Ha Joon Chang Quotes

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Once you realize that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are -- a simple upward redistribution of income, rather than a way to make all of us richer, as we were told.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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People 'over-produce' pollution because they are not paying for the costs of dealing with it.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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The best way to boost the economy is to redistribute wealth downward, as poorer people tend to spend a higher proportion of their income.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Equality of opportunity is not enough. Unless we create an environment where everyone is guaranteed some minimum capabilities through some guarantee of minimum income, education, and healthcare, we cannot say that we have fair competition. When some people have to run a 100 metre race with sandbags on their legs, the fact that no one is allowed to have a head start does not make the race fair. Equality of opportunity is absolutely necessary but not sufficient in building a genuinely fair and efficient society.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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People who live in poor countries have to be entrepreneurial even just to survive.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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95% of economics is common sense
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Ha-Joon Chang (Economics: The User's Guide (Pelican Books))
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Running the company for the shareholders often reduces its long-term growth potential.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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The top 10 per cent of the US population appropriated 91 per cent of income growth between 1989 and 2006, while the top 1 per cent took 59 per cent.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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A well-designed welfare state can actually encourage people to take chances with their jobs and be more, not less, open to changes.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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If we assume the worst about people, we will get the worst out of them.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Once poor people are persuaded that their poverty is their own fault, that whoever has made a lot of money must deserve it and that they too could become rich if they tried hard enough, life becomes easier for the rich.
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Ha-Joon Chang (Economics: The User's Guide: A Pelican Introduction)
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Economics is a political argument. It is not – and can never be – a science; there are no objective truths in economics that can be established independently of political, and frequently moral, judgements. Therefore, when faced with an economic argument, you must ask the age-old question β€˜Cui bono?’ (Who benefits?), first made famous by the Roman statesman and orator Marcus Tullius Cicero.
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Ha-Joon Chang (Economics: The User's Guide)
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The widely accepted assertion that, only if you let markets be will everyone be paid correctly and thus fairly, according to his worth, is a myth. Only when we part with this myth and grasp the political nature of the market and the collective nature of individual productivity will we be able to build a more just society in which historical legacies and collective actions, and not just individual talents and efforts, are properly taken into account in deciding how to reward people.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Markets weed out inefficient practices, but only when no one has sufficient power to manipulate them.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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95 per cent of economics is common sense – made to look difficult, with the use of jargons and mathematics.
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Ha-Joon Chang (Economics: The User's Guide)
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If the world were full of the self-seeking individuals found in economics textbooks, it would grind to a halt because we would be spending most of our time cheating, trying to catch the cheaters, and punishing the caught. The world works as it does only because people are not the totally self seeking agents that free-market economics believes them to be. We need to design an economic system that, while acknowledging that people are often selfish, exploits other human motives to the full and gets the best out of people. The likelihood is that, if we assume the worst about people, we will get the worst out of them.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Since the 1980s, we have given the rich a bigger slice of our pie in the belief that they would create more wealth, making the pie bigger than otherwise possible in the long run. The rich got the bigger slice of the pie all right, but they have actually reduced the pace at which the pie is growing.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Above a certain level of income, the relative value of material consumption vis-a-vis leisure time is diminished, so earning a higher income at the cost of working longer hours may reduce the quality of your life. More importantly, the fact that the citizens of a country work longer than others in comparable countries does not necessarily mean that they like working longer hours. They may be compelled to work long hours, even if they actually want to take longer holidays.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Sometimes it is in the long-run interest of the business sector to restrict the freedom of individual firms so that they do not destroy the common pool of resources that all of them need, such as natural resources or the labour force.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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why do we need to make the rich richer to make them work harder but make the poor poorer for the same purpose?
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Ha-Joon Chang (Economics: The User's Guide)
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all technical professions have an incentive to make themselves look more complicated than they really are so that they can justify the high fees their members charge for their services.
