EVENT TRANSCRIPT: Edge of Chaos: Why Democracy is Failing to Deliver Economic Growth – and How to Fix It
DATE: 18:00-19:00, Wednesday 2nd May 2018
VENUE: The Wilson Room,
Portcullis House, Westminster, London SW1A 2JR
SPEAKER: Dr Dambisa Moyo
International Economist and New York Times best-selling Author
EVENT CHAIR: Sir Michael Fallon MP
Member of Parliament for Sevenoaks
FULL NAME OF FIRST SPEAKER:
[Apologies that the first minute of recording is missing]
Dr Dambisa Moyo:
My new book Edge of Chaos which came out just a week ago, and really I must confess, my PhD, my doctorate from Oxford is in economics, so I as an economist have been quite frustrated because a lot of the issues that we’ve been facing as economists are long term, inter-generational challenges, structural challenges to the economy. But I’ve found, like many other economists a lot of frustration, in that political structure, particularly of liberal democracies is short-term and myopic, because very often our politicians are having to compete in elections, as you’ll probably be doing tomorrow. What I’d like to do this evening is to briefly talk to you more specifically about why it is people are sceptical, or why you hear very often people say now democracy is under siege, and to give you a few data points to characterise, to set the stone of what I mean by that. I’d like to then spend a bit of time talking to you about why it is absolutely essential that we fix the democratic process, not only essential but urgent, because we are dealing with a number of economic headwinds, and I’m going to highlight for you six of the key, big headwinds that are threatening to upend the global economy if we do not do something actually quite aggressive to redress them. I’ll then conclude by talking to you a little bit about some of the proposals that I have in my new book. Essentially proposals that are designed to tackle two things that I view as weaknesses in the democratic process. One is the issue around legitimacy, by that I mean why there is a lot of scepticism about democracy, why it is that we’re dealing with a lot of questions of legitimacy of the democratic process. But more importantly as I see it, the proposals will be tackling the issue of short-termism, of myopia, this gap or this schism between the long-term economic problems and this short-termism that I mentioned in the political sphere.
So let me first offer to you why it is that many economists but also more generally people are concerned about democracy. In no particular order, one of the biggest problems we’re facing right now is voter participation is declining. And, if you think about it, voter participation rates today are very far from “the one man one vote” mantra of democracy. In fact in the United States today, the Presidential elections have a participation rate of around 50%, it’s down from the 1960s when you had participation rates closer to the high 60s. In fact for low income households, so these are households in the United States that earn about £13,000 a year, participation rates are around 30%. And these types of numbers are very much seen in the British but also in the European context – 45%, 48%, sometimes in the high 50s and 60s, but really quite far away from what we would hope to see.
The second issue I see is that money has seeped into the political process. Again this is maybe much more of an issue in the United States but nevertheless quite an important point worth highlighting. According to the New York Times, just 158 candidates were responsible for 50% of the political contributions that were made in 2016 election. This is creating a lot of skew in terms of who is not only participating in the elections, but also who is influencing public policy. Another data point related to money is that lobbying funds have also doubled since 2000. In 2000 money that went to public policy, politicians and representatives was around $1.2 billion, today that number is now over $3 billion. In fact it’s more than the amount of money than is spent on funding political campaigns. Some other data points that cause a lot of concern are that people no longer trust their governments, and there are a lot of surveys around this; a Pew survey that estimates that 80% of Americans do not trust the federal government to do what is right on a regular basis. A study by the World Economic Forum found that citizens around the world are now much more in trust of authoritarian states than they are of democratic states in order to deliver economic outcomes. But also Freedom House, which is a civic institution in Washington DC, has found that over the past 11 years, on a sequential basis there has been a decline in political freedoms, and this also includes in the United States in the last couple of years. The problem around the decline in political freedoms is so acute that the Economist Intelligence Unit – the EIU – claimed recently that they have now downgraded the United States from what they call a “full democracy” to what they now call a “flawed democracy”.
So these data points are making us all feel quite queasy about the fate of democracy. And I will just add one last point, which is that again, and we know in the United States because in many respects people, and England and Britain have a longer history, but I think in many respects around the world people look at the United States as the largest economy and the vanguard of the democratic process, as being in a precarious place in terms of its credibility. So one last data point around this is that the three key pillars of democratic process, the executive, the legislature, as well as the judiciary, are now viewed with a lot of scepticism. Very quickly in terms of the executive, which is the office of the President, since President Clinton we’ve seen an increased use of executive orders. So it’s not just President Trump, we’ve seen actually Clinton, Bush one, as well as President Obama, use executive orders more regularly. In terms of the legislature, there is so much combat and gridlock, and threats of shutdowns at the government level, that people I think by and large are concerned that this policy of combat is far beyond what the forefathers had envisaged when they thought about creating a system where there’s tension and debate. And finally with the judiciary, there are deep concerns in the United States that the criminal justice system in particular is of two forms. A criminal justice system that is designed for the wealthy and/or white, and another system that is designed for blacks and Latinos and other minorities, and the poor. So there is a belief that actually this is not fair, and it’s not evenly applied, and therefore these three pillars, three key pillars of democracy are considered quite weak.
