Economist Dambisa Moyo

Economist analyzes how the uprising in Libya will impact global oil prices and argues that the U.S. could become a socialist welfare state in a matter of decades.

Economist Dambisa Moyo has been honored by the World Economic Forum as one of its Young Global Leaders and by Time as one of its 100 most influential people. She's worked for the World Bank and Goldman Sachs and is also a best-selling author. Born and raised in Zambia, she's an outspoken critic of international development aid to Africa, which she wrote about in Dead Aid. Moyo holds a Ph.D. from Oxford, a masters from Harvard's Kennedy School of Government and an MBA from American University. Her latest text is How the West Was Lost.

TRANSCRIPT

Tavis: Dambisa Moyo is a former consultant to the World Bank and author of the “New York Times” best seller about financial aid in Africa called “Dead Aid.” Her latest, though, is called “How the West Was Lost: 50 Years of Economic Folly and the Stark Choices Ahead.” Dambisa, nice to have you back on this program.
Dambisa Moyo: Thank you. Thanks very much.
Tavis: Before I get into the text, let me ask about the news of the day with the ongoing crisis, the protests, the unrest in Libya, oil prices driven up slightly higher today.
Talk to me about what you make of that and what’s in store, because we all know in this country what happens when the price of oil goes up.
Moyo: Yeah, absolutely. So I think my immediate concern is that I think people are sort of categorizing or characterizing what’s going on in the Middle East as an issue around democracy, which it partly is. But I think more than that it’s people’s disappointment and even outrage at the fact that many of these countries have just simply not significantly improved their living conditions in terms of economic growth and reductions in poverty.
As you’re aware, many of these countries in North Africa, across Africa also, but in the Middle East, have significant pockets of young people who remain disaffected. So I think what you’re really seeing here is an outrage and disappointment with the economic situation, but more than that, the issues around politics.
Just coming to your specific question about the oil price, clearly there are issues here. I think at $100 a barrel, I think the rule of thumb is you’re talking about $4 a gallon. I think that we have to wait and see what happens, and if this continues through to Saudi Arabia and other places, the UAE, for example, I think that there’ll be serious knock-on effects.
Tavis: You think that we’re going to see rising prices in gasoline, given the way this thing is working out at the moment?
Moyo: Well, for now I think that people – the momentum of disaffection is likely to continue. I think that the market has not mispriced, or rather has not priced a dislocation between demand and supply as yet, and I think that the Saudi Arabian government has talked about actually picking up where any shortfall might occur from Libya or any of the other countries.
But I think in the longer term we do have to monitor and see what this means for economics and for politics in the region.
Tavis: Since you mentioned economics and politics and I listened to, obviously, your first answer, before I get into the text of “How the West Was Lost,” In your own words, tell me what you see as the culpability, the responsibility, of the United States for all of these years, given the relationships that we’ve had in many of these countries where we now see this unrest.
You know the story as well as I do – in a whole lot of these countries we’ve had relationships and friendships enough to prop up some of these folk, and now we see all the chickens coming home to roost. Just tell me in your own words the role that the U.S. has played over these years in this region of the world.
Moyo: Well, as you know, certainly from my last book, “Dead Aid,” I think that the whole culture of aid, whether it’s for military aid or for economic aid, has simply not done what we would hope it would do, which is to in effect create economic growth, reduce poverty.
I think that the United States, in its role as a sort of beacon of freedom, has disappointed on many occasions. I think there’s been a large expectation from people across Africa, South America and across the world that the United States be the emblem or the representative for freedom, for democracy, and we simply don’t see that, especially when the United States engages in relationships in not only propping up but also building relationships with some of the greatest despots that are known on the planet today.
Tavis: To your point now, let me go right inside the book, “How the West Was Lost.” There is a lot in here worth wrestling with, but I’m going to put this up on the screen because I want to just read actually two or three sentences here from the text.
“The odds are, however, the United States will be a bona fide socialist welfare state by the latter part of this century. Indeed, if nothing else changes it from its current path, it is almost certain that America will move from a fully fledged capitalist society of entrepreneurs to a socialist nation in just a few decades.”
We see in the media all the time, by certain parts in this country, the president, Obama, being labeled a socialist, and here I read now you suggest that’s exactly where we’re headed. We can debate all day long whether or not he’s a socialist, but your argument is that’s where we’re headed, a socialist welfare state somewhere down the road. Unpack those sentences for me.
Moyo: So, I think, first of all, I’m using the term “socialist” with a small “s,” in the sense that the United States is not embarked on a deliberate policy of designing a socialist state. So in other words, it’s not going to look like what you see in Scandinavia or Germany, where they’ve a very deliberate society which has been designed to be socialist – in other words, where the government takes a primary role as an arbiter of labor and capital and also in terms of creating policy for the economy.
I think what you’re going to see in the United States is that these socialists with a small “s” will actually emerge by accident and in that sense it’s much more detrimental and much more risky. We’re seeing already many of those hallmarks in the United States.
For example, if you look at public sector compensation in the United States, since 1980 it’s been much higher than the average private sector compensation. This is quite surprising to people like me, who always looked at the United States as sort of a home to entrepreneurs in the private sector.
But beyond that, already around 45 percent of Americans don’t pay federal taxes. A lot of the issues that we’re hearing around things like healthcare and entitlements, which have been a big issue; obviously Wisconsin and Ohio, the issues around pension reform and pension liabilities.
I think all of that, really, put together suggests that the United States is much more leaning towards dependency on the public sector than traditionally we’ve known.
