Friday, August 19, 2011

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

My intention is to summarize the important points as I read this book. I will be sending an announcement to my Political//Economics Email Group as I complete each chapter, I will send you an email with a link to the next chapter. If you know how to add this blog to an RSS or Atom feed you can do that also.
>>>Ha-Joon Chang teaches in the Faculty of Economics at the University of Cambridge, His books include the bestselling "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism", which has been translated into nine languages. His "Kicking Away the Ladder" received the 2003 Myrdal Prize, and in 2005 Chang was awarded the Leontief Prize for Advancing the Frontiers of Economic Thought. (from back cover)

Chang seeks to know why there was a total collapse of the global economy in 2008. This catastrophe has ultimately been created by the free-market ideology what has ruled the world since the 1980's. The world was sold a bill of goods that the free-market ideology would result in the most efficient and fair economic system possible  rewarding productive people ---- were given maximum freedom. Firms, being close to the markets, know what is best for their businesses. Great wealth will be produced and everyone will benefit. Government intervention is unwise. Government does not understand business, doesn't have enough information and lacks the incentives to make good business decisions. In sum, we were told to put all our trust in the market and get out of the way. This resulted in privatization, deregulation, reduction in corporate and income taxes and welfare payments, as well as liberalization of international trade and investments.

The results of these policies has been the polar opposite of what was promised. Chang says that the result of these policies has been slower growth, rising inequality, and heightened instability in most countries.  In the United States there was a huge expansion in credit expansion, e.g. use of credit cards, borrowing on homes, etc. which dulled the brunt of the developing disaster  -- for awhile.
If things were bad because of free-market capitalism in the developed world, the consequences were even more deadly in the underdeveloped nations. Countries that were not harmed, in fact, seemed to avoid these evils were China, India, South Korea, etc. who refused to introduce full-blown free-market policies.

This book is not an anti-capitalist manifest. Being critical of free-market ideology is not the same as being against capitalism.  Despite its problems and limitations, I believe that capitalism is still the best economic system that humanity has invented.

The author believes that ordinary educated persons are suffering from the misconception that economics and economic problems are just too complex for them to deal with. This is a serious mistake, Chang says, and allows business, corporations and financial institutions to do what they think is best and which often is not best for the nation, for its people and even for these powerful entities themselves. 95 per cent of economics is common sense made complicated, and even for the remaining 5 per cent, the essential reasoning, if not all the technical details, can be explained in plain terms.

Professor Chang says must stop assuming that what most experts believes must be right. Then  --- you can begin doing some real good as  active economic citizens.

[Text in italics are direct quotes from Dr. Chang.]

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