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Ha-Joon Chang (Economics: The User's Guide)
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In no country does the average income give the right picture of how people live but in a country with higher inequality it is likely to be particularly misleading. Given that the US has by far the most unequal distribution of income among the rich countries, we can safely guess that the US per capita income overstates the actual living standards of more of its citizens than in other countries....The much higher crime rate than in Europe or Japan -- in per capita terms, the US has eight times more people in prison than Europe and twelve times more than Japan -- shows that there is a far bigger underclass in the US.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Harry S. Truman, in his typical no-nonsense style, once said that β€˜An expert is someone who doesn’t want to learn anything new, because then he would not be an expert.’ Expert knowledge is absolutely necessary, but
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Ha-Joon Chang (Economics: The User's Guide)
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Between the Great Depression and the 1970s, private business was viewed with suspicion even in most capitalist economies. Businesses were, so the story goes, seen as anti-social agents whose profit-seeking needed to be restrained for other, supposedly loftier, goals, such as justice, social harmony, protection of the weak and even national glory.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Breaking away from the illusion of market objectivity is the first step towards understanding capitalism.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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Gore Vidal, the American writer, once famously described the American economic system as β€˜free enterprise for the poor and socialism for the rich’.
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Ha-Joon Chang (Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity)
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The free market doesn't exist. Every market has some rules and boundaries that restrict the freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them. How 'free' a market is cannot be objectively defined. It is a political definition.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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free trade economists have argued that the mere co-existence of protectionism and economic development does not prove that the former caused the latter. This is true. But I am at least trying to explain one phenomenon - economic development-with another that co-existed with it - protectionism. Free trade economists have to explain how free trade can be an explanation for the economic success of today's rich countries, when it simply had not been practised very much before they became rich.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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Government exists to protect us from each other. Where government has gone beyond its limits is in deciding to protect us from ourselves.
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Ha-Joon Chang (Economics: The User's Guide)
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95 per cent of economics is common sense made complicated,
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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When some people have to run a 100 metre race with sandbags on their legs, the fact that no one is allowed to have a head start does not make the race fair. Equality of opportunity is absolutely necessary but not sufficient in building a genuinely fair and efficient society.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Britain also banned exports from its colonies that competed with its own products, home and abroad. It banned cotton textile imports from India ('calicoes'), which were then superior to the British ones. In 1699 it banned the export of woolen cloth from its colonies to other countries (the Wool Act), destroying the Irish woolen industry and stifling the emergence of woollen manufacture in America.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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In fact, most successful people are those who have been well supported, financially and emotionally, by their parents when they were children. Likewise, as I discussed in chapter 2, the rich countries liberalized their trade only when their producers were ready, and usually only gradually even then. In other words, historically, trade liberalization has been the outcome rather than the cause of economic development.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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The issue of false consciousness is a genuinely difficult problem that has no definite solution. We should not approve of an unequal and brutal society because surveys show that people are happy. But who has the right to tell those oppressed women or starving landless peasants that they shouldn’t be happy, if they think they are? Does anyone have the right to make those people feel miserable by telling them the β€˜truth’? There are no easy answers to these questions, but they definitely tell us that we cannot rely on β€˜subjective’ happiness surveys to decide how well people are doing.
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Ha-Joon Chang (Economics: The User's Guide)
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Take the following potent and less-is-more-style argument by the rogue economist Ha-Joon Chang. In 1960 Taiwan had a much lower literacy rate than the Philippines and half the income per person; today Taiwan has ten times the income. At the same time, Korea had a much lower literacy rate than Argentina (which had one of the highest in the world) and about one-fifth the income per person; today it has three times as much. Further, over the same period, sub-Saharan Africa saw markedly increasing literacy rates, accompanied with a decrease in their standard of living. We can multiply the examples (Pritchet’s study is quite thorough), but I wonder why people don’t realize the simple truism, that is, the fooled by randomness effect: mistaking the merely associative for the causal, that is, if rich countries are educated, immediately inferring that education makes a country rich, without even checking. Epiphenomenon here again.
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Nassim Nicholas Taleb (Antifragile: Things that Gain from Disorder)
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the demands of a highly organized industrial society made people behave in more disciplined, calculating and cooperative ways.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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... the human tendency to be seduced by a theory that supposedly explains everything.
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Ha-Joon Chang (Economics: The User's Guide)
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Audite et alteram partem
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Ha-Joon Chang (Economics: The User's Guide)
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The most important assumption underlying HOS is that all countries have equal productive capabilities – that is, they can use any technology they want.3
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Ha-Joon Chang (Economics: The User's Guide)
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Even in the richer countries, what happens at work can make people fulfilled, bored, valued or stressed. At the deepest level work shapes who we are.
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Ha-Joon Chang (Economics: The User's Guide)
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It always seems impossible until it is done.’ NELSON MANDELA
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Ha-Joon Chang (Economics: The User's Guide)
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It is a law of competition that people who can do difficult things which others cannot will earn more profit.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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All technical professionals have an incentive to make themselves look more complicated than they are so that they can justify the high fees their members charge them for their services.
