MALE SPEAKER: Good morning.
Welcome to Authors at
Google in Cambridge.
Today, it's my great pleasure to
introduce Ha-Joon Chang, author
of "Economics,
The User's Guide."
In his bestselling
"23 Things They
Don't Tell You
About Capitalism,"
Dr. Chang, the
Cambridge economist,
brilliantly debunked many
of the predominant myths
of neoclassical economics.
Now, in an entertaining
and accessible primer,
he explains how the
global economy actually
works in real-world terms.
Writing with irreverent wit,
a deep knowledge of history,
and a disregard for
conventional economic pieties,
he offers insights
that will never
be found in the textbooks.
Dr. Chang teaches in
the faculty of economics
at Cambridge University.
His books include the
international bestseller "Bad
Samaritans, The
Myth of Free Trade
and the Secret History
of Capitalism,"
"Kicking Away the Ladder,"
winner of the 2003 Myrdal
Prize, and again,
"23 Things They
Don't Tell You
About Capitalism."
In 2005, he was awarded
the Leontief Prize
for Advancing the Frontiers
of Economic Thought.
Please join me in welcoming
Dr. Ha-Joon Chang.
[APPLAUSE]
HA-JOON CHANG: Good morning.
My great pleasure to be here.
As a recent recruit to
your Android system,
I thank you for inventing
a very good one.
Yeah, I went-- I come from
the other Cambridge, which
is a few hundred
years older than here.
Yeah, but then there are places
like Oxford, where there's
a college called
New College, which
was founded in the 15th century.
So yeah, a lot more
advanced than that.
Today, I want to talk about
this book, "Economics,
The User's Guide."
And the reason why I
got to write this book
is many people agree that
economics is very important.
Economic events like 2008
financial crisis, or the rise
of China, the invention of the
internet, and so on, I mean,
they seriously affect our
lives for better or worse.
And how our business
and political leaders
deal with those
changes also affect
how people live, how they
grow old, how they retire,
and so on.
So everyone agrees that economic
issues are very important.
But when it comes to talking
about those things, when
it comes to talking about
economics, which is supposed
to tell you how these things
do work and should work,
there's widespread perception
that it is too complicated.
Economics is too complicated
for non-specialists.
Actually, it's very
interesting because we
have very strong opinions
about all sorts of things, Iraq
War, gay marriage, Afghanistan,
climate change, nuclear power.
I have got strong views
on all those things.
But then are we
actually qualified
to make those judgments?
That the only thing I know
about in terms of politics
is this introduction to
international relations
that I took as an
undergraduate student
back in South Korea in 1983.
And then I'm saying all kinds of
things about US foreign policy,
and the Middle East, and
the role of Britain in that.
So we are not actually
afraid of saying those things
without having the
necessary qualifications.
But when it comes
to economics, people
say, oh, yeah,
that's too difficult.
That's for the experts.
And indeed, the
experts themselves
say, yes, that stuff
is so difficult.
You wouldn't understand
it even if we
tried to explain it to you.
So don't worry.
Everything's under control.
Go away.
Don't look into this.
Yeah?
[LAUGHTER]
But why?
Why should economics
be different?
I mean, it's only because my
professional colleagues have
been fantastically
successful in convincing
the rest of the world that
that stuff is so difficult,
that it's not going to be
understandable to mere mortals.
But I believe, as I
said in my earlier book,
"23 Things They Don't
Tell You Capitalism,"
I believe that 95% of economics
is actually common sense.
Of course, they're
made to look difficult
with the use of mathematics
and graphs and the jargons.
And even the remaining
5%, I would argue,
can be understood
in their essence,
if not in all technical details,
if somebody bothers to explain
them in an accessible
way, which is
what I tried to do in this book.
Yes, I tried my best
to make it interesting.
So there is "Mary Poppins," "The
Simpsons," well, at least Ned
Flanders, my favorite
"Simpson's" character,
"The Hitchhikers
Guide to the Galaxy,"
"The Matrix," "My Fair
Lady," "Gone With the Wind,"
and whatnot.
However, being
accessible doesn't
mean that I'm trying to give
you some kind of baby version
or dummy's version
of economics to you.
So when we remember
these 15 things, 7 things
you need to know
about inflation,
or that kind of approach.
I take my readers very seriously
and talk about all kinds
of fundamental things.
So what is economics?
We can talk about
that, but I don't
think we have enough
time to do that.
Whether economics
can be a science,
as some or indeed
many economists claim,
the ethical foundations
of economics, and then we
can separate economics from
politics, different approaches
to understanding the
economy, and so on.
So if I briefly--
this is the cover
of the British edition,
which is same in content
but a different format.
So it's a pocket-sized book.
So if I show you--
ah, yeah, I'm,
yeah, trying to do something
completely different
from the existing
economics books.
As you can see from
this table of contents,
I mean, you will
find a lot of things
that you normally do not see
in introductory economics book.
