1 — Garlic

There are many schools of economic thought, but neoclassical economics holds a near-monopoly over the subject. This is harmful because it also gives neoclassical ideas a chokehold over human thought. Our finances, and the economic ideas that influence them, greatly affect our ways of thinking. Chang argues that neoclassical economic ideas assume selfishness in every human and (perhaps like a self-fulfilling prophecy) perpetuate them in its implementation.

This is the direct hold of economics on our lives, but it also has an indirect role: in shaping our environment, it affects us. Few things influence us like our environment, and few things influence our environment like economics. Chang gives us an example of this: urban societies attach more importance to time than agrarian societies; after all, an office worker lives by the clock, while a farmer may not even keep track of it at all!

Thus, Chang intends, with this book, to make ’economics more palatable by serving it with stories about food’. In so doing, he hopes to give us more knowledge about this very important discipline.

2 — Acorn

When explaining economic outcomes across countries, culture is a common refrain, especially when it comes to the East Asian ’tigers’. Culture is the only conceivable reason (to some) why Korea, Japan, China, and Singapore are so rich, and the African, Latin American, and Muslim worlds are so poor. Theories of this sort often make lavish use of ‘Confucianism’. Confucianism is why East Asia is rich, and Islam is why the Middle East is so poor. Chang argues theories such as these are narrow-minded in more ways than one.

According to some, Confucianism promotes hard-work — and yet, a common cultural stereotype of Asians used to be that they were lazy. Confucianism promotes learning, and this may be partly true, but the education it promotes is one-sided, and certainly not scientific, which is why the Korean government practically had to force people to study STEM. Perhaps in an effort to remain balanced, some argue that the strict social order of the Confucian structure is also responsible for the lack of originality and entrepeneurship in East Asians — even when East Asian countries have taken front stage in technological innovation the last few decades (Nintendo, Samsung, TSMC, Huawei, just to name a few).

Similarly (likely according to the same people), Muslims are intolerant and close-minded — when Muslim countries used to be some of the most tolerant realms of bygone eras. Islam discourages scientific and mercantile enterprise — but the Prophet Muhammad was a merchant, and Muslim scientists have founded whole fields of science crucial to our modern world. The Quran’s emphasis on legalism (the Shari’a) meant that Islamic countries developed legal systems centuries ahead of their European counterparts.

This is just another instance of people bending reality to fit their views. No culture is perfect. Neither is any culture perfectly harmful, but for the people who desire a quick and easy explanation of the world and its people. Policy action is what actually makes or breaks prosperity. Even if a culture is backwards, government policy can often right its wrong (social engineering). Savings rate in South Korea were abysmal after the Korean War, largely because of widespread poverty. Strict government policy restricting consumption and spending, almost totalitarian in nature, righted this wrong.

3 — Okra

Over 12 million Africans were condemned in the Trans-Atlantic Slave Trade, 2 million of whom died merely on the journey to the Americas. Slave labor in America was used in non-value added, primary sector work like mining and agriculture. The proceeds from selling these resources to the Europeans were used to fund machinery and factories in the cities. When industrialists needed cheap labor to work in their factories, however, they worked to abolish slavery. This allowed slaves to migrate to the cities and work for them.

Another interesting fact about slavery is its importance in building financial institutions in the US. Farmers most valuable posession’ was not their land, but their slaves. Thus, they often used these slaves as collateral when borrowing. ‘Slave-based mortgages’ emerged, and were lumped together like the ABSs that led to the 2008 Financial Crisis (only, hundreds of years ago). These bonds were even traded internationally, providing impetus to the US financial system.

In this way, slaves were necessary to build the capitalist system that operated in America, and also in Europe (the raw goods the slaves worked for, and the US exported, went to Europe and were fed into their industries). Chang asserts that free-market enthusiasts, who use ‘capitalism’ and ‘freedom’ as synonyms, have a one-sided view that puts economic freedom over other freedoms. This is why Friedman supported such dictators as Pinochet, why they oppose labor organization, and why even the Founding Fathers’ did not abolish slavery.

4 — Coconut

A common critique of citizens of poor countries, most of which reside in the tropics, is that they do not work hard at all. Many rationalizations, some utterly ridiculous, are used to explain why they are all just so lazy. All ignore the fact that this assertion is plain false. Poorer countries have far greater labour force participation rates than rich countries and far greater actual retirement ages, especially when you account for life expectancy. Even children are made to work in these countries, while the average adult in the developed world does not start working until his mid 20s. Statistically, this claim is rubbish.

