23 Things they don't tell you about Capitalism

In this economic system, capital, or the means by which goods are produced, is owned and operated privately. Chang generally supports capitalism as the most viable economic framework but suggests that outcomes can be improved through well-crafted government intervention.

A nation with a relatively weak economy and a lower standard of living than is found in the world’s rich countries is a developing country. Throughout the text, Chang explores the factors contributing to the gap between rich and poor countries, dispelling various myths along the way.

A type of asset that gains or loses value based on the performance of some underlying entity is a financial derivative. Chang suggests that the proliferation of increasingly abstract financial derivatives, relative to the real assets in the economy, was a major contributing factor in the 2008 financial crisis.

An economic system in which participants are free to produce, sell, and buy goods and services in exchange for money is a free market. Chang questions whether any market is truly free, since all markets operate within certain politically motivated bounds.

The general rise in the prices of goods and services over time, inflation is typically considered a bad thing by free-market economists. However, Chang suggests that moderate inflation can be good for the economy.

A sub-organization of the United Nations, the International Monetary Fund offers loans to developing nations, albeit with certain conditions attached. Chang argues that these conditions, which often include free-market reforms, are harmful to the target countries.

A legal concept called limited liability establishes limits on the amount of debt obligations owed by a company that declares bankruptcy. Prior to limited liability, business owners were fully responsible for their debts if their business failed. As Chang notes, implementing limited liability laws encouraged entrepreneurship but also paved the way for transient shareholders to gain greater influence over companies.

A small loan given to an individual in a developing country to allow that individual to start a business is microcredit, also known as a microloan. Despite the initially promising signs of this initiative, Chang considers the apparent failure of microcredit a sign that developing countries need institutions that support social collaboration, not individual ingenuity.

Designed to shield the economy of a particular country from competition with foreign companies, protectionist policies (or protectionism) often take the form of a tariff or a quota. A tariff is a tax on imported goods, while a quota limits the quantity of imported goods. While free-market economists oppose protectionism, Chang highlights cases in which it may be appropriate.

As popularized in the 1980s, shareholder value maximization refers to the idea that a company’s main responsibility is to maximize its profits to benefit shareholders. However, as Chang points out, since shareholders are transient, their interests do not always align with the company’s long-term interests, setting a precedent for seeking short-term profits over long-term viability.

Economic organizations fully owned and operated by the government are called state-owned enterprises. Chang indicates that these are more common and successful than most people think, suggesting that economic planning is possible.