This week, Project Syndicate catches up with Dambisa Moyo, an author and international economist.
Project Syndicate: In early 2018, you warned of a disconnect between investors’ euphoric mood and political leaders’ warnings of threats to the international order, and asserted that the market was mispricing long-term structural challenges. Now, a closely watched New York Federal Reserve model puts the chance of a US recession in the next 12 months at 38% – the highest level since the Great Recession a decade ago. What could trigger such a recession, and would it be as painful as last time?
Dambisa Moyo: The 38% probability estimate aligns with my own view. US corporate earnings remain relatively strong, and there are no meaningful signs of weakness in US consumer sentiment. A US recession thus seems possible, but still not likely.
Nevertheless, I believe that deeply rooted structural issues portend a lower growth trajectory over time. As I detail in my book Edge of Chaos, there are several headwinds impeding global growth: technology and the risk of a jobless underclass; demographic shifts in the quality and size of the workforce; worsening income inequality within countries; natural resource scarcity and vast environmental degradation; and the unsustainable global debt burden. There are also lingering concerns over productivity trends. But while this is certainly an issue globally, wage growth recently picked up in the US – an encouraging sign.
PS: You have tweeted about the inadequacy of the US minimum wage, while also acknowledging the Congressional Budget Office’s estimate that a $15 hourly rate would cause job losses. How might the US government be able to guarantee a living wage for workers while minimizing the fallout?
DM: Doubling the US national minimum wage to $15 per hour would likely have a material impact on company costs and the wider economy. In any case, a government-guaranteed minimum wage is a short-term policy that by itself cannot address the long-term challenge of raising living standards. That requires sustainable economic growth.
With the main US entitlement programs, Social Security and Medicare, on track to run out of funds by 2035, new ideas for generating growth – and, by extension, raising living standards – are urgently needed. Otherwise, the US could be forced to cut entitlement spending. To avoid that outcome, both the government and the private sector must be involved. Fortune 500 companies represent two-thirds of US GDP and employ 30 million people worldwide. They need to be part of the solution.
PS: Last July, you cautioned that abysmal voter-turnout in the US poses a serious threat to the country’s democracy. Four months later, nearly 50% of America’s eligible voters turned out to vote in the midterm elections – the highest percentage since 1914. Does this shift bode well for political engagement in the US in the 2020 presidential election and beyond? Or would the US still benefit from deeper reforms such as mandatory, weighted, or preference voting (which Maine has introduced, to considerable national interest)?
DM: In the 1960s, voter turnout exceeded 60% in all US presidential elections. The higher turnout in the 2018 midterm elections was undoubtedly a step in the right direction, but one election does not a trend make. It remains to be seen whether the apathy and disaffection that have prevailed over the last several decades will continue to be reversed.
Though mandatory voting is antithetical to the notion of free choice that many Americans hold dear, evidence from other countries shows that it can have a meaningful impact on voter participation rates, moving countries closer to the democratic ideal of “one person, one vote.” For example, after Australia introduced compulsory voting in 1924, its voter participation rate surged from below 60% in 1922 to 91% in 1925. On the flipside, the Netherlands eliminated mandatory voting in 1967; in its 1971 election, turnout dropped by 20%.
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We ask all our Say More contributors to tell our readers about a few books that have impressed them recently. Here are Moyo's picks:
by Margaret O’Mara
What I love about this book is that it reveals how long it took for Silicon Valley to become the engine of innovation growth it is today – and how deliberate the project was. Its roots go back to the 1930s-1950s, well before Microsoft and Apple were even founded (in 1975 and 1976, respectively).
by Daniel H. Pink
This book provides wonderful insights into how outcomes are affected not only by what we do, but also by when we do it – that is, the timing of our decisions.
by Eric Schmidt, Jonathan Rosenberg, and Alan Eagle
Bill Campbell was the mentor and coach to the biggest names in modern technology, including Steve Jobs and Google founders Larry Page and Sergey Brin. This book reveals how he deftly managed highly driven cult figures that have defined an age.
From the PS Archive
Moyo argued that, like senior managers at publicly traded private companies, politicians who made bad decisions – judged according to a variety of indicators, from unemployment to health outcomes – should face clawbacks, through performance-adjusted pensions. Read the commentary.
Before the Brexit referendum or the election of US President Donald Trump, Moyo was lamenting the lack of persuasive proposals to address income inequality. Read the commentary.
Around the web
Moyo suggests that the world needs to start thinking about capitalism as a spectrum, blending the best of different models together to foster growth. Watch the TED talk.
Moyo identifies the six big obstacles to global growth, and strategies for surmounting them. Read the interview.
Moyo proposes ten ways to “fix democracy,” giving people more security and a greater say in their political and economic future. Watch the presentation.