Friday, 25 March 2011

Do I understand the question ma'am, is it hopeless and forlorn?

Review of Beyond the Profits System, Possibilities for a Post-Capitalist Era
By Harry Shutt

H J Chang, in his 23 Things They Don’t Tell You about Capitalism, tells the story of the letter by top economists to Queen Elizabeth II trying to explain why none of them had seen the financial crisis coming.

The Queen had visited the LSE in November 2008 and asked why “nobody could foresee it”?

The result was a letter from the British Academy which lamented a failure of the “collective imagination of many bright people” who had “lost sight of the wood for the trees”.

Nobody could accuse Harry Shutt of taking his eyes off the wood. Here was one economist who foresaw the financial crisis. Sadly the Queen didn’t ask his opinion.

Those words were uttered in Shutt’s book The Decline of Capitalism. His latest work, Beyond the Profits System, outlines why the official response to the financial crisis can’t work, and why we need to take the plunge into a radically different type of economy.

Here is Shutt being interviewed by Michael Parkinson:

                                                                                                                                                                                                                                                                                           Just because he successfully predicted the financial crisis doesn’t automatically make Shutt right. As Noam  Chomsky once said, if you point at the building opposite screaming “Fire!”, and that building just happens to light up at that moment, you are not a prophet, just lucky.
                                                                                                                                           The real question is not whether Shutt predicted the crisis, but are his reasons persuasive?
                                                                                                                                            Those reasons diverge from the consensus as to why the financial crisis happened. The accepted analysis by government, academia and business is “uniformly superficial”, Shutt says. That consensus blames reckless lending and speculative investment by banks for the crisis and the recession that ensued. If the banks had acted more responsibly, the arguments runs, none of this would have happened.
                                                                                                                                            The solution therefore is better regulation and changes so that, for example, investment and retail banking are separated. Banking is made safer and the economy can grow again. But, says Shutt, these approaches fasten on a symptom – reckless banks - rather than looking for the underlying cause. The obvious question – how did the economy get so dysfunctional that the crisis happened in the first place – is evaded.
                                                                                                                                            Shutt’s explanation for this dysfunctionality starts, as with Chang (see previous review), with the economic failure of neo-liberalism. A strategy that promised high economic growth, when it took over the reigns of the world economy in the 1980s, has delivered the opposite.
                                                                                                                                              Neo-liberal policies “most serious failing was one that has largely gone unnoticed both then and subsequently: their inability to achieve any sustained revival of growth,” he writes.
                                                                                                                                               GDP growth of the industrialised countries was an average of 3.5 per cent in the 1970s, already much lower than the 1960s. It declined to 2.8 per cent in the 1980s and 2.5 per cent in 1990s.
                                                                                                                                               But it wasn’t meant to be like this. Neo-liberalism was supposed unleash the forces of enterprise and lead to higher economic growth. Neo-liberalism was a response to the failure of the Keynesian, mixed economy approach that came apart at the seams in the 1970s. A mixture of high inflation, recession and strikes convinced many that a new economic approach was required. Inflation had to be controlled, trade unions cast out and the rich and corporations allowed to keep more money so that they would invest more.
                                                                                                                                               As Chang has shown this strategy has not worked even on its own terms. More market freedom has led to slower growth and reduced investment. But neo-liberalism is a corpse that won’t lie down and die peacefully. The zombie neo-liberalism  of the present UK government shows that even proven failure is no reason to stop. Chang says that the economic wreckage of neo-liberalism is why we need to go back to a controlled capitalism, where companies are forced to invest for the long-term, government is more active, there is a return to manufacturing and the welfare state is strong.
                                                                                                                                              But Shutt says we can’t go back. We have to go beyond, beyond the profits system, as the title of his book says. Though the Keynesian, mixed-economy approach and neo-liberalism were very different economic strategies, they have both hit the rocks for the same reason: they couldn’t keep economic growth rising fast enough.
                                                                                                                                               The explanation for this failure lies in the nature of the economic system that surrounds us. Growth is inevitable if capitalism is to function. Capitalism is about the investing of money to make more money.  The generation of profit, and thus more money to invest, is a never-ending process.
                                                                                                                                               This money, incessantly generated, must find somewhere to go. It depends upon consumption going up endlessly. But there is a limit beyond which the market cannot absorb new products.
