Jared Diamond in his superb book Guns, Germs and Steel outlined a theory of human economic development that regards Western Europe's original pre-eminence in this regard as being contingent on geography combined with a large slice of luck. Great book though it is more recent work casts doubt on the main findings. Increasingly it looks like success in economic terms depends less on geography and more on history.

Quite how history impacts differential economic development as seen in the world today is a booming and fascinating area of research. Teasing out the relevant factors from a jumble of data is a difficult and delicate art but one theme seems to be increasingly prevalent. It rather looks like current economic success and failure is predictable from the robustness or otherwise of institutions established hundreds of years ago. History casts a long financial shadow it seems.

Geography Is Wealth

The differential economic development of countries has long been a puzzle to economists, who have developed multiple hypotheses to explain it. One theory has it that the main determinant of success is geography, another that it's a consequence of history which has long-term, hidden but decidedly enduring effects.

The geographic explanation was covered by Diamond, whose tour de force of a book covers vast amounts of ground. Summarising briefly, though, the peoples of the European-Asian land mass were especially favoured because the East-West directionality of the continents meant that people and animals could spread without encountering hugely unfavourable climate conditions. In Africa, for example, spreading North-South meant overcoming widely different temperature conditions, a malarial zone and the Sahara Desert.

Meanwhile Europe and Asia were especially favoured by access to the widest range of domesticatable animals and plants and furthermore then benefited from natural selection in favour of those people best fitted to survive the diseases which could jump species. The full argument, of course, is much more developed than this but it's best to read it for yourself. It's a terrific book.

Persistent Institutions

The historical argument comes down to the establishment and long-term pervasiveness of institutions. The idea here is that the effect of robust institutions – for better or worse – has significant impacts on societies over unexpectedly long periods of time. This suggestion arose out of the observation that many of today's economic success stories are those countries where European colonisers…

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