Now alan beattie provides information on world economies. Wax welcome to booktvs after words. Alan beattie, journalist and economist and historian as well. His ran a fascinating book, sort of covering everything to the current times. In the Economic Trends that have prevailed and taken hold. I think he finds quite a few things that are common with today and ancient Egypt Independent agent from. It is a fascinating book. The title of the book, false economy a surprising economic history of the world. That is the part that puzzles me the most. I thought i would ask you why did you write the book and what is the meaning of the title . The meeting of the title is pretty much because i think so much goes into the economy. And a lot of things are going on about human history. The most prominent one being that things that will happen and its inevitable where we are and is nowhere to go about it. Some countries are rich in summer for fear ais the way things are. Some are destined to be rich and others destined to be poor. I call that a false economy of thought. I think it is a problem we are trying to explain where things are at the moment. To say lets look back in history and explain why things are and that there was nothing anyone could have done about it. So is trying to challenge the idea that economic history is destiny or fate and we cannot control the past and we cannot control the future. You do an excellent job with that. I think making very clear what is kind of baked in the cake. We are given when we start out but also what choices are made and those who make good choices and those who make bad choices. His first chapter i think is one of particular interest to americans. And asked the question that i think probably has occurred to a lot of people in this country. Why did we turn out so different from south america . And you take the example of argentina. Essentially, the two consonants were discovered roughly the same time and they had the same blank sheet or blank page to be written on by the europeans who came. The United States has fertile land and wonderful resources. But so did argentina and brazil and so on. See you discuss why it is argentina ended up being part of a poor developing world and the us became the biggest and richest economy and earth. Can you go through that and how all of that happened . Starting with the very beginning . Sure. In some ways it is even more dramatic than that. It is not that argentina was always poor. They became rich between the wars. They are one of the 10 richest economies on earth. And then it fell. As the old saying goes, just about the only economy that is ever managed in the third world to the first and then back again. The question is why did it do that . From the beginning, the way in which argentina was developed and sold its frontier was different from the us. Both of them were similar with fertile grasslands. But the us did this in a kind of entrepreneurial way. Small amounts of land were given to farmers who wanted to make a go of it and increase productivity. Argentina, possibly because of the legacy of the spanish empire, essentially recreated european aristocracy. In the new world. They parceled out huge pieces of land very arbitrarily, often they didnt necessarily want to farming. There were not that interested in forming or doing anything with it or they really just put barbed wire intended over. So that was kind of one of the early missteps. And then from then on argentina began to be run by a small oligarchy. They were not very interested and industrializing. They were not interested in saving their money and investing in industry. While the us had this go ahead entrepreneurial save their money. And they had technology and knowhow as well. But they were very interested in whatever the newest thing was. And industrializing. And argentina really wasnt. That was the initial misstep i think that put argentina on a different path to the us. Then, for a while that was masked. Argentina was just doing so well pumping out food exports, wheat and beef and so forth. But all it really was is a glorified export. It wasnt really kind of a standalone economy on its own. The brits poured money and expertise into argentina. But all they wanted to do is get the weekend the beef. When the Great Depression came, and affected argentina enormously because of the cultural frame. It was one of the biggest casualties of the Great Depression. In them where the us kind of renew itself, democracy was tested but survived and the federal government changed some of the things it said and so forth. Argentina unfortunately, slid into dictatorship and also into isolation. You know the idea that argentina can oil with the Great Depression was entirely the wrong one. We relied on the rest of the world and they let us down. We will not do that anymore. We assigned to cut ourselves off and be isolationist and selfsufficient. And that really was not the best recipe for become a rich country. That is the moment in which some of the mistakes they made became very obvious. And argentina began to slide back to the third world. That is very interesting. I dont think people realize argentina was one of the top 10 richest countries in the world like one century ago. And lost its place because of some bad decisions made during, i guess primarily during the Great Depression. It was the defining event where the United States certainly had trouble but ultimately over a troubled period, made the right decisions. As far as adjustments and its economy, adjustments in the government and regulation of the economy. Whereas argentina went to an extreme and was not able to pick itself up and succeed after that in the way it had started out. It is interesting as you say also that the british played i think, and equally Important Role in both countries development. Providing financing, providing capital and expertise. But it was the americans that such that and sort of ran with it and master it themselves and they can industrialize all the argentinians were in essence resting and staying agricultural state primarily. So that is a