[Book Review] Capitalism Unleashed

[Book Review] Capitalism Unleashed

1. What Economics Fails to Explain

It's something I've long felt while studying the social sciences: how can we best explain the world we actually live in? What I found interesting about studying economics was a certain sense of awe — how could economists possibly compress the complexity of our lives into such simple graphs and equations?

But even Marx, who believed that economics underlies everything, ultimately acknowledged that the human being is the biggest variable of all. The countless assumptions and simplifications that make economic models work show that economics can only illuminate one dimension of our lives. It's like an X-ray — it can capture the skeletal structure that underlies the body, but it cannot explain the totality of a human life.

However precisely Keynesians and monetarists may have drawn their graphs and predicted their shifts, did they foresee the changes those graph movements would bring to the lives of my neighbors? To the country I live in? To nameless countries on the other side of the world whose names I don't even know?

If scholarship is not divorced from life, and if their theories can function as a double-edged sword, then these scholars need to be far more careful. What the book describes — capitalism since the 1980s — is, in the literal sense, a capitalism that has broken free of human control.

2. Neoliberalism? But Isn't That Just the Way Things Are?

One of the most common chants on university campuses during my time was "anti-Americanism" and "opposition to neoliberalism." The anti-Americanism was at least understandable — events like the Iraq War gave it some logic. But the anti-neoliberalism crowd never quite succeeded in persuading my rational mind with their arguments. The equation of globalization = neoliberalism = inequality = injustice never clearly explained the steps between each link. And looking at Korea's chaebol-dominated structure, I found myself thinking that some of the neoliberal prescriptions — financial liberalization, labor flexibility, deregulation — seemed genuinely necessary. The measures the IMF demanded of Korea in 1997 appeared, at least on the surface, to be pulling the country out of the quagmire. And in the face of a global neoliberal tide, the self-deprecating refrain was: we can't afford to fall behind.

* The wave of deregulations...

But gradually, the contradictions embedded in neoliberalism began bursting out of society. The voices of people who couldn't cope filled the newspapers, while real estate nouveaux riches emerged on the other side. Not just at the micro level — macro problems kept rearing their heads and putting us on edge. The fright of the foreign exchange crisis left a lingering distrust of foreign speculative capital, and unexpected exchange rate spikes have regularly sent warning signals to the Korean economy.

The growing power of the market began to overwhelm labor — which was particularly unjust given the history of labor sacrifice under Park Chung-hee, Chun Doo-hwan, and Roh Tae-woo. The modest gains in labor conditions achieved through the 1990s were reversed after 1997: workers were forced to retreat from the unemployment benefits, minimum wages, and employment protections they had managed to establish during that decade. This mirrored what the Western world had experienced under the 1980s wave of neoliberalism.

The deregulation of labor markets was celebrated as "labor flexibility," and the IMF applauded. Korea was dazzled by investment capital of obscure origins and pushed labor market deregulation forward without weighing the costs and benefits. The result? Unemployment and job insecurity. Market supremacy does not automatically translate into the objectification and alienation of human beings — but market supremacy has been generous only to those who already have, and 80% of people have felt increasingly marginalized.

In practice, the biggest beneficiaries of privatization — one of the pillars of neoliberalism — are the investment capital with no real connection to the privatized companies, who profit from capital gains. Meanwhile, the biggest losers are the workers who lose their jobs as a result. When the OECD acknowledges that privatization involves "at least some degree of short-term disruption and unemployment," what exactly are they saying? As Keynes put it, in the long run we are all dead.

* So why does neoliberalism insist on labor flexibility?

The basic argument is that wage rigidity increases unemployment and inhibits industrial efficiency, thereby holding back overall development. But as the cases of Canada and France show, the hypothesis that wage rigidity increased unemployment among low-skilled workers is not well supported. There may be variables that theory failed to account for, but fundamentally, labor flexibility is a policy that benefits management.

