Last weekend I went to the Robinson Sale at Expo. While shopping I picked up this book:
"A thorough examination of economies from the age of empire to the age of the IMF. . . Beattie writes, ‘History is not determined by fate. . . It is determined by people.’ He insists that it is not destiny but the right and wrong decisions by political leaders that cause societies to rise and fall. Beattie's analysis dazzles. . ."
— Washington Post Book World
His first chapter explored and compared how 2 countries, Argentina and USA, both with almost the same level of economic development in 1900 ended up with diametrically different outcomes.- one became an economic super-power while the other ended up in bankruptcy in 2006[Link]. Argentina in 1800 and 1900 was one of the wealthiest nation in the world[Link]. In 1900, Boenos Aires was on par with New York. How did the 2 countries end up with such different fates?
Beattie explained that while the both countries had similar starts in terms development and natural resources, the systems they had in place were different. Argentina was controlled and ruled by a small number of elites modelling themselves after autocratic Spanish rule while USA was a full fledged democracy. Land ownership in Argentina was concentrated in the hands of wealthy land owners while in the USA, there were in the hands of smaller farmers i.e. more equally distributed. Because the farmers in US owned smaller plots, they had to be more productive to achieve better yields from their land employing farming techniques from Dutch farmers. In Argentina, the powerful land owners imported cheap labor from poorer parts of Europe to work on their farms - the imported labor would work on the farms for certain parts of the year and return home. The availability of cheap labor meant that they were able to achieve high profits when productivity was low. The availability of cheap labor was a disincentive for the rich to take risk and invest in new industries (industrialization). The model resulted in extremely unequal wealth distribution and the wealthy class started to wield enormous influence over political leadership eventually leading to social upheavals, instability and corruption.
Argentina was a wealthy first world country that fell back to become a third world country due to missteps. This a cautionary tale for leaders today that the future of a country is destiny not fate - where your destiny lies is a result of choices you make today.
Here is Alan Beattie discussing his interesting book: