The Geography of Poverty and Wealth; March 2001; Scientific American Magazine; by Jeffrey D. Sachs, Andrew D. Mellinger and John L. Gallup; 6 Page(s)

Why are some countries stupendously rich and others horrendously poor? Social theorists have been captivated by this question since the late 18th century, when Scottish economist Adam Smith addressed the issue in his magisterial work The Wealth of Nations. Smith argued that the best prescription for prosperity is a free-market economy in which the government allows businesses substantial freedom to pursue profits. Over the past two centuries, Smith's hypothesis has been vindicated by the striking success of capitalist economies in North America, western Europe and East Asia and by the dismal failure of socialist planning in eastern Europe and the former Soviet Union.

Smith, however, made a second notable hypothesis: that the physical geography of a region can influence its economic performance. He contended that the economies of coastal regions, with their easy access to sea trade, usually outperform the economies of inland areas. Although most economists today follow Smith in linking prosperity with free markets, they have tended to neglect the role of geography. They implicitly assume that all parts of the world have the same prospects for economic growth and long-term development and that differences in performance are the result of differences in institutions. Our findings, based on newly available data and research methods, suggest otherwise. We have found strong evidence that geography plays an important role in shaping the distribution of world income and economic growth.