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"23 Things They Don't Tell You About Capitalism"
British Media Praise S. Korean Economist's
Recent Book on Capitalism

Cambridge Univ. Economics Prof. Chang Ha-Joon
"23 Things They Don't Tell You About Capitalism" by Chang Ha-Joon, professor of Cambridge Univ.

A South Korean scholar's book on capitalism "23 Things They Don't Tell You About Capitalism" is praised by foreign media including Britain's Guardian and the Independent.

Guardian's John Gray and the Indedendent's Sean O'Grady has recently wrote a detailed and lengthy book review of Cambridge University Prof. Chang Ha-Joo's book, respectively to give readers an insight into the shortcomings of the capitalism.

The following are the stories of them.

"23 Things They Don't Tell You About Capitalism" by Ha-Joon Chang

Ha-Joon Chang offers a masterful debunking of some of the myths of capitalism
By John Gray

The world is awash with books that claim to explain the global financial meltdown. Not many are written by economists. Ignorant of history, including that of economics itself, most economists not only failed to forecast the crash but, mesmerised by the spurious harmonies of their mathematical models, were blind to the mounting instability of the financial system and failed to grasp that an upheaval of the kind that is currently under way was even possible. After an intellectual failure on this scale, what could economists have to say today that would be of any interest to anyone?

Anxiously defending their turf, many have objected that they never claimed to predict the future. But as Ha-Joon Chang writes: "Economists are not some innocent technicians who did a decent job within the narrow confines of their expertise until they were collectively wrong-footed by a once-in-a-century disaster that no one could have predicted." Far from being an inward-looking, hermetic discipline, economics has been a hugely powerful – and profitable – enterprise, shaping the policies of governments and companies throughout much of the world. The results have been little short of disastrous. As Chang puts it: "Economics, as it has been practiced in the last three decades, has been positively harmful for most people."

In his 2008 book, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, Chang – an economist himself, a specialist in the political economy of development – mocked one of the central orthodoxies of his profession: the belief that global free trade raises living standards everywhere. 23 Things They Don't Tell You About Capitalism assaults economic orthodoxy on a much larger front. Dip into this witty, iconoclastic and uncommonly commonsensical guide to the follies of economics, and, among many other things, you will learn that free market policies rarely make poor countries richer; global companies without national roots belong in the realm of myth; the US does not have the highest living standards in the world; the washing machine changed the world more than the internet; more education does not of itself make countries richer; financial markets need to become less, not more efficient; and – perhaps most shocking to Chang's colleagues – good economic policy does not require good economists. Each of Chang's 23 propositions may seem counterintuitive, even contrarian. But every one of them has a basis in fact and logic, and taken together they present a new view of capitalism.

Chang may be our best critic of capitalism, but he is far from being any kind of anti-capitalist. He recognises the failings of centrally planned economies, and rightly describes capitalism as "the worst economic system except for all the others". At the same time he is confident that capitalism can be reformed to prevent crises like the one we have just experienced recurring. Making markets more transparent is not enough. "If we are really serious about preventing another crisis like the 2008 meltdown," Chang writes, "we should simply ban complex financial instruments, unless they can be unambiguously shown to benefit society in the long run." He is aware that he risks sounding extreme, but argues that the ban he proposes is no different from those that have been enforced on other dangerous products. "This is what we do all the time with other products – drugs, cars, electrical products and many others."

It is at this point that Chang's analysis, otherwise refreshingly down to earth, seems to me to become unrealistic. Banning opaque financial products might be a step towards a safer world. Unfortunately it is also politically impossible. In the US, Obama's economic policies are being shaped by the same people – many of them with close links to Wall Street – who dismantled Roosevelt's curbs on the banking system during the Clinton era. American politics has been captured by a financial oligarchy, and there is no prospect of meaningful reform.

Again, Chang urges that we ban financial derivatives, but who are "we"? Reforms of the kind he envisions require a type of global governance that will not exist in any foreseeable future. As he himself recognises, capitalism is not one economic system but many. "There are different ways to organise capitalism. Free-market capitalism is only one of them – and not a very good one at that. There is no one ideal model." This is clearly right, but the types of capitalism that exist today are not just different. They are also competitors, with conflicting needs and goals. Chinese capitalism, Russian capitalism, Indian capitalism and American capitalism are geopolitical rivals as much as they are different ways of organising the marketplace, and they threaten one another in a number of contexts – not least when they are struggling to secure control of scarce natural resources. Many of the world's conflicts are driven by these geopolitical rivalries. Afghanistan will enjoy nothing like peace when western forces are finally compelled to leave. Instead it will become a site of conflict between India, Pakistan, China, Russia and Iran, each aiming to pre-empt the others in exploiting the opportunities offered by the country's geography and resources.