So the definition of economics,
the history of capitalism,
different schools of economics,
topics like production
and work, which do not get
talked about very much.
For example, in
standard economics
we are mainly conceptualized
as consumers, yeah?
So we make consumer
choice, forms
that provide the
products, and so on.
And the form is there but
is seen as a black box,
as this thing called production
function, which describes
this relationship between some
abstract concept called capital
and labor.
And then there's
really very little
talk about how to actually
organize production,
whether for the material
things or immaterial
things like what you
produce here, and so on.
So I tried to talk
about these things.
I'll talk about some of
them in a few minutes,
but let's go through
some of the basic things.
My book also
introduces the readers
to what I call
real life numbers.
People think that economics
is a numbers subject.
And yes, I mean, if you
look at economic articles,
you see a lot of numbers.
But these numbers are dealt in
a very kind of abstract way,
in aggregate ways.
So it is quite common these
days that people graduate
with an economics degree without
knowing really much numbers
about the real economy.
So economics graduate
would be hard pressed
to know what the national
income of their country is,
how big the world economy is,
and what proportion of that
is produced by the US
or China or Germany.
Now, [INAUDIBLE] why do you
need to know these numbers?
Because of you.
You have created this
amazing search engine
where you can find anything.
But even to know
what to look for,
you need some sense
of these numbers.
And if you have no
sense of these numbers,
you can make very
serious misjudgment.
A great recent example
is the Eurozone crisis.
So a number of European economy
using the common currency
euro got into economic
trouble, and especially bad
was the situation in Greece.
And when the Greek
crisis erupted,
there was this very
widely-accepted narrative,
mainly coming out
of Germany, they
started saying the Greeks are in
trouble because they are lazy.
Ah yeah, those Mediterranean
types, they always
eat and drink and dance,
and they don't work,
and they want to leech on
the hardworking Germans,
and the Dutch, and
the Finns, and so on.
But actually, did you
know that the Greeks work
30% longer than the Germans and
40% longer than the Dutch, who
happen to be the laziest
people in the world?
They have the shortest
working hour in the world.
Once you know that, you
realize that the Greek crisis
is a crisis of productivity,
not work ethic.
Greeks actually work very hard.
It's that the
whole Greek economy
that has a low productivity,
to address which
we need to talk about investment
in infrastructure, research
and development,
things like that.
The Greek economic
problem is not
going to be solved by
shouting at the Greeks
that you have to work harder.
While talking about
misunderstood numbers,
in this country
Mexicans are seen
as the quintessential
lazy Latinos.
But did you know that
Mexicans actually
work 25% longer
than the Americans?
I mean, this is
just one example.
But if you get
these numbers wrong,
you can have a pretty
distorted sense
about the real-world economies.
And for that reason,
I emphasize that we
need to know many of
these real-life numbers,
and I actually
give a lot of them.
Of course, emphasizing
the importance of numbers
doesn't mean that you have
to take them too seriously.
I suggest that numbers have to
be taken with a pinch of salt
and sometimes with
a bag of salt.
The German writer,
and apparently he
was also a scientist writing
books on the theory of color
and things like that, Johann
Wolfgang von Goethe once said,
"Everything factual
is already a theory."
Economic numbers, I mean,
same with other numbers,
but economic numbers
are constructed
on particular
theoretical assumptions.
So take the case of GDP,
our Gross Domestic Product,
which is a way of measuring what
an economy produces in a given
period.
This number doesn't include
unpaid household work and care
work that people do at home.
Well, one standard
justification is, oh, you know,
they are not marketed.
It's very difficult to
calculate their economic value.
But this is not true.
In constructing the GDP data,
the national statisticians
go at a great length to impute--
that's the technical term--
impute the market value
to services and goods that
are transacted in the markets.
So for example, if you own
a house and live in there,
they actually try
to estimate the rent
that you would
have paid yourself
if you are renting
it from yourself.
So when you are even trying
to include those things,
why do we not include
household work
and care work, which then
leads to gross underestimation
of women's contribution
to the economy,
because most of this
work is done by women?
And in the standard
estimate that this kind
of ignored contribution
is estimated
to be around 30% of national
output in any country.
Unemployment numbers.
Well, if you want to be
counted as unemployed,
you should be willing to work.
Not everyone who is not
working is willing to work.
One example is students.
They want to get education.
They do not want to work.
So even if they are
not working, they
are not counted as unemployed.
They are counted as people
who are not participating
in the economy, not active
in the labor market.
There are people
who might stay home
but who take care
of children who
are not seeking paid employment.
So that you aren't counting only
people who are willing to work
and do not have a job
when you are counting
the number of people
who are unemployed.
But how do you know whether
this person is willing to work
or not?
You don't just ask them,
are you willing to work?
You have to prove that you
are willing to work, which
in standard methodology is done
by showing that I have actually
applied for paid employment
within the last four weeks.
In normal times, this is not
an unreasonable approach.
But in difficult economic
times, like we have been through
in the last several
years, there are
a lot of people who are known
as, technically, discouraged
workers.
