23 Things they don't tell you about Capitalism

According to free-market economists, the market automatically rewards people according to their productivity. Questioning this notion, Chang suggests that differences in wages between rich and poor countries are mostly due to immigration restrictions. For example, although a bus driver in Sweden may make 50 times as much as a bus driver in India, the Swedish driver is not 50 times as productive; instead, immigration controls prevent workers from India from competing for jobs in Sweden.

The real reason why wages are higher in rich countries like Sweden is that the richest people in such countries are more productive than the richest people in poor countries, which makes general labor scarcer and thus more expensive in the rich countries. However, the gap between the productivity of these countries’ richest workers arises from differences in infrastructure and institutions, not from differences in individual capabilities. To build a just society, Chang suggests, requires abandoning the notion that a free market rewards everyone fairly.