Customer Reviews

False Economy: A Surprising Economic History of the World

5 star:		(13)
4 star:		(19)
3 star:		(6)
2 star:		(2)
1 star:		(5)

 

 

Rules for successful countries: Don't be overly isolationist. Don't strive toward complete self-sufficiency. Plan ahead for cities but don't support them over and above what supply and demand allows. Support your country's economy for those things it does well, not what neighboring countries may do well or other preconceived notions. Prevent any group from hijacking religion for their own political purposes. Don't let your government ignore property rights and the rule of law. Don't let natural resource windfalls, such as oil or diamonds, distract you from finding employment for your middle and lower classes. Don't let small interest groups hold your politicians hostage to the detriment of the rest of the country. Poor nations - worry less about trade policy and more about obstructive customs procedures and corruption that drives away business. Worry less about corruption that is moderate and predictable. When your country falls off the wagon, make every attempt to recognize it and get it back on course.

Each chapter asks a question. Here are the author's answers:

1. Argentina failed and the United States succeeded because the United States consistently self-corrected from a good start based on a good English model. Argentina consistently repeated mistakes from a bad pattern inherited from an autocratic Spanish model.

2. Like countries, cities are shaped not just by big economic forces and geography (although those have a big influence) but also by choices made by governments and their people. Washington DC was placed in a "federal district" because the founding fathers were paranoid about giving any state the upper hand. Political inertia has kept DC without a vote but this is not a chapter about Washington DC. It is a fascinating survey about the rise and fall of cities in general.

3. Egypt imports half its staple foods because becoming self-sufficient in agriculture would use more water than it can afford to. When countries import certain commodities, with those commodities comes "virtual water."

4. Oil and diamonds are more trouble than they are worth (to a country as a whole) because the rulers and their buddies can't seem to resist taking all the profits; neglecting other industries and leaving the rest of the nation on its own. A notable exception is Botswana, which shows the formula to success.

5. Islamic countries don't get rich, not because of the religion itself, but because of the actions of priests, politicians, monarchs, and bureaucrats exploiting malleable religious doctrines to pursue personal goals of wealth and power.

6. At the expense of growers in the United States, we import our asparagus from Peru because the US spends millions subsidizing Peru asparagus growers so they won't grow coca leaves and make it into cocaine - despite the futility of efforts such as this. This chapter is full of examples from around the world of failed economic policies that gain a life of their own.

7. Africa doesn't grow cocaine because it doesn't have a good enough infrastructure. In this sense, the author means more than infrastructure such as roads to transport goods, although those aren't adequate either. Africa also doesn't have the business networking systems necessary to expedite business. Instead, there are bribes to pay at every juncture. The European former colonies all over the world were left with a business infrastructure. Europe tried to colonize equatorial Africa but because of malaria and other diseases, they lost too many colonizers, so they just took as many slaves as they could (the healthiest individuals) and got out.

8. Indonesia prospered under Suharto (a crooked ruler) and Tanzania stayed poor under Nyerere (an honest ruler) partly because Suharto, as corrupt as he was, maintained order and had some good economic policies. Nyerere had isolationist, self-sufficiency policies and his officials took wide advantage to extract bribes - not exactly a good business atmosphere.

9. Pandas (in the author's opinion) are useless because they went down an evolutionary cul-de-sac. Their incompetence at consuming and reproducing makes them hopelessly vulnerable. Contrast that to the flexible business plan of the ordinary housecat. Recognizing that Homo sapiens was going to have companionship needs for the foreseeable future, cats instantly spotted this opportunity and filled that slot in the market. Many countries act like Pandas rather than cats.

10. Conclusion: Entertainment is free and frequent at meetings of the World Trade Organization. Representatives of countries, including the US, relentlessly do things that are bad for their countries in the long haul to satisfy their small special-interest groups. Meanwhile, because of their oil, Russia is not even there. The job of staying on the right track only gets more difficult as the world economy gets larger, more integrated, and more complex. Lets hope we continue to make more right than wrong choices.

False Economy is more of a random set of musings, stories and discussions than a consolidated economic history of the world. Organized across a combination of economic and societal principles, the book reads more like a private tutorial session -- over coffee -- at Oxford or Cambridge than a book intended to illuminate the reader. If the author intended this book to follow in the footsteps of Thomas Friedman, then he has come up short, not from lack of material, but rather from lack of organization and telling a consistent story across the chapters.

