Geography and Economic Growth

If you look at the African continent, perhaps the first word to come to mind is "enormous." And that's true. You could fit most of the United States, China, India, and a lot of Europe, into Africa. But if you compare Africa to Europe, Europe has two to three times the length of coastline that Africa has.

But what does coastline length have to do with anything?

Well, coasts mean access to water.

As benign as water might seem, it’s a major driver of economic growth. Adam Smith, the father of modern economics, argued that access to water reduced the cost of trade, and gave merchants access to larger markets. These larger markets incentivized specialization and innovation.

These twin processes ultimately spurred trade activity, and consequently, economic growth.

As an end result, civilization tended to grow wherever trade was easiest.

If you want proof of this, think of a few major cities.

Look at Istanbul, New York, Venice, Hong Kong, London, and similar areas. What do they all have in common? They all sit near a major coast or a major river. In contrast, look at some of the poorest areas in the world—places like Kampala, or Pointe-Noire. These places are all landlocked. Since goods are easier to transport over water than over land, trade in landlocked areas is more expensive.

And what happens when trade is more expensive?

It becomes harder to spark economic growth.

What this all means is economic growth is not only affected by a country’s rules and institutions, but by a country’s natural blessings, or natural hindrances, too. The effects of geography on growth cannot be discounted.

Help us caption & translate this video!

[alfredm]

Not sure if Africa is the best example you could have used, but you made your point clear enough

[sararomaniega]

Hi, I wonder when you are going to upload new videos of Principles of Macroeconomics, they are fantastic, but there are few videos. Thanks

[hilolafr]

Who’s here from school science homework?

[LionRulesx]

Who is here cause of, school social studies

[jorgejoaquinpuentenovell]

Clearly the geographic conditions are a factor of development, but it is not so determining as institutions and the fact that those countries where colonized and weren't allowed to look for their own economy. As stated by Acemoglu and Robinson, democracy is a turning point for growth and development.

[marceloguedes]

In this case, why the countries in the coast of Africa don't prosper?

[kingj]

These arguments require a more sophisticated analysis on the impact of trade on landlocked regions. However, here the presenter appears to be using correlation causation without taking into consideration the myriad of other intricate factors that are responsible for economic growth and development. Being landlocked would have little to no impact on a nation's economic development but it would depend on (to put it bluntly) 1. sound academic and political institutions, 2. technological innovations of goods and services (of which industrial trade is a major part of), 3. productivity, and 4. the entrepreneurial investments that are responsible for wage growth.

[zinxin]

What would you say is the clearest case of an exception to this rule?

[nasiromg]

I learned a lot from this thanks for the educational video

[abhijeetvasishtha]

Please! make a series on 'Independent India Economic History'. Highly Demanded!!

[Jekyll_Island_Creatures]

Sounds like something Jared Diamond would proclaim.

[Beni]

What is the classical music at the beginning?

[hishamel-garf]

What about Switzerland? Landlocked and 40% higher than USA in GDP per capita

[tarquin]

How about foreign policy and military dominance, that has dictated the success and exploitation of failing nations on the receiving end, that have syphoned the resources of once great nations for the benefit of nations capitalising on them. Africa could be great with its natural resources if not for the might of corporations and corruption.

[Law]

I'm willing to bet that if a land locked African Country did a better job with it's rule of law and established a sales tax only tax code, the sales tax being around 15% to 20% & 10% for exports, along with Free Trade and no Tariffs they would see a major boost to their economic growth. What Corporation wouldn't want to be in a country with zero corporate taxes? and what rich person wouldn't want to retire in a zero income tax country? but that's entirely up to their rule of law, these nations tend to be in constant state of conflict with bribery being an epidemic, otherwise this economic model would give them an edge against their global competition.

[PrideDefiler]

0:38 - It almost feels like you omitted Korea on purpose? I mean it's a very wealthy and one of the top 10 trading nations in the World.
Why couldn't you just say East Asia?

[adildoloo]

How's Africa landlocked when I live in the city of Tanzania that clearly has access to the Indian ocean? We have Zanzibar that's an island itself and most of you Americans and Europeans flock to Africa for trade and natural resources. We have the biggest river, Nile. Did you do your research well? A few landlocked countries do not represent the entire Africa!

[chefcinco]

2:15 Did You Just Say..? Actually Never Mind

[Walkabout]

too bad all of africa's "natural blessings" were plundered to fuel the growth of the northern world.

[charlesfeng]

1:29 You accidentally put Taiwan into China