Why isn't the entire world rich?
There are important constraints on the spread of human material progress.
There has been enormous material progress throughout the world over the last three decades. Inequalities still exist, though. Most likely they will always do so. Fortunately, they are diminishing greatly over time, but true equality eludes us.
Large inequalities between nations and subnational groups are one of the key reasons why the Left is skeptical of or hostile to progress. Typically, the Left views prosperity and equality as the expected outcome and any deviation from those outcomes as something that needs to be explained.
The Left explains variations between societies and within societies as being caused by discrimination, selfishness, capitalism, and colonialism. More sophisticated explanations on the Left point to structural economic factors, politics or ignorance causing inequality.
Anyone who has got this far reading my Substack column or my books should be immediately skeptical of these explanations. We have seen that inequality has been rampant in all societies that evolved past Hunter-Gatherer societies. We have also seen that poverty has been an inherent part of the human experience for hundreds of thousands of years. We have also seen how differences in wealth between societies are very similar to those 2,000 years ago.
We have also seen that progress was invented in a few Commercial societies centuries ago and that progress diffused through the rest of the world over centuries. Progress and prosperity are unusual; poverty is the norm. I hope that my book series and this Substack column help you to better understand how progress emerged and gradually diffused.
We have also seen that six historical breakthroughs have led to sudden expansions of progress. The most recent was the fall of the Soviet Union in the early 1990s.
But why has it taken so long for progress to spread throughout the globe? Why didn’t the emergence of Commercial societies rapidly spread? Why didn’t the entire world industrialize within just a few decades of Britain doing so? Why are some societies still living in circumstances that more closely resemble their lives 2,000 years ago than what Western nations today enjoy?
Part of the reason why the Leftist explanations of discrimination, selfishness, capitalism, colonialism, structural economic factors, politics and ignorance have lived on despite being wrong is that there is no real counter-explanation. This book series starts the process of creating that counter-explanation.
Much of this article is an excerpt from my book From Poverty to Progress: Understanding Humanity’s Greatest Achievement. You can purchase discounted copies of my book at my website, or pay full prize at Amazon.
If you are interested in this topic, you should read my “From Poverty to Progress” book series:
See more articles on the impact of Geography in human history:
Why isn't the entire world rich? (this article)
Why are there such huge variations in income across the globe?
Geographical Distance
Geographical distance has always been a barrier to the diffusion of progress. Before the advent of large ocean-going sailing ships, societies that were far away from each other rarely came into contact. We have already seen that the development of North America and South America was seriously constrained by a lack of contact with more complex Eurasian societies before the year 1500. The same can be said for Sub-Saharan Africa, New Guinea and Australia. It is likely that if these regions had been closer to Eurasia, particularly Northwest Europe, they would have developed far more complex societies.
Societies on the Eurasian continent were able to develop at a far more rapid pace because they came into far more frequent contact with each other. Innovations in one society could be noticed by traveling merchants and then brought back to their homeland. Just as important, because the Eurasian societies were in constant military competition, any laggard society would be forced to copy more complex technologies, skills and social organization or risk annihilation through conquest.
Fortunately, today we live in a world where transportation and communication technologies make the barrier of geographical distance easier to overcome than ever before. Most people on the planet now have relatively easy access to modern transportation and communication devices that were inaccessible to all but the wealthiest just a few generations ago. Mobile devices, in particular, have diffused across the world with amazing rapidity. In doing so, they have transformed the lives of so many previously poor people by connecting them.
But it is important to realize that geographical distance still plays an important role. Rural regions located far from trade-based cities often lack transportation and communication infrastructures. Inland regions of South America and Africa are often very remote from navigable rivers and container ports. Sub-Saharan Africa, in particular, lacks a robust electrical grid capable of powering modern communication devices reliably.
Cultural Distance
Another barrier to the diffusion of technologies, skills and social organizations is cultural distance. Cultural distance is a measure of similarity between people based upon the culture that they were born into. In general, cultural distance aligns with geographical distance, but due to large-scale migrations, they sometimes differ substantially.
For example, the English are culturally similar to their neighbors the Scots, but the English are more culturally similar to the distant Australians and New Zealanders than to their French neighbors. The reason, of course, was the mass immigration of the British to Australia and New Zealand.
But how does one measure cultural distance? One method is to list all the characteristics of every culture and compare them to each other, but this would be extremely time-consuming and very subjective. Inevitably, researchers would disagree as to which characteristics to include and how important each of them is compared to the other.
Genetic sequencing technology gives us a simpler and more objective method: genetic distance. By measuring the aggregated differences in allele frequency on a chromosome, geneticists can measure how similar two peoples are to each other genetically.
In general, the overall amount of difference between two peoples is related to migrations in the distant past. The key assumption is that when two peoples are relatively isolated from each other, they will diverge both genetically and culturally. So the longer that two peoples have lived since their last common ancestor, the more different their cultures are likely to be.
It is important to point out that this method does not assume that genes create a culture and that culture is immutable. Genetic sequencing is merely a convenient method to measure cultural distance, and there is strong reason to believe that genetic distance and cultural distance are closely related.
