23 Things They Don't Tell You About Capitalism

It would not matter if this distortion of perspectives was just a matter of people’s opinions. However, these distorted perspectives have real impacts, as they result in misguided use of scarce resources.

The fascination with the ICT (Information and Communication Technology) revolution, represented by the internet, has made some rich countries – especially the US and Britain – wrongly conclude that making things is so ‘yesterday’ that they should try to live on ideas. And as I explain in Thing 9, this belief in ‘post-industrial society’ has led those countries to unduly neglect their manufacturing sector, with adverse consequences for their economies.

Even more worryingly, the fascination with the internet by people in rich countries has moved the international community to worry about the ‘digital divide’ between the rich countries and the poor countries. This has led companies, charitable foundations and individuals to donate money to developing countries to buy computer equipment and internet facilities. The question, however, is whether this is what the developing countries need the most. Perhaps giving money for those less fashionable things such as digging wells, extending electricity grids and making more affordable washing machines would have improved people’s lives more than giving every child a laptop computer or setting up internet centres in rural villages. I am not saying that those things are necessarilymore important, but many donors have rushed into fancy programmes without carefully assessing the relative long-term costs and benefits of alternative uses of their money.

In yet another example, a fascination with the new has led people to believe that the recent changes in the technologies of communications and transportation are so revolutionary that now we live in a ‘borderless world’, as the title of the famous book by Kenichi Ohmae, the Japanese business guru, goes.[6] As a result, in the last twenty years or so, many people have come to believe that whatever change is happening today is the result of monumental technological progress, going against which will be like trying to turn the clock back. Believing in such a world, many governments have dismantled some of the very necessary regulations on cross-border flows of capital, labour and goods, with poor results (for example, see Things 7 and 8). However, as I have shown, the recent changes in those technologies are not nearly as revolutionary as the corresponding changes of a century ago. In fact, the world was a lot more globalized a century ago than it was between the 1960s and the 1980s despite having much inferior technologies of communication and transportation, because in the latter period governments, especially the powerful governments, believed in tougher regulations of these cross-border flows. What has determined the degree of globalization (in other words, national openness) is politics, rather than technology. However, if we let our perspective be distorted by our fascination with the most recent technological revolution, we cannot see this point and end up implementing the wrong policies.

Understanding technological trends is very important for correctly designing economic policies, both at the national and the international levels (and for making the right career choices at the individual level). However, our fascination with the latest, and our under-valuation of what has already become common, can, and has, led us in all sorts of wrong directions. I have made this point deliberately provocatively by pitting the humble washing machine against the internet, but my examples should have shown you that the ways in which technological forces have shaped economic and social developments under capitalism are much more complex than is usually believed.

Thing 5 Assume the worst about people and you get the worst

What they tell you

Adam Smith famously said: ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.’ The market beautifully harnesses the energy of selfish individuals thinking only of themselves (and, at most, their families) to produce social harmony. Communism failed because it denied this human instinct and ran the economy assuming everyone to be selfless, or at least largely altruistic. We have to assume the worst about people (that is, they only think about themselves), if we are to construct a durable economic system.

What they don’t tell you