i also got a ph.d. in history from duke university, and prior to that i got an undergraduate degree in history from fuhrman university. >> host: where'd you grow up and what did your parents do? >> guest: right. i grew up in a small town in south carolina, greenwood, it's called. my parents, well, like ethel may matthews' participants, my father -- participants, my father was once a sharecropper. he later on worked in a factory. both of my parents attended segregated schools in south carolina. my mom late or, actually, when i was in law school, went to college and became a teacher which is something she does now. >> host: we have been talking with tomiko brown-nagin author of this book, "courage to dissent: atlanta and the long

history of the civil rights movement." .. >> we're happy to have with us ha-joon chang tonight. he teaches at the faculty of economics at the university of cambridge. his books include the best selling "bad samaritans: the myth of free trade and the secret history of capitalism." is also the recipient of two very prestigious awards, 2003 prize and the 2005 prize for

advancing the frontiers of economic thought. we're happy to celebrate tonight 23 things they don't tell you about capitalism. his new book out on bloomsbury books which is kind of a forensic study of our ideas about capital. it and to equip the reader with an understanding of how global capitalism works and doesn't work. professor chang offers an appraisal and many fresh insights into how to shift from a more plutocratic to humane economic agenda. so please join us and giving him a very warm welcome. [applause] >> thank you, peter, for that very kind introduction. yes, i'm delighted to be here. it's one of those legendary places that one hears about all the time but i've never visited. i'm happy i have a chance to

actually give a talk here. let me change my -- getting warm. you see the book in front of you. the book argued that has the weirdest title in the history, correct? now, a lot of people have asked me why 23 things. actually, it has developed around guessing why 23. so one in the initial period, one prominent theory was i'm a big fan of michael jordan. [laughter] you all know of michael jordan. but actually, i'm very big fan of baseball but i don't watch basketball. even though i have known michael

jordan is i did realize his number is 23. others thought i was more to the esoteric shores, principally in numerology there's this theory which is called the 23 enigma, which claims exactly how i don't know, that all significant events in human society are somehow connected to number 23. so there's that famous book, series of novels which i of course haven't read, a trilogy. and also there's this movie with jim carrey called the number 23. now, i don't know how this theory works, and i never heard of it before people pointed this out to me.

and some people have different view of me and thought i was implicitly referencing to the so-called 23 mathematical problems proposed by the great mathematician david kilberg in the early 20 center. i've never heard of the guy. [laughter] so this theory by if i said was true what bit me in a very favor of life. i mean, have nothing to do with the title actually. i mean, i can't exactly have the name -- number came out but i worry that you might be disappointed by the story. 23 actually is a random number, how it came about was the working price, 20 things. and one day, i remember exactly

what happened. this station in london, agatha christie's for 50. it's a famous location. and i was sitting in this french participatory poll with my literary agent, this irish guy, i've been. we are talking about this and that. and suddenly we looked at each other and said, 20, that's rather boring, isn't it? so we started playing with the numbers, and i said look, i could probably write i don't know, 30 things, 32 things or whatever, but that would make the book too big. so why do we stop at 25? and then we thought 25 is obvious. i told them i don't like even

numbers. 21, to close to 20. so that left 23, and that's how the title was born. i know, it sounds -- sounds like sketch and -- a sketch in monty python your in a way, that story, you know, i tell you this but because i didn't know and representative of the spirit with which the book was written. american publisher, bloomsbury u.s.a. in its catalog describes this book as a lighthearted book with a serious focus. in the same playful way in which we came up with the title, the book has a lot of jokes and

satire, and things like that. to the extent that one of the reviewers describe the book as general three we written by the argentinian novelist. actually the review was meant as a criticism but i took it as a praise because i love them. is exactly the kind of description that i wanted to get attached to the book. it is unusual, interesting, sometimes bizarre. so let me tell you a few things about this book. the book, i will tell you, a lot

of things that you thought you knew about capitalism, at best partial truth, and at worst downright math. now, in the book, chapters are called things. so thing one, thing to anything three, dr. seuss, to deliver cat and deliver cat in the hat? with thing one and thank you. italy two things, but i have 23 of them. so thing one says that there's no such thing as a free market. now, a lot of you might be positive. you might say okay, i mean, we may like or dislike the premarket, i mean, how can you say that we are liking or disliking something that doesn't exist? you know, it may be difficult to

scientifically defined a free market, but we know it when we see one, in the same way that it's very difficult to define an elephant. but, you know, it when you see it. but i put to it that we cannot tell whether our market is truly free or not, in any objective way. let me give you an example. back in 1819, new laws were proposed to regulate child labor in the british parliament. now, the proposed law was incredibly weak why modern centers, so they said very young children shouldn't work. now, how young is very young? can you guess? you know, they were not that popular. [laughter]

below eight, children cannot work. but from nine they can. then they said between nine and 16 they would be allowed to work, but their working hours should be restricted. can you guess? that's right, 12 a day. that is considered being soft, yeah? so you find regulation quite certainly like. especially given this law is supposed to apply only to cotton factories which are considered exactly harmful for children's health. the dust settle in the lung, a lot of children working and put in factories that died of lung disease. anyways, so there was this very light touch regulation, but a lot of people couldn't even take

it. a lot of people argued, look, this is such a fundamental to the principle of freedom of contract which is the foundation of a free colony. these children want to work. these people want to employ them. what is your problem? few people today even including the most enthusiastic supporters of free market, including the rich countries come would argue that we need to bring back child labor, you know, to truly free our labor market. when you think about it, there are few labor regulations that can have such a huge impact. you know, in many developing countries, children on the 16,

