The Net isn't as Important as we Think


Born in South Korea in 1963, Ha-Joon Chang is an economist based at Cambridge University specialising in development. Known for his heterodox views, he is the author of several books, including Kicking Away the Ladder (2002) and Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (2008). In his new book, 23 Things They Don't Tell You About Capitalism (Allen Lane, Chang debunks many cherished myths about the free market. In one chapter, he says: "The washing machine changed the world more than the internet."


Is it really true that the washing machine has changed the world more than the internet?

When we assess the impact of technological changes, we tend to downplay things that happened a while ago. Of course, the internet is great I can now Google and find the exact location of this restaurant on the edge of Liverpool or whatever. But when you look at the impact of this on the economy, it's mainly in the area of leisure.


The internet may have significantly changed the working patterns of people like you and me, but we are in a tiny minority. For most people, its effect is more about keeping in touch with friends and looking up things here and there. Economists have found very little evidence that since the internet revolution productivity has grown.


And the washing machine was more transformative?

By liberating women from household work and helping to abolish professions such as domestic service, the washing machine and other household goods completely revolutionised the structure of society. As women have become active in the labour market they have acquired a different status at home they can credibly threaten their partners that if they don't treat them well they will leave them and make an independent living. And this had huge economic consequences. Rather than spend their time washing clothes, women could go out and do more productive things. Basically, it has doubled the workforce.


The washing machine is just one element here. Other factors have contributed to the liberation of women feminism, the pill and so on.

Yes, but feminism couldn't have been implemented unless there was this technological basis for a society where women went out and worked. Of course it's not just the washing machine, it's piped water, electricity, irons and so on.


Do we tend to overestimate the importance of communications revolutions?

Not always. The invention of the printing press was one of the most important events in human history. But we overestimate the internet and ignore its downsides. There's now so much information out there that you don't actually have time to digest it.


In another chapter of the book, I talk about the American economist Herbert Simon, who argued that our problem now is that we have limited decision-making capability rather than too little information. If you try to find something on the internet, it's a deluge. And in terms of productivity, the internet has its drawbacks for example, it makes it a lot easier to bunk off work.


But what about the sheer speed at which it allows us to do things?

That is exaggerated too. Before the invention of the telegraph in the late 19th century, it took two to three weeks to carry a message across the Atlantic. The telegraph reduced it to 20 or 30 minutes an increase of 2,000-3,000 times. The internet has reduced the time of sending, say, three or four pages of text from the 30 seconds you needed with a fax machine down to maybe two seconds a reduction by a factor of 15. Unless I'm trading commodity futures, I can't think of anything where it's really so important that we send it in two seconds rather than a few minutes.


Does it matter that we overestimate the internet's importance?

On one level, no. If I think the Sun goes round the Earth, it's not going to affect how I do my grocery shopping or teach economics. But where it does matter is that a lot of people have come to accept a policy action or business decision on the grounds that this is something driven by technological changes rather than by active human decisions. So anyone who is against total globalisation is a modern luddite.


This idea that the internet is driving globalisation has enabled business leaders and politicians to get away with decisions made for their own self-interest, because people have been too ready to accept that things have to be like this.


Do we fundamentally misunderstand the nature of capitalism, as the title of your book implies?

Let me start by saying that I am an advocate of capitalism. To paraphrase Winston Churchill, I think it's the worst economic system except for all the others. So I'm not an anti-captialist, or anarchist. I want capitalism to work. But the version of capitalism that we have practised in the past two or three decades is a very extreme free-market version which, contrary to the claims of many economists, is not the only or best way to run things. There are many different ways and in the book I show that countries that have run capitalism differently, even if they practise free-market capitalism today, have done much better.



William Skidelsky, The Observer, Sunday 29 August 2010