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How the West Was Lost: Fifty Years of Economic Folly--and the Stark Choices Ahead Hardcover – Bargain Price, February 15, 2011
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Top Customer Reviews
The first half of this book kind of does basic economics, explaining things like why the crash of 2008 occurred. This is not exactly new territory. But then, she moves on to discuss the overall failure of US economic policy, and the lack of strategic planning.
It's the latter half of the book that I enjoyed the most, where she discusses the 3 types of capitalism. There's unfettered greed, like in the US. There's quasi-socialism, where the state takes care of infrastructure, like Europe. Both of these are poised to fail with the change in demographics. Then there's state-run capitalism, like China or Singapore, where the state plays a very active role in the economy. The good thing, the author says, is that in the latter, there may not be as much freedom, but there is a group will that permits long-range thinking. In this way, China is investing in resources in Africa, and other places, in order to secure its 50 - 100 year security. Moyo stresses that this puts them at a huge competitive advantage, especially when they are able to steal technology from the West.
"How the West Was Lost" is a very unsettling book, challenging America's blindness and inability to put the common cause over individual desires. I wish more people would read this book, especially people with a better background in economics than I have, in order to talk about it with me.
Moyo clearly and succinctly describes the folly of short term vision by politicians which will be the downfall of western economic domination. Nikita Krushchev, when he visited the U.S. in 1959, said "We will bury you". He was misinterpreted as saying this literally, what he meant was that the Soviet technological effort would smother the U.S. As history proved, he was wrong but China will most likely fulfill the prophesy.
This book should be required reading for every western politician, bureaucrat and university president.
A Book Review
It is so ironic that a young scholar, Dambisa Moyo, from Zambia, one of the poorest countries in Africa, would write a bestselling book in 2011 entitled, "How the West Was Lost". In her book she straightforwardly indicated her points of view on the decline of the West. Based on many data she collected and cited in her book, the West predicament in comparison with the rising economic group, she referred to as "the rest", is not only the economic recession caused by 2008 financial meltdown, but also the breakdowns in terms of social, political, educational domains. They are like fault lines in an earth quack prone zone. A major disaster could bring down the modern Western system and culture developed since 400 years ago.
Furthermore, "Time is running out. Unless the West adopts radical solutions and adopts them quickly, it will be too late." It is not China becomes powerful and rich, "but rather because of America's own folly in policymaking", which affects Europe and Japan as well. The most urgent and pressing problem is shortage of cash, which has ill effect on the accumulation of capital. Greece, Italy, Spain, even England and America all have serious loss of money. It is not only the governments' deficits, but high rate of debt among their population.
The U.S. is the worst in terms of fiscal and financial aggravations, except those of debt ridden countries in Europe. Government's debt is approaching 16 trillions, almost equal to GDP, but budget deficit keeps going up every year with no end in sight. The Fed is adopting QE (quantity easing) policy which is printing 85 billion per month (recently reduce to 75 billion) to buy government bonds to ease the problem of current and immanent breakdown for government finance and operations. It is being going on more than a year. Any tax increase, particularly of the "rich people", is bogged down in congress because of Republican majority and insistence of implementation of Obamcare and other welfare spending by the Democrats, there is no solution in sight to the reduction of Government budget deficit, thus the overall debt. Even though there is some improvement of unemployment, GDP growth and industrial manufacturing recently, the American international trade deficit continues to worsen. Unless as some people predicted, America can reduce large portion of oil import or even becomes oil export country due to the new technologies of producing share gas and oil, there is neither government policy nor plan to improve American capability of industrial output to stampede the outflow of hard currency. Given several years of this shortsighted act of printing money, America will face an irreversible bankruptcy. The U.S. dollars might become worthless papers which can be a total disaster for the world economy. The sad thing is that not many American politicians, economists and general public believe that day might come.
