There are many books that claim to explain the global financial meltdown of 2008. Not many are written by economists. Ignorant of history, most economists failed to forecast the crash. Many are mesmerised by the spurious harmonies of their mathematical models. What could economists have to say today that would be of any interest to anyone?
Source: https://pediaa.com
Anxiously defending their turf, many economists have objected that they never claimed to predict the future. But as Ha-Joon Chang writes: "Economists are not some innocent technicians who did a decent job within the narrow confines of their expertise until they were collectively wrong-footed by a once-in-a-century disaster that no one could have predicted." Far from being an inward-looking, hermetic discipline, economics has been a hugely powerful – and profitable – enterprise. It has shaped the policies of governments and companies throughout much of the world. The results sometimes have been little short of disastrous. As Chang puts it: "Economics, as it has been practised in the last three decades, has been positively harmful for most people." (Chang is a development economist based in Cambridge University).
In his 2008 book, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, Chang mocked one of the central orthodoxies of his profession: the belief that global free trade raises living standards everywhere.
In 23 Things They Don't Tell You About Capitalism economic orthodoxy is assaulted on a much larger front. Each of Chang's 23 propositions may seem counterintuitive, even contrarian. But every one of them has a basis in fact and logic, and taken together they present a new view of capitalism.
Chang may be the best critic of capitalism, but he is far from being any kind of anti-capitalist. He recognises the failings of centrally planned economies, and rightly describes capitalism as "the worst economic system except for all the others". At the same time he is confident that capitalism can be reformed to prevent crises. Making markets more transparent is not enough. "If we are really serious about preventing another crisis like the 2008 meltdown," Chang writes, "we should simply ban complex financial instruments, unless they can be unambiguously shown to benefit society in the long run." He is aware that he risks sounding extreme, but argues that the ban he proposes is no different from those that have been enforced on other dangerous products. And the derivatives market is several times larger than global GDP with no known regulation in place.
Capitalism is not only about creating wealth, it is also about power – and western power is waning. Economic energy is shifting to the emerging countries, while in the west economies stagnate and politicians continue to worship at the altar of the free market (not least in Britain, where the coalition seems bent on pursuing neo-Thatcherite policies more extreme than those of the 80s). Rather than reforming itself, free-market capitalism looks set simply to decline.
Anyone with a rudimentary knowledge of economics, will tell you that there is no such thing as a “free” market. It is a utopia that some economists indulge for the benefit of their capitalist masters. But it has prevailed since the Reagan era of the 80s. We need some common sense driving a responsible or progressive capitalist system. After all economics is all about common sense or is it?
Reference:
23 things they dont’ tell you about capitalism, Ha-Joon Chang (https://www.theguardian.com)
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