After listening to an lecture on the financial crisis at the prestigious London School of Economics in November 2008, the Queen somewhat impertinently asked, 'how come nobody could foresee it?'
How come indeed. In his new book, '23 Things They Don't Tell You About Capitalism' Cambridge economist Ha-Joon Chang provides some answers.
Chief among them is that for the last 30 years we have been blinded by endless propaganda from economist and politician alike about how free market capitalism is the best way to organise society.
Like a religious mantra it has been drummed into our heads that, if subject to only the lightest regulation, markets are inherently self correcting and guaranteed to ensure the most optimum and efficient allocation of resources.
Chang demonstrates this is nonsense. He dismantles myth after myth about how capitalism actually works as opposed to how we are led to believe it works. Again and again he illustrates a conviction, learned the hard way by our ancestors during the 1930's, that it was in the public interest that market capitalism be regulated.
While the economists of today became hypnotised by the apparent infallibility of the finance sector, their predecessors half a century ago would not gave been.
They had lived through the Great Depression. They had seen how economies driven to meet the short term needs of shareholders did long term damage to the underlying economy. They had experienced how the interests of the private financial sector was opposed to interests of society as a whole, and therefore had to be tightly regulated.
That's why the Roosevelt administration introduced strict regulations, including the Glass-Steagall Act of 1933, putting a wall between investment and commercial banking (torn down by the Clinton Administration in 1999). And it is why Labour's 1944 manifesto carried the pledge to return finance 'to it's role as the servant, and the intelligent servant, of the community and productive industry; not their stupid master'.
Chang agrees that the market 'is an exceptionally effective mechanism for coordinating complex economic activities across numerous economic agents'. He argues that while the Soviet command economies could be remarkably successful when confronted with tasks which were relatively simple and clear during it's early industrialisation phase, once the economy developed and became more complex, decision making became more complicated and the central planning mechanisms in place were simply not up to the task.
However, he disagrees in investing markets with some divine power.
The market is nothing more than a mechanism-a machine that like a powerful car needs careful steering and good breaks. He highlights over and over how the state not only regulated the market, but subverts it by intervening and allocating resources in the public interest.
Chang also points out that you did not have to be alive during the Great Depression of the 1930's to learn the lesson that capitalism has inherent destructive tendencies.
Since the 1980's there have been dozens of smaller financial crisis: the 1982 Third World debt crisis, the 1995 Mexico peso crisis, the 1997 Asian crisis and the 1998 Russian crisis. For those not blinkered to see it, the writing was on the wall.
We have been failed by a right wing economic model and those politicians, on both right and left, who became enthralled to it. Today millions of people around the world pay the price for that failure in unemployment, cuts to wages and welfare provision. If we are to see any silver lining in the dark clouds above, one must be an opportunity for public re-education about the need to subvert markets to people, not the other way around.
To that end, Chang's book should be required reading.