BOOK REVIEW: 23 Things They Dont Tell You About Capitalismby Ha-Joon Chang; Allen Lane; £20 (€24), reviewed by DAN O'BRIEN
ANTI-CAPITALIST tracts are usually either turgid or full of off-putting, intense passion. Ha-Joon Chang, a leading development economist and Cambridge don, has written one that is neither. He offers a comprehensive critique of many aspects of market capitalism – 23 to be precise – that is accessible, jargon-free and unencumbered by the outrage that often makes books with such titles so wearisome to read.
He describes the historic role of governments in curbing the free market and how this often helped rather than hindered economic development. He shows that western countries have not de-industrialised, as many people believe, and warns about the limits of the services-based “knowledge economy”. He debunks the notion that India can advance by becoming the world’s back office, not least owing to the sheer size of the country’s population. He dismisses some of the currently popular explanations for Africa’s underdevelopment – such as the climate and “resource curse” – by listing countries with similar conditions that have managed to develop. Throughout, he advocates a bigger role for the state in driving growth and a more circumscribed role for the market. Chang’s viewpoint is strongly influenced by his origins. It is easy to see how a Korean can have faith in big government. The role of the state in economic development in South Korea has been central since the end of the war that ravaged the northeast Asian peninsula in the middle of the last century. Among other things, the authorities were central in the creation of vertically integrated, export focused conglomerates which powered one of the most astonishing modernisations in world history. To illustrate the potential for government to act as a driver of development, Chang recounts the history of POSCO, the country’s steel-maker, which was set up at the instigation of the government in the mid-1960s and which is now a world leader in the sector.
South Korean public officials are incredibly driven and the sheer scale of their ambition awes. This reviewer chaired a conference there at which one of the speakers – a bureaucrat in the semi-tropical port city of Busan – gushed from the podium about his plan to build an indoor skiing facility to generate tourism. It sounded potty in 2005. Today, the pistes are open for business.
But there is a darker side to all of this. At the same Busan conference, one of the officials organising the event tried to have me make all members of the media stand up, identify themselves and publicly promise not to use the speakers’ comments. This crass attempt to intimidate is illustrative of how things work in South Korea. Chang gives a far better and more chilling example. During the set-up of POSCO, he recounts (without comment or disapproval) how the then military regime deployed the secret police to help get the steel maker off the ground, and threatened with bankruptcy those who wouldn’t play the role designated to them. It is unsettling to hear a Korean so uncritical of the abuse of state power when his co-nationals north of the 38th parallel continue to be starved and brutalised by it. Just as I find it difficult to take seriously any free-marketeer who ignores or dismisses pervasive market failure, I am suspicious of any advocate of statism who does not acknowledge the eternal threat Leviathan poses to liberty.
Each of the 23 chapters begins with a “what they tell you” introduction, which describes the apparently dominant “neoliberal” viewpoint. This is a useful device, but one which the author abuses frequently. There are too many straw men and the description of what “they” believe is frequently either a caricature or something one might read on the editorial pages of the Wall Street Journal, whose influence outside the US is next to non-existent, as its low circulation attests.
The author also frequently mixes good argument with bad. When he does so it undermines his case. One example is on the costs of excessive financialisation of economies. Few would now disagree that regulation of finance was too lax in recent decades. Despite this, Chang makes the factually inaccurate claim that the Irish crash was the result of the economy becoming a hub for the international financial services sector (narcissists may care to note this is the sole reference to Ireland in the book’s almost 300 pages). Chang is often more contrarian than anti-capitalist. He takes on issues that are little contested ideologically. One example is foreign direct investment. Governments of almost every hue today seek to attract foreign capital because it brings well-paid jobs and know-how that spills over to the benefit of the rest of the economy. But the author is having none of it. “The chance is that a foreign company is more likely to produce potato chips and wood chips than microchips.” Really? In this country, who makes Tayto and who makes Pentium processors?
The state-versus-market debate is far more subtle than Chang describes. Anyone who has watched closely how government policy is formulated in different countries knows that ideology plays a relatively small role, and often none at all. Vested interests, political feasibility, the international evidence base, whim, fad and a host of other factors all count for more. 23 Points is a polemic which does little to advance the debate on the respective roles for the market and the state in economic life.
Dan O'Brien is economics editor of The Irish Times
