BOOK REVIEW: False Economy – A Surprising Economic History of the WorldBy Alan Beattie Penguin Viking 298pp; £20
THIS IS among the first of what promises to be many such books, not to mention movies and novels, plays and TV documentaries that will attempt to explain how in the space of around 18 months, starting in mid-2007, the world economy imploded. Alan Beattie, a former Bank of England economist, and currently an editor with the Financial Times, sets out to describe "how the world really works". This formidable task results in a lively and entertaining book, even if its conclusions are less than dramatic.
Beattie compares the histories and fortunes of different countries as a way of explaining how some succeeded while others failed. The comparison of Argentina with America is an absorbing one.
“A short century ago the US and Argentina were rivals and started off in similar places. Both were riding the first wave of globalisation at the turn of the 20th century. Both were young, dynamic nations with fertile farmlands and confident exporters. Both brought the beef of the New World to the tables of their European colonial forbears. Before the Great Depression, Argentina was among the 10 richest economies in the world.” However, “ hundred years later . . . ne had gone on to be among the most successful economies in history. The other was a broken husk.”
A number of reasons are given for this spectacular divergence in fortunes between the countries of the prairie and the pampas – and no, the author doesn’t accept that it was because the US was settled by hard-working Prods, whereas Argentina was Catholic. It had more to do with attitudes and individual choices at crucial times in history. From the outset, America encouraged individuals, “squatters”, to acquire farmland, whereas Argentina backed the landlord system it inherited from Spain. America’s newly arrived farmers “came largely from Britain, Germany and the Netherlands” and “brought with them the tradition of skilled farmers on small homesteads. Argentina, by contrast, had a history of a few rich landowners on great estates left by the Spanish . . . ”
Argentina’s elite aspired to European gentrification, sent their children to school in Eton and legislated for economic self-sufficiency – protectionism, by another name. The US had little time for self-indulgence and invested its agricultural riches in industry. “If the South had won the Civil War,” Beattie says, “America might have looked a lot more like Argentina.”
Beattie tries to liken Argentina to Ireland “before its economic boom”, saying that both countries had the “credit rating of the Netherlands with the economy of Jamaica”. This is an unworthy dig at Ireland, given that we have never defaulted on our sovereign debt whereas in Argentina it has long been a national pastime.
Beattie describes Argentina as suffering from “a sense of entitlement hugely out of line with its historic achievements”, which might be the basis for a more apt comparison.
In a series of engaging chapters with such sub headings as “Why are oil and diamonds more trouble than they are worth?”, “Why doesn’t Africa grow cocaine?” and “Why are pandas so useless?”, Beattie explores the role of corruption in world trade, how trade routes and supply chains work, the part religion has played in economics over the centuries, and still plays today, and how the discovery of oil can be more a curse than a blessing.
His conclusions, however, are less than startling. If you hold Irish bank shares, then you won’t need to be told that economic and financial disasters are caused in the main by self-aggrandising, greedy, weak and deluded people.
Peter Cunningham’s most recent novel, The Sea and the Silenceis published by New Island