An Interview With Ha-Joon
Chang
Wednesday, February 08, 2017
By C.J. Polychroniou,
Truthout | Interview
[…]
C. J. Polychroniou: For the
past 40 or so years, the ideology and policies of "free-market"
capitalism have reigned supreme in much of the advanced industrialized world.
Yet, much of what passes as "free-market" capitalism are actually
measures designed and promoted by the capitalist state on behalf of the
dominant factions of capital. What other myths and lies about "actually
existing capitalism" are worth pointing out?
Ha-Joon Chang: Gore
Vidal, the American writer, once famously said that the American economic
system is "free enterprise for the poor and socialism for the rich."
I think this statement very well sums up what has passed for 'free-market
capitalism' in the last few decades, especially but not only in the US. In the
last few decades, the rich have been increasingly protected from the market
forces, while the poor have been more and more exposed to them.
For the rich, the last few
decades have been "heads I win, tails you lose." Top managers,
especially in the US, sign on pay packages that give them hundreds of millions
of dollars for failing -- and many times more for doing a decent job.
Corporations are subsidised on a massive scale with few conditions -- sometimes
directly but often indirectly through government procurement programs
(especially in defense) with inflated price tags and free technologies produced
by government-funded research programs. After every financial crisis, ranging
from the 1982 Chilean banking crisis through the Asian financial crisis of 1997
to the 2008 global financial crisis, banks have been bailed out with hundreds
of trillions of dollars of taxpayers' money and few top bankers have gone to
prison. In the last decade, the asset-owning classes in the rich countries have
also been kept afloat by historically low rates of interests.
In contrast, poor people have
been increasingly subject to market forces.
In the name of increasing
"labor market flexibility," the poor have been increasingly deprived
of their rights as workers. This trend has reached a new level with the
emergence of the so-called "gig economy," in which workers are bogusly
hired as "self-employed" (without the control over their work that
the truly self-employed exercise) and deprived of even the most basic rights
(e.g., sick leave, paid holiday). With their rights weakened, the workers have
to engage in a race to the bottom in which they compete by accepting
increasingly lower wages and increasingly poor working conditions.
In the area of consumption,
increasing privatization and deregulation of industries supplying basic
services on which the poor are relatively more reliant upon -- like water,
electricity, public transport, postal services, basic health care and basic
education -- have meant that the poor have seen a disproportionate increase in
the exposure of their consumption to the logic of the market. In the last several
years since the 2008 financial crisis, welfare entitlements have been reduced
in many countries and the terms of their access (e.g., increasingly ungenerous
"fitness for work tests" for the disabled, the mandatory training for
CV-making for those receiving unemployment benefits) have become less generous,
driving more and more poor people into labor markets they are not fit to
compete in.
As for the other myths and
lies about capitalism, the most important in my view is the myth that there is
an objective domain of the economy into which political logic should not
intrude. Once you accept the existence of this exclusive domain of the economy,
as most people have done, you get to accept the authority of the economic
experts, as interlocutors of some scientific truths about the economy, who will
then dictate the way your economy is run.
However, there is no objective
way to determine the boundary of the economy because the market itself is a
political construct, as shown by the fact that it is illegal today in the rich
countries to buy and sell a lot of things that used to be freely bought and
sold -- such as slaves and the labor service of children.
In turn, if there is no
objective way to draw the boundary around the economy, when people argue
against the intrusion of political logic into the economy, they are in fact
only asserting that their own 'political' view of what belongs in the domain of
the market is somehow the correct one.
It is very important to reject
the myth of [an] inviolable boundary of the economy, because that is the
starting point of challenging the status quo. If you accept that the welfare
state should be shrunk, labor rights have to be weakened, plant closures have
to be accepted, and so on because of some objective economic logic (or "market
forces," as it is often called), it becomes virtually impossible to modify
the status quo.
Austerity has become the
prevailing dogma throughout Europe, and it is high on the Republican agenda. If
austerity is also based on lies, what is its actual objective?
A lot of people -- Joseph
Stiglitz, Paul Krugman, Mark Blyth and Yanis Varoufakis, to name some prominent
names -- have written that austerity does not work, especially in the middle of
an economic downturn (as it was practised in many developing countries under
the World Bank-IMF Structural Adjustment Programs in the 1980s and the 1990s
and more recently in Greece, Spain and other Eurozone countries).
Many of those who push for
austerity do so because they genuinely (albeit mistakenly) believe that it
works, but those who are smart enough to know that it doesn't still would use
it because it is a very good way of shrinking the state (and thus giving more
power to the corporate sector, including the foreign one) and changing the
nature of state activities into a pro-corporate one (e.g., it is almost always
welfare spending that goes first).
In other words, austerity is a
very good way of pushing through a regressive political agenda without
appearing to do so. You say you are cutting spending because you have to
balance the books and put the house in order, when you are actually launching
an attack on the working class and the poor. This is, for example, what the
Conservative-Liberal Democrats coalition government in the UK said when it
launched a very severe austerity program upon assuming power in 2010 -- the
country's public finance at the time was such that it did not need such a
severe austerity program, even by the standards of orthodox economics.
What do you make of all the
talk about the dangers of public debt? How much public debt is too much?
Whether public debt is good or
bad depends on when the money was borrowed (better if it were during an
economic downturn), how the borrowed money was used (better if it was used for
investment in infrastructure, research, education, or health than military
expenditure or building useless monuments), and who holds the bonds (better if
your own nationals do, as it will reduce the danger of a "run" on
your country -- for example, one reason why Japan can sustain very high levels
of public debt is that the vast majority of its public debts are held by the
Japanese nationals).
