23 things they don't tell you about capitalism

I just finished a book by economist Ha-Joon Chang dispelling some of the free-market dogmatic myths that have propagated themselves in the past few decades.  It is written in an accessible, straightforward style that helps even laypeople understand complex economics questions.  Many of his points shouldn't be news to anyone who has thought critically about the current global economic system.  Some of Chang's points pertaining to the importance of government action through anti-free market policies I had already read about more in-depth in his prior work, Kicking away the Ladder.  But "23 things they don't tell you about capitalism" is a great, succinct summary of the most salient critiques to the prevailing free market ideology. 

The book did confront me with at least one very new piece of information to think about; education is not a reliable engine for economic development.  (This is in contrast to job-related training, which does have a demonstrable effect on economic growth, as job training is linked directly to increased productivity).  The education-development causal link was a bit of received orthodoxy I had always taken to be true, but Ha-Joon Chang shows pretty clearly that higher education as such (and even much of pre-college education) is often not a very direct contributor to nor a predictor of a country's growth.  It makes sense when you think about it.  Granted, individually a bachelor's degree or a doctorate can move you into higher-paying fields, but this is often due more to the filtering effect of a degree--many jobs are open only to holders of certain levels of educational credentials, even if that education isn't directly relevant to job duties.  In the aggregate, this means that as a nation's populace becomes more educated, it doesn't make the nation more prosperous, because most of that education does not result in new businesses or new sectors.  The increased education simply raises the bar of what's considered standard.  Jobs that used to require a high school degree now require a bachelor's, those that used to want a bachelor's want a master's, etc.  Anyway, I have always been a firm believer in the importance of education, so this shook me a bit.  But Chang's evidence and his logic are irrefutable, and in the end it does jibe with my anecdotal experience of the education-development link (or lack thereof). 

Given this new discovery about education, I have to revise my opinion of it.  I still believe that education is the best way of freeing one's mind and expanding one's horizons, and the type of education that truly does inspire people to think in new ways should in fact result in economic growth, as people come up with novel business ideas.  But for the most part, I can no longer assume that improving education in a country improves that country's overall economic performance.  In fact, a darker side of Chang's assertion is that if education does not promote overall growth, but does sort and filter the workforce, then much of education's role in a modern economy is a pernicious one--not the expansion of minds and opportunities, but rather a way to cement the advantages of some people while firmly excluding others from prosperity.  In this light, at least in the US where there are still large disparities in access to what is considered "quality" education, it becomes a zero-sum game in which the success of some (the educated ones) comes at the expense of others (those without education), even though many jobs could ostensibly be performed equally well by many people, regardless of their formal credentials. 

If this is the case, the answer is not to stifle education, but rather to assure equal access to it.  This would on the one hand level the playing field such that education ceases to play a sorting, exclusionary role, while at the same time allowing us to focus on providing education that is really worthwhile and liberating, as opposed to education designed to help the learner get ahead in the job market.  This new, equally available education would not magically create economic growth, as Chang clearly shows, but rather it would create better thinkers, better critics, better artists, better human beings, whose lives are more meaningful, and their contributions to their society greater, thanks to their education.  This education would have to be not some rote technical training to prepare the workforce, but a liberal, Classical education.  As I noted above, more technical, job-related training does in fact contribute to economic growth and should also be encouraged and generalized, but most job-related training can occur in short programs of a few months or years, not the 12-16 years of basic education that we now consider standard for the formation and socialization of children and young people.  Separating into two different categories the idea of a Classical, mind-expanding basic education (which should be available to everyone), and a more job-focused training that directly creates economic growth (and which should be open to everyone according to their job field but would obviously not be the same for everyone) helps me to somewhat resolve the dilemma I'd discussed in an earlier blog post, about my conflicted feelings as to whether college should be universal or not.

Anyway, I'll close with the eight principles that Dr. Chang explains at the end of his book, which do a good job of summarizing the rest of the work.  Here they are:

1. Capitalism, yes, but we need to end our love affair with unrestrained free-market capitalism, which has served humanity so poorly, and install a better-regulated variety.
2. We should build our new economic system on the recognition that human rationality is severely limited.
3. We should build a system that brings out the best, rathr than worst, in people.
4. We should stop believing that people are always paid what they "deserve".
5. We need to take "making things" more seriously.
6. We need to strike a better balance between finance and "real" activities.
7. Government needs to become bigger and more active.
8. The world economic system needs to "unfairly" favor developing countries.

If you want more detail on these eight points or anything else about Ha-Joon Chang's thinking, I highly encourage you to check out "23 things they don't tell you about capitalism".