‘Countries that have crashes are those that follow one school of economics too closely’

Economist and author Ha-Joon Chang says that when he was a younger man in the early 1980s, many mothers in his home country of South Korea would ban their sons from their kitchens. If they entered, their mothers warned, their “gochu would fall off”. A gochu is a capsicum chilli pepper. It is also Korean slang for something else. Chang avoided his mother’s kitchen.

But this meant when he moved to Britain to pursue graduate studies at Cambridge University in 1986, he was unable to cook. He became a hostage of a dire British culinary culture that prevailed at the height of the Margaret Thatcher era. Her economics fetishised openness with an emphasis on global trade, but her nation’s attitude to food was grim and parochial, suspicious of anything foreign.

Pizzaland realised Italy’s staple fast food could be ‘traumatically foreign’ for local Brits, so it lured them in by topping their pizzas with the familiarity of British baked potatoes

Chang visibly shudders as he recalls a now-defunct British dining chain of the time, Pizzaland. It realised Italy’s staple fast food could be “traumatically foreign” for local Brits, so it lured them in by topping their pizzas with the familiarity of British baked potatoes. In most UK kitchens of the time, vegetables were typically “boiled long beyond the point of death”. Only salt and gravy were available to liven things up, Chang says.

“To escape this culinary hell, I started to cook for myself,” he writes in his new book, Edible Economics: A Hungry Economist Explains the World. More than three decades on, Chang is a highly skilled recipe wrangler as well as a provocative economist. Unlike his mother, his Korean wife has no qualms about him being in the kitchen of their English home. She cooks their Korean food, while he produces dishes from all over the world.

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But while Britain’s – and also Ireland’s – culinary culture underwent a radical transformation from the 1990s onwards to embrace different foods, the West’s thinking on economics went just as rapidly in the other direction during this time. These days, there tends to be only one approach on the menu: neoclassical economics, which is sometimes derided by its left-leaning critics as neoliberalism.

Chang, who will speak at the Kilkenomics fiscal-comedy festival in Kilkenny next month, has for years argued against the dominance in Western economics of the US-propagated neoclassical school, which holds that low taxes, low regulation and barrier-free trade are the best way to run an economy. Ireland has long gorged on this philosophy, even after the indigestion of the post-Celtic Tiger crash years.

Yet economics is like food, Chang says. We need a varied diet. He argues that State intervention in the economy should not be dismissed and can even spur growth if it is timely and well designed.

Banana republics

In Edible Economics, he uses his passion for food as a device to discuss his beliefs on fiscal policy and the history of trade, with examples such as how trade in spices led to the development of perhaps the first real multinational corporation, the Dutch East India Company. A chapter on the culinary delights of bananas segues into a discussion about how multinationals can help countries to develop. But if left unchecked to amass too much power, they can turn states into banana republics. The economic relevance of chocolate and noodles are also dissected for fiscal foodie lessons.

“Countries that have crashes are those that follow one school of economics too closely. That’s what happened to Ireland [after the Celtic Tiger],” says Chang, speaking this week to The Irish Times.

“In the 1950s you had protectionist policies. But then, from the 1980s onwards, Ireland really started to change [with the arrival of more multinationals]. You had a pragmatic approach, but slowly the financial sector and [and its symbiotic comrade, the property sector] took over. That’s why you had a crash.”

Chang says there was a time when different economic modes of thought, such as Marxism, Keynesian, and also neoclassicalism, “learned from each other, and sometimes even stole ideas from each other”. Now, he argues, the US-driven low-tax, pro-free trade model has trumped all others, which are routinely dismissed by most governments.

“It’s very sad,” he says. But hasn’t neoclassical economics crowded out all the other approaches simply because it is the best at producing wealth, if not at distributing it? Chang argues that typical western economics makes the best use of statistics, such as measuring growth through gross domestic product (GDP), which confers an advantage on its proponents who can empirically point to its apparent superiority.

‘The problem is that quantitative data is only one way of understanding the world. That’s not to say it is a better way. The world is complex and we need a range of methodologies’

“The use of a lot of maths and statistics gives neoclassicalism greater precision. This gives an aura that it is more scientific than all the other schools of economic thought. But the problem is that quantitative data is only one way of understanding the world. That’s not to say it is a better way. The world is complex and we need a range of methodologies.”

