Why economies fail
Alan Beattie’s new book provides a whirlwind tour across the landscape of economic history to figure out why some countries are poor and others rich. “Countries do not get rich by accident. They make choices that determine the path their economies take,” he says. Beattie, a world trade editor at the Financial Times, begins his dizzy voyage by comparing the US with Argentina—two countries that were relatively at par with each other at the turn of the 20th century.
Both had massive, fertile tracts of land, were opening up to immigration and fed much of Europe with their beef. However, Argentina pampered its elite landowners while severely restricting land ownership. Juan Peron, in later years, closed off the economy, leading eventually to serial bankruptcy. The US, meanwhile, opened up land ownership to practically anyone (who was white), was steered by a visionary president (F.D.R.) through ‘The Great Depression’ and became an economic giant.
Beattie’s explorations are richly detailed— sometimes muddled—but ultimately eye-opening. West Africa, says Beattie, doesn’t produce cocaine despite having a perfect climate and soil because it has appalling infrastructure and logistics.
Botswana is well-off because its leader Khama made sure that funds accumulated through diamond mining was spent judiciously and equitably. Others, like Sierra Leone, didn’t and atrophied. Linking growth to religion is specious, adds Beattie. He rubbishes the common view that Islam breeds stagnating countries, observing that Malaysia has been far more successful than either ‘Christian Philippines or Buddhist Thailand’.
But are nations truly in control of their destinies? Colonialism ravaged Africa, killing large numbers—King Leopold alone was responsible for 18 million deaths in the Congo—enslaving millions, looting resources, ripping families apart and pitting tribe against tribe.
At the end of empire in Africa in the 1960s, countries were severely underdeveloped and had large illiterate populations. Beattie gives a one-page nod to these issues, but never explores the immense, long-lasting psycho-social—never mind physical—destruction and trauma that colonial rule caused, in a book that touches upon practically everything else.
Beattie’s treatment of India is more robust. He correctly excoriates the caste system for India’s low growth. After all, entrepreneurship, innovation and progress cannot thrive in a deeply disenfranchised society. Yet, he errs by faulting men like Nyerere and Nehru for the widespread corruption in Tanzania and low-growth socialism in India.
Fact is, Nyerere was too busy ensuring that Tanzania didn’t suffer the devastations of postcolonial states—namely, acute ethnic divisions. Remember Rwanda? Inefficiency and corruption— the economist in Beattie will agree—was a small, short-term price to pay for long-term stability. Nehru, too, faced enormous odds, being handed a divisive nation rife with secessionist states, chronic food insecurity, a succession of wars and the need to grow an underdeveloped economy from scratch. Again, low-growth was a short-run trade-off for the project of nation building.
For Beattie to fulfill the promise of his book, he has to accept that countries are often held hostage to circumstances that are well and truly beyond their control, often by men with guns, and by deeply flawed institutions foisted upon them. Undoing all of this—as South Africa is learning— may take more time, or blood, than some of these countries have at their disposal.
BOOKMARKS
Marketing 101
By Don Sexton
John Wiley
Pages: 319
Price: Rs 1,054
With a foreword by Donald Trump, and written by Columbia University professor and 40-year veteran of marketing, Don Sexton, this book offers the nuts and bolts of great marketing, along with exercises and other tools.
Bailout Nation
By Barry Ritholtz
John Wiley
Pages: 332
Price: Rs 1,198
Filled with novel illustrations and approachable language, Barry Ritholtz, a popular economic blogger and money manager, explores how the US went from rugged individualism to surviving on its taxpayers’ largesse to bailout greedy companies.
