False Economy - Alan Beattie

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the complete review - economics / history

False Economy

by
Alan Beattie

general information | review summaries | our review | links | about the author

Title:	False Economy
Author:	Alan Beattie
Genre:	Non-fiction
Written:	2009
Length:	301 pages
Availability:	False Economy - US
	False Economy - UK
	False Economy - Canada

A Surprising Economic History of the World

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Our Assessment:

B : fairly entertaining

See our review for fuller assessment.

Review Summaries
Source	Rating	Date	Reviewer
Business Week	B+	16/4/2009	Jack Ewing
The Economist	.	23/7/2009	.
Financial Times	.	13/4/2009	William Easterly
The NY Times	.	5/4/2009	Devin Leonard
The Washington Post	.	26/4/2009	Justin Moyer

From the Reviews:

"Beattie avoids writing like an economist, despite a stint at the Bank of England and the book's subject matter. He wants to entertain and provoke (.....) False Economy is full of insightful nuggets, such as Beattie's account of how the profligate ways of the Portuguese in India opened the door for the British. But it's not always clear how these digressions fit into his central argument; sometimes they even punch holes in it." - Jack Ewing, Business Week

"In a shortish book on a vast subject, Mr Beattie’s thematic structure makes sense. In a chronological or regional treatment, short would surely mean superficial. Here, unusual examples can stand out (.....) He does, however, try a little too hard to be "surprising" at times." - The Economist

"Some themes took shape as I read – but they were often contradictory. We should learn the lessons of economic history, says Beattie, yet those lessons are often unclear. (...) Beattie’s supremely entertaining and informative book is a great reminder that the details of success are often impossible to predict or prescribe: no one can work out how to achieve each component." - William Easterly, Financial Times

"It would be fun to talk with Mr. Beattie at a dinner party. He’s witty. He’s well read and well traveled. But in his book, he has a tendency to dart from topic to topic. He jumps from continent to continent and from the dawn of history to the present. (...) A bigger problem with False Economy is that Mr. Beattie talks about choice, but also stresses the role that history plays in economic success or failure." - Devin Leonard, The New York Times

"Beattie's analysis dazzles with particulars (.....) A lover of Adam Smith's invisible hand, Beattie criticizes protectionist mollycoddling of inefficient industries. But despite his generally conservative outlook, his far-reaching history is grounded in a curiously Obama-esque, populist belief that open markets guided by modest, business-friendly policies can guide us through the current economic downturn" - Justin Moyer, The Washington Post

Please note that these ratings solely represent the complete review's biased interpretation and subjective opinion of the actual reviews and do not claim to accurately reflect or represent the views of the reviewers. Similarly the illustrative quotes chosen here are merely those the complete review subjectively believes represent the tenor and judgment of the review as a whole. We acknowledge (and remind and warn you) that they may, in fact, be entirely unrepresentative of the actual reviews by any other measure.

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The complete review's Review:

       False Economy looks at the many factors that have shaped contemporary societies and nations, and what effects these factors have had on their economic success and viability. The book is fairly cleverly presented, in nine chapters (plus one chapter to sum things up), each addressing one of these factors, and usually framed around a specific case and question. So, there's a chapter on 'Trade', asking: 'Why does Egypt import half its staple food ?'; one on 'Religion', asking: 'Why don't Islamic countries get rich ?'; and one on 'Path Dependence', asking: 'Why are pandas so useless ?' (The title-questions do prove a bit simplistic: as Beattie notes, for example, some Islamic countries have performed well -- and as for the pandas, he takes it as a given that they're useless and his real question is why we still bother trying to insure their continued survival.)
       In looking at historical trends, and successes and failures, Beattie provides some useful insight into current conditions and future opportunities. He begins by contrasting Argentina and the United States, noting how in the late nineteenth century they were in very similar positions, and had similar economic opportunities but how the choices Argentina made resulted in such stagnation that what had once been one of the wealthiest nations in the world (as Argentina was early in the twentieth century) was left further and further behind. Many of the mistakes now seem obvious , but here and in many other instances Beattie notes and shows how deeply ingrained these can become, and how hard it is to escape them -- so, for example, also the caste system in India.
       Frequently what works in the short or even medium-term eventually freezes up a system: the Islamic world was long a leading area of traders, but even something like inflexible laws of inheritance (preventing partnerships from outliving their founders, and hence from: "building up expertise and economies of scale over time") eventually severely limited opportunities in an increasingly competitive world. Entrenched interest groups -- such as the ancient Chinese bureaucracy -- prefer the status quo, and Beattie shows that it often took great popular pressure to force any change (and even now small special interest groups such as cotton or sugar producers in heavily industrialised nations are absurdly supported by their governments, with no one benefitting except them (and many -- from consumers to far more competitive foreign competitors -- greatly harmed)).
       As appealing as the free market may seem, Beattie also notes that historically much has conspired against it: rare is the culture that allows much freedom, as the granting (in one form or another) of monopolies is a much more effective means for those in power to exact as much cash as possible. Indeed, even:

the history of trade routes and supply chains was, for centuries, not one of free agents operating in open markets, but of merchants exploiting military power and monopoly.

       Some of the mad policies are staggering -- but, as Beattie repeatedly shows, once in place often difficult to rid oneself of.
       Among the more illuminating chapters is that on corruption, where Beattie asks: 'Why did Indonesia prosper under a crooked ruler and Tanzania stay poor under an honest one ?' -- the simple answer being that Suharto's systematic and organised corruption was predictable enough that most elements of the economy could function in it, and work with it. Nyerere's policies, on the other hand, fostered widespread but individually self-serving corruption: as Beattie puts it: "Nyerere had a principal-agent problem on a nationwide scale." As Beattie also notes, one of the problems African countries have is that their rulers (or, indeed, most people in positions of any power there) are so insecure in their positions that the incentive to loot while they have the opportunity is overwhelming.
       A major difficulty faced especially in Africa but also, for example, in the Philippines, is also that of getting goods to market: between weak infrastructure and lack of information (about prices, supply, and demand) many producers in poor countries are at an enormous disadvantage. As one of the easier-to-remedy problems it seems obvious this should have a high priority.
       Interestingly, Beattie maintains that:

Import tariffs and subsidies can distort trade mightily [...] but these days aren't a big deal for Africa.

       That seems a bit too broad a claim -- but one example he cites suggests that some of the problems might be at a more basic level, as Beattie lists some of those who believe (mistakenly, as it turns out) that the European Union allows the tax-free import of cocoa beans from Ghana, but taxes imports of processed Ghanaian chocolate (i.e. places an additional burden on Ghana if Ghana wants to move up the economic ladder from resource-exporter to manufacturing exporter). Beattie claims that among those he has: "heard or seen propagating this myth" are Tony Blair, the UN in its Human Development Report, and: "astonishingly enough, Alan Kyerematen, then Ghana's trade minister." Obviously, if even the trade minister doesn't know what is and isn't taxed the problems get to be pretty fundamental .....
       False Economy isn't that surprising (as the sub-title suggests), but it is a fairly entertaining overview of many economic issues, and how countries, cultures, and societies got to where they are (and aren't). It dismisses a few canards -- such as the idea that religion is a bar to (or guarantee of) economic success -- and explains many of the more difficult-to-deal-with economic problems countries face (such as how to deal with being a producer of a valuable natural resource -- oil, diamonds, etc.).
       A good, quick overview, that, in Beattie's jaunty style, reads quite well.

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Links:

False Economy:

Riverhead publicity page

Reviews:

Other books of interest under review:

See Index of books dealing with Business and Economics

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About the Author:

Alan Beattie is the Financial Times' world trade editor.

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