The chapters themselves are interesting, full of personal opinion, and provide a subtle but decidedly British point of view. The bias and slant that this includes sheds additional light on the subject of each chapter but only if you read for it and recognize that its there. Its a little like British humor which you have to listen to the words. In this book you have to read every sentence because more likely than not the main idea is buried in a sentence in the middle of a paragraph. Just a note to readers.

This makes the book tough to read for someone who is used to reading while they are travelling, have an hour or two to spare, etc. To get the most out of this book, I had to reserve an hour or so at the start of the day to do nothing but read and think about what the author was saying.

The assertions made in across the chapters on economic choices, cities, trade, natural resources, religion, etc are deliberately provocative -- again in the British style. The author's words are not as radical as the titles would suggest, and his prose can be indirect in several places.

So three stars, good content, interesting conjecture, well written technically, but not well structured for the reader. Given the plethora of books that are coming out on the economy and economic crisis, this would not be the first book I would naturally buy, but it is perhaps the one I will return to time after time.

Alan Beattie writes for the Financial Times. Here, he departs from financial reporting to write something geared to a more general audience. People who have an interest in economics, and history, but who are not economists or historians.

False Economy was just right for me. Not too technical, but not too general. Economic history has always interested me. With economics, no one has a crystal ball to peer into the future. The past is our only clue. For economists, studying the past is important. Ben Bernanke, head of the Federal Reserve, knows as much about the Great Depression as any historian.

But economic history books can be some of the toughest to get through. Dense information must be presented. Careful analysis must be made. Comparing and contrasting different economic theories must be done in detail. Most of the time, that detail is excruciating.

Robert Samuelson's book The Great Inflation shows that. I like to read Samuelson's columns in Newsweek and the Washington Post, and I enjoyed reading his book. But it was a chore to get through. (To be quite honest, there were some parts I skipped.) Same with Lords of Finance: The Bankers Who Broke the World, a fine but occasionally tedious history of the four men who led the central banks in the US, France, England and Germany during the Great Depression.

For me, tedium was not a problem with False Economy. The book reads well, with interesting examples carefully analyzed. Each chapter takes a topic and runs with it. One example, comparing the economic histories of the United States with Argentina, appears several times in the book. The rest divides into discrete chapters.

Those without much interest in this kind of book, though, may find even False Economy a bit of a chore. As one might expect, Alan Beattie does not quite make economic history read like a good spy novel.

But he's pretty close. Certainly economic history buffs should, I think, find False Economy to be a refreshing change from our usual fare. Alan Beattie tries to teach by using surprising questions, like why doesn't Africa grow the cocaine that travels through it to Europe (it's grown in South America in countries that have the infrastructure to support it).

Unlike many books of this type, Alan Beattie does not take any particular political posture. He does not advocate for anything. His opinions come through in the book, certainly. But nothing you have to agree or disagree with. The countries and times tell their story, and you can interpret it how you wish.

My only caveat is to those who are looking for something scholarly, a book that provides the detail a student or teacher might want from an economic history. This book does not have that. It's more milk than meat. For some, that may be a reason to pass on it.

The real suprise with this book is that is was published. The book has no coherent theme or direction. Conclusions are drawn hastily without developing a supporting narrative. Poorly written, and without any factual references. A much better book on a similar theme is The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor by David S. Landes.

This is amazing, this author looks like Dan Brown, the question is: How the world (or the US public at least) accepts these kinds of books?
Assertions like:

6. At the expense of growers in the United States, we import our asparagus from Peru because the US spends millions subsidizing Peru asparagus growers so they won't grow cocoa and make it into cocaine - despite the futility of efforts such as this. This chapter is full of examples from around the world of failed economic policies that gain a life of their own.

This shows a total ignorance about it, the asparagus are grown for years in the coast of Peru, the coast is mostly dessertic and irrigated only with the water of rivers coming from the Andes, asparagus are not grown by poor little farmers but by big corporations with peruvian, chilean, spanish and even north american capitals. The coca not the "cocoa" is grown in the jungle (even far from the Amazon River shores), where the weather allows it. The north american public as the rest of the public in the world buys the most competitive product, it means the cheapest and/or the best and it is just a consequence of the fact that Peru has a better weather (very slight variation of temperature in the year) then more harvests a year, the labor is far cheaper, etc, etc.