So if I haven’t depressed you enough I’d like to just spend a bit of time talking to you about what the economic challenges are. And this is really the impetus and really the first half of the book is about these economic challenges. And I’m going to list them off for you really quickly and then I’ll to you specifically a little bit about each of them. So again in no particular order: technology and the risk of a jobless underclass, what are we going to do if automation and robotics continue to seep into the job creation, job opportunities for citizens. The second point is around a demographic shift to the world’s population and the speed at which the world’s population is changing. The third issue is income inequality, so this is obviously the spread between the wealthiest and the mean incomes, or at least the incomes of the lowest brackets of the population. And there is natural resource scarcity – the imbalance between the supply of natural resources and the demand for natural resources. And then finally the last two, the sheer amount of debt, especially in the post-, in the aftermath of the financial crisis the amount of debt that governments are carrying and what that means for investment and other public goods. And finally the issue of productivity which I will explain in a moment.
So let’s start with technology and the jobless underclass. About three years ago I attended a conference in Wyoming, the Federal Reserve in the United States has an annual conference, and one of the papers, one of the main papers that was discussed was a paper written by two economists from Oxford Martin School. And that paper forecasted that by 2030, 47% of jobs in the United States will have disappeared because of automation. And as we can imagine 2030 is not that far away so there are deep concerns about what the consequences of that paper might be. Of course since then there have been a lot of studies, Andy Haldane here in the United Kingdom has written extensively about what the job losses might be or come from technological advances, so, if you look again at the United States there’s a lot of discussion of how upwards of 80% of the population is vulnerable to this disruption because of their being involved in delivery, car delivery, or in you know lorry delivery, or taxis. But to put this into context I’d like to give you a little bit of a snapshot historically of how the economy has evolved, and I’m focusing on the US here but there are a lot of similarities in terms of the evolution even if the numbers are a little bit different. In the 1900s, in fact at the tail end of, or rather the beginning of the last century in 1900, 60% of Americans were involved in agriculture; today less than 2% of the American workforce is involved in agriculture. What we saw is that the American workforce moved out of agriculture into manufacturing, and out of manufacturing into services. Today about 80% of Americans are involved in the service sector, very similar to what you see here in Britain, and approximately under 20% are involved in manufacturing. The question that public policy makers and politicians have to answer is what happens if we see the sort of dissemination or disintegration of the job market that we’ve seen already in the manufacturing sector, if that were to occur in the service sector. And already we can, I’m sure in this room have experience of what that might look like. Today you can go through the airport without really speaking to anybody, you can download your boarding pass and you put it through a robot. You can go to the supermarket, go to Safeway or Sainsbury’s and actually there’s often an automated way for you to check out. The question is what happens to those low income jobs and even more than that what happens to those higher paid jobs because we are seeing disruption of this market, particularly for routinized work. This is a big issue that we don’t have an answer to, and I say that because as public policy makers and economists we have to be quite bearish, or negative about what the outcomes might be because of our responsibility for society as a whole. So although I served on the board of a technology company where people were very euphoric about the impact of technology, and we can all agree technology has helped enhance our lives in very meaningful ways, there is this split in the discussion, because people who are in Silicon Valley and in the technology space tend to be very excited and think technology will transform and encourage human progress, but people who work in, as economists like myself, or as public policy makers, it’s our job to be worried about what happens in a world where we’re able to produce goods and services but we don’t need that much in terms of human input. John Maynard Keynes, the great British economist, in the 1930s forecasted that 2030 we’d have a 15 hour job week. Usually when I say that people cheer, they get so happy at the thought of only working 15 hours, but he did go on to say and ask the question what will we be doing if we only have to work 15 hours a week, and many people puzzled by that question, but he responded that he thinks we’ll be contemplating God, and hopefully he’s right because I hope we’re not at each other’s throats. But suffice to say at this moment in time, we don’t know any sector that can absorb the number of people who are ill-skilled or ill-equipped to compete in a modern tech-based economy. I’ll leave you one last thought in terms of technology which is there is room for us to be a little bit euphoric, in the sense that the cost of many things in our living basket or our consumption basket is declining. The cost of me calling my mother in Africa is almost free now, just use WhatsApp or one of these other platforms, and it’s pretty much free. The cost of food production has gone down, the cost of transportation is going down, there are things that technology is doing that might alter our need to work for long hours. But at this moment we don’t know what that transition looks like as people are losing their jobs and maybe not finding something else to do.
