Geographical Conditions and Economic Development
Bin Zhou
Department of Geography
Southern Illinois University Edwardsville
Edwardsville, IL 62026
Geographical Conditions and Economic Development
Abstract
This article reviews an on-going economic debate concerning the role of physical geography in
economic development. Three major themes are identified. The first theme views the role of
geography and governance as competing forces shaping development. The second theme views
geography and governance as co-existent factors that enable society to develop. The final theme
views geography as a factor that influences development through institutions. The economic
debate on the role of physical geography occurs at a time when human geographers are giving
increasing weight to institutions in shaping geography phenomena, and poses certain challenges
to human geography study.
Keywords: physical, environmental-determinism, institutions, development, resource curse,
reversal of fortune.
1
Although environmental determinism has long been discredited within the geography
community, recent years have seen a rising debate concerning the role of geography (mainly
physical geography) in economic development, primarily among economists. Many scholars
depart from an institution-based perspective and give more weight to geography in shaping the
state of economic development. With the publication of Diamond’s award winning Guns, Germs,
and Steel (1997), the role of the physical environment has eventually been pushed to the
forefront in addressing fundamental questions regarding what has contributed to the differential
paths and levels of development across the world as observed today. Some label Diamond's view,
which attributes different development paths to the availability of domesticatible plants and
animals and the land orientation, neo-environmental determinism (Sluyter 2003). However, even
the many economists who do not hold such a clear-cut view also vigorously defend the argument
that physical conditions are a crucial aspect in understanding the state of underdevelopment in
places such as Africa. This has formed a clear contrast to the human geography community
within which political sensitivities have risen, and where the use of resources and the resultant
ecological change are increasingly seen as outcomes of larger institutional processes (Blaikie
1985; Watts 2000). In general, the “culture turn” has become a main theme in nearly all sub-area
study within human geography since the 1990s. Given this different development, and amid
rising economic debate concerning the role of physical geography in economic development, this
short report reviews the main arguments in the on-going debate, focusing on publications in
economics journals and working papers. While this summary is not a report on recent human
geography research per se, the issues the debates touch upon are nonetheless relevant to human
geography study. Physical geography has always been an important component in human
geography issues and the relationship has been a source of debate. Economists take on an issue
2
that traditionally falls in our own court. Should we contribute to the debate with what we know?
If so, are we capable of joining the debate and convincingly conveying what we know given the
methodological differences between human geography and economics? These issues have
important relevance in the future development of human geography study.
I. Geography or Governance?
The debate among economists on the role of physical geography and institutions can be
grouped under three themes. The first theme views the role of geography and governance as
competing forces shaping development. The second theme views the effect of physical
geography and governance as co-existent factors that enable society to develop. The final, and a
more sophisticated, theme views physical geography as a factor that influences human conditions
through governance and institutions.
Economists have clearly separated the effects from physical geography and institutions. As
Acemuglu et al (2003) state, geography refers to the "forces of nature" while institutions or
governance is about "man-made" influences. Although very few people attribute human
conditions exclusively to geography or governance, historically and contemporarily there are
divergent views regarding which factor plays a primary role in shaping development.
Geographers had a major hand in formulating an early version of environmental determinism.
This tradition can be traced to writings by Ratzel (1882; 1891), Semple (1911), Huntington, and
Taylor (Martin and James 1993), among others. According to this view, the physical
environment caused social development (Rubenstein 2005). People and peoples are what they
are because they have been shaped by their physical surroundings--climate, vegetation, and so on.
The notion is considered to be implicitly racist since it associates the superiority of certain
3
peoples from northern latitudes or a cool environment, and denigrates peoples from the tropics.
After the 1930s, environmental determinism lost its appeal and credibility among most
geographers due to its use of loose correlations and anecdotal evidence, the tendency to ignore
contrary evidence, and the largely ethnocentric ranking of the environment (Martin and James
1993; Holt-Jensen 1988).