Then he says that Africa does not grown Coca because it does not have the infrastructure to do it, Oh Lord, it does not mainly because the weather is the clue, not the roads, where the coca is grown in Colombia, Bolivia and Peru, there are not roads, there are rustic paths, however, the business is still profitable because it can grow all over the year.

My advices for this guy are:
First, not only check Google Earth but buy National Geographic or the illustrated Atlas (I bet he has money to do it, I'm not sure about the time)
Second, learn another language to read articles from experts in the matter in other languages than english or you think you are the only smart guy in the world....................
How the public is cheated by guys like these?
Best for all,

Aldo (From Peru but having lived in Europe, the US and visited countries in 4 continents)

The False Economy is an ambitious attempt to bridge popular and scholary information. The best writer I have found, that can do that is Brian Green, who is a superstring scientist, but can write popular books. Not only does Alen Beattie, fail to make the book fun to read (sans a few anicdotes) but his scholarly research is overly thin. Take the first chapter of comparing the U.S. with Argentinia. Hard read. But in the end, he fails to provide more examples of different countries with similar contrasts. One hint that it might not be a good book to spend money on, could be gleemed from the back of the book. Recommendaton red flags - red flag 1) Bono, and red flag 2) Business Week " .. insightful nuggets".

The book starts out disorganized, unfocused, and vague. Even by page 44, the direction and focus of the book are unclear, the chronology and geography are confusing and not handled in a linear manner.

It really picks up about one third of the way through in chapter 4 on Natural Resources. This area is the best part of the book.

In chapter 5, Religion, he makes a point which is sorely lacking in Western literature and history - that China was far more developed and technologically advanced as a society far earlier than is usually told. He lists an impressive collection of the technological advances which originally appeared in China, such as gunpowder, the compass, printing, the wheelbarrow, and the use of coke (coal related, not the drug) to smelt iron.

The author's description of capitalism only working when regulated and controlled is far more realistic than most of the economic silliness we hear from many quarters these days. His discussion of the marketplace, also in Chapter 4 on Natural Resources is very well done and insightful.

I chafe a bit at his calling the huge American agribusiness machine "the farm lobby." Corporate agribusiness has about as much to do with farms as General Motors does with the local bike shop. It is just another corporate power group whose primary interest is profit, not quality, abundance, or sustainability of agriculture.

He has a few ideas which are not quite correct:

The U.S. is not a democracy, it is a federal republic.

His discussion of the Russian revolution of 1917 neglects the influence of foreign money interests (the same ones who financed Nazi Germany, by the way).

He massively oversimplifies Germany's descent into fascism, again missing the influence of foreign (Wall Street) money in creating and growing the Nazi party.

While Pat Buchanon may be a blowhard, he is hardly a populist.

His agreement with Gerald Ford's quote about "the people" ruling America is profoundly naive.

He misses the point of the housing bubble - cui bono? - who benefits? If one follows the money and movement of devalued assets, one learns a great deal about the real nature of the crisis.

The idea that the growth of the American West was mostly about settlers and not huge landowners and companies is false. Large landowners, railroads, mining and timber interests all had a great deal more to do with politics and economics in that development than small family farms.

The idea the European banking did not have a strong effect on U.S development is wrong. The American Revolution was mostly about breaking free of the stranglehold of the British banking/monetary system. After that, it has been an ongoing battle.

He ignores the global nature of banking in the 1800s.

He also has a very naive view of the WTO. It is hardly the benevolent organization he paints it to be. It is mostly a tool of global corporate/banking interests. The author ignores the influence of global corporatism as outlined in books like Economic Hit Man, and seems to fall for the Donna Reed/Walt Disney version of economic reality.

While there is much of interest in this book, I would caution people to read it with a canister of salt nearby, and to read a lot more about these topics to be able to see where his opinions mislead.

Alan Beattie gets it, or at least he gets most of it. Not much of what he says in his "Surprising Economic History of the World" will surprise readers who know economic history, but that leaves about 6 billion other potential readers, and they likely will be surprised.

If they swallowed the bitter pill of Reaganomics, they will be astounded.

In a chatty but nevertheless well-grounded book, Beattie, trade editor at the Financial Times, challenges loose thinking. His view is often ironic, as with the counterfactual title of the opening chapter, "Making Choices: Why Did Argentina Succeed and the United States Fail?" In the 19th century, the USA and Argentina were both among the richest countries and they had (he says, not quite accurately) similar prospects. Yet one went to the top, the other almost to the bottom. Why?