fascinating chapter and i guess, it helps to really define as you lay it out, what you are given and what you start with and what you can make of it as a country and as an economy. I thought also your discussion of the egyptians and how they were at one time the breadbasket of the world. I think that is eyeopening. The breadbasket of the ancient world of course, the romans depended on them for bread. But then of course today they are unable to feed 80 Million People because the population has grown so much. Can you explain all of that and how that came to be and the significance of that for modern economy . This is a question of trade. During the ancient times because the effective trading ranked fourth things like grain which were bulky and low value and so forth was the mediterranean. So within the mediterranean during roman times. Egypt has more water than anyone else because that denial. And they had worked out how to irrigate and how to deal with floods and so forth. And turn themselves into the well ordered and Stable Society and they could spare all the people to build the. Build the pyramids. At that point he made absolute sense and they were going grain more than anyone else within the mediterranean. But then technology changed and as we now have shipping containers and huge oceangoing vessels, the effective range of trade in grain is the entire world. So they might have more work in the mediterranean but certainly not in the world. In countries like ukraine, canada, us and australia, argentina actually which have a lot of water that falls from the sky in the form of rain, not from the nile. It is a comparative advantage. Whats going on here is really water. When egypt looks like its doing is trading grain. Really what theyre doing is trading water. Because if they really wanted to, they can just import hundreds and hundreds of 40 foot containers of freshwater and they can grow grain in the desert themselves if they wanted to. But that is not very efficient way. For more efficient ways they instead of importing the waterless important incident made and are born with the water. So implicitly they are importing water. Its a lovely idea and an academic came up with this. It is virtual water. It is not just the free market that does it. You do not a treaty or international bureaucrat, no government, you just need the market. We need to do is price water properly. In countries where it is scarce it should have a high price and where it is low they should have a low price. That is when egypt was the breadbasket of the ancient world and is now the Worlds Largest importer of grain. The question is why does egypt import half of their food . And answer i came back with, why do they still exist they use some of the very scarce water that comes down the nile . And to grow some of their own grain what would be more efficient if these if other things in the continued to import grain. So it is the advantage in countries that have a lot of a particular resource, whether it is water or land or people or should, specialize in that indentured countries that have more resources and something else. Is fascinating although the way you highlight how you can go from being a country that has water and the land and the resources, to being the one that really doesnt and in the long history of egypt they have had a complete reversal. And i am sure other nations are going through the same kind of transitions. Water interesting issue advantage while on because it seems that that is getting to be and will be even more important issue with time as it goes on. With the population grows in much of the World Population seems to be in these very dry areas. How do you see that working out . Will they be able to import their water through food and other things and succeed . Or will we see any kind of a crisis developing . If the World Trading system remains open then they should be able to import it. This talk about water and the clichcs that the were served about oil but the next one will be about water. People have been saying this for decades. And there is a conflict over water between jordan and israel and syria in the 1950s. And yet, that action does not has not happen in the middle east. One of the things, countries have increasingly left this logic play out. Have increasingly imported their water embedded in food. These calculations that his academics have done say that a lot of the countries in the middle east, certainly jordan, which is a small dry country, ceased to be able to become selfsufficient in food decades ago. And they had to grow old before they just cannot get the water to do it. And yet, theyve not particularly been because they have not been able to import that food. One of the difficult things about this is that this relies on their always being something to import into relies on a global market. One of the disturbing things that we saw, with the food crisis when the oppressive respect. Is that they certainly look like egypt itself, the price of rice spiked 30 percent there one day. If youre going to take the risk of saying that we will import our food, you need the food to always be there to import. And that is one of the reasons i think it is so important of International Organizations and organizations with trade organizations. Because they kind of married this import and export. To those country which might have been inclined to say we must grow our own food no matter what. Anything organization like wto can say there will always be put in the market for you to buy, that gives them confidence and are therefore able to let them use the water for something else. One of the really important things i think we saw during the food crisis, countries, at the same time they were desperately trying to import as much food as possible and cutting the trade barriers against food. So in the short term, at the same time in the longerterm bsa we must not rely on the world market. See if countries like the philippines which is a very crowded country. It is not a particularly good place grain and food. Ive seen rice farms and it is a very inefficient