                                                                                                                                               How do you confront the paradox of the need for constantly expanding consumption and the fact of limited spending power? You don’t confront but evade it through credit and low interest rates. This is how prosperity has been maintained despite the lack of growth in wages and salaries. Average wages in the US, says Shutt, fell by almost 20 per cent between 1974 and 1994. Personal debt in the UK stands at £1,463 billion with annual interest payments amounting to £68.3 billion.
                                                                                                                                               So one part of the explanation for the financial crisis is that the lack of real spending power in the economy couldn’t be evaded forever through credit. The financial crisis was caused by the collapse of a housing bubble. People stopped being able to afford their mortgage payments, and the whole speculative house of cards of mortgage-backed securities, collateral debt obligations, and credit default swaps came crashing down.
                                                                                                                                               The other question is why this speculative house of cards got so tall.
                                                                                                                                               This, Shutt says, is because the economy is chronically weak in another way. There is a long-term decline in outlets for fixed investment. Fixed investment means investment in things like factories, vehicles and equipment.
                                                                                                                                               Fixed investment was vital to the success of the Asian Tiger economies, whose growth up to the mid-1990s Chang describes as miraculous. This growth was achieved by investment in things like cars, electrical equipment and steel. For capitalist economies to stay healthy, fixed investment must grow.
                                                                                                                                               But it’s not growing. The most obvious example now is the difficulty corporations have in charging users for online news content or for music and films. If enough profit cannot be made, investment will not happen. For want of “real things” to invest in and actual expansion, money goes in parasitical directions in search of returns.
                                                                                                                                               For example, companies acquire other companies. Or private equity funds buy companies, restructure them through jobs losses, and resell them for a large profit, newly loaded with debt, so the original speculative investors continue to get large returns. It is estimated that the price of a pint of beer in British pubs has increased by 50 per cent because of this.
                                                                                                                                               Shutt attributes the commercialisation of sport to the need for opportunities to make financial returns that cannot be made, as in the past, mainly through “organic” growth, investment in physical things. The real point of privatisation, he says, is nothing to do with efficiency, but gutting the public sector to provide opportunities for private investment.                                                                                                                                               But most of all, money goes into speculation, the cause of the financial crisis. This is investment, not in actual things, but in financial assets in the hope their market valuation will go up, and they will make a return. This is what banks are blamed for but they were far from alone. Shutt says the value of credit default swaps in 2009 was between $45 trillion and $65 trillion, equal to global GDP, so “it is safe to assume that the vast majority of these contracts were purely speculative bets”. But the strength of these assets is ultimately derived from the real economy. And when demand in the real economy falters, you have a crisis on your hands.
                                                                                                                                             In response there has been official volte-face in adopting Keynesian methods of government intervention, massive bail-outs and government deficit spending. Things aren’t now as bad as during the Great Depression, says Chang, only because government has adopted these methods. Bank of England governor Mervyn King agrees that a Great Depression has been narrowly averted.
                                                                                                                                             But in the most important way, the worldwide government response to the financial crisis is just a repeat of methods that didn’t work in the past
                                                                                                                                             That response is aimed at stimulating spending and borrowing through extremely low interest rates. The Bank of England has the lowest interest rates since its formation in 1694. Hundreds of billions have given to banks through quantitative easing so that, in theory, banks lend to businesses.
                                                                                                                                             We can now get an understanding of why Shutt says this official response can’t work.
                                                                                                                                              Because it’s not as if this desperate stimulation of demand has not been tried before. The dotcom share collapse of 2000 threatened an economic slump. The threat was met by the US Federal Reserve reducing interest rates below the rate of inflation for three years. As a result, Shutt says, borrowing doubled to over $4 billion a year, and financial speculation rocketed. GDP growth rates recorded their highest performance since the 1960s. But the “boom” generated was, in fact, the bubble that burst in 2007, precipitating the current crisis.