No determinist, Beattie concludes that deliberate, if not always well thought out, decisions accounted for the difference.

He repeats the exercise with cities as engines of economic energy; simple trade (asking how Egypt, once the breadbasket of Rome, now imports grain); natural resources (why having oil is often so bad for a nation); religion; the politics of development; trade routes (why doesn't Africa grow cocaine?); corruption (not always bad); and something called path dependence (which is basically historical overhang).

I would quarrel with Beattie over dozens, perhaps hundreds of small items, but in the main -- and giving consideration to the fact that he is covering vast sweeps with few words -- he describes the world of work as it is, not as economic elites tell us it ought to be.

However, having established by historical example the glaringly obvious -- "The financial crisis that started as a credit crunch in 2007 and exploded dramatically in 2008 was not caused primarily by a failure of global regulation; it was caused by a global failure of regulation"-- in the chapter on trade he throws most of that out.

It is true that trade enriches both sides, so long as each is purveying an item it has an advantage (for some reason) in producing. It does not follow, however, that free trade is the best kind of trade.

Apart from the fact that it doesn't exist (and if it did, it would soon lead to monopoly or cartels), markets are incapable of assessing externalities: All the market knows is the offering price, the offered price (and, sometimes, the quality of the product). If a product is fungible, the market cannot tell the difference between slave-grown sugar and free labor sugar.

In "The Political Economy of Slavery," Eugene Genovese put it this way: "Although all commodities are products of social relationships and contain human labor, they face each other in the market not as the embodiment of human qualities but as things with a seemingly independent existence."

Beattie discusses sugar, without understanding it; and never mentions slavery, which is still an issue. In particular, he notes the "sugar mountain" in the European Union without guessing how it arose. He gets how it is maintained, but why did it come to be in the first place? It was not, in my opinion, a matter of small highly interested groups prevailing over much larger but less committed groups, as Beattie, following theorist Mancur Olson, would have it. It began when Europe was led by men who as little boys had been stinted of sugar. It is my opinion that, mostly unconsciously, they balanced the cost of having too much sugar most of the time with the much higher cost of not having any sugar some of the time. The fact that the other items in the EU's surplus mountain, like butter, were also items of wartime and postwar stringency, is persuasive.

Astonishingly, although Beattie devotes a lot of time to resources, he pays no attention at all to externalities. He thinks global trade is, in itself, a good thing.

That depends upon the source of the alleged efficiencies. If the United States enters into a global network that includes China, then it willy-nilly also adopts Chinese environmental standards. It may try to set national standards, but so long as trade is free, businesses will migrate to China.

Beattie spends a lot of time on a trade concept called "implied water" (Egypt, a dry country, imports wheat that contains rain that fell on America or Australia) but does not realize that "implied filth" is even a greater component of trade. Every item you buy from China includes the poisons that China allows its industries to dump into the air, water and countryside. If you are concerned about anthropogenic global warming (I'm not), this implied filth does not even remain local.

A rich country can have global trade and either jobs or a clean local environment. It cannot have both.

It may be pernickety to bring it up with such a short book, but Beattie surprisingly ignores education.

Only in the last pages does he mention, in two sentences, the value of human capital. Yet of all the inputs into an economy, human skill is by far the most important.

Beattie talks about India's work force compared with China's, but he does not notice that the rapid growth in India has been in South India. Beattie talks about the importance of education as a relative advantage of higher castes in India, but he does not mention that there is also a geographic divide. North India is less literate (and more Muslim, which helps explain this) than South India.

The clearest example of how education is the main component of economic advance comes from Europe. You could win a lot of bar bets with economic historians by asking them to name the poorest country in Europe in the early 19th century. It was not Portugal, Sicily or Greece, nor even Romania. It was Sweden (then incorporating Norway). In the spring, Swedish peasants ate pine bark, which helps explain why they thought North Dakota such a wonderful place. Literacy is not of great value to rural people in the premodern world, and until around 1840 Sweden was premodern, despite its significant iron industry and elite academic institutions. However, unlike most premodern societies, Sweden was completely literate. The Lutheran Church required that every tiny village have its school, taught by the pastor.