The second issue I wanted to talk about is demographics, and I have to confess demographics to me is one of the most interesting areas of my research, I find it fascinating. So today there’s 7.5 billion people in the world, and again just to put this is context, just in the 1960s so 50 years ago, there were 3 billion people in the world. The world’s population will continue to grow at pace until 2100 then there will be 11 billion people on the planet that’s the first time we start to see the world’s population start to plateau and start to turn downwards. You might be saying well what does this really mean? Well it took 125 years to go from 1 billion people to 2 billion people, and it’s taken only 50 years to go from 3 billion to 7.5 billion. So the world’s population is growing incredibly fast. India is adding 1 million people a month to its population. Just think about that, 1 million people a month. And the world is adding about 80 million a year, which essentially adding Germany every single year to the world’s population. The forecasters, the demographers, and actuaries argue that the world’s population will continue to grow as I mentioned until 2100, but more than that and why this is so important and a critical issue of public policy today, is that once it plateaus out we will never again see the rate of growth that we’re seeing today in the world’s population. In fact there is no record in history or pre-history of the rate of growth of the world’s population that we’re witnessing today. So this is a very unique period in terms of the growth of the world’s population, and that’s why it makes a particularly big headwind. It’s not just about the quantity of the world’s population it’s also about the quality of the world’s workforce. You are I’m sure familiar with the term “NEETs”, in terms of young people in this country there are 1 million of them, who have no education, employment, or training. According to the ILO, the International Labour Organisation, there are approximately 100 million young people between the ages of 18 and 25 who are ill-equipped to find jobs, they are unable to find employment, certainly in the sectors that the jobs are available in today. This is particularly a problem because in the emerging markets, which reflect 90% of the world’s population, so 90% of the world’s population live in the emerging markets, in many of those countries 60%-70% of the population is under the age of 25. In countries like Uganda 50% of the population is under the age of 15. So you have this massive skew to a young population at a time when not only global growth is slow, but also we’re seeing that there’s no real opportunities for improvement in standards.
Let me move on to one other point worth mentioning in terms of the quality of the workforce. The OECD based out of Paris, so this is the club of advanced, rich economies, has done a lot of work in terms of education and investment in education, and they’ve found a couple of things that I think are worth stressing. For one thing, for the first time in the history of the United States, since 1776, this is the first generation of Americans which will be less educated than the preceding generation. But not only that, if you look at what they call the PISA survey, this is the Programme for International Student Assessment, which basically tests students around the world in mathematics, in science, and in reading, those three subjects. They found that developed countries, which were the number 1 number 2 and number 3 in the rankings about 15 years ago, have now slid down the ranks, and they’re now ranked around 28, 29, and 30. This is simply not good enough. The leading countries such as Britain, and European countries as well as the United States, need to do more in education, because ultimately long-term it’s going to save not just themselves but also the world in general.
A couple of last data points just worth thinking about, according to McKinsey the global management consulting firm, they estimate that by 2050, which again is not that far away, the United States will be minority majority; meaning blacks and Latinos will be the majority population in that country. Already in some of the big states, California, Texas, Florida, minorities are already the majority. But there has been such a systematic underinvestment in education in those groups, that they claim, McKinsey claims, that by 2050 when those populations become the majority, it could put the United States in a permanent recession. And these are very, very startling and worrying statistics. And although the United States on a per capita income basis is the largest investor in education, they’ve done a horrendous job in ensuring that their population is becoming more educated.
The next thing I’d like to say a few things on is income inequality. When I was doing my doctorate on economics at Oxford nobody talked about income inequality, they always assumed that if you could create economic growth then people would be able to have better opportunities and through social mobility they’d be able to get jobs and better opportunities, and so income inequality would naturally close. Well that has turned out not to be the case and today I would argue that income inequality is, I would argue, in the top three biggest issues that public policy debate and attention is focused on. So the question is why is it a problem? What is the issue? Well there are a number of things, and one of them I’ve just talked about, in many countries social mobility has actually collapsed. Specifically the data that I’ve looked at in the United States has shown that the probability of being born in a low-income family, and working hard and getting an education and ending up in a higher income bracket has actually collapsed by about 50% over the last several decades. So the social mobility which is a key pillar of the story is actually falling away. But worse than that we have tried both extreme interventions to solve the income inequality problem, with no success. So we have tried to focus on tax and redistribution, a very popular tool from the left and left leaning parties they love that kind of proposal, but that has not worked to stop, to solve, to stem the tide that I have just described of income inequality getting worse. But in terms of more conservative, right wing, in terms of what I call “trickle down”, low taxation environment policies, they have also not worked to stop the rising income inequality. So we’re now in this place where these two extremes have really been tried and there’s a real concern that we don’t really have a clear path to go forward in this regard. One last thing worth thinking about in terms of income inequality; today the number one largest economy in the world is the United States, it has about a $23 trillion GDP. This economy as you know is based on democracy as a political stance, and it has a focus on market capitalism as its economic approach. The second largest economy in the world is China, by some the estimates already, the IMF has put out estimates that they believe that China is already the number one country but for our purposes let’s say it’s number two, it’s about an $18 trillion economy. China as we know has deprioritised democracy, does not have democratic process as its political system, and it has focused on state capitalism as its economic approach. These two countries, number one and number two, completely different political systems and completely different economic systems, have roughly the same GINI coefficient, which is the measure of income inequality – it’s around 0.45. But worse than that, the US income inequality has worsened over the past ten decades, and that of China has actually improved. So we have to ask the question, and I mentioned that I’d been to over 80 countries over the last decade and this is one of the most popular questions I get from politicians around the world, we care about income inequality we don’t like this idea of these big gaps, which model should we choose? How should we think of income inequality? And again this is a very big issue for economists to deal with.
