The key aspect to Ha-Joon Chang’s book in my opinion is that Economics is not a science with a correct answer. It is about deciding what sort of a society we want to live in and how we achieve that. Chang himself clearly has a view of what that world should look like and he expresses that as he looks at different aspects of the particular form of capitalism that is prevalent in the West, but the central tenet remains true whether you agree or not with his personal economic philosophy.
As such it is important that we do not fall for the myth that our economy must be set up a certain way and this is what fuels Chang’s critique of the defining myths that he sees put forward by advocates of free market economics, the dominant view of our time. As expressed by Owen Jones in his book The Establishment, those in power and influence try to maintain their positions by pushing the theory that there is no alternative to the status quo, that their ideas have won and are beyond challenge, but this simply is not true and the society they are implementing is out of kilter with the majority preference.
For me one major aspect of that is the idea that we must incentivise entrepreneurs to make more money because that is the way that we all move forward. This implies that there is not enough to go round and so we need to make the pie bigger, but I would argue that the size of the pie is not the problem but rather the way we slice it up. If we take that view then we need to build an economic policy that actively shares wealth more equitably and we can afford to lose some efficiency in growth to achieve it.
Chang goes so far as to say that a strong Welfare State can actually fuel increased growth because it encourages risk taking in employees, providing them with a safety net that allows them to consider re-training and changing jobs more easily. This in turn makes the workforce more able to adapt to the changing needs of the economy by providing second and third career chances. He likens this to the equivalent protections for capital that are provided by limited liability and bankruptcy laws.
Another area that stands out is on international development, perhaps not surprisingly given Chang’s previous publishing history. Pushing developing countries into following the mantra of free markets is detrimental to their development and counter to the very journey that rich countries went on themselves in establishing their economies. Chang argues for policies that act in favour of developing countries to even out the unequal difficulties that they already face.
Then there is the belief that the free market ideology works because of the USA which takes no account of the problems currently mounting in the US balance of payments or that the ability of many Americans to live so well is built on the back of an underclass of low paid service employees. Inequality is a problem that we see bubbling under the surface of the American dream and which explodes onto the surface periodically in social tensions, which we also see developing in the UK as inequality expands.
Indeed so much of the economic ideology that we are sold is built on mythology and Chang has put together an impressive de-bunking of the key myths that are used to lead us into a free market capitalism that actually harms our long term prosperity. With the economic debate dominated by demands to shrink government and de-regulate markets this is an important book that systematically dismantles the credibility of the last thirty years of western economics. It then offers eight guiding principles for re-building a global economy that those thirty years took to the edge of total collapse.
Chang’s writing style is easily accessible so there is no need to have a background in economics to understand his principles and arguments and his discussion goes to the heart of the type of society that we want to create, alongside an economy that can truly prosper. This book is highly relevant to the UK as it prepares for a General Election and has implications both for the type of country we want to live in and the place we want it to take in the wider world.