Revival of environmental determinism? Toward the end of the 20th century, some
development economists, in their efforts to model divergent economic growth patterns across the
world, attributed increasingly significant roles to differences among countries in terms of
geographical conditions. For example, particular geographical circumstances --whether a country
is landlocked and thus is not open to trade --will permanently inhibit access to a large market,
limit its ability to explore economies of scale, and therefore lower its efficiency, and ultimately
growth and development (Sachs and Warner 1995a, 1995b, 1997). Natural resources such as
minerals and ecological conditions favoring cash crops also affect income (Easterly and Levine
2003). Bloom and Sachs (1998) point to Africa's tropical location as largely a hindrance to
development. Bloom and Sachs (1998) and Sachs (2001) argue that tropical location leads to
underdevelopment mainly due to (1) soils that are fragile and of lower fertility; (2) the
prevalence of crop pests and parasites; (3) excessive plant transpiration and a lower rate of
photosynthesis: (4) high evaporation rates and the insufficient supply of water; (5) lack of a dry
season, lack of cold temperatures, or insufficient length of summer days for temperate crop
growth; (6) ecological conditions favoring diseases that infect humans and livestock; (7) lack of
coal deposits; and (8) high transport costs. Landes (1998) emphasizes the inhibiting effects of
high temperatures on humans' willingness to work. These views that see unfavorable physical
4
conditions as a hindrance to development are collectively called the "Geography/Endowment
Hypothesis" (Coviello 2003).
The most sweeping view regarding the dominant role of the physical environment since the late
20th century is found in Jared Diamond's influential book Guns, Germs, and Steel (1997).
Diamond recognizes the proximate causes of western dominance in the world since the 16th
century such as guns, germs, and modern technologies (steel, etc.) that westerners used to
decimate indigenous societies in the New World and Africa. Diamond looks for deeper causes
that led to the rise of these proximate causes since the last Ice Age 13,000 years ago. In his
search for ultimate explanations of the broadest patterns of history, Diamond zeros in on the
availability of wild ancestors of plants and large mammals, suitable for domestication, on
different continents, and the orientation of continents. According to Diamond, in the Fertile
Crescent wild ancestors of many crops were abundant, highly productive, and occurred in large
stands. Many species of cereals and pulses developed as annuals, packing much energy into
producing big seeds. Domestication was relatively easy, with little additional change needed for
cultivation. Many of these seeds were edible by humans, which presented their value clearly to
hunters and gathers. Cereals and pulses domesticated in the Fertile Crescent accounted for six of
the modern world's 12 major crops. These advantages made the big seeded cereals the first crops
developed in the Fertile Crescent. As Diamond points out, the favorable local flora was not an
isolated factor in securing the Fertile Crescent’s food production system. Other factors, such as
climate, environment, and animals were all important enabling factors that contributed to the
early rise of the West.
5
Blumler (1992) studies the world distribution of large seeded grass species. These are wild
grasses with significant seed size that might potentially be chosen as targets for domestication by
human ancestors. Of the 56 species he found, 32 are native to the Mediterranean zone or other
seasonally dry environments, especially the Fertile Crescent or other parts of western Eurasia's
Mediterranean zone. In contrast, East Asia has only six species, and Sub-Saharan Africa has four.
The Americas have 11 species with North America having four, Mesoamerica five, and South
America two. The availability of wild plants that are easy to domesticate, along with some
necessary accompanying conditions for plant domestication, is at the heart of Diamond's
explanation of history's broadest patterns. Similarly, western Eurasia had a high concentration of
ancestors of wild large mammal species for domestication. It had 72 such species, compared with
51 in Sub-Saharan Africa, 24 in the Americas, and 1 in Australia. Of all 14 domesticated large
mammals, 13 were confined to Eurasia, becoming an indispensable component of the food
production system. The east-west orientation of the Eurasian continent provided ease in the
spread of this productive agricultural system from the Fertile Crescent to Europe, North Africa,
and the Indus Valley.
