Capitalism! The American Dream! Except that what we believe about capitalism, and how it actually works, are two different things. We’ve been told that the essence of preserving the economy involves making things better for the wealthy, so that they will make bigger companies and hire more people for more jobs, and thus the crumbs of their good fortune will “trickle down” to the rest of us. Except that it’s not true; wealthy people won’t part with their wealth unless regulations force them to.
We are told that the American Dream rewards the hard-working and the worthy, and that anyone can succeed if they try hard enough. Except that it’s not true; people in poorer countries are more entrepreneurial than people in wealthier countries, and good infrastructure is the key to building the wealth of nations.
We are told that you must pay good CEOs and Directors of large corporations top dollar so that you will get the best. Except that it’s not true; Board Directors often make decisions that are best for them in the short term, and really bad for the company itself in the long term (fancy that!) And by the way, you’re probably wrong about how much they’re getting paid. Most people think it should be about 10 times what the average worker in their companies get paid, and they think it’s actually more like 30 times. But they’re wrong; it’s really more like 300-400 times as much!
We are told that what’s good for the shareholders of a company is good for the company overall. Except that it’s not true; shareholders want to buy low and sell high, and quickly, and that means that often decisions are made in companies to cut corners, cheat, and patch instead of fix, until the whole structure collapses. Like with pretty much every automobile company you’ve ever heard of, and several large airlines.
We are told that the free market economy is the best way to handle things, because market forces will ultimately balance everything out. Except that it’s not true; there is actually no such thing as a “free market economy;” governments and corporations fix the conditions of the market all the time. So could we; and so we have in some ways, which is why “fossey jaw” is a thing of the past.
We are told that education is essential to the future wealth of a nation. Except that this isn’t true either; there’s almost no correlation. What drives the wealth of nations is actually manufacturing.
Don’t believe me? That’s okay; Ha-Joon Chang is a Cambridge trained economist who has won prizes for his work, and he’ll tell you better than I can, with figures to back it up. And he’ll explain it in a way that even an arts major like me can clearly understand.
I can’t say enough good things about this book! If you, like me, see the rot at the core of our economic system but you lack the words to tell people why it’s rotten, this is the book for you. If you don’t understand economics and you want to learn without taking a course, this is the book for you. If you think that capitalism is the best thing since sliced bread, and you think lefties are wingnuts who don’t understand how the world really works, this is still the book for you because you can acid-test your theories against an educated dissenting opinion. I wish that my Prime Minister would read it because I think he would run things a little differently if he did.
Over the next couple of months I’ll be writing an extended series focused around the theories presented in this book on Gods & Radicals if you want to know more.