                                                                                                                                              It’s worth examining, as Shutt does, the reasons why the dotcom boom didn’t last. The logic, in the late 1990s, was that online, electronic and biotechnology firms, would unleash higher rates of growth. New production would create its own demand. But the boom petered out with the realisation that real profits did not follow these new production methods.
                                                                                                                                              In Shutt’s words, the rhetoric ignored “obvious fact that the consequently increased capacity could only be translated into actual higher output if market demand expanded in parallel.”
                                                                                                                                             We are now contending with the consequences of an economic meltdown that was only postponed from 2001.
                                                                                                                                             The trillions of pounds/dollars that have been pumped into the economy since 2007 only serve to hide a problem that remains as insoluble as before, that market demand is not expanding. Why should methods that didn’t work before and, in fact, lay the foundations of the financial crisis, work now?
                                                                                                                                            As Shutt says it is perverse to respond to the bursting of a credit bubble with the extension of more credit. With individuals and businesses already in debt, ultra-low interest rates aimed at incentivising borrowing and spending, are not going to address the underlying problem.
                                                                                                                                           As it is the UK government has retreated into supply-side delusions that by cutting corporation tax you will generate growth. Or possibly there are no delusions left, merely gifts to corporate friends and donors, while ordinary people are left to shoulder the tax burden.
                                                                                                                                              In Shutt’s view the financial crisis is not a sudden event that will be overcome but a gradual realisation that sustained economic growth will not return. Demand, if not artificially buffed up by credit, is not there. And companies will find it more difficult to make the levels of profit demanded by investors. We are facing, as he called a previous book, the decline of capitalism.
                                                                                                                                               Is he right? It is true that Beyond the Profits System has been studiously ignored. Partly it’s because economics and finance remain a mystery to all but the initiated. And the Left, which may be expected to be open to Shutt’s ideas, is committed to the idea that we can achieve “sustainable economic growth”, that capitalism can be restored to health 
                                                                                                                                            But support for Shutt’s thesis does come from one source, albeit inadvertent support. Personal finance magazine Money Week said in February 2011  that shares have risen only because companies have the appearance of growth. This appearance comes from cost-cutting. “You can’t cut staff forever,” the magazine said. “Real growth in demand has to take over from ‘cost efficiency’ for a true recovery. And right now we’re seeing nothing like that.”
                                                                                                                                           “The way we see it these aren’t healthy markets at all, they’re not even recovering markets. These are grossly inflated markets, pumped up by desperate government intervention. The very same people who got us into this mess are using the very same toxic policies to get us out,” it added.
                                                                                                                                            But where Shutt ventures “beyond” the profits system, no personal finance magazine will follow. He says we need to “dethrone the god of growth” and rid the economy of the imperative that economic activity means making a profit. Though abolishing the profit motive is impossible, it needs to stop being the raison d’etre of enterprises.
                                                                                                                                            Why does he come to this conclusion? Because, in his opinion, growth will never return to the high rates of the past. Capitalism is based on the investment of money to make a profit. But in future, Shutt believes, not enough profit will be made to make the investment of money worthwhile. Booms will be short-lived and stem mainly from speculation, not actual company expansion.
                                                                                                                                           “Once this nettle is grasped the necessity to seek a new economic order compatible with negligible growth for the indefinite future will also become self-evident,” he writes.
                                                                                                                                            At present, these truths are far from self-evident. The dethroning of economic growth is a complete departure from economic theory, both of the Right and Left. As Shutt shows, both Keynesianism and Neo-liberalism are committed to attaining the highest possible level of productive capacity. In the case of Keynesianism, demand has to be expanded. This is why strong trade unions were quite compatible with Keynesianism (and capitalism), because workers gain a larger slice of profits and thus consume more. In the case of neo-liberalism, the strategy is all about the supply-side and releasing corporations and the rich from taxation and regulation so they, in theory, invest more in production.
                                                                                                                                            Even in Marxism, there is a bias towards raising production. As Shutt shows, the aim in Communist systems was to provide employment for everyone, thus raising production, not to give consumers what they actually wanted.
