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The History Of Capitalism Has Been So Totally Re-written That Many People In The Rich World Do Not Perceive The Historical Double Standards Involved In Recommending Free Trade And Free Market To Developing Countries.

-Ha-Joon Chang

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The History Of Capitalism

Ha-Joon Chang

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The History Of Capitalism Has Been So Totally Re-written That Many People In The Rich World Do Not Perceive The Historical Double Standards Involved In Recommending Free Trade And Free Market To Developing Countries.

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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.

People 'over-produce' Pollution Because They Are Not Paying For The Costs Of Dealing With It.

Environmental Pollution

Self-interest, To Be Sure, Is One Of The Most Important, But We Have Many Other Motives - Honesty, Self-respect, Altruism, Love, Sympathy, Faith, Sense Of Duty, Solidarity, Loyalty, Public-spiritedness, Patriotism, And So On - That Are Sometimes Even More Important Than Self-seeking As The Driver Of Our Behaviors.

Corruption Often Exists Because There Are Too Many Market Forces, Not Too Few.

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.

Capitalist Economy

There Is A Big Logical Jump Between Acknowledging The Destructive Nature Of Hyperinflation And Arguing That The Lower The Rate Of Inflation, The Better.

The Free Market Doesn't Exist. Every Market Has Some Rules And Boundaries That Restrict Freedom Of Choice. A Market Looks Free Only Because We So Unconditionally Accept Its Underlying Restrictions That We Fail To See Them.

The History Of Capitalism Has Been So Totally Re-written That Many People In The Rich World Do Not Perceive The Historical Double Standards Involved In Recommending Free Trade And Free Market To Developing Countries.

In Manufacturing, Where Mechanization And The Use Of Chemical Processes Are Much Easier, It Is Easier To Raise Productivity Than In Services. In Contrast, By Their Very Nature, Many Service Activities Are Inherently Impervious To Productivity Increase Without Diluting The Quality Of The Product.

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.

The Days Are Over When Technology Can Be Advanced In Laboratories By Individual Scientists Alone. Now You Need An Army Of Lawyers To Negotiate The Hazardous Terrain Of Interlocking Patents. Unless We Find A Solution To The Problem Of Interlocking Patents, The Patent System May Actually Impede The Very Innovation It Was Designed To Encourage.

We Are Not Smart Enough To Leave Things To The Market.

The Danger Is Not Only That These Austerity Measures Are Killing The European Economies But Also That They Threaten The Very Legitimacy Of European Democracies - Not Just Directly By Threatening The Livelihoods Of So Many People And Pushing The Economy Into A Downward Spiral, But Also Indirectly By Undermining The Legitimacy Of The Political System Through This Backdoor Rewriting Of The Social Contract.

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.

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.

The Invention Of The Printing Press Was One Of The Most Important Events In Human History.

Important Events

The Washing Machine Changed The World More Than The Internet.

As South Korea Shows, Active Participation In International Trade Does Not Require Free Trade. Indeed, Had South Korea Pursued Free Trade And Not Promoted Infant Industries, It Would Not Have Become A Major Trading Nation. It Would Still Be Exporting Raw Materials (e.g., Tungsten Ore, Fish, Seaweed) Or Low-technology, Low-price Products (e.g., Textiles, Garments, Wigs Made With Human Hair) That Used To Be Its Main Export Items In The 1960s.

Culture Changes With Economic Development.

If We Are Really Serious About Preventing Another Crisis Like The 2008 Meltdown We Should Simply Ban Complex Financial Instruments, Unless They Can Be Unambiguously Shown To Benefit Society In The Long Run. This Is What We Do All The Time With Other Products-drugs, Cars, Electrical Products And Many Others.

To Paraphrase Winston Churchill, Capitalism Is The Worst Economic System Except For All The Other Forms.

[good Managers] Know That People Have 'good' Sides And 'bad' Sides And That The Secret Of Good Management Is In Magnifying The Former And Toning Down The Latter.

95 Percent Of Economics Is Common Sense Made Complicated, And Even For The Remaining 5 Percent, The Essential Reasoning, If Not All The Technical Details, Can Be Explained In Plain Terms.

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.

The Higher Education System In These Countries (us, Korea Etc) Has Become Like A Theatre In Which Some People Decided To Stand To Get A Better View, Promoting The Others Behind Them To Stand. Once Enough People Stand, Everyone Has To Stand, Which Means No One Is Getting A Better View, While Everyone Has Become More Uncomfortable.

Equality Of Opportunity Is Meaningless For Those Who Do Not Have The Capabilities To Take Advantage Of It.

All The Alleged Key Causes Of Soe [state-owned Enterprise] Inefficiency - The Principal-agent Problem, The Free-rider Problem And The Soft Budget Constraint - Are, While Real, Not Unique To State-owned Enterprises. Large Private-sector Firms With Dispersed Ownership Also Suffer From The Principal-agent Problem And The Free-rider Problem. So, In These Two Areas, Forms Of Ownership Do Matter, But The Critical Divide Is Not Between State And Private Ownership - It Is Between Concentrated And Dispersed Ownerships.

A Well-designed Welfare State Can Actually Encourage People To Take Chances With Their Jobs And Be More, Not Less, Open To Changes.

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.

There Are Different Ways To Organise Capitalism. Free-market Capitalism Is Only One Of Them-and Not A Very Good One At That.

There Is No Such Thing As A Free Market.

The Korean Economic Miracle Was The Result Of A Clever And Pragmatic Mixture Of Market Incentives And State Direction.

People Who Live In Poor Countries Have To Be Entrepreneurial Even Just To Survive.

Rich Countries Have 'kicked Away The Ladder' By Forcing Free-market, Free-trade Policies On Poor Countries. Already Established Countries Do Not Want More Competitors Emerging Through The Nationalistic Policies They Themselves Successfully Used In The Past.

History Is On The Side Of The Regulators.

Low Inflation And Government Prudence May Be Harmful For Economic Development.

Corruption Exists Because There Is Too Much, Not Too Little, Market.

Democracy And Markets Are Both Fundamental Building Blocks For A Decent Society. But They Clash At A Fundamental Level. We Need To Balance Them.

Assume The Worst About People And You Get The Worst.

It's Not Just About The Current Economic Environment. History Shows That Slashing Budgets Always Leads To Recession.

Gore Vidal, The American Writer, Once Described The American Economic System As 'free Enterprise For The Poor And Socialism For The Rich'. Macroeconomic Policy On The Global Scale Is A Bit Like That. It Is Keynesianism For The Rich Countries And Monetarism For The Poor.

Financial Markets Need To Become Less, Not More, Efficient.

Financial Markets

Rational Thinking Is An Important Aspect Of Human Nature, But We Have Imagination, We Have Ambition, We Have Irrational Fear, We Are Swayed By Other People, We Get Indoctrinated And We Get Influenced By Advertising.

Democracy Is Acceptable To Neo-liberals Only In So Far As It Does Not Contradict The Free Market.

The Foundation Of Economic Development Is The Acquisition Of More Productive Knowledge.

Manufacturing Is The Most Important...route To Prosperity.

Once You Realize That Trickle-down Economics Does Not Work, You Will See The Excessive Tax Cuts For The Rick As What They Are -- A Simple Upward Redistribution Of Income, Rather Than A Way To Make All Of Us Richer, As We Were Told.

Countries Are Poor Not Because Their People Are Lazy; Their People Are 'lazy' Because They Are Poor.

95% Of Economics Is Common Sense Deliberately Made Complicated.

Making Rich People Richer Doesn't Make The Rest Of Us Richer.

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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