Does the world become more prosperous when divided?
score:6
Ridley's argument as presented above is very simplistic. Fragmentation may sometimes lead to prosperity, but only if a number of other conditions are fulfilled. To my mind, these other conditions are more important and more interesting than the number of countries in the world, which seems incidental and arbitrary. Does Ridley think more fragmentation is always better, or are these diminishing returns when you reach the levels of the Holy Roman Empire? Is there something magical about our 195-some countries today, or would we for some reason be more prosperous if the U.S. split up into 50 countries?
What are some of these preconditions for prosperity among political fragmentation? For example, fragmentation of government does not lead to wealth if every minor baron demands a toll to use his road or float barrels down his river. This is grossly inefficient. The Roman Empire (which mind you, also had the revenue to invest in roads and other infrastructure) was more conducive to growth.
Political fragmentation can also lead to a lack of standardized currency, volatile exchange rates, and jealous attempts to protect domestic industry, all of which can slow growth. The United States' economy puttered under the Articles of Confederation, but started to prosper after the new Constitution sought further political integration of the states--which led to further economic integration. Note that it was the merchants of New England and the pro-growth Hamiltonians who wanted closer political integration in order to achieve economic integration.
Note also that governance can exist at many levels. The modern state system has been accompanied by a proliferation of trade-related international agreements. These often seek to harmonize domestic laws, establish international standards, standardize payment methods, protect property rights, tear down tariffs and customs. International political economy faces enormous pressures for coordinated governance at the highest levels--and that level of coordination appears all the higher when we consider the role of behemoth transnational corporations, which generate a "private" layer of world governance. It's unlikely that the modern economy could sustain such high levels of economic integration without these many, many public and private coordinating mechanisms.
TLDR: A fragmented world is conducive to growth in some ways (innovation; distribution of wealth) but deleterious in other ways (incompatible standards; higher barriers of trade). However, the fact that governance exists at subnational levels means that even very large political entities can enjoy great periods of economic growth and innovation; the fact that governance also exists at supranational levels means that even a world as fragmented as today's can enjoy the benefits of political integration. The number of countries is only loosely related to the quality of governance, and so it's better to write directly about the policies and institutions conducive to growth, trade, and innovation.
Upvote:2
Several counterexamples to this general statement can be given.
Spanish colonies in Central and South America are divided, and they are less advanced than the United States which united.
Roman empire in the first 2 centuries AD was the largest united state in the world, and also the most advanced.
Upvote:3
Based on that argument, the 57 countries comprising Africa should be more prosperous than they are. The division of Germany into East Germany & West Germany after World War II didn't make East Germany prosperous as West Germany became, prior to reunification of the two Germanies and likewise for North Korea after the division of Korea following the Korean War in the early 1950s.
Political leadership and the rule of a country and opportunities for personal advancement are significant factors.
Professor Niall Ferguson lists six 'killer apps' that made western countries prosperous:
- Competition
- Scientific revolution and innovation
- Property rights for everyone
- Modern Medicine
- The consumer society
- The work ethic
All are required for a country to be prosperous.
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