                                                                                                                                              In contrast to this commitment to raise production to its highest possible level, Shutt is proposing a more rational economy based on “providing people with what they need and want to the maximum extent permitted by the available resources”. 
                                                                                                                                            This involves a huge cultural and economic shift. Companies, in this post-capitalist era, would not see their overriding purpose as making and distributing profits. Companies would only enjoy the state-granted privilege of limited liability if they served a public purpose and the local community was represented on their boards. Markets would still exist but companies would take account of much wider considerations such as the environment and the full costs – including externalities – of producing goods.
                                                                                                                                             In the absence of competition as a spur to cost-effectiveness, Shutt says a regulator should supervise companies and make recommendations on performance.
                                                                                                                                             This shift in economic priorities would mean that employment would no longer be dependent on whether an enterprise could make a profit. Shutt says that technological advancement has created a perverse kind of scarcity – it is making jobs and therefore, the ability to maintain a liveable income, more difficult to find.
                                                                                                                                            Therefore in a more rational and stable economic order the connection between the entitlement to an adequate income and paid employment would be severed.  A dwindling proportion of the population would be employed on a full-time basis and all would receive a citizens’ income, a flat-rate payment to everyone above the school-leaving age, irrespective of their means.
                                                                                                                                             There is no doubt this would be expensive. Estimates in 2009 put the cost at double the UK rate of income tax and national income. Against this, a citizens’ income  would replace all social security benefits, and in a post-capitalist economy, companies would be absolved from paying returns to shareholders or debts on loans, a burden which is estimated at 15 per cent of GDP in Britain and the USA.
                                                                                                                                             But the main benefit of the post-capitalist economy Shutt envisages is not financial. It is that people would be liberated from the treadmill of work, and enabled to pursue more creative lives without the burden of needing to get a cash reward.
                                                                                                                                             “For one activity that people would readily find more time for in the absence of productive work opportunities would surely be what might be termed ‘active citizenship’”, Shutt writes. “Thus potentially the human race could rediscover the opportunity to practice direct democracy somewhat in the manner of the ancient Athenians – but without their need to depend on slaves to do all the menial work.”
                                                                                                                                             It’s important to realise that Shutt is not talking about a state socialist future in which all enterprises are controlled by an elite. His meaning of “post-capitalist” is not socialism, whatever that word means now, but a society that is not dominated by the economic requirement that a profit be made on all investment. If capitalism is the investment of money to make more money, “post-capitalism” means freedom from that necessity.
                                                                                                                                             But the ideological transformation that would be required to make this change does not seen imminent. As Shutt says, “it seems likely that the catalyst for such a shift towards a more radical agenda is likely to be a traumatic event such as an even more profound financial upheaval that that of 2007-8”. Needless to say, he regards such an upheaval as inevitable.
                                                                                                                                             Perhaps the absence of receptiveness to these ideas stems from an awareness of the past. As Shutt says at the beginning of the book, the current complacency is in stark contrast with the response to the Great Depression of the 1930s. Then, among many, there was an assurance that capitalism was doomed, and an alternative existed – in the form of Soviet Communism.
                                                                                                                                            Both those assumptions turned out to be flawed. Capitalism was going through a trough but emerged from the Second World War greatly strengthened. And Communism turned out to entail, in Shutt’s words, “horrific human cost”.
                                                                                                                                            Now there is fear of an alternative and an ingrained belief that capitalism is endlessly resilient. That reticence is reflected in the hesitant word “possibilities” in the title of Shutt’s book.  It is easier, as Slavoj Zizek has said, to imagine the end of the world, than to imagine the end of capitalism. It would be ironic if those beliefs turned out to be as misplaced as the contrary beliefs of the 1930s.
                                                                                                                                             As it is Shutt cuts a lonely figure. But the collapse of the Soviet Union was predicted in 1976 on the basis of increasing infant mortality figures. And that prediction was conspicuously ignored by right and left.