These are people who have
applied for 100 jobs, 150 jobs,
got rejected over and
over and over again,
and they just give up.
So when the statisticians that
[INAUDIBLE] come and ask them,
have you applied for a paid
job in the last four weeks,
they say no.
But that doesn't mean that
they are willingly unemployed.
Anyway, you can debate
all these numbers,
but the point I'm
trying to say here
is that all these
numbers are based
on particular assumptions,
and you can't take them
in the way you take, I
don't know, the temperature
of water or weight of
an elephant and so on.
Although if you ask
a scientist, they'll
say even those numbers
can be debated.
Now, talking of
science, many economists
will try to tell
you that economics
is a science in which
there's one right theory,
or at least one best theory.
But in this book, I
devote one long chapter
to explain that there are at
least nine different schools
of economics, each with its own
unique strength and weaknesses.
And for free market
economics alone, there
are three different varieties.
One is classical
economics of Adam Smith
and David Ricardo,
neoclassical, which
is the dominant school of
economics today, and Austrian.
This is represented by the,
well, Austrian economist
Friedrich von Hayek.
I mean, this school
is sometimes known
as libertarian in
the United States.
Well, the complication is
the neoclassical economics
isn't the same as
free market economics.
Some neoclassical
economists, like Paul Krugman
and Joe Stiglitz, they are
not free market economists.
I mean, we can talk about
that if you are interested.
But the majority of
neoclassical economists
these days advocate
free market policy,
but the way they advocate
free market is all different.
So the classical
economists, they
do not talk about
the individuals.
They do not really
talk about consumers
because their analysis is
based on class analysis.
Their theory is that there are
three classes, capitalists,
workers, and landlord.
And the best way to
maximize national output is
to give the maximum amount of
surplus to the capitalists,
will invest and generate
growth and jobs.
And in order to achieve
that, the best way
is to leave it to the market.
Neoclassical economics doesn't
have the notion of class.
Actually, a lot of
neoclassical economists
will say, well, class is
wrong analytical category.
We are all individuals.
There is no such super
individual thing like class.
The Austrians also have
a very different defense
of the free market.
To simplify it, the neoclassical
defense of free market
is that everyone knows
what he or she is
doing, so leave people alone.
The Austrian defense is no one
really knows what's going on,
so how dare the
government thinks
that it can tell
people what to do.
These are quite different
views of the world.
Because the Austrian
views that the world
is full of uncertainty.
Our rationale is limited, and
therefore there cannot be some
centrally planned or at least
centrally-directed policy.
The neoclassical view is that
the world is very certain.
People are rational.
They know what they
are doing, so why
should government
meddle with it?
Yeah, so there are all
these different ways
of conceptualizing the economy.
And if you know that there
are three different ways
of defending the
free market, you
know that this is not a science
like physics or chemistry.
But I give you these different
schools not to create division,
not to create
factional fighting.
Because my view is that all
these diverse approaches
to economics is
necessary in order
to explain the complexity
of real-world economics.
And to illustrate this
point, I give you what I call
"The Singapore
Problem," or "life
is stranger than fiction."
Now, if you read standard
things about Singapore
in, I don't know, the
"Wall Street Journal,"
the "Economist" magazine,
standard economics textbooks,
they don't need to tell
you about its free trade
policy and its
welcoming attitude
towards foreign
investors, which it has.
But you will never be told
that 90% of land in Singapore
is owned by the government,
and 85% of housing
is provided by government-owned
housing corporation,
and a staggering 22%
of GDP is produced
by state-owned enterprises
including Singapore Airlines.
So I put it to my
students, look,
give me one economic
theory-- it doesn't matter
what it is, neoclassical,
Austrian, Marxist, Keynesian--
one economic theory
that can single-handedly
explain Singapore.
Well, they can't because
there is no such theory.
Singapore combines the
features of extreme free market
capitalism and
socialism, and where
is a theory that can
reconcile these two?
So in the book, I argue that we
should let a "hundred flowers
bloom," as Chairman
Mao Zedong once said.
And of course, he said
it with ulterior motive.
He wanted everyone
to speak their mind,
and then get rid of
people he didn't like.
I don't have such intention.
I don't have such power.
So this is a genuine plea.
Well, moreover, I argue that we
should let them cross-fertilize
because different
approaches to economics
can actually benefit a lot
from learning from each other,
making our understanding of
the economic world richer.
And my advice to the
reader is that they
should try not to be a man
or a woman with a hammer.
There's this famous saying
sometimes attributed
to Mark Twain that,
"He who has a hammer
sees everything as a nail."
Yeah, so if you
acquire one theory,
you keep applying
it to everything.
So if you acquire a hammer,
you keep banging things.
I mean, it's great
if it's a nail.
It would just about
work if it's a screw.
But it would be a
disaster if it is the egg.
And it would be totally
ineffectual if it's jelly.
So we need a Swiss army
knife approach, yeah?
