These telling extracts from Ha-Joon Chang‘s 23 Things They Don’t Tell You About Capitalism come from ‘Thing 7’ (p.63-5):
“Contrary to what is commonly believed, the performance of developing countries in the period of state-led development was superior to what they have achieved during the subsequent period of market-oriented reform. There were some spectacular failures of state intervention, but most of these countries grew much faster, with more equitable income distribution and far fewer financial crises, during the ‘bad old days’ than they have done in the period of market-oriented reforms. Moreover, it is also not true that almost all rich countries have become rich through free-market policies. The truth is more or less the opposite. With only a few exceptions, all of today’s rich countries, including Britain and the US – the supposed homes of free trade and free markets – have become rich through the combinations of protectionism, subsidies and other policies that today they advise the developing countries not to adopt. Free-market policies have made few countries rich so far and they will make few rich in the future.”
To illustrate the above, a brief country case study:
“[This] country’s trade policy has literally been the most protectionist in the world for the last few decades, with an average industrial tariff rate at 40-55 per cent. The majority of the population cannot vote, and vote-buying and electoral fraud are widespread. Corruption is rampant, with political parties selling government jobs to their financial backers. The country has never recruited a single civil servant through an open, competitive process. Its public finances are precarious, with records of government loan defaults that worry foreign investors. Especially in the banking sector, foreigners are prohibited from becoming directors while foreign shareholders cannot even exercise their voting rights unless they are resident in the country. It does not have a competition law, permitting cartels and other forms of monopoly to grow unchecked. Its protection of intellectual property rights is patchy, particularly marred by its refusal to protect foreigners’ copyrights…
…[the country described above]…is the USA, around 1880…one of the fastest-growing – and rapidly becoming one of the richest – countries in the world…[following] policy recipes that go almost totally against today’s neo-liberal free-market orthodoxy.”
Although the post is more about politics than economics, from a political economy perspective, the two are more useful when analysed together. In modern capitalist economies, the role of the state is inseparable from other institutions such as the rule of law and the market.
The debate over economic policy should be thoroughly exercised in the public realm of a healthy democracy. This requires well-educated citizens open to engaging critically in such a debate, allowing space for diversity and pluralism without dictating their terms. Intolerance is present in elements of both left and right and is contrary to the liberal perspective. Continue reading →
Chris Edwards says the privatizations started by Thatcher “transformed the British economy” and boosted productivity. This raises an under-appreciated paradox.
The thing is that privatization isn’t the only thing to have happened since the 1980s which should have raised productivity, according to (what I’ll loosely call) neoliberal ideology. Trades unions have weakened, which should have reduced “restrictive practices”. Managers have become better paid, which should have attracted more skilful ones, and better incentivized them to increase productivity. And the workforce has more human capital: since the mid-80s, the proportion of workers with a degree has quadrupled from 8% to one-third […]
An interview from the Real News Network with Professor John Weeks of SOAS in London, which punctures some of the myths put forward by proponents of neo-liberalism. In short, he shows with a few examples that under capitalism markets and government need each other to function well. Some of the video is not the best quality, but stick with it. Weeks gave this interview in the wake of the publication of his book Economics of the 1%, a passionate rebuttal of modern mainstream economics, which he terms fakeconomics.
As a brief follow-on from my previous post, it is useful to note that in some ways there is not huge ground between the neo-liberal right and socialist left in their view of how the capitalist economy can be managed. Continue reading →