Friday, 11 March 2011

Most of all you've got to hide it from the kids

Review of 23 Things They Don’t Tell You about Capitalism
By Ha-Joon Chang

 It may have been uttered in 1980 but the meaning of Margaret Thatcher’s mantra, ‘there is no alternative’ is only now becoming clear. For the global elite there really is no alternative to corporate capitalism, even when that system is entirely discredited. Privatise, drive the sick into non-existent jobs, outsource public services to the private sector. More of the same medicine that nearly killed the patient in the first place.

Albert Einstein said a long time ago that you can’t solve a problem with the same kind of thinking that created it. As a matter of interest, Einstein was a socialist

Chang's 23 Things is an attempt to rouse the sleepers from their ideological slumbers. It is a sustained attack on the assumptions behind the economic thinking that has been dominant for the past 30 years. But it is not an anti-capitalist manifesto. It is an argument for a different kind of capitalism. 

Here is Chang talking about the ideas of the book:

Noam Chomsky once said that before you can change the world you have to understand it. He has described Chang as a “fine economic historian” and his respect stems from the fact that Chang doesn’t believe in convenient myths, such as the fallacy that rich countries have always believed in free trade 

In 23 Things the myth Chang attacks is that neoliberalism works. The raft of policies that constitute neoliberalism – tax cuts for the rich, degregulation for the financial sector, privatisation, dismantling of all protection against the  freedom to speculate in things like food and currencies – were sold as a pill that had to be swallowed because everyone would benefit in the end. But the result turns out to be all pain and no gain, or only gain for a minority.

Chang’s point is that neoliberalism, the way the world has been run economically for the last 30 years, has resulted in slower growth. In the 1960s and 1970s, when countries protected native industries and speculation was heavily restricted, the world economy grew at 3 per cent a year. In the post-1980 neo-liberal era, the growth rate is 1.4 per cent.

Britain, which exported many of neoliberal practices to the rest of the world, grew economically by 1.7 per cent between 1990 and 2009. But during the 1960s and ‘70s, when the country suffered from the “British Disease” of high taxation of the rich and strong trade unions, the growth rate was 2.4 per cent. Economically, neoliberalism is a confirmed flop.

Chang says that this failure has been masked by a huge expansion of borrowing and the fact that both partners in a household invariably work now. In the US, average hourly wages are barely more than they were in 1973.

The failure is even more dramatic in poor countries where a lack of democracy meant neoliberal policies could be imposed in a purer form. In the 1960s and ‘70s Sub-Saharan Africa grew at 1.6 per cent a year. But after 1979 these countries, through the World Bank and IMF, were forced to adopt neo-liberal policies.

Industries collapsed because of foreign competition. Countries were forced back to exporting basic commodities like cocoa and coffee and the large increase in supplies caused a collapse of prices. During the 1980s and 1990s income in Sub-Saharan Africa fell by 0.7 per cent a year. Only after this failure of neoliberal policies, Chang says, did excuses for African underdevelopment, such as laziness and too much ethnic diversity, gain currency.

The core justification for neoliberalism, that if you give corporations maximum freedom and make rich people richer, everyone will benefit in the long run, turns out to be just plain wrong. “We have to question an assumption that has dominated economic thinking over the last three decades” he says, “The belief that maximising market freedom is the best way to generate wealth.”

The economic rationale was that the investing class (corporations and the very rich) have to keep more of their money or they won’t invest. In plain terms, you have to create wealth before you distribute it.