We need a range of tools, and
of course, the sense with which
to decide what tool to apply to
what problem, which is provided
by our knowledge of history,
politics, and ethics,
and so on.
And this is what we need
because, unfortunately,
economists have become the
proverbial man with the hammer.
I mean, they have
only one theory
that they try to
apply everywhere.
We've seen what
kind of mess that it
can create in the
last several years.
Now, as I said
earlier, my book deals
with a number of topics
that are not usually
discussed in economics
books these days.
So I mentioned
production and work.
Let me elaborate on
only one of them, work.
Most people of working
age spend at least half
their waking hours at work.
And for white-collar
workers like you and me,
the boundary between
work and personal life
has been blurred because of
the internet, the mobile phone,
what have you.
And if you begin to count
the commuting hours,
some people are spending
basically 2/3 of their lives
for working.
In South Africa under
the apartheid regime,
they built these
so-called townships
for black people,
which are built
in a far-flung place from
the nice, white cities.
And apartheid
regime didn't really
provide any public transport
for these townships.
Even after the end
of the apartheid,
the South African
government haven't
invested enough to
solve this problem.
So people in some
of these townships
have to rely on these
strange things known
as taxis in the country,
which are basically minibuses
run by organized crime gangs.
So they charge an arm
and a leg, and they
have to travel in very bad or
sometimes non-existent road.
For some people, one-way
commute takes three hours.
So it's six hours both ways.
Even if they work only
eight hours, which
few of these people do, you
are spending 14 hours just
going to work, working,
coming back a day.
Despite the fact that work
takes up so much of our lives,
there's really little discussion
of work in economics books
these days.
Work is, in a way,
discussed only
when it's absent, when
there is an unemployment.
The work itself
is not discussed,
and this is because people
are mainly conceptualized
as consumers, as I
mentioned earlier,
in relation to production.
Because in the standard
economic theory,
neoclassical
economic theory, work
is seen as disutility
that people
have to put up with so that
they can earn something
income with which to buy things,
goods and services, whose
consumption gives the utility,
their ultimate pleasure
in life.
The work is only a means.
But we know that what happens
in the workplace tremendously
affects us.
Work can be interesting.
I hope that at least
most people in this room
think that their
work is interesting.
Can be deathly boring.
I mean, you've seen Charlie
Chaplin in "Modern Times."
I mean, it can really affect
your psychological well-being
because a lot of companies have
introduced this performance
monitoring regime, which
really drive people hard,
or they have reduced
job security, and so on.
And ultimately, work can
also affect our identity
and self-fulfillment.
Despite that, we
don't talk about work.
So government
policies and economics
advises that
economies [INAUDIBLE]
all gear towards income.
So a lot of people in the rich
countries over the last 20
years have become
richer, but many of them
are feeling less happy
because their work has
become more stressful.
The work intensity
has increased,
the commute has become
longer, that there
is less job security.
But then these people are
told, oh, you should be happy.
Your monetary economy
is 20% higher.
But should they?
Well, we need to discuss
these things at least.
Throughout the book, I
emphasize that economics
is a political subject.
It's not a science.
Of course, many economists,
neoclassical economists,
will try to tell you
that what they do
is a value-free science.
But economics can
not be separated
from politics in the end.
Actually, very interesting,
all the name for economics
was political economy.
There's an explicit recognition
that politics and economics
are inseparable.
The neoclassical
school, which came
into being in the late 19th
century, didn't like that.
They wanted to make
economics science.
So they tried their best to
rid economics of politics.
So they renamed the subject from
political economy to economics.
They introduced this
ethical criteria, which
they think is apolitical,
known as the Pareto criterion.
This is named after
half-Italian, half-French
economist in Switzerland
in the late 19th century
and early 20th century
called Vilfredo Pareto.
And Pareto argued that we
should call a social change
an improvement only when it
makes at least some people
better, but makes
no one worse off.
And this actually is a
very important principle
because it's a
defense of individuals
against the tyranny
of the majority.
So to explain this-- I
don't do this in the book--
I often use this story that I
call the one-finger example.
Suppose there's someone knocks
on my door tomorrow and says,
oh, Dr. Chang, we've invented
this wonderful technology
that will solve the
global climate change
problem overnight.
The machines are built.
It's ready to go.
We only need one tiny
input, which you, we hope,
can provide.
And I said, what is it?
He says, well, we need
one live human finger
to start the machine.
Yeah, I'll gladly walk into my
kitchen, chop off my finger,
and give it to him.
But what if it's one arm?
I think I'll do it.
But what if it's my life?
What if it's the life
of all my family?
What if it's the life of
all 50 million Koreans?
Where do you stop?
So Pareto was terribly
concerned about this and said,
look, we can't say
you have to sacrifice
some people for
the greater good.
So this is a very
important principle.
However, it still is
our political position
because the converse of this
position is that you cannot
make a social change that
will improve the lives of many
people if one person objects.
And suppose there's a country
with one very rich guy,
and you try to
introduce some welfare
program for poor people.
