23 things they don’t tell you about Capitalism

A brief summary of some of the key themes in a talk by Ha-Joon Chang based on his book ’23 things they don’t tell you about Capitalism’ – relevant to the A2 Module on Global Development – He is basically critiquing neo-liberalism.

He claims that 95% of economics is common sense deliberately made complicated and that ordinary people can understand most of economics fairly easily. He wants to help ordinary people engage in ‘active economic citizenship’ and demand the right decisions from their leaders…. I imagine he would say a big fat ‘NO’ to the Tory cuts!

This is very much along the same lines as Joseph Stiglitz and David Harvey btw…!

His basic point seams to be that Capitalism is the best economic system in world history, yet our present form of Western Capitalism (there are many types) – ie neo-liberalism – has served us very badly. We have been told that things have been going very well – what with post-industrialism and the new knowledge economy – but things have not been going well since the 1970s. Neo-Liberal policies have been very bad at generating economic growth – the world economy has slowed down massively over the last three decades. What has also happened is that the rich have got richer and many economies have become less stable.

He also points out that in those countries where neo-liberal policies have been applied the most rigourously have often seen the lowest levels of growth – such as in much of sub-sharahan Africa. Those countries that have grown the quickest – China and India did not apply neo-liberal policies to the extent that countries in Africa did.  

Anyway – just some of the points he makes – some of the things neo-liberal idealogues do not tell us about Capitalism are as follows (he is destroying the myths of free market, neo-liberal ideology)….

1. There is no such thing as a ‘free market’ – ‘freedom of the market is in the eyes of the beholder. The very definition of the ‘free market’ – who can participate, what can be bought and sold for example – is political.

2. Under neo-liberalism… Companies are not run in the interests of the owners – these days companies are owned by free floating shareholders who are primarily interested in short term profit (high dividends) which can harm the long term interests of the company – which requires investment in infrastructure and training of the workers. The shareholders can always move onto another company.

3. The market is not just – he gives two examples of two bus drivers – one in India who gets paid less than one in Germany – the chances are that the driver in India is more skilled as he drives on more dangerous roads….

4. We are still living in planned economies, despite the collapse of communism

5. Making rich people richer does not make the rest of us rich

7. People in poor countries are more entrepeneurial than people in wealthier companies…

 

NB – DEFINITION – Neo- liberalism is an economic and political ideology that believes state control over the economy is undesirable and seeks to transfer control of the economy from the state to the private sector. It gained popularity amongst politicians and influential economists following the economic crisis of the late 1970s. It involves three main policies –

 

  • Deregulation – Nation States placing less restraint on private industry. In practise this means fewer laws that restrict companies making a profit – making it easier for companies to fire workers, pay them less, and allowing them to pollute.
  • Privatisation – where possible public services such as transport and education should be handed over to private interests for them to run for a profit.
  • Cut backs in public spending – taxes should be low and so investment in public services would be cut back.
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