So where does the claim come from that cutting unemployment benefits, lowering the minimum wage, and weakening employment protections creates jobs? The OECD, IMF, and EU cheered on the shredding of social safety nets — did they genuinely not know that economic theory and reality differ?

In medicine, clinical experiments on humans are prohibited. So why do economists insist on experimenting with unproven theories on the real lives of human beings? Are workers — are we — nothing more than lab rats?

3. Justice Sacrificed in International Politics

Of course, neoliberalism began as a response to the dysfunction of post-Keynesian welfare states — a market-centered alternative to a stagnant economy, seeking the maximum efficiency that an invisible hand could achieve. But woven through that process were invisible political variables.

Consider the international monetary system. The shift from fixed to floating exchange rates after 1973 was, as Triffin's Dilemma predicted, an inevitable problem. Going further back, the postwar monetary order that established the US dollar as the global reserve currency made some form of monetary system transformation all but predestined. But the sudden transition to floating exchange rates in 1973 — against a market logic and in the specific context of that moment — was ultimately nothing more than a mechanism for maintaining US economic hegemony. With more flexible monetary conditions, American financial capital and assets could exert a more direct influence on the global economy. In practice, foreign direct investment (FDI) soared after 1973, and in tandem with that trend, the world was absorbed into a financial economy far larger than the real economy. The result: unpredictable exchange rate volatility and an ever-increasing frequency of financial crises. If a shift of a few dozen won in the exchange rate can produce hundreds of thousands of poor people in the real world, then the floating exchange rate system — and the wave of financial liberalization it triggered — is profoundly inhuman. How many lives have been sacrificed to the political greed embedded in economics? According to World Bank figures, the Asian financial crisis after 1997 increased the number of people living in poverty in Asia by 22 million.

4. The Report Card We Face

Since 1980, we have experienced several rises and falls. Some say we broke out the champagne too early; others say we remain, despite everything, the most dynamic economy. In the late 1990s we faced the Asian foreign exchange crisis, and now we face a global financial crisis. We need to watch with open eyes to see what the neoliberal prescriptions we adopted after 1997 will ultimately produce. And if we judge them to be wrong, we must have the courage to consider a decisive policy change.

Countries that accepted and internalized neoliberalism more than 20 years before us appear, in hindsight, to have failed. The neoliberal wave did not restore the vitality of advanced economies; it made developing economies more vulnerable to external shocks; and it degraded workers' quality of life. The maximum efficiency that neoliberalism aimed for never operated as market idealism promised, and we find ourselves living in a more fragile and volatile world. The three pillars of the global economy — the US, Japan, and Europe — continue to ride the waves of financial liberalization and deregulation, yet cannot escape low growth and stagnation. The world looks less flat and more steep. Unexpected potholes are everywhere, and in the competitive race no one stops to help those who have fallen in. The IMF, rather than pulling people out of the holes, demands further financial liberalization and deregulation. Where does this breathless sprint end? Don't they know that at the end of a steep road there is a cliff?

And yet, under the pressure of globalization, country after country competitively adopts the American model — more unequal income distribution, a minimalized welfare state, longer working hours. Is that really the right answer? Have we reached the point of declaring the end of democracy and capitalism's arc through history?

5. Will Economic Growth Make Us Happier?

I don't think so. I think we need to pause and reflect on our lives more carefully. A 1% growth rate is, in numerical terms, an enormous figure. But the dimensions of our lives sacrificed for that 1% cannot be converted into percentages. My initial skepticism about economics as a discipline stems from the same place. We miss so much inside numbers and statistics. The environment, family, neighbors, love, hope, work — these are what fundamentally constitute our happiness. The current financial crisis gives us much to reflect on. Many economists are beginning, one by one, to acknowledge the failure of neoliberalism and to discuss alternative paradigms. This is my hope: that we can develop not through competition but through cooperation. That we can learn an economics where human beings — not markets — stand at the center.