ECONOMIC GROWTH AND HUMAN PROGRESS. Dambisa Moyo is a Zambian-born economist and writer whose books, articles, and public lectures centre on the creation of wealth in a global economy.
You can listen to the podcast of this interview here.
Dambisa Moyo, in 2022 you were ennobled to become a British Life Peer with the title Baroness Dambisa Moyo of Knightsbridge. How did this come about?
I was approached initially on behalf of Her Majesty the Queen, but ended up being ennobled on behalf of King Charles. It was a long, drawn out process.
Why did it happen?
I spent 30 years working on issues of economic development, economic growth, human progress and all the facets related to that, not only as an academic but also as a public policymaker, specifically at the Department of Trade and Investment. Also, on the business side, I’ve spent a long time working at Goldman Sachs in the City, and I’ve served on a number of complex global corporations, from Barclays Bank to Chevron, as well as the Oxford University Endowment. I’ve done work with the G7 on behalf of the UK Government and also in terms of climate. These activities put me on the map and then I was approached.
“For a country to continue to see human progress every generation, you need to grow per capita incomes at 3% per year for 25 years.”
Alain Elkann in conversation with Baroness Dambisa Moyo, London 2023
Dambisa Moyo, what is your job in the House of Lords?
Our job is to scrutinize the legislation that comes from the House of Commons. A range of issues come to the House of Lords, and without having an agenda to be re-elected we are able to offer a perspective on that. We have a very heavy work schedule. The King will do the State Opening of Parliament, then the government of the day will say it wants to achieve eight or ten different items, and we then spend the whole year looking at those issues. The elected parliamentarians in the House of Commons send us legislation, and we criticize it, make edits, and send it back. We also have a lot of committees, on issues from AI and technology to the Economic Affairs Committee, to issues around military strategy. It is demanding.
But you are still managing to do many other things?
They really encourage people to maintain a foot in other areas and it’s good for the country for people to have the role in the House of Lords but also understand what’s happening in the “real world”. For example, medical doctors in the House of Lords are also working in the NHS and come to the House of Lords and explain what the issues are. This is very helpful.
Which are your core interests?
Economic growth and human progress. Anything I do feeds into that. The boards of the corporations are investing, creating jobs, paying taxes, innovating. The stuff that we do in government is about public policy, how to create an environment that attracts investment and that continues to think about public goods like education and health care. My maiden speech in March in the House of Lords was around growth, and I very much hope to continue to participate with that lens.
Is Brexit a success or a failure?
It’s too soon to tell. The pandemic has been incredibly damaging in terms of what subsequently happened around growth and around debt levels for the government. It was not anticipated in 2016 when people voted for Brexit. We are now in the middle of a war and there’s high inflation and high interest rates partly driven by the war.
Will there be a better accommodation with the European Union?
I hope so, and I do think so. In 2025 we have another review. The current British political class has done a good job to reduce the stress with the Windsor framework. Both sides understood the benefits of the UK being part of the European construct and sensible minds will prevail.
What are the main problems after the pandemic?
I wrote a book in 2018 called Edge of Chaos, and in that book there were a whole list of problems that public policymakers, economists and academics were already talking about: worries about slow growth, about the creation of technology that would replace jobs, that the world population was going to be 11 billion by 2100 and there was a risk of disorderly migration, about the debt to GDP ratio, about productivity declines, natural resources and climate change. The pandemic has accelerated the arrival of the problems. A pandemic means you have to take on even more debt, so the US and other countries around the world have now a debt to GDP ratio above 100%, which means the problem of being able to fund entitlements has become much more acute much more quickly. We didn’t have inflation in 2018. We’re now in a world of inflation. We are in a world of a war. The inflation has been caused by both demand increases post COVID – so we were in quarantine and then were not – but also by supply constraints because China was in shutdown and, because of the war, Russia’s very important role as a producer of not just energy, but also a lot of foodstuffs, Ukraine also. Those things were not anticipated in the pre-COVID era.
“30 years ago lots of countries said America is right, the West is right, we want democracy. Now those countries do not agree with the Western approach to economics and politics.”
Dambisa Moyo, central bankers globally are uncertain how to manage this round of inflation. What is your point of view?
The UK has got a more challenged position because it’s an island; it imports a lot of things. The US is basically self-sufficient in food production, energy, clean water, etc. This means that they’re able to address this problem of inflation much more easily, but even in their case they still have sticky inflation at around 3%, not quite at the 2% target level. The last time we had similar inflation in the late 1970s to early 80s, in the US Paul Volcker had to raise rates to the 20% range before the inflation was killed off. In this country since World War Two, every time but one that there’s been inflation rates had to go to above 10%. We’re not there yet. We’re still at 5% interest rates and the rates have to go to 10% if you believe that history repeats itself. The Federal Reserve, Bank of England, ECB, have all said explicitly they are going to continue to raise interest rates until we get to the 2% target.
Do the many different sources of information and disinformation create instability for governments?
Absolutely. Often rational arguments are hard to package and explain to a population of voters, because people often can vote very much by emotion. If you have to pay your mortgage and you see it increased by £700 a month that’s a very different proposal than trying to parcel out the intellectual argument of why interest rates need to go up to fight inflation.
Your specialty is economic growth but are we seeing satisfactory growth nowadays?
