Book Review: 23 Things They Don't Tell You About Capitalism by Ha-Joon Chang

 

Chang says that free market ideology makes us believe that markets will produce the most efficient and just outcome. This is because competitive market processes ensure that individuals are rewarded according to their productivity. The author is not critical of capitalism, in fact he is critical of free-market ideology.

The first argument of the author is that there is no such thing as a free market. Two, companies should not be run in the interest of their owners. Three, most people in rich countries are paid more than they should be. Four, the washing machine has changed the world more than the internet. Five, assume the worst about people and you get the worst. Six, greater macroeconomic stability has not made the world economy more stable. Seven, free-market policies rarely make poor countries rich. Eight, capital has a nationality. Nine, we do not live in a post-industrial age.

Point ten, the United States does not have the highest living standard in the world. Eleven, Africa is not destined for underdevelopment. Twelve, governments can pick winners. Thirteen, making rich people richer does not make the rest of us richer. Fourteen, US managers are over-priced. Fifteen, people in poor countries are more entrepreneurial than people in rich countries. Sixteen, we are not smart enough to leave things to the market. Seventeen, more education in itself is not going to make a country richer. Eighteen, what is good for a large company (such as General Motors) is not necessarily good for the United States. Nineteen, we are living in planned economies. Twenty, equality of opportunity may not be fair. Twenty-one, big government makes people more open to change. Twenty-two, financial markets need to become less, not more efficient. Twenty-three, good economic policies do not require good economists.

Chang stresses that 95 percent of economics is common sense made complicated. In the book he tries to provide solution to the problem in simple plain language. He argues that the fundamental theoretical and empirical assumptions behind free-market economics are highly questionable. The author suggests that free-market capitalism has served humanity very poorly and because of this we should build a new economic system which recognizes the limitations of human rationality, brings out the best in people and stops people from believing that people are always paid what they deserve. Furthermore, Chang views making things (manufacturing) very important. Moreover, he says that striking a balance between finance and ‘real’ activities is important. The seventh point of the author is that the government needs to become bigger and more active. Last but not the least, the eighth point states that the world economic system needs to ‘unfairly’ favor developing countries.

In the concluding paragraph of the book the author says that ‘unless we abandon the principles that have failed us and that are continuing to hold us back, we will meet similar disasters down the road’ (p. 263).