Posted by: CS | April 7, 2011

The Economist Who Said "The Emperor Has No Clothes"

Unlike almost every other well known economist, Dambisa Moyo has not won the economics Nobel prize. Moreover, the economics Nobel Prize is an accolade for which Dambisa Moyo seems entirely unqualified since she has published neither block-busting economics textbooks, nor clever mathematical models in obscure economics journals. Indeed, she has published almost nothing at all, other than a book on development aid, and her latest work, “How the West Was Lost.”

Despite her seemingly slight credentials, Dambisa Moyo has pointed out what none of America’s many economics Nobel laureates seem to have noticed; namely, that America, and more broadly the West, is (a) going broke, and (b) facing imminent eclipse by Asia’s economic giants. More importantly, she explains why.

The story is best told in her book or in abbreviated form in this lecture to the Commonwealth Institute of California:

Briefly, her account is simple and irrefutable. We are living beyond our means, massively over-investing in housing and other forms of consumption, imposing massive and unbearable financial burdens on our children through Ponzi healthcare and pension schemes, and ignoring a catastrophic decline in educational standards.

Housing bubbles she attributes largely to misconceived government programs that subsidize home ownership, proceeding on the assumption that housing, a basic necessity of life, should be expensive not cheap: an insane idea to anyone concerned with the welfare of the people, but one highly profitable to the construction industry and property developers.

The Ponzi schemes are, well, just that. Ways in which governments bribed voters with the voters’ children’s money, a symptom of a terminal decline in public intelligence and the morality of Western governments.

On education, she makes the obvious point that if English kids can’t do math their contribution to the nation’s declining industrial economy is likely to be small. Moyo does not enter directly into a discussion of the causes of the decline in educational standards throughout most of the West, although she touches on what is the most important factor: employment opportunity.

Western state have for a generation pursued a policy of unconstrained free trade, which has meant off-shoring and outsourcing of manufacturing and many service sector jobs including design work, computer programming and financial-services-industry back-office functions, mainly to Asian sweatshops where labor rates average less than 5% of those in the West. Under those circumstances, what is the reward for the hard work necessary to obtain a good education? LOL. They have plenty of good brains in India and China, so who’s gonna rush to employ a math wiz. or programming geek who expects to earn a decent salary and who, in any case, is not permitted by law to work for less than than a minimum wage that a fresh graduate in India would die for.

But what Moyo does show is that under the conditions of World trade that currently prevail, the claim by the likes of Canadian economist, Jeff Rubin, that free trade benefits everyone — the argument for comparative advantage, is a lie, thereby indicating the remedy that the West must employ if it is not to be driven into absolute poverty. We must allow Canadians, and Britons and Americans and Australians to make shoes and shirts and cars and cameras for one another. The time of exchanging bits of worthless paper for Asian made goods will soon be over, and if by then we have entirely destroyed our manufacturing, scientific and technological skills, we will never recover.

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Responses

  1. "if English kids can't do math their contribution to the nation's declining industrial economy is likely to be small."Dang, because with no math skills in the states you can look forward to a long career in Washington or at the Federal Reserve."Low Plains Perspective"

  2. Dambisa Moyo starts by saying unintended consequences is the premise of both her books "How the West Was Lost" and "Dead Aid". I could not disagree more with this premise. She quoted FDR but he said "In politics, nothing happens by accident. If it happens, you can bet it was planned that way."She said the government lowering interest rates created the economic problem. The Federal Reserve lowers interest rates in the USA. Perhaps Oxford needs to update their curricula as that changed in 1913.She shoots fish in a barrel and states the obvious. The ony education solution touched upon was tenure elimination and cutting pensions. Christy from NJ was given Kudos.Aung San Suu Kyi was the person in Berma she could not remember, but she sure knew the Packers, Dallas, Dynasty, and Jeaopardy which made me laugh since the Commnwealth Club of California ia an educational organization and she was trying to point out the failures of the education system. But the humor gets better when she says "People are relying on America to get it right". Well then they're fu*$@#!"Low Plains Perspective"

