23 Things They Don’t Tell You About Capitalism
This book is fun, but it might make you mad. That’s because it may skewer some of your favourite convictions about the free market.
The author, an economist at Cambridge University, insists that “capitalism is still the best economic system that humanity has invented,” but many so-called truths about it are “based on lazy assumptions and blinkered visions, if not self-serving notions.” He wants his ladder-kicking to show how the system can be improved and do a better job of alleviating poverty.
He does so in 23 “myth-destroying” chapters with titles such as “The washing machine has changed the world more than the internet has,” “Free-market policies rarely make poor countries rich,” and “Africa is not destined for underdevelopment.” Each chapter lays out “What they tell you” then follows with his take on what they don’t.
He starts by declaring boldly that no matter what the capitalist intelligentsia may say, there is no such thing as a free market. “Every market has some rules and boundaries that restrict freedom of choice,” and we should not waste time claiming otherwise. In fact, he claims, our supposedly free market has plenty of un-free components, and we should be happy about them. Examples: rules about child labour, influence-peddling, loan default, product liability, and labelling. Or safety standards for food, drugs, cars, and planes.
We accept these regulations because we’re used to them, and probably even recognize they’re good for us, he says. “In other words, the free market is an illusion. If some markets look free, it is only because we so totally accept the regulations that are propping them up that they become invisible.”
Hasn’t the “free market” made countries rich? “The truth is more or less the opposite,” he says. Countries like the U.S. and Britain – supposed bastions of free trade and the free market – “have become rich through the combinations of protectionism, subsidies, and other policies that today they advise the developing countries not to adopt.”
And so on, to maximizing shareholder wealth (“the dumbest idea in the world”), globalization (“the world was a lot more globalized a century ago”), manufacturing (“the post-industrial knowledge economy is a myth”), and even Adam Smith’s famous hand (companies wouldn’t work if everyone were really out only for themselves).
For my purposes at Mennonite Economic Development Associates, one of the most interesting chapters is on entrepreneurship in developing countries. Chang points out what anyone in development knows, that the poor need to be entrepreneurial just to survive. “For every loiterer in a developing country, you have two or three children shining shoes and four or five people hawking things,” he writes.
“What makes the poor countries poor is not the absence of entrepreneurial energy at the personal level, but the absence of productive technologies and developed social organizations, especially modern firms.” He says the average person in a developing country is twice as likely as someone in a developed country to become an entrepreneur. What’s missing for them is the ability to channel individual entrepreneurial energy into collective entrepreneurship: “Unless we reject the myth of heroic individual entrepreneurs and help them build institutions and organizations of collective entrepreneurship, we will never see the poor countries grow out of poverty on a sustainable basis.”
And so it goes as Chang seeks to debunk a host of “myths” that supposedly undergird the free market, challenging “the received economic wisdom” of the last generation. His saucy style, while eminently readable and compelling, sometimes comes off as glib and can be off-putting when it happens to be your economic ox that is being gored. But, as he concludes, if we are to make a real difference to the billions suffering in poverty, certain economic bromides need to be challenged. “It is time,” Chang says, “to get uncomfortable.”