The above video is a Commodities Boom discussion panel put on by the Milken Institute 2012 Global Conference. (April 30, 2012)
Maclean’s is the largest circulation weekly news magazine in Canada, reporting on Canadian issues such as politics, pop culture, and current events. The interview below, with economist Dambisa Moyo, comes from the June 4, 2012 issue of the magazine.
Zambian-born, Oxford- and Harvard-trained economist Dambisa Moyo, 43, first rose to prominence with her bestselling 2009 polemic Dead Aid. In it she argued that development aid from rich countries to poor African nations has left the continent mired in dependency, corruption, market distortion and deeper poverty. In her new book, Winner Take All: China’s Race for Resources and What It Means for the World, Moyo rings a new alarm. Only China, she believes, has realized the pressure that rising world prosperity is placing on increasingly scarce commodities, and has begun to act accordingly.
Q: You are a free-market economist, but here you are expressing a limits-to-growth view.
A: Three billion new people will join the middle class by 2030. This is a positive trend toward a wealthier and more inclusive global order, and it will not be possible without healthy levels of economic growth. My concern is the limits to the kind of economic growth now under way. There is increasing demand for land, water, energy and minerals that far exceeds the diminishing supply.
Q: The situation you describe seems Malthusian: peak oil—and peak land, peak water, peak minerals—writ large. Wouldn’t free-market determinists respond that either the market or technological change will see us through?
A: The role of the market and technology will be necessary but not sufficient. At some point, one could surmise, the price of gasoline will be high enough that people will no longer want or be able to purchase it—that’s what economists call demand destruction. There is a big role for this in the West, and market signals in the form of high prices can push us to invest more in things like efficiency and new forms of energy. The problem is we have not seen demand destruction work in the developing world. There, consumption fulfills basic needs and people are not able to forgo it regardless of price increases.
Q: As for China’s specific role, you seem not so much politically worried as economically, even environmentally, concerned. It’s not that China’s actions are necessarily wrong, but that the West should be aware of the implications.
A: There’s nothing wrong about China going around the world making resource deals to support its growing population. What it’s doing makes a lot of sense. Yes, my concern is that other countries will not catch on until it is too late. In a zero-sum world, what will happen if China wins the race for resources? Other countries seem to be asleep while China is making a concerted effort. Some 24 ongoing wars and violent conflicts have their origins in commodities, and this trend is poised to continue. China is befriending what I call “the Axis of the Unloved”—countries and regions such as Africa, Brazil, Colombia, Argentina and parts of Eastern Europe that have been basically ignored by the Western economies. China is the leading trading partner and foreign investor in many of these countries—a very different approach to the West’s largely aid-based model.
Q: The Chinese economic edge in this is that its state capitalism offers advantages that the Western laissez-faire model does not.
A: Favoured Chinese companies have a zero or near-zero cost of capital. State-owned banks provide highly concessional credit lines, in the form of government grants or low-interest loans. Favoured companies also benefit from tax breaks and the preferential allocation of key contracts. Like the US$12-billion credit line extended to Wuhan Iron and Steel, a major steel producer, by the state-owned China Development Bank, for ﬁnancing “overseas resource base construction.” And of course it helps to have a war chest of over US$3 trillion, while Western economies are struggling with cash constraints.
Q: The Chinese political edge is that it’s famously untroubled by governance issues in the countries it deals with.
A: Well frankly, in practice there is little to distinguish between the commodity counterparts of Western nations and those of China. U.S. and European countries are just as happy as China to strike deals with countries with less than pristine reputations—whether it’s Saudi Arabia, Venezuela or Russia. Two wrongs don’t make a right, but in this narrow sense, it’s unfair to constantly point fingers at China.
Q: So you think that criticism of China on both scores—cheating, so to speak, economically and being too comfortable with dictators politically—is often unfair and wrong?
For the rest of this interview, please go to the Maclean’s website: http://www2.macleans.ca/2012/06/04/dambisa-moyo-on-resource-scarcity-and-chinas-race-for-deals/