Explaining the wealth of nations
Alan Beattie defines the “false economy” of his title as the belief that “our economic future is predestined and that we are helplessly borne along by huge, uncontrollable, impersonal forces.” To counter this concept, he takes the reader through the economic histories of such countries as Egypt, China, India, Russia, England, the United States, Argentina, Indonesia and Tanzania and points out specific policies—none of them inevitable—that either enhanced or retarded the public well being.
Beattie, who holds a master’s degree in economics from Cambridge and is now world trade editor for the Financial Times, argues in False Economy that nations are seldom content to surrender control to pure market forces. Instead, they impose tariffs, give preference to special interest groups, misuse vital natural resources and otherwise distort the basic making-selling-buying continuum. Even oil- and diamond-rich countries may, through the political corruption they engender, find these coveted resources a curse rather than a blessing, Beattie says. “It seems bizarre that discovering something that is greatly prized should impoverish its finder,” he observes. “But national economies, by and large, become rich because they can make and provide goods and services, not because they own a source of basic commodities.”
Political corruption always distorts market dynamics. But Beattie says it isn’t always the hazard to economic health it appears to be. “If corruption is stable and predictable enough,” he notes, “it essentially simply becomes a tax.” However, he continues, “What starts out as a rational, if dishonest, response to an opportunity to make money often becomes hardened into a dominant culture that can endure for centuries.”
Although he insists this book isn’t “a detailed instruction manual on economic policy,” Beattie does hold out several broad principles to nations seeking economic health and stability. Among these: don’t isolate yourself from other nations. Build your economy on what it does best and don’t tamper too much with it. Honor property rights and maintain the rule of law to encourage investment and trade. Don’t let small but well-connected interest groups subvert the larger economic good. Be alert to signs that your economy is going awry and seek ways of righting it.
“The experience of history should lead us to hope and strive to make the world better,” Beattie concludes, “not to despair and resign ourselves to fate.”
Edward Morris reviews from Nashville.