I’ll very quickly go through the last three, the next one I’ll talk about is resource scarcity. About 18 months ago I was very privileged to be invited to meet with President Xi Jinping of China, I was part of a group of 20 people from all over the world and we went to meet with him in Beijing for one hour. And of course in that time we listened to what he had to say about the challenges that China was facing and his view of the global economy was etc., and at the end of the conversation we asked the question what is it that he is most worried about. And he said it’s natural resource scarcity. The idea that not only 1.3 million Chinese, but the world as a whole it’s been promised the opportunity to live like the average British person – so to have two cars, to have a beautiful home, to have running water, to have a refrigerator, televisions, etc. – but we’re living in a time where we cannot deliver all these types of goods and services to this mass population, at a time where the inputs – portable water, arable land, minerals and energy are scarce, finite, and depleting – it’s becoming much harder for many companies, they have to go much farther, into much more treacherous terrain in order to get these natural resources. So he believed that this was the biggest problem, and how were we going to manage the expectations of people in the emerging world, that they cannot live like Westerners, especially since we’ve already convinced them that they can.
The next thing is debt. Today the world’s debt to GDP ratio is about 340%, it has grown exponentially since the financial crisis, as you know, government intervention to ensure that the global economy did not collapse was really founded on providing an immense amount of debt. To put it into context, 7.5 billion of us would have to work for approximately four years and not consume any of the amount of money that we would earn in order for us to pay back that amount of money. Why does it matter? Well, virtually every class of debt today, particularly in the United States again – government debt, corporate debt, household debt, credit card debt, auto loan debt, student loan debt – is over $1 trillion. You know about debt because in this country as well you talk a lot about household debt and the risks, I know the Chancellor of the Exchequer has talked about this for many, many years, not just this Chancellor but previous Chancellors as well. There is a deep risk, especially in a world where interest rates are rising, what do we do with all this debt particularly as the growth rates, where growth tends to help solve the problem of debt, as growth rates are slow and low. How are we going to get out of it? There’s a lot of speculation that we might deflate it, we might default on it, we might have a global jubilee. But today the United States has China as its biggest lender, biggest foreign lender, and that creates a lot of dynamics in terms of geopolitical risks that I think are of much more concern.
The final headwind, number six, productivity. For people in the room who have done economics, studied economics, you will know that 60% of why one country grows and another one will not grow is because of productivity. And productivity is essentially how efficient is a country at taking raw materials and inputs and converting them into GDP or into output. Unfortunately over the past decade, the past ten years, in virtually every advanced economy including here in Britain, we have seen productivity decline. And this is a puzzle, because we do not understand as economists and politicians why it is that productivity particularly in an era of technology, why is it declining? You would think that with the advent of technology, the efficiencies and gains of technology, you might see people’s ability to actually produce more output actually enhance, but that has not been the case and virtually every sector has seen a plummeting of productivity. One of the potential explanations about why productivity is declining is mismeasurement, perhaps as economists we’re not measuring it correctly. Think about the moment from when Benjamin Franklin had his kite and he discovered electricity because lightning struck the kite, to the moment when you could actually convert that idea into a grid so that you could have electricity at homes and for commercial use, it would have taken a lot of time. So some of the theories right now on productivity is that we will see gains from technology but perhaps we’re just not seeing them yet. After all, many of these tech companies are quite young. So we are concerned about productivity given its importance. By the way the other 40%, it comes from labour, and we talked about labour and demographics earlier, but also capital, which is essentially how much money do you have, your debt and deficits. But 60% is productivity.
