Living Economics

In 1997, the richest 20 percent of the world's population enjoyed 74 times the income of the poorest 20 percent, compared to 30 times in 1960. The countries left behind tend to be located in the tropical regions or, because of their location, face large transportation costs in accessing world markets - or both. That geography should play a more crucial role than economics, in determining the underdevelopment of so many countries of the world, may seem a little surprising to economists whose economic development models are often abstracted from geography.

Consider the two main engines of growth that economists frequently refer to: Access to markets and technological progress. True, easy access to markets helps specialisation through both the export of goods and the import of technology. But countries that are landlocked and far away from the coast must overcome land transportation costs that are seven times higher than ocean transportation over the same distance. This helps explain why large parts of western China are underdeveloped. Being landlocked to the west, these regions are literally blocked out from the rest of the world. On the other hand, as USA has oceans on both sides, only very few regions in central US are really far away from the sea.

Landlocked countries also face the additional challenge of coordinating infrastructure expenditures with neighbouring countries. For example, if a country wants to reach the sea through a river, it has to bear the additional costs involved in negotiations with the neighbouring country. Finally, landlocked regions are also affected by erratic climatic conditions - facing extremes of temperature and scanty rainfall - a factor that severely impedes agricultural production.

Further, landlocked countries that are in the tropic zone suffer from additional disadvantages. R&D geared toward rich, temperate-zone agriculture could not be implemented in tropical areas. Further, these countries are severely plagued by diseases, especially malaria. It has been estimated that per capita economic growth in countries with severe malaria is more than a full percentage point lower than in nations where this illness is not prevalent. That may be why among the tropical countries, only a handful that are ideally suited for maritime trade such as Brunei, Hong Kong, and Singapore are among the 30 richest economies of the world.

Thus, if a region is poor because its geography undermines agricultural productivity, impedes market access, and facilitates endemic disease, then good domestic policies will hardly suffice to foster growth. Expanded nutrition programs or better education alone will not help eradicate poverty. At best, better-trained students will only migrate to more prosperous regions. It may be more important to devote time and resources toward development of transportation infrastructure (which lower the costs of trading), new technology for agriculture and public health, and economic integration projects. Unless borders can be made less problematic for economic integration, they may condemn geographically distant countries to an independent oblivion.