Edge of Chaos

By Dambisa Moyo

Dambisa Moyo’s Dead Aid was controversial, or ‘Dead Wrong’ as many argued: see heavyweight reviews by Kevin Watkins, Owen Barder and Madeleine Bunting, or the Hard Talk debate between Moyo and Alison Evans. Duncan Green commented himself and also rounded up sceptical African voices. Moyo’s new book, Edge of Chaos, is likely to ruffle even more feathers.

Ostensibly, this is a book about reforming democracy, with a ten point programme of slightly bonkers suggestions, like insisting that voters pass a civics exam before being allowed to vote, or giving extra weight to selected voters ‘based on their professional standing or qualifications’.

We might argue about whether people of high professional standing, like members of the Masons or the Rotary Club, should have votes more heavily weighted than others, or whether people with a 25m swimming badge should be offered a red carpet at the polling station; but it is not possible even to open that conversation without a measure of agreement on what problem exactly political reform is designed to solve.

Moyo's argument rests on three legs, each of which has shaky foundations. First, she rhapsodises about growth, in a chapter called ‘The Imperative is Growth’. Second, she extols untrammelled globalisation. Third, she denigrates all forms of Government other than liberal democracy. The ten point programme of reform is needed, she says, because liberal democracy has failed to embed full-blooded globalisation and deliver sustained growth.

On gowth, Moyo argues that ‘Growth is imperative for fulfilling human demands and improving lives. Economically, growth promises to reduce poverty and raise living standards; politically, growth is the sine qua non for free markets, free people, and the rule of law; individually, growth is essential to allowing people to maximise their potential’. ‘Quite clearly’, she says, ‘economic growth is utterly vital to the survival, success and stability of a nation’. It is a problem that growth is ‘flatlining, and lower for longer’, with emerging economies averaging only 3% p.a. rather than the 7% needed to double per capita incomes from one generation to the next. And it is not just any old problem: ’Creating and maintaining economic growth are the defining challenges of our time’.

There is discussion in the book of the drivers of growth, categorized under the headings of capital, labour and productivity. And there is a chapter on the seven hurricane-force headwinds that are said to constrain the prospects for growth. These are: poorly managed debt; natural resource scarcity; misallocation of capital; the declining quantity and quality of the global workforce; growing inequality; the impact of technical change on jobs; and slow growth of productivity.

Hang onto that list, because it provides a framework for judging the next step of the argument, on globalisation. Perhaps add some other factors: unfair terms of trade, or tax evasion, or the arms trade, or monopsony, or oligopoly . . . Ask also, which Moyo does not, about the impact of colonialism on the long-term capability and growth of countries like India. She cites Niall Ferguson, a defender of empire, but for a contrary view, try Shashi Taroor on the Inglorious Empire.

In addition, look carefully at the section on natural resource scarcity, in particular, and ask whether the analysis is consistent with Moyo’s enthusiasm for growth. You might think not. Moyo says that ‘the combination of greater global demand and a shrinking supply of commodities poses a dire threat to global economic growth. Ultimately . . . a world of depleting natural resources cannot support long-term economic growth’. Indeed, Moyo runs through a list of scarce resources (water, land, energy, minerals), bemoans population increase, and worries about resource use by cities. She acknowledges that ‘according to many environmentalists, economic growth is degrading the planet’. And the answer? Well, there are compelling (unspecified) arguments for ‘green growth’, but the debate between environmentalists and economists ‘still rages’.

There are no further references in the book to green growth. I checked the references to climate change. There are only three, simply name-checking the problem without any discussion. The neglect can charitably be described as a missed opportunity. Moyo might have started with the World Bank policy paper on inclusive green growth, from 2012 (read my review here), or browsed more recent material from the OECD or on the website of the Green Growth Knowledge Platform. She might have looked at the wider literature on climate change, including on adaptation: see, for example, the book by CDKN on mainstreaming climate compatible development. Key topics include the regulatory regime, greening finance, and the sequencing and coordination of policy interventions; managing the politics is also a recurrent theme.

More generally, it is astonishing that Moyo does not explore the debate about the long-term sustainability of growth. Where is Tim Jackson, Prosperity Without Growth?  Or Kate Raworth’s Doughnut Ecopnomics, sceptical about growth, and pleading for a regenerative economy? Or, though published after Moyo went to press, Jason Hickel in The Divide, arguing for ‘degrowth’ as a paradigm for the future. I have personally been sceptical about a zero growth prescription, especially for poor countries; and have argued that progressive politics needs a ‘narrative of accumulation’. But finding an environmentally and socially sustainable approach to global growth is a much better ‘defining challenge for our time’ than just ‘growth’.

Is globalisation the answer? According to Moyo, it seems so. Chapter 4 is headed ‘The False Promise of Protectionism’. She contrasts a world of no globalisation with one of full globalisation, ‘characterised by unfettered movement of goods, services, capital, and people’. Most countries live in a mish-mash middle ground, the product of zero-sum thinking and a short term mentality. Worse, attempts to roll back globalisation, often in response to the legitimate concern of those left behind, threaten longer-term economic prospects. Protection, she says, ‘causes economic weakness, costs jobs, and slows economic growth’. In fact, people ‘think they are objecting to globalisation when in fact they are objecting to an incomplete and impure form of globalisation’. Impure globalisation, ‘globalisation lite’, especially in relation to trade, capital movement and migration, ‘sets in motion a global economic death spiral’.