Even under the strain of capital shortage, the government budget continues to spend large proportion on social welfare and military with disproportion low amount on state sponsored R&D for new industry and better education for the next generation. As for infrastructure, there is 30-year neglect which can only be corrected by putting in 7 trillion new investments. The QE and high budget deficit for short period of time are good for politicians and CEOs of Wall Street financial firms because they can keep their jobs and power without asking too much of sacrifices from general public. Yet for the long run, it is very bad for the country's future. A little by little the West is losing supremacy position on international stage. On the other hand, the civil investments are concentrated on real estates and financial instruments with little impact on the manufacturing and new industry. Since IT and internet, there is no major new industry in the West that can compete with "the rest", not even Nona and biotech. The monopoly in terms of innovation and creativity is no longer a West phenomenon.
For the past thirty years outsourcing is the key word for the West. Corporations of the West are making tons of money by transferring productivity to overseas paying a fraction of wages, thus enormous profit for the shareholders, but destroyed the middle class of the West in the process. Without manufacturing the West economy becomes an empty shell. For example, even European high end and luxury products, such as Italian leather goods, fabrics, French hand bags and fashion products, even Swiss watches are facing fierce competition from China, where "San Zai"(imitations) version of all those products are filling the world markets. Many are skillfully made in China at fraction of cost and yet with acceptable quality.
European debt crisis is in brewing for many years. The main reason is twofold. One is the default of the West democratic system in which politicians are making mockery promises and issuing empty checks and governments are running record high budget deficits which led to insurmountable national debts. Another fundamental one is that people in the West are living in unprecedented luxurious style thinking someone else will supply them endless goods." Welfare State" is the stage their country deserves and real economy is for someone else to worry. Also due to the automation, many jobs are replaced by robots and automatic process, one of the major elements that caused the disappearance of middle class. What left is
the rich and the poor, the"in between" is shrinking.
As we mentioned before, the intercontinental companies are making enormous profit by outsourcing and meanwhile the middle class in the so called advanced nations is diminishing. So the governments are short of tax income and people are becoming debt loaded individuals with no hope ever being restored as middle class, the net result is huge disparity between social classes.
Executive pay, especially those associated with Wall Street financial firms, is based on false assumptions and not justifiable calculations. The public has to take on the burden at the end if anything goes wrong. Furthermore, the compensation for those" stars" in show business and sports is beyond comprehension of the ordinary folks. For example, Jeremy Lin, a Harvard Graduate majoring economics, is getting paid for 15 million as a NBA top player. If he chose to follow up on his academic training to land a job on one of those Wall Street firms', he would probably be compensated by around 150K to 200K per annum. From whole society's prospective, would Lin as a NBA player is 100 times valuable than that as a company clerk. In real economy, which" Lin" can contribute more to the society? It is obvious that the society is placing wrong value judgment on its social and economic activities. Thus, it encourages its youngsters to follow wrong track; everyone is hoping to become a movie or sport star against almost insurmountable odds. As a result, fewer and fewer young graduates are willing to work in a factory or any other jobs in real economy. The West society is running into the dead end. Many people say under the capitalism there can't be installed any salary control. However, there are a number of economics scholars indicate that current situation is not true capitalism, it is a distorted version. In any event, the West must act quickly an overhaul in dealing with its political, economical and social problems before it is too late. War and violent action or reaction will not be the answer. The West traditional way of thinking and its philosophy must be examined carefully and injection of Asian ones is a must. The world is for all its peoples to participate in exploring and finding the best system and most suitable disciplines in modern time. Whether it is West or East doesn't matter as long as it fits in today's world that peace can be assured.
Moyo gives an albeit feeble solution to this problem, specifically for the USA, a solution that is most likely to be politically difficult if not impossible to implement, and as a result is likely to be much too late.
The book concentrates particularly on the positions of the USA visa vie Chine, although there are references to the UK and Europe. It also deals to some extent with China's foray into securing her urgent and longer term need for soft and hard commodities, which she is able to do with her large cash reserves.
Overall, the book has a journalistic approach with many bibliographic references, and will appeal to readers interested in world economics without needing to have the know-how, as the author explains everything quite clearly in layman's terms.
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