On the decline of Peruvian blow
‘Twas asparagus that killed the beast:
Peru grows most of the world’s asparagus today because of a 1991 trade deal that discouraged its farmers from growing coca for cocaine. Peru’s asparagus industry enjoyed lower global tariffs, plus direct financial assistance from the U.S. government.
That’s from a review of Alan Beattie’s False Economy: A Surprising Economic History of the World.
More:
When trade is free, says Beattie, mutually beneficial exchanges can “take resources from places of plenty to places of scarcity.” His best example concerns Egypt and grain. Today, the country imports about half of its wheat, while in ancient times it served as the breadbasket of Greek and Roman civilizations. Back then, the infrastructure of global trade of course did not exist. But now, because the market for grain is not geographically limited, it makes no sense for relatively arid Egypt to grow so much of a crop that requires substantial amounts of water. So, writes Beattie, what Egypt is really doing is “importing millions of tons of the water” used to grow wheat.
This “virtual water” trade epitomizes the types of innovations that have created today’s global economy: it “happens on its own, without intelligent, or at least manifest, design.” But again, interested parties can, with the help of their governments, “block and distort that process.” As such, not nearly as much “water” (in the form of water-intensive crops), along with labor and land, is as efficiently allocated in the world economy as it could be.
Everyone familiar with Milton Friedman’s example of the pencil knows how this works. Read the review and/or google “Milton Friedman pencil.”