The real problem is not hard work, but ‘smart work’ — productivity. The average productivity in these countries — the amount of value a worker producer in an hour — is comparatively low. Responsible for low productivity is not health or education, as Chang points out. Migrants to the US often experience a massive increase in productivity, even when they haven’t availed the local education or healthcare system at all. It is the environment these workers work in that is responsible. Whether it be better management, better infrastructure, better technologies, or a more efficient and rational government.

The reasons for why these facilities are so underdeveloped in poor countries is a separate topic, but it is assuredly not the fault of workers from these countries. Local elites often use refrains of hard-work to blame their own people for their misery, and distract blame from their role in these problems.

5 — Anchovies

History is replete with stories of commodity-reliant countries facing deep troubles when an industrialized country, usually reliant on these commodities for fueling their industry, develops some technology to make that commodity redundant. Or, they run out of said resource and have nothing left to fuel their luxuries.

From 1840–1880, Peru experienced widespread prosperity on account of exports of seabird guana. These bird droppings were rich in nitrate and phosphorus, and were thus essential to the production of fertilizer — until the Germans figured out a way to make ammonia, and from ammonia: fertilizer; out of thin air. By this time, however, the Peruvian boom had petered out because Chile had seized the lands that were so rich in seabird guana, so it was the Chileans who lost out.

Around the same period, the Germans (and the British) also invented artificial dyes, devastating Guatemala’s economy and harming India quite a bit too. The invention of synthetic rubbers in the 70s would’ve done a lot more damage to Malaysia if the country hadn’t diversified its export mix a little earlier, though it still left a mark.

Needless to say, the moral of this story is that, with technology, you can overcome any obstacle. The primary sector, so reliant on nature, can not be trusted to form the basis of an economy. The industrial sector, which is responsible for most technological advances in a country, also does not ‘run out’ as commodities like oil might. An economy must not bet on the wrong horse.

6 — Prawn – or Shrimp?

Japan was itself quite reliant on a primary commodity before its economic ‘miracle’. Silk from silkworms were Japan’s biggest export until the 50s, and played a pivotal role in its industrialization. But embargoes against Japan, during World War 2, led to the widespread adoption of a technological alternative: nylon.

Japanese policy-makers knew they couldn’t rely on silk alone, and they admired the heavy industry of the Western countries. If they opened their economy, however, they would stand no chance of holding their own against Western heavyweights of industry. Instead, they decided to protect their domestic industry from foreign competition using tariffs and taxes. This allowed Japanese producers of, say, automobiles, to compete with far more advanced and experienced Western players.

The problem with a strategy such as this are that these ‘infant industries’ are liable to become inefficient. Without access to international markets, they don’t face actual competitition (the ‘free-hand’ of the market), and they find it hard to adopt new technologies as well. Worst of all is that they have no incentive to become efficient — they can rely on government protection indefinitely, and don’t really have to change. This may not sound bad, until you realize that consumers would suffer most from this. They will pay more (international competitiors would offer cheaper prices) for products of inferior quality. Often, governments provide subsidies, from taxpayer money, to these infant industries, suffering consumers even more.

Chang acknowledges these problems. Most countries, excepting the rare (successful) few such as Japan, Korea, and Taiwan, went down the path of excessive protectionism. Their industries never became internationally competitive, and when they finally opened up their economies (if ever, since lobbying by interest groups often prevents this), these industries collapsed in the face of superior competition. The goal is to find a balance — the same balance that led most of the industrialized world, including the preachers of laissez-faire policies like the US, to success in the first place.

7 — Noodle

In the 60s, the Hyundai business group started moving into higher-productivity (heavy) industries. One of these was the automobile industry, and the Hyundai Motor Company was founded to oversee this sector. It set up as a joint venture with Ford, but soon split up in 1973 to produce its own cars. At this time, it was producing miniscule amounts of cars. By 1986, it had entered the US market, and at the turn of the century, it was one of the biggest automobile manufacturers in the world.

Part of its success was the vision of its founder — Chang Ju-yung. As the owner of a business group, Chang allowed HMC to run losses and made up for this with profits from other ventures (intra-group cross subsidization). But the Korean government, and HMC employees, played major roles as well. The Korean government specifically, banned the import of all automobiles until 1988, and of Japanese automobiles until 1998. This was part of their strategy of infant industry protection.

It also actively provided exporters with highly subsidized credits; the Korean banking sector was state-owned, and tightly regulated to ensure capital flowed to investment in productive enterprises, as opposed to consumption (car financing, mortgages, etc.). At times, the government directly intervened to force its automobile industry to domesticate its production.

