ISBN 978-1-846-14328-1. “23 things they don’t tell you about Capitalism” by Ha-Joon Chang was published in 2010 by Penguin. This hardback has 286 pages with Acknowledgements, Introduction, twenty-three “things” as Chapters, a Conclusion, Notes and an Index. “This book is not an anti-capitalist manifesto” states the author right up front. This is probably a good thing as we probably wouldn’t have it on our pages if it was. This is a follow up to Chang’s successful 2007 book “Bad Samaritans” which we also reviewed here as a timely reminder (since the crash of 2008) of just how far neo-conservative economic dogma has held us back from building a sustainable economic system. Without a said system we will not have the capital to build sustainable homes, energy infrastructure and food systems. Economics is at the heart of it all. Since the environmental movement arose in the early 1970’s it has proudly touted its achievements in winning a battle here and there but it lost the war on the one front that REALLY mattered: economics. The conservatives won. The Chicago School won and it has lead us down a path that cannot be sustained. We learnt that greed was good and short term profits were all that mattered as the free market would sort everything else out. Come the dawn of an era of peaking energy supplies and climate chaos and we had a demonstration of what many came to call “market failures”.
Despite these obvious failures the market still dominates the ideology of modern Government. Chang tears this apart and asks the questions that very few even ask these days. As with “Bad Samaritans” we get a well researched slice of work but overall this is a weaker effort. The strength of “Bad Samaritans” was that it was based upon the ground-breaking work “Kicking Away the Ladder” and was focused upon the development of poor countries. This time around Chang attempts to take what he has learnt and apply it to everybody. Sadly the work suffers on the quality side as the strength and clarity of argument do not come shining through as they did in his earlier book.
That aside this is still a great read. It may well be picked up by people who wish to re-affirm their own pre-existing prejudices against the free market but as the author reminds us, he is not anti-market, he is anti-dogma. For it is the dogma that is the problem. With dogma we edit the evidence to choose only the bits that suit our argument. And these days that argument has largely evolved via the hands of the extremely rich and powerful to serve the interests of a system that only perpetuates their privileges at the cost to future generations. Hence we would recommend this book to a wide range of readers as a helpful critique of how economic dogma can fail and how markets need Governments if we are to resolve their many failings.
There is (as the author tells us) no such thing as a free market. We are being deceived by claims that regulation somehow impedes a market. Sometimes markets may not work at all or even may operate more efficiently with better regulation than none at all. Distrust of Governments is as displaced as our faith in free markets is. We do not live in a post-industrial knowledge economy – we will always need manufacturing. Trickle-down economics do not work and make most of us poorer. Nothing that has unfolded since 1970 is a force of nature nor is any of it inevitable or irreversible. “This book is intended to equip the reader with an understanding of how capitalism works and how it can be made to work better” writes Chang (page xvii/xviii). It is our version of capitalism that is destroying the future for all of us.
On page 3 Change states that “Today, most people accept […] that it is sensible to make careful use of our energy resources when many of them are non-renewable. They may believe that reducing human impact on climate change makes sense too”. Now isn’t that a thing? Commonsense and pragmatism in a debate about economics, resources and the environment? And maybe much to the annoyance of ideologues across the political spectrum Chang lays into the many failings of micro-finance from page 162 onwards. You may well recall that it was in “Co-opportunity” that author John Grant waxed uncritically on the wonders of micro-finance. You may comes as a shock to some on the left that their own ideology may also come under the spotlight here. In reality micro-finance only existed due to Government subsidy. Interest rates were very high and most borrowing was for consumption not investment. There are only so many business opportunities in poor countries in the absence of Government-lead industrial restructuring. The idea that a country can drag itself by its own bootstraps via grassroots efforts alone remains a fantasy according to Chang. Basically, the Grameen Bank would never finance a sunrise industry that would grow into the next IBM or Nokia. Poor countries have plenty of entrepreneurial spirit at the grassroots scale – what they lack is a collective ability to put it together in any scale. That takes Governmental organisation, infrastructure and institutions. When it comes to the developing nations Chang has done his homework.
However, in other areas his work may disappoint. In the area of investment capital Chang deplores the short-term investment decisions of the market but goes not further. The killer-punch for short-termism remains the prerogative of those who understand monetary reform. A topic that Chang doesn’t touch upon. Likewise “Thing 10” deals with the prosperity of the United States but is written in such a way as to prove the opposite of what Chang is trying to show. For a more thorough critique of the problems of the USA you would probably have to study Chomsky or Gore Vidal as their writing has a solid evidence base. So, where does it leave is? How do we build Capitalism 2.0 and make it last? In fact Chang predicts this question and devotes the entire Conclusion to “things we can do” – something Chomsky and the Left are rarely lucid on. Chang gives us his eight principles: we should embrace many different models, not one-size-fits-all; we should recognise the limitation of human rationality; we should bring out the best in people, not the worst; people are not paid what they deserve; we must start to take manufacturing industry seriously and bring it home again; we need to rebalance finance and real economic activity; Government should be bigger & more active; and finally, the system needs to be fair to developing nations. Pipe-dreams maybe but as good a set of ideas as any we have seen. This may go against every wisdom we have come to accept. It is challenging but, more than that, it is probably right. Recommended.