Curious Worldview

120: Ha-Joon Chang | South Korea's Greatest Economist

• Ha-Joon Chang • Episode 120

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🎙️: https://atlasgeographica.com/ha-joon-chang/

Ha-Joon Chang is a developmental economist who has been named among the worlds top 20 thinkers.

He has served as a consultant to the World Bank, the Asian Development Bank, the European Investment Bank, Oxfam and the United Nations. Ha-Joon Chang is the author of many books, the most notable of which are

  • 23 Things They Don’t Tell You About Capitalism.
  • Kicking Away The Ladder.
  • Bad Samaritans.
  • The Economics Users Guide.
  • & his highly anticipated new book, Edible Economics. 

Episodes Of The Curious Worldview Podcast Mentioned.

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  • 00:00 – Introduction.
  • 01:37 – There Is No Such Thing As A Free Market.
  • 14:32 – Which Country Has The Best Economic System?
  • 22:35 – Why Does Ha-Joon Chang Love Scandinavia?
  • 36:28 – How We Misunderstand Inflation.
  • 41:07 – Did The Washing Machine Change The World More Than The Internet?
  • 47:05 – Ching Ju Yung (GOAT Korean Entrepreneur) & South Korean Culture.
  • 58:43 – Working For Oxfam & World Bank.
  • 1:04:33 – Is Foreign Aid Good or Bad?
  • 1:10:01 – Country Ha-Joon Chang Is Bullish On.
  • 1:11:37 – Conversation Between Any Two People Of History.

🍻☕: https://www.buymeacoffee.com/ryanhogg

SPEAKER_00

Hajun Chang is a developmental economist who's been named among the world's top twenty thinkers. He served as a consultant to the World Bank, the Asian Development Bank, the European Investment Bank, Oxfam, and the great and powerful United Nations. Hajoon Chang is the author of many books, the most notable of which are twenty-three things that don't tell you about capitalism, kicking away the latter, Bad Samaritans, The Economics Users Guide, and his highly anticipated new book, Edible Economics. In this podcast, you can expect to hear Hajun respond to questions such as why there is no such thing as a free market, which country has the best economic system, how the washing machine may have changed the world more than the internet, very controversial take there, South Korea, whether organizations like Oxfam and the World Bank of Forces for Good, and more and more and more and more as well. Now, you all know the drill, this podcast took me more than five hours to put together, but will only take you five seconds to review. So pump that good juice into the algorithm and submit a five-star rating everywhere you listen to this show and tell a mate, tell your mum, tell your mates, mates, tell everyone you see, tell your colleagues about the Curious Worldview podcast. And if you follow me on socials, which is at the moment about five people, you will see that I am now shilling the shorts game. YouTube Shorts, TikToks, and Instagram. So get excited for that. Maybe we can uh generate a bit more of an audience that way. So with no further ado, here is the amazing Ha Jun Chang. The biggest thing that stayed with me from the book, 23 Things That Don't Tell you About Capitalism, is the explanation that you give for why there is actually no such thing as a free market.

SPEAKER_01

Yes, uh that idea had uh developed over probably the couple of decades that uh since I started my academic career. I mean it was that uh first uh the formulated in this article that I published in 2002 in this uh journal called Cambridge Journal of Economics. But uh yeah, I mean that uh leading up to that point, you know, this was uh the late 80s, 90s when I was at uh first uh PhD student and then a junior academic. And at the time the world was uh dominated by the most uh rigid kind of uh free market economics. And yeah, I mean you kind of took it for granted that uh people knew what they were talking about, even if you don't agree with them, but uh when they were talking about uh free market, but I realized uh actually what is the free market? Because uh you read uh the different uh gurus of uh free market economics, you know, Friedrich von Hayek, uh Milton Friedman, they are all slightly different. Yeah, I mean they they their their definition of uh free market is actually uh not the same. So I got to uh explore this, think about this, and also the doing work on economic uh history as a sideline, uh I realized that uh the notion of what is a free market has changed enormously over time. You know, uh so in the 19th century, not all, but uh many Americans, uh the free market included uh free market in people, you know, that uh they were market uh forced uh slaves, yeah. I mean in the 19th century Britain and other European countries, free market included labor market uh with uh labor. So I got to uh really think about this and basically come to realize that what is a free market depends on your ethics, your philosophy and your idea on the how the economy works. For the same market, one group of people might say this is a free market and others may say it's not. Take the case of child labor, you know when the in the early 19th century the reformers in Europe were trying to push for regulation of child labor, a lot of the free market economists were outraged because they thought that this was undermining the very foundation of free market economy, namely the freedom of contract. So their point was: look, these kids want to work, they need to work. These uh the factory owners that want to employ them, what is your problem? It's not as if uh these uh factory owners uh kidnap these children and use them as uh slave labor. It's uh based on the free contract. Now, if you take that view, you know, uh you'd of course uh say that uh the trying to intervene in the labor market by regulating child labor is uh anti-free market policy. But on the other hand, uh these days not even the most uh ardent uh supporters of uh free market do not say that all we need to bring back child labor so that our labor market can be truly free, because in the last uh couple of centuries, even these people have come to accept that yes, uh the right of uh children to have a childhood and education has uh priority over freedom of contract. Once you accept that, you don't even uh consider it uh as a the the regulation. But uh when you think about it, this is a huge uh regulation because if you say, I mean, uh it's a hypothetical that uh the situation, but if you try to ban the completely child labor in the very poor countries where forty-fifty percent of the people uh sorry, children working, and I'm not talking about, you know, taking care of the family good and you know getting filed, uh that kind of work. I mean, we are talking about the the children actually doing adults' work. And in many poor countries, that uh, you know, the the the 40-50 percent of the children might be working. And in that uh kind of situation, if you uh try to ban the child labor, it would be tantamount to, I don't know, the the US government saying that that uh everybody whose uh social security number ends with an old number will uh be prevented uh from working that uh from tomorrow. I mean, they'd be a riot. So it's uh that kind of huge uh that uh regulation banning child labor, but uh these days uh most people don't even see this uh a regulation. No one says that uh we don't really have a free market economy because we ban child labor. We uh have banned uh slavery. So all these uh examples that uh make you realize that actually the idea of free market itself is a political construct. You know, I would uh go even further and say that the market itself is a political construct because all markets have uh some but uh political uh institutions at the foundation of it, which embody certain ethical values, that that this means that uh there is no kind of scientific, uh totally objective way of drawing the boundary around the free market. And once you begin to accept that, uh you begin to understand uh the economy in a very different way, because it means that the economy that now needs uh the public uh deliberation, that uh we need to think about uh ethical values, that we need to uh think about the political institutions before you decide uh what kind of economy we are going to have.