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Ha-Joon Chang
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Free trade economists have to explain how free trade can be an explanation for the economic success of today’s rich countries, when it simply had not been practised very much before they became rich.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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Not being able to see this, culture-based explanations for economic development have usually been little more than ex post facto justifications based on a 20/20 hindsight vision. So, in the early days of capitalism, when most economically successful countries happened to be Protestant Christian, many people argued that Protestantism was uniquely suited to economic development. When Catholic France, Italy, Austria and southern Germany developed rapidly, particularly after the Second World War, Christianity, rather than Protestantism, became the magic culture. Until Japan became rich, many people thought East Asia had not developed because of Confucianism. But when Japan succeeded, this thesis was revised to say that Japan was developing so fast because its unique form of Confucianism emphasized co-operation over individual edification, which the Chinese and Korean versions allegedly valued more highly. And then Hong Kong, Singapore, Taiwan and Korea also started doing well, so this judgement about the different varieties of Confucianism was forgotten. Indeed, Confucianism as a whole suddenly became the best culture for development because it emphasized hard work, saving, education and submission to authority. Today, when we see Muslim Malaysia and Indonesia, Buddhist Thailand and even Hindu India doing well economically, we can soon expect to encounter new theories that will trumpet how uniquely all these cultures are suited for economic development (and how their authors have known about it all along).
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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The Roman politician and philosopher Cicero once said: β€˜Not to know what has been transacted in former times is to be always a child. If no use is made of the labours of past ages, the world must remain always in the infancy of knowledge.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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In recommending free trade to developing countries, the Bad Samaritans point out that all the rich countries have free(ish) trade. This is, however, like people advising the parents of a six-year old boy to make him get a job, arguing that successful adults don't live off their parents and, therefore, that being independent must be the reason for their successes. They do not realize that those adults are independent because they are successful, and not the other way around.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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As the saying goes, β€˜he who has a hammer sees everything as a nail’. If you approach a problem from a particular theoretical point of view, you will end up asking only certain questions and answering them in particular ways. You might be lucky, and the problem you are facing might be a β€˜nail’ for which your β€˜hammer’ is the most appropriate tool. But, more often than not, you will need to have an array of tools available to you. You are bound to have your favourite theory. There is nothing wrong with using one or two more than others β€” we all do. But please don’t be a man (or a woman) with a hammer β€” still less someone unaware that there are other tools available. To extend the analogy, use a Swiss army knife instead, with different tools for different tasks.Β­
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Ha-Joon Chang (Economics: The User's Guide)
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In the prologue, I explained the gradual and subtle process in which history is re-written to fit a country's present self-image. As a result, many rich-country people recommend free-trade, free-market policies in the honest belief that these are policies that thier own ancestors used in order to make their countries rich. When the poor countries protest that those policies hurt, those protests are dismissed as being intellectually misguided or as serving the interests of their corrupt leaders. It never occurs to those Bad Samaritans that the policies they recommend are fundamentally at odds with what history teaches us to be the best development policies. The intention behind their policy recommendations may be honourable, but their effects are no less harmful than those from policy recommendations motivated by deliberate ladder-kicking.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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The rich countries also contribute to the brain drain from developing countries by more willingly accepting people with higher skills. These are people who could have contributed more to the development of their own countries than unskilled immigrants, had they remained in their home countries.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Ricardo's theory is absolutely right-within its narrow confines. His theory correctly says that, accepting their current levels of technology as given, it is better for countries to specialize in things that they are relatively better at. One cannot argue with that. His theory fails when a country wants to acquire more advanced technologies so that it can do more difficult things that few others can do- that is, when it wants to develop its economy. It takes time and experience to absorb new technologies, so technologically backward producers need a period of protection from international competition during this period of learning. Such protection is costly, because the country is giving up the chance to import better and cheaper products. However, it is a price that has to be paid if it wants to develop advanced industries. Ricardo's theory is, thus seen, for those who accept the status quo but not for those who want to change it.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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The place to start is with a true history of capitalism and globalization, which I examine in the next two chapters (chapters 1 and 2). In these chapters, I will show how many things that the reader may have accepted as β€˜historical facts’ are either wrong or partial truths. Britain and the US are not the homes of free trade; in fact, for a long time they were the most protectionist countries in the world. Not all countries have succeeded through protection and subsidies, but few have done so without them. For developing countries, free trade has rarely been a matter of choice; it was often an imposition from outside, sometimes even through military power. Most of them did very poorly under free trade; they did much better when they used protection and subsidies. The best-performing economies have been those that opened up their economies selectively and gradually. Neo-liberal free-trade free-market policy claims to sacrifice equity for growth, but in fact it achieves neither; growth has slowed down in the past two and a half decades when markets were freed and borders opened.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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As these contrasts show, capitalism has undergone enormous changes in the last two and a half centuries. While some of Smith’s basic principles remain valid, they do so only at very general levels. For example, competition among profit-seeking firms may still be the key driving force of capitalism, as in Smith’s scheme. But it is not between small, anonymous firms which, accepting consumer tastes, fight it out by increasing the efficiency in the use of given technology. Today, competition is among huge multinational companies, with the ability not only to influence prices but to redefine technologies in a short span of time (think about the battle between Apple and Samsung) and to manipulate consumer tastes through brand-image building and advertising.
