Questioning the concept of capitalism

Hi, and welcome to another entry! For this week, I have decided to write about an economics book I read called '23 Things They Don't Tell You About Capitalism'. This book completely transformed my view on free-market economies and how they operate. Ha-Joon Chang splits up his book into 23 chapters or 'things' that are claims of the free market and then essentially disproves them.

In this entry, I will go into a couple of my favorite chapters and talk about what Chang explained and how it changed my view on the capitalist system. Thing 1: ‘There is no such thing as a free market’. In the first chapter, Chang writes about how the originally proposed idea of a free market is where the government should have zero intervention and operate entirely on incentives and people’s own personal interests, then the market will thrive. However in reality this cannot exist as there is a lot of politics and government involvement in the free-market system that goes against this concept. Otherwise, there would be no restrictions on what items are sold (Guns, organs, human beings, etc), no minimum wage, and many other things that are controlled by politics and the government, therefore the idea of a completely ‘free market’ does not actually exist. In reality, the countries using this system are operating with an adapted version of the free-market system.

Another chapter that really opened my eyes was Thing 3: ‘Most people in rich countries are paid more than they should be’. Chang questions the concept that someone in a wealthier country gets paid more than someone in a poorer country due to their relative productivity. He mainly explores the specific example of a bus driver, where one in Sweden will get paid 50x more than a bus driver in India, even though it is very unlikely that the Swede bus driver is 50x more productive than the Indian one. He even goes into detail about how it is likely more difficult and dangerous to drive on busy streets in India due to the lack of enforced traffic laws and having to dodge opposing cars, animals, people, and more. Therefore the Indian bus driver's skill/productivity is higher than the Swede. Showing how the salary is more a reflection of the relative productivity of those at the very top of the economic market, as opposed to those at the bottom.

In my microeconomics class we are taught about the works of famous economists such as Adam Smith who proposed the idea of the invisible hand, which is a metaphor for how, in a free market economy, self-interested individuals operate through a system of mutual interdependence. In simpler terms, people are motivated by their own self-interest, so the baker will make and sell bread to make money for himself, rather than for those who need to buy the bread to eat, yet they still benefit while giving money to the baker. Those who sell goods will only sell what is demanded to ensure profit, and those who demand it will typically have it available to them as there is a market for it. While everyone has their own motives and prioritizes themselves, they all benefit one another unintentionally, as is the goal of the entire free market system. Thing 5: ‘Assume the worst about people and you get the worst’, indirectly questions this theory. Chang goes against the widely known free market assumption that people are solely motivated by their self-interest. While it is important, human behavior in actuality is more complex as there are other motives such as honesty, self-respect, altruism love, and solidarity. He criticizes the view that government intervention is inherently negative, as there is a need to consider the different motivations humans have to ensure effective economic systems.

The last Thing or Chapter I am going to mention a little bit about is Thing 15: ‘People in poor countries are more entrepreneurial than people in rich countries’. Here he discusses how people in developing nations, despite contrary beliefs, exhibit high levels of entrepreneurship for survival and engage in various economic activities. This is one of the many times Chang challenges the idea that poorer countries are that way due to laziness or lack of entrepreneurial drive. He states that the key to economic development is fostering entrepreneurship collectively and building institutions rather than just having one individual entrepreneur. This is quite interesting as typically the conceived reasoning behind the success of the 1st world countries is due to the population being more entrepreneurial, and the views Chang has really changed my way of thinking.

Obviously, that's just a few bits about this book, but I highly recommend anyone who takes economics A level or is even interested in economics reads it, as it really aids further understanding of how the capitalist system works.

That's it for this entry! Thank you for reading :). Please check out any of my other entries on my blog page!