A productive food production system was only the first the step in a long sequence of
development. According to Diamond's logic, the developed food production system was also
responsible for high population densities. Epidemic diseases evolved from the dense population
of domestic animals with which humans came into close contact. The immunities humans in the
Old World acquired allowed them to survive while the germs could pass on to, and kill, the
indigenous peoples of the New World upon close contact with the Old World invaders. In
addition, high population densities also triggered the development of political organization,
6
which helped effective territory governance and political/military expansion. Developed
agriculture also enhanced the division of labor, promoted invention, innovation, and
technological development, which eventually gave rise to guns, cannons, and other weapons.
Thus, a conquering and killing machine formed based on early advantages in the rise of food
production. Such a mechanism essentially explains why it is the West that dominates the other
world regions instead of the other way around. Diamond's message has been further reinforced
by the biogeographical evidence provided by Hibbs and Olsson (2003) and Olsson and Hibbs
(2005) who found that different initial conditions in biogeography and geography largely account
for the different timing of the Neolithic transition and thus ultimately help account for the large
divergent income levels among nations today. They also found that the effect due to geography is
only partly mediated by institution quality and partly independent of the institutions today.
Governance's Primacy. Contrary to those who attribute differential development to the physical
environment, institutionalists hold the view that institutions are the first-order determinants of
economic performance (Coviello 2003), or as Rodrik et al. state, institutions' primacy over
geography. By institutions, economists mean a whole range of social, political, and economic
governing mechanisms and cultural characteristics. Kaufmann et al. (1999a and 1999b) and
Easterly and Levine (2003) design an institutional index that contains the effect of six
institutional or governance measures: Voice and accountability (the extent the citizens can
choose their government, political rights, civil liberties, and an independent press), political
stability and absence of violence (a low likelihood that a government will be overthrown, by
unconstitutional or violent means), government effectiveness (quality of public service delivery,
competent of civil servants, and the degree of politicization of the civil service), light regulatory
7
burden (relative absence of government controls on good markets, government interference in
the banking system, excessive bureaucratic control on starting new businesses, or excessive
regulation of private business and international trade), rule of law (protection of persons and
property against violence or theft, independent and effective judges, contract enforcement), and
freedom from graft (absence of the use of public power for private gain or corruption). They also
adopt three macroeconomic indicators as measures of macroeconomic environment; openness
(low tariff against trade and less government interference in export), real exchange rate
overvaluation, and inflation. Other measures they adopt include ethnolinguistic diversity and
religion.
Institutionalist views can claim a long tradition tracing back to John Locke, Adam Smith, and
John Stuart Mill (Acemoglu et al 2003). For example, John Locke stressed the importance of
property rights, and emphasized the role of government in "preservation of the property
of …member of society" (Locke [1690] 1980:47). Economist Douglas North was awarded a
Noble Prize in part for articulating the role of institutions in understanding development. In their
study, Easterly and Levine (2003) find strong evidence to support the primacy of institutions or
governance over geography in shaping economic performance. Their study does not support the
idea that tropical location and lack of access to the sea inhibit development. In their study, the
institutional index significantly explains economic development, consistent with the institutions
hypothesis. In addition, in their study, the strong positive impact of institutional development on
economic development is also robust to the alteration of the instrumental variables used in the
model. Coviello (2003) also find evidence consistent with the institutionalist view rather than the
Geography/Endowment Hypothesis.
8
Rodrik (2002) and Rodrik and Submaranian (2003) estimate the respective contributions from
geography, institutions, and trade in determining income levels around the world. Their results
show that the quality of institutions "trumps" everything else. Once institutions are controlled for,
measures of geography have only very weak impacts on income. These results lead the authors to
declare "Institutions rule" as reflected in the view of the primacy of institutions over geography
in economic development.
II. Geography and Governance
While holding geography and institutions as the competing forces shaping economic
development and human conditions, emphasizing one inevitably decreases the role of the other.
Some scholars tend to emphasize the roles of both. Naude (2004) estimates the effects of
geography, policy, and institutions in the context of African economic development. He finds
that while institutional factors such as literacy, investment, foreign direct investment,
government expenditures, and urban agglomeration have clear and significant impacts on
economic development, geographic factors such as settler mortality as impacted by tropical
ecology, landlockedness, land area, and malaria also play significant roles. The results reject the
notion of "either institutions or geography"; that one is more important than the other in the
context of economic development, and contradicts, at least for Africa, the finding of Rodrik et al.