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Ha-Joon Chang (Economics: The User's Guide)
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I would go one step further and say that the willingness to challenge professional economists - and other experts - should be the foundation of democracy. When you think about it, if all we have to do is to listen to the experts, what is the point of having a democracy at all? Unless we want our societies to be run by a body of self-elected experts, we all have to learn economics and challenge professional economists
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Ha-Joon Chang (Economics: The User's Guide)
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But it is far more important that we allow developing countries to use protection, subsidies, and regulation of foreign investment adequately in order to develop their own economies, rather than giving them bigger agricultural markets overseas. Especially if agricultural liberalization by the rich countries can only be 'bought' by the developing countries giving up their use of the tools of infant industry promotion, the price is not worth paying. Developing countries should not be forced to sell their future for small immediate gains.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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Joseph Schumpeter emphasized that all analysis in economics is preceded by a pre-analytical cognitive act, called vision, in which the analyst β€˜visualise[s] a distinct set of coherent phenomena as a worth-while object of [his] analytic efforts’. He pointed out that β€˜this vision is ideological almost by definition’, as β€˜the way in which we see things can hardly be distinguished from the way in which we wish to see them’. The quote is from J. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), pp. 41–2. I thank William Milberg for pointing me to this quote.
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Ha-Joon Chang (Economics: The User's Guide)
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The age-old trick of transfer pricing Taking advantage of the fact that they operate in countries with different tax rates, TNCs [transnational corporations] have their subsidiaries over-charge or under-charge each other – sometimes grossly – so that profits are highest in those subsidiaries operating in countries with the lowest corporate tax rates. In this way, their global post-tax profit is maximized. A 2005 report by Christian Aid, the development charity, documents cases of under-priced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528 and over-priced imports such as German hacksaw blades at $5,485 each, Japanese tweezers at $4,896 and French wrenches at $1,089. The Starbucks and Google cases were different from those examples only in that they mainly involved β€˜intangible assets’, such as brand licensing fees, patent royalties, interest charges on loans and in-house consultancy (e.g., coffee quality testing, store design), but the principle involved was the same. When TNCs evade taxes through transfer pricing, they use but do not pay for the collective productive inputs financed by tax revenue, such as infrastructure, education and R&D. This means that the host economy is effectively subsidizing TNCs.
