Constraints to Progress (part 1): Geography, Culture and Monopolies

This is the first post for an ongoing series about constraints to progress.

In previous posts, I have argued that progress has been highly localized. Progress began in very few geographical areas where people lived in a social environment that was most conducive to the innovating and copying of technologies, skills and social organizations. Progress then diffused to wherever people are willing to copy what works.

To be more specific, progress originated in the commercial city/states of northern Italy during the Renaissance and then diffused to modern-day Belgium, Netherlands and southeast England. These societies invented the Four Keys to Progress, which enabled their societies to evolve into vast decentralized problem-solving networks.

With the Industrial Revolution, progress then radically accelerated and spread to the rest of Europe, North America, Oceania and later Japan. Within the last thirty years, progress has spread through most of the rest of world with the most progress occurring in East and South Asia. Even Sub-Saharan Africa has seen remarkable progress over the last 20 years.

This remarkable diffusion of progress throughout the world does not mean that progress automatically and easily spreads. There have been and still are a number of major constraints on the diffusion of progress.

In previous generations, the two most important constraints to progress were:

  • Geographical constraints on food production that limited the type and amount of food that society could produce. Those constraints on food production placed fundamental limits on which types of societies could evolve.
  • Extractive institutions in Agrarian societies that diverted the food surplus towards increasing the income and status of elites who controlled those institutions.

I have already discussed the first two constraints in previous posts. There are, however, other constraints to progress that still exist today. Among the most important are:

  • Geographical distance
  • Cultural distance
  • Monopolies
  • The legacy of society types
  • Ethnic/religious/racial identities
  • Ideologies that promote class, ethnic, religious or racial resentments.

In this series of posts, I will focus on these other constraints to progress.

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. The development of North America and South America before the arrival of Europeans was seriously constrained by a lack of contact with more complex Eurasian societies. The same can be said for Sub-Saharan Africa, New Guinea and Australia. It is very 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, so 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 together.

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 far removed 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 the Scots, but the English are more culturally similar to the distant Australians and New Zealanders than to the nearby French. The reason, of course, was the mass immigration of British to Australia and New Zealand.

But how does one measure cultural distance? One method is to list out all the characteristics of every culture and compare them to each other, but this would be extremely time-consuming and very subject to interpretation. Inevitably, researchers would disagree as to which characteristics to include and how important each one of them is compared to each 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 the time that two peoples have lived since their last common ancestor, the more different their cultures.

It is important to point out that this method does not assume that genes create culture and that culture is immutable. Genetic sequencing is merely a convenient method to measure genetic distance, and there is strong reason to believe that genetic distance and cultural distance are closely related.

In an article entitled “The 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 interesting, 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 distance but culturally close nation), but much slower 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. Clearly, cultural differences have played a very important role in hindering diffusion of innovation. In 1870, the peak of the Industrial Revolution, the effect increased to 80%. Cultures who 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 then could be in turn copied by other nations that were culturally similar. Japan in East Asia played a particularly important role in this regard. Japan is culturally similar to neighboring Korea and China, so those nations were far more willing to copy Japan than they were to copy Europe directly.

Note that cultural distance is not just a barrier to diffusion; it is also a local accelerator. If an innovation takes place among one’s own 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. Over all, culture tends to retard diffusion.

Progress follows cultural pathways.

Monopolies

In a previous post, 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 end 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.

Every organization would prefer to be a monopoly. Being a monopoly creates a steady stream of revenue without the need for unsettling change. Monopolies create a very 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 up 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 very 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 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 do not deliver benefits to society, this will tend to stifle progress.

In future posts, I will write about the other constraints to modern progress:

  • The legacy of society types
  • Ethnic/religious/racial identities
  • Ideologies that promote class, ethnic, religious or racial resentments.

If you would like to learn more about this or other related topics, read my book From Poverty to Progress.

ABOUT THE AUTHOR:

Michael Magoon is the author of the “From Poverty to Progress” series of books. The first book in the series is already published with many more to follow.

The writings above are under the same copyright as the main book “From Poverty to Progress”
Copyright © 2021 Michael Magoon

2 thoughts on “Constraints to Progress (part 1): Geography, Culture and Monopolies

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