(2004) that "institutions rule." (2004: 842).
Sachs, who is generally viewed as a Geography/Endowment Hypothesist (Easterly and Levine
2003), at times also expresses views that support a more balanced approach toward the role of
9
geography and institutions in economic development. He offers a broad explanation of divergent
levels of economic performance among countries, focusing on three major categories of factors.
The first category is geography factors. He points out that certain parts of the world are
geographically favored with advantages ranging from natural resources, coastlines, navigable
rivers, proximity to economically advanced nations, and advantageous conditions for agriculture
and human health. However, Sachs equally emphasizes the role of social cultural systems, and
the cumulative effects of history in shaping development levels (Sachs 2000).
The other category of factors is that of social system (governance or institutions). He states that
certain social systems have supported modern economic growth, whereas others have not.
Precapitalist systems based on selfdom, slavery, and inalienable landholding tend to slow
modern economic growth. Socialism during the 20th century proved to be a disaster for
economic well-being and growth in those places where it was adopted. Colonial rule was
generally adverse to high rates of economic growth.
In addition to these two groups of factors, Sachs also points to the role of history in reinforcing
previous development and exerting a cumulative feedback factor, in line with recent "New
Economic Geography." Positive feedback processes amplify the advantage of early
industrialization and widen the gap between rich and poor, by allowing the early developers to
conquer and exploit the late developer, causing some late developers to collapse. The
technological gap between early developers and late developers also tends to widen over time. In
this sense, the historical or the feedback factor discussed by Sachs can be broadly placed within
the institutions or governance view, since it involves the issue of how to govern the political and
10
economic relationships among today's nation states, which at some point in history were colonies
and colonizers.
Although Sachs (2003) recognizes that institutions matter, he warns that the characteristics of
institutions do not explain everything. He is critical of those studies that attribute most
development problems to institutions, at the expense of geography and resource constraints. He
sees this as oversimplifying the issue of development by resorting to a single factor explanation.
He warns of the danger of an institution argument that would relieve rich countries of the
financial responsibility for the poor, because development failures are the result of institutional
failures rather than lack of resources (Sachs 2003: 38). Sachs emphasizes the roles of combating
AIDS, TB, malaria, of addressing the depletion of soil nutrients, and of building more roads to
connect remote populations to regional markets and coastal ports. He criticizes some economists
(Acemoglu et al. 2001) who declare malaria has a limited impact in Sub-Saharan Africa because
most adults have some acquired immunity, as completely neglecting the true negative impacts of
the disease on local investment return, and raising the transaction cost of migration, trade and
tourism. In general, constraints due to the physical environment and geographical isolation are
still a large part of the developmental problem in places such as Sub-Saharan Africa and some
other developing countries such as the Andean countries of Latin America (Gallup 2000). Sachs
calls for development thinking that recognizes that both institutions and resource endowments
are critical, not just one or the other (Sachs 2003: 41). In his latest work (2005), Sachs lists
factors that are responsible for countries failing to grow economically. Unfavorable physical
geography is listed equally with other factors such as governance failure, cultural barriers, and
unfavorable demographic conditions.
11
The approach that emphasizes both geography and institutions in shaping development is to a
certain extent a parallel to the traditional Possibilist perspective in cultural ecology. Originating
from the French school of geography, especially Lucien Febvre and Paul Vidal de la Blache, and
extended by Americans Bowman and Carl Sauer (Barton and Karan 1992; Holt-Jensen 1988;
Martin and James 1993), this perspective holds that while the environment certainly both
constrains and enables human activity, it is possible for people to choose from many courses of
action and even to alter their environment in various way depending culture. Carl Sauer espoused
the principle that the same environment could have very different meanings to people depending
on their attitudes, objectives, and level of technology. Current landscapes could be seen to be the
result not just of nature, but also of repeated and varying cultural impressions over time. For
Sauer any separation of environment and human activity was flawed since they exist in a
recursive relationship that varies both temporally and spatially (Barton and Karan 1992; HoltJensen 1988; Martin and James 1993).