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Ha-Joon Chang (Economics: The User's Guide)
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To sum up, the truth of post-1945 globalization is almost the polar opposite of the official history. During the period of controlled globalization underpinned by nationalistic policies between the 1950s and the 1970s, the world economy, expecially in the developing world, was growing faster, was more stable and had more equitable income distribution than in the past two and a half decades of rapid and uncontrolled neo-liberal globalization. Nevertheless, this period is protrayed in the official history as a one of unmitigated disaster of nationalistic policies, especially in developing countries. This distortion of the historical record is peddled in order to mask the failure of neo-liberal policies.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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If there are so many successful public enterprises, why do we rarely hear about them? It is partly because of the nature of reporting, whether journalistic or academic. Newspapers tend to report bad things – wars, natural disasters, epidemics, famines, crime, bankruptcy, etc. While it is natural and necessary for newspapers to focus on these events, the journalistic habit tends to present the public with the bleakest possible view of the world. In the case of SOEs, journalists and academics usually investigate them only when things go wrong – inefficiency, corruption or negligence.Well-performing SOEs attract relatively little attention in the same way that a peaceful and productive day in the life of a β€˜model citizen’ is unlikely to make front-page news. There
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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But the conclusion of the HOS theory critically depends on the assumption that productive resources can move freely across economic activities. This assumption means that capital and labour released from any one activity can immediately and without cost be asbsorbed by other activities. With this assumption-known as the assumption of 'perfect factor mobility' among economists-adjustments to changing trade patterns pose no problem. If a steel mill shuts down due to an increase in imports because, say the government reduces tariffs, the resources employed in the industry (the workers, the buildings, the blast furnaces) will be employed (at the same or higher levels of productivity and thus higher returns) by another industry that has become relatively more profitable, say, the computer industry. No one loses from the process.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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Hamilton provided the blueprint for US economic policy until the end of the Second World War. His infant industry programme created the condition for a rapid industrial development. He also set up the government bond market and promoted the development of the banking system (once again, against opposition from Thomas Jefferson and his followers.) It is no hyperbole for the New-York Historical Society to have called him 'The Man Who Made Modern America' in a recent exhibition. Had the US rejected Hamilton's vision and accepted that of his archrival, Thomas Jefferson, for whom the ideal society was an agrarian economy made up of self-governing yeoman farmers (although this slave-owner had to sweep the slaves who supported this lifestyle under the carpet), it would never have been able to propel itself from being a minor agrarian power rebelling against its powerful colonial master to the world's greatest super power.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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To begin with, even though the rich countries have low average protection, they tend to disproportionately protect products that poor countries export, especially garments and textiles. This means that, when exporting to a rich country market, poor countries face higher tariffs than other rich countries. An Oxfam report points out that 'The overall import tax rate for the USA is 1.6 percent. That rate rises steeply for a large number of developing countries: average import taxes range from around four per cent for India and Peru, to seven per cent for Nicaragua, and as much as 14-15 percent for Bangladesh, Cambodia and Nepal. As a result, in 2002, India paid more tariffs to the US government than Britain did, despite the fact that the size of its economy was less than one-third that of the UK. Even more strikingly, in the same year, Bangladesh paid almost as much in tariffs to the US government as France, despite the fact that the size of its economy was only 3% that of France.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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In 1832, Andrew Jackson, today a folk hero to American free-marketeers, refused to renew the license for the quasi-central bank, the second bank of the USA - the successor to Hamilton's Bank of the USA (see chapter 2). This was done on the grounds that the foreign ownership share of the bank was too high -30% (the pre-EU Finns would have heartily approved!). Declaring his decision, Jackson said: 'should the stock of the bank principally pass into the hands of the subjects of a foreign country, and we should unfortunately become involved in a war with that country, what would be our condition?........Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence, it would be far more formidable and dangerous than the naval and military power of the enemy. If we must have a bank...it should be purely American.' If the president of a developing country said something like this today, he would be branded a xenophobic dinosaur and blackballed in the international community.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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This neo-liberal establishment would have us believe that, during its miracle years between the 1960s and the 1980s, Korea pursued a neo-liberal economic development strategy. The reality, however, was very different indeed. What Korea actually did during these decades was to nurture certain new industries, selected by the government in consultation with the private sector, through tariff protection, subsidies and other forms of government support (e.g., overseas marketing information services provided by the state export agency) until they 'grew up' enough to withstand international competition. The government owned all the banks, so it could direct the life blood of business-credit. Some big projects were undertaken directly by state-owned enterprises-the steel maker, POSCO, being the best example-although the country had a pragmatic, rather than ideological, attitude to the issue of state ownership. If private enterprises worked well, that was fine; if they did not invest in important areas, the government had no qualms about setting up state-owned enterprises (SOEs); and if some private enterprises were mismanaged, the government often took them over, restructured them, and usually (but not always) sold them off again.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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Hong Kong became a British colony after the Treaty of Nanking in 1842, the result of the Opium War. This was a particularly shameful episode, even by the standards of 19th-century imperialism. The growing British taste for tea had created a huge trade deficit with China. In a desperate attempt to plug the gap, Britain started exporting opium produced in India to China. The mere detail that selling opium was illegal in China could not possibly be allowed to obstruct the noble cause of balancing the books. When a Chinese official seized an illicit cargo of opium in 1841, the British government used it as an excuse to fix the problem once and for all by declaring war. China was heavily defeated in the war and forced to sign the Treaty of Nanking, which made China 'lease' Hong Kong to Britain and give up its right to set its own tariffs. So there it was-the self-proclaimed leader of the 'liberal' world declaring war on another country because the latter was getting in the way of its illegal trade in narcotics. The truth is that the free movement of goods, people, and money that developed under British hegemony between 1870 and 1913-the first episode of globalization-was made possible, in large part, by military might, rather than market forces. Apart from Britain itself, the practitioners of free trade during this period were mostly weaker countries that had been forced into, rather than had voluntarily adopted, it as a result of colonial rule or 'unequal treaties' (like the Nanking Treaty), which, among other things, deprived them of the right to set tariffs and imposed externally determined low, flat-rate tariffs (3-5%) on them.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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A HistΓ³ria Γ© ΓΊtil para destacar os limites da teoria econΓ³mica.
