This is a refreshingly honest book by an economist who is fully aware of the shortcomings of “economics” as a predictive social science. Chang refutes many of the dogmas propounded by “free market” economists – using facts and examples to support his case. He looks towards a world where there is more social justice between peoples and countries – using the political process to channel the forces of economics more effectively.
HJC says (quote) : economics as it has been practised in the last three decades has been positively harmful for most people. (p248)
HJC sets out 23 points to cover several main issues:
1. Understanding Capitalism There is no such thing as an objectively defined “free market”. There are hundreds of regulations, treaties and restrictions of immigration (affects wages). People (economists) use the term “free” to justify what is always a political position. And massive state intervention has also been necessary from Governments who purport to support the “free market” - US car industry/banks etc.
Companies are run primarily for the benefit of their shareholders and executives – all others lose out and long term investment is discouraged.
The economist's idea that everything we do is simply motivated by self-interest is completely wrong. There are dozens of other motives for doing things.
There are very good reasons for being cautious about allowing foreign investment in your country.
Making rich people richer does not make the rest of us richer.
The “market” system can ge tthings spectacularly wrong (2008 banking crisis) so It's not such a bad idea to have government regulations.
National and corporate interests may be very different so corporations may have to be controlled and, in some critical cases, even managed by the state.
Equality of opportunity may be impossible or meaningless where there are limited public welfare arrangements – you can succeed in school if you are starving!
Modern financial markets can react so quickly (to maximise their short term profits) that long term beneficial investment is prejudiced.
2. Politics is essential to make economics work - by imposing regulations. Evidence shows that free trade does NOT make poor countries rich. Free trade was never used by the great economic powers before they became great – protectionism is necessary to protect infant businesses. Governments can often manage and develop new industries successfully. Regulation can help prevent failures. Unemployment pay, welfare and subsidies can all help make industry work better.
3. Despite technological improvements and economic growth, the quality of life has not improved in many “rich” nations. Corporate policies have squeezed workers into longer hours and less secure jobs. Efforts to control inflation have created unemployment.
4. Countries and people are not rich because they are more capable. The so-called “free” market does not necessarily reward those that are the most capable. Colonial history, millitary conquest and imposed treaties (immigration) – including stringent rules imposed by the IMF – give rich countries a huge advantage.
HJC sets out 8 principles for the future management of the global economy:
1. Capitalism needs to be properly regulated to achieve political goals
2. Everyone should understand that predicting and managing events is too complex to understand – to pretend otherwise leads to disaster
3. Our systems and behaviours should no longer be based primarily on the profit motive – social and community status/capital should be properly recognised (rather a difficult value transition to achieve!!)
4. We should stop believeing that people are being paid what they deserve – bankers and executives are seriously overpaid
5. the financial system needs to be regulated, taxed and slowed down so financial transactions no longer dominate real activities
6. We need to take “making things” more seriously – industry is important
7. Government needs to be made bigger and better – so it can interfere successfully to limit the dangers of the “free” market
International trading treaties and the WTO need to be radically reformed to allow developing countries to protect their infant industries.