Let me just spend a few more minutes very quickly going through some of the solutions that I propose in the book having outlined these problems in the first half of the book. I won’t give them all to you, otherwise you won’t buy the book [laughter] so I’ll have to keep you scintillated hopefully. I will say the book has ten proposals to reform democracy. I deliberately, I am not talking about nascent democracies or countries that are blatantly non-democratic; we’ve talked about China, we’ve talked about Russia, I’m not interested in those countries. I’m interested in how it is that we can remedy the problems that we are facing in democracies here, not only in Britain but in liberal democracies, which are the leading economies in the world today. So this is the main agenda item, what is the menu that we should be thinking about in terms of improving our own democracies. I should say about six of the proposals are targeting politicians, and four of them are targeting the voter, which is essentially all the rest of us in this room. I will make another point which is that, for all the proposals, ten proposals and I have a table where I’ve ranked the different countries, I will not tell you out of ten on the ten proposals, I will tell you that America is ranked one out of ten. In other words they only have one thing that I think that they can lead out of ten. But I will also say that this is not designed to be taken wholesale, for wholesale consumption. Because we’re on different types of political systems, the plan is for countries to look at this menu and to pick and choose to see how best they can improve their democracies. But let me give you some flavour on this.
So let’s start with the proposals for the politicians, as I said I won’t give you all of them. One of the proposals, which I’m sure Sir Michael will appreciate, is that I think that they should increase the pay of politicians – increase [laughter]. But force them also to justify their compensation. There have been enormous changes, as you know, as many of us in this room will know, to pay scales and how people are compensated in the private sector, many of us don’t get pensions anymore and we have to justify our compensation. Well I suggest that politicians should also justify their compensation. Where does that happen? Singapore. Singapore’s head of state earns $1.4 million a year which is an enormous salary. They heavily discourage politicians leaving the public sector and getting jobs in the private sector. They also aim to discourage them changing their political views with the mind of “oh I better give them a good break as I might have to work for them later”. But also, which I think is particularly interesting, ministers are given bonuses at the end of the year, up to 30-40% bonuses based on the outcomes of the country. If they see income inequality improving, life expectancy increasing, GDP improving, they see improvements in their compensation at the end of the year. And just before anybody gets worried that this sounds very dodgy, they also have clawbacks; so in 10-15 years if they look back and they say, “wait a second, those guys were actually just inflating the numbers”, or they were not correct, then the government has the ability to claw back on their pensions. And I think this reward and punishment kind of scheme is something that already happens in the private sector, I think it’s something we should think about for politicians. Why should they not justify their compensation? I think it should be one think we should think about.
I talked about earlier on, the schism between long-term economic problems and short-term myopia. Well one of the things I also think we should think about is extending the terms of politicians, but also limiting the terms, and that will actually help us to get out of this cycle of politicians constantly pandering, very rationally pandering, to the needs of today’s voters. What we need is politicians to be elected and to go away and do their job, and do their bidding. We don’t want them to come and promise every other day to see “what do you think about the tax rate” and “what do you think about healthcare”, because I think that creates a situation where they’re very focused on winning the next election, and not so focused about inter-generational concerns and concerns of future generations. Countries like Mexico, Mexico has a one-term policy for their President, their President gets six years, much closer linked to the six year economic cycle that you see in the global economy. Brazil has a nine year term, eight to nine year term for their senators, they will have no elections in-between, so they’re absolutely focused on delivering the public policy agenda. I think this is something we should think about as well. I’m not suggesting that we end up with politicians who stay forever. In the US Senator Byrd and Congressman Dingell stayed in office for over 50 years, I think that is not to be encouraged. Congressman Dingell was in power for 59 years which I think is insanity, but we don’t want that, but we also want to ensure that we have politicians who are focused on important things and not distracted by whether they’re winning or not.
I’ll say one last thing about politicians, which is that I also talk about minimum requirements for politicians. Meaning, look back in the 1960s, we were just talking about Harold Wilson whose name I was just told is, is actually the name of this room, it comes from the late Prime Minister. But back in the 1950s and 60s the British parliament had a higher average age, by some estimates the average age was around the 60s, and the makeup of the parliamentarians was from people who had actually had jobs outside of politics: they were farmers; doctors; teachers; lawyers. So when they went into parliament they could actually talk about what the impact of these areas were on public policy. That is not what we see today, in fact Philip Cowley has written, has done a lot of research on this area I talk about him in the book, and he estimates that the average age has gone down to around 40, certainly in some of the departments here in Britain, and many politicians don’t have any experience except as professional politicians. And so I think that’s an area again in terms of minimum standards, and many countries I talk about in the book have minimum standards or requirements for you to be a politician.
In terms of the voter, I talk about mandatory voting. If you recall one of the first things I was very worried about was voter participation, well this is a very quick way to solve voter participation is to have mandatory voting. Of course this flies in the face of, I talk to Americans about this and they say “well I have a right to choose. I have my individual right”, well this is about society and community. And I think that there has to be some kind of civic responsibility there that we should think about. There are about 27 countries in the world today that have this mandatory voting scheme – Australia being one of them, Belgium, a lot of Latin American countries. If you do not vote, and by the way their participation rates are around 90%, if you do not vote you can face a fine in terms of a financial/monetary fine, or, sometimes it will make it much more difficult for you to get a job in public policy or in the government or public sector. So look I think that that’s something again we should think about.
