Dambisa Moyo argues China is making deals that will hurt the US in the future. (
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Asked to cite a running theme in her work, economist Dambisa Moyo says, “unintended consequences.”
In her first book, “Dead Aid,” the Zambia-reared, Oxford-trained Moyo argued that handouts to (as opposed to business deals with) Africa were worse than useless. Now she says the West has been missing the point again: In the past few years, while we have been distracted by banking crises, global warming and the future of energy, we’ve been overlooking China’s colossal commodities grab. It’s out of humble stuff like copper and aluminum that China is building a highway to global leadership, Moyo argues in her new book “Winner Take All: China’s Race for Resources and What It Means for the World.”
With the power of the government behind them, Chinese companies scour places like Africa and South America — “the axis of the unloved,” Moyo calls these developing countries — to shop for raw materials. Recently a Chinese concern bought a mountain full of copper in Peru. Soon nearly anyone who wants to manufacture anything is going to have to deal with China.
Though Moyo describes herself as right-of-center economically, she worries that the West is losing ground. “American companies compete against each other,” she says. “In China, the government parcels out different roles, and it’s ultimately for the greater good of all Chinese.”
That sounds like statism, but Moyo notes that even the governments that claim to back free markets constantly intervene in business. “I am a pure free marketer,” she says, “who over time has come to the realization that free markets exist only in textbooks.”
China has a $3 trillion war chest to fund its buying spree and though the global slowdown has recently caused commodities prices to sag, Moyo predicts skyrocketing valuations for commodities and the finished goods they go into.
This sounds like the view most famously argued in 1798 by the Rev. Thomas Malthus and, in the 1970s, by the Club of Rome. They held that since the earth contains finite amounts of necessary inputs like arable land, population growth is bound to create a bidding war for ever-scarcer resources.
Perhaps no economic thinker has been more mocked than Malthus, who would have been flummoxed by 200 years of consistently increasing prosperity in market-based economies. And today, with even Iranian birth rates plummeting to about 1.9 children per woman, the population scare has crested.
Yet people are graduating out of extreme poverty en masse in India and China. Will the world sustain another 3 billion people joining the middle class in the next 20 years? Will “The Road Warrior” look like a documentary a century from now? Will the Rev. Malthus have the last laugh?
“The whole Malthusian view, the limits to growth theory, I am sympathetic to them,” Moyo says. Malthus failed to see that “technology might offer a reprieve,” she acknowledges, but being wrong is different from being premature: “We’re simply at a point where technology is not able to meet all of the demand problems that exist.”
She notes that self-correcting mechanisms are breaking down. For instance, when gas hits $4 a gallon in the US, people reduce their driving and the price falls again — but the new rich of Asia keep consuming right past that “reservation price,” as economists call it. The same will happen to food prices thanks to new Asian demand for protein: Raising animals consumes vastly more land and water than crops. China, playing the long game while our firms worry about the next quarter of profits, is buying up arable land in Africa, home to one-third of the world’s unused potential farmland.
China’s strategy is “incredibly symbiotic,” she says. “China gives their counterparties in the host nations what they want. They give them investment, trade, loans. That’s what these countries need.”
Polls show the developing world welcomes Chinese involvement — some might call it plunder — and thinks more favorably of China than of the US, which offers the destitute world pity instead of opportunity.
So, what’s the solution for the West? Moyo says, “If the United States used the bulk of its military spending on R&D and energy and food, I actually believe that the world would be a better place, there would be fewer wars and you would actually see better returns for American companies.”
Make the Pentagon more of a Chamber of Commerce? Sounds about as likely as turning Fort Bragg into a commune for hemp growers and locavores.
Moyo’s arguments carry a whiff of the 1980s, when serious people argued that the US needed an “industrial policy” like the one credited with much of Japan’s success.
Today the Chinese model of running the state the way John D. Rockefeller would wins praise from both left and right. But we all know how an industrial policy would work in the US: Subsidies would be allocated based on politics, not business potential. We’d get a million Solyndras sucking money out of the real, results-based economy.
Washington isn’t going to save American business, so American business will have to cooperate ever more closely with Beijing.