Book Review: Winner Take All

Winner Take All:  China’s Race for Resources and What It Means for the World
By Dambisa Moyo
Basic Books, New York, 2012

Dambisa Moyo’s latest book, Winner Take All:  China’s Race for Resources and What It Means for the World, is supposed to be a wake up call, but actually I think it’s a bit of a yawn. 

Moyo, a former World Bank economist, gained notoriety or perhaps infamy a couple of years ago with her controversial book Dead Aid which argued that foreign aid has harmed rather than helped Africa. 

In her latest book she argues that the world faces an imminent natural resource crisis:  land, water, oil and minerals are in increasingly short supply.  Demand is surging due to a world population that is both increasing and increasingly wealthy.  Hundreds of millions of people are joining the middle class in emerging economies and are eager to acquire and consume like their middle class counterparts in the developed world.  And who can blame them?  But this imbalance of supply and demand could lead, Moyo warns, to skyrocketing prices, civil unrest, and even a “doomsday scenario of commodity wars.”

It’s a standard Malthusian argument.

Well, maybe it’s a bit more complex than that.  Moyo argues quite convincingly that we need to factor China into the mix.  In its drive to raise its 1.3 billion people out of poverty, China is pursuing an aggressive strategy of resource acquisition around the world, securing supplies through trade deals, development agreements and direct investment.

To her credit, Moyo doesn’t try to set up China as a resource-hungry bogeyman.  Her assessment of China’s impact is fairly balanced.  She notes that Chinese investment in various countries, especially in Africa, benefits the host countries by providing capital and know-how for them to develop infrastructure and industries of their own.  She points out that China shows little interest in imposing its own political agendas on host countries as a condition of its resource deals.  And if China has shown little reservation about striking deals with autocratic, thuggish and/or corrupt regimes, well it is certainly not the only country doing so. 

If there’s a problem with China’s appetite for resources, it’s that it will likely drive up prices for the rest of us.

In the first place, with a billion more people to raise out of poverty, China’s need for resources is huge and growing.  This increasing demand tends to drive up commodity prices on world markets.  Oil price rises in recent years have often been attributed to rising demand in China as well as India, Brazil and other emerging economies. 

In addition, by some reckoning China is overpaying for the resources it is acquiring.  Moyo suggests this may be because the Chinese government is willing to pay a premium to secure its supplies of natural resources as a hedge against civil unrest at home.  Sudden spikes in the prices of bread, flour and oil have brought down governments in a variety of countries.  The Chinese Communist Party wants to avoid this at all costs.  Again, this puts upward pressure on commodity prices.

Because China has been following such a comprehensive resource acquisition policy, it is starting to become a monopsonist.  (Monopsony is the opposite of the more familiar monopoly where there is only one seller of a good or service.  In a monopsony there is only one buyer.)  That means it has the power to strongly influence or even dictate prices.  That of course has serious implications for the rest of the world. 

Still the most important thing about China’s resource acquisition strategy is that it has one.  No other country in the world appears to have anything remotely comparable.  And no other country is likely to develop one either.  Democratic governments are too focused on the next election to develop and execute anything so long term.  Other countries are simply too poor. 

Despite its ominous-sounding sub-title, Winner Take All isn’t really about China per se.  It’s about the fact that the world is unprepared for likely resources shortages, and lacks the international institutions and policies to deal with the resulting conflicts.  In fact, one of the few concrete suggestions in the book is the creation of an international body empowered to manage resource crises among member nations. 

Moyo is quite pessimistic about the future.  On the demand side, she thinks consumers in both the developed and developing worlds are unlikely to voluntarily reduce consumption.  There’s more room for optimism on the supply side where technological innovation, improved public policy, recycling and waste reduction can help.  Still the overall impression from Winner Take All is that the world faces a high likelihood of reduced living standards and violent conflict over access to natural resources in the next couple of decades. 

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So why do I think Winner Take All is a yawn?