and expensive way to grow rice. Nonetheless, that is with selfsufficiency and they also untrusting of the world market that they say, we would rather take the inefficiency. We would rather pay a lot more for us as well as we can guarantee it. And that was within the unfortunate outcomes. I was going to ask you how did you how would you evaluate that . It seems like did the wto and it is International Organizations, i can see the World Food Program that played an Important Role in ameliorating that crisis for some of the countries that were hit the hardest. The rise to the occasion . Or was there some development that would look badly for the future . One of the things i get the impression that the crisis ended mostly because of the class and Commodity Prices that occurred when the credit crisis sets in and the rest of the world fell into a recession. The middle of last year. Rather than as a result of our concerted effort for the wto or whatever to prevent the crisis from worsening by government action. But what was your evaluation . Do we make any progress here where there are some warning signs that we may have another food problem or a food crisis to deal with in the future when the economy starts picking up again . I agree entirely with you. The wellspring program and other humanitarian agencies are attempting to do shortterm relief. They do their best. But it is not designed for a longterm system. One of the things i found really remarkable having covered talks are a number of years now. During crisis countries like the philippines, at the same time that they were cutting their own immediate barriers to food trade there arguing even more than they should be allowed to raise them again in the future. And if the World Economy i think theres a chance you will see another crisis three or four years on the line. One of the kind of wiser things in the book is that before we, every former easier i would not write books like this. Government reform is not just because they have not read my book yet. Its because it is enormously difficult. Youre often fighting against special interest and your fight against ideology and so forth. There are certain times in which the form is much easier than others. And to hear in times of crisis. And i think id only heard maybe one thinking about moving year ago. And now at about every other day. When crisis hits, a lot of things become possible that were impossible before. And just going back into history, one of the greatest changes, with trade include in the middle of the 19th century, it was the epic system of agricultural protection. And that was a really pivotal shift when britain said, were not going to be an agricultural country and we will be a manufacturing country. We are not going to hold food prices to benefit landowners. We will have chiefly because it will be lower cost for factory workers. And reform has been coming for a long time. One of the ways in which reform was the food crisis. This is exactly the same food crisis that caused them an island there people that survived that and emigrated but it was that kind of imperative and that disaster that caused the government say, you know something place we cannot hold the price of food up anymore. And it was exploiting that. And one of the biggest changes in trade policy and the world is ever seen. That was unfortunately last couple of years with the food crisis. Nazis. In fact it was quite notable that there was no progress made in the world trade talk. On the very issue food and agriculture. Which is been a Sticking Point for years now. Even in the middle of this big crisis when it was c it was obvious then we needed a more rational system of trade and food. So i can see why think that not much has been solved. In fact he did see some, on the supplier side also you saw some rather bad things happen. Like argentina starting to export or im sorry even though this is a major provider of staple tools the rest world and yet, it was during this crisis aand started passing them food exports or taxing their food exports. Absolutely. In the middle of this, in the middle of this crisis, argentina, one of the greatest beef growing nations in the world, people in browness aris said there was no beef in the market. They filled up the meat counters. Because a employers own these taxes on exports and the farmers went on strike to say that we are not going to have our income stolen. So the time in argentina should been benefiting enormously, it was one of the good things that they are good at doing. And instead production came to a halt in the country. Certainly have documented very well how are able to sort of blow the opportunities not given us by doing things like that. So really is a very interesting history of trade around the world about an pamphlet that religion may or may not have. I think a lot of people do tend to think that religion plays an Important Role somehow in our economy or how we end up coming up this idea in the spirit of capitalism that somehow our puritanical spirit that we have in the United States is something that helps us become a powerful industrialized nation. The thing you really kind of got that done quite a bit and acknowledge a role that religion plays andb; play generally in the economy. Generally it is s more also transmitted pay of the power elites and how they use religion to slip by their control. And so on. Going back to argentina for simplicity, i mean i think that a lot of people have thought that the Catholic Church, the influence of the Catholic Church was an important factor that held south america back with ethics which is a more individualized work ethic and rewards effort and so on. In the north american sphere but he did upon the particularly to be the case, did you . Because i dont think so, no. When you look at this indeed, even as they that had a whole bunch of restrictions on enterprise which would make it into the Harvard Business school. They often invade against the sunset commodities werent as much a civil paperwork. And they had profiteering. And in many cases, they wanted to live actually nonmateria