SPEAKER_00

Maybe you could uh answer the question by giving an example of the US like you do in the book. Basically, people might think that the US is as close as we've got to a sort of free market capitalist uh sort of uh utopia, as close to the original philosophy as they'd come, but you realize that wait a minute, the F as soon as the FDA is involved, that's regulation, that's not free market at play. As soon as you have uh immigration involved, that's a type of uh protectionism, that's immigration uh that's regulation, no longer a free market. It's not just simple the equilibrium of demand and supply in every single domain. So could you explain, maybe using the USA as an example, why there is no such thing as a free market?

SPEAKER_01

That's a good uh way of doing it. Yeah. Okay, so uh these days uh we uh are told to aspire to basically copy the US model of capitalism, which uh comes as closest uh to the ideal free market uh economy as uh possible. And yeah, indeed uh many uh Americans uh will say Britain is a socialist country because they have uh nationalized health service, you know. Sweden's a socialist country because uh they have very high income tax and so on. But you know, uh even the US, I mean, uh just that uh let's uh look at it a bit more closely. So the yeah, I mean, uh probably uh if you go back to the 19th century, you didn't have uh all sorts of uh regulations on the food standard, you know, drug safety, environmental regulation. Of course, uh these uh the regulations uh uh I mean were not there in the beginning. And maybe that uh uh cum uh when you think about those things, uh that the US uh maybe far more socialist than what it used to be. But uh by today's standard it uh seems to have the smallest amount of uh regulation, but uh even then the uh you know the the the country has a welfare state that uh is uh much smaller than in say Sweden, but uh it uh still the take takes up uh 80-90% of uh GDP. You know, you have all sorts of uh regulations on drugs and food safety and uh environment, uh maybe uh lighter than in Sweden, lighter than in the the Japan, but uh still the lots of regulations. And uh the US uh has uh over time but introduced a lot of uh regulations regarding uh labor issues. Uh so slavery was banned after the Civil War, and then child labor was banned, yeah. And uh indeed uh I mean uh there are the restrictions on the working hours and uh, you know, the work safety and all sorts of things, which uh when they were first uh beginning to be introduced uh were vehemently opposed by the free market advocates, yeah. And let's not forget that uh the US also has uh huge government influence on how the economy develops, because uh it may not have the kind of very interventionist uh policies that you see in the countries like I don't know, the Korea or Germany or Finland, but uh the US government uh hugely influences uh the course of uh its uh economic development by funding a huge portion of uh the research and development. So that it was uh even higher during the the days of uh Cold War because at the time the US government put a lot of uh research money into the uh developing electronics and uh aircraft and so on. So, you know, my friend uh Mariano Matsukato that uh became famous uh for writing this paper showing how just about every single piece of technology in the iPhone was uh initially funded uh by the US government.

SPEAKER_00

Yeah. Which is which is the most incredible um counter-argument to just supply and demand in a totally unregulated market is going to sort everything. Yeah.

SPEAKER_01

Yeah, and uh go back further in history in the 19th century, the US was the most uh protectionist economy in the world, you know. It goes on. So yes, I mean I'm not saying that uh this or that regulation is uh necessarily justified or that should be abolished or whatever, but uh you have to realize that you don't see these things and think uh the US is a free market economy only because that that you have so totally accepted the political, ethical, and economic premises under these uh the regulations and interventions that you fail to see it, fail to see them.

SPEAKER_00

And the book had made such an impression on me because I did an economics degree, right? And I went through the entire three years and had never heard of Friedrich Hayek and I'd barely heard of Milton Friedman. And so when I discovered these guys, I thought, oh wait, here is the answer. And I became, you know, full free market hardcore uh to the to Austrian to the end. And the first real counter to that was uh reading your book, which just added so much more flavor to it, and Henry Hazlitt's Economics in One Lesson. I think just the combination of those two books taught me significantly more about economics and say maybe developmental economics than any degree maybe could have. Obviously, it's removed from all of the microeconomics and the theoretical side of economics, but just from a theor uh from a practical example, it had a huge impression on me for that. And that chapter stood out to me probably most significantly. And I've been able to bring it up many times in conversations throughout the years, just like, wait a minute, you know, you're telling me that you want an unregulated police force because you just think that the um the conditions of supply and demand are going to make it such. I'm like, wait a minute, it's too simple of an answer. And anyway, so to tack onto that, I'd love to hear, given your worldview, which country do you think has the best economic system?