Capitalism is not only about creating wealth, it is also about power – and western power is waning. Economic energy is shifting to the emerging countries, while in the west economies stagnate and politicians continue to worship at the altar of the free market (not least in Britain, where the coalition seems bent on pursuing neo-Thatcherite policies more extreme than those of the 80s). Rather than reforming itself, free-market capitalism looks set simply to decline. But if Chang's reforms are unrealistic, his account of where we find ourselves today is arrestingly accurate. For anyone who wants to understand capitalism not as economists or politicians have pictured it but as it actually operates, this book will be invaluable.

23 Things They Don't Tell You About Capitalism By Ha-Joon Chang

By Sean O'Grady

For those of us disturbed by the way that Bob Diamond, the new boss of Barclays, has, one way or another, made around £95 million from his bank, an institution virtually bust a couple of years ago, Ha-Joon Chang has a couple of "things" to say. Specifically, Thing Number 13 in this myth-busting and nicely-written collection of essays: "Making rich people richer doesn't make the rest of us richer"; and Thing Number 14: "US managers are overpriced." Diamond has spent most of his career on Wall Street, and much the same applies to the UK.

Chang gives us the common-sense reason: "Little is done to check excessive and biased (in the sense that failures are hardly punished) executive pay packages because the managerial classes in the US and Britain have become so powerful, not least because of the fat pay cheques they have been getting over the past few decades. They have come to control the boardrooms, through interlocking directorships and manipulation of information," so that "few boards of directors question the level and the structure of executive pay."

But haven't we been told that people such as Bob are the wealth- and job-creators, and therefore deserve their vast rewards? And that we thus have to cut public spending rather than tax the rich more to fix the deficit?

Not so, because it doesn't work: "Since the 1980s we have given the rich a bigger slice of our pie in the belief that they would create more wealth... The rich got the bigger slice of pie alright, but they have actually reduced the pace at which the pie is growing," arges Chang.

American managers earn ten or 20 times the salaries earned by, say, their Japanese or Swiss counterparts, even though the enterprises they lead rarely perform better. In this country, even before the financial crash, the long-term rate of economic growth has hardly shifted from the much-maligned 1960s, even after all those painful, divisive Thatcherite reforms, consolidated by the Major, Blair and Brown governments. You have to wonder whether it was all worth it: the miners' strike, the destruction of manufacturing, the fractured railways, the cult of money and property.

Just as the best scientists are those who look at the natural world and want to understand and order its seemingly random and meaningless phenomena, so the best economists are those who look around at our man-made world and ask themselves "why?". Chang is one such. The crucial point he makes is that capitalism doesn't come in one "flavour", and the only reason for keeping any economic system is if it "delivers the goods".

One can imagine young Chang growing up in South Korea, wondering about why some families had two cars and enormous houses while others could barely afford their daily rice; or why every Korean high-school student wanted to be a medic; or why Africa was written off as an economic basket case. Or why Korea decided to build a steel industry from scratch, back in 1965.

Now Chang is Reader in the Political Economy of Development at the University of Cambridge, and he can explain why. Thing Number 12 they don't tell you is that "Governments can pick winners". The South Korean steel industry is one of the most successful in the world, but it was once regarded as "the worst business s proposition in human history". The mill was far away from the raw materials required to forge steel and isolated from its markets.

That, too, was soon solved with a government-sponsored drive to create ship-building and car industries. All that was shortly followed by a similar exercise in electronics. So disturbed was the World Bank at the time that it advised its members to boycott the Korean ventures. The Koreans even had to finance the projects themselves.

Far from triggering a calamity, the Korean government's ability to pick successive winners propelled one of the poorest nations in the world into the G20. So next time you hear some minister on TV lazily dismissing the idea that the governments cannot intervene in industry and "pick winners", think about how the Samsung screen you're watching him on came to be in your living room. The best economists are always asking questions like that.






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