The slowing global economy occurs at a time when the social, political and economic institutions established by the West, including the World Bank, the World Trade Organization, the IMF, NATO and the U.N. are fighting for their credibility.
“The people in emerging markets have said ‘wait a second, the crises we are facing right now are largely coming out of the West,’” said Moyo. “Debt burden, political instability, the massive financial crisis, all of these problems come from the West. Might there be some other pathways in terms of ideologies that can generate long-term growth? There’s also a belief that income inequality could be a direct artifact of capitalism. Taken together, there’s a growing skepticism about democracy and market capitalism.”
Moyo argued that traditional global institutions are worth salvaging, but should be distanced somewhat from the Western political and economic models they were founded upon in favor of incorporating more ideas from emerging markets countries.
Western countries might also need to be more flexible with their strategies to foster growth and development, she said.
“Inequality is worsening in the U.S. and improving in China, and part of the reason is that in the West we tend to despise any form of government intervention,” she said.
Ideological strategies, like the implementation of free-market capitalism or command-and-control socialism or Communism, are unlikely to restore economic growth on their own, she said.
Successful policy won’t stem from pitting free markets against command-and-control philosophies, or democracy against other forms of governance, she said. Solutions are more likely to come from blending both ideals, says Moyo.
“We need some sort of third way, if I can use that terminology. But what that looks like ultimately is up for grabs,” she said. “What is clear to me is that” ideology for ideology’s sake is the enemy of growth.
Western policy makers, public and private, are also bound by short-term concerns, she said. In the U.S., she said, legislators are constrained by their constituents via electoral cycles that force them to favor quick, temporary fixes to large structural problems that may be easier to pass that complicated, long-term solutions.
Companies are also constrained into short-term thinking by their shareholders, Moyo said. In the West, public companies are encouraged to plunge ever higher levels of cash into dividends and buybacks, she noted, just as technological disruption threatens their businesses.