Zambian-born and Harvard- and Oxford-educated economist Dambisa Moyo is the author of several important books on the interaction between finance and statecraft. Here she examines America’s Gilded Age, and finds a surprising number of comparisons with our own.
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Andrew Roberts: Ladies and gentlemen, hello. I'm Andrew Roberts, the Roger and Martha Mertz Visiting Fellow at the Hoover Institution at Stanford University. Dambisa Moyo is a Zambian economist who specializes in how economics and power interact. She's the author of several controversial books, including Dead Aid and Winner Takes All. In 2018 she wrote Edge of Chaos about the great crash of 2008. Her latest book is How Boards Work. Dambisa, how is the gilded age, which we'll take to be 1870 to 1900, similar to the economic boom years of 1950 to say 2008?
Dambisa Moyo: Well, Andrew, in many ways. Let me just go through a bunch of things that happened during the gilded age that are very much reflected in the period between 1950 and 2008. For instance, these are both periods of high economic growth. As you know, in order to double per capita incomes in a generation, you need to be growing by at least 3%. Both of these are periods in which the global economy was growing above 3%. And certainly the United States economy was growing gang busters. The second point is that these are both periods of high globalization. By globalization I'm talking about a lot of trade across borders, a lot of movement of capital, high periods of immigration, and really great interaction of multilateralism between different countries. You had the League of Nations, the United Nations predecessor, and obviously more recently post Bretton Woods between the 1950s and 2008, you had the World Bank, IMF and many other international agencies that have been been spawned with this whole idea of globalization.
Dambisa Moyo: A couple of other ways in which these two periods are very similar. One is that you see a period in which corporations play a very dominant role. So they are large, corporate and [premature]. And in the period of the gilded age you have Standard Oil, you have the robber barons, very similar to the period of globalization that we have just witnessed through 1950 and 2008 with large global and complex organizations. And then perhaps, and a bit of a downer is that we actually see these periods as being very similar because of income inequality. And in particular inequality was widening and worsening in both the gilded age and clearly over the period between 1950 and 2008.
Andrew Roberts: And so what are occurrences punctured the heyday of these gilded ages, especially the first one?
Dambisa Moyo: Yes. So three things happened that punctured the gilded age. And almost in short script order. First of all, you had World War I, which was as you know, 1914 to 1918. You then had the Spanish flu, in which by some estimates as many as a hundred million, but certainly 50 million people died. And this was from 1918 to 1920. And then of course you had the economic crash which followed with a great depression of 1929, where we actually, I think very importantly, we saw a peak of the Dow Jones Industrial Average, where the stock markets peaked in 1929 at 381 points. And we did not see the markets hit that number again until 1954. So those three things really set the stage for a very big reckoning in terms of the global economy. And in fact, a reversal of the key characteristics of the gilded age that I outlined a moment ago.
Andrew Roberts: And you argue that that quarter of a century, the one from the great crash in 1929 until 1954, are a really useful historical indicator of what might happen in the next few decades, don't you? What specifically happened in what we now call the progressive era that serves as a guide for this future scenario of yours?
Dambisa Moyo: Yes, you're absolutely right. My great concern is that we've had our own pandemic and our own financial crisis. And I do think that those, God willing war with Russia doesn't end up being a segue to what did I think happens next. But I do believe that what we should expect is a complete reversal of the features of the gilded age, as well as the 1950-2008 period. So specifically, we saw the reduction of growth in the period between 1913-1954. In fact, many historians have cataloged and economists have cataloged a period of high unemployment and real trauma in terms of economic growth, at which many pictures still reflect that. It was a period in which corporations became small. The role of government became much bigger. The Sherman Act of 1900 Antitrust had already put in motion an anti-corporate sentiment.
Dambisa Moyo: So you actually see a dismantling of many conglomerates, and that is a very big feature of the 1930s period onwards. But more importantly, government becomes a much bigger feature of the economy. You start to see the development of the welfare state and with FDR, President Roosevelt, you do see the development, Social Security, Medicare, Medicaid, but also a complete reversal of globalization. In terms of trade and capital flows, you have Smoot Hawley, which is legislation in the United States that basically imposed numerous tariffs on goods and services. And so really a complete reversal of the story of the gilded age. And just again, trying to really to get at the inequality issue, the government becomes a big feature of the economy.
Andrew Roberts: And what brings to an end that growth era, that 1950 to 2008 growth era that you've just mentioned?
Dambisa Moyo: Yeah, so in much the same way that the gilded age really was scuppered or came to a screeching halt with the war, a pandemic, and then obviously an economic crash, we've had a 2008 financial crash. We've had a pandemic from 2020 and there are already a number of economic headwinds that the global economy's been dealing with. Things like technology and the joblessness or risk of a jobless underclass, demographic shifts from 1960 to today, we've seen the fastest increase in the world's population on record. You know, it's taken just 50 years to go from 3 billion to nearly 8 billion people. It took 125 years to go from 1 billion to 2 billion people.
