Ha-Joon Chang’s new book: 23 Things They Don’t Tell You About Capitalism

September 14, 2010

     By Duncan Green     

I still remember watching with delight as Ha-Joon Chang kebabed a US trade negotiator, shortly after the launch of the WTO’s Doha Ha-Joonround of negotiations. At one of those ‘schmooze the NGOs’ sessions in Geneva, the diplomat was explaining to us the folly of governments ‘picking winners’ – industrial policy. Those who did so were doomed to fail, apparently. From the floor, Ha-Joon pointed out politely that if that was true, surely the negotiator had wasted his professional life? Why bother haggling with other countries over their attempts to intervene in the market when they were going to self destruct anyway? Surely, he could just have sat back and watched the free market US on its way to inevitable triumph? The diplomat was lost for words – it was one of those rare knock-out blows that any policy wonk dreams of. Ha-Joon and I became friends and have talked and exchanged ideas and work ever since.

At the time, Ha-Joon’s book ‘Kicking Away the Ladder’ was making waves in Geneva and beyond. In it, he showed that when they were taking off, almost all successful economies had used the very industrial policies that they were now trying to prohibit via the WTO and a mesh of regional and bilateral trade and investment agreements. It was, according to the subtitle of a pamphlet we co-authored in 2003, a case of  ‘Do as we say, not as we did’.

Since then, Ha-Joon has gone from strength to strength, churning out the edited volumes and papers you’d expect from a Cambridge University economist, but also producing some increasingly successful popular books on economics.

23 things coverHis latest: ’23 Things They Don’t Tell You About Capitalism’ is published this month and is getting rave reviews. His central argument, set out in the introduction, is that even before the financial crisis, ‘free market policies had resulted in slower growth, rising inequality and heightened instability in most countries.’ What makes him different from other critics of market fundamentalism is that he is original and funny, as well as a good economist. He specialises in arresting ‘man bites dog’ reversals of received wisdom (see below). And all his writing seeks to encourage what he calls ‘active economic citizenship’ – to defrock the high priests of the economics profession and reassert the control of ‘public reason’.

I won’t try and review the book – there are some links at the end – but to give you a flavour and hopefully pique your interest, here are the ’23 things’:

There is no such thing as the free market

Companies should not be run in the interest of their owners

Most people in rich countries are paid more than they should be

The washing machine has changed the world more than the internet has [that’s the one that’s got the journalists’ attention! – see pic]Ha-Joon-Chang-006

Assume the worst about people and you get the worst

Greater macroeconomic stability has not made the world economy more stable

Free-market policies rarely make poor countries rich

Capital has a nationality

We do not live in a post-industrial age

The US does not have the highest living standard in the world

Africa is not destined for underdevelopment

Governments can pick winners

Making rich people richer doesn’t make the rest of us richer

US managers are over-priced

People in poor countries are more entrepreneurial than people in rich countries

We are not smart enough to leave things to the market

More education in itself is not going to make a country richer

What is good for General Motors is not necessarily good for the United States

Despite the fall of Communism, we are still living in planned economies

Equality of Opportunity may not be fair

Big government makes people more open to change

Financial markets need to become less, not more efficient

Good economic policy does not require good economists

I think (and hope) that 23 things will be Ha-Joon’s breakthrough book – it comes at a time when the economics profession is wracked by self doubt, (even the Queen is attacking it!). The hubris has at least been dented, leaving the profession open to new thinking. Let’s hope Ha-Joon is one of the people it listens to.

For reviews, try John Gray in the Observer, or James Crabtree in the Financial Times. Or download the podcast of Ha-Joon launching the book at the RSA.

September 14, 2010
Duncan Green