  3. Despite the fact that the future appears to be bleak in terms of our youth, I offer up the hope that there are still quite a number of American students (I will speak for America because that's where we live) who have not fallen in line with the indoctrination that has taken place in our school system underneath our noses with few complaints.These youths are bright beyond measure and appear to be immune to the dumbing down that has sinisterly been adopted as the approach to educating our FUTURE. They know how to use their minds–something most people have never learned or forgotten how to do. They are determined and I believe they are our best hope for cleaning up the huge mess taking place as we speak. They know things intuitively and are not swayed by group think. Have hope. There is always reason to hope.I think we need to take a look at how America has systematically drugged up our children and ruined them. I see this on a daily basis with my children's friends. Nearly all of them are on some type of prescription drug which alters their minds in ways you cannot imagine. How these parents have allowed this to happen is impossible for me to understand, but it has got to stop. We need to clear the minds of our children from the drugs they are pushing on them relentlessly for every little imagined problem.

  4. Thanks Aang for the plug.

  5. Anon from Low PlainsRe: "She shoots fish in a barrel and states the obvious"Quite right. That is why I referred to the Emperor's lack of cloths. The economic decline of the West is due in large part to massive misallocation of resources to consumption made possible by cheap credit that has enable folks to compensate, by borrowing, for income lost due to offshoring of jobs. Obviously unsustainable. But it got us through the difficult period when the crime of destroying much of the Western world's industrial base and technological capability was carried out. The decline in technological capability will only show up in the future as the failures of the educational system work their way through to the top ranks of the academic and industrial research worlds.And then there's the allocation of our kids' income to pay our pensions and healthcare.

  6. Anon: "There is always reason to hope."Absolutely.

  7. Though after saying that, I'm struggling to think what those reason are!

  8. I was not implying there is no hope. Life is grand!!! I just don't count on the American government to help the little guy unless it is a by-product of somebody stealing from the system. "Low Plains Perspective"Rise up this mornin', Smiled with the risin' sun, Three little birds Pitch by my doorstep Singin' sweet songs Of melodies pure and true, Sayin', ("This is my message to you-ou-ou:") Singin': "Don't worry 'bout a thing, 'Cause every little thing gonna be all right." "Bob Marley Perspective"

  9. "I just don't count on the American government to help the little guy"It wouldn't be so bad if they merely didn't help. The problem is when they take your money and spend it on a programs for the sexual humiliation and irradiation of air travelers, stuffing childrens' minds with lies and propaganda and bombing people abroad who naturally hate you and everyone in your country who, by complying with authority and paying their taxes, are complicit in these atrocities.

  10. I agree.And you would think being broke would slow down the USA, but the fed just keeps printing money.If only more people gave up one-way communication like TV and instead participated in two-way communications like the Canadian Spectator (AKA canspeccy.blogspot.com).Just keep plugging away. And hopefully you bought silver.The sun is out so I'm gonna go work in the garden and recharge by being.

  11. The argument is made that the US can't go broke because it prints its own money, so all debts can be paid even if they are infinite!It is also argued that inflation cannot occur in the US until full employment returns. But this, I think, although true in the thirties or even in the 60's is no longer true. If the money printing continues one of two things can happen:either China (and others) revalue their currencies relative to the dollar, which will drive up import prices. In theory, increased import prices should stimulate home production, but will they, when the difference in manufacturing wage costs is so vast? I doubt it. Alternatively, China and other exporters to the US will have to raise their prices due to inflation in their own markets. China, I believe, already has labor troubles that may only be resolved through wage increases that must be passed on to the customer. So yes, I think money printing must come to an end or result in severe US inflation before full employment returns.Unless, that is, the US adopts radical measures to boost employment: a tariff or some kind of reverse income tax scheme combined with the abolition of the minimum wage. Then American companies would have a level playing field with China in wage costs, at least, if not on workplace health and safety standards, environmental regulation, etc.

  12. And no, I didn't buy silver. I bought gold at about $300 and sold it at about $600 thinking I had done handsomely. To buy in now, I'd face all kinds of problems of cognitive dissonance!And yes, the sun is shining here too. I'm on my way out. Cheers.


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