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Ha-Joon Chang (Economics: The User's Guide)
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The world is too complex, Simon argued, for our limited intelligence to understand fully. This means that very often the main problem we face in making a good decision is not the lack of information but our limited capability to process that information – a point nicely illustrated by the fact that the celebrated advent of the internet age does not seem to have improved the quality of our decisions, judging by the mess we are in today.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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If chess is this complicated, you can imagine how complicated things are in our economy, which involves billions of people and millions of products. Therefore, in the same way in which individuals create routines in their daily lives or chess games, companies operate with β€˜productive routines’, which simplify their options and search paths. They build certain decision-making structures, formal rules and conventions that automatically restrict the range of possible avenues that they explore, even when the avenues thus excluded outright may have been more profitable. But they still do it because otherwise they may drown in a sea of information and never make a decision. Similarly, societies create informal rules that deliberately restrict people’s freedom of choice so that they don’t have to make fresh choices constantly. So, they develop a convention for queuing so that people do not have to, for example, constantly calculate and recalculate their positions at a crowded bus stop in order to ensure that they get on the next bus.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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If we are going to avoid similar financial crises in the future, we need to restrict severely freedom of action in the financial market. Financial instruments need to be banned unless we fully understand their workings and their effects on the rest of the financial sector and, moreover, the rest of the economy. This will mean banning many of the complex financial derivatives whose workings and impacts have been shown to be beyond the comprehension of even the supposed experts. You may think I am too extreme. However, this is what we do all the time with other products – drugs, cars, electrical products, and many others. When a company invents a new drug, for example, it cannot be sold immediately. The effects of a drug, and the human body’s reaction to it, are complex. So the drug needs to be tested rigorously before we can be sure that it has enough beneficial effects that clearly overwhelm the side-effects and allow it to be sold.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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(after all, in 1957 the Soviet Union put the first ever man in space),
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Ha-Joon Chang (Economics: The User's Guide)
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More importantly, in most countries there were also many policies that ended up redistributing income from the poor to the rich. There have been tax cuts for the rich – top income-tax rates were brought down. Financial deregulation has created huge opportunities for speculative gains as well as astronomical paycheques for top managers and financiers (see Things 2 and 22). Deregulation in other areas has also allowed companies to make bigger profits, not least because they were more able to exploit their monopoly powers, more freely pollute the environment and more readily sack workers. Increased trade liberalization and increased foreign investment – or at least the threat of them – have also put downward pressure on wages. As a result, income inequality has increased in most rich countries. For example, according to the ILO (International Labour Organization) report The World of Work 2008, of the twenty advanced economies for which data was available, between 1990 and 2000 income inequality rose in sixteen countries, with only Switzerland among the remaining four experiencing a significant fall.1 During this period, income inequality in the US, already by far the highest in the rich world, rose to a level comparable to that of some Latin American countries such as Uruguay and Venezuela.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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It may be argued that the host country should not complain about transfer pricing, because, without the foreign direct investment in question, the taxable income would not have been generated in the first place. But this is a disingenuous argument. All firms need to use productive resources provided by government with taxpayers' money (e.g., roads, the telecommunications network, workers who have received publicly funded education and training). So, if the TNC subsidiary is not paying its 'fair share' of tax, it is effectively free-riding on the host country.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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When we think of foreign direct investment, most of us think about Intel building a new microchip factory in Costa Rica or Volkswagen laying down a new assembly line in China-this is known as 'green-field' investment. But a lot of foreign direct investment is made by foreigners buying into an existing local company- or 'brownfield' investment. Brownfield investment has accounted for over half of total world FDI since the 1990s, although the share is lower for developing countries, for the obvious reason that they have relatively fewer firms that foreigners want to take over. At its height in 2001, it accounted for as much as 80% of total world FDI.