I’m reading 23 Things They Don't Tell You About Capitalism by Ha Joon Chang, a Cambridge Professor of Economics. He blames free market ideology for much of the world’s economic ills, and points out that the ‘free’ market isn’t really free, it’s just a relative term, because there are hundreds of rules, many of them political, around the market.
Since the West liberalised its trade and finance rules in the 80s, economic growth has slowed considerably compared to the period before. And sub-Saharan Africa, having been forced to open its borders to ‘free trade’, has seen its growth reduced to zero. Developing economies need to be protectionist in order to grow; the US and the UK were when they were building their industries.
What I like about the author’s style is that it is based in common sense rather than technicalities, and he says we can all make economic judgements. And he continually upends the received wisdoms, which as an Aquarian I like.
Here are a few more of his ‘Things’ as he calls them:
Companies should not be run in the interest of their owners
The washing machine has changed the world more than the internet has
Greater macroeconomic stability has not made the world economy more stable
Governments can pick winners
Good economic policy does not require good economists
Ha Joon Chang doesn’t have a political agenda. His only agenda is what promotes the greatest economic growth, based on the evidence.
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I’d often wondered about the ‘free’ market, not just because it clearly has thousands of rules anyway, but also for the common sense reason (that the author doesn’t mention) that all areas of human collective activity need regulation or destructive things happen. Like we saw in 2008 with the mother of all financial crises. I’ve always thought that the people who want the internet unregulated are being naïve. Bad things happen there as well. And bad things happen through mobile phone technology unless governments keep an eye. And someone needs to keep an eye on governments because they will do bad things as well, like when they take necessary surveillance to excess.
The bigger question that Ha Joon Chang doesn’t address is why growth? And what is sustainable? Those are the real questions. We have more than enough to live on in the West, particularly if wealth was shared a bit more equitably, so why does the economy need to keep growing, even if the planet could sustain that? Do we earn to live or live to earn?
The planet needs sustainability. What humans need is the forgotten notion of sufficiency. An idea of what is enough, of there being a point at which our economic needs are met.
This is why recessions can be good things. During the recent one we still had enough to live on, particularly again if things could have been shared out better, but the feelgood factor of growth was not there, so we all felt a bit gloomy. But why do we need to feel gloomy if there is enough to live on? I think in this way recessions can get us to think about our values, about what is in a real sense important.
Economic growth has become the main yardstick by which we judge a nation’s health and happiness. Not the only one, but the main one. And it’s crazy when you think about it, that what gives the most meaning to our collective life is whether we are increasing the rate at which we produce more than we need to live on. As the Buddha said, “All worldlings are mad.” I don’t quite agree with him, and it has religious superiority in it, but he has a point.
As I went into in a previous piece, the US has not put in anywhere near the legislation needed to stop another financial crisis occurring, and has no intention of doing so. The banks, for example, have not been divided into separate retail and investment institutions, and they are even bigger and more complex than they were.
The managerial level of the financial industry has such a power over government that very little has happened in the wake of 2008. A classic example in the UK was that of Fred Goodwin, the head of RBS, a bank that went spectacularly bust and required a huge government bail-out. Yet Fred was allowed to walk away with his £17 million pension pot untouched. After a public outcry, he gave back £4 million of it and he lost his knighthood. And that was that. He kept his reward for failure.
I don’t know about other countries, but certainly the US and probably the UK governments were, and are, being held to ransom by their lightly regulated financial industries. Well, everyone knows that the US Congress is in the pocket of Wall St.
For the West, the financial meltdown of 2008, and its consequences, have been the main event of the Uranus-Pluto square, which still has some years, and several exact crossings, to run. Uranus brings sudden disruptive shocks that open up new possibilities. Pluto brings a death to the foundations of the old, and a chance to rebuild on new foundations.
This was what happened in the last Uranus-Pluto square in the early 30s. We had a similar financial crisis, and governments learned from it and brought in a load of regulations to stop it recurring, and it worked.
But this time we seem to have learned nothing. Well, we learned from the last time not to let the banks go under. But that seems to have been it.
Uranus-Pluto will always bring disruption and change at a fundamental level that takes some years to work through. And the old power base will either be destroyed and reborn ( as it was in the 30s) or the old will remain but strengthened, empowered.
So this is what I think is looking like the most important outcome for the West of this Uranus-Pluto square: an empowerment of the financial industry in essentially its old form, and a strengthening of its stranglehold over government. And the certainty of future financial crises and their destabilising effects on society at all levels.
It’s rather like Rome burning: a decadent West that has been wealthy for so long it takes it for granted, is gradually losing out to the BRIC and other countries. It has borrowed massively to conceal this, and is unable to rectify the situation because it is being run by the financial industry which is seeking its own short-term interests at the expense, if necessary, of the interests of the country.
This is particularly the case in the UK and the US, which are less financially regulated than other western countries, though in the UK the situation is mitigated by the disproportionately international nature of our financial industry, and the earnings that brings us.
But if you want a real conspiracy it is this: the bankers and hedge fund managers really are running the world – well, the US – and their grip is tightening. Pluto in Capricorn. And it’s not a secret cabal, they are just doing what any industry will do if it is allowed to: it will end up advancing its own interests at the expense of the country’s. It is a failure of government.
|Goblin Bankers in Harry Potter|
And remember, your average banker is not a ‘bad’ person, he’s just doing his or her job, and it is a necessary one. We need our financial industry. There are of course ‘bad guys’ there, but it essentially a collective thing that is going on, a herd thing, if you like. It is often just easier for us to have some stereotyped figures in our mind that we can blame things on. It is lazy, it is an excuse not to think or to be conscious.
Maybe it comes back to Democracy itself. You can’t imagine the Chinese allowing something like that to happen, despite all the bribery and nepotism that goes on. Their government is able to exert its will. Meanwhile the US government is famously paralysed. And if the US is not able to regulate its financial industry, then the rest of the West has to follow suit to a large degree.
The received wisdom has been that Democracy advances hand in hand with the progress of capitalism. And there is a certain truth in that, in that we see the Chinese government having a more open country gradually forced upon it. But maybe that is mainly the internet’s doing rather than wealth.
So these are the major changes that Uranus-Pluto seems to me, from our current standpoint, to be bringing about: a shift in power from the West to the East; the strengthening in the West of the power over government of the financial industries; and a consequent crisis of Democracy in the US.