Dambisa Moyo: So enormous demographic shifts that are causing a lot of challenges across the world. Add to that climate change concerns, issues around supply constraints of natural resources. Add to that inequality, as I said, not just income inequality, but concerns about inequality and access to education and healthcare, which is creating a disaffection in society. These factors, more structural factors, the amount of debt productivity declines, are adding into a very complicated picture where there are really no solutions or it's becoming much more challenging for public policy makers to address the challenges because they've run out of toolbox kits.
Andrew Roberts: And before the 2020 global pandemic, what trends do you believe are already defining the global picture economically, geopolitically, sociologically, and so on?
Dambisa Moyo: Yeah, so certainly we were already seeing a balkanization or a breakdown in globalization. We had already started to see the rise of China, and obviously in many respects, ideologically in terms of their outlook economically, but also in terms of state craft and politics, very different ideological principles. And that had put us sort of at opposing sides. Obviously, as I mentioned, concerns around climate change. But also the real risk that technology was going to create a jobless underclass were all features of the pre pandemic era. Debt. The fact that in the financial crisis, and of course with the pandemic response, we've now ended up with many societies with debt to GDP ratios over a hundred percent. Where it's been telegraphed over centuries, that having that ratio debt to GDP acts as an enormous drag to an economy. So this confluence of factors, inequality, technology, China's rise, as well as climate are headwinds that were definitely hot on heels before the pandemic hit in earnest in March, 2020.
Andrew Roberts: And then during the historical policy response after the great crash, the great 1929 crash, do you think there are decisions that you think that decision makers will put in place over the next few decades? Are they going to learn the lesson as it were?
Dambisa Moyo: Well we have a knack and particularly policy makers have a knack for forgetting what happened the last time. And so I do worry a lot that the easy reach in a world of inequality and slow growth as we are facing today, leads policy makers to reach for solutions that are very attractive in the short term and are come to in less than a minute, but are quite damaging economically in the longer term. So things like taxing the sort of the goose that's laying the golden egg, if I may use a cliche. In this case, the taxing private sector industry, technology in particular, but also all areas of economy is a very big risk and could be believed to become very problematic. Other areas that I think we should watch out for is that I think regulation will become much more tough, meaning that you will start to see much more aggression around antitrust to the breaking up of monopolies.
Dambisa Moyo: Pretty much every sector, banking, technology, consumer goods, as well as insurance are now very heavily dominated by a handful of companies. If you look around the globe, airlines and many other sectors also. And so there's a high likelihood that government will be looking to break those companies up. You know, other things that I expect to see from government action are really starting to see governments become bigger in terms of a welfare state. We've already seen that in many economies. In the United States, Social Security, Medicare and Medicaid is now about 40% of the governments purse. And I think that according to Angela Merkel, if you look at Europe by itself, it's just 7% of the world's population, it represents 25% of world GDP, but it's 50% of world welfare payments. So half of the world's welfare payments are made in Europe, even though it's just 7% of the world's population. So again, I do think that trend will increase as well.
Andrew Roberts: And what does the past tell us about all this, about the role of the state, both during and after crises and the size of the welfare state in particular?
Dambisa Moyo: Well, fundamentally that it can be quite problematic. Because obviously it means that GDP or the way I would describe it, the pie is shrinking, it's not getting bigger. And so the appeal of redistributions of tax and redistribute in the short term means that sure, you can have people with a universal basic income, better living standards in the short term, but without longer term investment and planning, you end up in a situation where the economy's not growing. And there's a greater lack of opportunity to invest in things like education, infrastructure, national health, and national security, which are key features of how we're going to be able to compete in the future. So I'm not very sanguine, as you can probably tell, about what policy makers will do in the short term, which is to reach for these short term fixes. But I do think it's at the expense of these deeper, longer challenges that worry me a lot.
Andrew Roberts: You've mentioned Angela Merkel and also China. What's the role for multilateralism in all of this, would you say?
Dambisa Moyo: Well, I think at this stage it's pretty dim, the prospects. Partly because Western multilateral institutions have struggled to keep up with global changes. So in particular, organizations that are born out of the Bretton Woods agreements really have not kept up with recognizing that 90% of the world's population lives in the emerging markets. They've not given China, in particular, her due. She's now the second largest economy in the world, but is not really represented in a lot of the discussions where she ought to be. But beyond that, we now have rival organizations emerging from places like China, Belt and Road, what used to be called the BRICS bank, but also real efforts in terms of technology and future planning by the Chinese government in particular to dominate in terms of technology, AI, quantum computing, where we actually have a distinct lag. So if you take multilateralism, I do think that we've already seen good strong signs that de globalization is afoot, and that a lot of the expectations of a balkanized, or rather a sort of a unified global world have been dissipating and moving more into a much more fractured and balkanized world.
Andrew Roberts: So what's the role of the private sector and innovation in all of this then?
Dambisa Moyo: Well, it's a great question because I happen to serve on a number of large and broad global corporations. And we spend a lot of time trying to think, not only how to invest, but how to operate our businesses in a world that's become extremely dicey. And it is a great challenge. I do think two things are of great concern. One is that there's no doubt about it, we do need government to be functioning at higher levels in order to help build infrastructure and to help create an environment, a crucible, where business can thrive, education and healthcare. And so I do think that there's a role for corporations to work together with government in an efficient way. But the other thing that's worth thinking about is that we've seen a marked decline in the number of companies that are publicly traded.