In line with this dogma, there were tax cuts for the rich, exemplified by New Labour's cutting of capital gains tax to encourage investment. In the UK, after 13 years of a Labour government the richest   10 per cent paid less tax than everyone else. More money to shareholders only interested in short-term gains and executive salaries went through the roof.

But through it all, Chang says, investment fell rather than rose. Investment, as a proportion of national output, has dropped in all G7 countries and in most developing countries. “The rich got a bigger share of the pie all right, but they have actually reduced the pace at which the pie is growing,” he says.

Neoliberalism was also supposed to make the economy more stable. It was an alternative to the turbulence of the 1970s. But it’s feted taming of inflation was bought at a price of more instability. 

The financial crisis that has engulfed the world since 2008 did not “fall out of a clear blue sky" in the words of Bank of England governor Mervyn King. Despite what Gordon Brown wants us to believe, it was not the first crisis of globalisation but the latest.  

There were virtually no banking crises, Chang points out, between the end of the Second World War and the 1970s. In the 1980s, 5-10 per cent of countries had a banking crisis. In the 1990s, it was 20 per cent. After the latest financial crisis, the figure went up to 35 per cent of countries.

Why are banking crises more frequent? Because it is far easier to move capital around the world in search of quick financial gain than it was before the 1980s.

Job insecurity and intensity have increased. One in five private sector workers in the UK are employed by a company owned by a private equity firm.The purpose is to “restructure” the firm, frequently through mass job losses so it can be sold again for a profit.

As Chang shows, the logic of these economic changes, though presented as benefiting the majority, are just self-serving. The beneficiaries are the holders of financial assets. Greater labour market “flexibility” is needed because hiring and firing workers more easily enables companies to be restructured and sold more quickly. Capital mobility is required because higher returns are depended upon the ability to move financial assets around at speed.

But 23 Things is not anti-capitalist. Capitalism run in the interests of capitalists doesn’t work, says Chang, but it can deliver the goods if controlled in the public interest. Companies should be owned by shareholders interested in long-term investments. The shareholders might be representatives of the government or the workforce.

Governments should reassert their capacity to direct the economy. He gives the example of the South Korean government in the 1960s banning the LG group from going into the textile industry, as it wanted to, and compelling it to enter the electric cable industry. The result, decades later, is world-famous mobile phones.

Most of all finance should be reined in because it weakens productivity growth by directing resources to short-term gains. Complex products like derivatives should be banned, hostile company takeovers made more difficult, and restrictions reintroduced on the cross-border movements of capital.

If the “machine” of capitalism is properly regulated, says Chang, it can be force for good. Chang, a South Korean, can’t help but point to the success of the “Asian Tiger” economic model, before it dismantled after the 1997 Asian financial crisis. South Korea was a prime example with the highest economic growth rate of any country in the world for three decades.

The “Korean model” was based on preserving domestic ownership of its business conglomerates and joint planning between Korean banks and government ministries.

Chang points to the income growth rate of Asian Tiger economies (of which South Korea was one) of 6-7 per cent a year between the 1950s and mid-1990s. This “deserves to be called a miracle”, he says.

The only comparable country now is China. But, as Chang says in the introduction to the book, China, while liberalising its economy, has not introduced full-blown free-market policies.

Here lies the flaw in the Chang approach. 23 Things is an extremely lucid, persuasive account of why free-market economics fails on its own terms. Why corporations, shareholders and the very rich benefit, but investment is reduced and economic growth and productivity held down. In short, why neoliberalism is an ineffective form of capitalism.

The problem is that the world cannot take a miraculous form of capitalism. China has achieved double digit growth rates but it is also, according to the Guardian newspaper "the world's biggest greenhouse gas emitter, number one energy user and arguably most polluted nation on earth".  But if Chang’s prescriptions were adopted there would be 10 or 15 Chinas, in economic terms, around the globe. If what we have now is capitalist economic failure, thank heavens we don’t have success.

