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Economics and initiatives

‘Experts shouldn’t have too much say in running society’

In 2008, inflation in Zimbabwe was running at more than 100,000% and you would have needed 25 million local dollars to buy one US dollar. Ha-Joon Chang says everyone should have an understanding of basic economic concepts such as inflation (Keystone)

In 2008, inflation in Zimbabwe was running at more than 100,000% and you would have needed 25 million local dollars to buy one US dollar. Ha-Joon Chang says everyone should have an understanding of basic economic concepts such as inflation


Are some popular votes too complicated for those of us without economics degrees? Why and how should people become “active economic citizens”? Economist and author Ha-Joon Chang explains all. 

The South Korean researcher at the University of Cambridge also tells swissinfo.ch how he would have voted in two recent people's initiatives on limiting executive pay and why he is a fan of Swiss-style direct democracy. 

Chang has written several books, including “Bad Samaritans: Rich Nations, Poor Policies, and the Threat to the Developing World” and, most recently, “Economics: The User’s Guide”. 

swissinfo.ch: In a national ballot in March 2013, voters gave shareholders a veto over salaries and bonuses for the top flight of listed companies. In November 2013, voters decided not to limit a boss’s pay to 12 times that of the lowest wage. Are you a fan of Swiss-style direct democracy? Some people say some issues are too complex to be left to non-experts. 

Ha-Joon Chang: Well I’m an expert on certain things, but experts shouldn’t have too much say in running society. They can give technical advice but the overall direction of society should be determined by the broadest possible segment of the population. 

So yes, I’m a big fan of Swiss-style direct democracy because there are some issues that simply wouldn’t come on the electoral manifestos because the people who have power and money and influence do not want to hear of it. So it’s a great way of raising issues that can be ignored, that might be a big concern for ordinary citizens but not for people at the top. 

Of course feasibility is another question because Switzerland has had this tradition for hundreds of years, and it’s also a very decentralised place and there’s a lot of direct involvement by ordinary people in politics. 

swissinfo.ch: How would you have voted in those initiatives? 

H-J.C.: I don’t think it’s a feasible idea to set numerical targets, so I think voters were right not to restrict [bosses’ pay to 12 times that of the lowest wage]. I’m not saying 12 is necessarily too high or too low, but you can’t really work out these things with simple numerical value. Also, if you do set that value, they’ll find ways to go around it. 

But I think it’s important to put restraints on excessive executive salaries because at least in the UK and the US the top managers have basically built mechanisms to protect themselves from the market and competition that they are so keen to preach to other people. Because when they sign these managerial contracts, they sign things like ‘even if I fail and get kicked out, I’ll get a $25 million pay-out’. 

It’s almost as if there’s only an upside to what they do and no downside. If they do well, yes they should be paid well, but the truth is that they get paid well even if they are not doing well. 

swissinfo.ch: So in your opinion Swiss voters got it right in those two examples? 

H-J.C.: Yes. But I’d go one step further and say it shouldn’t be just shareholders who have a veto over the salary – I think employees should also have some say in it. 

swissinfo.ch: You conclude ‘Economics: The User’s Guide’ by saying the economy is too important to be left to professional economists and other technocrats. You urge people to become ‘active economic citizens’. How do they do that? 

H-J.C.: First of all, they should invest some time in basic economics. I’m not saying they should all do a degree in it, but they should all know what basic economic concepts like GDP and inflation mean. But what’s most important is that ordinary citizens talk about economic issues at whatever level they can: talk to family and friends, raise issues at work, get involved in campaigns, write to their member of parliament. 

‘Give me Monti over Berlusconi any day’

Because what’s been happening is that people have been told that economics is too difficult and that ordinary people shouldn’t bother themselves with it. The result is that basically we’ve created this very anti-democratic system where economists have somehow become the defenders of the faith. 

The best example was the eurozone crisis in 2011. Greece and Italy refused to implement the austerity policy recommended by the EU and basically parachuted two unelected economists into the job of prime minister: Lucas Papademos in Greece, a former deputy governor of the European Central Bank, and Mario Monti in Italy, a former European Commissioner. 

Now I know Professor Monti a little bit and he’s a very competent economist and an extremely decent human being – give me Monti any day over Berlusconi, who’s the worst kind of politician you can think of – but you can’t do things that way. It was really arrogant of economists to think that we know what other people don’t know and can basically tell others what to do. I think that’s extremely dangerous. From there it’s not that far to some kind of technocratic dictatorship. 

Citizens should be extremely vigilant about decisions, and that’s what I really liked about those Swiss votes. In other countries those issues might be discussed by some parliamentary committees and professional economists, but not ordinary people. In Switzerland, because you have that system of direct democracy, even those economic issues that some people might regard as very technical became subject to democratic debate and scrutiny.

Ha-Joon Chang

Ha-Joon Chang was born in Seoul, South Korea, in 1963. 

He travelled to Britain as a graduate student at the Faculty of Economics and Politics, University of Cambridge, in 1986. He earned his PhD in 1992. 

He has been teaching economics at the Faculty of Economics and the Development Studies programme at Cambridge since 1990. 

He has written several books, including Kicking Away the Ladder: Development Strategy in Historical Perspective (2002); Bad Samaritans: Rich Nations, Poor Policies, and the Threat to the Developing World (2007); 23 Things They Don’t Tell You About Capitalism (2010); and Economics: The User’s Guide (2014).




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