The way I talked about minimum standards with politicians, I think we should also have minimum standards for voters. Now, this is slightly controversial, it’s hard for me to articulate this in a way before people think “oh my God, that means there’ll be many more disaffected groups”. I’m not talking about testing based on education, I’m talking about testing based on knowledge. I worry a lot when, or I definitely worried a lot when I read that, I’m not sure if there’s any truth to this or not, that the day after the Brexit vote the most googled term was “what is the EU?” Now I don’t think we want to have a situation, this targets the heart of the legitimacy question, if we have our citizenry not sure about what we’re voting on, we end up in the situation where we are now where we might re-run Brexit, should we, should we not, and this really undermines the democratic process. So there are a number of ways of thinking about this type of voting system. As an immigrant to this country, and as an immigrant also who has lived in the United States, I have to take tests – I’m sure people know and I’m sure immigrants in this room know that in order to live in this country you have to take a civics test – I don’t see why, you know we’re willing to take driver’s license tests, why would we not want to have some civic responsibility where we take some minimum standard test, just to show that we understand what the three arms of government are, or what different public policy issues are. So I’m open to that.
The last thing I’ll say here, is that one of the other things I talk about in the book is weighted voting. And this is again quite controversial but I think it’s interesting, Canada’s thinking about it, Switzerland are looking at it, and this is the idea of potentially weighting votes based on age; with a view that people who are older have more experience, they understand how the world works, the economy and the politics, maybe their vote should count more than a young person who’s just starting out. You could take the reverse view. Brexit there were some people saying well actually the people who should have the bigger vote are young people because they will face the consequences, a longer future of consequences of a Brexit vote than older people. One could also, and I’ll just close out here, we could also think about doctors and nurses, people in the healthcare service who have better understanding of where we should spend the marginal pound, and so on. I’m going to just read one sentence, and then we’ll open up to questions, which is the first line of this book. And this is a quote from Jean-Claude Juncker, who is the current President of the European Commission, and he said: “we all know what to do”, he’s talking about politicians, “we just don’t know how to get re-elected after we’ve done it”, and I think that that is an indictment of the democratic system. Thank you for your attention.
Sir Michael Fallon MP:
Dr Moyo thank you [applause]. What a tour de force and its certainly encouraged me to go out and buy the book and read my way right the way through it. Good. Now we’ve got a good 15 minutes available for questions, and we can get more people in if they are questions. I know you’ve all got something to contribute, but if you could make it into a question please, then we can get through as many as possible. And we’ll start with the gentleman with the glasses.
You mentioned the idea of performance related pay for politicians, but given that we’re just across the road from Benjamin Disraeli famously said there are three sorts of lies: lies, dammed lies, and statistics, how on earth are you going to get objective measures for that?
Dr Dambisa Moyo:
So great question, and look as economists right now we’re struggling with if GDP is the right measure, we’re constantly, or should be evolving all the time. I think that the way the Singaporeans have tackled this is that they came up with their own metrics of what they think is important, and sometimes they’re actually more on the social side and quality of life. They actually poll their populations; “do you think you’re better off than you were four years ago?”, that kind of thing. So it doesn’t necessarily have to be statistics in the sense that somebody on high says well this is the GDP number, there’s a whole range of ways and I think that it’s a very good question.
Sir Michael Fallon MP:
Great, and rattling through, because you say we’re going to have democracy on tests so let’s see how many we can pack in. Sir.
Thank you very much. Euan Grant, Institute of Statecraft, but asking in a personal capacity. Firstly, do we know if Mr Juncker was sober when he made those comments [laughter]. Secondly, what’s the reaction in circles of influence? Are you surprised? Who’s reacting in what ways and are you surprised by reactions to the book, either positively or negatively?
Dr Dambisa Moyo:
The short answer is everybody knows there’s a problem. I think that the good news is that a lot of the reviews I’ve received have sort of said “this is fantastic, we now have a menu, at least we can shoot them down and we have some sort of touch points”. I would say that the weighted voting question is the one that’s probably the most challenging. I was just in Canada and they’re more au fait with the idea because they are exploring it, but as I mentioned mandatory voting is not something that Americans like to hear, but it’s certainly, that’s sort of the sense of it.
I was just wondering whether you had thought about what was the correct scope of government, because it’s all very well to tinker with how you get politicians into place but what should be their purview? If you don’t think about that then I think everything else really doesn’t matter.
Dr Dambisa Moyo:
So age old question, as you know. People on the right think it should be smaller, people on the left think it should be bigger. I would just say that as somebody who grew up in Africa, I’m not too sure about the size of government, and I take the view that it should be smaller. However, I think that there’s a more important question which is what are you trying to solve? Because in a place like Africa, the asset allocation decision is much simpler; it’s build a school, build a hospital, build a road. Here it’s much more complicated because you’re talking about intergenerational transfers, you’re talking about different competing needs in a way that you don’t see at your very basic levels.
