This book promises a lot but sadly delivers little. As an analysis of the sub-prime melt-down and the general structural economic decline of the 'West' and the USA in particular, it has it's merits.Yet the premise is a faulty one.Her view roughly summarized, is that the barbarians are at the gates, so we had better look out.
The USA after the setting up of the Bretton Woods agreement in 1944 became ascendant in the World Economy.The dollar replaced the £ as the currency of international choice,the US military had few if any direct competitors and the British bankrupt, whilst the Europeans needed American cash to rebuild.Meanwhile, American trade policies were implemented by Western instruments such as the IMF and GATT and American multinationals gained new markets in territories opened up to them after the war us military presence overseas. The immediate post -war period was the time of unrivaled American economic dominance until costly ventures like the Vietnam war and consequent American leaving of the 'Gold Standard' in 1971, coupled with the oil price shocks of 1973, indicated that a fundamental shift in America's global position was not not only possible but likely.(Most of this goes unmentioned by Ms Moyo)
History tells us that empires can't last for ever.Empires are created it could be said, by strength of arms, leadership and some sort of economic system that supports civil society and pays for the imposition of order at home and abroad. When the system can't support the military or vice-versa,the end is never far away. Either complacency, a penchant for luxury,some sort of external shock or the arrival of a foreign competitor spells the disillusion of the current hierarchy to be replaced by another. So it's not surprising, although to Ms Moyo it is, that the 'American Century' had to end sometime.
Where her argument is sound, is the fact that the 'West' has become economically degenerate. Debt and the love of debt to fund individual life styles (especially housing)and the black holes of government projects such as pensions ,welfare payments, bank bail outs,military adventurism and the like are not supportable by the economic underpinnings, then eventually the money must run out. As a result of the failure of the West to invest in education, innovation and infrastructure there has been a consequential weakening in America and the West's ability to compete with the emerging regional big guys like India, Brazil and of course China. So,like many an empire of old, collapse or retrenchment must follow- as slackness within and competition from without must make change inevitable. Productivity, creativity and enterprise mean success,it's lack- failure.
She is also right to point out that the Chinese especially have played a good hand- gradual relaxing of state control,looking at long term investment not short term consumption and using currency as a way of making her goods competitive. Yet also the Chinese have built up relations with countries in Africa and Asia to secure mineral and food supplies rather then relying on the vagaries of the market.The Chinese have been smart, the West complacent. In addition, the Chinese and Indians have moved their production up the 'value chain' , so that now they can produce complex high tech products and offer services such as IT, competing in West's backyard.
The meaning of all this gloom and doom is that governments can no longer support the generally liberal welfare systems of yore. Plus, something more needs to be done then hacking at the welfare budget: Ms Moyo claims to have some radical ideas here. Sorry to report but the most important part of the book is where I have to fundamentally disagree with the author. Protectionism she thinks is the answer: - the USA should in some way decouple (autarky)from the World trade system that it helped set up in the first place and debt default. Also government should reign in commitments like pensions and welfare and invest much more heavily in R and D. Fair enough, but how is this to be done? She also thinks that Europe ought to be left to drift off into oblivion as a failed trade bloc, to die slowly of its own self-inflicted wounds, unmourned and irrelevant.
How about a more constructive approach?- engagement and negotiation. Governments in America and the West should look at the tax avoidance of multinationals and the super-rich,look to cooperate with the emerging nations and where possible learn from them. Perhaps there should be an acceptance that the era of mass -consumption in the West is over. Citizens should look to care much for themselves in return for lower tax and regulation. Citizens should prepare to be more occupationally and regionally mobile, looking to create or find opportunities for themselves.
The author also forgets that the Chinese and Indians etc are starting fro a low base.They also have problems of their own - asset bubbles,inflation, significant variations in poverty, opportunity and productivity. Also, these governments will be faced with growing demands for higher welfare provision and the break down perhaps in centralist state authority as the economy gets too complex to control by committee.Also, it is a general fact that when governments get their hands on money, arms expenditure and the itch to use those arms gets irresistible.Net result; lots of money thrown at pointless expensive bits of kit that fuel expensive military ambitions. See the pre-1914 Dreadnought arms race. Afghanistan is a great example of where Russia and America thought that dropping bombs changed things 'on the ground', only to find that the costs of such campaigns where much higher than could ever been anticipated at the time.
If we want developing nations and indeed ourselves to prosper we need trade and mutual support. Also,it is no ones interest to have defaults and protectionism ,but the gains from trade have to be more evenly spread.The Chinese aren't the enemy.Trade is not a war, it is an activity for the benefit for both sides. I might sound like a libertarian of the rosy -tinted glasses variety, but I believe that the West has to become more competitive and it's citizens less dependent on government. Politicians have to start telling us the 'truth' before the markets do in the form of higher prices. Hard choices await us. Hiding behind protectionism does nothing but make the world a less safer and poorer place.
'How the West was Lost' is a good 'light' read, rather repetitious and short on sensible policy suggestions.It makes some worthwhile points, but is rather too keen to 'big up' the emerging nations and down play the very real strengths of Western political economy - respect for property,transparency and soundness of government coupled with formidable technical and human capital. Read Ms Moyo by all means, but beware of the significant limitations of what she has to say. Remember, the Chinese don't have all the answers and the West might be in a bad way, but the patient ain't dead just yet!