Tavis: Your comment about the public sector notwithstanding, I don’t know how one can even make the argument when you look at the numbers of the gap, the growing gap over these years between the pay of CEOs and the heads of companies and the workers in those very companies.
It just seems to me that beating up on the public sector is the easy thing to do, but in the private sector, which you referenced a moment ago, the gap between those at the top and those who do the work in these companies every day has grown exponentially. It’s ridiculous, how wide this gap is now.
Moyo: Yeah, no, I think it certainly has happened that way, but I think that’s a question for America to ask. Is that really the society that the United States would like to be? I was struck that the dinner that President Obama had a few days ago in San Francisco with the tech leaders, they had just a handful of them were worth $57 billion or something quite astronomical – much greater than the larger – even some GDPs of certain countries.
Obviously, at the same time, we’re looking at education in the United States, which has deteriorated significantly. I’ve just been in California on your roads, and some of the infrastructure is appalling. I’ve seen better infrastructure in places in Africa.
Tavis: Tell me something I don’t know. I blew out two tires the other day, so I know the feeling. (Laughter)
Moyo: So when you look at this imbalance, and obviously income inequality in the United States has widened over the time in the last few decades, I think these are the issues that policymakers should be grappling with, but they’re not incentivized to focus on long-term structural issues and are almost invariably focused on these very short-term issues, which are the things that they think they can win votes on.
Tavis: I want to discuss those three issues in just a second – capital, labor and productivity, long-term, in just a second. Before I do that, though, when I first saw your book come across my desk, the first thought was, when I saw the title “How the West Was Lost,” is it lost already? Is it already game over?
Moyo: It’s absolutely not, which is why the subtitle says, “Fifty Years of Economic Folly and the Stark Choices That Lie Ahead,” because there are choices that have to be made.
I think the choices are going to be incredibly difficult, I think there are going to be a lot of sacrifices that will have to be made, but the reality is – and I’m sure we’ll come to this in a moment – but one of my concerns is that we’re not there yet. I think that there’s still a sense that the United States will somehow naturally come out of this.
My reading of the situation is that a lot of where the United States is today is actually through deliberate policy, and the sooner that policymakers take up the mantle of encouraging and speaking to people honestly about the situation the U.S. is in, the sooner that you’ll get out of it.
Tavis: How would you describe, to your point, because I agree with you on this point, that there is this sense that we’re just magically somehow going to turn this around, that patriotism, that nationalism that many of us engage in makes us believe that we’re just going to turn this around, how do you read that?
Is that our arrogance? Is that hubris? Is that being stuck on stupid? Is that denial? What is that? All of the above?
Moyo: Well, I think when I’ve gone across the United States in the last few weeks and spoken to audiences, nobody is particularly surprised if you say education standards are declining in the United States, or infrastructure is dilapidated, or pensions are a big issue.
I think that the problem arises when you start to ask about what actually is going to be done in policymaking to reverse this decline, and that’s where I see that there’s a split.
So people do know that there’s a big issue – looming pensions and healthcare costs and so on – but as a practicality I fear that the sort of hyper-politicization in the United States – every two years you’ve got elections here – just means that the government and the political environment is much less focused on dealing with structural issues and much more focused on winning votes.
Tavis: I’ve got just a few minutes left here. Let me take these three issues we referenced earlier and get you to top-line for me the stark choices ahead for this country if we’re going to turn this situation around on these three issues – the three issues, of course, that drive any economy. First, capital.
Moyo: Yeah. So capital, you’ve just got to cut back on your borrowing for consumption. Borrowing in and of itself is not a bad thing. You have to make the decisions on whether or not you should be borrowing, but if you’re going to borrow you should absolutely be borrowing for investment, not for consumption, both at the public sector level but also at the individual level, and that has clearly been the problem in the United States.
Way over-leveraged and not for anything productive in terms of GDP enhancing. You’ve borrowed basically for consumption.
Tavis: Labor.
Moyo: Labor – pensions is an immediate problem. Nobody really knows how big the pension liabilities are. You hear $3 trillion, you hear debates around that; serious issues there. Healthcare related to that as well. Massive looming costs around the increase in the baby boomers going into retirement. Of course, the most obvious thing in the United States is education.
You’re lacking competitiveness. Looking ahead in the United States is simply not going to be able to compete internationally against these other economies if you don’t have the requisite mathematics, reading and sciences.
Tavis: That pension debate is going to be a tough one – witness Wisconsin, Ohio, Indiana.
Moyo: Absolutely, yeah.
Tavis: It’s just heating up, this debate about pensions long-term. Finally, productivity.
Moyo: So productivity – the United States has clearly still got gains, has earned gains, but nowhere near the gains that you see in places like China. And I think here you’re just going to have to be much tougher on investment in innovation, technology and R&D.
One part of that is that it could continue to increase the widening gap between the haves and have-nots in the United States, but at the same time I think in the areas where you do have a proprietary edge, things that the world is willing to pay the United States for – the innovation, the R&D and technology – the U.S. government’s going to have to become much tougher on making sure that other countries don’t just take it and create generics, or actually just misappropriate these assets. I think you actually need to make sure that people are going to pay for them.
Tavis: The new book from Dambisa Moyo is called “How the West Was Lost: 50 Years of Economic Folly and the Stark Choices Ahead.” Dambisa, thanks for the text. Good to have you on the program.
Moyo: Thank you very much for hosting me. Thank you.
Tavis: It’s my pleasure.
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Last modified: April 26, 2011 at 12:29 pm