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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A critical but often ignored impact of FDI is that on the (current and future) domestic competitors. An entry by a TNC through FDI can destroy existing national firms that could have 'grown up' into successful operations without this premature exposure to competition, or it can pre-empt the emergence of domestic competitors. In such cases, short-run productive capabilities are enhanced, as the TNC subsidiary replacing the (current and future) national firms is usually more productive than the latter. But the level of productive capability that the country can attain in the long run becomes lower as a result. This is because TNCs do not, as a rule, transfer the most valuable activities outside their home country, as I will discuss in greater detail later. As a result, there will be a definite ceiling on the level of sophistication that a TNC subsidiary can reach in the long run. To go back to the Toyota example in chapter 1, had Japan liberalized FDI in its automobile industry in the 1960s, Toyota definitely wouldn't be producing the Lexus today-it would have wiped out or, more likely, have become a valued subsidiary of an American carmaker. Given this, a developing country may reasonably decide to forego short-term benefits from FDI in order to increase the chance for its domestic firms to engage in higher-level activities in the long run, by banning FDI in certain sectors or regulating it. This is exactly the same logic as that of infant industry protection that I discussed in the earlier chapters-a country gives up the short-run benefits of free trade in order to create higher productive capabilities in the long run. And it is why, historically, most economic success stories have resorted to regulation of FDI, often in a Draconian manner, as I shall now show.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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Trade liberalization has created other problems, too. It has increased the pressures on government budgets, as it reduced tariff revenues. This has been a particularly serious problem for the poorer countries. Because they lack tax collection capabilities and because tariffs are the easiest tax to collect, they rely heavily on tariffs (which sometimes account for over 50% of total government revenue).7 As a result, the fiscal adjustment that has had to be made following large-scale trade liberalization has been huge in many developing countries – even a recent IMF study shows that, in low-income countries that have limited abilities to collect other taxes, less than 30% of the revenue lost due to trade liberalization over the last 25 years has been made up by other taxes.8 Moreover, lower levels of business activity and higher unemployment resulting from trade liberalization have also reduced income tax revenue.When countries were already under considerable pressure from the IMF to reduce their budget deficits, falling revenue meant severe cuts in spending, often eating into vital areas like education, health and physical infrastructure, damaging long-term growth. It
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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The welfare state is the bankruptcy law for workers
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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Before Keynes, most people agreed with Adam Smith when he said, β€˜What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.’ And some people still do. David Cameron, the British prime minister, said in October 2011 that all Britons should try to pay off their credit card debts, without realizing that demand in the British economy would collapse if a sufficient number of people actually heeded his advice and reduced spending to pay off their debts. He simply did not understand that one person’s spending is another’s income – until he was forced by his advisors to withdraw the embarrassing remark.
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Ha-Joon Chang (Economics: The User's Guide)
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The focus on the market has made most economists neglect vast areas of our economic life, with significant negative consequences for our well-being. The neglect of production at the expense of exchange has made policy-makers in some countries overly complacent about the decline of their manufacturing industries. The view of individuals as consumers, rather than producers, has led to the neglect of issues such as the quality of work (e.g., how interesting it is, how safe it is, how stressful it is and even how oppressive it is) and work-life balance. The disregard of these aspects of economic life partly explains why most people in the rich countries don’t feel more fulfilled despite consuming the greatest ever quantities of material goods and services. The economy is much bigger than the market. We will not be able to build a good economy β€” or a good society β€” unless we look at the vast expanse beyond the market.
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Ha-Joon Chang (Economics: The User's Guide)
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The view that the world has now entered a new era of the β€˜knowledge economy’, in which making things does not confer much value, is based upon a fundamental misreading of history. We have always lived in a knowledge economy.
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Ha-Joon Chang (Economics: The User's Guide)
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There is no such thing as free market. All markets are created and have rules and regulations.
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Ha-Joon Chang (50 Economics Classics: Your shortcut to the most important ideas on capitalism, finance, and the global economy (50 Classics))
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Unlike what neo-liberals say, market and democracy clash at a fundamental level. Democracy runs on the principle of 'one man (one person), one vote'. The market runs on the principle 'one dollar, one vote'.
