How the West Was Lost - Dambisa Moyo

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How the West Was Lost

by
Dambisa Moyo

general information | review summaries | our review | links | about the author

Title:	How the West Was Lost
Author:	Dambisa Moyo
Genre:	Non-fiction
Written:	2011
Length:	201 pages
Availability:	How the West Was Lost - US
	How the West Was Lost - UK
	How the West Was Lost - Canada
	How the West Was Lost - India
	Der Untergang des Westens - Deutschland

Fifty Years of Economic Folly -- and the Stark Choices Ahead

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Our Assessment:

C : wide-ranging and touches upon many problems/issues, but too muddled, and undermined by sloppiness and carelessness (in both argument and presentation)

See our review for fuller assessment.

Review Summaries
Source	Rating	Date	Reviewer
The Economist	F	20/1/2011	.
Financial Times	F	25/2/2011	Alan Beattie
The Guardian	.	26/2/2011	John Vidal
Independent on Sunday	.	6/2/2011	Sean O'Grady
The Observer	.	16/1/2011	Paul Collier

  Review Consensus:

  Generally quite appalled, by the presentation and the conclusions

  From the Reviews:

"Here are two predictions about the world economy. First, the West’s malaise and the rise of emerging economies will yield a mountain of books. Second, few of these are likely to be as bad as How the West Was Lost. (...) The trouble starts when Ms Moyo ventures into economic analysis. (...) Worse, Ms Moyo commits some jaw-dropping factual errors. (...) Ms Moyo’s editors are as bad as her fact-checkers. If they couldn’t spot the analytical flaws, they might have done something about the stylistic ones that range from curious analogies to long phrases in parentheses. Endnotes are used almost at random." - The Economist

"The challenges it identifies are for the most part real, if not original. But the huge flaws of the emerging economies are ignored. (...) Meanwhile, some of Moyo’s solutions verge on the surreal (.....) The carelessness with fact and interpretation evident in Dead Aid (...) reaches critical proportions here. (...) For the sake of the quality of public discourse, it would be best all round if this particular production line were to stop here." - Alan Beattie, Financial Times

"How the West Was Lost is more interesting, wider in scale and more important than Dead Aid. (...) For all her brio and glamour, Moyo is a very orthodox thinker, unable to consider a world beyond free markets and underpriced resources and blind to the social effects of what she proposes and celebrates. GDP is her best measure of a country's success or failure; growth is her grail. Her prose is littered with images of winning and losing races, conflict, aggression, submission, domination, victory, violence and triumphs." - John Vidal, The Guardian

"At first glance, Dambisa Moyo's latest work is merely an incremental addition to the already sizeable literature that can be summed up in the phrase "China Will Eat Us". (...) The answer, Moyo startles you, is for the West to be more like China -- and less democratic." - Sean O'Grady, Independent on Sunday

"She argues that the west has become mired in complacency: each of the drivers of growth -- capital accumulation, skill accumulation, and technical innovation -- have stalled, and there is no political will to salvage the situation. The market for capital has failed in its core task of finding investment opportunities that offer good returns at acceptable risk. (...) (H)er diagnosis of the recent disasters in financial markets is succinct and sophisticated (.....) Her proposed solution for the US is as radical as is her diagnosis: trade protectionism and debt default." - Paul Collier, The Observer

Please note that these ratings solely represent the complete review's biased interpretation and subjective opinion of the actual reviews and do not claim to accurately reflect or represent the views of the reviewers. Similarly the illustrative quotes chosen here are merely those the complete review subjectively believes represent the tenor and judgment of the review as a whole. We acknowledge (and remind and warn you) that they may, in fact, be entirely unrepresentative of the actual reviews by any other measure.

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The complete review's Review:

       In How the West Was Lost Dambisa Moyo wants to explain Fifty Years of Economic Folly -- and the Stark Choices Ahead. Her main points are that 'Western' economies (both governments and consumers) have relied far too much on debt in building their houses of cards (leaving them also now beholden to purse-string (well, debt-)holders such as China), and that they have got their priorities all wrong, from investment (not bothering with infrastructure, for example) to education (not producing enough engineers, for example) to housing policy. As a consequence, unless they get their act together (or do something creatively/crazily destructive -- like go for the all-out default) they may very well get stomped on and crushed by the economic juggernaut that now is (so Moyo) China. (Oh, yeah, and some of those other emerging economies might also prove uppity and annoying -- though she doesn't really get around to any sort of coherent picture of that non-'Western' bloc (sort of a modern, economically strong non-aligned movement, perhaps ?).)
       For Moyo's purposes, 'the West' is mainly the United States, and sometimes the United Kingdom; for the most part continental Europe is simply written off as a lost cause, and Japan doesn't rate much discussion either. On the other side -- and Moyo does present this as an us vs. them situation -- is, above all else, China, with a few nods to the entire BRIC-group (Brazil, Russia, India, China) and, occasionally, a few other developing countries tossed in for good measure. It's the rise of one system -- basically the China-model -- versus the decline of the other (basically, the US). One would say it's an oversimplified picture, but Moyo makes such a mess of things that her tangle of arguments and examples is anything but simple.
       How the West Was Lost is divided into two parts. The first covers the past fifty years and how the West (i.e. basically the US) has gotten itself into the situation it finds itself in; the second looks at the present day and what the options and possibilities for the future are.
       Moyo throws a lot into the discussion, and there are certainly many issues where she has a point. Unfortunately, she tends to focus in on specifics, making only very specific points and not considering the broader picture, or the consequences of alternative approaches elsewhere; to say that she cherry-picks her examples would be to put it very kindly. Typically the very different cases of American Social Security, and Medicare and Medicaid -- 'defined benefit' plans, though in the case of Medicare and Medicaid the cost of those benefits is much more open-ended, subject to largely unchecked and rapidly increasing medical costs -- are conflated into the (supposedly) single problem of "public pension schemes under the auspices of social security". Poorly planned for (hence now underfunded) and unrealistic pension benefit promises -- a form of deferred compensation -- are, at every level (federal, state, corporate), an enormous problem in the United States -- but also a different one than the seemingly inexorable rise in medical costs (with the surprisingly limited quality of life improvements they have to show for it ...). Along the way -- just as she does along all the way -- Moyo slips in bits of information that can, at best, be termed misleading, such as the 'fact' that public sector employees are better-paid than private sector ones: if you're going to quote Chris Edwards' Public Sector Unions and the Rising Costs of Employee Compensation [pdf] (going so far as to mention the full title of the piece in the body of your text, rather than in an endnote) you should also note that; "on average, state and local workers are also older and substantially better educated than private-sector worker", which skews those claims to the extent that, as John Schmitt argues in The Wage Penalty for State and Local Government Employees [pdf], in fact "state and local workers actually earn 4 percent less, on average, than their private-sector counterparts". (There's a lot more to be said about pensions, compensation, and even just these numbers; the point here is that Moyo limits what claims and data she provides, to an extent that it is difficult to have much confidence in the 'facts' she is using to support her claims.)
       Typically, Moyo will address an important issue by offering a paragraph such as:

Today, Saudi Arabia is the largest oil-producing country in the world, and Russia the second largest; together they produce just over 9 million barrels of oil a day. Yet America imports 11-12 million.