It’s not because I disagree with Moyo’s diagnosis.  The book is very well researched, and even without all the facts and figures, you only need to read the news these days to see she’s right.  Commodity prices have spiked in various places, resulting in civil unrest and even military conflict.   If you extrapolate from current trends, the outcome really does look pretty dire.

Still I find it hard to work up much angst about “one of the greatest threats facing the modern world.”

Maybe I’m suffering from crisis fatigue.  From the mortgage crisis to the Euro crisis to the environmental crisis, I’m all crisised out.  I know this isn’t a rational argument, it’s just venting, but honestly! how is anyone supposed to do anything about all these?

I think that’s partly why I’m so blasé – I feel utterly powerless.  Sure I can reduce my consumption, recycle more, “think global, act local,” do all that righteous stuff, but in the end will my actions make an iota of difference?  

I can’t do anything myself and I can’t even vote for someone who can do anything.  Local, state and national governments are paralyzed by partisan squabbles, captured by special interests, distracted by a laundry list of other problems, bankrupt (morally and fiscally) or all of the above.  And even if there were politicians with the right intentions, I think Dambisa Moyo is right: democratic governments are inherently focused on short term issues and incapable of acting on long term threats.  (The Communist Party of China is one of only three institutions on the planet capable of such long term planning and execution.  The other two are the United States Department of Defense and the Vatican, neither of which are likely to be especially helpful here.) 

But mainly, I’m just more optimistic than Moyo.  People have been predicting the exhaustion of natural resources since Malthus, and probably before him yet here we are, consuming more resources than ever before.  Could it all come to a crashing halt one day soon?  Possibly, but I don’t believe we heading for a “global resource Armageddon,” and I could do without the apocalyptic rhetoric too.

I’m more optimistic for three main reasons:

First, as Moyo herself hints, the problem is time-bounded.  As the world’s population levels off at just over 9 billion sometime around 2075 we can expect the demand for natural resources to also level off.  In other words, the world is not facing an eternity of ever-increasing demand for resources.  So the problem really is how do we make it through the next sixty years or so?  OK, it’s not going to be easy, but it’s at least a bounded problem. 

Second, it used to be that when one country wanted access to the resources of another it went out and conquered or colonized that country.  There’s still some of this happening today, but China appears to be pursuing a peaceful strategy, at least so far.  China has a vested interest in the continued peaceful operation of the global trade and investment system.  Perhaps that could change if China’s supplies are threatened, but for the time being at least this does not appear to be immanent.  

Finally, I think Moyo seriously underestimates the potential of technological innovation to address many of these problems.  Perhaps I’m still thrilled by NASA’s success at delivering the one-ton Curiosity rover to the surface of Mars in the most complex landing sequence ever achieved.  Maybe it’s that I work for a technology company.  Whatever the reason, I believe we’ve only scratched the surface of improved energy efficiency, alternative energy sources, higher yielding crops, and advanced materials.  Until now there hasn’t been much incentive.  Yes,  I understand Moore’s Law doesn’t apply to food or oil production, but there are plenty of ways already known, let alone yet-to-be-discovered to improve yields.  With focused effort and a dollop of sensible public policy we could see substantial improvements.  As one example, America’s energy position has dramatically improved in the last couple of years as a result of advances in hydraulic fracturing (“fracking”). The country now has a huge glut of natural gas that didn’t exist five years ago.

The critical question is do we have enough time?  Technological innovation takes focused effort over a period of time.  Even though the problem is time-bounded, it’s likely the next ten to twenty years will be crucial.  Can we innovate our way through the problem in that time? 

I don’t know.  But I think it’s much more likely that solutions will emerge from research and development labs than from any international body created to arbitrate resource disputes. 

Dambisa Moyo has written a clearly articulated book intended to stimulate discussion and hopefully action on an important global problem.  I just don’t believe we’re heading to a doomsday scenario.

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