This guy can say no,
and there's no way
you can make this guy do it
on the basis of the Pareto
criterion.
I'm not saying
that this is easy.
It's a terrible dilemma.
What do you do?
I mean, do you force that
one person to give up
a lot of things for
the greater majority?
Maybe you should.
But then how about 10 people?
How about 100 people?
How about a whole group
of people, and so on?
So it is a terribly
difficult issue.
But what I'm trying to say is
that you cannot rid economics
of politics.
Actually, the political nature
of economics goes even deeper.
In my earlier book, "23
Things They Don't Tell You
About Capitalism," I
have this chapter, well,
the first chapter,
titled, "There's
No Such Thing as a Free Market."
The point I tried
to make there is
that there is no
objective, scientific way
to draw the boundary
around the market.
Yeah.
So 200 years ago, in
this country and lots
of other countries,
it was perfectly
normal to buy and sell people.
Child labor was
considered normal.
Today, I haven't met any
free market economists
who say that we need to bring
back child labor to truly make
our economy a free
market economy.
Well, there is one person
who almost said that,
although he is not an economist.
Newt Gingrich, yeah?
AUDIENCE: Yes.
[LAUGHTER]
HA-JOON CHANG: You
know the story.
He said poor
children should work
as janitors in their school.
But other than him, I haven't
met any advocate of free market
who want to bring
back child labor.
But in the 19th century
when social reformers wanted
to regulate child labor,
many free market economists
were up in arms.
They said, this is undermining
the very foundation
of a free market economy,
namely the freedom of contract.
These children want to work.
These people want
to employ them.
What is your problem?
It's not like that these
people kidnapped these children
and used them as slave laborers.
Yeah, so if you take
the ethical position
there's nothing wrong with child
labor, well, a lot of people
have come to accept that,
no, actually children
need childhood.
They have the
right to education.
They need protection
up to a certain age.
Once you accept that,
it is inconceivable
that we are debating whether to
relax our regulation on child
labor so that we can become an
even more free market economy.
So economics is a fundamentally
political subject,
the one that any economist will
tell you that it is a science.
But finally, my book is
not just an explanation
of economic theories.
In fact, it's also
about the role
of economics in public life.
And in this regard, I have three
sets of observations to make.
So the first one is,
never trust an economist,
and that includes me.
Yeah, of course, that
creates the kind of paradox
that the Greek
philosophers used to love.
So if you don't
trust any economists,
how do you trust
this guy who says
don't trust any economists?
I'm not a philosopher.
I'm not going to
bother with that.
This is my advice.
Professional economists do not
have a monopoly over truth,
and it is entirely
possible for people
who are not professional
economists to have
sound judgments on
economic issues.
And sometimes
judgments might even
be better because they may
be more rooted in reality
and less narrowly focused.
Indeed, I would argue
that the willingness
on the part of ordinary
citizens to challenge profession
economists and other experts
is a foundation of democracy.
Just think about it.
If all you have to
do is to entrust it
to the professionals, what's
the point of having democracy?
Yeah, let economists
run economic policy.
Let the international relations
scholars run foreign policy.
Let philosophers
run, I don't know,
your policies on
religion and marriage.
And the rest of the population
don't need to bother.
Well, some people think that.
But I think that
that's a terrible idea
because then there's no
point in having democracy.
I also argue that--
well, I'm not even
trying to pretend
that I can read Latin.
I mean, apparently
this is a passage
written on the walls of
the city halls of Gouda,
the town famous for its cheese.
I don't know how they invented
this thing in the middle of all
the cheese making, but they did.
And I think that
this is the thing
we have to bear in
mind when you're
having this debate about
economic issues, which, I mean,
inevitably involve political
and ethical judgments.
Now, I'm not saying
that we should not
have a strong
opinion of our own.
I mean, we should.
But given the
complexity of the world
and given the necessarily
partial nature
of all economic
theories, we should
be humble about the validity
of our favorite theory
and should keep an
open mind about it.
And finally,
throughout the book,
even while I constantly
make reform proposals,
I emphasize how difficult it is
to change the economy reality.
Sometimes the difficulty is
due to the active attempts
by those who benefit from
the current arrangements who
want to defend their positions.
Bribing, lobbying, media
propaganda, and even violence
are used.
But the status quo
often gets defended even
without some people
actively being evil.
You don't need Dr. Evil to
have the world that is evil
because the one dollar,
one vote rule of the market
drastically constrains the
ability of those with less
money to refuse undesirable
options given to them.
So poor workers choose to
work in a dangerous factory.
But is that a real choice?
Yes, I mean,
[INAUDIBLE] is a choice
because the alternative
is starvation.
But if you had different
social arrangements,
these people would not
choose that kind of thing.
So in this regard, I'm always
reminded of this famous saying
by this Brazilian bishop
called Dom Helder Camara who
was one of the leaders of the
liberation theology, which
is the radical left-wing
Catholic theology that
was quite popular in Latin
America in the 1950s and '60s.
