Edge of Chaos -Dambisa Moyo
Economists are fascinated by the interaction of factors that lead to economic growth. From production, employment, trade, investment, savings, health, money, and industrial organization to consumer behavior and scarcity of resources and their allocation - all allow economists to observe, question, research, analyze and put forward policy suggestions.
However, there is no denying that over the last decade, the field of economics itself has come under fire. From the NYT article on how economists cannot stop talking about income inequality to the fact that economics needs a revolution, various economists argue that economics needs to change as we witness the changes on the global platform that somehow economics fails to address. Dambisa Moyo’s book “Edge of Chaos: Why Democracy is Failing to Deliver Economic Growth and How to Fix It” is an attempt to explain the shortcomings being witnessed in economic growth and how the roots of the shortcomings can be found in the political systems, namely democracy.
Economic growth is imperative for higher standards of living and for fulfilling human demands. However, globally, economic growth has been declining ever since the 2018 financial crisis. Stagnant wages, widening income inequality, illegal migration, technological revolution, and disillusion of improved living is taking over across the board in all countries. Capital, labor and productivity - the three key drivers of economic growth, Dambisa Moyo addresses the phenomenon of slow economic growth through a thorough analysis of the three factors and the changes that have disrupted the lives of ordinary people.
“Growth matters - powerfully - to ordinary people”
One of the key observations about the book is that Dambisa has written the book in a manner that any reader with no affiliation to economics can understand the arguments and observations presented in the book. The explanations come equipped with links to real-life examples that place the argument into a full-picture context. Another point to note is that the book begins by presenting and analyzing the history of economic growth. Here Dambisa presents not only the works of prominent economists over the years but also, the events that provide a context to understand how we arrived where we are today and what has gone wrong.
The historical analysis provides the platform by which Dambisa then analyzes the present-day context as to how changes have occurred and are taking place causing the majority to be left behind. She provides solid reasons through an analysis of each factor and the headwinds that are leading to unrest, polarization, and a disconnect from capitalism. She also provides the reason why many developing countries are trying to emulate China’s economic model. However, the author strongly favors liberal democracy and how it still can deliver the much needed economic growth today.
Dambisa introduces the interaction of political systems and economic growth explaining the present state of chaos.
“...economic and political decisions are the primary drivers that accelerate or decelerate economic success”
She is on point when stating that the present political system and politicians are “under pressure to show results, [thus] policymakers around the world are pivoting towards inferior political and economic models”. There is no denial as there is an enormous emphasis on fast growth, and faster results that is becoming the force, especially in the developing world, to look for a new form of economic model that would deliver apart from capitalism. This is being witnessed with many developing countries establishing economic relationships with China as its growth model offers a way to economic success. “The more authoritarian state capitalism promises a sure path to success”.
While the book presents all the observations, Dambisa very correctly points out that the political systems of today are suffering from “myopia” or rather “short-termism” which has become the root cause of the declining economic growth. As she states “economic choices are at the core of politics”, thus, politicians faced with unrest and a frustrated population, focus on short-term policies that deliver results, but come at the expense of long-term planning and outcomes. Liberal democracy suffers from an “endemic short-termism” problem and factors such as media, changes in economic ideology, and “a power shift away from state and towards non-state actors such as corporations and wealthy philanthropists” explain well the cause of the problem.
“Today, short-termism has spread beyond the halls of government into the power centers of finance and business.”
Despite capitalism and democracy failing to ensure equitable growth, Dambisa argues that “…creating growth requires that we preserve democratic capitalism’s core strengths - freedom, efficient markets, transparency, and correctly constructed incentives - and reform its weaknesses” And this is where my own point of view diverges from her.
Dambisa presents the weaknesses of the democratic system such as that “democracies tend to misallocate assets” and democracy “does not insure an economy against inequality”. With that, she proposes a number of recommendations for the system which would then address the short-termism problem and deliver economic growth.
Yet, keeping her recommendations in the current light, we all are witnessing the opposite. Firstly, there is more censorship than ever before across social media platforms, educational institutions, and general platforms. The freedom of speech is under severe attack in the developed world now than it was ever before. Thus, will the recommendations made by her see the light of the day remain to be seen.
Secondly, although Dambisa Moyo argues that the “liberal democracies of the sort prevalent in the West simply cannot deliver this growth without substantial reform”, she still “insists on the promise of liberal democracy”. Democracy does not work everywhere as Amy Chua has presented in her book “World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability”. One size does not fit all. If the Western democracies need reforms, if the Chinese economic model “has its limitations and is not necessarily replicable”, then preaching for liberal democratic systems stands on fragile ground. Looking down on China’s growth model does not help when the democracy’s ground is delicate. Countries are different in terms of their geography, history, region, culture, religion, and social norms.
Democracy cannot be dictated when the present model fails to ensure equitable growth, freedom of speech and rights, and income equality. In the words of Jim Yong Kim, the 12th president of the World Bank “There is more than one path to shared prosperity. One path is through increased opportunities driven by greater economic growth. Another is through a stable social contract, which focuses on raising the standards of living of the poor and the disadvantaged.” Thus, democracy can take multiple forms rather than this one specific model which must be followed by all.
Thirdly, democracies truly ever work if political relationships are on equal grounds, which is not the case in real life. Political relationships forged in the real world are not on equal grounds, rather, it is always one dominating the other. The power to curtail or cut off aid, implement sanctions, and use other forms of tools to make another country comply with a certain policy, even if it goes against the interest of the people, is not democratic at all.
The book presents the arguments and the observations of the present-day chaos very well and on strong premises. It does help the reader understand the reasons for the discontent and polarization that we are presently witnessing.
The part where it falls short is the premise that democracy still is and can be the force to deliver economic growth and that too a liberal democracy. In reality, the current state of democracy (which is becoming authoritarian gradually) is failing at delivering economic outcomes (or maybe its capitalism and democracy that are at odds?). The recommendations suggested by the author are well thought out, yet, with the current trajectories that many countries are taking, it hardly seems plausible for the recommendations to be even thought about, let alone, be implemented.
For now, it seems that capitalism and democracy are failing to deliver their promise of economic growth. And if economists like Paul Krugman and Lawrence Summers argue “that the results of leaving [the] headwinds unanswered will lead to economic depression - a catastrophe for which existing tools are ‘impotent’”, then it is time for economics to have a revolution of its own.
Book Rating: 3.5/5
