Dambisa Moyo on the Post-Pandemic ‘Progressive Era’ to Come
“It’s very easy for us to forget that things in the global economy and geopolitically were already somewhat precarious before COVID hit in earnest,” says Dr. Dambisa Moyo. “As we start to think about what a post-pandemic recovery looks like, I think it’s very important to have that context in mind.” This is why, for Dr. Moyo, “COVID is an accelerator to the challenged environment that was already occurring.”
Dr. Moyo is a widely acclaimed economist and author of four New York Times bestselling books, most recently, “Edge of Chaos: Why Democracy Is Failing to Deliver Economic Growth—and How to Fix It,” published in 2018. Her upcoming book, “How Boards Work—and How They Can Work Better in a Chaotic World,” is scheduled to be published in the spring of 2021. She spoke with WPR editor-in-chief Judah Grunstein about the challenges facing the developed economies, and how the pandemic will affect them and the global economy more broadly.
Among the “five things that were happening before COVID that were materially worrisome,” she points to “low, slow and even no growth in many large economies, both developed and developing.” The difficulty that democracies, in particular, have encountered in delivering economic growth, combined with increased income inequality, helped drive the backlash against free trade and the rise of nationalism seen across the West in the aftermath of the global financial crisis.
Listen to the full interview with Dr. Moyo on the Trend Lines podcast:
Now policymakers will have to be “visionary” in crafting responses to the coronavirus pandemic to make sure another unevenly distributed economic recovery doesn’t further tarnish democratic models of governance. “A lot of economists were all trained in a particular toolkit that public policymakers have in terms of monetary and fiscal policy,” says Dr. Moro, “but we obviously lack a lot of imagination. … I think that there are additional tools that we probably haven’t even thought of yet that will continue to be drawn upon in this very challenged environment.”
She says the increased risk that income inequality and social mobility will worsen in the post-pandemic period means that government interventions in the economy will in all likelihood increase.
“I personally think we’re heading into a very progressive era,” Dr. Moyo says, but that does not necessarily represent a threat to the private sector. “I don’t see this as an either/or,” she adds. “If government is not working … the GDP pie will not grow. It’s as simple as that.”
The following is a partial transcript of the interview that has been lightly edited for clarity.
World Politics Review: Your last book from 2018, “Edge of Chaos,” looked at the relationship between democracy and growth: how democracies are failing to deliver growth, and what’s at stake. So what were some of the long-term structural obstacles to growth in the developed economies from before the pandemic?
Dambisa Moyo: I think that’s a very important question, because it’s very easy for us to forget that things in the global economy and geopolitically were already somewhat precarious before COVID hit in earnest. But also, as we start to think about what a post-pandemic recovery looks like, I think it’s very important to have that context in mind. To my mind, there were at least five things that were happening before COVID that were materially worrisome. At a very high level, we had low, slow and even no growth in many large economies, both developed and developing. By that, I mean that most economies that are quite significant contributors to the global economy were not able to even reach 3 percent growth, which is the minimum that they should be growing at in order to double per capita incomes in a generation.
A second concern is that public policy, both monetary as well as fiscal policy, was already somewhat challenged and some might even say impotent. We were already in a world of negative interest rates in places like Europe and Japan. And the amount of debt already on government balance sheets, as well as corporate and household debt, was already highly considerable and worrisome in the aftermath of the financial crisis of 2008. In addition to this, we were worried about technology and the risk of a jobless underclass, something that’s only going to accelerate with the sort of a push towards digitization. We were worried about demographic shifts, both in terms of the quality and the quantity of the global workforce. India’s adding a million people a month to its population. This was happening before COVID hit.
We were worried about climate change and natural resource scarcity, as well as income inequality—the fact that not only was income inequality widening, but there was a real concern that social mobility, which is a real big driver for improving world outcomes and reducing income inequality, was actually getting worse. So this is a confluence of factors that was happening before COVID, and really in that respect COVID is an accelerator to the challenged environment that was already occurring.
The post-Gilded Age, from 1870 to 1900 in the United States, is a great indicator of what happens next around the size of government.
WPR: Another feature of the global economy prior to the pandemic was this backlash against globalization and free trade. At the same time, in the past four years since Donald Trump took office, there have been a number of huge free trade agreements that have been sealed. I’m thinking of the RCEP, the Japan-EU free trade agreement, the way in which the Trans-Pacific Partnership was salvaged even after Trump withdrew from it. Do you see that as a last gasp of the move toward free trade? An ongoing tension? Or is it a sign that free trade is actually more resilient to the backlash than we expected?
Dambisa Moyo: Well, I think what you’re referring to as free trade is really not what broad-based globalization was expected to deliver. What you’re describing is regionalization and balkanized agreements between countries, whether it’s on a bilateral basis or on a multilateral regional basis. That is not what I would say textbooks promised when we think about globalization. Globalization really ought to be broad-based. It should cover trade in goods and services, capital movement, movement of people, the spread of ideas and standards around that, as well as multilateralism around governance structures. And it is patently clear that that is not what we’re seeing. If you look at the pace of growth in trade, from the World Trade Organization, that has slowed in the post-financial crisis period. Capital controls have become much more stringent. We know that, not just in the United States, but also across Europe, there’s been a very heavy anti-immigrant backlash.