And Camara said, "When
I give food to the poor,
they call me a saint.
But when I ask why
these poor people do not
have enough to eat, they
call me a communist."
Yeah, I mean, we should all
become a bit of a communist.
You should question the social
order, the economic order,
underlying the
surface phenomenon
and try to question whether this
order is just, or efficient,
or whatever, and whether
it can be changed.
Moreover, we can be
susceptible to beliefs
that go against
our own interests.
The Marxists used to call
this false consciousness.
Today, we call it "The Matrix."
The best example came
from this country
when they tried to introduce
so-called Obamacare.
There were pictures of these
pensioners demonstrating
against Obamacare with placards
saying, "Government, hands off
my Medicare program."
Hello, Medicare is a
government program.
But these people have
been so brainwashed
by the medical insurance
lobby that they
think it's a private
program because it works,
because they've been told
all the time that government
program never works.
So we have a lot of
difficulties in changing
the social order because of the
active obstruction of people
who will benefit from the status
quo, the limitations of choices
that the markets
give to poor people,
and down to false consciousness.
But acknowledging
the difficulties
should not make us
give up the fight
to create a better economy and
in the end, a better society.
Yes, changes are difficult.
But in the long run, when
enough people fight for them,
many impossible things happen.
Yes, I mean, 200
years ago, anyone
who in this country that said
we should abolish slavery,
would have been branded
unrealistic at best.
Yeah, and makes sense.
I mean, the US
economy at the time
was totally dependent
on the export of cotton,
tobacco, and other
agriculture products produced
by Southern plantations
that used slaves.
So saying that we should
free all the slaves,
that can be easily
seen as an attempt
to undermine the foundation
of the US economy.
And 100 years ago in
Britain and other countries,
they put women in jail
for asking for vote.
Only 50, 60 years ago,
all the founding fathers
of most of today's
developing nations, well,
actually including
Israel, were hunted down
by the British and the
French as terrorists.
And 25 years ago, not that long
ago, Margaret Thatcher famously
said that, "Anyone who
thinks that there will
be a black majority
rule in South Africa
is living in a
cloud cuckoo land,"
which is where she was living.
Yeah, so all these
impossible things
have happened because
people fought for them.
And this is why I often
quote Antonio Gramsci,
the Italian political
thinker, that we
need "pessimism
of the intellect,
but optimism of the will."
And let me conclude
by showing you
my favorite quote from
Nelson Mandela who said,
"It always seems impossible
until it is done."
Thank you very much.
[APPLAUSE]
All right.
I'll be happy to
take any question
and comment you may have.
AUDIENCE: I have one question.
So a lot of us are
evolved in technology
that it seems to
me simplistically
is driving up productivity.
And it seems that if, just the
normal progression of things
just from a mathematical
perspective,
might be the case that the
needed employment to supply
goods and services, I
don't see any guarantee
that it needs to stay high.
That, in fact, we could
have fewer and fewer people,
like in agriculture
or something.
So I'm just curious.
Is that something that in
modern free market economics
people are looking
at that assumption?
It seems as if we always
regard lower employment
as something that
needs to get fixed.
And [INAUDIBLE], with just the
right policies, we can fix it.
What's the proof
that says that there
is gainful employment within
a free market [INAUDIBLE]?
HA-JOON CHANG: OK.
Well, thank you for that
interesting question.
Yes, in the long
run, we have always
found work for the
majority of people.
AUDIENCE: Right.
But it is still is the
same. [INAUDIBLE] years ago
[INAUDIBLE].
So basically, [INAUDIBLE].
HA-JOON CHANG: Yeah, yeah.
No, let me continue.
So not so long ago, even in
the fairly rich countries,
15% to 20% of people
worked in agriculture.
Today, it's 1% or 2%.
In South Korea,
my native country,
when I was born in the early
1960s, nearly 80% of people
worked in agriculture.
Today, it's like 3%.
Yeah, so if you believe
that these people who
say technological progress
destroys jobs, I mean,
we would have a
terrible employment
crisis over the last 200 years.
So in the long run, we keep
finding new things to make,
new services to provide,
and people have jobs.
The trouble is in
the transition period
when the change is very fast,
when a lot of people lose jobs.
They need to get retooled, if
you like, and that takes time.
That takes income
support and so on.
And in some
countries, they manage
this better than others through
various government-assisted
retraining schemes and so on.
So yes, I mean, technology
will create-- sorry, destroy
many, many jobs, but it
will also create many.
But then during the
transition period,
you need some kind
of social arrangement
to help people to retool
themselves to find new jobs.
Some countries do it
better than others.
Yes.
AUDIENCE: Well, the
jobs that are replaced
are not necessarily equivalent
jobs that are lost, right?
There's a lot of evidence
that certain change
in jobs in the middle is being
taken on by automation and jobs
that are too cheap
to automate or too
expensive to automate, right?
And [INAUDIBLE] to
middle class jobs.