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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I personally think that society is responsible for a very significant percentage of what I’ve earned. If you stick me down in the middle of Bangladesh or Peru or someplace, you’ll find out how much this talent is going to produce in the wrong kind of soil. I will be struggling thirty years later. I work in a market system that happens to reward what I do very well – disproportionately well.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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Our story of bus drivers reveals the existence of the proverbial elephant in the room. It shows that the living standards of the huge majority of people in rich countries critically depend on the existence of the most draconian control over their labour markets – immigration control. Despite this, immigration control is invisible to many and deliberately ignored by others, when they talk about the virtues of the free market.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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People do not necessarily know what they are doing, because our ability to comprehend even matters that concern us directly is limited – or, in the jargon, we have β€˜bounded rationality’. The world is very complex and our ability to deal with it is severely limited. Therefore, we need to, and usually do, deliberately restrict our freedom of choice in order to reduce the complexity of problems we have to face. Often, government regulation works, especially in complex areas like the modern financial market, not because the government has superior knowledge but because it restricts choices and thus the complexity of the problems at hand, thereby reducing the possibility that things may go wrong.
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Chang Ha-Joon
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It is hard to believe, but the phrase β€˜workshop of the world’ was originally coined for Britain, which today, according to Nicolas Sarkozy, the French president, has β€˜no industry’. Having successfully launched the Industrial Revolution before other countries, Britain became such a dominant industrial power by the mid nineteenth century that it felt confident enough to completely liberalize its trade (see Thing 7). In 1860, it produced 20 per cent of world manufacturing output. In 1870, it accounted for 46 per cent of world trade in manufactured goods. The current Chinese share in world exports is only around 17 per cent (as of 2007), even though β€˜everything’ seems to be made in China, so you can imagine the extent of British dominance then.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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Unless South Africa is
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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The data are not easy to come by, but a mid 1940s study by the US Rural Electrification Authority reports that, with the introduction of the electric washing machine and electric iron, the time required for washing a 38 lb load of laundry was reduced by a factor of nearly 6 (from 4 hours to 41 minutes) and the time taken to iron it by a factor of more than 2.5 (from 4.5 hours to 1.75 hours).2 Piped water has meant that women do not have to spend hours fetching water (for which, according to the United Nations Development Program, up to two hours per day are spent in some developing countries). Vacuum cleaners have enabled us to clean our houses more thoroughly in a fraction of the time that was needed in the old days, when we had to do it with broom and rags.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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It shows that the living standards of the huge majority of people in rich countries critically depend on the existence of the most draconian control over their labour markets – immigration control. Despite this, immigration control is invisible to many and deliberately ignored by others, when they talk about the virtues of the free market.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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G. HODGSON How Economics Forgot History: The Problem of Historical Specificity in Social Science
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Ha-Joon Chang (Economics: The User's Guide)
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E. REINERT How Rich Countries Became Rich, and Why Poor Countries Stay Poor
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Ha-Joon Chang (Economics: The User's Guide)
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A. RONCAGLIA The Wealth of Ideas: A History of Economic Thought
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Ha-Joon Chang (Economics: The User's Guide)
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This approach has enabled Japanese firms to achieve such production efficiency and quality that now many non-Japanese companies are imitating them. By not assuming the worst about their workers, the Japanese companies have got the best out of them.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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This is known as the Pareto criterion and forms the basis for all judgements on social improvements in Neoclassical economics today.
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Ha-Joon Chang (Economics: The User's Guide: A Pelican Introduction)
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However, if everyone were really only out to advance his own interest, the world would have already ground to a halt, as there would be so much cheating in trading and slacking in production. More importantly, if we design our economic system based on such an assumption, the result is likely to be lower, rather than higher, efficiency.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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During the past quarter of a century, most developing countries have liberalized trade to a huge degree. They were first pushed by the IMF and the World Bank in the aftermath of the Third World debt crisis of 1982. There was a further decisive impetus towards trade liberalization following the launch of the WTO in 1995. During the last decade or so, bilateral and regional free trade agreements (FTAs) have also proliferated.Unfortunately, during this period, developing countries have not done well at all, despite (or because of, in my view) massive trade liberalization,
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Ha-Joon Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism)
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George W. Bush, the former US president, is reputed to have complained that the problem with the French is that they do not have a word for entrepreneurship in their language.
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Ha-Joon Chang (23 Things They Don't Tell You about Capitalism)
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the chance of an average developing-country person being an entrepreneur is more than twice that for a developed-country person (30 per cent vs. 12.8 per cent).
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Rumsfeld opined: β€˜There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.’ I
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)
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Recognizing that the boundaries of the market are ambiguous and cannot be determined in an objective way lets us realize that economics is not a science like physics or chemistry, but a political exercise... If the boundaries of what you are studying cannot be scientifically determined, what you are doing is not a science.
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Ha-Joon Chang (23 Things They Don't Tell You About Capitalism)