There are real risks around the “Splinternet,” by which the world could potentially split into two competing intellectual protocols—one China-led technology base, and another one U.S.- or Western-led. And then obviously we’ve seen multilateral institutions such as the IMF and the World Bank—the Bretton Wood Institutions from 1944—now face considerable rivalry from some Chinese-led organizations. So, in a nutshell, I think that we will continue to see a retrenchment of what I would call broad-based globalization in all of these areas that I just listed. And I think in that respect, to be quite candid, I think it’s evolved away from economics into a much more political sphere, as governments become much more challenged and face much more retribution in a political sense from their populations. …
So I would argue that what we’re seeing is a scramble for a more balkanized, more regionalized type of trade agreements. But that’s, to me, a material move away from the sort of broad-based globalization that we know and love.
WPR: Now, fast forwarding a couple of years from the publication of your book, and we have the pandemic that’s hit, with all of the economic fallout that you referred to already, particularly with regard to debt. Are there any other gaps or weaknesses in developing economies, but also the global economy, that the pandemic underscored for you that warrant more attention?
Dambisa Moyo: Well, for me, the big question that I hear a lot about in corporate boardrooms is around a digitization and how COVID is an accelerator or maybe a catalyst of this whole movement towards a world which is more automated, more technology-based, more robot-based, and what that might mean for technological unemployment, which we were already anticipating. I wrote about it in my last book, “Edge of Chaos.” But we’ve been talking a lot, public policymakers have been talking a lot about how there’s a risk that there will be a lot more people who are unemployed. Well, that has now been catalyzed.
And the debt point you’ve raised: I think both debt as well as issues around digitization, as well as the burgeoning size of the world’s population, all of these factors feed into widening income inequality, in terms of a lack of access to public goods such as education and health care and infrastructure. But also, I think it also materially underscores the risks that income inequality and social mobility will worsen in the period that is coming. So that’s an area that I think has been particularly much more highlighted in the post-COVID era.
WPR: You mentioned, too, that governments and central banks had entered the pandemic with pretty limited tools at their disposal in terms of monetary and fiscal policy. Do you see any potential innovative instruments that they could use for recoveries? And if not, what kind of recovery do you expect to see?
The public policy initiatives that government has to outline cannot be reactionary. They’ve got to be visionary—they’ve got to be long-term.
Dambisa Moyo: Well, I think that’s a great question, because a lot of economists were all trained in a particular toolkit that public policymakers have in terms of monetary and fiscal policy, but we obviously lack a lot of imagination. And there’ve been a number of things that have happened, certainly in the aftermath of the financial crisis, but even more so during COVID that have underscored this point. The fact that we’ve had negative interest rates—this is just unheard of. The fact that debt-to-GDP ratios are at 100 percent in the United States and the U.K.—who would have thought that that would be the case? I’ll give you another one, the Federal Reserve in the United States buying sub-investment-grade corporate debt. Never would we have thought about those as being real tools. But they are.
And I should also point out that, on a very macro level, the fact that Republican and Conservative governments in the United States and the U.K. are essentially turning to the Keynesian playbook—big government, massive stimulus, etc. These are all things that, if you’re lacking imagination, you would not have seen. So in that respect, I think that there are additional tools that we probably haven’t even thought of yet that will continue to be drawn upon in this very challenged environment.
With respect to the second part of your question, where does this lead us? I personally think we’re heading into a very progressive era. The post-Gilded Age, from 1870 to 1900 in the United States, really is a great indicator of what happens next around the size of government, not just in terms of debt and deficits, but also governments’ importance in the economy as an arbiter of capital and labor. We’re seeing it in furlough schemes. As I mentioned, we’re seeing it in much bigger responsibility in terms of capital as well.
WPR: How do you expect, then, that increased role of government in the market, particularly in terms of social inequality and income inequality, to affect the balance of power between government and corporations?
Dambisa Moyo: Well, I think there are a lot of questions in your question. So let me try and take a stab at this. It is absolutely the case that, to my mind, government—and I’m using the term broadly to mean politicians, public policymakers as well as regulators—are the backbone of an economy. We’ve seen it not only when they’ve been, shall I say, less aggressive, so more laissez-faire, but also when they become incredibly innovative in designing programs like the Manhattan Project or DARPA, or the building out of Silicon Valley. You’ve seen it where governments can become incredibly driven, and we see this in China today, to help support the broader economic engine, which the private sector obviously participates in. And so, I don’t see this as an either/or. If government is not working and you have massive unsustainable debts, you have public policy not working to deliver public goods in terms of education and health care and infrastructure, then the private sector will struggle and the GDP pie will not grow. It’s as simple as that.
And so it can’t be a balance of power point, because the private sector cannot develop if government’s not doing its job efficiently. What does efficient look like? It’s basically government being very data-driven, very forward-leaning, really focused on measured outcomes, and also avoiding being corrupt. … So I don’t think of this as either/or. I think that we need corporations to function at the highest level so that they can deliver the capital allocation and investment in R&D and innovation to help solve a lot of the problems that the world is facing. And we’ve seen that done brilliantly during this COVID era. But at the same time, we can’t have government as free riders who are riding shotgun, so to speak. I mean, government has to be part of the discussion.
And the public policy initiatives that government has to outline cannot be reactionary. They’ve got to be visionary—they’ve got to be long-term. And we’ve seen it happen before, as I gave some examples, but whether it’s through building out roads in the interstate system, or doing what the Chinese government’s doing right now in terms of driving technology as a sector, that is what is going to be called upon for government. And the best governments will continue to do that and be much more proactive instead of reactive.