HA-JOON CHANG: Yes, I mean,
this is a new phenomenon,
because in the past the jobs
that have been destroyed
were mainly to do
with manual labor,
sort of so-called
low-class jobs.
Now, it's encroaching
the middle class area.
And this is probably why that
we see more anxious comments
in the media because
those are people
who are writing for the media
who give opinions to the media.
But once again,
jobs can be created
through different
social arrangements.
For example, in many
European countries,
a very large number
of people work
in public welfare services.
And yes, they were
created deliberately
by government
intervention, and I
don't see anything
wrong with that.
So yes, I mean-- well,
basically, my view is that,
yeah, the technology and
other economic forces
are difficult to control.
But they are not
like earthquake.
They are not like typhoon.
I mean, there are different
ways of dealing with them.
And for example, a
lot of people have
argued that because of
globalization, inequality
is rising everywhere.
This is not true.
It hasn't risen in Switzerland.
Also, if you look at the data,
before taxation and welfare
transfer many European
countries actually
are as unequal as
the United States.
Sweden, Belgium,
Germany, they are
very unequal before
those things.
And they tax and
redistribute so much
that their income inequality
after those things
is much lower than in the US.
So you can change those things.
This is not to say that
those countries were not
affected by globalization
and technological changes
[INAUDIBLE], but
there's actually
a lot more that you can
do than people suggest.
So please don't think
that, I mean, it's
all because of
technology or whatever,
middle-class jobs will
have to disappear.
No, they don't have to.
Yes.
AUDIENCE: I was wondering,
isn't-- to me it has also some
similarity to some of
the philosophical change
[INAUDIBLE] we have in
this country from, say,
the 10-hour workday to
the 8-hour workday, where,
at first, it was union
fights, whatever, to do that.
And companies say, well,
we're going to cut your pay
and we'll cut your hours.
And strikers say, no,
[INAUDIBLE] hours.
And where the money was coming
from, just a change in who's
driving what.
The scale might be a
little bit different,
but it seems that just the
underlying assumptions of, we
earn our food, whatever,
from work, these jobs exist,
and they go away.
And you said, who suffers?
Even though the
assumptions of almost
seem to be [INAUDIBLE] needs to
change just sort oif like they
changed in those times.
HA-JOON CHANG: Yeah,
absolutely, I mean, yeah.
I mean, I have this
beautiful example
in the chapter on
work in this book.
In 1905, New York State
introduced this law
restricting the working hours
of bakers, bakery workers,
to like 10 hours.
Typically, bakers work 14 hours
in those days, some of them 16.
So New York State thought
that this is outrageous,
wanted to regulate it.
The Supreme Court struck
it out as unconstitutional
as it deprives the
workers the freedom
to work as long as they want.
Yeah, so that there
was a time when even
16-hour work was considered OK.
And yes, people
have fought for it
and, I mean, got these rights.
And I mean, it's exactly
where politics comes in.
Of course, I mean, there
were also economic forces.
People are, relatively
speaking, becoming
more valuable than when
the country was poorer.
So there was also
economic forces.
But economic forces only
give you the outer boundary.
Exactly where you end
up within that boundary
depends on your political
action, union activities,
or democratic pressure,
and things like that.
Yes.
AUDIENCE: So I think, in
response to the productivity
question, there's always
stuff for people to do.
The issue is whether
society-- or how much
society values that be done.
When I was in Hong
Kong 20 years ago,
there were people
whose job it was
to go down the
street every morning
with a broom and a basket
sweeping everything up
from the night before.
HA-JOON CHANG:
That's right, yeah.
AUDIENCE: During the Depression,
the WPA, the New Deal,
created jobs by saying,
we need infrastructure
in our national parks.
We need a bathhouse on
Revere Beach, right?
And it's a question of whether
you have to what extent
the work is valued, right,
the work is of value.
HA-JOON CHANG: Yeah,
exactly, yeah, yeah.
Well, that's
absolutely why, I mean,
the economic values of jobs
are, I mean, in large part,
created by the society.
So if you begin to hire all
lot of, say, [INAUDIBLE] nurses
to available-- sorry, to enable
women to leave their children
and go out to work, that
creates a certain dynamic.
But if the government
isn't willing to fund
that kind of thing,
only rich women
will be able to
afford those things.
So the value of the
women's work itself
is dependent on the political
action of the governments.
And that's another example, but
yes, you're absolutely right.
I mean, what is valuable work
is partly socially determined.
Yes.
AUDIENCE: So inequality
is increasing,
and I think my understanding
is that mobility is decreasing,
in the United States at least.
Is there any way that
that can be reversed
without significant
policy changes,
or is that something that will
sort of, in theory, depending--
HA-JOON CHANG: Yeah.
No, no, no.
I mean, it is a
general phenomenon.
I mean, with increasing
inequality, mobility falls.
I mean, it's a
well-known regularity.
Now, I think that what we
have to think about here
is that people who say, well,
inequality should be accepted,
usually tend to focus on
equality of opportunity.
