I once recall David Friedman recalling that, despite constant warnings in the 1960s and 1970s about overpopulation leading to poverty, some of the richest countries in the world were the most population-dense. Yes, those warnings were largely useless in an urban setting, for countries like the Netherlands and Singapore of the 1960s. They were, however, quite reliable in a rural one, such as Bangladesh before 1990: when 18th-19th century writers (including Adam Smith) contrasted the high real wages of the Five Eyes with the mass poverty of Asia, they typically pointed to Asia’s population pressures (as well as poorer institutions). Lemin Wu suggests this vast gap in real wages between the Netherlands and eastern China from the 18th to the early 20th centuries is to be related to internal migration and relative prices of goods permitting subsistence consumption. But I won’t go there. In any case, this graph by Gregory Clark shows that the population=poverty equation held in a fairly strong form in Medieval-Early Modern England:

Note: from DeLong's blog, preserved here to not put eggs in many baskets.

Note: from DeLong’s blog, preserved here so as to not put eggs in many baskets.

As Acemoglu, Johnson, and Robinson pointed out (using admittedly dubious data), it was the most population-dense places in 1500 which became conquered by Europeans that were also the poorest in 2000 (the Philippines, which weren’t at all population-dense in 1500, unlike similarly presently rich Indonesia, is something of an outlier). Acemoglu, Johnson and Robinson correctly attribute this fact to the inferior (labor-extractive) institutions set up by the imperialists in the most population-dense places, such as Rwanda and Bangladesh, and the superior (land-extractive and capital-expansive) institutions set up by the imperialists in the least population-dense places they conquered, such as Uruguay, America, and Hong Kong. Indeed, this was also pointed out by Adam Smith in his comparison of Company Bengal with British North America. I’d also add, however, that most non-European races (the Chinese, who settled Singapore and Hong Kong, are an exception) are generally inferior at dealing with modern life compared with the Western European ones, especially collectively, and that this is likely largely genetic in nature (e.g., compare El Paso, Texas with Detroit, Michigan with Lincoln, Nebraska with Honolulu, Hawaii).

When I look at the future of much of the institutionally deficient world, I see Mauritania: not much richer than it was in 1970, but far more urbanized. This, I predict, is the future of such population-pressed lands as Senegal, Sudan, and Chad, but especially and above all, Niger (which, admittedly, has not urbanized much during the past thirty years, but let’s wait and see). It has certainly been the recent past of numerous Black African countries:

Urbanization

Of course, I may well be wrong in my prediction for some of these countries (perhaps, even Niger; there are some fertile areas there in the South): the Philippines offers us an example of an institutionally deficient country which is less than twice as rich and not substantially more urbanized than it was thirty years ago. This attachment to the soil may well be an issue in places with large areas of fertile soil, high population growth in the countryside, overcrowded cities, and little urban opportunity, all which the Philippines has plenty of. Egypt, almost exactly as urbanized as the Philippines in 1985, is still so today, and, indeed, is slightly less urbanized today than it was in the early 1980s, due to precisely these factors. Egypt’s real GDP per capita growth rate since 1985 has also been virtually identical to that of the Philippines.

Nevertheless, with the poorer nations growing rapidly in population, with a continued gap between urban and rural opportunities, with insufficiently fertile soil, and with limited area, the rising rural population in the Third World has to come to an end someday.

As agriculture becomes increasingly irrelevant to the world economy, the poorer nations will not undergo a manufacturing age. This will be not due to any physical impossibilities or the rise of China, but due to their institutional deficiencies. If the presently poor and de-industrializing nations were not institutionally deficient, they would have made their manufacturing sectors take off long ago, like South Korea and Taiwan did. The only way to make manufacturing as a percentage of GDP rise again in countries such as India or Zambia is massive institutional reform -and most of those nations don’t have what it takes to disentangle the built-up institutional crud they have accumulated since independence to do that.

It is quite certain that, due to the facts presented by Richard Florida and Dietz Vollrath, urbanization and GDP per capita will become increasingly uncorrelated as the decades roll on. While many of the economically stagnant nations continue to urbanize, there is simply no way a country can reach an urbanization rate of over 100%. This lack of correlation will be especially severe if, as in Mauritania, there is little difference between urban and rural productivity in a period of rapid urbanization in many poor countries. India also has a small difference between urban and rural productivity, though its urbanization is less rapid than Mauritania’s. However, there is little question that the urbanization process in China continues to strongly contribute to its economic growth and is not yet over. This, with rising Chinese urban real wages, will propel China’s ascent for decades to come.

So expect poverty to become more urban- with exceptions.

This is a pre-requisite for my upcoming post on North Korea.

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