15, keeping only statistics, california they have the population. they actually say we ban child labor, your ultimately excluding almost half of the labor force from the labor market. economist debate whether minimum wage regulation make 1% more of the labor force unemployed or not. compared to that, this child labor thing is so huge, but very few people, including the rich countries, think that this is a big regulation. why? does they upset the values underlying those regulations so totally that they now don't see them. so in honor the way, like beauty, freedom of the market is in the eyes of the beholder.

there's no scientific way to define a free market. all markets have regulations. many regulations. week, depending on what we believe in, see the same markets and one person says yes this is a free market, another person says no, it has to be regulations. there are people who believe that banking industry in, say, the united states or the united kingdom is too unregulated. there are other people who say it is too regulated. their so-called free banking so which i believe should have no say in how much capital banks should have. if they mismanaged their money and go bankrupt, it's their problem. you see the same labor market if

you're in favor of child labor regulation. yes, i mean, you would say just labor market is quite free market, especially compared to the markets in europe. but if you believe that child labor regulations are illegitimate, then you say it is a very heavily regulated market. you are excluding all the part of the labor force. you think the stock market is a free market, but can you really -- and sell them on the doorsteps? no. you have to get listed here can you just get listed if you want? no. you have to supplement. a lot of information. your detailed account for three, five, whatever years, depending

on the particular stock exchange we are talking about. when you get that listed, anyone can buy and sell the? no. you have to do it through certified trainers and so on. so you hold the whole market of free market only because you don't see these regulations. because you implicitly upset the values that these regulations embody. free market economies are like portray all regulations as politically motivated interference is in the free workings of our national system. but when there is no way to scientifically defined a free market, free market our political as any other prediction. it is a very important fact of life, because people who want regulation tend to be on the defensive. they say, you know, there's the

market, it doesn't work very well. we have to do something. no, it's not like that actually. all markets have regulations. all natural by which regulations you see as legitimate. so thing one is by saying that breaking away from the objectivity is the first step towards understanding capitalism. and then thing two gets even weirder and says companies should not be run in the interests of their owners. now, how can i say that? i mean, we have been told by many experts that, you know, the properties get properly taken care of only when there are clear owners. and since the shareholders own

companies, companies should be run in the interest of the shareholders. that is a well-known proposition of shareholder value maximization, famously propagated by mr. jack welch, the former ceo of general electric. now, the argument that companies should be running the shareholders interest may have made actually more sense in the old days when countries were basically owned by a small number of people, if not single individual. but that today in the system where all these companies have limited liabilities and have dispersed all, i.e., owned by hundreds of thousands, millions of people come in the system

despite being the legal owners, most shareholders are actually the least committed to the long-term future of the company because they are free to leave. in contrast, other stakeholders in the company, like the employees, suppliers, the local community, they cannot leave the company, not in the literal sense because people like suppliers do not literally belong to the country, but they cannot leave the company in the metaphorical sense that easily. you have been supplying, so you want to switch to, i don't know, nissan or four. it's not that easy. were as you can sell it with a click of your mouse. now, this has made the

shoulders, well, not all shoulders, but short-term floating shoulders very impatient. they want results now. they want results of yesterday, but they couldn't afford it. companies have to cater for their interest because a lot of them, you have a lot of these floating shoulders. and in the last three decades with increasing financial deregulation is free floating shareholders that have become even more powerful that basically hired managers like mr. jack welch who decided to run the company in the interest of the shareholders chose. so what you do when you run the company in the interest? first of all, you maximize your profit, by squeezing the workers, squeezing the suppliers, not investing because if you don't invest, the result

shows maybe five minutes later. today, it makes you look good because you have a lot of cash. so first of all, maximizing short-term profit, even if it means hurting the long-term because you're not investing in research, not investing and trading. and once you have made those profits, you get an ever-increasing share of the prophet to the shareholders through increased dividends and share buybacks. so in the 10 a in the 1970s -- and in the united states in the 19 cities, given is used to account for about 35, 45% of corporate profit. now it's over 60%. basically until the '70s the shareholders claimed through

dividends about one-third of corporate profit. now they take away nearly two-thirds. as for share buybacks, really even more come in the 1980s, yes, there was a share buybacks here but this accounted for 5% corporate profit. so essentially kind of short-term activity. you buy back your own shares so that you pump up the share prices. you occasionally do it. sometimes you, utah had used this kind of things. the trouble is that in the recent period, the share buybacks have become the tail that wags the dog. in 2007, 90% of the american for-profit was used for share buyback. in 2008, the ratio was 230%.

now we have entering the territory. you are spending two and half times of your profit to buy back the shares, unproductive activity there. and the result, when we have seen it, the decline of giant american corporations. you know, general motors once used to produce millions of cars, when japan, although japanese companies together, produced less than 100,000 cars. today, the company is basically hollowed out. they did everything to make money except make good cars. truly. i mean, i have a lot of

discussion in the book, but let's not get into that. so the decline of many american corporations have to be seen in this, and now even the appropriateness of this idea, mr. jack welch had the famous guru of shareholder value, recently came out and admitted that this idea of shareholder value maximization was, and i'm quoting, the dumbest idea in the world. it's too late because it's in your. destroy the economy and nicely it was the dumbest idea in the world. thing three says something quite strange. it says most people in rich countries are paid more than they should. now, what do i mean by that?

