Kevin Libin: Democracy suffers from politics of the faint-hearted

Kevin Libin May 27, 2011 – 12:30 PM ET | Last Updated: May 27, 2011 2:43 PM ET

Touching down on Canadian soil in the midst of a federal election, Dambisa Moyo comes with something provocative to say about these kinds of democratic exercises—and it’s not good. It’s not that she’s anti-democratic, she hastens to note. It’s just that frequent votes like this have their downside. They create problems. In fact, the major maladies catalogued in Ms. Moyo’s latest book, How the West was Lost, an unsparing critique of U.S. economic and fiscal policy, are ultimately traceable back to one cause: the structural incentive for politicians to think only as far ahead as the next election.

“Policymaking,” she says, “is not incentivized to solve structural problems.” Quite the opposite: it’s incentivized to create them. At least, this is how things appear to have turned out in the U.S. When you look at the origins and outcomes of the last 50 years of vote pandering in America, it’s easy to see what she means. A political promise of home-ownership for all begets, through suppressed interest rates, a bubbling sub-prime mortgage crisis. A political guarantee to secure workers in their golden years begets, when coupled with demographic shifts, a pension plan as tottering as a pyramid scheme. A president’s ambition to serve up cheap health care to all begets…well, we can only speculate. But if history’s any guide, that, too will end up just as costly.

Ms. Moyo, who was visiting Calgary recently as the guest of the Teatro speakers series, last made a splash with her 2009 book, Dead Aid, which laid bare how decades of Western foreign aid to Africa had only made things worse for an already beleaguered continent, entrenching poverty and dependency while perpetuating undemocratic rule and corruption. It wasn’t an entirely novel argument: conservative thinkers and writers had been making that case when Ms. Moyo was still busy building her impressive collection of degrees at Harvard and Oxford, before moving on to the World Bank and Goldman Sachs . But coming from a young woman born and raised in Zambia, even a relatively privileged one (her mother’s a bank chairwoman), she lent the thesis a credibility that greying white men could not.

Much of the ideas in her present book have been aired before, too: anyone who’s been paying attention knows how a political fixation with keeping mortgages accessible fed the housing bubble, and the rise of China’s economic power, the competitive threat that Ms. Moyo believes may succeed in toppling America’s global supremacy, has been the decade’s most inescapable business story. But in How the West was Lost, Ms. Moyo broadens to look at the number of places America has chosen the wrong path: she looks past the elephantine issues to scold the U.S also for giving away drug patents to developing nations, sabotaging its own pharmaceutical industry; for the rise of Wall Street’s unproductive day traders; for screwing up its auto industry; even for its culture of celebrity worship, which, she says, tempts teenagers to pursue long-shot careers in professional sports or hip-hop, and away from training for real world professions.

But when Ms. Moyo takes on what she thinks are America’s most dangerous follies, she advances a theme that also coloured Dead Aid: how soft-hearted political intentions — whether that’s trying to feed Africans, or feed the American Dream — can be hurtful.

If the West has to worry about China, it’s because China has spent so long worrying about only its own interests: not policing the world, not feeding the world, not even caring altogether much about the human rights of its own people, let alone whether they can get a cheap boat loan.

“The notion China would care about religion or democracy or social concern in other countries is mad,” says Ms. Moyo. The country has built its international reach, snapping up businesses and resources abroad with alacrity. But when the Chinese do it, they are, “much more blatant and obvious: they’re there for Chinese interests.” They keep their heads down politically, and focus on maximizing their own benefits. Compare that to a democratic country, where parties are vulnerable to the pressure of special interest groups, international NGOs and, of course, guilty, liberal voters: Our own official opposition party wants to force Canadian firms to indulge first-world environmental and worker rights standards when doing business in the laxer jurisdictions of the developing world. You can be sure the Chinese won’t be doing that.

It’s true China is gradually confronting its own middle-class pressures; its latest five-year plan considers the prospect of a wider social safety net. And its economic trajectory is not to be taken for granted by any means, Ms. Moyo points out. But they can learn from America’s mistakes, while sitting on a cushion of cash—earning $1 billion a day from foreign interest alone—that allows a lot of forgiveness for missteps. The lack of political competition in China, meantime, means there’s no race to the bottom among vote-hungry parties for who can grovel most for public support.

“The political framework that we live in actually encourages western policy makers to choose policies that look short-term-attractive but, longer-term, are detrimental,” says Ms. Moyo.

The situation, writ small, may highlight the paradoxical disadvantage of democracy: freedom, openness and electoral accountability may be the very qualities that bred innovation and prosperity in the West. But they’ve also bred a weakness. Voters demand entitlements, and politicians oblige; special interest groups press for touchy-feely policies — more welfare, environmental standards, foreign aid — and politicians oblige; populists vilify big business and profits, and politicians fall in step. As China, focused on the long-term, unworried about two-year election cycles, emerges more ruthlessly capitalist, America, Ms. Moyo believes, is well on its way to losing its identity and en route becoming a socialist welfare state.

“I think that the fact 45% of Americans don’t pay federal taxes…doesn’t smell like the American dream.” Meanwhile, even Sweden and Denmark offer businesses a vastly more competitive tax environment than the good old U.S. of A. “I mean does this sound like America? Home of the free, land of the brave?” she asks.

The bleakest thing about Ms. Moyo’s thesis is the forbidding challenge of fixing a problem that appears so intrinsically structural. One option she thinks might work, is lengthening the political cycle, giving politicians breathing room to dream up policies more serious and durable than just bribing voters. The fact that Americans last voted in November, and president Barack Obama kicked off his own re-election bid just five months later, is proof, she says, there is “just too much noise around politics.” Where, she asks, “is the time and space to focus on the seemingly intractable issues?” Still, she says, a major constitutional remodeling like that would be “quite difficult” to sell to citizens.

The other, more realistic solution, Ms. Moyo believes may be to redirect the bribery—this time towards positive ends: pay people for the right behaviours; use the tax code to reward them for saving instead of borrowing; pay them to pursue math and science degrees, or to take better care of their health. Above all, stop the incentives to do things that harm the country’s economic strength. But both cases require citizens to want to fix things and to be willing to think of the long-term themselves. Unfortunately, there’s no sign yet from America that that way of thinking will take hold anytime soon.

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Jules said...

10-thumbs up!

Anonymous said...

I remember when then this blog was about trading and hadn't yet lowered itself to posting pictures of (intelligent, persuasive) attractive women. I have plenty of other links (hidden from Mrs L&W) for this kind of thing.

Solfest said...

Well there's the pot calling the kettle black.

At least I post something.

And after getting up at 6:00 AM, opening charts, seeing the volume, thinking the world came to an end, then realizing it was Memorial Day in the US, having Mrs. Solfest leave me a long list of chores while "she's off to work", I'm in no mood to talk.