Ha-Joon Chang: Despite the fall of communism, we are in fact living in planned economies
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay. We’re continuing our series 23 Things They Don’t Want You to Know About Capitalism. Joining us again, Ha-Joon Chang. Thanks for joining us. Okay. We’re up to Number 19: Despite the fall of communism, we are in fact living in planned economies. So explain that. This is supposed to be free market.
HA-JOON CHANG, UNIV. OF CAMBRIDGE: That’s right. Yeah. I mean, that’s what people think. But, you know, just think about it. When Karl Marx was writing about central planning, there was actually no centrally planned economy. Where did he get the idea? He got it from corporations. So corporations might look free, kind of, when it interacts with other corporations, but internally it’s a very hierarchical organization.
JAY: And Wal-Mart would’ve blown Marx away. I mean, there’s the internal–.
CHANG: Oh, absolutely, yeah, planning on a global scale. So, I mean–.
JAY: I’ve often thought, if you want to have a planned economy in the United States, the American government should just buy all the shares of Wal-Mart. You’d have the seeds of a planned economy.
CHANG: No, no, exactly. No, actually, that’s exactly what Marx thought was going to happen. I mean, companies become bigger and bigger, they plan more and more of the economy, and in the end it becomes more rational to run it as a whole kind of separate unit.
JAY: And he never imagined digitization. When you add digitization to the planning process and computerization, places like Wal-Mart, they’re tremendous in the amount of planning [incompr.]
CHANG: Yeah, but, I mean, you know, as the failure of Soviet Union shows, it wasn’t really about the lack of information and so on. It was a more complex problem. I mean, when you have, like–I mean, when you’re poor and trying to feed people, then there are relatively few things to plan. But when you reach a higher stage of material development, people want diversity, people want different things, and so on. And, therefore, how do you plan an economy with millions of corporations and billions of products? I mean, is that–I mean, there is a reason why central planning didn’t work. But, however, this doesn’t mean that there’s no planning. I mean, governments still plan many things. I mean, there are a lot of industrial development in the United States is actually planned by the government, in the sense that it finances a huge amount of money used in the corporate research and development, or it provides it indirectly through federal defense research and health research and so on. All these companies are planning things more and more. I mean, not just–we are not within national borders anymore. I mean, they are transnational and there are a lot of planning elements. Now, therefore, I argue that the question is not whether to plan or not, because we are already planning. The question is what to plan, exactly, at what level.
JAY: And for who.
CHANG: Exactly. Yeah. The Soviet experience has shown that this internally centralized kind of uniform planning doesn’t work. On the other hand, it’s not as if there is any real-world economy that is not planned at all.
JAY: And to be fair, in the Soviet model, it did work for a time. To go from, you know, semi-feudal–
CHANG: Yeah. Exactly. When things were simpler–.
JAY: –to sending a Sputnik, there was a–.
CHANG: [crosstalk] things were simpler, it work very well.
JAY: And then it couldn’t–then it got stuck.
CHANG: Or so–when–. Yeah. When they had, like, one or two kind of very clearly defined objective, like Sputnik or winning the Second World War, it worked brilliantly. I mean, after all, during the Second World War, the US economy and the British economy were also centrally planned, rationing and everything. So it’s not, I mean, that planning never works, because if that was the case, all these giant corporations collapse. But, you know, I mean, there are areas and there are tasks for which planning works better.
JAY: I mean, the other thing with the Soviet model is the idea that everything had to be owned by one central state in order to plan it, gave rise to dictatorship. But that doesn’t mean that there isn’t ways to plan with a diversity of ownership with some kind of public interest.
CHANG: Yeah. I mean, there was some experiment along that line in Yugoslavia with self-management and so on, but it had its own problem, because the one main justification for planning was to coordinate the activities across different enterprises, trying to distill that–some kind of unified national interest out of diverse demands. So if you decentralize too much, this becomes dysfunctional. So, I mean, it’s not easy, but yes, I mean, there was definitely that problem this centralization naturally led to.
JAY: So where do you go from this, then? If there is a lot of planning in the economy and people don’t want to admit it, then what?
CHANG: No. I mean, you know, there are certain things that we really need central planning for.
JAY: Like, we’re talking about a new green economy [crosstalk]
CHANG: Green growth. Exactly. Yeah. Without a concerted, centralized effort, also globally coordinated, it’s not going to happen. I mean, if you just leave it to the market, the market [incompr.] says, yes, keep pumping oil out; I mean, destroy Alaska; destroy Mexican Gulf. You know, it doesn’t matter. I mean, it’s not going to happen if you left it to the market. So this is exactly the kind of thing that you need central planning for.
JAY: And you’re constantly hearing in the financial pages, you know, praising China, how China’s doing this, China’s doing that.
