Dambisa Moyo is one of those writers on my list of people to pay attention to, even though I don’t always agree with them. Her books are short, smart, and not afraid to tell people things that they don’t want to hear. I’d read her first and third books, Dead Aid and Winner Take All respectively, and last week I found time to catch up with the middle one, How the West was Lost: Fifty years of economic folly – and the stark choices ahead.
The first thing to say is that I clearly left it too late. The book was published in 2011, and so much has happened since then that it feels very much a product of its time. It’s written in the aftermath of the financial crisis, and its comments on current affairs of the time and how things might unfold have been rapidly overtaken by events.
The overarching point still stands though, and it is this: the dominance of the Western powers over global affairs is ebbing, and it is largely self-inflicted.
For centuries Western countries have set the rules, with America coming out on top after the World Wars. For the last half century in particular, other parts of the world have been catching up. This convergence has eroded the relative differences in power and wealth. At the same time, the West has made a series of mistakes and now find itself “desperately strapped for cash”. One of the biggest mistakes is the vast amounts of money that have been sunk into housing. This is a spectacular misallocation of capital as far as Moyo is concerned, because it drives inequality, pushes housing out of people’s reach, and builds up a giant debt bubble.
Alongside housing, Western economies became dependent on debt as ‘leverage’ in the financial markets, and in the form of consumer credit. “Like the US economy itself, millions of families became more adroit at maintaining the facade of being much wealthier than they really are” writes Moyo. Across the economy, buying power has been confused with wealth, but the power lies with those who provide the finance. In many cases, that’s China or the Middle East.
The labour force is also declining in the West. The population is aging (though without sustainable pensions provision) and is not being replaced. Education and skills aren’t keeping up. Infrastructure is crumbling in places, with no money to maintain or upgrade it.
It’s hard to argue with most of this. In a converging world, the West is going to lose its relative influence, and that’s entirely right. We’ve been terrible at sharing, and far too quick to dictate terms to others. There’s no great tragedy in the decline of the West, except that in our GDP-based world of winners and losers, there’s no way to make a dignified exit. We fear the loss of power and privilege, and it drives us to make stupid and self-destructive electoral choices.
“Should it matter if some other country is richer and more militarily powerful? Who cares if a country has economic supremacy, as long as your country is prosperous and can manage its own internal affairs?” writes Moyo at the beginning of the book. These are questions she doesn’t really comment on beyond pointing out that some places seem to have that view – Scandinavia for example. To me, its the critical issue – not how Britain and America can cling onto their undeserved power, but how we make ourselves at home in this new world.
Interestingly, Moyo tiptoes very close to the central point of this blog, and the reason I called it make wealth history. “The bottom line is this. Given where forecasts are for resources (energy, land, water) there is no way that one billion Chinese people can live like 300 million Americans. Ceteris paribus, this is not possible; but it exactly Western standards of living that the Chinese (never mind the hundreds of millions of people from other emerging states) are striving for.”
Unfortunately the book doesn’t run with that problem. The question it sets out to answer is “how did the West give its undeniable lead away?” It does that well enough. But what we do about it looks more urgent than ever. How do we adjust our expectations and our politics to reflect our new place in the world? How do we reconcile those aspirations for a Western lifestyle with the limits of the natural world? For answers to those questions, we’ll have to look elsewhere.