I meant of it thinking in a more, geopolitical sense. When I look back on the history of the Weimar republic for example, its chief flaw was that practically everything in society was decided by a political process. And people just got fed up with that because when you have government which is trying to be so benevolent, an omni-benevolent government is an omni-annoying government, and that’s what was the case in the Weimar republic, and that’s really what killed it, ultimately. And I think that could be what will kill Western democracy and prevent real democracy emerging anywhere else.
Dr Dambisa Moyo:
I think, so I hear your question. I think the one point I would just say is that, you’re right because I think the fundamental point is that democratic governments have to pay to play so to speak, so they’re constantly trying to seduce voters with trinkets and goods and services, etc. And if you spend time in China that’s what they think is going to be the downfall of democratic governments. For me I really think that it’s the economy that is the problem, meaning that you can get rid of a lot of ills if the economy is growing and you can have improvements in social mobility. In a world where people are worried about growth and opportunities, that’s where the fissures start to emerge.
In this hurricane of bad news isn’t there one central element which is that a population that doesn’t take education to actually become more educated, standards are going down, productivity is not increasing, I think the central cause is trans-valuation of our values and therefore the society has lost direction.
Dr Dambisa Moyo:
So if I understand correctly, I think that society has lost direction, but it goes back to the ideological point which is that if you live in a society where the individual is viewed as paramount and the individual can do whatever they like as long as they are not impinging on another individual, then you consider that to be fine, that is what Western society is built on. Well the Eastern society, Chinese society, they have a very different view; the most important thing is society and they are worried about the errant behaviour of individuals. Why is this important, this split important? Well it’s important because the ability for public policy to manage bad behaviour or outcomes, or social costs that emerge from the behaviour of individuals is quite limited. You know I can eat whatever I like, behave badly, drink whatever I want, but I know that at the end of it there’s a welfare system to take care of me. But that welfare system is funded by taking money out of infrastructure or public education. That is not how the Chinese society works. The Chinese society takes the view that the most important thing is society, and you Mr individual better fall in line because otherwise we’re letting you run rampant and it’s going to undermine the broader context. And I think so in that context values do matter, and I think just one last point, ideologically when I speak to people in China they say to me the only thing they are ideological about is economic growth. So they say they’re misunderstood and people say “oh they’re communists”, they said “you never hear us say that. The only thing we care about is economic growth”. And if we could convince them democracy and market capitalism could deliver economic growth they would adopt it tomorrow. They just don’t believe that it can in a way that is sustainable and equitable.
Edward Ben-Nathan, member of the Henry Jackson Society. In a recent edition of The Economist, China very unusually, I was sort of gobsmacked by this, it was an advertising piece but essentially they were saying “we’re offering another model of good governance as an alternative to liberal democracy”. I don’t personally see how that could apply to anyone other than the Chinese, but anyway. The next point was Stephen Pinker in his recent book is very optimistic, everything is all going up, including democracies. What is your view? Are you optimistic about liberal democracy or not?
Dr Dambisa Moyo:
At this stage I am not, for the reasons I outlined. And I think that Stephen Pinker is right, but I just don’t believe past performance is an indicator for future performance. And as I was trying to emphasise, these headwinds are very unique and very specific. We have not had to deal with the rate of population growth that we are dealing with today, we have not had to deal with technology that is disrupting jobs without another sector to absorb that…
But that technology if that works then productivity is going to go up.
Dr Dambisa Moyo:
Potentially, but we’re already seeing technology today but we’re not seeing productivity gains. There’s a great book by Robert Gordon, you know we’re still flying New York to London, was a seven hour flight 50 years ago, guess what, it’s still a seven hour flight. There’s lots of ways in which technology has not disrupted in a way which we think it should with varying efficiencies. One last point, dematerialisation is another point. We thought by now we would be able to produce the same widget with less input, that has not happened either. And so I think Stephen Pinker is very optimistic and right to be optimistic in certain respects, but there are a lot of headwinds we have not dealt with before and I think it’s a little bit naïve, dare I say it. Can I just say, I know I’ve gone on a little bit, I also just want to point out that today we have about 70 million refugees around the world, this is the highest number on record, some people say potentially before World War II, in other words we’ve never had this many refugees. A fantastic book after you buy mine you should buy mine is called “The Drugs Don’t Word” by Sally Davies, and listen to what they’re saying about communicable diseases, things like Ebola, Zika, Sars. The incidents and prevalence of these diseases, even the CDC, the Centre for Disease Control in the United States, they’re writing regularly that these diseases are manifesting much more swiftly, and these are the things that to me are problematic. So Stephen Pinker can look back at the data and think everything is just so wonderful; he’s right, I’m sitting here, I wouldn’t have been sitting here 50 years ago, that is progress. But there are some serious headwinds, and these headwinds that were actually catalytic for growth in the past 50 years will now become headwinds and we need to address them.