III. Geography through Governance
It is understandable that less favorable physical conditions may delay development or
even cause underdevelopment, but less developed economies also exist in places where natural
conditions favorable to development in some measure failed to lead to an advanced economic
status today. Such a paradox is sometimes labeled the “resource curse” (Engerman and Sokoloff
2005). At the heart of the resource curse hypothesis is a more sophisticated perspective that sees
the role of geography through institutions. Specifically, geography may exert impacts on
institutions, which further affects development. This view recognizes a subtle relationship,
instead of simple competition or coexistence, between geography and institutions.
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Even many institutionalists, though advocating economic development as determined by
institutions, also recognize the role of geography in shaping development through changing
institutions. Rodrik et al. (2004), Rodrik (2002) and Rodrik and Subramanian (2003) adopt a
scheme to show the relationship between income, geography, and institutional factors where they
consider endowment and productivity as endogenous factors, trade and institutions as partly
endogenous factors, and geography as an exogenous factor affecting economic performance and
income. The reason that institutions are considered only partly endogenous is recognition of the
role of geography in institutional building.
Institutionalists contend that geography and the environment's impacts on economic
development operate through long-lasting institutions. For example, environments where crops
are most effectively produced using large plantations, will quickly develop political and legal
institutions that protect large landholders from the many peasants and small landowners, and
may even develop slavery as a way to accommodate the needs of the large landholders
(Engerman and Sokoloff 1997; and Sokoloff and Engerman 2000). In places like this, even when
agriculture is no longer the main economic activity, enduring institutions may still continue to
inhibit competition and economic development for the majority of the population.
Similarly, the era of colonization laid the foundation for many countries' institutions today,
which provides a natural experiment for the role of geography in shaping institutions (Acemoglu
et al. 2001, 2002, and 2003). For example, in places with diseases which cause high settler
mortality, or more prosperous settlements with high population density and urbanization, or with
13
inhospitable germs and climates, colonizers established extractive institutions where a few
settlers manipulated a local political power structure in order to exploit the material riches. On
the other hand, in places with low population density, underdevelopment, hospitable hosting
population and less local resistance, colonizers established settler institutions where European
settlers moved in and established institutions similar to their home countries. The result is that in
places with extractive institutions, a few elite tended to stay in power and the rule of law was not
established. In contrast, in places where settler institutions were established, the rule of law,
property rights, and democracy were eventually established. Such "Institutional Reversal" is
largely responsible for the "Reversal of Fortune" where the originally more developed place
became less developed while originally less developed regions became more prosperous
(Acemoglu, et al. 2001, 2002, and 2003). According to this view, the institutional structures
created by colonialists in response to environment endure even with the end of the colonialism.
Thus, the institution view argues that the major impact of the environment on economic
development runs through its long-lasting impacts on institutions. Most institutionalists do not
completely deny the role of geography and the environment on economic development. However,
they reject any claim for the direct role of geography. Instead, they trace the role of geography
and environment through institutions (Easterly and Levine 2003).