In an article entitled “The Diffusion of Development”, Enrico Spolaore and Romain Wacziarg tested how much of an impact cultural distance had on the ability of poor countries to copy wealthier countries both today and in previous centuries. Not surprisingly, they found that geographical distance and cultural distance are closely related. In other words, nations close to each other tend to be culturally similar.
Far more interestingly, they find that cultural distance has a more powerful effect than geographical distance and that nearby nations with significantly different cultures have particularly strong barriers to diffusion. These results help to explain why industrial technologies quickly spread from Britain to the United States and Canada (i.e. between geographically distant but culturally close nations), but much more slowly from Southern Europe to North Africa (i.e. between geographically close but culturally distant nations).
Spolaore and Wacziarg find that after controlling for other possible explanations, cultural distance accounted for 49% of the variation in income differences between 1500 and 1820. Cultural differences played a crucial role in hindering the diffusion of innovation. In 1870, the peak of the Industrial Revolution, the effect increased to 80%. Cultures that were similar to the cultures of the first industrializers were far more willing to copy industrial technologies than those that were more distant culturally.
Fortunately, in more recent years, the barriers of cultural distance have declined (to just under 20%) as a few non-Western nations copied industrial technologies and these could be in turn copied by other nations that were culturally similar. In East Asia Japan played a particularly important role in this regard.
Note that cultural distance is not just a barrier to the diffusion of progress; it is also a local accelerator. If an innovation takes place among one’s group, members of that group are much more likely to adopt that innovation. People tend to copy other people who are like themselves. So culture accelerates diffusion within cultural groups. But given that humanity is divided up into hundreds or thousands of cultural groups, this diffusion within cultures can take us only so far. Overall, culture tends to retard diffusion.
Monopolies
Earlier we saw that organizations competing against each other is one of the key driving forces in progress. Because there are limited resources, usually in the form of revenue, organizations are forced to compete against each other for survival. This competition forces each organization to adopt new technologies, hire people with skills in those technologies and adopt new processes to most effectively coordinate these technologies and skills. In this way, organizations that compete against each other facilitate progress.
There are, however, some organizations that do not need to compete. Most commonly these are governments or government-sanctioned private monopolies. Because these types of organizations are insulated from competition, they have little desire to adopt new technologies, skills or processes. This does not stop progress, but it does slow it down considerably. The higher the proportion of the total economy that is controlled by monopolies, the slower the progress.
Most organizations would prefer to be a monopoly. Being a monopoly creates a steady stream of revenue without the need for unsettling change. Monopolies create a comfortable internal environment for the members of that organization. No one has to improve or change in any way to maintain a steady flow of revenue.
The winners of a monopoly are its members, particularly those at the top who control the organization. The losers are the rest of society.
Because the benefits of being a monopoly are so great, most organizations try to become one. Businesses push governments to enact regulations, tariffs, subsidies or loopholes to gain an advantage over their competition. Businesses often try to buy start-ups that could potentially grow into dangerous competitors. They also narrow their product line so that they can gain a significantly larger portion of a smaller market, enabling them to have more influence over prices. Businesses sometimes form cartels to fix prices.
Governments, in particular, want to preserve their monopoly. Those who work in government are naturally suspicious of private organizations that can potentially out-compete them. There has also been a long-term trend within the wealthiest nations for centralized governments to grow at the expense of local governments. While local governments are often forced to compete against each other, centralized governments can often avoid this. There has also been a long-term trend of international organizations growing at the expense of national governments.
All of the above suggests that we should be deeply suspicious of monopolies. While it is likely that some monopolies are inevitable, most are not. Limiting the number and size by promoting transparency and competition should be one of the key goals of government policy.
Of particular importance is enabling new organizations to start up and old uncompetitive organizations to fail. As long as government policies make it difficult for new organizations to be founded, it will be much easier for existing organizations to maintain their power. In addition, if government policies try to maintain existing organizations even when they are not delivering benefits to society, this will tend to stifle progress.
If you are interested in the role that geography played in shaping human material progress, see Why are there such huge variations in income across the globe?
Much of this article is an excerpt from my book From Poverty to Progress: Understanding Humanity’s Greatest Achievement. You can purchase discounted copies of my book at my website, or pay full prize at Amazon.
If you are interested in this topic, you should read my “From Poverty to Progress” book series:
See more articles on the impact of Geography in human history:
Why isn't the entire world rich? (this article)
Why are there such huge variations in income across the globe?
"Progress and prosperity are unusual; poverty is the norm"
This is the key quote concept that so many still fail to grasp. We should not ask why some people are poor, we should ask why some are rich and work backward from there. We need to stop thinking of wealth in terms of greed and instead wealth in terms of capabilities and opportunities.
As I wrote here: https://www.lianeon.org/p/does-material-progress-matter
"while a person who is fasting has the same nutritional state as one who is starving, we would not treat them identically disadvantaged; the latter has no capability to eat, as opposed to the former."