Such as?

“I’m not saying quantification is bad – we need it. But we are not asking the more important questions. For example, during the pandemic, people working in supermarkets and home delivery were deemed essential workers. But it turns out these people are, according to what market prices say, apparently not essential because they are lowly paid. Are market prices really the right way to measure people’s value? If you don’t ask this question, you just engage in narrow-minded quantification.”

Status quo

The western-led economic thought that prevails in Ireland is also, according to Chang, successful mainly because it does not challenge the status quo of the gap between rich and poor.

“Neoclassicalism starts by accepting the existing distribution of power, income and wealth. Only then does it see how you can try to improve things. It views improvement as progress that also doesn’t damage anyone else. So you cannot take one dollar away from a group without their agreement. It is naturally averse to questioning the underlying social order, which makes neoclassicalism quite comforting for people who benefit from current arrangements.”

This school of thought gets all the research funding, attention and, consequently, all the plaudits, Chang argues.

The economic development of South Korea, which rose from near penury in the 1960s to become a technological and economic regional powerhouse, is not completely unalike the trajectory of Ireland – although Ireland’s developments were on a far smaller scale.

Both Korea and this State used multinationals, especially those in the technology sector, to blast their way to economic success. But with one fundamental difference. Anyone in the West who drives a Kia or owns a Samsung television is proof that Korea eventually became successful at developing its own multinationals. Ireland, which has remained an outpost of mostly US multinationals, has never had the same level of homegrown success.

“Some Koreans like to think they are the Irish of East Asia. We like singing, we have strong family bonds. We even like a little bit of drinking. Both countries also had unfortunate colonising experiences with our nearest neighbours. The big difference is, Korea wanted to develop its own multinationals and Ireland didn’t. I’m not saying it is a bad thing – Ireland is a very small country. But Ireland made a deliberate choice to do that. It is up to you to decide if you develop your own big companies.”

There is a risk, Chang argues, in allowing such a huge chunk of a small nation’s economy, as Ireland does, to remain in the hands of foreign investors.

Chang is relentlessly critical of what he sees as a central assumption of conventional western market-economy thinking: that human beings are essentially selfish, and that this can inform economic planning

“It can make you vulnerable if you don’t you control the core technologies and the supply networks. Ultimately, the guys who control these things [big US companies] could up and leave and do things elsewhere. Ireland is in a unique position. Maybe it’s okay for you to do it – Ireland is English speaking, which is always great for investment. And you have great connections to Irish America, for example. But generally [it is a bad idea].”

‘Big government’

It is hard to find fault with his culinary obsessions but Chang’s economic philosophy, which urges countries to be more confident about state interventions, remains near the periphery of mainstream western economic thought. Yet it may move closer to the centre in the years ahead. He says the world is entering a new economic era, as challenges such as the Covid-19 pandemic, war and climate change spur more “big government” action, such as taxpayer economic supports.

Throughout his writing, Chang is relentlessly critical of what he sees as a central assumption of conventional western market-economy thinking: that human beings are essentially selfish, and that this can inform economic planning.

“People are selfish. But they are also other things. They have complex human motivations,” he says.

“Often we behave selfishly, but we are also altruistic and, for good or bad, we have beliefs, ethical standards and imagination. You have to capture all of this to truly understand how the real-world economy works. Up to now, we have been measuring our welfare only in a material way.”

It often has been argued by capitalism’s critics that the global market economy will eventually eat itself. Chang’s essentially optimistic view of human nature suggests there may be another way, if people and, eventually, policymakers, can be convinced to learn from different schools of economic thought.

“We must all find our own ways to understand [and change] our economy and, with it, the world in which we live and share, in the same way [that] we all have to figure out our own ways to eat better,” he writes.

“Good cooks, above all, have the imagination to defy culinary conventions and combine different culinary traditions. The best economists should be, like the best of the cooks, able to combine different theories to have a more balanced view.”

Edible Economics: A Hungry Economist Explains the World by Ha-Joon Chang is published by Allen Lane (€28).