now, especially in the last three decades of free market capitalism, we have been told that people are paid what they are worth. so we should not complain about the income inequality. the guy gets paid $50 million a year, that's what happens only because he is worth that. if you are paid $10,000 as a cleaner, it must be that you are only worth about. now, the natural tendency then is for people to predicted this, and think that poor people, i'm sorry, people in poor countries are poor because they are not

very productive. it sounds quite obvious, but is it really true? to show that this is not quite the case, i talk about to bus drivers in the book. one guy is called ron and he drives his bus in new delhi. and another guy is called sin who does that in stockholm. stan gets paid about six times what ron does. is it because sven drives 50 times better? now, to begin it, you could make your driving skills in a way and isn't really possible one guy tries 50 times better than another? maybe you're comparing me with michael schumacher, but i don't think that it's possible to say

that they're such differences in driving skills between two regular bus drivers. now, actually it is more than that because when you think about it, if anything, ron should be the more skilled driver because he has tv, you know, to do acrobatics every second of his driving. towards the cow, towards the rickshaw, towards the bicycle, the children. were as sven can do his job more or less how to drive straight. swedish drivers keep perfect rules very well. there are no cows on the street, as far as i have seen. so actually how it is that this guy who is a much more skilled driver gets paid only one 50th of what the other guy is being paid. well, the main reason of course

is protectionism. in other words, immigration control. unit, the truth of the matter is if you totally free immigration 80, 90% of the workforce in the rich companies -- countries can be and will be displaced or i'm not just about the other striver and closer and talking about bankers, engineers, medical doctors, economists. i should know because i replace a british guy. [laughter] now, i'm not advocating a full immigration. i think that would do more harm than good, but if free market economy is to be consistent they should advocate it because they advocate fully for capital market. they advocate for legislation of

trade in goods and services, then why not free market in labor? you know, once again this shows that markets are fundamentally predictable construct. if they really want to advocate free market, you know, these people should advocate for legislation of immigration, bring back child labor, bring back slavery. they don't do that because some of these things politically they do not want to, but economically speaking, that's inconsistent. anyway, so that isolates back to my earlier point. the flipside of this story is that poor countries are poor not because they are poor people, but because there are rich people.

if you go to poor countries, the rich people of these poor countries, i mean, keep telling you if you'll listen, because the uneducated lazy people that the country is poor. our people work hard like the japanese and kept time like the germans, or as inventive as the americas, we will be a rich country but we have all these good for nothings. not wanting to work hard and soon. but actually, these people do not realize it isn't their fault. because as i said earlier, the poor people in poor countries actually can hold their own against, quite well, against their counterparts in the rich countries. actually, many of them like iran

will be more productive than their counterparts in the rich countries. they fail to pull the rest of the country together. which is what makes these countries for. now, that leads the rich and rich country. that doesn't mean they cannot have themselves on the back and to say only we are worth the money we get. i don't think so. what those people don't often realize is that their high productivity's liberty depends on the fact that the report into, at least migrated to, societies with advanced ecologies, well advanced for good institutions and high quality physical infrastructure. and most of these that have been accumulated collectively, and

over time, and not something that have created themselves. and the smarter ones now, you know, warren buffett already back in 1995 said in an interview that, well, i think that most of my wealth was made. it's not my doing it is you drop into bangladesh, i would be a poor farmer. it was i cannot create all the kind of infrastructure that i needed to make my money. so the smart ones know, and that's why, you know, that he has studied this movement of giving pledges. we can debate whether that is necessary to best use of his money, but still, he knows that individual productivity is

fundamentally collective. it's not just your own doing. the same person with the same skill, same brains can become very differently productive, according to the society that he or she belongs. anyway, i can go on like this but i haven't got the time to go through all 23 of them. but let me just give you really one or two more. i mean, i could talk about that thing four which says the washing machine has changed the world more than the internet has. this has raised quite a lot of eyebrows, but this one will take a bit of time so i can get back

to it if you are interested. i could also talk about things 23 were i say with the economic policy does not require economists. there you go. i burned my union card. i also say in things 22, financial markets need to become less, not more efficient. and thing 16 i say we're not smart enough to be things to the market. so there are lots of different statements which -- coming, sometimes put deliberately provocative way to make my readers think. so it goes on in that kind of thing. let me give you one, maybe two more. thing 13 says making rich people

richer does not make the rest of us richer. know, but this is what we have been told by free market economists all the time. especially in this country for the last three decades. you know, you have to keep giving money to the rich people so they invest and they create wealth. so initially that it might look unfair because they are taking a bigger slice of the pie, but they invested make the pie bigger. so any and everyone has a slice that becomes bigger. you are not getting a smaller version of the pie, is that high surface bigger. the magic is actually bigger. that sometimes known as trickle-down economy. you know, trickle-down is not completely stupid idea.

because what it says is you cannot judge things simply by looking at the forest order of that. yes, i mean, initially people might take more money but if they invest the money, create jobs, and so on, then the effect might be more positive than what you think in the beginning. so it's not a completely stupid idea. the only problem is that it is supported by evidence. [laughter] yet, but we economists are very good at not collecting my things like evidence get in the way of a good argument. there we go. anyways, the interesting thing is that this logic is identical to what stalin used when he

collected soviet agriculture. what he argued at the time was actually an extension of the classical argument by 19th century free market economists like david ricardo who argued, but, there are three groups in society. there are the workers. there are the capitalists, and there are a the landlords. landlords are the one who achieved a capital and create economic growth. workers basically if you give them in terms of wages, they don't invest. landlords, despite having all of the money, they actually do not have the drive. they will all this money on conspicuous consumption. so have to concentrate in the investor. i.e., the capitalist cloud.

