Predicting Prosperity: Economic Success Over the Millennia

Five thousand years ago the fact that Portugal, Spain, France, and Britain stuck out from Europe into the Atlantic was a huge geographical disadvantage. All the action at the time was in Mesopotamia and Egypt, as this was where technology and wealth were the greatest. The only means of traveling there was over land, since oceans in that era were giant impassable barriers. A Londoner may as well have been living in Peru if he wanted to trade with Syrians. As such, location was clearly important. Then, around 500 years ago, technology turned the tables. With ships that could navigate these oceans, owning land that jutted out into the ocean became one of the most valuable geographical advantages a nation could wish for. It wasn’t the Syrian, Iraqi and Iranian ships that sailed to the Americas, China and Japan, but the Portuguese, French, and Brits who where at the forefront. Once again location was important.

Clearly maritime technology therefore benefited nations geographically predisposed to the technology. This happened at the expense of nations which did not share this advantage.

Looking Back – B.C. Era

Let me provide you with another example. In the 4th millennium BC the trend towards agricultural villages turning into cities was beginning. It is interesting to see how this played out. Previous to this period land values were heavily influenced by access to particular soil types and climates. As trade routes such as rivers, oceans and roads developed, access to these trade routes became more important. The ability to move goods to a broader market provided far greater margins and subsequently farmland located along rivers enjoyed higher valuations, even where soil quality was relatively less fertile. Additionally, technology allowing irrigation from rivers meant that climate mattered less than was previously the case. Once again location was important. Then as time progressed we can see that even this dynamic changed as access to metals, manpower and rule of law made certain places more favourable than others.

Jumping Onto The 1800s

More recently (mid 1800’s) we could look at the “guano age” in Peru. Guano; scientific name “bird shit”, was one of the major factors involved in the agricultural boom of the same period. Peru exported some 12 million tons, reaping truly enormous funds into the treasury. Unfortunately this capital was never utilized to diversify their economy, as Peruvians were daft enough to allow the government to commandeer – ah, I mean steal the assets and use the funds instead to expand the size of the bureaucracy. Sounds eerily familiar no? Then of course came fertilizers based on nitrate. More technological change. For Peru, its previous disastrous decision to vest the guano assets in the hands of the “people” (a popular term meaning political powers) resulted in the war of the pacific, sometimes referred to as the nitrate war, which they lost. I wonder whether the war would have even taken place had Peruvians used the massive revenues generated from that era to diversify their economy?

As we can see from the examples above location was important, but location in the context of technological change was really what one needed to understand. Without that understanding it would have been quite easy to invest in Mesopotamia just as the advent of technology was shifting the world’s power away from the area. Similarly one may easily have been forgiven for buying fertile farmland with no consideration for maritime technology and how it would transform the entire farming industry.

What Do YOU Think Propels A Country To Success?

If you look at every example I’ve provided above you’ll find that without exception technology was the driving force creating changes and respective profits and losses. Fast forward to the year 2011 and ask yourself what are the most important factors allowing for prosperity or lack thereof in our world, and what is shaping the world moving forward?

We have made no secret of our interest in certain technological changes, and next week I will provide you with some thoughts on this, but in the meantime I’d love to know what you think are the most important factors driving trends here and now.


“Just think, right now, all over the world, there are people exercising bad judgment. Somebody, right at this minute, is probably making the mistake of his (or her) life.” – George Carlin