Of course, excessively high
public debt can be a problem, but what is excessively high depends on the
country and the circumstances. So, for example, according to the IMF data, as
of 2015, Japan has public debt equivalent to 248 percent of GDP but no one
talks of the danger of it. People may say Japan is special and point out that
in the same year the US had public debt equivalent to 105 percent of GDP, which
is much higher than that of, say,South Korea (38 percent), Sweden (43 percent),
or even Germany (71 percent), but they may be surprised to hear that Singapore
also has public debt equivalent to 105 percent of GDP, even though we hardly
hear any worry about public debt of Singapore.
A number of well-respected
economists are arguing that the era of economic growth has ended. Do you concur
with this view?
A lot of people now talk of a
"new normal" and a "secular stagnation" in which high inequality,
aging population, and deleveraging (reduction in debt) by the private sector
lead to chronically low economic growth, which can only be temporarily boosted
by financial bubbles that are unsustainable in the long run.
Given that these causes can be
countered by policy measures, secular stagnation is not inevitable. Aging can
be countered by policy changes that make work and child-rearing more compatible
(e.g., cheaper and better childcare, flexible working hours, career
compensation for childcare) and by increased immigration. Inequality can be
countered by more aggressive tax-and-transfer policy and by better protection
for the weak (e.g., urban planning protecting small shops, supports for SMEs).
Deleveraging by the private sector can be countered by increased government
spending, as the Japanese experience of the last quarter century shows.
Of course, saying that secular
stagnation can be countered is different from saying that it will be
countered. For example, the quickest policy that can counter ageing -- that is,
increased immigration -- is politically unpopular. In many rich countries, the
alignment of political and economic forces is such that it will be difficult to
reduce inequality significantly in the short- to medium-run. The current fiscal
dogma is such that fiscal expansion seems unlikely in most countries in the
near future.
Thus, in the short- to
medium-run, low growth seems very likely. However, this does not mean that this
will forever be the case. In the longer run, the changes in politics and thus,
economic policies may change policies in such a way that the causes of
"secular stagnation" are countered to a significant extent. This
highlights how important the political struggle to change economic policies is.
What is your professional
opinion of Donald Trump's proposed economic policies, which clearly embrace
neoliberalism and all sort of shenanigans for the rich but oppose global
"free-trade" agreements, and what do you expect to happen when they
collide with Ryan's austerity budget?
Mr. Trump's plan for American
economic revival is still vague, but, as far as I can tell, it has two main
planks -- making American corporations create more jobs [at] home and
increasing infrastructural investments.
The first plank seems rather
fanciful. He says that he will do it mainly by engaging in greater
protectionism, but it won't work because of two reasons.
First, the US is bound by all
sorts of international trade agreements -- the WTO, the NAFTA, and various
bilateral free-trade agreements (with Korea, Australia, Singapore, etc.).
Although you can push things in the protectionist direction on the margin even
within this framework, it will be difficult for the US to slap extra tariffs
that are big enough to bring American jobs back under the rules of these
agreements. Mr. Trump's team says they will renegotiate these agreements, but
that will take years, not months, and won't produce any visible result at least
during the first term of Mr. Trump's presidency.
Second, even if large extra
tariffs can somehow be imposed against international agreements, the structure
of the US economy today is such that there will be huge resistance against
these protectionist measures within the US. Many imports from countries like
China and Mexico are things that are produced by -- or at least produced for --
American companies. When the price of iPhone and Nike trainers made in China or
GM cars made in Mexico go up by 20 percent, 35 percent, not only American
consumers but companies like Apple, Nike and GM will be intensely unhappy. But
would this result in Apple or GM moving production back to the US? No, they
will probably move it to Vietnam or Thailand, which is not hit by those
tariffs.
The point is that, the
hollowing out of American manufacturing industry has progressed in the contexts
of (US-led) globalization of production and restructuring of the international
trade system and cannot be reversed with simple protectionist measures. It will
require a total rewriting of global trade rules and restructuring of the
so-called global value chain.
Even at the domestic level,
American economic revival will require far more radical measures than what the
Trump administration is contemplating. It will require a systematic industrial
policy that rebuilds the depleted productive capabilities of the US economy,
ranging from worker skills, managerial competences, industrial research base
and modernised infrastructure. To be successful, such industrial policy will
have to be backed up by a radical redesigning of the financial system, so that
more "patient capital" is made available for long-term-oriented
investments and more talented people come to work in the industrial sector,
rather than going into investment banking or foreign exchange trading.
The second plank of Mr.
Trump's strategy for the revival of the US economy is investment in
infrastructure.
[...]
It will be interesting to watch how this pans out, but my bigger worry is that
Mr. Trump is likely to encourage "wrong" kinds of infrastructural
investments -- that is, those related to real estate (his natural territory),
rather than those related to industrial development. This not only will fail to
contribute to the renewal of the US economy but it may also contribute to
creating real estate bubbles, which were an important cause behind the 2008
global financial crisis.
C.J. Polychroniou is a
political economist/political scientist who has taught and worked in
universities and research centers in Europe and the United States. His main
research interests are in European economic integration, globalization, the
political economy of the United States and the deconstruction of
neoliberalism's politico-economic project. He is a regular contributor to
Truthout as well as a member of Truthout's Public Intellectual Project. He has
published several books and his articles have appeared in a variety of
journals, magazines, newspapers and popular news websites. Many of his
publications have been translated into several foreign languages, including
Croatian, French, Greek, Italian, Portuguese, Spanish and Turkish.
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