23 Things They Don't Tell You About Capitalism is a nice little book from University of Cambridge economist Ha-Joon Chang, incidentally a supporter of capitalism, and is worth a careful read. It is easy to follow and avoids difficult jargon.
Chang's focus is primarily on a critique of "free market" ideology and policies, which in his introduction he identifies as the cause of the current economic and financial catastrophe (xiii).
He also notes that over the past 30 years the countries that have implemented "free market" reforms have seen "slower growth, rising inequality and heightened instability." And in countries, like the U.S. where stagnant wages in the face of increased working hours, this dour economic picture has been covered up by expanded credit – a system that has now collapsed (xiv). Countries like China and India, by contrast, refused to go all out with "free market" reforms and have consequently seen tremendous growth (xv).
Chang goes to special pains to emphasize his pro-capitalist credentials, calling it "the best economic system that humanity has invented." His goal is to improve it.
Of course, Marxists respond by noting that while reforms that increase equality, reduce exploitation, or generally improve economic conditions for working families are good policies to pursue, "free market" ideology and policies are not the sole problem or glitch in an otherwise well-functioning capitalist system.
"Free market" ideology and policies, while they specificallyare designed to increase the intensity of exploitation and inequality and to inflict great damage, are a but symptom of the basic problem with capitalism. This will sound abstract, but "free market" policies are put in place when social democratic policies – generally the social wage for working families – seem (from the perspective of capitalists) to inhibit the maximization of profits. This explains why some far-right politicians today want to eliminate child labor laws, civil rights protections, health and safety protections, healthcare coverage, anti-poverty programs, etc. They use the cover of balancing budgets to do so.
Consider this perspective: there is NO urgent fiscal reason for emphasizing a balanced federal budget. Indeed, paying for social goods (like education, healthcare, infrastructure) with debt that will ultimately be repaid with inflated dollars actually makes more fiscal sense that paying for everything now with more expensive dollars. Contrary to rhetoric of right-wing politicians, a national debt is nothing like your family budget.
The point is that capitalists would like to shift resources away from working families – especially during a crisis – in order to ensure their bottom line, hence massive new tax cuts as the primary if only real goal of the congressional Republicans. This power differential and the private appropriation of social wealth is a defining feature of capitalism that is contradicted by another defining element: a system of commodity production depends on consumption by workers for its sustenance. And as exploitation increases (wages fall) that commodity system is jeopardized, demanding further exploitation to protect profits.
A strong safety net, planning and public ownership are the best protections against this inherent capitalist contradiction, and as Chang notes, despite the revulsion of the "free marketeers" toward these protections, they are always present in capitalist economies – to one degree or another with varying amounts of success. Primarily they serve the interests of the most powerful, Chang admits, and it is up to everyday folks to understand what's going on and why in order to deploy their "active economic citizenship" to counter this trend.
In the end, Chang explains that "human decisions" rather than market "forces" cause economic outcomes. Human decisions led to the decline in real wages, technological developments, choices to allow manufacturing sectors to collapse, and the emergence of financialization of the economy as separate from the "real economy."
