China brought to book

By Jonathan Brown, Critical Resource advisor

Dambisa Moyo’s new book on China’s impact on commodity markets brings an old debate into the mainstream, but leaves key questions unanswered

‘Winner Take All: China’s Race for Resources and What It Means for Us’ by Dambisa Moyo (2012), Allen Lane, 257 pages, £20.00.

As in comedy, so in life, timing is everything and one can’t help feeling that Dambisa Moyo has picked a bad moment to release her new book just as many commodity prices are on the slide with worries over slow growth in China. Released less than a year after her work on the debt crisis and western decline, her new book argues that the sheer scale of both population growth and the rising expectations of the emerging new middle classes in the developing world will cause pressure to rise on world resource availability, causing a Malthusian crisis in the global economy.

The second part of her thesis is that, of the significant world powers, only China is making any systematic attempt to prepare for this crisis by concerted and co-ordinated policy action; namely its purchasing of commodities and extractive rights throughout the world, but particularly in Africa and South America.

Moyo argues that China’s quest for commodities is now so extensive and backed by so much state-provided capital, that in much of the world it has become a ‘monopsonist’: a buyer so powerful that it can dictate terms to resource producers, and effectively make it impossible for other international players in the market (particularly western energy and mining companies) to compete on profitable terms.

As a former economist at the World Bank and Goldman Sachs, Moyo has made a name for herself as an opinion shaper with her attacks on the corrosive effects of western aid in her book ‘Dead Aid’ and fiscal irresponsibility in ‘How the West Was Lost’; her focus on the big picture is a breath of fresh air and her work is none the worse for it. However while ‘Winner Take All’ undoubtedly highlights an important issue facing the world, it feels far more like the beginning of a debate than a definitive survey of the topic.

Under-resourced arguments

Many readers, especially considering the aforementioned slump in many commodities prices, are likely to take issue with the basic premise of her argument: that the supply and demand rules of the free market will not operate under a Malthusian crunch of resources. Price signals will surely force serious efforts to seek substitution or alternative-energy sources well before the world hits a Malthusian cliff. Although western governments may be particularly complacent in their attitude towards future supply, future rises in the price of commodities will drive private companies to take action (just as mining companies have invested heavily in new projects during the boom of recent years – which in turn has contributed to the recent price falls).

In terms of energy resources, Moyo does give a nod to the shale gas and fracking revolution later in her work, but there is no detailed engagement with the rise in new energy technologies, substitution and efficiency improvement issues most recently espoused by the energy expert Daniel Yergin in his 2011 book ‘The Quest’.

Even if we accept Moyo’s overarching thesis, there seems another weakness in this work. Her reliance on macro-economic statistics and her focus on the operation of international markets means there is actually relatively little research on the motivations of actors or the mechanics of engagement with host governments on the ground. The motivations of the Chinese government are taken as given; there are no interviews with Chinese officials and no real sense of the subtleties of their policy positions. Moyo also appears not to have interviewed or engaged with a significant number of managers in the big international energy or mining companies who surely, rather than western governments, are the chief drivers of strategy with regards to future resource acquisition and development.

Likewise Moyo does not examine in detail the interactions between the governments of resource-rich countries and Chinese companies; she does mention the temptation of host countries to renegotiate the terms of, or expropriate, investments but only briefly touches on China’s willingness to defend its assets.

Linked to this, Moyo appraises China’s Africa policy as far from neo-colonial in its current manifestation, but this misses the fact that one of the principle motivations behind European colonial intervention in past centuries was to secure the trading rights and property previously secured by private companies and merchants and then apparently threatened by ‘host’ governments. A case study or two about the details of China’s current interactions with the governments of resource-rich countries would not have gone amiss.

Despite its frailties, however, Moyo’s book may have served a very useful purpose: to bring a debate regarding the effect of China’s rise on commodity availability, long conducted in the resources sector, into the arena of the informed public and policy maker. In this she may have benefitted us all.