2008 Global Financial Crisis in a Long-term Perspective: The failure of neo-liberalism and the future of capitalism

Ha-Joon Chang, University of Cambridge; author of 'Kicking Away the Ladder'

Presented by the Centre for Global Development (CGD) and Applied Institute of Research in Economics (AIRE)

The 2008 global financial crisis has been portrayed as a ‘perfect storm’, which no one could have predicted, by the proponents of free-market, neoliberal capitalism, which has dominated the world in the last three decades. However, even before the crisis, anyone who was interested in knowing had known that not all was well with neo-liberal capitalism – not just in terms of inequality but also in terms of stability and, most importantly, economic growth. The 2008 crisis was only the culmination of the neoliberal failure, at whose heart was the deregulated financial system with excessive complexity and very short time horizon.

Unfortunately, five years after the crisis, few necessary reforms have been made. Financial reforms in the rich countries have been limited and what changes that are to be made are introduced only very slowly. The developing countries are struggling to cope with inflows and outflows of capital, while being increasingly restricted in policy measures that they can use to promote high-productivity sectors.

In this talk, Ha-Joon Chang discussed what reforms need to be made to the financial system of the rich countries and the global regime for international trade and investment, without which we are destined to repeat the last three decades of low growth, high inequality, and repeated financial crises in the coming years.

For the talk given by Ha-Joon Chang ­ a joint event by the Centre for Global Development (CGD) and the Applied Institute for Research in Economics (AIRE) ­ we had a turn out of approximately 290 members of the university and the local community, from undergraduates to retired academics, representing many different schools and faculties, and also including NGOs, local activists and community organisations.

Ha-Joon Chang, a reader in Political Economy of Development, University of Cambridge, is one of the leading development economists of our time. He has written several bestselling books on the subject, including 23 Things They Don’t Tell You about Capitalism(2010) and the internationally celebrated monograph Kicking Away the Ladder ­ a core text for many studying the history of International Development.

Ha-Joon Chang now consults for many international institutions, such as the World Bank and the Asian Development Bank. These links may come  as a surprise, given his longer tradition as a critical thinker, a thorn in the side of technocrats and central bankers, someone who is not afraid of challenging and critiquing orthodox economic ideas, including the myth of market perfection and the idea that the market is a natural phenomenon, rather than political construct. Ha-Joon Chang was asked how he annoyed people the most, to which he replied, ‘By attacking Free Trade, the xxx or our time.’

His work demonstrates passion for his subject and a desire to share ideas in accessible language, not the language of technocrats and bankers. He was recently quoted in Financial Times: ‘That’s why I am writing these popular books, because people have been told a very particular story and they need some antidote to it. I’m not saying I have some kind of monopoly over truth, but at least you need to hear a different side of the story.’ Exemplifying his style bringing together humour and sharp critique, when commenting on rising inequality in the US over recent decades, he quipped, ‘Rich people in the US have become expensive to keep.’ Given his use of accessible language and humour (‘even a monkey can fall from a tree’), and the fact that he is commenting  on one of the most pressing issues of our time, the global economic crisis, it is perhaps no surprise that Prospect Magazine ranked him among one of the top World Thinkers in 2013 (no. 18 out of 65).