now, stalin to argue for agricultural collectivization in his logic identical. he argued that at that moment all the surplus that could be invested in the soviet economy was in agriculture sector. industry sector is tiny. and, therefore, thought you had to mobilize surplus in the agriculture sector. unfortunately, the landlords and farmers were not investing. so you had to actually get this resource away from them by collectivize in agriculture and extracting a lot of resource on the agriculture sector by deliberately keeping the agriculture prices down and

transferring that resource into the investor, i.e., the central planning authority. actually it's very striking, the similarity. in the book i call as far as free market study. now, of course stalin's collectivization led to pashtun that i was their persecution, labor camps and so on as you all know, but there was also huge famine in 1933. there was a huge disruption in the agriculture sector. in large part because they shipped out so much grain out of the countryside that they didn't have enough grain to feed and to track animals like course. so when you don't have traction

power, how do you till the land? it was a total failure in that respect, but at least it achieved its central aim, i.e., raising investment and raising economic growth. because of soviet growth develop so quickly, so much so that we, saw once very poor nation industrializing enough. unfortunately we cannot say the same about free market stalinism. i.v., trickle-down economics. they fail to deliver high-end invested at high-growth. especially in this country, the top 1% took about 10% of national income in 1979.

by 2006 through a series of tax dollars in business deregulation and so on, they share has gone up to 23%. it might be even higher today. but i mean, there isn't -- we have the latest figure. so the rich, the very rich are getting something like two and a half times more than before, in proper terms. but since the late '70s, the rate of investment is a part of national income have all fallen to the previous period of the '50s, '60s and '70s. so, you know, the rich, especially the american rich, have become very lazy, very inefficient. you have to pay them two and a half times more to deliver what

is inferior good. less investment, less growth. they try to justify all this by saying, yeah, we are, thanks to all these policies, richer than ever. yes, by definition if you're going, even at 0.1% come if you keep going you would be richer than ever. but the point is, are we? could we have been even richer? because the growth rate has slowed down. and all this as opposed to huge disparity in income, and why are we doing this? action, i don't mind giving a lot of money to the rich people if they genuinely create wealth and jobs. but we have been duped.

so there is something to think about. okay, i have to wind up here, otherwise we don't have time for q&a. he for i finish, let me just -- before i finish, let me just tell you that in this book i have tried my best to dispel the wide spread process that it is too complicated for non-economist. you know, i say in the book that 95% of economics is commonsense, of course me to deliver complicated. this is known as the entry barrier. to be fair it's not just economists who do that. lawyers and then all these jargons. i have this document which ostensibly say that i own my apartment, but does it really

mean? i do not. i haven't been trained in the language. it's the same for all profession, but economists have done it probably a bit more than others. you tried to read economics, kind of writings, it's very difficult to make sense of it. believe me, 95% of it is commonsense. okay, there is remaining 5% which isn't. but even for those essential reasoning, all technical details can be explained in plain terms. so through this book i want to include my readers with fundamental economy reasoning and some basic but often misunderstood facts about capitalism so that they can better exercise what i in the book called active economic citizenship, and demand right course of action for our

policymakers and business leaders. when you think about this, we demand also some things we don't ask another technical detail. how many of you actually know anything about epidemiology, but you still demand that restaurants and food factories have to have hygiene. it's the same. if you know some basic principles, you don't have to become a trained economist. if you know some basic facts, you can make very robust argument for, say, more heavily regulating. you can make that argument for the -- sorry, you can make a good argument for letting government kind of develop certain industries. because there are some

industries which are naturally difficult to develop through pure market mechanism. i mean, these are just examples, but basically you can make quite robust judgments about economic policy with basic knowledge of some very and some facts. and i wanted this book to be an encouragement for people to actually go out and do things, and more actually exercised their economic citizenship. all right, so, i think i should stop there and ask you to give me questions and comments. i thank you for listening. thank you. [applause]

>> i have a question about population. roger penrose the great mathematical physicist in england and the fellow who died recently who was an australian biologist said that in 100 years we will be extinct because of overpopulation, and overuse of resources. now, i can understand through technology that we might be able to feed all of the world, but we cannot create enough jobs. in other words, how many arista shoe salesman and doctors can you have in the world? so i'm wondering if economists, and i think governments must be thinking about the final solution, to use the nazi terror. it was a very brutal and it transcends gender ethnicity, age and everything. in other words, there's a famous american film called soil in

greenport they were making food from dead bodies. i think we are approaching that. and so what do you think as an economist about the idea that there are too many people in the world, and what do we do? thank you. >> thank you. well, that's a very serious question. first of all, i do not think it right to say that it makes it impossible to create jobs. i mean, once again, i mean, this is something that people continue to believe because they think that jobs have to be created only through profit-seeking firms. there are lots of jobs that we can create by providing better social services, and then by putting and regulations that require more, kind of labor input. how do american service center, retail service countries make

