Economic Success: Geographics and Demographics

Economic success of any country depends on many factors, but geographics and demographics are the core ingredients for economic growth.

Good geographics matter for economic success as in how a country is geographically positioned. Having (partial) sea borders instead of land borders with neighbouring states – for example - will minimise the chances of conflict. Island nations such as the UK, Iceland, New Zealand and Australia – to name a few – have always been able to successfully carry on with their business without having to negotiate with land-bordered neighbours to offer safe passage of goods and people though their territories. Other well positioned geographical countries such as the US, China, Thailand and India are benefitting from having dominant sea borders over land borders and hence their flow of goods in and out can occur equally unimpeded, at least geographically.

Geographics are equally important as in climate, soil quality, good availability of (ground) water and presence of natural resources. The geographical lottery is to have all those factors combined in one territory and the larger a country is, the more likely it is to be ‘lucky’ geographically, such as Canada, Brazil, the US and China for example. On the other end of the spectrum there are countries whose geographic fortunes may be too one-sided. Saudi-Arabia is one such country, rich in resources - oil – but with claustrophobic sea borders and an increasingly unsuitable climate for food production (like many of its direct neighbours on the Arabian peninsula), making it almost entirely reliant on imports for basic food staples (wheat).

Demographics are the other cornerstone of economics success; the absolute population size matters as well as the age-composition of the population. The size of a population gives an idea with how many people a country’s resources need to be shared. For example, Norway, another oil rich but only scarcely populated country, is so wealthy that it is joked that every Norwegian citizen could go on holiday the entire year and that this would not make a difference to its GDP per capita. A large population, on the other hand may ensure a stable work force and hence the potential for strong and continued economic growth, a phenomenon seen in China, the world’s most populous country, in the last 25 years. China’s economic success was built on its enormous supply of (low cost) labour.

It would be easy to conclude that having winning geographics and a proportionally ‘right’ population size in relation to the size of the territory are a guarantee for success. But this is where the composition of the population of a country comes in: is the population young or are the majority of inhabitants over 50? And if the population is young, is there a good education infrastructure in place to create a productive (future) workforce? If most of the population is old (er), what is being done by the country’s government to mitigate this potential declining economic growth as the labour force will shrink and costs for healthcare and social care will go up.

The mix of good geographics and good demographics is a very strong indicator of (future) economic success. China’s much admired economic growth is now projected to slow due to a fast-aging population. A populous and young country like Nigeria, faces a different problem altogether as the country is losing an unsustainable number of hectares of range- and cropland each year to desertification and may face issues with the food supply for its ballooning population. Most European countries are, like Japan and China, aging fast and productivity – economic growth – is expected to stagnate with it, giving fresh meaning to the term ‘old’ world…

Globalisation and free trade seem to have done away with the importance of countries’ geographical positions; in fact, free trade has almost eliminated geographics as a factor for economic success. Can this be maintained?

Aging demographics – a more recent global trend – could be solved by immigration – the import of young workers from elsewhere – at least if a local population tolerates this. But would a reduction in free trade and ‘lucky’ geographical countries prioritising their own nations or imposing high taxes on their exports, bring back the importance of a geographical position? Just imagine for a moment how challenging it would be for less lucky countries to import what they don’t have themselves at reasonable prices.

So, looking at a country’s geographic position, its climate as well as the size and composition of its population will give you a lot of insight about its potential economic success, today and in the future and – to an extent – how willing a country may be to cooperate with other countries economically.

Suggested links:

Full Planet, Empty Plates. By Lester Brown of the Earth Policy Institute 2012