Bookshelf – Plenty more ammunition for high stool economists

By Ha-Joon Chang Allen Lane €16 WINSTON Churchill once described democracy as the worst system of government, except for all the others. Ha-Joon Chang, the author of 23 Things They Don't Tell You About Capitalism argues that capitalism is the worst economic system, except for all the others. Chang is no leftie, or anti-capitalist, but he feels passionately that what passes for free-market capitalism today is a mirage conjured with smoke and mirrors, manipulated by master puppeteers to suit their own ends. 'Economics, as it has been practised in the last three decades, has been positively harmful for most people,' he says. Well, a lot of us are finding this out in practice, but what about the theory? This marvelous book is just what's needed to help the average, but interested, reader understand the forces that dominate our lives. There are 23 lessons here that provide a fine grounding in economic and political theory. Best of all, they are written by an economist who doesn't have much time for economists. Plus he can write and knows how to grab and hold his reader's attention. For instance he argues, quite convincingly, that the washing machine has had more impact on global society than the Internet. We swallow whole this tosh about the Internet spreading freedom and opening up the world. Realistically, if we are to judge it by its actual usage, the main freedom it has provided is in the sphere of disseminating pornography, followed by the dissemination of vacuous tittle-tattle and so on. About three per cent is of any social use. But the washing machine transformed lives. It freed women from endless hours of drudgery and made it possible for more and more to enter the workplace. Chang backs up his points with statistics and argues his case strongly. Every wonder how bankers' bonuses got so big? Chang explains that almost all big companies are now run by management bureaucracies. The owners are shareholders who hold stock. In a well-run company managers reinvest profits in the company and look after the stakeholders, workers, suppliers etc, as well as shareholders. But since bonuses became linked to the return the shareholders got, then the long-term well being of the company is often ignored. Dividends eat up reinvestment capital and the managers take their fat bonuses. Like parasites they consume their host from within. He explains this in a chapter entitled 'Companies Should Not Be Run In the Interest of Their Owners'. Privatisation is a two-edged sword. In 11 concisely written pages he expounds his theory, argues his case and presents his conclusions on this issue. There are 23 such chapters here where he blows the lid off many of the sacred cows of free market capitalism. Among these are the argument that the poor will get richer if the rich get richer first; the nonsense that we live in a post-industrial age; that governments can stay out of economic matters and that trade will pull the developing world out of debt. Chang's field is development economics but he paints with a broad stroke. He argues that there is no one type of capitalism which suits all situations - look at China - and we have to seek common ground rather than pretend there is uniformity. His concluding argument is that capitalism is too important to the well-being of the globe to be left to the capitalists. Just as we accept control in certain aspects of our lives for the good of the collective, from the sale of heroin to driving with seatbelts, then we should do the same with capitalism. By banning the likes of credit default swaps and many other complex financial instruments which have led the global economy to the abyss, we can harness the best of what capitalism has to offer while ensuring it doesn't turn and devour us in the process.