Ha-Joon Chang, Professor of Political Economy of Development at the University of Cambridge, explains economics very clearly and simply. In his book, 23 Things They Don’t Tell You About Capitalism, he argues these 23 tenets:
- There is really no such thing as a free market.
- Companies should not be run in the interest of their owners.
- Most people in rich countries get paid more than they should.
- The washing machine has changed the world more than the internet.
- Assume the worst about people, and you get the worst.
- Greater macroeconomic stability has not made the world economy more stable.
- Free-market policies rarely make poor countries richer.
- Capital has a nationality.
- We do not live in a post-industrial age.
- The US does not have the highest living standard in the world.
- Africa is not destined for under-development.
- Government can pick winners.
- Making rich people richer doesn’t make the rest of us richer.
- US managers are over-priced.
- People in poor countries are more entrepreneurial than people in rich countries.
- We are not smart enough to leave things to the market.
- More education in itself is not going to make a country richer.
- What is good for General Motors is not necessarily good for the US.
- Despite the fall of Communism, we are still living in planned economies.
- Equality of opportunities is unequal.
- Big government makes people more, not less, open to changes.
- Financial markets need to become less, not more, efficient.
- Good economic policy does not require good economists.
My key takeaway:
Maximizing shareholder value is the root of the problem of western style capitalism: with dispersed ownership, individual shareholders don’t have the incentive to commit to the long-term success of the company. Floating shareholders are running companies in the name of shareholder maximization. There is no investment in R&D and training and machinery, because results in 5 or 10 years are not interesting. Today, over 60% of corporate profit are given out as dividends, as compared to 35 to 45 percent in the 1970s. Companies have less cash to invest, and that is not being used for appropriate long-term development.