What Makes Countries Rich or Poor?

Jared Diamond, best known for the Pulitzer Prize-winning book Guns, Germs, and Steel, recently reviewed Why Nations Fail by Daron Acemoglu and James Robinson, a book I’m deeply interested in that explores the question in the title: why are some countries prosperous and developed, while others seem chronically poor and unstable?

As you’d imagine, the answer is complex and debatable, and Diamond offers his own interesting two cents while reviewing the book’s central thesis that effective economic and political institutions play the most central role in determining a nation’s fate. It’s quite a long read, but I definitely recommend it. While there are many interesting points made — for example, that soil quality or climate are major factors in determining national wealth — here’s an excerpt that stood out to me:

But it’s obvious that good institutions, and the wealth and power that they spawned, did not crop up randomly. For instance, all Western European countries ended up richer and with better institutions than any tropical African country. Big underlying differences led to this divergence of outcomes. Europe has had a long history (of up to nine thousand years) of agriculture based on the world’s most productive crops and domestic animals, both of which were domesticated in and introduced to Europe from the Fertile Crescent, the crescent-shaped region running from the Persian Gulf through southeastern Turkey to Upper Egypt. Agriculture in tropical Africa is only between 1,800 and 5,000 years old and based on less productive domesticated crops and imported animals.

As a result, Europe has had up to four thousand years’ experience of government, complex institutions, and growing national identities, compared to a few centuries or less for all of sub-Saharan Africa. Europe has glaciated fertile soils, reliable summer rainfall, and few tropical diseases; tropical Africa has un-glaciated and extensively infertile soils, less reliable rainfall, and many tropical diseases. Within Europe, Britain had the further advantages of being an island rarely at risk from foreign armies, and of fronting on the Atlantic Ocean, which became open after 1492 to overseas trade.

It should be no surprise that countries with those advantages ended up rich and with good institutions, while countries with those disadvantages didn’t. The chain of causation leading slowly from productive agriculture to government, state formation, complex institutions, and wealth involved agriculturally driven population explosions and accumulations of food surpluses, leading in turn to the need for centralized decision-making in societies much too populous for decision-making by face-to-face discussions involving all citizens, and the possibility of using the food surpluses to support kings and their bureaucrats. This process unfolded independently, beginning around 3400 BC, in many different parts of the ancient world with productive agriculture, including the Fertile Crescent, Egypt, China, the Indus Valley, Crete, the Valley of Mexico, the Andes, and Polynesian Hawaii.

Pretty interesting stuff. As always, feel free to weigh in. 

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