I was watching a talk by economist Ha-Joon Chang today (see the video below, and also his book, 23 Things They Don’t Tell You About Capitalism), and he mentioned that in his opinion, poor countries were poor, not because of the laziness and ineptitude of the poor people (as right-wing economists generally believe), but because the rich people in those countries were not doing their job properly. He is of the opinion that the rationale for allowing a system that funnels money towards relatively few people is that those people should then invest that money to produce economic growth.
He gave the rather unfortunate example of Stalin, who expropriated financial surpluses from the agrarian economy of the USSR (and caused widespread famine). The surplus was invested in Russian industry and did, indeed, produce economic growth over time. The same basic method of wealth redistribution and investment in growth (with nationally and historically relevant variations) have been used in Britain at the beginning of the Industrial Revolution, in post-revolutionary USA, Germany since the war, Japan, South Korea, and in many other countries with success over the past couple of centuries or so.
It struck me watching this, that in Britain today, with the modern cult of selfishness (“greed is good”), that the wealthy lack the Christian ethics of their forebears, who actively invested in the betterment of society for the good of their fellow humans, as well as for profit. This resulted in economic growth and improvements in living standards for all, over time.
Today, instead, the focus seems to be strongly on self-enrichment – and in the short-term at at that. Even investment advisors recommend that people invest in companies that increase their dividends year-on-year, whether that comes at the long-term expense of the company or not. After all, profits are best re-invested in R&D and long-term growth, not handed out to passive shareholders all the time. Companies that increase their dividends too much do so at the expense of their own long-term viability. If they haven’t researched new products and future markets, how will they keep up? The advice is bad advice – except in the short term.
So, in short, it seems that the Western mantra of “greed is good” is being shown up as a lie. Wealth doesn’t “trickle-down” without an appropriate ethical backdrop in which the wealthy feel obligated to uplift the rest of society. Instead, their wealth just sits, relatively unproductive, in offshore tax havens.
The lecture below is done in a bit of an amateurish way sound-wise (it is Britain, after all) but don’t let that put you off.