SPEAKER_01

Yeah, no, I'm uh very uh uh flattered uh to hear that uh my book uh provided uh you with the broader view by economics. But uh, you know, my position is uh what they call pluralists. Yeah, I believe that uh all these different schools of economics has uh uh some things that uh to teach us. So, you know, when people ask me uh who are the say three most economists, who are the three economists who influence you the most, uh I would say Karl Marx on the left, but uh the Friedrich Hayek on the right and Robert Simon, the father of uh the behavioral economics in the middle, you know and people uh freak out that uh they say, how can you that uh be influenced both by the Marx and Hayek? You know, Hayek, I think it's uh the great uh economist, I mean his uh view of the world is uh uh actually very much more sophisticated than the standard uh neoclassical uh the view of the world uh represented by Milton Friedman. So even though they may advocate uh similar policies, I think uh Hayek was uh a much uh more profound uh thinker. So, you know, I'd uh take all the different schools seriously. Basically, the point is that uh these different schools were developed to explain different things in different contexts, and uh they therefore made different assumptions about the human nature and nature of the economy, you know, that they also have different uh political and ethical positions. So one theory that might be perfect uh for one type of uh situation might be totally useless for another. One theory that uh is uh very good at uh explaining something might be totally incapable but uh explaining something else. So like that, uh my view on that uh the ideal economic system is very pluralist, in the sense that uh the different countries faced different conditions, they wanted different things, and uh they all developed their different models. So the the most uh shocking, uh the striking example uh in that context is uh Singapore, you know, uh because uh the when you hear about uh Singapore the standard textbooks or the you know the Wall Street Journal, the Economic Magazine, or whatever, you only hear about this uh free trade policy and its uh welcoming attitude towards uh the multinational corporations, which it has, but you know that you are never told that 90% of land in Singapore is owned by the government. 85% of uh the housing is uh provided by the government house uh government government housing uh corporation, and a staggering 22% of GDP is uh produced by the what are known as uh GLCs, uh government-linked uh corporations. Yeah, these are corporations in which uh the government has, well, roughly the at least 20% of the ownership, sometimes up to 100%. And I often challenge my graduate students, look, uh if uh someone told you to design uh the best uh economic system according to a particular economic theory, no one that uh could have invented something like Singapore, yeah? Because it's a mixture of extreme socialism and extreme the uh free market uh uh economics, yeah. So the yeah, all systems are like that. I mean Singapore is uh the very extreme example because it uh had a very uh peculiar condition of being a city-state, very limited land, uh a lot of uh internal political conflict initially. So they uh came up with uh these uh the ways of uh managing uh the economy. You know, that you had uh land and housing problems. So basically without uh the government uh controlling it in some fashion, you couldn't have uh political stability, which was uh essential for economic development. You had that uh relatively limited uh entrepreneurial uh resources, so you had to invite uh foreign firms to come and uh teach you things, but on the other hand, you didn't want to uh completely lose uh control of your economy to foreign companies. So you set up uh a lot of uh state-owned enterprises, you know, uh in shipbuilding, in semiconductors, you know, and even the famous uh Singapore Airlines, yeah. So all other countries have but uh developed their systems in that kind of way. But you know, if you that uh ask my preference, I think uh that Scandinavian countries and other northern European countries have uh probably uh got that uh system that I like the most, but that doesn't mean that uh it's uh necessarily little correct, yeah. No, because uh they've been able to uh develop a system which uh combines uh the quite uh the egalitarian social arrangement and uh the dynamic uh innovative uh economy. So I think uh they got the combinations right. I mean the the US uh might be yeah innovative and dynamic, but you know that it's uh too kind of uh uh well, I mean, how can I put it uh harsh for people who do not belong to, say, top 20%. Yeah. I mean, uh Bernie Sanders uh that some years ago in his uh presidential campaign famously said that if you are an American dream, go to Scandinavia. Because that uh the US might have had uh very high social mobility up to say the 1950s and 60s, but the system has ossified and now it uh has actually very low social mobility. So actually that uh you uh have a high social mobility in the countries like uh Sweden or Finland or the Netherlands, yeah. So that I mean, and uh there are many other issues that uh in which I think uh the Scandinavians and other northern European countries that are doing quite well. But uh you know the this uh combination of uh economic dynamism and uh social equity, I think is uh that uh quite uh difficult balance uh to strike. And uh I think uh those countries have uh done that. Yeah. But you know, that at the same time, uh there are other countries that uh are good at uh other things. You know, the South Korea, my native country, has been extremely successful in uh creating uh an economy that is uh based on innovation and uh creativity. On the other hand, it has uh the very poor the welfare system, so much so that uh now the countries that uh got uh serious uh problem with uh falling uh social uh the mobility, you know, the the the lowest uh the uh fertility rate in the world, the highest uh uh gender wage gap in the OECD. So, you know, on those things it uh uh has uh done terribly. So I'm sure that uh the you know the you can uh say similar things about all the countries, including the northern European countries, because uh there are uh obviously the problems uh in those countries too. But you know, if you ask my preference, I would say uh Northern Europe. But you know, the other people have different uh political views and ethical views.

SPEAKER_00

Clearly. What are the economic indicators that you're using to measure Scandinavia as your favorite economic system?

SPEAKER_01

Uh a number of indicators, yeah. So the the first is uh the you know the economic growth rate. Yeah. Actually, the uh people have this uh the notion that if you have uh high equality, it uh means that uh you don't grow fast. Yeah, you may have an equal society, but uh your economy loses dynamism because entrepreneurs uh don't bother and uh you know but actually that Sweden, Finland, these countries uh uh in the the last uh six, seven decades have uh grown faster than the United States.

SPEAKER_00

Do you want to know uh really interesting statistic that backs up what you just said? You know, people might think that because of the extremely high taxes that this uh country is ext is is very um unattractive to entrepreneurs, but per capita there are more unicorns in Stockholm than there are in Silicon Valley.