Many researchers have found evidence of the role of geography in affecting institutions. For
example, Hall and Jones (1999) associate the lack of development in tropical countries with the
fact that Europeans did not settle in the tropics and thus did not bring high quality institutions to
these areas. Here the point is that it is not the tropical environment per se, but the lack of high
quality institutions, that hinders development. Acemoglu et al (2001) suggest that European
14
settlement in North America, Australia, and New Zealand created institutions to support private
property rights and limit the power of the State. On the other hand, Europeans did not settle in
Congo, Burundi, the Ivory Coast, Ghana, Bolivia, Mexico, Peru, etc. They established
institutions that empowered an elite to extract gold, silver, cash crops, etc. For Easterly and
Levine, slavery was a way for Europeans to capture a labor force for extractive states, such as in
the Caribbean and Brazil. Acemoglu et al notice that Pilgrims settled in the American colonies
instead of Guyana partially because of the high mortality rates there. Similarly, Sokoloff and
Engerman (2000) find that a Puritan colony on Providence Island off the coast of Nicaragua did
not last long. Sokoloff and Engerman (1997) and Engerman and Sokoloff (2000) provide
evidence to support a crop hypothesis. They argue that the land endowments of Latin America
lent themselves to commodities favoring economies of scale, and/or the use of slave or local
indigenous labor (sugar cane, rice, silver), and thus are historically associated with power
concentrated in the hands of the plantation and mining elite. In contrast, land endowments in
North America lent themselves to commodities grown on family farms (wheat and maize), and
thus promoted the growth of a large middle class which helped spread power widely. Once the
power structure was formed, the elite in Latin America created institutions that preserved their
hegemony, such as restricting voting rights, public land and mineral rights distribution, and
limiting access to schooling. Even granting new corporate charters favors those with (elite)
insiders. These elite groups ultimately were opposed to democracy. In contrast, North America
enjoyed a larger middle class with a less powerful elite, so that the United States and Canada
created more open and egalitarian institutions featuring broader voting rights, equal protection
before the law, wider distribution of public lands and mineral rights, lower entry barriers to
businesses, and a big government effort to provide schooling. Differences in institutions between
15
Latin America and North America also contributed to the larger European immigration flows to
North America than to Latin America (Sokoloff and Engerman 2000). In general, the "resource
curse" works so that favorable resource conditions end up fostering "wrong" institutions, which
had long lasting negative impacts on development. The resource curse arguably occurred in Latin
America (Engerman and Sokoloff 2005) and Australia (late 19th century and early 20th century)
(McLean and Taylor 2001; McLean 2005). In the Middle East the resource curse occurs in the
form of “external rentierism” (Selim 2003), where windfall income from oil export delays efforts
toward industrialization and economic diversification. Many states become rentiers that thrive on
a unique resource base instead of their own efforts toward innovation and technological
advancement. Due to the state’s control of foreign exchanges, external rentierism also reinforces
the role of the state in economic development, further weakening the private sector (Selim 2003).
IV. To Join or not to Join the Debate?
While human geographers are increasingly attributing various human geography phenomena to
“culture” or institutions (the "culture turn," as current debates in human geography are often
labeled), the economics community as a whole expands the realm of inquiry, examining the role
of both institutions and the physical environment in shaping economic development. However,
the diverging views in the debate among economists show that the intersection of geography and
governance is an area that still requires further research. Nonetheless, the debate highlights
several issues that may be relevant to future development in human geography. First, although
“environmental determinism” seems to be a “dead horse” within the geography community, the
debate obviously has not died in the larger academic arena. Can, and how can, geographers
contribute to this debate in order to inform the academic community with what we know? In
16
general, can human geographers join the debate concerning geography and economic
development, in a way that contributes to as well as informs us of something new from the
debate? Second, while recent human geography study increasingly looks at the role of
institutions on the ecological environment, the debate among economists points to the effects of
physical geography on institutions. Is this a sign that inadequate attention has been given to
geography by geographers in pursuing the relevance of institutions and politics? Have
geographers lagged behind in research issues that involve our own training? Third,
methodologically, should we join the debate on our own term or on economists’ terms? The
debate concerning “New Economic Geography” serves as a good illustration. While economists
describe the new economic space in the language of mathematics, many criticisms of their
conceptions from economic geographers are in literal forms and are descriptive in nature. It is
hard to gauge to what extent the two sides have really convinced each other. Self-satisfaction
within a familiar circle is one thing, but winning over an audience in a large arena is quite
another. Similarly, most economists discuss the role of geography in economic development
using statistical models while the rising tide of the “culture turn” has seen the recession of the
use of statistical analyses in human geography. What would be the point of participating in a
debate where the different sides use different “languages” and are not sure of whether we truly
understand each other? The debate on geography and development among economists poses a
challenge to human geographers. Whether and how we meet the challenge are the issues that are
truly relevant to the future development of human geography.
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