money? by basically not hiring people and making things very inconvenient. you know, in japan, korea, yes, bby american scanjet over employment. but this is actually good because you go to the shoe shop, someone will be with you within one minute. here you have to take a ticket, wait for 20 minutes, and they don't even bother. so to actually, you could argue that these industries have to hire more people through regulation, and that may create jobs, can create jobs, many government jobs. a lot of government services are very labor intensive. libraries, home care. lots of things. so this notion that we somehow

have run out of ways to create jobs is actually the result of this relentless corporate campaign to make us believe that, unless the job makes money for the corporation, it is worthless. know, we should say to the companies, look, i really making money by raising social productivity because as we see it, you actually -- dumping all this cost to the consumer. you've been doing this for ages and you don't even realize. supermarket, you are doing all work. you know, i mean, when supermarkets first came, a lot of people found it quite offensive. my god, you know, like border us

out and wrestle and kitchen garden, go out and pick your needs. but we have to become so used these ideas that doing nothing, work for them. so actually we need to think about this in totally different way. now, having said that, yes, constrain is a problem. i have great trust in human ingenuity to come up with solutions to a lot of our problems, but the thing about economists is that development isn't certain. it is unpredictable. for all i know, some might come up with solution to all the world's energy problem in two years time. or it could take 500 years, and we might all die before then. so that's my problem. but yes, like some other, i

would not dismiss the power that easily. let's leave it at that. >> hi. could you talk about whether the observation that capitalism needs growth in order to survive, whether that's one of the, maybe thing 24 are not. >> well, i -- yeah, let me start in a more roundabout way. i mean, my view on capitalism is like winston churchill view on democracy. so i think it's the worst economic system except for all the others. so i don't see any kind of some form of capitalism but important

point is that there is capitalism and there is capitalism. even the united states didn't use things like this. on in the last 30 years. think about the duties, create society. this is a different country. i mean, you have different forms of capitalism. american capitalism is a different from the japanese which is very different from the swedish want which is different from the french went and saw. so it isn't just one way of running capitalism. now, because of his global warming issue i think that the rich countries have to seriously think about kind of not pursuing growth as an object per se. you might a chief growth, but somehow we have become obsessed with economic growth and this is not healthy, this is unsustainable. but on the other hand, and other

poor countries i don't see how you can guarantee decent standard of living for everyone without having a period of significant economic growth. so i think we need to be a bit more kind of nuanced, whether we want more growth or not. i mean, depends on who you are talking about, whether capitalism is relentless pursuit of profit, because all of the countries have actually modified capitalism. and they live quite happily. take the case of denmark. the government takes more than 50% of national income as tax. to a lot of americans that is like the soviet union. but when you look at all the indicators of quality of living and peoples objective assessment

of happiness and so on, it is at the top of the world. we might have come other good things in this country, but people are not as happy as the days. and why? >> hello. i thought your first statement about the free market, you and i can agree three is a good thing without uttering what it is. i mean, mit for human? i'm not free in a way that a tiger is free. so i'm assuming that by free market you mean to say deep markets that are liquids. writes? is that an accurate description of what a free market is, as you

mean? and if so, if you're to look at the data in the 20 our past 50 years, say, those economies that switch to more deeper markets, non-shallow markets that are liquid, liquid in the sense that did ask, difference is mostly can self expected to systematically better or happier in whatever economic criteria, cbp, let's just say. is there a systematic trend that those economies that adopted deeper and more liquid markets? did they get better off like brazil, argentina, asian countries? >> right. yes, i mean, even defining what is liquid market and so on, quite problematic because a lot of people thought the american or the british financial markets

creates a very deep into 2008. and suddenly it seizes up so that there are lot of things that we do not understand about working the market. but let me put it in this way. unocal the fact that something is beneficial doesn't mean more and more of it is more is better. so yes, but i am definitely of you that the central planning system was not working, so that injecting those market forces into the economies was a good thing. but this doesn't mean that the most deregulated market is the best. look at the case of ireland, iceland, which had basically

abolished all these kind of crazy regulations that are relatively free. for a while it looked great. the viking raiders were buying every other big chain store in britain, everyone having a party, but they completely went off the rail. and they are now in deep trouble. probably we need to see things in kind of a balanced way. i mean, let me give you an example. it is necessary for human survival. some more salt may not be a completely good thing because it

increases health risk, but it makes are eating more pleasurable. but after a point, there comes a point where you have too much salt is actually canceling out whatever pleasure you're getting from the tasty food. so markets are like that. some is actually necessary, but too much can be very harmful. >> of the 23 things that you proposed to find economic climate of today, what's one thing that you think children of today should be educated about now, seeing that they will soon inherit the economic climate that we are creating? >> right. wow. ideally, all of them, but i think that in terms of practical

lessons, i would say it's thing 16 which has we're not smart enough to keep things in the market. i mean, at a more philosophical level i would say that is thing one, there is no such thing as a free market, and at the more kind of personal level i would say that they should remember that the washing machine has at least so far changed the world more than the internet has. ..

