Why are some countries rich and some poor? Why is wealth distributed unequally?

Oded Galore, a professor at Brown University and my latest guest on the Top Traders Unplugged podcast, believes we must go back to the beginning of human culture to find the answers.

His findings are good news for the United States and perhaps unwelcome news for its biggest competitor, China.

Galore is the founder of a new field of economics called uniform growth theory. It explores how ancient factors such as geography, culture, and diversity influence wealth inequality today. His new book, The Journey of Humanity: The Origins of Growth and Inequality, uses simple language and entertaining narratives to explain how this works.

The surprising and deep roots of cultural values

Galore reveals certain “cultural values” associated with economic prosperity. For example, cultures that value a “future-oriented” mindset tend to be wealthier because it emphasizes saving and planning. But where does this mentality come from?

It turns out that it reflects the geographical conditions that the founders of that culture faced. Herding cultures, especially those that grow crops like wheat and rice with long intervals between planting and harvesting, had to postpone consumption and make complex plans for the future. This focus on the importance of the future was then passed down through generations as a cultural value – even when their descendants long ago stopped farming.

In contrast, hunter-gatherers consumed their catch immediately, and thus did not develop the same future orientation. This does not make them “worse” than agricultural cultures, just different. But it is unlikely to thrive economically in the modern world where future-oriented activities such as saving and investing generate wealth.

Ancient geography influenced gender bias

Shadow of Geography covers other cultural values ​​that promote growth. In places that required a heavy plow to plow fields, cultures developed that emphasized the importance of men’s labor to provide income – because it was men who had the physical strength to manage the plow.

By contrast, in areas where the soil could be tilled with light equipment, men and women worked the fields together, and from these cultures arose that valued and encouraged both sexes to work. In today’s world, this translates to higher female participation in the workforce, which in turn leads to better economic outcomes long after the plows have been set aside.

Galore's book helps us see that the roots of cultural traits are deep, and that they travel with us through time and space. What happens when these trips cause different cultures to mingle? Is the diversity this creates beneficial for economic growth?

Economically, is there a "nice place" for diversity?

Galore uses Detroit to arrive at the answer.

In the 1920s Detroit was the "Paris of the West," with its streets lined with beautiful buildings and its economy driven by a nascent auto industry. Work in the automobile industry attracted a massive influx of African Americans from the South. There they mingled with a variety of white European cultures.

Galore writes: From this fusion of peoples and traditions emerged one of the eclectic developments of the twentieth century - rock and roll.

But also, prejudice and racial violence, culminating in a three-day race riot in 1943, which destroyed the lives and property of many African Americans. In terms of its impact on economic growth, diversification works both ways - it enhances creativity and innovation but reduces trust and cohesion.

Globally, this results in a mixed relationship between diversity and wealth. Initially, as the region becomes more diversified, its economic performance increases, culminating in a "sweet spot" where opposing forces balance out. Once diversity crosses this point, negative effects dominate, ending with poor outcomes. war. He cites Ethiopia as an example. It is one of the world's most ethnically and religiously diverse countries and has been mired in war for years.

Future prosperity will require more diversity

This spot of diversity has changed over time. In the Middle Ages, avoiding conflict - what Galore calls "social cohesion" - was more important than innovation. Now, innovation matters a lot more. In fact, according to Galore's scales, the level of diversity in the United States is currently close to optimal in terms of economic productivity.

This is bad news for China as the government still attaches importance to cohesion. The future will require more diversity to solve increasingly complex problems and design new technologies. Galore believes that China risks being left behind unless it can develop ways to encourage a culture that values ​​critical thinking and creative discord.

Does history = destiny?

Humanity's journey reveals the ancient roots of current economic conditions. Does this mean that history is "destiny"?

Galore says no.

Instead, he sees his job as creating a model that allows us to move away from a one-size-fits-all description of economic success. Instead, he believes, we can now design approaches to wealth creation that are specific to the region's history, culture and diversity. Understanding the path of our past travels will help chart a more prosperous future.