SPEAKER_01

Yeah. Wow, no, that's uh very impressive. No, yeah, exactly. I mean, this is no coincidence, you know, that uh because that uh I mean the system of course that uh imposes high taxes and so on, but that tax is uh used uh to provide social uh stability, but more importantly for the the the the point that we are discussing now I mean that it uh enables the society to utilize all the talents in society yeah because uh in the the Sweden and other the northern European countries it is uh actually very possible that for people who have uh come from very low background uh the to the rise to the top you know because of the welfare system the education system and uh the training and retraining programs so actually the Americans that uh just think about I mean uh they are getting all this uh entrepreneurial talent uh from countries some uh the incredible strength uh but uh you know it that uh the his uh internal system has uh now ossified that uh he cannot you know bring uh people up uh from by the the lower the rate uh society. Another indicator that look at is uh the you know the the rate of uh sorry the the indicators of uh income distribution you know of course that uh in Sweden and then recently inequalities uh reason yeah but uh still that uh by international standard is uh very very low and uh that that uh makes a more pleasant society.

SPEAKER_00

You know go to New York, London, you know, that uh you see so many the homeless people in the Britain which is uh one of the richest that uh societies that uh the world has uh sorry the humanity has uh ever created you have millions of people going hungry reports of uh school kids uh stealing their mates at uh lunch i mean that uh bringing a single slice of moldy bread uh for lunch and uh stuff like that so you know I don't want that to kind of uh live in that kind of society how much wealth it might uh create uh overall so yeah I mean uh there are uh I mean your Unicorn indicators is also that very very important you know all these uh uh the indicators are pointing out that these countries have but uh got it uh better than the most other countries and what about the cultural question here you know it's also worth mentioning that Sweden is extremely homogenous you know they all sort of practice the same religion they generally all have the same type of family values there is so little friction when it comes to people's worldview and sort of ambition for life within the Swedish society which has to be this giant intangible reason why all these other things seem to work why there is so much trust in the government to be willing to give 60% of your income which is my freaking tax rate. It's a joke but I'm here right and I decide to do it. So um what about the cultural question? How does that feed into your economic worldview?

SPEAKER_01

Yeah those uh the the I mean yeah cultural the aspects are broadly defined people worldview the their relationship with uh each other the their view about the community the trust in the public authority and all of these uh of course uh these things uh matter the enormously but I have been writing quite a lot of stuff on this uh the aspect arguing that these things are important but they can be changed they have been changed Sweden itself is a very good example in the 1920s Sweden actually had the worst industrial relations in the world yeah the country lost the largest number of uh days uh working days in strikes per worker yeah in the world so it was a very conflictual uh society I mean never mind the homogeneity I mean homogeneity uh can actually uh make a society more conflictual because uh people might uh uh be far less uh willing to accept but uh high inequality in a homogeneous society. In the US, I mean you have uh all kinds of uh immigrant uh groups and so on that uh coming from different background at different times uh so it's that uh in that country the people are more willing to accept uh high degree uh inequality because uh they think oh we are different from them I mean uh the ancestors have been here for a few centuries we just keep uh you know in the last uh uh 20 years or whatever but in homogeneous societies uh the inequality is harder to accept i mean which is actually the case in uh Korea too you know that uh you see the all these uh the dramas from Netflix uh coming out of uh Korea and the movie the Parasite and uh stuff like that. I mean that you see very high tension even though I mean yeah Korea is actually quite unequal by the standard of Europe but uh you know it's uh that uh state uh one of the more equal societies but uh people just cannot accept it because they are so homogeneous. So anyway going back to Sweden in the 1920s you had uh terrible industrial relations and then the the country had that the big problems with the Great Depression you know at some point unemployment rate was uh 30% and uh the conflict uh grew and grew but they finally realized if uh the they behaved like this uh that they are all going to uh go down the drain together so that is uh when 1938 that the workers and the capitalists uh got together to sign this uh the Zalchabad and uh the agreement I don't know whether I got the pronunciation right then how about that okay that's a that's a rogue reference yeah uh the so the yeah in that agreement uh basically the the workers and capitalists uh came to a basic understanding that they need to work together yeah and it's only after that that the the the capitalists that uh uh became more willing to pay higher taxes uh to fund the uh welfare state the workers became more restraining in terms of the industrial actions that uh the country eventually uh developed but this uh very cooperative but trustworthy culture. Same story Japan I mean the the you know it's uh another society that looked uh known for the peaceful industrial relations and trust in the each other but 1950s and 60s uh Japan lost more uh working days uh to industrial strikes uh per worker than did uh not to speak of uh Sweden and Germany but uh uh than did uh Britain and France. It had uh very bad uh industrial relations because they had quite a tense uh situation with a very strong uh militant uh communist union and the capitalists are still not uh quite uh willing to make uh concessions but once again from the 60s uh they realized we we need to solve this and uh the companies uh started uh creating I mean it was a very different arrangement uh from Sweden but uh the the companies that uh started creating what is known as a lifetime employment for the co-workers they provided company welfare you know the the workers that started uh moderating their demand uh the communist unions that the popularity fell because of that and yeah in the end I mean that it's uh not as uh good as uh the Scandinavian system because it is great uh in Japan if you belong to the say top uh 50% of the workforce because you have but uh your job guaranteed you have uh very good company welfare but you know this uh the the kind of part-time workers you know uh workers uh working in smaller companies that cannot uh offer these things uh they are not uh doing very well yeah but uh still I mean they were able to solve the problem yeah so once again that that uh you know the the important point of our culture is that yes uh it matters but it can be reconstructed it has been reconstructed partly that uh through these political efforts but also that through the very development of the economy because uh when our material conditions change people's attitude change so one thing that uh a lot of uh uh the developing countries uh uh are finding it difficult is uh to basically make uh their workers accept uh kind of industrial discipline yeah keeping time and uh being there when uh you are needed and uh you know the the working uh the in cooperation with other workers uh because uh you know the the in agrarian societies you know kind keeping is not that important yeah I mean you are uh essentially working except for a few the major tasks that uh you are essentially working alone yeah that you are not tied to a production line and so on so people in agrarian uh societies have got a very different attitude towards these things and when they first uh start working in factories I mean they appear lazy and uh the uncooperative and uh exceptionally individualistic and so on and indeed uh this was uh the as I cite in the couple of my the works uh that this was uh the conclusion that this uh Australian engineer who visited uh Japan in 1915 that uh drew he was invited by the Japanese government to advise on how to improve uh the productivity in Japanese factories and he basically said you know that these guys are just too relaxed you know they don't keep time they are lazy you know and uh when I asked yeah yeah and uh when I asked uh the Japanese managers that uh that uh what they're going to do about it that they said oh we cannot change national character no fast forward that that that uh 50 years later I mean this is uh 1915 the 50 years later the Japanese came to be known as uh worker ants you know exactly yeah when the society industrializes more and more people learn this uh the capitalist uh labor the discipline and timekeeping and uh uh their attitude change so the while the culture is uh extremely important I think uh the problem with the people who are advocating uh the the importance of uh culture is that they usually think of it as fixed national character coming from if not that uh two thousand years ago at least that uh for the last uh few centuries I think that uh that uh needs to the the question of culture is extremely fascinating to me and I'm sure you'll get a chance to speak about it again when we speak about your time at the World Bank.