>> yeah. i think the most important thing in the american context is to realize that this country's not the country of american dream anymore, yeah? you know, that this country has operated on this belief that if you work hard, you know, if you invested in educating your children, the next generation will live better. and for a long time this was actually true. because in europe, the most comparable part of the world, there are too many kind of futile legacies, and it was difficult for people who were born in lower classes to move up. but today this is the reverse, yeah? except for one or two european countries like britain and

italy, all the other european countries have much higher social mobility. why? basically, because of the welfare state, yeah? so that this country really needs to look at -- [inaudible] b -- unfortunately, it's going in the other direction. people say we have too much government debt, we have to cut social services, reduce the welfare state. but, actually, one of the things that -- [inaudible] equality of opportunity may not be fair. the free market economy say, oh, what matter is equal opportunity. i mean, if you try to equalize the outcome, then you punish people who work hard and so on. so that we should not have equality outcome. now, to an extent this is true, but there's a deeper sense in which it is not true because

until you guarantee some minimum living standard and stability for everyone, the equality is enough kind of approach, actually -- [inaudible] people from deprived background, children from deprived background. so it's like saying, well, you know, we have this 100-meter race in which everyone starts from the same starting line, yeah? that's equal opportunity. without mentioning that some of these kids only have one leg, yeah? you know, i mean, this is the ultimate problem with american approach to opportunity and equality. and other countries have gone beyond that. i mean, comparable countries in europe have gone beyond that. they have created this welfare state which guarantees, actually, some kind of minimum for all children so that competition can be genuinely, you know, fair.

but here you are kind of deceive yourselves because you keep saying, yeah, yeah, everyone starts from the same starting line, yeah? when some kids have only one leg, others have sandbags in their leg, some others are blind, yeah in the and this kid without -- yeah? and this kid without all these disabilities win and say isn't this fair? they all started from the same starting line, yeah? and i think that's the biggest problem in this country. >> which country would you say is the closest to being completely free market? and if you want to take a guess on the other end, which is the country that is farthest from being a e free market. >> right. well, probably the freest market

is hong kong. well, of the countries that are functioning, you know? i mean -- [laughter] no, no, really, i mean, if you have too much free market, if people begin to buy and sell government -- [inaudible] and so on, you don't have a functioning society. so i'm excluding some of the -- yeah. >> how about one of those -- >> oh, one of those, you know, a lot of developing countries are in that situation, yeah? the so it shows that too much free market can be bad many that sense. but of the funking ones, probably -- functioning ones, probably hong kong is the closest that comes to mind. but, you know, hong kong's a tricky proposition because it never was an independent country. it was always part of a bigger system. but before 1984, sorry, 1994

part of britain, afterwards part of china. so, i mean, if you excluded probably the countries like ireland come the closest. but then they got into a lot of trouble because of that lack of regulation and defined market. and, of course, at the other extreme is our own north korea, yeah? i mean, it's a country that has, yeah, i mean, for popular reasons wanted to live on their own, yeah? but, you know, sadly, it was an illusion because they kept talking about self-reliance and so on, but, you know, did they use only technologies that were invented by koreans over the last 2,000 years? no.

basically, the economy has been running with 1930s japanese and 1950s soviet economies, and they deluded themselves that this is our self-reliant way of life. so, i mean, once again, i mean, the extremes tend not to work very well. >> given that religion owns most of the property in the world, how would it change the equation if we taxed religious property in america? >> wow. [laughter] yes. that's an interesting question. well,ly, i do not know exactly how the religious bodies are exercised their property rights, huh? i mean, do they behave differently from other property other

owners? maybe they do, maybe they don't. i mean, i have no basis to judge that. but, yes, religious bodies are serious wealth owners. in britain the biggest landowner is the queen and second is the church of england, yeah? so depending on how you exercise your property rights with the land or whatever you own, the way our economy works that would differ quite significantly, but i do not have any empirical basis to say whether they are really different, yeah, from other property owners, if so, how they are different and so on. i'm sorry. >> they don't pay taxes. >> sorry? >> pay -- >> yeah, apart from that. but that's only part of the equation, yeah? because the way they exercise their property rights, i mean, if they own shares in certain companies, are they less kind of

willing to sell at slightest disturbance? i don't know. >> um, hi. my question is, basically, back in the '80s in latin america there was a lot of debts, and a lot of countries had to take out loans from the imf and the world bank. >> uh-huh. >> and then we come to, like, the '90s and the 2000s, and we have nafta and cafta. >> yeah. >> is there any way that you think that the trade agreements could be made so that way they're more fair and competitive to the people in developing countries? >> yes. um, well, i mean, you know, my basic view is that free trade is good if it's done among countries at similar levels of

development. it is not good for the poorer countries if it's done between countries at very different levels of development. in the short run, everyone will benefit, yeah, because, i mean, central american countries through cafta will be able to sell more of what they already sell. but the problem is once you sign free trade agreement with the united states, yeah? it means that, basically, you are not going to develop any new industry. >> [inaudible] >> yes. [laughter] that's how people should feel -- [laughter] so, i mean, there's a short-term, long-term trade-off there because in the short run, yeah, it is better to sign this agreement, yeah? you, yeah, lose some industry that you have been protecting, but you are probably able to sell more of what you already have. but over 10, 20 years period you

just cannot develop anything very much new. i mean, look at mexico. when they signed nafta in 1994, everyone thought mexico's future was -- [inaudible] they joined the oecd, and everyone was happy. i mean, it seemed to work for five, six years because a lot of -- yeah -- american, japanese, korean companies that went there to build factories, create jobs, basically targeting the american market. but in the last ten years mexico's growth rate in per capita terms has been, basically, zero. they've been losing a lot of jobs to china, to guatemala, and they have in the meantime lost their own capability to create new activities, new jobs. this is what happens, huh? so, unfortunately, there are a

