False Economy - Alan Beattie [155]
Often, taking the right path is more than one country can do on its own. When a country like Egypt clings to a substantial degree of self-sufficiency in food, it may not be economically efficient. But to rely on international markets involves a great degree of trust that those markets will always be able to supply what you need.
The food crisis that began in 2007 shows that that trust may sometimes be misplaced. Rice prices, for example, shot up by 30 percent in a single day after Egypt, appropriately enough, announced it would ban rice exports. For countries like Egypt to embrace freer trade and carry on importing water embedded in food means that someone else has to carry on exporting it. And the traditional producers could not be relied upon. Argentina was not the only agro-exporter to put blocks on sales abroad. Grain producers such as Ukraine and rice growers such as Vietnam also did so. Unlike ancient Rome, modern-day Egypt doesn't enjoy the option of invading Ukraine and extracting grain from it by force. Politicians might want to make the right decision for the long term, but they also need to maintain their short-term popularity. And subjecting your country to a food crisis in the interests of future efficiency is not a great platform on which to run for reelection.
This is why we have international institutions like the WTO: to enable countries to make the right decisions collectively when it is hard for them to do so individually. The ancient Romans could make decisions about food supply only within the seas and territory that they controlled and inside the effective range of bulk food trade. Today that range has increased to encompass the entire globe. Yet the institutions that are intended to run and regulate the world economy have not kept pace with the growth of trade and technology. Within its jurisdiction the WTO has far less firepower than the Hanseatic League, let alone the Roman empire.
Even when credible national or international institutions do exist, they aren't necessarily used properly. The financial crisis that started as a credit crunch in 2007 and exploded dramatically in 2008 was not caused primarily by a failure of global regulation; it was caused by a global failure of regulation. That is, national regulators and national policymakers had lots of tools to stop fantasy financial assets from being created, given ludicrously unrealistic prices, and sold on. In a whole string of countries, they chose not to use them. The coming years will see which countries can learn the lessons and which cannot.
A few years before the Spanish monarchy's effort to arrest the decline of its empire ended in nothing more than the abolition of the ruff collar, William Shakespeare wrote these lines:
Our remedies oft in ourselves do lie,
Which we ascribe to heaven: the fated sky
Gives us free scope, only doth backward pull
Our slow designs when we ourselves are dull.
The difficulty of getting on the right track and then staying there does not diminish as the world economy gets larger, more integrated, and more complex. If anything, the opposite is true. Nations that have risen, like the United States, can make mistakes that will cause them to fall back again. Argentina could have been like the United States; and if it does not address the flaws that have brought its financial system into crisis, the United States could end up like Argentina. Globalization increases the potential rewards