Dambisa Moyo: So many companies, for a whole host of reasons, partly because of M and A activity, of mergers and acquisitions, but also because they just don't want to be under the scrutiny of regulation and institutional investors, we're starting to see fewer and fewer companies that are trading publicly. In fact, specifically over the last 10, 12 years, we've seen the number of publicly traded companies in the United States go down by 50%. So there were about 7,000. Now there are about 3,500. This has real consequences for investment, as well as investment of companies into the future to help create jobs, be it tax based, invest in innovation, but it also has real implications for how business can survive and thrive in a very competitive world with very, very aggressive competition from China in military, economics and technology.
Andrew Roberts: Absolutely. And also of course the evolution of democracy. What's the story there over the period that we are looking at, the gilded age and the progressive era, and today indeed?
Dambisa Moyo: You know, I think what gets missed very often, especially if you're living in the West, is that we've made important strides, no doubt about it, in sort of telling and telegraphing the story of democracy. But it's really important to remember that we're living in unique period of time. Meaning that today with all the efforts with the wall coming down and with all the sort of glasnost and perestroika, we still have a situation where about only 30% of the world's population lives in free liberal democracies. In addition, the world, historically, has only seen democracy for 1% of human history time. And we're living through that period right now. So it's really an aberration to have liberal democracy as sort of extensive as we are seeing it today. And many regions of the world, in fact, many countries that are developed and developing are not liberally democratic. And we have to figure out how to continue to sell the story of the importance of democracy, but at the same time, continue to defend our values.
Andrew Roberts: Well, you mentioned glasnost and perestroika. I mean, those are pretty much dead as of the 24th of February of this year, aren't they, with the Russian invasion of Ukraine? Can you see any good things around the corner at all, to cheer us up after this fascinating, but rather depressing, discussion Dambisa?
Dambisa Moyo: Well, let me assure you Andrew, that we don't have the sort of benefit of the world coming to an end on our watch. I don't believe that it will. And so the question is what happens next? And I must say, I'm quite heartened by the speed with which Western countries have come together to defend ideological values and democracy. Quite candidly, I wish we had more planning, maybe even taken these issues more seriously. I think we could have probably saved a lot more lives.
Dambisa Moyo: But nonetheless, I think we should be heartened at the fact that there is still an opportunity economically to exert pressure on countries that go rogue such as Russia, but also really send a message or a beta test to other countries that might have ideas about taking down the ideological narrative of the West around democracy. But look, there's a lot of work to be done. And I certainly don't rest easy when I look around the world and I think about just how many catastrophes have happened. And not only how we've been ill prepared, but also how we didn't expect the pandemic. We didn't expect the financial crisis. We didn't expect Brexit. Those things happened and we didn't have a plan to address them or to prepare for them. And I think it's that, which is quite worrisome.
Andrew Roberts: Dambisa, you've written an extremely good book about boards and sitting on boards. And of course, as you mentioned, you are on the boards of many important and serious and substantial companies. How can that help? How can being better at the governance of these big corporations help all of the issues that you've just mentioned with the problems of democracy in the world so far?
Dambisa Moyo: Well, it's a wonderful question. Because I look back in history, and I've had the privilege of serving on a board that's over 300 years old. And you know, many corporations have been able to survive through economic and political upheavals, pandemics, economic downturns. And I think what's really important is they've survived. And we need corporations to not just survive, but to thrive and to be able to compete as sort of culture carriers and sort of bearers of ideological values that we espouse. These companies are providing jobs. They're providing a tax base, which is really important for government in terms of building out infrastructure and roads, as well as schools and healthcare. But also, they're critically at the tip of the spear in terms of innovation and how we'll be able to compete with countries like China. And so I think it's really important for us to understand that corporations are partners and ought to be partners with society, but partners also with government in trying to solve some of the biggest, challenging and seemingly intractable problems that the world faces today.
Andrew Roberts: This is a question that I ask all of my guests. What history book or biography are you reading at the moment?
Dambisa Moyo: So prophetically enough, I'm rereading one of my favorite biographies, which obviously I can't say Andrew Roberts book. So that would be a bit gauche. But it's a book by Ron Chernow called Titan, about John D Rockefeller, which is fantastic. It does cover the gilded age, of course, but really the mind of a genius in terms of building up corporations whose legacy remains today.
Andrew Roberts: Well, we're rather hoping that Ron will come on the show, in fact he said he might later on. So this will help enormously, I think, in bringing him along.
Dambisa Moyo: I hope so.
Andrew Roberts: Dambisa Moyo, thank you very much indeed for this truly fascinating conversation.
Dambisa Moyo: It's been a pleasure. Thank you for hosting me.
Andrew Roberts: I hope you enjoyed my conversation with Dambisa. In the next episode, we'll be returning to politics in a conversation with President Iván Duque of Colombia who ran on a platform of fighting the FARC Marxist Leninist guerilla group.
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