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Edge of Chaos

Why Democracy is Failing to Deliver Economic Growth – and How to Fix It

By Dambisa Moyo
13-minute read
Audio available
Edge of Chaos: Why Democracy is Failing to Deliver Economic Growth – and How to Fix It by Dambisa Moyo

Edge of Chaos (2018) examines the key challenges that liberal democracies around the world are facing today. Aging populations, limited resources and increasing debt are all threats to these countries’ economic well-being – but so too are the “remedies” of short-term policies and protectionism. Author Dambisa Moyo examines that misguided agenda and presents a radical blueprint for economic growth in the twenty-first century.

  • Citizens concerned about Brexit and Donald Trump
  • Policymakers interested in rebuilding their political systems
  • Curious readers hoping to get a grip on global economic systems

Dambisa Moyo is an internationally renowned economist and author whose career has included posts at the World Bank and Goldman Sachs. Her macroeconomic analyses have landed her on the New York Times best-selling books list four times. Her books include Dead Aid (2009), How the West Was Lost (2011) and Winner Take All (2012). In 2009, she was recognized as a World Economic Forum Young Global Leader, listed in TIME’s 100 most influential people in the world and named as one of “20 remarkable visionaries” by Oprah Winfrey.

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Edge of Chaos

Why Democracy is Failing to Deliver Economic Growth – and How to Fix It

By Dambisa Moyo
  • Read in 13 minutes
  • Audio & text available
  • Contains 8 key ideas
Edge of Chaos: Why Democracy is Failing to Deliver Economic Growth – and How to Fix It by Dambisa Moyo
Synopsis

Edge of Chaos (2018) examines the key challenges that liberal democracies around the world are facing today. Aging populations, limited resources and increasing debt are all threats to these countries’ economic well-being – but so too are the “remedies” of short-term policies and protectionism. Author Dambisa Moyo examines that misguided agenda and presents a radical blueprint for economic growth in the twenty-first century.

Key idea 1 of 8

Economic growth improves living standards, while political instability and short-term policies harm the economy.

Economics is a rich and complex field of study. But when you read or see a news report about how a particular company or country is doing, it all gets boiled down to a few bare figures. And most of the time, what’s being talked about is growth. We’re obsessed with it and we expect it: if a country’s economic growth is stagnating, then you can be sure that some politician is going to come in for criticism.

But let’s backtrack a bit. Just why is growth so desirable?

Simply put, growth brings economic opportunity, upward mobility and increased living standards.

China is the example par excellence here. Its growth over the last 40 years has been stupendous and it now stands as the world’s second-largest economy. By 2014, China’s purchasing power parity – how much a country's money can buy in other countries – was $17.6 trillion, surpassing the United States’ $17.4 trillion.

China's economic growth also brought economic opportunity. Its economy created new jobs, especially for the rural poor; in just one generation, over 300 million Chinese were lifted out of poverty.

In 2013, the Chinese State Council’s income distribution plan made clear how the economy would be directed. China would work toward minimizing income inequality by raising low wages, increasing education spending and providing more affordable housing.

This begs the question: what factors result in a country failing to grow? As we know from Argentina, when economic growth fails to materialize, it’s often down to political instability and short-term thinking.

Back in 1913, Argentina was, per capita, the world’s tenth-richest country. But between 1930 and the mid-1970s, the country experienced six military coups. Alongside this political instability, three separate bouts of hyperinflation exceeded 500 percent per year, while economic “growth” rates sank below zero for several years.

Furthermore, Argentine governments weren’t exactly thinking long-term about what could be done to benefit the country. They failed to invest in education and instead preferred to build up a cheap, poorly educated agricultural labor force – hardly a strategy for economic success. In fact, during the 1940s, Argentina had the lowest rate of secondary-school attendance in the world, and the result of poor education was ultimately a lack of innovation and a competitiveness shortfall.

The full effects were felt in Argentina’s 1998-2002 economic and political crisis. Unemployment peaked at 25 percent, the currency lost 75 percent of its value and poverty went from 35 percent in 2001 to 54.3 percent in 2002.

Getting the economy right is tricky, but one thing is clear: growth matters.

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