“The countries that have crashes are those that follow a school of economics too closely” – The Irish Times

Economist and author Ha-Joon Chang says that when he was younger in the early 1980s, many mothers in his home country of South Korea forbade their sons from entering their kitchens. If they entered, warned their mothers, their “gochu” would fall. A gochu is a capsicum pepper. It’s also Korean slang for something else. Chang avoided his mother’s kitchen.

But that meant that when he moved to Britain to pursue higher education at Cambridge University in 1986, he was unable to cook. He became hostage to a terrible British culinary culture that prevailed at the height of the Margaret Thatcher era. Its economy fetishized openness with its emphasis on global trade, but its nation’s attitude toward food was dark and parochial, suspicious of anything foreign.

Pizzaland realized that basic fast food in Italy could be “traumatically foreign” to local Britons, so it lured them in by topping their pizzas with the familiarity of British baked potatoes.

Chang visibly shudders as he recalls a now-defunct British restaurant chain from the era, Pizzaland. He realized that basic fast food in Italy could be “traumatically foreign” to local Britons, so he lured them in by topping their pizzas with the familiarity of British baked potatoes. In most British kitchens of the time, vegetables were usually “boiled well past neutral”. Only salt and gravy were available to liven things up, Chang says.

“To escape this culinary hell, I started cooking for myself,” he writes in his new book, Edible Economics: A Hungry Economist Explains the World. More than three decades later, Chang is a highly skilled recipe preparer as well as a provocative economist. Unlike his mother, his Korean wife does not hesitate to see him in the kitchen of their English house. She cooks their Korean cuisine, while he prepares dishes from around the world.

But while British – and also Irish – food culture underwent a radical transformation from the 1990s to encompass different foods, Western thinking on economics went just as quickly in the other direction during this time. These days, there’s usually only one approach on the menu: neoclassical economics, which is sometimes derided by its leftist critics as neoliberalism.

Chang, who will speak at the Kilkenomics tax comedy festival in Kilkenny next month, has for years opposed the dominance in Western economics of the neoclassical school propagated in the United States, which argues that low taxes, low regulation and unfettered trade are the best way to run an economy. Ireland has long gorged on this philosophy, even after the indigestion of the post-Celtic Tiger crash years.

Still, the economy is like food, Chang says. We need a varied diet. He argues that state intervention in the economy should not be rejected and can even stimulate growth if timely and well designed.

banana republics

In Edible Economics, he uses his passion for food as a tool to discuss his beliefs about tax policy and the history of trade, with examples such as how the spice trade led to the development of perhaps the first truly multinational corporation, the Dutch East India. Company. A chapter on the culinary delights of bananas follows in a discussion of how multinationals can help countries develop. But if left unchecked to accumulate too much power, they can turn states into banana republics. The economic relevance of chocolate and noodles is also dissected for lessons in fiscal gastronomy.

“The countries that have crashes are those that follow a school of economics too closely. This is what happened to Ireland [after the Celtic Tiger]said Chang, speaking to The Irish Times this week.

“In the 1950s, you had protectionist policies. But then, from the 1980s, Ireland really started to change [with the arrival of more multinationals]. You had a pragmatic approach, but slowly the financial sector and [and its symbiotic comrade, the property sector] took over. That’s why you had an accident.

Chang says there was a time when different modes of economic thought, such as Marxism, Keynesian and also neoclassicalism, “learned from each other, and sometimes even stole ideas from each other.” Now, he argues, America’s low-tax, free-trade model has taken precedence over all others, which are routinely rejected by most governments.

“It’s very sad,” he said. But hasn’t neoclassical economics crowded out all other approaches simply because it’s the best for producing wealth, if not for distributing it? Chang argues that the typical Western economy makes the best use of statistics, such as measuring growth by gross domestic product (GDP), which confers an advantage on its proponents who can empirically point to its apparent superiority.

“The problem is that quantitative data is only one way of understanding the world. That doesn’t mean it’s a better way. The world is complex and we need a range of methodologies”

“The use of a lot of mathematics and statistics gives neoclassicalism greater precision. This gives it a more scientific aura than all other schools of economic thought. But the problem is that quantitative data is only one way of understanding the world. That doesn’t mean it’s a better way. The world is complex and we need a range of methodologies.

