False Economy summary

You may have noticed that major cities can serve as a good representation of a nation’s economic success or failure. That’s because the tricky business of development and urbanization can play a big role in a country’s economic prosperity.

For instance, nations with unstable governments will often have a bloated capital cities that reflect their problems.

Have you ever been grocery shopping in the United States and wondered why the asparagus comes all the way from Peru? It actually goes back to the 1980s when the two countries made a trade agreement. As a result, the United States gets tens of millions of dollars worth of asparagus every year and Peruvian farmers have an incentive that keeps them from making cocaine.

Decisions like these can play a big part in determining a country’s economic stability.

You probably wouldn’t think that finding oil or a diamond mine in your backyard would be a bad thing. But for many countries, this kind of discovery has brought more economic chaos than prosperity.

Oil can bring economic stability, but only if you know how to manage it properly.

How big a role does religion play in determining a nation’s economic success? It’s a question that has been written about since 1905, when German sociologist Max Weber suggested that Protestants were more successful in business than Catholics.

But history has gone on to prove Weber wrong.

Political corruption can’t benefit an economy, can it? Well, just because a nation’s leader is honest, it doesn’t mean he’ll make the right choices that will lead to a prosperous economy.

Take Indonesia, which thrived under a corrupt president, and Tanzania, which crumbled under an honest one.

In the animal kingdom, natural evolution can lead to a dead end like the giant panda: a species that can barely survive or reproduce and has no hopes of changing. Fortunately, in world economics, it’s never too late to change.

Let’s take a look at why, of two countries with similar backgrounds, one managed to change and the other didn’t.