This is not a Korea-, or even Hyundai-, exclusive story. Samsung, another Korean manufacturer, went from sugar refining and textiles to its current state. Toyota, from Japan, began as a manufacturer of textile machines to the leading car manufacturer globally. Nokia, from Finland, was once a paper mill. All of these business groups — they were groups and not individuals — thrived thanks to the efforts of entrepeneurs, policy-makers, and consumers.

8 — Carrot

The poor of rice-farming countries in Asia and Africa, and though rice is very nutritious, suffer from a lack of Vitamin A (VAD). Vitamin A, found in carrots as beta-carotene, is essential for eye, skin, and immune-system health. To overcome VAD, a group of scientists synthesized rice with beta-carotene found in maize to produce Golden Rice (so named because of its gold color). The scientists sold this technology to Syngenta, a multinational biotech and agribiz company.

Some found the sale of such an important technology to a corporation distasteful. The scientists claimed they had no choice, however — in order to commercialize the technology themselves, they would have to go through nearly seventy patents, and they had neither the capacity nor the finances to do so. A patent is a government grant of monopoly to the owner of a technology, so long as he makes the exact technology open.

Patents are a bit problematic. It is a good incentive to work on technology, but over the fixed term (i.e. 20 years) that the patents last, others are not able to build upon it. When new technology is reliant on multiple, patented, old technologies (as it almost always is), this creates a sort of patent thicket, discouraging the commercialization of new technologies. This is what occurred in the case of Golden Rice.

The modern patent system, once a spur to new technologies, is now their greatest enemy. Chang recommends two things to fix this: shortening the length of a patent, and a prize system. The former is self-explanatory; the latter involves inventors of technologies receiving a one-off reward to release the technology to the public, no patent involved.

9 — Beef

The Corn Laws were tariffs imposed by Britain on imported — you guessed it — corn (among other food items), around the early 19th century. The law met stiff opposition domestically because Britain’s urbanizing, industrial population was forced to pay greater prices for food. Critics argued that allowing cheap food imports would feed the urban population and thus benefit the countries’ industrial revolution. Meanwhile, the tariffs would merely lend support to the old landlord class.

The repeal of the Corn Laws later in the century is seen by free-market supporters as a historic win for free-trade — the period afterwards, lasting till the Great War, one of the most prosperous in human history. But this portrayal is mythical. Free trade, as mentioned previously, was not actually practiced by most countries during this period — save some exceptions, like Britain and the Netherlands. Certainly not the United States.

The countries that did adopt free trade? Colonies, and countries bound by ‘unequal treaties’ (under force of arms) by countries that did not practice anything close to free trade. Iran, the Ottomans, China, Japan (for a period of time), are just a few. The Latin American countries suffered this too, but once their treaties expired, they put up high tariffs. Japan did the same. Most others didn’t get the opportunity (see: force of arms).

Chang acknowledges that comparing trade policy during this period to modern day international trade is ignorant. But he sees some similarities in the WTO:

1. The WTO puts less restrictions on agricultural-, than industrial-, protection. Since richer countries have the least competitive agricultural sectors, he figures this is not surprising. (I’d argue that plenty of developing countries also actively practice protectionism in the agricultural sector. In fact, given the higher amount of activity in that sector in those countries, the government is likely to intervene more than in developed countries).
2. The WTO bans governments from requiring MNCs to domesticate their products. Since most MNCs are from richer countries…
3. The WTO may well be tolerant towards protectionism (in developing countires), but institutions like the IMF and the World Bank sing a different tune. They force developing countries to adopt free trade policies, and definitely don’t allow them to take advantage of WTO’s lax rules.

Chang’s argument is not to disparage free-trade. Instead, he asks us not to be misled by the inclusion of the word ‘free’ within. The first ‘age of free-trade’ was nowhere near free, and the second one has its own flaws, after all.

10 — Banana

Bananas have quite the dark history. The Portugese used bananas to feed African slaves in their colonies, and later expanded their production to supply the ships that transported Africans across the trans-atlantic slave trade. Once development in refrigeration enabled the (easily-spoiled) bananas’ transport in mass quantities, they also became a hot commodity.

The United Fruit Co. was one company — ‘multi-national’ in nature, but obviously based in America — that exploited this opportunity. It set up plantations all across the Americas and came to dominate, not only the banana trade, but the national economies of its ‘host’ countries. It bought off governments and politicians, which enabled them to exploit labor and land horrifically. When workers attempted to change this situation (as in the Banana Massacre), the threat of US intervention in support of its ‘interests’, and bribery, persuaded the government to intervene — in support of the company. Some say 2,000 perished in the Banana Massacre.