lot of countries that are so desperate that they want to sign this agreement for the benefit of the next five, ten years. but in a way they are signing away their future. >> professor chang, i think that the work that you do is very special, especially as an economist from cambridge university. i feel like oftentimes academics when they get to that level, they don't care about trying to engage with ordinary people, so i really applaud you for that. but i'd love to know, like, what, what happened for you that made you want to, as you say, you know, try to engage citizenry in more practical economics to have a more educated populace engaging in

that. and then the other question i had was i'll get the book, but i'd love to hear your perspective on, like, the role of women. um, i guess that's a broad question, but i'm just kind of grappling with this, this kind of rhetoric that has been emerging about the need of investing in women. it feels as if it has such a capitalist agenda behind it so that wick can be -- women can be more productive workers in the work force. and, you know, jpmorgan and all these big, multi-national corporations have these, you know, efforts to bring women into business schools. i don't know, there seems something very suspect about it. [laughter] so if you could address those things. and also the last thing is wisconsin. what you think about what's happening in wisconsin. >> right. yeah.

[laughter] well, yeah, i'm grateful that you appreciate my effort to communicate with the general public. yes, i mean, it actually is a bit worrying. some of my colleagues get worried when ordinary people understand them, yeah? is. [laughter] so, yes, i mean, i do not want to suggest even for a second that what i'm doing here, suggest that we don't need professional economists. there are some technical things that only trained professionals can do well. so that's not what i'm trying to do. but to tell you that, actually, you can at least understand what they are trying to do, yeah? and you can make robust judgments.

anyway, so that way, you know, it's actually quite strange because it really comes to the kind of drug safety, nuclear power station, i don't know, the middle east policy, yeah? for all kinds of things, a lot of people have very strong opinions. they say, oh, yeah, that's your thing, yeah? no. it shouldn't be like that, yeah? i mean, why do you let just economists get off the hook so easily, huh? i mean, why do you get angry with foreign policymakers and the fda and everyone, but you just think, well, larry summers is okay, greenspan was okay, yeah, and so on. i don't think so. role of women. i don't know, but what you have raised is a very complex question that i cannot deal with

partly because of time constraint, but mainly because of my lack of ec per tease. but, you know -- expertise. but, you know, my tribute to women is in -- [inaudible] that says that washington has changed the world more than the internet has. i mean, basically, the argument is that the household technology represented by the washing machine has reduced the requirement for household work so much that now we have a complete, completely different labor market dynamic and family dynamic. that come from, yeah, a lot of women working, having independent means and, yeah? this changing the sort of internal bargaining power in the family and facilitate decisions and many things, yeah? >> but that, i mean, can i go into this? let me put it very simply.

you know, i was -- the book has already been translated into four languages and will come out in ten more. i mean, one of the countries that has already translated it is the netherlands, and i was once invited to dutch cable tv to debate a dutch professor. actually, he really liked the book, so there was nothing to debate, but he -- [laughter] however, raised the issue of this washing machine thing, huh? we had, like, very little time left, so what did i say? i said, well, i cannot really go into the detail, but have you ever had to break ice in the river to wash your clothes? and, of course, the answer is, no. so i said, well, i rest my case, yeah? [laughter] and he was a smart guy. within two seconds he said, yes, you're right. [laughter]

taiwan problem is that people who sing praises about the transformative power of internet are usually middle-aged men working in the media or the academia who have never had to do household work. so that's why they think internet's so cool whereas the real changes are with things like the washing machine. i mean, of course, i'm not saying that my comparison is entirely fair because washing machine has been around for 100 years, the internet has been around for only 20, so maybe 100 years later the internet will have, yeah, changed the world more. but at least so far it hasn't, yeah? i don't know enough about the situation, wisconsin, but, i mean, this is what i find very depressing. i mean, it's not just this country but, yeah, in britain and many other european countries as well.

basically, this recession has been created by the finance industry. but now business are used as an attack on the welfare state, an attack on ordinary people who have nothing to do with this crisis, huh? so much so that the governor of the bank of england who by any stretch of the imagination is not a leftist, yeah? in a speech recently said, actually, i'm quite surprised by the lack of anger in the population against the finance industry because they are totally to blame for creating this crisis. the people who are being hit by the welfare cuts have no role in creating the crisis, and people, well, i mean, he didn't quite say it that way, but people are

not rioting, yeah? so we need to think about this. i mean, somehow the financial industry and the right-wing media have, i mean, created this myth that in all this budget deficits are created by excessive spending when the deficits are mainly caused by the fall in tax revenue as a result of the recession. plus a bit of government injection of public money into the failing financial institutions. but very cleverly they turned this around and said, look, we cannot afford all these nice things, we have to cut them out, yeah? so you need the really wake up to this problem because today it is wisconsin, tomorrow it will be montana, yeah? day after -- massachusetts, yeah? day after it will be the whole

country. and once you begin this game, it's actually very difficult to get out of it by cutting spending further and further. i mean, look at greece, look at ireland. they've been cutting government spending center or, left and right. they are pared to the bones. still, you know, in our recessionary situation if you keep cutting spending, you are actually making the economy worse, and that reduces your revenue even farther. so your spending might be falling, but the revenue is falling together, so your deficit still remains, yeah? i mean, please, don't repeat that mistake in this country. of course, the republicans are pushing very hard for that kind of solution. but, you know, i mean, you have all these experiments going on in europe, yeah? at least try the learn lessons from those, yeah? so, well, thank you very much. [applause]

