Why Nations Succeed or Fail: False Economy Explains Choices that Shape Economics
1. False Economy
A surprising economic history of the
world
By
Alan Beattie
Team Apple
Sneha Nimkar
Sourangshu Sarkar
Mir Zeeshan Ali
2. False Economy
• Author – Alan Beattie
• Was born in Chester in 1971
• Balliol College under Oxford
University - Degree in History
• Master Degree in Economics
– Cambridge
• Economist – Bank of England
• Editor – Financial times since
2004
3. Preface
The aim of this book is to explain -
3. how and why countries and
societies and economics got to
where they are today
4. what made cities the way they are
5. why corruption destroyed some
nations but not others
6. why the economy that fed the
Roman Empire is now the world’s
biggest importer of grain
7. Countries have choices, and those
choices have substantially
determined whether they
succeeded or failed
6. Making Choices: Why did Argentina succeed and the US Stall
• Countries do not get rich
by accident, they make
choices that determine
the path their economics
takes
• US and Argentina: rivals -
young, dynamic, fertile
farmlands and confident
exporters
• Before great depression
of 1930s, Argentina was
among the ten richest
economies in the world
• A hundred years later
there was no choice at all
7. Making Choices: Why did Argentina succeed
and the US Stall
• Colonies of US got independence in
1776 /new nation in 1789
• Argentina independent republic in
1816
• Both faced internal struggle
• US farmland to individuals and
families / imported many farming
practice from northern Europe,
Britain, Germany, and Netherlands
• Argentina delivered it rich
landowners / 1860-70 land owners
attracted towards rural life and
passed their time with literature,
music etc
8. Making Choices: Why did Argentina succeed and the US Stall
• 1880-1914 first golden age of
globalization
• US/Argentina's export increased
• Argentina’s income captured by the
owners of huge lands
• Argentina needed to import more
technology
• Argentine was trying to follow US, but US
invested it’s saving in industrialization
• Argentina denied to invest in
industrialization initially
• Argentine manufacturing was small-scale
– handicraft workshops
9. Cities
• Cities are shaped by choices
made by government and people
• 130-50 BC Rome (capital of Italy)
– Military conquered
– Unemployment
– Bribe & Tax
• Venice and Florence
– Trading warehouse
– Industrial revolution
• Milan – economic powerhouse of
modern Italy
• China - proliferation
• Washington DC
10. Trade: Why does Egypt import half its staple food?
• Egypt – grain export
• Nile river
• Grain importer
11. Natural Resources: Why are oil and diamonds more trouble than
they are worth?
• Oil – UK, Norway
• Giant, high technology drill, offshore
platform
• Small no of employee
12. Dutch Disease
• Exchange rate rose
• Other export down
• Unemployment
Oil Vs Tulip
13. Natural Resources: Why are oil and diamonds more
trouble than they are worth?
• Diamond – West Africa
• Antwerp, Amsterdam, Mumbai
14. Natural Resources: Why are oil and diamonds more
trouble than they are worth?
• Copper – Zambia
• Low price /60 years tax rebate
• Chinese miners
15. Religion: Why does Islamic countries get rich?
• Does success of economy
depends upon religion?
• Islamic countries
• Prohibition on usury
• Restriction to business and
commercialization
• Did not allow new technology
• Conquer to other countries
• Struggle to increase productivity
16. Religion: Why does Islamic countries get rich?
• Arab Empire (ottoman)
• Absorbing new technology
• Exchange of ideas and goods
• Hinduism
17. Trade route & supply chain: Why doesn’t Africa grow cocaine?
• International trade – good
communication, cheap & reliable
transport, certainty about staff and
customer
• Advance in telecommunication &
transport increased trade
• Long distance : less trade
• Rich – Poor countries : less trade
• 1600 AD – East India Company
• Monopoly – Spices / pulse
• England to Bombay – 100 to 120 Days
• Dutch East India company – modern
Trade – Financial - Logistical
• Steam-powered ship
18. Trade route & supply chain: Why doesn’t Africa grow cocaine?
• Why do Africans not grow coca to
make cocaine?
• Like coffee, coca grows in high
altitude – Andes
• Large coffee growing regions –
Uganda, Ethiopia
• struck doing low-paid supply chain
• As per UNO – poor transport and
logistics
• Unstable policies
• Coca – not have a quick return
19. Corruption: Why did Indonesia prosper under
a crooker ruler & Tanzania stay poor?
• Corruption
• Abuse of position for
personal gain
• Indonesia
– Ruled by Suharta
– Bribery & cronyism
– Orthodox economic policy
– Contract to private cronies
• Tanzania
– Julius Nyerere
– Great personal honesty
– Allowed state hold
companies
– Swept small holding farmers
– Appoint bureaucrats