Economic Growth and Development

fraction of the population within 100 km of the coast which rises to 67 per cent
if ocean-navigable river systems are included, and has a generally temperate
land mass (Gallup and Sachs, 1999). A big challenge to the geography hypoth-
esis is the ‘reversal of fortune’ thesis (Box 11.1).

Geography and economic growth: investigating the link

There are five major mechanisms by which geography can influence economic
growth:transport costs; proximity to/ownership of natural resources; state forma-
tion; human health; and agricultural productivity (including animal husbandry).

Geography and transport costs

Transport costs are similar to import tariffs: they impose additional costs that
producers must absorb to penetrate export markets. Sometimes those costs can

Geography and Economic Resources 235

Box 11.1 The reversal of fortune hypothesis

If the geography hypothesis is true, geography is a fixed factor so areas of bad

geography will always be poor and areas with poor geography should still be

poor today (Acemoglu et al., 2002a). But in the sixteenth century the Mughals

in India and Aztecs and Incas in the Americas were among the richest civiliza-

tions in the world (measured by urbanization) and today’s high-income coun-

tries were then much poorer.

For some scholars this reversal of fortune is a strong argument against the

geography thesis. But, the reversal of fortune hypothesis is actually demonstrat-

ing that ‘good geography’ changes over time. Although geography isfixed, what

constitutes good and bad geography doeschange over time. In earlier civiliza-

tions, when transport was slow and unreliable, geographical advantage came

from agricultural productivity not trade. Hence early civilizations and densely

populated urban areas tended to emerge in the fertile valleys around the Indus,

Ganges, Nile and Euphrates rivers. In Africa dense urbanized populations

emerged around the fertile Great Lakes region (Rwanda, Uganda, Burundi). The

rise of Oceanic trade after the sixteenth century saw economic advantage shift,

in particular to the trading ports of the European Baltic and North Atlantic.

Those early civilizations based on rich landlocked agriculture were left isolated

from these new sources of wealth. The meaning of ‘good geography’ changed

again in the era of industrialization. In the early nineteenth century, before

improvements in shipping technology, it was expensive to transport coal so early

industrialization based on steam power was helped by a proximity to coalfields.

This advantage disappeared with the discovery of petroleum refining, oil, and

hydro-based power and its quick and cheap transport across the world by super-

tankers. The advantage of being close to the coastline has more recently been

eroded by improvements in transport and communications, such as the internet.