Yeah, so as far as you
had the same opportunity,
you shouldn't complain because
the more competent people will
rise to the top and less
competent people with fall
to the bottom.
This will be correct if you
lived in Aldous Huxley's "Brave
New World," and everyone was
raised under same condition.
But they are not.
So if you have richer parents,
you get more attention.
You get better education.
You get better
nutrition, and so on.
So it's not like a
race where no one is
allowed to have a head start.
It's equality of opportunity.
But you don't mention that
some kids have only one leg.
So is it a fair race?
So we need to think
about these trends,
the generational
transmission of inequality.
And yes, I'm afraid on this
you equalize the-- I mean,
not necessarily the
parental income,
but the life opportunities
that children
have when they're
young, we are not
going to solve this problem.
And I mean, there's a
lot of research showing
how social mobility in, for
example, Scandinavian countries
is much, much higher
than in countries
like Britain and
the United States
because they provide
those conditions
when children are young.
Whereas in the US
and Britain, they
don't do that to
the same extent.
So yes, I mean, we need
that policy intervention.
I mean, we'll need some
reduction in income inequality.
But you should have more
focused intervention
in terms of childhood
stimulus and nutrition
and opportunities.
Yes, miss.
AUDIENCE: I'm
significantly shorter
than the person who
was here before me.
In the beginning, you kind of
mentioned that we, as people,
have opinions on
all kinds of topics
that we're probably
not qualified for.
And I think part of that's
because various forces have
kind of allowed us to mobilize
around one element of it,
right?
So if we think about
global warming or issues
of environmentalism, we
focus on global warming,
not like the 12
other issues that
are part of this
broader need to fix
what's happening
environmentally.
So what would you say are the
one or two economic issues
that we, as laypeople, or me, as
someone who has a liberal arts
background, could
maybe mobilize around
to invoke more conversation?
HA-JOON CHANG: Well,
this sort of depends
on the exact society
we are talking about,
because does some
organization A have
to address the questions
that are the most important
for that particular society?
And also, different people react
to the same thing differently.
So it is well-known that
in this country, typically,
the tolerance for inequality
is a lot higher than, say,
in European countries,
which doesn't necessarily
mean that inequality
shouldn't be an issue here.
But you need to
consider these things.
And yes, you're
absolutely right.
I mean, what people find
difficult in their attempt
to be an active
responsible citizen is
that there are so many issues.
And I sometimes joke that the
most difficult job in the world
is to be a responsible citizen
of a democratic country
because you have to care about
everything from global warming
to your country's income
inequality, balance
of payments, monetary policy,
the defense policy, what
have you.
So yes, I mean, if
you tell people,
well, we have like 727 issues,
let's all think about it,
they'll not do it.
So you need to focus.
But exactly what are
those one or two issues
will depend on the
time and the country.
And yes, I think that in the
US, the concern for inequality
has actually become very strong.
I wouldn't have imagined it to
be so even, say, 10 years ago.
But yes, I mean, this
might be your chance
to address some of this
inequality problem,
even though the final
outcome might be
you are still more
unequal than, say, Sweden.
So yes, I mean, you'll have
to think about those things
and try to focus people's
minds, because when
I said my intellectual hero,
Herbert Simon once said,
"The most scarce resource in
human society is attention."
Yes, please.
AUDIENCE: Now, what happened
to UK on Friday's [INAUDIBLE]?
HA-JOON CHANG: Ah.
[LAUGHTER]
AUDIENCE: Economic
[INAUDIBLE] end of the world.
HA-JOON CHANG: Yeah.
Well, I am not a
UK citizen, so I
don't have to worry about that.
The UK equivalent
of a green card.
Yes, but I think this is
quite a complicated issue
because if you read about the
history of the United Kingdom
in the last three
centuries, actually
the Scots were crucial in
building the UK economy.
All the early economists,
Adam Smith, well,
except for David Ricardo
who was a Jew, were Scots.
The guy who set up
the Bank of England
was a Scotsman called Paterson.
I mean, the way that these
two countries work together
was quite amazing.
And yeah, now the Scots are
saying, we want to leave.
I think that one difficulty here
is that the Scots, many Scots
see it as a way to get rid
of the Conservative Party
rather than truly be
a separate country.
So yeah, they might
be in for a shock.
Because my view is why not?
Yeah, there are a lot of small,
very prosperous countries.
Finland has less than
5 million people.
Denmark has 5 million people.
Austria has 7 million.
Switzerland has 7 million.
So why not?
But this will create quite a
disruption in the short run.
And yes, the UK
economy might suffer
because of all this
short-term turmoil.
And can it survive that
given its weakened state?
I don't know.
I mean, because
the UK economy was
damaged a lot more by
this 2008 financial crisis
than even the United States
because its reliance on finance
was much higher.
And yeah, I shudder to
think what will happen,
but it's not for me to say.
Any more?
Well, thank you very
much for listening.
[APPLAUSE]
