An economist’s powerful but flawed recipe for urgent political reform

Zambian-born, Harvard-educated economist Dambisa Moyo jokes that she wishes she had never written her bestselling book, Dead Aid, as every question and answer session reverts to Africa whatever the topic up for discussion.

This is precisely what happens at her London School of Economics event this month to launch her latest work, Edge of Chaos, a harsh analysis of the potential threats to the western model of liberal democratic capitalism along with 10 radical solutions.

It should be no real surprise to her given that Dead Aid — full title: Why Aid Is Not Working and How There Is a Better Way for Africa — was a searing indictment of Western aid practices, which managed to gain huge publicity after software billionaire turned philanthropist Bill Gates called it “evil”.

But almost 10 years on and Moyo is turning her attention to the West, which as her book’s title indicates, she fears is on the edge of chaos. She identifies six headwinds that have undermined voters' confidence in the ability of liberal, democratic market economies to deal with the challenges.

They should be familiar to any regular Disclaimer reader: technological revolution, demographics, income inequality, natural resources and climate, debt, and productivity. She goes through each in devastating detail, showing how each has impacted on large swaths of the population and fuelled a wider anger against globalisation that has left them feeling powerless.

So far, so familiar but she moves the debate into the political arena, pointing out that this anger against depressed wages, loss of traditional employment and the hollowing out of the skilled lower-middle and middle classes fuelled anger against the impotence and corruption of the ruling political elites.

The results are clear, she says: voter turnout is down as is political participation; political donations now dominate the US elections; politicians are seen as liars and purveyors of fake news. This has culminated in the British vote to exit the European Union, the election of political neophyte and outsider Donald Trump, and the emergence of illiberal regimes in eastern Europe and elsewhere that are democratic in name only.

The glaring deficiency in the democratic system is that it is too short term 

Her argument is that the modern democratic political system is simply incapable of dealing with her six global headwinds. They problems that have materialised and worsened over time and so would take a long period of sustained effort to turn around; climate change is perhaps the most obvious example.

The glaring deficiency in the democratic system is that it is too short term with political cycles of four or five years and even those are interrupted by mid-term elections such as take place in the United States. “Political decision making in liberal democracies has prioritised political outcomes today over economic outcomes tomorrow,” she writes.

Her solution is to use political reform to empower governments to tackle the economic challenges. First up is to lengthen the political cycle so that it covers the economic cycle that since 1945 has been about six years. This should be combined with maximum terms a leader can serve.

The next step is allowing policymakers to bind future governments to agreed strategies that prevents, for example, Trump unwinding long-terms agreements on climate change and trade put in place just months earlier by his predecessor.

This is controversial as it subverts the principle of parliamentary sovereignty. But that’s nothing on her other suggestions. On the one hand she wants tighter restrictions on campaign finance, but on the other she wants political leaders to be paid salaries equivalent to private sector CEOs and performance-linked bonuses. Before people rush to ask how others would feel about Theresa May or Jeremy Corbyn a £1 million- a-year salary, it is worth remembering that Singapore’s president is paid $1.7 million a year.

In order to deter these well-paid leaders becoming career politicians, Moyo says democracies should impose minimum standards for holders of public office, highlighting the recent rapid rise in the UK of leaders with little experience outside politics (looking at you, Cameron and Miliband). Her suggestions include setting a minimum numbers of years spent in the “real world”.

Other reforms are equally ambitious: reduce the number of safe seats in the legislature by redrawing boundaries; and making voting mandatory as it is in Australia.

But her most headline-grabbing proposal is to insist that the voters also pass a qualification before they can cast a ballot. She throws out many ideas such as passing a government-sanctioned civics test. There seems a real danger here of recreating the English property qualification that disenfranchised the working class and could discriminate against minority groups who have suffered from worse education standards.

“Too much is at stake for us to remain wedded to the status quo”

Moyo does acknowledge this, but goes on to make an even more provocative suggestion: weighted voting that would give greater influence to the best-informed segments of the population. Voters could earn extra poll power bypassing additional exams and Moyo goes into detail on the idea of the results being linked to the power of the vote, i.e. getting three out of 10 questions right gives you a 0.3 vote. An alternative is to automatically obtain enhanced voter accreditation based on their professional standing or qualifications.

Again, she acknowledges that past experiments have tended to be rooted in racial or class prejudice but believes that universal and automatic suffrage carried with it the risk that voter apathy and ignorance will allow politicians to offer short-term beguiling promises (perhaps better known as lies).

It is a strong point, but to come out with the proposal in the 100th anniversary year of British women gaining the right vote seems unfortunate to say the least.

While those last two ideas seem flawed and unlikely to gain much traction, the overall message of the book is powerful. Creating sustainable economic growth in the 21st century will require a radical restructuring of democratic capitalism. “Too much is at stake for us to remain wedded to the status quo,” Moyo writes.

In a week when Theresa May appointed nine Tory politicians to the House of Lords, Trump performed a dramatic U-turn to give the green light to a Chinese company (ZTE) that was accused of spying on Americans, and Vladimir Putin was appointed to a fourth term after a shameful election, reform is needed more than ever.

 

 

More about the author

About the author

Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.

Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.

He is the author of Brilliant Economics and The Great Economists.

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