>> for more on ha-joon chang and his work, visit ha-joon chang.debt. >> things didn't always look so bright in new york city. when i was a kid growing up here in the 1970s, it looked as if not just president ford, but history itself was telling new york the drop dead. [laughter] the city seemed mired in crime and disorder. decline of that garment industry felt as if it had left the city, essentially, unmoored. now, that situation was not unusual for new york because what new york was going through was a process of deindustrialization decline that was common to all of america's older cities. one of the themes of this book is that the american dream doesn't have to lie behind a white picket fence in the suburb and that cities have been as intrinsic to american history and to our experience as a nation as any place else.

the very birth of america has its roots in interactions in boston in the 1770s between john hancock who badly wanted the political change that could be created by a political mob and sam adams, who you how to conjure a mob. [laughter] and their connections as created by the city of boston changed america, created, helped create this great country of ours. in the 9th century, the -- 19th century, the great problem was making the wealth accessible to the markets of the east and to europe. cities made that happen. they grew up as nodes of a great transportation network that enabled the rich, dark soil of iowa to become productive. if you go back to 1816, it cost as much to move goods 33 miles over land as it did to ship them across the atlantic. it was enormously difficult to access the wealth in the american hinterland. cities grew up as nodes of this great transportation network. chicago, which was formed,

started off when the illinois/michigan canal created a great watery arc. rails only supplemented that transportation network that was initially based on water. indeed, every one of the 0 largest -- 20 largest cities during that time period were on a river. minneapolis, on the northernmost navigable point on the mississippi river. industry then grew up around those transportation nodes. new york's three great industries in the 19th century were sugar refining, printing and publishing and garment production. all of them were intimately tie today the port. sugar refining, of course, there was plenty of raw sugar coming into new york which is how isaac roosevelt, the founder of fdr's family fortune, got involve inside the sugar refining business. he also was an anti-british agitator because mercantile

rules interfered with his sugar trade. the big money in 19th century printing and publishing was in printing pirate english novels. you had to come out with the latest dickens or walter scott and get it out first. now, new york's port made that happen. the thing that made the harper brothers succeed in the 1920s was the fact they could get the latest walter scott novel faster than their philadelphia competitors because they were in new york. they were in this great port that actually got the books first, and that enabled them to print first and dominate the market. chicago as well, right? chicago's greatest industry, the stockyards, of course, grew up around its rail yard. the stockyards were right next to rail. and in detroit and even more a remarkable event occurred in the rise of its automobile industry. and it shows the ability of cities that form often for mundane reasons to then create these chains of innovation that create some of humankind's greatest endeavors.

so if you go back to mid 19th century detroit, it's a city of small firms, smart people and connections to the outside world. and it's a city with a huge amount of trade and engines of the ships going on great lakes. so detroit dry dock, a seminal firm in the 19th century, frank kirby, a great shipping entrepreneur comes there. and they then perform a critical role educating young people who work with engines like henry ford. henry ford gets his start with engines in detroit dry dock. he becomes part of a great chain of entrepreneurship. detroit in the early 900s feels like silicon valley in the 1960s. there's, basically, an automotive genius on every street corner, all of whom are, you know, innovating and inventing and supplying each other with input, trying to figure out the new new thing. and they produce the inexpensive

automobiles. now, one of the tragedies of detroit and, unfortunately, there are going to be several i'm going to talk about in the next several minutes, is that the way they're able to figure it us out is by doing something that's fundamentally antithetical to cities. they do it by creating great walled-off factories that are vertically integrated and provide employment for less educated americans on a grand scale. now, on one level this is great, providing jobs for americans who start with less education. that's wonderful. but nothing could be more antithetical to what makes cities work than ford's river rouge plant. great walls surrounding the area. little connection with the people around them. and for a while it's wildly productive. but when the economics change, when transportation cost fall, that production could easily move, and it can move to lower-cost areas like the right to work states. then, of course, automobile production can cross the globe. and when those conditions change, detroit didn't have the stuff to reinvent itself because

it didn't have the culture of entrepreneurship, the skills that were so intrinsic to urban renewal. now, of course, a second tragedy of detroit is the way the government responded to it was exactly the opposite of what, in fact, detroit needed. the government responded, and the federal government bears a lot of blame in this, by being ready to subsidize urban renewal creating nonsensical investments like detroit's monorail, the people mover, right? the problem is a city like detroit, a declining city, already has an abundance of structures and infrastructure relative to people. the last thing you need were more structures in a place like detroit, and yet the politician were ready to build temp kin villages because it looks great. it's beautiful to have a shiny new building, and all of a sudden you can declare cleveland a comeback city. but that does nothing to do the most important thing which is to make sure that the children who are growing up in those cities

have the skills they need to compete in the global economy and have something so marked be a birthright of everyone which is the safety of the streets. so we have a people mover that moves over, essentially, empty treat streets -- streets. by contrast, new york did come back, and it came back not because of some government program, but because of private entrepreneurship. because of people coming up with new ideas and creating change. >> you can watch this and other programs online at booktv.org. >> robert hirst is the general editor of the mark twain project at the university of california berkeley. next, he describes the work involved in preparing the autobiography of mark twain, volume one. published 100 years after the author's death. mr. hirst also discusses his thoughts on the book's success and responds to the criticism the book has received. this hour and 20 minute event was hosted by the university of