Chapter 2

Did Some Societies Win the Geography Lottery?

Did some parts of the world become rich because of their geography? Climate, soil, access to coasts, and mountains can all contribute to productivity and trade. But what role did they play in triggering modern economic growth?

Perhaps the most well-known insights are those of Jared Diamond in his classic Guns, Germs, and Steel. Diamond argues that factors like the relative length of continental axes (see the figure above), the disease environment, proximity to the equator, and access to coasts and rivers had a tremendous influence on long-run economic prosperity. But is geography fate? Are locations with “good” characteristics destined to be more developed?

What about the Industrial Revolution? Britain’s position as a large island off the coast of Europe, endowed with a moderate climate, numerous rivers, and a long coastline, helped shape the formation of its political institutions. Abundant coal resources played an important role in its early industrialization. It is worth asking: could this be why Britain industrialized first?

One important example of a geographic factor that we cover in the book is disease burden. Countries in the “malaria belt” in sub-Saharan Africa continue to be underdeveloped (see the figure below). Malaria has probably killed more human beings over the course of human history than any other disease. But the burden of malaria is also economic. All else being equal, countries where a high proportion of the population are infected with malaria had growth rates that were around 1.3% lower than other countries (Sachs and Malaney, 2002). They also have higher infant mortality and lower investment in physical and human capital.

Africa’s “malaria belt”

This and many other examples we highlight in this chapter point to the attractions and limitations of arguments based on geography. On the one hand, geography-based arguments are simple and geography has the advantage of being largely exogenous. This means that it is not affected by other variables of interest. As such, we don’t have to worry about geography being the result of other factors that are also important for economic growth, such as culture or institutions. Hence, geographic explanations can potentially provide a straightforward explanation of economic growth and poverty.

The big problem with geographic explanations, however, is that geography is largely unchanging. This can be a problem for explanations linking geography to long-run economic growth. Many of the differences in incomes that we observe across the world today have changed dramatically over time. For instance, explanations relying solely on geography cannot easily explain why the Middle East or China was much more developed in 1000 than Western Europe yet by 1800 Western Europe was far ahead.

This hardly means that geography has played no role in the economic fortunes of many parts of the world. Diamond's hypothesis laid out in Guns, Germs, and Steel provides many reasons why geography may have mattered. For one, the relative height and length of the Eurasian, African, and American continents may have played a role in their economic capabilities. Vertically aligned continents contain numerous micro-climates, which limit the spread of crops, domesticated animals, and people. After all, crops suitable for rain forests are unlikely to grow in the savannah or mountains. So, the domesticated plants and animals of Mesoamerica did not spread to Peru or the Amazon basin.

Perhaps more importantly, technology and knowledge spread more easily horizontally than vertically, since climatic characteristics vary less. These arguments received empirical support from Pavlik and Young (2019), who find that technologies moved more easily between east–west neighbors than between north–south neighbors (see the figure below).

Technology adoption levels in 1500 (% of frontier technologies adopted)

The chapter continues by overviewing various other geographical features that contribute to economic growth (or lack thereof). These include mountains, rugged terrain, coasts, and climate. These features can have an important influence on economic outcomes by affecting trade and trade routes, agricultural productivity, the total amount of cultivatable land, and propensity to engage in warfare.

Of course, the "curse of bad geography" can in part be overcome via infrastructure. The Roman Empire invested heavily in a road system, which played a critical role in Roman economic growth. Transport infrastructure also mattered for Chinese economic development. Economic growth in the Middle Kingdom was greatly aided by the creation of the Grand Canal by the Sui (581–618 CE) and Tang (618–907 CE) dynasties and improved by their successors. Likewise, there were massive investments in infrastructure in industrializing Britain, first with expansive road and canal networks and ultimately with the introduction of the railways.

But why do some states invest in infrastructure and others do not? When are states even capable of undertaking such projects in the first place? These questions suggest that overcoming "bad" geography may require institutions capable of diverting resources to infrastructure.

Later in the book, we will discuss these as key mechanisms through which geography affects economic outcomes. While explanations relying solely on geography have a hard time explaining reversals of fortunes, explanations that consider the interactions between geographic and institutional, cultural, and demographic outcomes can take us much further in explaining how the world became rich.