‘Why Democracy is Failing to Deliver Economic Growth- and How to Fix It’
Last week, I read a book – Edge of Chaos: Why Democracy is Failing to Deliver Economic Growth – and How to Fix It, by Dambisa Moyo. Edge of Chaos is the fourth book by Dambisa Moyo after Winners Take All, How the West Was Lost, and Dead Aid. In this book, Dambisa has made an attempt to answer the question – Why democracy is failing to deliver economic growth and how to fix it? The following is a short summary of the book.
In the first chapter – The Imperative of Growth, she argues that the economic growth is important for prosperity. Stagnation negatively impacts numerous social, health, environmental, and political problems. Growth enhances the living standard of individuals and society in three ways. Firstly it offers the individual an opportunity to improve their livelihood. Secondly, growth allows individuals to have a wider impact on society. Finally, growth also helps in increasing transparency in the political system. Conversely, the absence of growth increases social tensions. Overall economic growth is important for the success, survival, and stability of a nation. With that, she moves on to the measurement of growth and criticizes GDP as it fails to capture the black market and changes in the economy. Furthermore, GDP also fails to capture the non-monitory form of economic progress and distribution of income. Hence, the endgame of public policy should be progress and improved living standard rather than GDP growth for growth’s sake.
In chapter two – The Brief History of Growth, Dambisa deconstructs the history of growth in Argentina, the USA, China, and Japan. All four countries are uniquely placed in terms of present-day economy and natural resources. All of these countries traversed the arc of economic growth from agrarian to manufacturing and then research development. The key drivers of economic growth have been demographic shifts and productivity linked with improved efficiency. A common thread running through the stories of these countries is strong and trustworthy institutions and these include civil services, judiciary, and police. All of these have attracted a good investment. These provide a foundation for innovation, investment, and finally growth.
In chapter three – Hurricane Headwinds, she talks about the challenges faced by economies in the highly globalised world. These challenges are debt, scarce natural resources, misallocation of resources (concerning capital), worsening inequality, declining quantity and quality, total factor productivity due to the counterintuitive effect of technology, and declining efficiency. Hence threat to democracy is income and political inequality. Ultimately, it becomes very difficult to sustain growth as a result more and more countries get in the False Promise of Protectionism (chapter – 4) and that leads to a vicious cycle of isolation at the global and local levels impacting global peace. This is what is called de-globalization – restricting the flow of capital, trade, people (labor), and ideas causing myopic policy decision making. Protectionism forces businesses to adopt more local models than global significantly impact inflation and in such a scenario governments are more likely to favor local champions through tax breaks. This situation poses A Challenge to Democracy’s Dominance (chapter five). As the promises of democracy remain unfulfilled more and more emerging nations feel attracted to the promising Chinese models of state-led capitalism.
Why the Chinese model is so attractive? It is because the Chinese model has got results. China has shown that it is possible to meaningfully reduce economic inequality. China has delivered a legendry infrastructure campaign. China has been successful in providing innovative solutions to age-old social challenges. At the basic level state has three major roles: providing public goods, enforcing and regulating laws, and acting as financer of last resort when markets fail. In chapter six he further argues that governments have been myopic and that has further worsened the crisis. Governments have become less effective and the role of the private sector has increased especially because of the rise in the wealth of private players.
Edge of the Chaos by Dambisa Moyo
Most important recommendation of hers’ calls for a system of “weighted voting,” in which a ballot counts more or less depending on a voter’s qualifications. Weight would be determined by a civics test or maybe by one’s profession or education.
Weighted voting “will no doubt be seen as jarring and antithetical to the principles of democracy,” Moyo concedes. Yet she argues that it “reduces the influence of those most likely to be apathetic or disengaged from public policy debates and thus to make poor electoral choices.”
Finally, in the last chapter, she makes recommendations to correct the present political system to improve sustained economic growth and to strengthen democracies. These recommendations are targeted at politicians, political institutions, and the voters themselves. These recommendations are: making it harder to repeal legislation, reducing the frequency of elections, implementing term limits, requiring officeholders to have the nonpolitical experience, mandating voter participation, and instituting minimum qualification for voters. These recommendations look promising and mainly targeted at mature democracies like the USA, Western Europe, and countries like Australia and Canada. This book ensures, at minimum, the world has been warned. You will not regret reading it.
About the Writer: Gaurav Dhankar is a Senior Manager with STiR Education. Previously, Gaurav worked as a Chief Minister’s Good Governance Associate in Haryana. He has studied professional social work from the Tata Institut of Social Sciences (Mumbai) and has done prestigious programs such as the Young India Fellow. He loves traveling, meeting people and learning from them, and enjoys reading. You can reach out to him using- firstname.lastname@example.org, LinkedIn – https://www.linkedin.com/in/gaurav-dhankar-495a2678/ Twitter – https://twitter.com/GauravDhankar1