When modernity came to Sweden, Sweden was prepared. In about four generations it want from poorest country in Europe to richest country in the world.

With those cautions about what is and is not in it, "False Economy" is an excellent and thought-provoking quick read which will, most likely, cause the reader to digest his ration of continuing economic news rather differently.

I enjoyed this book very much. It's main premise is that nations, through their own decisions, determine how successful their economies will turn out. Beattie makes a strong case against any fatalistic theory of the wealth of nations (that any nation had to end up as it did, due to its climate, religion or natural resources).

The first chapter is a fascinating look at how similarly Argentina and the USA started out, but, through a series of poor economic choices, Argentina ended up as a second-rate nation. What is chilling is that the USA has, in the last decade, been making decisions quite similar to those made historically by Argentina. (Hopefully the USA can turn this around before it's too late.) The second chapter discusses the rise (and sometimes fall) of a number of famous cities throughout history. For instance, it's interesting to see how leaders in Rome became controlled by a large population of idle hangers-on, each grown custom to regularly receiving free grain and how coliseums with gladiator contests developed largely in an attempt to placate this group.

Chapters 3, 6 and 7 examine what nations choose to import (versus produce themselves) and discusses the notion of "embedded water"; for example, when one imports wheat, one is in effect avoiding the cost of coming up with the water that would have been needed to grow that wheat. I had no idea that the USA in 1870s shipped 12,000 tons of ice to India each year. There is an excellent discussion of the issues of distance, scarcity of a resource, the logistical requirements for its transport and the role of special-interest groups and how these various issues have impacted trade across different nations throughout history.

The fourth chapter was a revelation to me. I had not realized that the discovery of mineral wealth (diamonds, gold, copper, oil) has been an economic curse for many developing countries (why? because such sources of wealth tend to drive out other industries within those countries -- raising the value of their currencies enough to kill off their export industries and causing a variety of political problems for their citizens). The fifth chapter vigorously attacks the theory (originally espoused by Max Weber in his 1905 book The Protestant Ethic and The Spirit of Capitalism) that religion greatly influences a nation's economic success. Specifically, through recent and historic comparisons of nations he refutes the thesis of that the religion of Islam keeps Muslim countries poor.

Chapter 8 discusses the role of political corruption in making countries poor. Beattie argues that there are two different forms of corruption: one form is a mainly drag on economic growth while the other is deadly to it. He discusses instances in which well-meaning leaders mistakenly established state mechanisms that resulted in the more deadly form of corruption.

There is a tendency for governments (and peoples) to blame others for their problems (for example, rarely have I heard Mexican politicians admit that their own government's corruption and policies are the major causes for their country's social and economic troubles; instead, they more often prefer to blame their neighbor to the north). Beattie convincingly argues that the fault of a nation's poverty most likely lies largely within that nation itself. This position leads to the positive view that such erroneous policies can be corrected (with the caveat, covered in chapter 9, that it can become very difficult for a nation to fix a policy error once it has become culturally entrenched.)

False Economy is full of interesting, detailed economic and political examples. It is a more difficult read than Robert Frank's The Economic Naturalist but is well written and well worth the effort. False Economy is written for lay people and I recommend it to anyone who wants to understand why is it has been (and continues to be) difficult for many nations to achieve economic prosperity.

There is so much talent wasted in this book. Beattie has done the hard work which is a lifetime of thinking and learning but unfortunately what is missing is good quality writing and well argued points. As I was reading this book, there was much that interested me but time and time again I found that Beattie failed to finish a point or argument that I thought he was leading to. The book is a culmination of interesting tidbits but no logical arguments. The author divides his book into ten chapters. Each chapter attempts to address an interesting point. For example:

Chapter 4: Natural Resources: Why are Oil and Diamonds More Trouble Than They Are Worth
Chapter 5: Why Don't Islamic Countries Get Rich?

These questions as well as the others that the author puts to the readers are certainly very interesting. But if you expect the author to make logical arguments with interesting facts to back himself which lead to the answers then you will be disappointed. Instead you will find much unrelated information crammed into these chapters with only minor inference to the central question. The text does not read smoothly and is difficult to get through - not because of the difficulty of the material but more because of poor writing and presentation. There is a lot of potential here but the presentation needs a lot more work. If you are still curious about this book I recommend briefly reading one of the chapters that sound interesting to you and if you like it then go ahead and read the whole book.