MNCs have their benefits, of course. They often bring capital and technology that the host countries did not have access to — the banana plantations the United Fruit Co. set up are one example. This is why international institutions encourage countries to provide benefits to MNCs.

This is blind to the faults of MNCs. They often bring international labor for higher-productivity jobs when setting up new operations, leaving the unskilled jobs for locals. They also tend to import capital and materials from their home countries. These lead MNC operations to resemble ‘screwdriver operations’ — MNCs import most parts of the production process, use low-level labor to ‘screw’ it together (like an IKEA desk), and then sell it to the local market or export it. This may well be harmful to the economy, rather than beneficial.

Some countries have worked around this. Establishing joint-ventures with local companies ensures some element of ‘representation’ for host countries. They also mandate technology transfers, licensing, and domestication. Especially in high-productivity, high-technology sectors, MNCs can be absolutely beneficial if regulated in this way. On the other hand, they can be a drain if not.

11 — Coca-Cola

Coca-Cola is perhaps the face of modern-day globalized capitalism. It is established in more countries than are members of the UN. The original Coca-Cola was made of three main ingredients: coca leaf, kola nut, and wine. Over time, all of these have been replaced by synthetic ingredients or removed altogether. The coca leaf, specifically, was the most controversial of these ingredients. An important crop in South America, it is used most famously in the production of cocaine. It was removed from the lineup more than a hundred years ago, once its harmful addictiveness was revealed.

As part of the War on Drugs, the American government has attempted to pressure various Latin American governments to destroy coca leaf production. Farmers, however, resisted this vociferously. In Bolivia, Evo Morales won election based on this opposition. His government not only promised to maintain coca leaf production, but also promised a slew of other ‘socialist’ measures, and was completely opposed to the Washington Consensus.

His measures were a success: inequality decreased, government revenues increased, and so did economic growth. Alongside Bolivia, other Latin American governments also embraced socialist measures — with mixed successes. In Brazil, they had little effect, and in Venezuela they led to hyperinflation and state collapse. A problem is that these policies also did nothing to reduce their countries’ dependence on commodity exports (perhaps the issue is not economic or political ideology, but more fundamental, and cycling through a new extreme ideology ever four years is not going to change anything?).

Neoliberal policies don’t just increase inequality. Their effects are inequal across economies as well — they are far more harmful to developing, than developed economies. That different economies may require different policies was never a factor for the Washington Consensus.

12 — Rye

The largest producer of Rye in the world is Germany. Rye is so prominent in Germany that it figures in the name of a major historical alliance. The ‘marriage of iron and rye’ was brokered by Bismarck, and involved the major landowners and capitalists of Germany. The results entailed both industry, which was being outcompeted by its British counterparts, and agriculture, which was being outcompeted by its American counterparts, being protected by the government.

The result was the massive growth of German industry — its industrialization. There were costs, of course: the agricultural tariffs meant that Germans had to pay more for food. But those tariffs were a political necessity, and the industrialization meant higher wages for workers such that they could easily pay the higher costs.

Bismarck realized, however, that these tariffs and the ensuing prices would dissatisfy the working class. They might even join the socialists, who were already in bad favor with Bismarck. To make up for it, he spearheaded the creation of the world’s first ‘welfare state’. It began with public insurance for accidents, then moved onto public health insurance and pensions. These were unprecedented measures.

The idea of a welfare state is controversial. The main criticism is simple: hard-working taxpayers pay for these welfare schemes, which benefit the ’lazy’ poor. They also discourage hard-work; why work, when you can sponge off the public exchequer?

This is wrong on a few accounts:

1. Welfare benefits are not free, even for the most impoverished exempt from income taxes. Through indirect taxes, most people pay taxes — including these poor.
2. Welfare benefits everyone, including the poor and middle-class.
3. By ‘buying in bulk’, the social insurances of a welfare state ensure lower prices for everyone — essentially, it centralizes the healthcare system (for example). This greatly saves costs for everyone.

13 — Chicken

There are two extreme views on equality: the communist one where everyone, regardless of their individual needs and preferences, receives the same treatment; the other — capitalist — view, that sees freedom as the ultimate equality. The most equal society is the one that gives to people what they ‘deserve’, and nothing more or less. Both these views are flawed, Chang argues.