Well, yes, up to a point. Protection can indeed harm the poor, as the recent IFPRI Global Food Policy Report has demonstrated in the case of agriculture and food security: this is consistent with Dambisa Moyo’s analysis. But then ask whether her enthusiasm for the Washington Consensus is widely shared, even these days in Washington; and also check the prescriptions against the seven headwinds. There is nothing in a package of liberalisation and structural adjustment that guarantees innovation, equity, social justice or participation – let alone fair trade or action on global or national market failure. I checked the text: no references to Stiglitz or Ocampo, or Hausmann or Ha Joon Chang or Mariana Mazucatto. Let’s not labour the point.

The third leg of the argument is that liberal democracy is the only route to growth.  This is Chapter 5. The purpose is to counter the claim that China has found an alternative path, descried by Moyo as ‘authoritarian state capitalism’. She says that ‘while this economic and political model holds tantalizing promise in the short term, it places the world on a dangerous path in the longer term . . . (and) is decidedly inferior to Western liberal ideology, liberal democracy and market capitalism’. Why is this? Or, to ask the question another way, citing Moyo’s own examples, and paraphrasing Monty Python, ‘what have the Chinese ever done for us’? Taken 300 million people out of poverty? Of course, but apart from taking 300 million people out of poverty? Built infrastructure? Well yes, but apart from taking 300 million people out of poverty and building infrastructure? Provided health and education? Yes, but apart from taking 300 million people out of poverty, building infrastructure and providing health and education? And so on, including with respect to China’s many activities in Africa . . .

Moyo’s problem with China is rooted in a general scepticism about the burgeoning role and size of Government, which, she says, should limit itself to three functions and focus on carrying these out effectively. The three are: provision of public goods (including national security, health and infrastructure); enforcing and regulating laws; and acting as financier of last resort at times of financial crisis. Then she asserts that ‘any shift toward an expanding role for the state in an economy poses a risk to government effectiveness and ultimately the prospects for economic growth’. China appears to be tarred with this brush.

Specifically, Moyo thinks that ‘the Chinese model has its limitations and is not necessarily replicable’.  Its state-centric system leads to structural inefficiencies, supply and demand imbalances, inflation, the crowding out of private sector investment, higher costs of doing business, debt, a property bubble, pollution, and possibly corruption.

China watchers may wish to unpack this argument, wonder why no data are provided, and examine the success or otherwise with which China is managing its various problems. The evidence is that China has become a global leader in renewable energy, for example, contributing to a cleaner environment. And for anyone interested in active industrial policy, innovation and investment in capability, an informative and authoritative source on China’s advance is Haour and von Zedwitz ‘Created in China: How China is becoming a global innovator’. It is important not to look at China through rose-tinted spectacles. But on the other hand, it would be complacent to write China off.

Probably, Moyo would agree. In effect, she uses the China case to frighten the Western democracies and urge them to reform. This is where we get (in Chapter 6) to short-termism, lobbying, corruption, and political gridlock; and (in Chapter 7) to the ten-point plan. There is a strong US focus in Chapter 6, but the recommendations in Chapter 7 are ‘intended for mature democracies like the United States, Western Europe, Canada, Japan and Australia’, and, it turns out, all emerging economies across the developing world that pursue democratic principles. That’s quite a few. They should (i) bind the Government more firmly to policies, (ii) control campaign finance; (iii) pay competitive salaries to ministers, including an element of results-based remuneration; (iv) extend terms in office, (v) set term limits, (vi) insist on work experience outside politics, (vii) stop gerrymandering the boundaries of political constituencies, (viii) make voting mandatory, (ix) make the right to vote conditional on knowledge of the issues, and (x) weight voting power in favour of the better informed. Not all bonkers, of course, but to my mind not worth discussing without a better statement of the case.

I would make a different case, and have been writing about it under the rubric of ‘Taming Cerberus’ (see here and here). Indeed, there are headwinds, though I would call them disruptors, technological, environmental and political. I focus on three, viz unequal globalisation, automation, and climate change, which all imply large-scale restructuring of the global economy. Indeed, there are different political reactions, in particular a lurch towards populism and protectionism, or alternatively a call for reinforced neo-liberalism. Up to this point, Dambisa Moyo and I kind of agree. But whereas she plumps firmly for the pro-globalisation, Washington Consensus, neo-liberal view, I have been concerned to demonstrate that developing countries have learned through history that neither populism nor neoliberalism delivers what they need. There is a progressive alternative for the successful management of change, including: active state-led industrial policy, with a strong focus on innovation; high standards of accountability for corporate social responsibility; strong social policy, including social protection, to help underpin transition and help the losers from change; political mobilisation to guarantee participation; and strengthened multilateralism (for a full list see here). That implies a different political project.