       Saudi Arabia and Russia are, indeed, consistently the two largest oil-producing nations (though they've switched top position several times in recent years); in fact, however, they each currently produce around 10 million barrels a day (see the numbers here) that's simply a (major) factual error. The US hasn't imported 11 million barrels of oil since January 2009 (and the latest available figures, for October, 2010 were only 8.692 million (admittedly an unusually light month)) (see the figures here); while imports have been as high as 13.4 million (August, 2006), Moyo's claim is, again, a misleading number. Arguably the worst sin, however, is one of omission: as is frequently left unmentioned in the great energy debate, the world's third-largest oil producer is none other than the United States -- in November 2010 producing only a few thousand barrels daily less than Russia (very close to 10 million, too). America's oil dependency is an enormous problem, but it shouldn't be forgotten (as it always is) that a significant sector of America -- and several states, in particular -- do very, very well when oil prices are high; the vested interests in energy-profligacy in the US are not to be underestimated (much less ignored, as they are here -- and Moyo might have done well to look into the economic policy distortions oil wealth has led to in many of the petro-states, from Venezuela to Saudi Arabia, offering an endless variety of examples of the misallocation of capital and incentives (and arguably far more wastage than the Americans ever could come up with)).
       (As far as energy goes, Moyo offers a quick endorsement of nuclear energy, without going into the economics of that (nuclear is theoretically a cheap, reliable energy alternative; in practice it certainly hasn't quite worked out that way so far). She also argues that: "the US Government does not fund anything meaningful in the nuclear field"; support is currently largely in the form of (enormous) loan guarantees -- arguably not 'meaningful', in a certain sense, but certainly playing an important role. Certainly, larger-scale research and development in the field would be welcome, but to say that the government hasn't done enough to foster this industry (spending tens of billions over many decades) seems a curious interpretation of the facts. And, yet again, Moyo also does herself no favors with throw-away claims such as: "even France gets almost 20 per cent of its electricity from nuclear sources" (the actual percentage for super-nuclear France of course is -- and long has been -- around the 80 per cent mark; in fact, France is a surplus producer and exports electricity to other European nations).)
       In her rush to address all the wrong priorities and the misallocation of capital and labor she sees (especially in the 'West') Moyo even goes after high-priced sports and entertainment stars. Their stratospheric salaries come at an enormous cost, she says -- including (or especially) a social cost, of deluding youngsters into believing they, too, might achieve such positions, leading them to waste years of their lives on the useless acquisition of such skills like ball-dribbling when it would be much better if they strove to become engineers and the like. It's a fun idea -- and, sure, it'd be great if more kids applied themselves to their studies, but ... seriously ? (Apparently so -- though Moyo's case in this case really isn't very convincing (i.e. there's an enormous amount she isn't taking into account).)
       Moyo actually discusses the American housing collapse (and its larger consequences) in reasonable depth, and even hammers home the good (if familiar) point that the longtime American policy of encouraging homeownership (and the way this was promoted) has some terrible consequences, and that it is has led to a damaging misallocation of capital; she even correctly notes that: "US policy now should focus on what to do next given that the government is involved in the housing market". Again, however, she uses the isolated example, and doesn't compare housing policies and bubbles in other countries (some still on-going, some inflating for entirely different reasons). Indeed, while bashing the 'West' and its failures comes relatively easy to her, she consistently doesn't consider too many of the problems of the rising economies. While the demographic issue faced by Europe and Japan are seen as problems, she doesn't note plummeting fertility rates in many developing countries, and the problems those will bring with them -- first and foremost China, whose one-child policy (which, of course, was never implemented to the extent of reducing the fertility rate to anywhere near one) will likely hit home devastatingly at some point in the coming decades unless the sudden turn to a rapidly aging population is carefully prepared for.
       Moyo seems somewhat blinded by China's success -- and, curiously, rarely notes the one-time much feared juggernaut that was Japan (and all its wonderfully ineffective policies -- despite investment in infrastructure and R&D). Rapid economic growth -- whether on national or corporate scale -- can hide many flaws, and flame-outs, from the dot-com pseudo-companies to countries like Ireland, can suddenly reveal that there wasn't all that much there in the first place. China has had a nice long run (though it has only been on it for a couple of decades); the extent to which it is sustainable remains to be seen, and Moyo certainly should have probed a bit more closely whether there isn't a house-of-cards aspect to much of what supposedly has been built there ("it largely seems to have got that right" she instead says about Chinese economic policy, without very convincing explanation).
       Moyo begins her book (which has both a Preface and an Introduction) by suggesting that the US has alienated many up-and-coming countries -- going so far as to suggest that:

Were it not for the profit motive, the real risk is that come the day when the emerging nations don't have to trade with the West, they won't.

       Moyo's faith in -- and support of -- globalization is, indeed, rather limited (and that does influence much of what she offers here) So also, among Moyo's scenarios of the future, she suggests radical protectionism is a viable option for the United States (indeed, she even suggests the true nuclear option of an American government default, an ... interesting idea (with so many consequences that the few pages Moyo devotes to this suggestion seem far too inadequate)).
       How the West Was Lost does address many important issues and problems, and Moyo certainly has it right in ridiculing much American policy and noting the dangers and consequences of large-scale (even on the small, personal scale) debt-financing, leverage, misallocation of capital and labor, among other things. But it's not a coherent critique -- and it's an odd world-view on offer here, in which economics matters a great deal in certain regards and not at all in others.
       Moyo spreads herself and her arguments very thin -- which could be pardonable if she didn't also make so many mistakes (never mind the misleading statements, the many omissions, and everything that she leaves undiscussed (especially the many different weaknesses of the emerging economies)). There's so much here that is plain wrong, and so many (counter-)examples and arguments that are left out that even her valid arguments begin to look suspect, fatally undermining her project.
       It's not uninteresting, but it is a maddeningly frustrating book.

- M.A.Orthofer, 9 March 2011

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Links:

How the West Was Lost:

Farrar, Straus & Giroux publicity page
Allen Lane publicity page
Douglas & McIntyre publicity page
Profile in The Telegraph
Profile in the Irish Times

Reviews:

Dambisa Moyo:

Official site

Other books by Dambisa Moyo under review:

Dead Aid - Why Aid is not Working and how there is a Better Way for Africa

Other books of interest under review:

See Index of books dealing with Business and Economics

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About the Author:

Zambian-born Dambisa Moyo was educated at Harvard and Oxford, and worked for Goldman Sachs.

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