CHANG: Oh, yeah. I mean, today [snip] China putting huge money and government direction behind developing the solar cell industry. You know.
JAY: That’s planning.
CHANG: Yeah. They came from nowhere to become the biggest solar cell producer in the world. I mean, still a bit lower quantity than in other countries, but they are coming up very, very fast. And when the tests are very clearly defined and your objective is clear, the planning is much better than market.
JAY: Okay. Moving on, Number 20: Equality of opportunity may not be fair. What’s that mean?
CHANG: Well, you know, a lot of people argue that we don’t want equality of outcome, because that’s counterproductive. Only thing that we have to guarantee is equality of opportunity. So if you have a 100 meter race, they all have to start from the same starting point. You know, if one has a head start and another that runs 20 meters–from 20 meters behind the starting line is unfair. That’s what they mean by equality of opportunity. So once you make sure that everyone runs from the same starting line, then we have to accept the result. Now, what these people don’t tell you, however, is that in the race, some of the kids might actually have only one leg, or, you know, some of them are so badly malnourished that they hardly can run. But it is not because these kids are, you know, inherently incapable. It’s because they were not properly catered for. If you have a disabled kid, then, you know, you have to have a program to fit an artificial leg to this kid so that he can actually run.
JAY: So in terms of public policy, what are the implications of that?
CHANG: Yeah, in terms of public policy, this basically means that equalizing the parental income to an extent–I mean, not completely. I mean, I–.
JAY: Well, especially in the US now, where you’re getting what’s essentially a two-tier education system, where private schools are giving kids excellent educations, and public school education in many areas is so defunded.
CHANG: Exactly. Yeah. I mean, in the US, the problem is particularly serious, because you fund education with local taxes. You know. So, I mean, the quality of education is basically determined by the wealth of your neighborhood, which reproduces this social inequality. I mean, in European countries, education funding’s much more centralized. Even deprived areas get basically a similar amount of funding. Now, funding good schools, good public schools, is one solution. Another is you need to give some stability and minimum degree of income to all parents, because, you know, I mean, schools can only do so much. I mean, if the parents are constantly worried about money and, you know, because of that–fighting with each other all the time, I mean, the kids cannot have a secure environment to study. And if you–at the end of that kind of home environment this kid doesn’t do well, it’s not necessarily because the kid is less capable. So you have to make sure that these minimum condition for competition is met.
JAY: Okay. Number 21: Big government makes people more open to change. How’s that? We’re told big government destroys innovation.
CHANG: That’s right, yeah, exactly, yeah. In the United States especially, people believe that big government made people lazy because they give free handouts to these people who don’t want to work. But, you know, this is one of the biggest kind of misconceptions that we have, you know, this notion that you need to make people really afraid for them to do things, work hard, think creatively. No. I mean, this actually is counterproductive. I mean–.
JAY: Unless your objective is a low-wage, disciplined labor force.
CHANG: Exactly. I mean–but that’s probably not the recipe that countries like the United States should pursue.
JAY: Well, no, they don’t pursue it with–publicly they don’t say these things.
CHANG: That’s right. Yeah. If you have, I don’t know, $300 per capita income like Ethiopia, maybe even low-wage, well-disciplined work force is what–I mean, something that you can contemplate. But, you know, in a economy with $40,000 per capita income with one of the highest skill levels in the world, I mean, aiming for this low-wage economy is ludicrous. But, you know, the point that I’m trying to make is that by actually giving people some minimum degree of security in basic things like health care and education and so on, and old age and so on, you actually make people more progressive, you make people more willing to take chances. And this is exactly what goes on in the Scandinavia countries like Sweden, Finland, Norway. They have a huge welfare state, spending in proportional terms double the money that Americans spend, triple the money in some countries, in social spending. But these countries actually are as dynamic, actually even more dynamic than the United States, because their workers are willing to take chances with their career. I mean, they, you know, do not–I mean, no one likes–.
JAY: And if nothing else, they sleep better, which actually is a big factor. Like, if you’re up all night worried about losing your job and your house, you’re not getting to be very creative about things.
CHANG: Yeah. So these people, they are not only provided the basic health care, education, and minimum income support; they also are provided with this retraining skills, which means that you lose your job. Okay, I mean, no one likes to lose their job, but, I mean, even if you lose the job, it’s not the end of the world, because you have the minimum living standard. You will get retrained and probably find another job, whereas in America you don’t want to lose your current job ever, because it means no health care, no retraining. You are likely to be thrown on the heap of history, the rubbish heap of history. So this is why, actually, the American workers are a lot more resistant to foreign competition.
JAY: Right. Okay. In the next segment of 23 Things They Don’t Tell You About Capitalism, we’re at 22 coming up: Financial markets need to become less–not more–efficient. Please join us for that on The Real News Network.
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