Over the last five posts we’ve briefly looked at the five components of what I’m calling the cycle of prosperity: Technology, Food Supply, Human Capital, Economic Growth and Wealth, and Trade. I identified at least thirteen different types of impacts (arrows A through M) on creating economic prosperity. My intention has been to demonstrate the organic nature of an economic system. All parts are connected to each other. If nothing else, I hope of demonstrated that a singular focus one aspect like free versus fair trade, or economic aid, or improving medical care, is ineffective as a solution for creating economically prosperous societies. But the picture becomes even more complex.
We noted earlier that every economic system presumes to things: physical resources and a society of people. Therefore every economic system operates within two contexts. The first I will call the physical environment and the second cultural environment. We will discuss cultural environment in the next post but first let us examine what we mean by physical environment.
The economy is about people transforming matter, energy, and information from less useful states to more useful states. But people live in a particular physical context and contexts vary widely as we span the globe. There are a wide range of climates and terrains, with widely varying resources, that humanity has called home. Due to relatively limited mobility and thus limited trade, people have been compelled to live within the constraints of their physical environments.
At the most basic level, people can not survive more than a month or so without food. As food growing seasons are limited to a few months in many regions of the world. There must be technology for both producing sufficient quantities of food and then storing adequate food supplies during non-productive periods. Technology can increase the levels of production per amount of input and it can improve storage. But the ability to transport foodstuff across long distances and engage in trade has been essential to making some regions of the world more habitable.
Terrain can have a significant impact on an economy as well. For instance, water transportation has historically been the most effective and least costly means of transporting large amounts of goods. Look at the map of Europe and notice how much coastline there is. Start in the bottom right in the Black sea, come south into the Aegean Sea, into the Mediterranean Sea, and out into the Atlantic. Then follow the coast around Portugal up through the English Channel into the North Sea. From there you may head north along the coast of Norway or east into the Baltic Sea and up toward Finland. Notice how many nations have direct access to ports along these paths. But then also consider the numerous navigable waterways that extend deep into the interior of European nations. Historically, Europe had many geographic features that made trade easier than in other parts of the world.
The present day United States also had many navigable waterways. The coastline extending from Maine all the way from down around Florida, into the Gulf of Mexico and all the way down to Brownsville, Texas, made access to these costal areas accessible. But despite having some interior waterways, the terrain made foliage made land transportation arduous prior to the industrial revolution. In 1790, the typical means of transportation from Philadelphia to the area of Pittsburgh was not across present day Pennsylvania. People would board a barge on in Philadelphia, sail around Florida into the Gulf, head up the Mississippi into Louisiana, and up the Ohio River to the Pittsburgh area. It was ten times cheaper than the land route. Without the invention of the railroad a few decades later, it is hard to imagine much expansion into the North American interior.
Also figuring into the equation of economic development was the presence (or lack) of various resources. Many historians have noted the lack of a beast of burden in the Americas comparable to the ox or the horse on other continents. That deficiency limited agricultural developments. However, the introduction of several native American foodstuffs into Europe significantly improved the European food supply.
Thus, we can see that geographic limitations have had a significant impact on the development of different societies. However, in light of globally integrated markets and transportation, there is little reason, from a technical standpoint, why most nations should have to do without basic resources simply because of geography. (There are modern exceptions as we will see.) That is, of course, presuming that the nation is connected and integrated into the larger global market. If not, then natural resource questions can still be significant issues a nation’s economy.
We must also add to this discussion that while the earth certainly provides the resources for economic activity, the earth is not merely a bundle of resources for our consumption. The earth is also our home. As Christians, we also believe that creation has intrinsic value because it was made by God and pronounced good by him, though it is still incomplete. Throughout most of human history nature has been appreciated as an untamable threat. Far from worrying about damaging nature, human life was consumed with not being destroyed by natural events. The idea that we could do harm to nature on any significant scale has been a recent phenomenon that parallels the rise of industrial technology. Consequently, preservation and protection of the environment has emerged as in important economic consideration.
There is certainly much more we could say about the significance of the physical environment and more will be interjected in later posts. For now I merely wish to make us conscious of the impact our environmental context can have on economic life. What said we will turn now to turn cultural environment, which I will discuss at greater length.