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11 Aug 2022 12:10
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  •   Home > News > Business > Features > The Investor

    Why New Zealand Can't Catch Australia

    I once worked for a brief period in Tanzania, East Africa. At the time, the country was the fourth poorest in the world, despite having a wealth of base and precious metals and masses of fertile land.


    Investment Research Group
    Investment Research Group
    I quickly learned that one of the country's biggest issues was a poor transport system.

    Most of the country's roads are unpaved and seem to consist of a series of potholes joined together by dirt. As a result, it is virtually impossible to move crops from the hinterland to the population centres on the coast or to ports to be exported.

    On the other hand, wealthy economies like the USA and Europe have excellent transport networks. Where did that wealth come from and why do so many other countries not achieve it?

    Political, economic, and military intelligence company Stratfor has looked into the geographical benefits of the world's largest countries and believes the USA will always have the strongest economy.

    The most important aspect of the USA is not simply its sheer size, but the size of its usable land, which is much larger than any other country.

    Also, the USA has a fortuitous combination of an extensive river network in the mid-west, not least of which is the Mississippi River, and three of the world's largest and best natural harbours. The result is a free transport system that allows crops to be moved quickly to much of the country or overseas.

    Thirdly, with less wealthy and powerful neighbours in the form of Canada and Mexico, the USA has not required a large standing army to protect its borders, leaving more funds available for stimulating capitalistic endeavours.

    Significantly, major nations such as Russian and China also lack America's natural advantages. Russia, although large, suffers climatic conditions much more hostile to habitation and agriculture and it has no river network to allow for easy transport of products.

    Russia also has no meaningful external borders and has Europe on one side and China on the other. Because Russia lacks a decent internal transport network that can rapidly move armies from place to place, geography forces Russia to maintain massive standing armies on all of its borders to protect against external threats.

    China also faces significant hurdles. China's core is the farmland of the Yellow River basin in the north of the country, a river that is not readily navigable and is remark- ably flood prone. Simply avoiding periodic starvation requires a high level of state planning.

    China's geography also encourages separate development by various parts of the country so its rulers are constantly using carrots and sticks (in the form of cheap loans and a large army) to hold the place together.

    Europe has a number of rivers that are easily navigable, providing a wealth of trade and development opportunities. But none interlinks with the others, retarding political unification.

    Stratfor doesn't mention Australia or NZ but there are a number of lessons we can learn from its report. One is that Australia (wide, with lots of resources) is likely to be continually more successful than skinny little NZ. All our attempts to catch up with the lucky country's per capita income are doomed.

    For this reason among others, investors should look to put a sizeable portion of their money into Australia, then have a hard think about doing the same in the USA.

    © 2022 David McEwen, NZCity

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