetrable elitism and jargon - though while his other book is an introduction/manual, this (as its title may suggest) is out-and-out mythbusting. Ha-Joon, in a deft ten-pages or so each, outlines the surprisingly straightforward cases for 23 things about our current system of freemarket capitalism which if were widely known would radically alter political and corporate activity. They are:

1. There is no such thing as a free market
2. Companies should not be run in the interests 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 worst about people and you get the worst
6. Greater macroeconomic stability has not made the world economy more stable
7. Freemarket policies rarely make 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 doesn't make the rest of us richer
14. US managers are over-priced
15. 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 good 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

   Sound interesting? Oh of course.

   Sound like the exact opposite of what most mainstream pro-establishment-remora-fish economists tend to say on these matters? Why, yes.

   Sound plausible, having weighed up evidence, theory, and arguments from economics, politics, sociology, psychology, history, ethics, and the various other fields one must draw from and think in to make proper judgements about these issues? Yes. All of them do.

   The 23rd thing is an excellent critique of current vested interests in economic policy-making and education. The reason he can make such cogent points in direct contrast to the myths he busts is because 'economics' as a discipline has lost its way, has become enslaved as an apologist for the status quo, enforcing its dogma by mathematics and abstract diagrams, ignoring any inconvenient misalignment of theory and reality. He does economics properly by recognising its limitations and uses, and complementing it with other tools of thought to tell better truths about economic issues. Though politically controversial topics, these are not opinions he's voicing; these are calmly-assessed analyses and presentations of facts, more often than not weighted with ethical implications. It'd be a great book to give to someone with right-wing socioeconomic views (assuming they were open-minded enough to properly engage true stuff) as a challenge. These assertions that sound like leftist spoutings are actually just statements about economic reality. It reminds me of the simple brilliance of evidence-based policymaking, which I discussed in my post about The Spirit Level.

   Anyone with but a newswatcher's understanding of the economy has, most probably, been deceived about how quite a lot of it works. There's a two-fold effect to this misinformation; established elites propagate myths about the world economy that aid their positions of wealth and power, and mainstream academic economics (doubtless aided by funding from the aforementioned top-class citizens) has become narrowed and corrupt in the way it approaches any issue, leading to often radically ineffectual and often arguably unethical conclusions about them. Because of this, not even economists are much help.** Ha-Joon makes an excellent case for our need to take a critical stand toward the conventional wisdom of pseudo-economists, as in the dismal science if we are better informed and better able to understand the issues we have a much clearer means of making ethically right sociopolitical choices.
   If you think you understand economic issues because you've seen a Robert Peston documentary or two, read this book. If you don't even have a layperson's understanding of economics, I still recommend you read it, but would advise first checking out his other book (see *) as a helpful clear-headed overview of the subject and how to think in it.

   

* For more on proper approaches to economics, especially public understanding of it, check out my post about his other book, Economics: the User's Guide. There are also relevant resources from the international network of campaigners, Rethinking Economics.

** Our lecturer for a module called The International Economy asked the class (third-year economics students, mind you) earlier this year who could explain, even superficially, how the financial crisis happened. Less than a fifth raised their hand. Have we learned nothing?

   Imagine if psychology were dominated by a single school of thought (fortunately, it isn't). Then, imagine tens of millions of people around the world go insane in ways that no mainstream psychologist can properly rationalise given their existing theories of the human mind. Would those theories and models continue to have as much worth? Demonstrably not, as they failed to predict and even fail to satisfactorily explain an enormous series of catastrophic psychological events. Handfuls of heterodox psychologists, though disreputed in academic circles for espousing 'implausible' or 'outdated' theories about mental activity, had (weirdly enough) predicted the 'Insanity Crisis' decades earlier, and using their alternative schools of thought and models are able to form a variety of coherent, overlapping explanations for what caused it and how it might be prevented from reoccurring. However, seven years after the Insanity Crisis, psychology students are taught the exact same mainstream models, policymakers are informed using those exact same mainstream theories, and psychologists all over the world despair that their noble and important science has become the object of so much public distrust and disillusionment.
   Economics's reaction to the 2008 crash was, cheesy thought experiment aside, pretty much this absurd.