No. For a country to continue to see human progress every generation, you need to grow per capita incomes at 3% per year for 25 years. Right now around the world, both developed and developing countries are growing at far less than that. In Germany they are in a recession. There’s a real risk that we are going to continue to stagnate, which means people’s livelihoods and improvements in life will continue to go down. Not only do we have low growth, we have high inflation. Together, we call that stagflation in economics. It is a very difficult cycle to get out of. Economic stagnation happened in Japan, and it can go on for decades. That’s generations of people without an improvement in the quality of their life.
What are some of the political factors involved?
We’re in the middle of an ideological battle which for the last 30 years the West has won. People believed in democracy and in market capitalism. In 1989 when the Berlin wall came down, or glasnost and perestroika around the Eastern Bloc, after many decades of soft and cold wars between the West and the rest the world said, we think the West has won. We now are all going to conform to democratic systems in the political sphere, but also on the economic side we’re going to adopt more market capitalist, market friendly economic approaches.
But what has happened?
So now we’re 40 years later, and in 2001 China joined the World Trade Organisation. We’ve had globalization, a lot of economic gains at a global GDP level, but life expectancy in the US is declining for certain groups. So that’s not an improvement in the quality of life, and real wages have been going down in the West. Countries have now ended up with a lot of debt. Certainly in the last ten years after the financial crisis we have not seen the growth rates in the emerging markets that would help to continue economic growth.
What does this mean?
All of a sudden the fact that the US and the West had won that ideological battle is now in question. China is now the largest trading partner, foreign direct investor and lender to many countries around the world, including developed countries, and we have the emergence of a lot of swing states. 30 years ago lots of countries said America is right, the West is right, we want democracy. Now those countries do not agree with the Western approach to economics and politics. Saudi Arabia, India, Turkey, South Africa, they’re now questioning the West. So that’s on the political side.
And on the economic side?
People don’t believe in globalization anymore, because we’ve got massive inequality, not just between countries but also within countries. An Oxfam report said the top eight wealthiest people in the world are richer than the bottom 50% of the rest of the world. That’s unsustainable. Government has also become very statist. Europe is very state centric, so we have a massive welfare state. Angela Merkel, former chancellor of Germany, talked a lot about how Europe is 7% of the world’s population, but 50% of the welfare payments in the world are coming to Europe. That doesn’t make sense when 90% of the world’s population lives in the poor emerging markets.
Where does all this leave us?
A lot of structural problems have emerged on both the political and the economic side, which leaves us now in a situation where on the political side, the tension between the US and China in particular, is very fundamentally about values and principles, and about the way countries think they can govern themselves in the future.
“The US is self-sufficient in terms of arable land, of food, of clean air, of energy, but it also has built up a culture of innovation.”
Dambisa Moyo, do you see a conflict because of Taiwan or is it not in the interest of China to create another conflict?
For thousands of years China is not an expansionist conqueror in the traditional way, sending out troops to go and conquer other lands. The risk is that it could actually just be that the Taiwanese parliamentarians – and they have an election next year – decide to vote that they want China to take over, in which case you’re not going to have a big blow up war. There could be more subtle ways in which China could come to dominate Taiwan, and we need to be quite open minded. I would prefer it if the US and China go to the table together and understood how deep and important their symbiotic relationship is. China is the largest foreign lender to the US government. There’s a lot of trade in capital flows and immigration and a lot of ideas, so there should be some way to come together and figure out how to live in what my friend Ian Bremmer calls a G-Zero world. The approach that we’ve seen of name calling is not diplomatic and has been very damaging for both sides.
In America there are these two elderly Presidential candidates?
The age of the two possibly leading candidates right now is an artefact of the system. We’re more than 12 months away from the election, so maybe something changes and hopefully we start to see new ideas come out. We need to see more innovation in terms of the thinking. The America Now approach of both President Biden and President Trump recognizes that Americans want their politicians to focus on the US. I’m afraid that means other countries will take a backseat.
As an investor where would you be looking to go?
In the short term, the returns that you get on the interest rate on an interest bearing loan are very attractive and a lot of people are putting their money in bonds. Debt is an attractive space. On a growth basis, there’s still a lot of appetite for the United States, because it’s ring fenced. The US is self-sufficient in terms of arable land, of food, of clean air, of energy, but it also has built up a culture of innovation. If technology is going to be a real driver of economic success for the future, it’s very easy to point to the US. China also looks quite promising in the technology space, but geopolitical risks mean that you have to understand that if you invest in China you may never see your money again. China has a lot of economic headwinds. Debt, the real estate sector, its demographics, and obviously the lack of democratic process, means there’s not much visibility in policy making.
Are the European luxury companies who have relied on China going to have problems?
A deglobalised world means that there will be many global businesses that have joint ventures based in China where they raise money in China, invest in China, but can’t send the money out. So you could have a global luxury brand that has a European arm and a Chinese arm. The more globalized world is going to move to a more siloed world. That means your ability to raise capital, invest and then generate returns as dividends and send them out is going to be very hampered.
Might Brexit be a good thing for the UK in this deglobalized world?
Brexiteers wanted to limit the European regulations which were quite burdensome. They wanted to be able to be less risk focussed and more investment focussed. Now people say, wait a second, we still have numerous regulations from the European frame and until those are gone and until we see the UK able to attract investors, it’s just a small market of 70 million people. If they can’t get past all the regulation, planning and licensing, then I think it’s going to be very difficult to get gains.
Thank you very much.
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