SPEAKER_00

But there are other questions we need to address. So I would ask you to please not as as quickly as possible but in a more terse manner speak to me about the chapter on how we misunderstand inflation because this seems like a very relevant question at the moment.

SPEAKER_01

Yes I think uh the world has been obsessed with uh inflation for the last at least uh the five decades uh because uh we had uh this uh the very bad uh experience with uh inflation in the 70s you know following on from the oil shock and a lot of uh effort uh had gone into controlling inflation uh since the 1980s and yeah indeed uh we have uh not everywhere but in most countries uh have succeeded in bringing down the inflation uh since then uh although now it's uh spiking up again uh because of uh the war in ukraine disruption uh to the global supply chain due to COVID pandemic and so on but uh the unfortunate thing is that uh this uh view of uh macroeconomic stability is too narrow because uh uh uh just uh think about it the last few decades we may have had uh relatively low inflation measured by consumer price index yeah that is uh basically the prices that uh we encounter when we go to supermarkets yeah the world has uh seen so many macroeconomic instabilities because we had uh so many big financial crashes yeah so the in the the the Chilean banking crisis the third world uh debt crisis the savings and loan the debacles in the US and uh you know uh the nice uh Mexican peso crisis Asian crisis Brazilian Russian until we got to experience a 2008 uh global financial crisis you are not actually measuring uh macroeconomic stability in the right way because uh you are looking only at a small part of it yeah so that the consumer price index yeah it's important but how about asset prices? I mean uh in many countries uh house prices in relative terms that have gone up uh so much that is uh not uh included in the headline inflation rate yeah we have but uh that uh had all these uh macroeconomic instabilities uh coming from financial uh crashes and so on but it's not inflected uh sorry it's not reflected in the the headline inflation rate. So my the the problem is uh not so much that macroeconomic stability is uh unimportant but that we are measuring it it uh in the wrong way. We are just uh looking at a tiny bit of uh this much bigger issue called the macroeconomic stability and we get too obsessed with it and then we ignore other more important things.

SPEAKER_00

So what's the takeaway then if you're an individual looking at an inflation rate of six, seven, eight, nine percent and you're starting to really, really feel it every time you fill up your car or you go grocery shopping, what is the lesson within that chapter that you would want to impute onto the people?

SPEAKER_01

Yeah well unfortunately there isn't a huge amount that uh individuals can do that when we face uh inflation uh because uh there is a systemic problem. I mean sometimes it's uh the you know oversupply of money sometimes it's overspending by the government this time around is that uh basically the supply side issues.

SPEAKER_00

Uh so as an individual that uh we cannot uh solve uh this problem but yeah as an individual uh one thing that uh we have to uh remember is that even while your grocery bill and that the gas bill might be going up uh if you have uh debt in general that uh you are benefiting uh from inflation so not all bad news uh that's a nice uh that's a nice bow on it actually nice nice um a very provocative statement you make within the book is that the washing machine changed the world more than the internet now I don't know when this book was written but I think it was more than ten years ago I wonder whether you can still make this argument yeah I will still that uh hold on to it there there will be a point uh when I say yeah it uh has hasn't but uh until now I think uh you know we tend to take existing things uh for granted too much yeah so just uh go back at uh say you are talking about a completely different world you know that uh you have uh societies where you know 10, 15 even higher percentage of people are in so-called domestic service yeah I mean the that they are cleaning and cooking and uh you know the changing bed she's or whatever.

SPEAKER_01

We have a world where that uh you know that very few women even in the most uh that uh affluent societies actually can go out and work. We we have a world where the most families had uh like five, six yeah if not more children. Now we live in a that the world where you know most of uh the domestic services are done by machines yeah I mean uh in the affluent societies uh the the the large proportion if not necessarily the majority of women are uh the in paid employment and uh the most families have but uh one two maximum three kids yeah so this that uh has that uh this have uh changed uh social dynamic uh the completely now I'm not saying that all of this was uh uh due to washing machine and other household uh the machines yeah I mean there were also other important uh changes about uh uh the nature of work. There have been a lot of uh automation so now muscle power is uh less important than uh say a century ago so that uh women have become more competitive in the lots of jobs yeah I mean uh a lot of these uh the old traditional uh sexist ideas have but uh broken down and now a lot of women are going to universities and uh getting highly qualified and so on. So I'm not uh saying this uh entirely because of these uh household machines but it uh those have uh played a very important role so you know I mean when we are comparing uh what the internet has done so far I don't think uh we are talking about the same magnitude of change yet. Maybe in 10 years' time maybe 20 years time I'll say yeah now it has uh the completely changed uh the society that that uh the now I would uh the admit that uh washing machine isn't as important as the the internet but so far you know it it has it's uh beginning to the the the influence uh the now the factories and uh driving and lots of things so we are getting there but so far it has uh mostly been on the kind of uh the uh social entertainment uh side of things yeah I mean I love the internet because that uh you know I'm but it's much more than just social entertainment.