The limits of Chang’s thinking are seen in his take on Soviet communism. The communist central planning system failed because there were no markets, no-one knew what consumers really wanted. Many unwanted things were produced and the second largest cause of fires in Moscow in the 1980s was exploding televisions. There were, Chang says, many dedicated managers and workers who tried to make the system work. Despite this, it failed because of its unavoidable inefficiency. It was, institutionally, flawed.

Quite true, but what about capitalism? There are lots of dedicated managers and workers toiling away for corporations who don’t want to destroy the biosphere and who want to represent the interests of consumers. But what do they end up doing after their efforts are filtered through the profit-dedicated institutions that they work for?

It’s one of the things that they don’t tell you about capitalism that the needs of consumers aren’t represented by it. But Chang chooses not to contest this convenient myth. As economist Harry Shutt has noted conventional economics says that competition between enterprises means the customer gets the best deal because nobody buys bad products. In a market system, restaurants that serve terrible meals don’t survive.

 However the truth is that the customer is not always king, but there to soak up as many products as possible. The imperative is not what the consumer wants, but what he or she can be persuaded to buy. To that there is no limit. The aim is always to raise the level of consumption to the maximum that production will allow for, by advertising and credit, rather than adjusting production to satisfy what consumers need and want.

And despite the myth-busting quality of 23 Things there is one way in which Chang give credence to an idea that has become a convenient excuse for an establishment that wants to change as little as possible.

This is the idea of free-market economics that, in order to make its models work, treats all people as if they were purely calculating and selfish.

But self-interest is not all that counts. ““The bottom line is that companies, and thus our economy, would grind to a halt if people acted in totally selfish way, as they are assumed to do in free-market economics,” says Chang.

Chang gives the example of the work to rule, which reduces output by 30 to 50 per cent, to conclude that production depends on workers’ goodwill, and that they will go beyond what is required by their contracts.

This idea, that the roots of the economic crisis lie in a denial of capitalism’s moral dimension, has been expounded by UK Conservatives like Jessie Norman (see review below).

It has been seized on by people like Bank of England governor Mervyn King who has obviously read Norman’s book. Nissan, in Sunderland, asks all its workers how to raise productivity, he says.

Chang, as a supporter of Japanese and South Korean capitalism, would agree. But the obvious question is how do workers who help raise the profit levels of corporations like Nissan, benefit in return? The answer is that they don’t. It’s a one way exchange of give and then give some more.

People, who are workers and consumers, are naturally moral agents. Corporations aren’t. They are institutionally selfish institutions only interested, as institutions, in making profit. But humans, acting in moral way, keep the system working, and permit inhuman institutions to flourish.

It was the economic historian, Karl Polanyi, a great influence on Chang, who pointed out the obvious. He said that if workers followed faithfully the free market doctrine of only selling commodities at the highest price you can get, they should almost permanently be on strike. Because what they are selling is their labour and they should get the highest price for it.

The problem with capitalism isn’t that people are too selfish but that they are not selfish enough. Of course if people were truly selfish, capitalism would grind to a halt. Which would be a terrible shame.

The most pithy response to this question was made by the American community organiser, Saul Alinsky. He was asked by the President of a US corporation why he saw everything in terms of power and conflict instead of goodwill and cooperation, when he seemed such as nice guy personally.

"When you and your corporation approach competing corporations in terms of goodwill, reason and cooperation instead of going for the jugular, then I'll follow your lead," was his answer

But this is one lacuna in Chang’s assault on the triumphalism of neo-liberalism. His answer is that we should look back to the state capitalist economies of Japan and South Korea, and to the welfare economies of Scandinavia.

23 Things is an assault on conventional economics. But another unconventional economist, Harry Shutt, argues that we can’t go back. That capitalism, the incessant search for returns on investment, has become dysfunctional. For the sake of taxpayers and consumers, we need a more rational economic system. To his ideas, we turn in the next review.