Such as?

“I’m not saying quantification is bad – we need it. But we don’t ask the most important questions. For example, during the pandemic, people working in supermarkets and home delivery were considered essential workers. But it turns out that these people are, according to market prices, apparently not essential because they are poorly paid. Are market prices really the right way to measure the value of people? If you don’t ask this question, you are simply engaging in narrow quantification.

status quo

Western economic thinking prevailing in Ireland is also, according to Chang, successful mainly because it does not challenge the status quo of the gap between rich and poor.

“Neoclassicalism begins by accepting the existing distribution of power, income and wealth. Only then does he see how you can try to make things better. He views improvement as progress that harms no one else. So you can’t withdraw a dollar from a group without their consent. It is understandably reluctant to question the underlying social order, which makes neoclassicalism quite comforting to people who benefit from current arrangements.

This school of thought gets all the research funding, attention and, therefore, all the applause, Chang claims.

The economic development of South Korea, which has risen from a near scarcity in the 1960s to a regional technological and economic powerhouse, is not entirely different from the trajectory of Ireland – although developments in the Ireland were on a much smaller scale.

Korea and this state have used multinational corporations, especially those in the tech sector, to carve their way to economic success. But with a fundamental difference. Anyone in the West who drives a Kia or owns a Samsung TV is proof that Korea has finally succeeded in developing its own multinationals. Ireland, which has remained an outpost of mostly American multinationals, has never enjoyed the same level of local success.

“Some Koreans like to think of themselves as the Irish of East Asia. We like to sing, we have strong family ties. We even like to drink a little. Both countries also had unfortunate colonization experiences with our closest neighbours. The big difference is that Korea wanted to develop its own multinationals and Ireland did not. I’m not saying that’s a bad thing – Ireland is a very small country. But Ireland has deliberately chosen to do so. It’s up to you whether you develop your own big businesses.

There is a risk, according to Chang, in leaving such a large part of the economy of a small country, such as Ireland, to remain in the hands of foreign investors.

Chang relentlessly criticizes what he sees as a central assumption of conventional Western free-market thinking: that human beings are essentially selfish and that this can inform economic planning.

“It can leave you vulnerable if you don’t control core technologies and supply networks. In the end, the guys who control these things [big US companies] could get up and go and do things somewhere else. Ireland is in a unique position. Maybe you can – Ireland is English speaking which is always good for investing. And you have great relations with Irish America, for example. But usually [it is a bad idea].”

“Big government”

It’s hard to criticize his culinary obsessions, but Chang’s economic philosophy, which urges countries to be more confident about state interventions, remains close to the periphery of mainstream Western economic thought. Still, he could move closer to the center in the years to come. He says the world is entering a new economic era, as challenges such as the Covid-19 pandemic, war and climate change spur more “big government” actions, such as economic support for taxpayers.

Throughout his writings, Chang relentlessly criticizes what he sees as a central assumption of conventional Western market-economy thought: that human beings are essentially selfish and that this can inform economic planning.

“People are selfish. But these are also other things. They have complex human motivations,” he says.

“We often behave selfishly, but we are also altruistic and, for better or worse, we have beliefs, ethical standards and imagination. You need to capture all of this to really understand how the real world economy works. Until now, we have only measured our well-being in a material way.

Critics of capitalism have often argued that the global market economy will eventually eat itself up. Chang’s essentially optimistic view of human nature suggests that there might be another way, if people and, eventually, policymakers, can be convinced to learn from different schools of economic thought.

“We all have to find our own ways of understanding [and change] our economy and, with it, the world in which we live and share, in the same way [that] we all need to find our own ways to eat better,” he writes.

“Good cooks have above all the imagination to defy culinary conventions and combine different culinary traditions. The best economists should be, like the best cooks, able to combine different theories to have a more balanced view.

Edible Economics: A Hungry Economist Explains the World by Ha-Joon Chang is published by Allen Lane (€28).