The world’s most economically powerful nations have seen their wealth and dominant political position decline to the point where, today, they are about to forfeit all they have strived for – economic, military and political global supremacy, according to Dambisa Moyo in her book How the West Was Lost: Fifty Years of Economic Folly – and the Stark Choices Ahead. The author explains that capital, labour and technology have been the pillars on which economic growth has been built, then goes on the describe how mismanagement of these factors is leading to certain decline.
Capital has been misallocated as a result of government policies supporting subsidized home ownership, encouraging a culture of debt and diverting capital away from productive investment in business. Labour has been misallocated by failing to take account of future pension costs, failing to educate sufficient people in useful professions like engineering, and encouraging people into the wrong pursuits by grossly overpaying sports stars. Technology has been misallocated by giving it away to Chinese manufacturers in return for cheap goods, rather than protecting it.
If we stick with the status quo, then all is lost, according to the author. China could falter, but that is an unlikely scenario. The US and Europe could fight back, but at present America does not appear to have the mettle. The author’s preferred approach seems to be for the US to default on its loans, reckoning that China will suffer more than America.
As was the case with her previous book, Dead Aid, the author’s diagnoses of the problems have some merit, although they are overly dramatic, but in my opinion her proposed solutions leave something to be desired. The book is an entertaining read, and the issues are presented in a way that will make the reader sit up and take notice.