SPEAKER_00

I mean how many people can do their job without a computer?

SPEAKER_01

No no that's true but it hasn't yet reached the stage where a whole class of workers are just uh in obsolete. Yeah.

SPEAKER_00

Yeah it's coming it's coming because that soon uh we'll have uh that uh kind of artificial intelligence doing the works of lawyers and uh accountants and maybe even university uh professors and it is uh definitely coming but not yet I wan I know it's probably an impossible task but has have you read anything about the economic impact of say the washing machine or the economic impact of say you know the internet?

SPEAKER_01

Has anyone done some grand study to try and figure out I yeah think it'll be a fascinating uh the balance sheet uh to draw up you know yeah because uh yeah uh no but uh actually uh it is at uh at one level a fundamentally unfair comparison because uh the internet has been around for only say three decades. The washing machine that uh and uh other things uh the other household machines have been around uh for a century.

SPEAKER_00

So at one level is that uh fundamentally unfair comparison and yeah probably if you give both uh hundred years I mean uh definitely the the internet will uh have done more but uh no I was that uh with that uh chapter just trying to kind of remind people that actually we tend to that uh take so many things for granted and we think always that that that the changes that are happening to us are the biggest and the most important and so on but take a step back and uh that you can uh get a better sense of uh proportion cool I would love to hear you speak about South Korea there is a figure called Chung Zhu Yung who I listened to a a podcast about his biography and he just he had truly maybe one of the most exceptional lives of anyone who ever lived and you discuss him specifically in your new book which is The Economics of Food in the Noodle chapter so I'd love to hear you explain the culture of South Korea via the life of Mr Chung Juyung yeah Chung Juyung is uh yeah probably one of the greatest entrepreneurs that the humanity has uh produced uh ever yeah I mean he started that as a kind of small time rice merchant you know I mean he was kind of uh selling rice uh uh in in the kind of uh the provincial areas and yeah and then he got into construction business and built one of the biggest uh construction uh companies in the country at the time but I'm talking about Dante Fizz and his but uh he was a very very ambitious man and uh he uh eventually wanted to compete in the best uh of the industries uh he got into automobile industry as uh his uh first uh the attempt to diversify uh away from construction and initially he ran this uh small assembly plant in collaboration with uh Ford producing like three thousand cars per year that kind of thing yeah

SPEAKER_01

And most of uh the parts were basically imported uh from uh America and other parts uh where food was uh in operation. But in uh 1973 uh he made this uh big decision to develop uh his uh original model. Now this was uh not entirely him because uh the the the South Korean government was uh uh also as ambitious as him uh and wanted to develop uh an indigenous uh automobile industry and uh the South Korean government said unless that uh you come up with your own model, we are going to uh uh cancel your license. Uh no more of this uh that uh importing foreign models, uh assembling them and selling them. So the the two forces that uh really came together and the automobile corporation was uh sorry that came up with this uh local model called Pony in 1975 and uh went into production in 1976. But from the beginning, it was a very ambitious uh company because they asked uh, as I uh talk about uh in my new book, uh Edible Economics in the chapter called Noodle, they asked uh the world-famous uh car designer called uh Giugiaro, this Italian car designer who has designed over 100 cars for almost all the car companies in the world, you know, Volkswagen Golf and you know everything that uh you have heard of. So that there was already this uh big ambition that uh we are going to uh be a world-class company, but in the beginning it was uh the kind of pitiful side, you know, that in 1976, the first full-year production, Chandai produced uh 10,000 cars. And in the same year, Ford produced 1.9 million cars, General Motors uh produced 4.8 million cars. So just imagine, I mean, if I took a time machine, went back to 1976, and told people, look at this two-bit uh the automobile company in the kind of lower middle-income country called South Korea, which uh produces uh 10,000 cars a year, but give it uh just over 30 years, it will be bigger than Ford. In uh less than 40 years, it will be producing more cars than General Motors. You know, people that uh put me in uh mental hospital. But this is what happened, you know. From 2009, Chang produced more cars than Ford, uh from 2015 it produced more cars than uh General Motors, yeah. So that uh this was uh the the ambition of uh the unimaginable scale, but uh you know the important thing is that uh this company and uh many other South uh South Korean companies succeeded because it uh kept investing, kept uh developing new technologies, kept training uh the workers, and kept developing uh the new models and basically kept upgrading is uh the technologies and uh product quality constantly. So there's an important lesson there. I mean that you know that these days, especially in the Anglo countries, you know, the US, uh the UK and others, uh the this this idea that uh you know the financial alchemy, you know, almost or at least uh financial engineering is uh the way to uh make money. And indeed uh they are making lots of money. But those are the the efforts are the in the end uh the kind of weakening uh the underlying economy because uh there's nothing going back into those uh the enterprises. Yeah. I think that uh this uh the the important uh set of lessons there. So, first of all, uh you know Mr. Jiang Jiang and uh other Koreans, they uh were very ambitious. You go to some developing countries, you know, especially in Latin America, they are very good at that uh things that they are already good at. Yeah, uh that uh Colombia produces uh the best coffee in the world, you know, Chile has uh that uh uh come from nowhere to become the second uh biggest uh salmon exporter in the world and so on. But you know I didn't know there was that. Yeah, yeah.

SPEAKER_00

I thought it was like uh America, Norway, Scotland or something like that. Okay.

