I just finished 23 Things They Don’t Tell You About Capitalism. It’s a fascinating book about the perils of free market capitalism. Chang is pro-capitalism but anti-free-market. He makes a compelling case for government intervention in markets.
He writes about his country, South Korea, where the government put a damper on government economic intervention in 1997 and left their workers to the dictates of the market. Like the U.S., Korea has a weak welfare state, so if a Korean company goes under or sends a Korean employee packing while the economy is bad, that employee’s life will change in a big, big way.
The end result is that “nearly four out of five ‘top-scoring university applicants’…in the science stream wanted to study medicine.” (p.222) Koreans know that if they lose their engineering or business jobs in their forties, they’re dead. So many try to play it safe by getting a medical degree. Even if they get downsized by a hospital, they can always set up their own clinics. In a state where there is no safety, people have to create their own safety. A medical degree–in Korea, as in most places in the world–is the best way to create safety.
But as Chang points out, that’s not a great allocation of talent. He writes that there is no way 80% of the smartest science kids in Korea are cut out to be doctors; they have diverse interests in many areas but flee to medicine because of fear. Contrast this with a culture that exists in a country with a good welfare state–Norway, Sweden, Canada–and there will most likely be more people taking risks to excel in other areas.
Chang admits that there are some people who will milk the system. Overall, however, most people want to succeed. With a safety net along with a culture that encourages success, a country can have a greater diversity of competencies, as well as a better overall economy due to better efficiency in the allocation of talent.
Some say that we don’t have enough money to support a welfare system. I say look at what the CEOs of Countrywide, Merrill, and Citi made from 2002-2006 while driving their companies–and our country–into the ground. They made $460 million. Even if they were good at their jobs–which they clearly weren’t, as proven by the financial disaster they created–those numbers are excessive. Not only did their companies pay them what they did, but our government extended welfare to these big companies when they needed a helping hand. If there were something in place to curb executive pay and use it to make a safety net, we’d be better off. Then we could help individuals as well as companies.
Think about it. If these three guys made half of what they made in those four years: $230 million dollars, divided by three guys, over four years, they’d be making $19 million a year each, which is more than enough to live on, especially for a job not well done. The country could take $57 million a year to provide a safety net. Let’s say welfare pays $15k a year for an individual to live on while finding a job. That’s 3,800 people a year who could be helped. And this comes only by cutting the excessive salaries of three people!
We’ve got too much income inequality in this country, and not a large enough safety net. Kids starve in our country. People die because they have no medical insurance. There is no reason why this should happen in a country like ours that has the means to prevent it.