Very entertaining and informative book especially the last three chapters regarding economic growth, scarcity power, competition, the theory of comparative advantage, and globalization. To introduce you to these concepts the author uses Cameroon (in chapter eight: Why Poor Countries Are Poor), China (in chapter ten: How China Grew Rich) and the trade war between the US and China (in chapter nine: Beer, Fries and Globalization) as case studies.
If you are from a poor country like me then the chapter eight is a must read, as he discusses the reasons for our poor countries being poor. He highlights a theory of government banditry and the role of corruption and weak institutions in keeping regimes firmly in power. In poor countries corruption and week institutions exist either a president is not confident of his tenure or because he/she needs to allow others to steal in order to keep their support. He eventually proposes two simple solutions:
- Reforms
- Seeking help from world economy (fostering globalization)
Then in chapter nine he looks into the globalization and finds how it can make poor countries rich. Here he introduces the theory of comparative advantage and common sense. He then goes ahead and discuss two trends that people argue when they talk about globalization:
- More trade of goods and services
- More direct investment by companies from rich countries
Being from poor country I have seen some reforms and increase of trade and foreign investment in poor countries in recent years but still we are not catching up. Why? Because according to the author we still have to put many more reforms in place and also because at global scale very few trade and foreign investment are happening between rich and poor countries.
So what are those different reforms to be put in place by poor countries? The final chapter, chapter ten, is even more entertaining and very informative. It summarizes the basic lessons of economics covered in this book. It presents how China was striving to improve the commercial framework of property rights and contract law. He then concludes that for any poor country to catch up it has to fight scarcity power and corruption, correct externalities, try to maximize information, get the incentives right, engage with other countries, and most of all, it has to embrace markets.
This book comes very handy for a layman especially during these days of economic downturn.