SPEAKER_01

Not anymore. So the Norway is uh still number one, but uh Chile is now number two, you know. So that they're children are very good at uh what they're already doing, but you know, they are not ambitious. I mean, there's no ambition that we will one day, you know, beat up uh the biggest boys, you know. And uh that I think is uh the an important lesson uh the about uh you know Korean economic development and is uh kind of as you put it uh the cultural attitude uh towards these things. Uh so that's uh the the first lesson. The second lesson is that uh uh these people understood uh the Mr. Chang and uh the Koreans that uh who worked with him, but who competed with him and everyone, uh they knew that uh you cannot get something out of nothing. You have to uh put in the effort, uh, you have to invest, yeah. You have to uh develop uh technologies, you have to constantly upgrade, yeah. So that that's another uh important uh the lesson uh to learn uh from that experience. Uh I mean it is that uh, you know, I mean I as I already mentioned, I mean, we have but uh some very big uh problems, you know. But I think that uh this aspect of uh you know industrialization, technological upgrading, constant uh innovation, I'm but uh very uh proud of uh what uh my country has achieved.

SPEAKER_00

And is it does it still have uh a rosy future? Do those same values still live in the culture? You mentioned earlier the rising prominence of South Korean pop culture, you know, with Squid Games and with Parasite, and um all of a sudden it's a place that people like really, really, really want to go to. Um yeah.

SPEAKER_01

Yeah, no, I think uh the country has this uh incredible uh strengths still in terms of his uh the willingness to innovate and uh the you know really uh shoot uh for the highest uh stars. But uh I think uh unfortunately we've been uh losing this uh the mobilize uh all of uh society's uh the talents, yeah because uh in the early 90s, it was literally possible to be born in the poorest uh family in the country and become the republic's uh president, uh Supreme Court judge, uh the top scientist, because we at the time had that very flat uh social structure, you know, the old uh feudal hierarchy was uh destroyed the first uh that through Japanese colonialism and then uh the Pacific War and the Second World, the Korean War, and uh the land reform and so on. So that and then we had uh quite a meritocratic education system, so we're able to utilize all the talents that uh in the society to create that uh some incredible things, you know, the Mr. Chang Jiang being a very good example, yeah. But now the society is ossifying, you know, that that's the kind of thing you are seeing in Parasites, Squid Game, I mean uh lots of but uh recent uh Korean dramas. Yeah, so that now that the younger generation that they feel very frustrated because unless they come from the top, say, 10% of uh families, they have so many obstacles uh to uh realizing their the dreams and and uh uh expanding their talents. So I think uh we need to get that right uh through a better welfare system, uh reform of the education system and so on. But yeah, I mean that that that uh somewhat uh ludicrous uh ambition that uh that uh enabled uh the people like uh Mr. Chang and uh the the big Korean entrepreneurs and uh the the the um policymakers uh of the earlier years uh the is uh still there.

SPEAKER_00

So I live in hope. There is um a really interesting question on economic development that I wanted to ask you. You've been a consultant to the World Bank, the Asian Development Bank, the European Investment Bank, and as well as Oxfam. So from working with all of these different organizations, what is something interesting that you've learned about economic development?

SPEAKER_01

Yeah, I think uh one important thing uh to bear in mind when we talk about these uh big organizations is that uh they have this big kind of uh headlines, yeah, made decided by the top people. But uh, these are very large and complex organizations. So actually that what they are depends on the which part you look at and which part you work with. So that the World Bank uh that uh you know as a kind of corporate policy might state that we are going to liberalize uh trade all over the world, we are going to uh privatize everything. But actually, when you work with the people who work there, who are in charge of a particular country or particular sector, particular aspects of policy, whether it's that uh social policy or trade policy, actually you meet that uh very diverse people. And in that sense, that uh my example is biased because uh people who don't like uh what I say wouldn't have asked me to work with them. So it's people within those organizations that were interested in uh listening to something different, listening to the unusual point of view that I have worked with, and I have had very good experiences uh with those people. But the problem with these uh big uh international organizations is that they are in the end a very politicized organization. Whatever good policy that uh people lower down come up with, yeah, if uh it doesn't uh uh the match uh the top uh corporate uh kind of vision, then they get uh ignored. You know, that people often ask me, oh, you have been uh criticizing the World Bank uh the for decades and how can you work with them? I say it's uh very easy because I uh uh criticize their headline policies. But actually what I do with uh this economy, that uh department in the World Bank, uh I'm very happy with because uh these are in the end very uh pragmatic people. They want to help this country, help the sector, help this group of people, and then we uh try to find a way to do that uh in the best uh possible way. So yes, I mean the overall experience that uh with these people have been uh good, uh, but you know, I mean the problem is that this is a very biased sample.

SPEAKER_00

Can you give an example of when the recommendation you made went against the sort of headline politics? I mean, isn't the whole idea of a World Bank to be politically agnostic? Can you give us an example?

SPEAKER_01

Yeah, no, I mean the the what's uh there. I mean, uh for example, one side uh work with uh a group of World Bank economies uh to kind of but develop uh more kind of uh nuanced uh understanding about deregulation. You know, this was uh the indeed uh the World Bank uh headline policy was uh, you know, you deregulate uh everything you can think of. Yeah. But there was uh this uh group of uh World Bank economists who were not happy with uh that kind of bulldozer approach, and they contacted me asking me to write uh uh research uh that uh paper to provide a more kind of uh if you like uh multidimensional and uh nuanced uh view of uh regulation. So yeah, I wrote a research at that paper saying that, you know, yes, I mean that uh sometimes deregulation is uh good, uh sometimes it's even necessary, but uh you need to make this uh decision sector by sector, country by country, because uh there's no you know economic theory that says the more deregulated your economy is, uh the better it is. So I was uh trying to explain what kind of things uh that you might uh consider when uh making a decision as to whether to uh the deregulate uh the particular sector, particular uh industry. Yeah, so uh they they they were very happy with the report, but I don't know what kind of impact uh it had internally and uh you know.

SPEAKER_00

Yeah.

SPEAKER_01

They they must have that uh used it uh to make their case, uh, but you know, who knows? I mean it's a huge organization, you know, uh these were just uh small group of people.

SPEAKER_00

Yeah. Speaking of these international banks that are supposed to be apolitical, um what's your take on foreign aid? Uh, because you know, there is from what I see, you know, like an obvious divide between people saying it's absolutely necessary versus it's actually a detriment to the country. You know, a wild, wild, shocking statistic that Michael Yauss on episode 12 of this podcast said was that Africa imports more calories than they produce themselves, and Africa is the most fertile land for agriculture in the world, even more so than the United States. So that's just a crazy statistic to fathom. What is your position, given your very sort of uh eclectic and pluralistic economic worldview? I'd be very interested to know what you think about uh foreign aid.

SPEAKER_01

Well, uh yeah, once again, my view is that uh it can be very good, uh, it uh can be the the a really bad thing. Yeah. I mean let's begin uh from the beginning. I mean, uh at one level, you know, if there's more money, who can argue with it? Yeah, I mean, uh most developing countries uh need more money, yeah. So that uh that's the starting point. But of course that uh it can be appropriated uh by small group of people and use for the wrong things, yeah. It can be implemented uh used uh in a generally decent way, but uh you know you might have uh missed uh the design, the scheme, and actually that uh they don't work. So that you know what comes out of it uh really depends on the how you use the money. So that there are the cases where the the Foreign Aid uh did uh some really important good things, you know. For example, that uh in the 1950s, South Korea was uh devastated, uh the you know, first uh the the Pacific War and then the Korean War. And yeah, I mean the people were starving, and uh, you know, the country was uh not able to invest that uh more than like uh 5% of uh the is uh GDP, you know, it was a terrible situation. So in that situation, foreign aid uh from the US uh mainly but the other the rich countries enabled the country to rebuild the infrastructure that uh was uh destroyed uh through the Korean War, sent uh the kids to school. So yeah, I mean uh you have uh examples like that where foreign aid was uh crucial in the country's uh future development. Yeah. On the other hand, you have uh many examples where foreign aid uh, first of all, is kind of uh hugely exaggerated because uh, first of all, the a lot of money is uh used uh for companies and consultants uh from the country that is uh giving the aid. Uh so actually they might say, oh, we have a foreign aid budget of I don't know, 500 uh million, but actually the actual money that goes to recipient countries might be the only 20% of that or whatever. So that's that one problem. And uh secondly, uh you know that there are countries where this uh aid is uh appropriated by the the corrupt uh political elite, and then uh there are all kinds of uh schemes that are introduced that haven't been really thought through so that do not uh that benefit the country to the extent that uh you'd uh expect uh from seeing the figure. But yeah, I mean uh on the whole I think uh I would say that foreign aid uh uh isn't a good thing for countries at uh very low levels of development, yeah, where South Korea was 1950s and so on, provided that that uh the political corruption uh doesn't uh eat it away. Uh at the middle income level it becomes uh more debatable. Then uh you really need to uh look at uh the particular scheme, the particular way in which uh is uh used. Uh so then that uh you are that uh really uh talking uh about uh a case-by-case approach. So yeah, I mean uh my answer is that uh very complicated, but uh that's how I see it. Yeah.

SPEAKER_00

Well, fascinating. Also, for those listening along at home, Hajun and I have had really, really poor internet connection on this entire conversation, which is obviously very frustrating, but we must endure. Maybe some of that foreign aid can be sent Sweden's way for better fiber optic cables. What do you think? Would that be a good allocation of resources? Look, the final two questions for you, Hajoon. These are questions that I like to ask absolutely every guest. The first is what is a country you're particularly bullish on?

SPEAKER_01

Oh is there such a country? None, I think. Well, I think uh it depends on what kind of time frame we are talking about. I mean, if you're talking about uh say next 10 years, I would uh uh certainly say Vietnam. It's been uh doing very well. You know, the challenge for Vietnam will be whether they can now upgrade this economy in the same way that uh South Korea did in the say 1970s and 80s. Yeah. I'm not sure whether they have a good uh the plan to do that. Yeah. I mean they won't only pass the steam for another 10 years in a good way. In the 10 years' time, their wages will be too high for the kind of things uh they are exporting now, you know, coffee, you know, the electronics assembly. So where do you go for the next step? That I'm not sure about.

SPEAKER_00

Okay, interesting. Well, it's nice to see Vietnam join the list. I think that might be the first time they've had uh an answer in over a hundred interviews. Finally, Hajjun, if you could listen to a conversation between any two people of history, dead or alive, no language barrier. So if you were to listen to a podcast between these two people, who would it be?

SPEAKER_01

Gosh, uh, that's an interesting question. One historic person and one current person. So the historic uh person is uh Alexander Hamilton, the first Treasury Secretary of the United States, uh the guy who invented uh the infant industry argument, which has been central to my vision of uh economic development. I mean, from what I can gather from his uh biographies and so on, I think he was uh rather arrogant and obnoxious character, but you know uh he is uh really the first one that has come up with a systematic approach to economic development. So I think uh that uh we have to uh we have to have him. Definitely. Yeah, I don't know. I mean that uh maybe if he uh comes alive and uh turns out to be excessively obnoxious, then I'm not sure about that case, not regret uh my choice, but uh you know uh what uh can you do? And I think uh Hamilton's uh modern conversation partner I would uh choose uh San Marin, the the Finnish uh prime minister.

SPEAKER_00

Well, Hajun, I can't thank you enough for being so generous with your time and uh uh thankful for your patience.

SPEAKER_01

I mean I haven't been able to communicate with you that uh as quickly as I should, uh, but I mean the last uh uh few weeks uh have been insane with the release of the new book and I was yeah, yeah.

SPEAKER_00

That's okay. No, it's cool. And edible economics, so I'll make sure that there is a link to that in the description. Thank you.