If I could bring you back to the system of governance, is there an electoral system that is better? That produces more stability in that sense? Is it proportional representation, is it a Westminster model? Are we kind of destined for coalitions everywhere?
Dr Dambisa Moyo:
I worry that we’re destined for coalitions but I also, and let me just say two important things. So maybe a roundabout way of answering the question is what would happen if my book is ignored and people just keep trundling on. Well I think two things could happen. One is where, these are extremes, where government will become beholden to populism or to extreme groups – Italy is a great example of that, in fact there’s a fantastic article that came out a couple of weeks ago by David Brooks of the New York Times, and he asked the question; after Trump what’s going to happen? Is America going to revert back to the mean and the way it’s always been? Or are we now in a new world order? And he says the best indication of what happens is Berlusconi, because we’ve already been to 20 years of a billionaire, media-savvy person, and it’s destroyed the country in the political realm. You’ve seen what happened with the results a few weeks ago. So we could just end up with lots of extremism, right and left, non-serious candidates coming in, the collapse of the middle, that’s one scenario. The other scenario is plutocracy, which I would say America is trending that direction, where voter participation continues to fall, you end up with a small cadre of very wealthy people who are essentially dictating public policy. And I think that those two extremes are very viable in a world where we’re not doing anything to rectify things.
Sir Michael Fallon MP:
Let’s see if we can get a couple more in before the bell goes. Sir.
What would President Xi think of the term limits you’ve proposed now? And the 27 countries with the mandatory quota, are they showing signs of better governance?
Dr Dambisa Moyo:
So I think President Xi’s view would probably be, and this is not what he’s answered, but I think the view would be “we know we’ve got long-term economic headwinds, we don’t have time to have elections all the time, we’ve got to sort this out.” And as many of you will know, China does have democratic elections at the very nascent level, at the Mayoral level, so I think they view democracy as emerging in a very organic way, as opposed to shoe-horning it in which we’ve seen in many countries around the world. There’s a fantastic study that I talk about in the book by Przeworski who’s a professor at NYU, he finds, he’s actually got a model that predicts how long democracies will survive based on per capita incomes, and one of the things he says is below a per capita income of about $6000 that’s unadjusted for inflation, you will never have democracy survive. And think about these countries where you turn on the television and see the parliamentarians beating each other up, that is not a democracy that’s viable. And the world’s largest democracy of course is India, and you look to India, look at India and China which are two live experiments, there is a lot of gridlock, a lot of bureaucracy, and an inability to deliver I would argue in a way that we see in China. I’m not here to claim that, I should have been very clear if I haven’t already, I’m very much pro-democracy, very much pro-market capitalism, but it does need to evolve. Just to your point about the 27 countries, what a brilliant question, because the question essentially around does it matter for public policy if you have mandatory voting. But also is I may extend the question, if we had adopted these policies that I just suggested would the Brexit result have been different, would we have had a different outcome from Donald Trump – that’s not the point. Meaning that we don’t know, and in fact we may have ended up with the same result, but the point is that we would have had more legitimacy around those results. And to your specific question about whether they have better outcomes, that’s a brilliant question and very hard to test because essentially you would need to have a counterfactual to say well you know, two different governments. I would love to, and in fact I’m looking at research now to see what the answer would be, but very good question.
Sir Michael Fallon MP:
One more in, the lady in front.
In relation to the threats to economic growth that you’ve spoken about, which of the solutions that you’ve proposed do you think is the most controversial?
Dr Dambisa Moyo:
In terms of? Sorry just trying to understand the question exactly.
The threats to economic growth that you spoke about at the beginning and then you proposed some solutions towards the end, which of those, perhaps the testing for voting, do you feel were the most controversial?
Dr Dambisa Moyo:
I think certainly weighted voting is the one that people find, I think they find it hard to understand how it would work. And to be quite honest I think it works better in a referenda situation, a referendum situation; in California they have lots of referendums on everything. I think it’s easier to say well, in order to do something on the sugar tax and questions around obesity in a referendum, you might have only nurses, doctors, people who work in healthcare, where should we spend that extra £1 that we have – should it be x-rays or beds or medicine, how do we do that? I think in a general election it would be harder to do, but nevertheless I think it’s worth exploring.
Sir Michael Fallon MP:
Thank you very much, and apologies for my brisk chairmanship but we have to finish at exactly 7 o’clock, the bell is about to go, but before it does I’m hoping there is time to thank Dr Moyo properly. Many times I’ve sat round this table on our treasury committee, probing for a better economics; you’ve come here and asked for a better politics, which I think is fascinating, and certainly encouraged me to go out and get the book. I’ve found this a most illuminating evening, and on behalf of us all I’d like to thank Dr Moyo.