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.

Chris

“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

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Mark S.
10 years ago

Off the cuff, I’d say information/communication technology, especially wireless. Everyone anywhere can tap into the global information grid. As a result the advantage of living in the old knowledge centers, such as Wall Street, have dissapated. Information no longer moves along a predictable sequence of pit stops on its way towards public dissemination. Instead new informatin is literally available to everyone everywhere simultaneously. This means knowledge workers can move away from traditional work centers and chose locations that appeal to them personally. Factors such as climate, taxes, political stability and freedom will become more important than local work opportunities as one’s professional work is performed online and one’s network of contacts can be maintained online (verbally and in writing).

Chris, are you seeing expats relocate to New Zealand? Are wealthy Chinese coming to NZ more to vacation or buy property?

I think this would benefit warm-climate

Paul
Paul
10 years ago

Technology is the lifestyle changer. My daughter who is 13 stopped talking to me after she got her first cell phone. Recently, we went to Seattle for a few days of fishing and crabbing and I did not allow her to take the phone. Without the distractions of phone and facebook….she became an adorable sweet child again and enjoyed life for a few days. It has become such an obsession and an addiction that I think at some point there will be a need to break this addiction to certain technologies and revert to interacting again. But maybe I am just musing because I refuse to participate in these technologies. The youth of today are pre-programmed to do so by following others before them that are already addicted. It will take something huge to break this cycle.

Simon
10 years ago

Paul, meaning no disrespect, but can’t you just take the phone away when she gets home from school until after dinner (or from dinner till morning or whatever is agreed). This is not a technology issue, it’s an issue about parents being empowered (rather than feeling dis-empowered). When I was a young shit-kicker I had no mobile phone but any number of books/toys/games were taken away according to schedule and behavior.

Chris, in terms of the relationship between technology and geography, have you been following the emerging technology of 3D printing? I’ve been following it for the last year or so and it has just started getting a lot more high profile (mainstream) exposure. This technology is a significant game-changer for all industries. In terms of the geography, think of the liberation this technology can offer to someone like me living in Vanuatu. Instead of ordering a spare part and waiting a month or more, I can print it out and keep working. The reliance on access to shipping routes and transport will be reduced in many ways. The hardware might be expensive but we’d only need one printer for the entire island – we can email our designs then walk down the road and pick them up.

The technology is disruptive and anarchistic but luckily the thick-skulls in government haven’t woken up to the implications of this technology for (a) eliminating sales tax; (b) making mockery of patent law; (c) rendering many border controls / protection / tariffs / etc meaningless.

It’s going to eliminate the concept of isolation. People will be much more ready to live in the desert, in middle of the Pacific (like me), or perhaps deep underneath the ocean. What this will do to property prices is, as they say “an exercise best left to the reader.”

Bring on the game-changing technologies!

Simon

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