The communist idea is obviously problematic. Different people view different treatments differently, and respecting this is part of equality, not against it. For instance, a vegetarian and a protein-lover (such as myself) would value chicken differently — so if you were to give both chicken regardless, it wouldn’t be fair at all.

The capitalist view is also faulty, though harder to argue against. The idea is simple: you get what you work for. You wouldn’t give the same treatment to a janitor and a nuclear scientist, right? Since ones’ work (the janitor’s, duh!) is clearly more demanding than the others’. (What does a nuclear scientist even do?). But it’s not just that — rewarding the hard-worker less than than the lazy slob will disincentivize the former. This is the idea of meritocracy.

Even the most stringent will recognize one pre-requisite to this idealistic view: equality of opportunity, if not outcome. Equality of opportunity is an elusive ideal, however, in the same way as the communist view of equality. It can only be achieved by giving all people, from the crib to the deathbed, essentially the same life. But, again, people — even babies — have different needs, and giving them the same treatment to ensure ’equality’ is in itself inequal. You could say we’ve run into a catch-22.

Or you could say that our first principles were false — that the capitalist idea of equality is also wrong. We can not afford to accomodate two extremes on such an important debate. We must meet in the middle, for the benefit of all.

14 — Spice

The first Limited Liability Corporations (LLC) were formed during the European naval explorations. Trips across oceans were expensive, but they were too risky to attract investors. This was because investors themselves could be held liable if the company they were investing in failed, assuming it had any liabilities. All their belongings, and even their freedom, would be seized.

With the LLC, investors would only lose their shares if something went wrong — hence ’limited liability’. This opened up massive amounts of capital for naval explorers, and such companies as the Dutch East India Company and the East India Company were formed soon after.

Adam Smith was critical of the idea of an LLC since he thought it would encourage risk-taking behavior amongst manager of such firms. A rare supporter was found in Karl Marx, who believed that it represented a higher stage of capitalism (to be replaced by communism, regardless). Regardless, LLCs became commonplace as more capital-intensive heavy industries (steel, ship, arms, e.t.c) developed. With more money flowing around in larger trades, LLCs actually became the standard.

LLCs have faltered in recent years, however. Shareholders jump between stocks like its nothing, especially given the wide variety of choices in the market. To keep these shareholders, then, companies dole out loads of cash as dividends or on share buybacks. This keeps this capital from actually flowing to investment, and hinders economic growth.

15 — Strawberry

Strawberry harvesting is one of the most labor-intensive agricultural jobs, even in this age of automation. The reasons are simple: strawberries are delicate, so using rough robots to do the work is going to harm their quality; and, deciding whether a strawberry is ripe or not has, so far, not been possible with AI. But even strawberry harvesting is going to fall to the AI ‘hordes’, especially with rapid advances in technology in recent years.

Your job will likely be replaced by AI as well, at least in part. Should you panic? Probably. Is it going to be the end of the world? No. While it’s true automation will destroy jobs, it will create jobs as well. Robot engineers (and really anybody who plays a hand in developing automation) are obviously going to increase in demand. Will going from working as an accountant to a robot engineer be easy, though? Probably not.

But still, fear not (too much). Automation increases the productivity of a country, and this results in more output, and thus more money and products flowing around the economy. Not all of this money will be going to the robot engineering industry, either. There will likely be some accountant-adjacent jobs that you could find — though you’ll have to learn how to work AI, regardless — that will benefit from this.

Automation shouldn’t be feared unnecessarily. Still, it will cause some churn, and you’ll have to ‘reskill’, or even learn new skills. This is part and parcel of a knowledge economy, unfortunately, and you ought to get used to it. The government can play its part by helping workers through this process, with training institutions and such, and also helping link job-searchers and employers together. It can also limit harm in some industries by imposing regulations, like a certain teacher:student ratio or doctor:patient ratio.

16 — Chocolate

When people think Switzerland, they think: watches, chocolates, and (illicit) banking. Few realize that Switzerland is one of the most industrialized countries in the world, measured as the amount of manufacturing output per person. Instead, Switzerland is held as a post-industrial model of development. Countries such as America and the UK, and (more harmfully) even developing countries like India are seeking to follow such a model.

The idea is simple: importance is given to the services sector, with the economy based around things like finance. After all, manufacturing is for poor countries with cheap labor.

This is an obviously flawed perception. First, a question: why do we have a services sector? Jobs like finance, accounting, consulting, and all that exist for the manufacturing sector. If you do not understand this, you are liable to cause bubbles — like the 2008 financial crisis. If an economy does not generate output (manufacturing or whatever else), then it has no need for a financial system — it is a primitive economy.