The results of the 2018 election in Italy reflected two main economic realities: the economic struggles in Italy relative to northern Europe, and the economic struggles in southern Italy relative to northern Italy. The former helped anti-establishment parties to gain a large share of the country’s vote. The latter resulted in Lega Nord and centre-right parties performing well throughout much of the north of Italy, and the 5-Star Movement performing well in the south of Italy.
In geopolitics, the school of thought that argues that geography is the most significant or fundamental element in politics, these two economic realities have the same obvious source: mountains. Italy and southern Europe are much more mountainous than northern Europe, and southern Italy is much more mountainous than northern Italy. Mountainous regions tend to be much poorer than non-mountainous regions. Italy is no exception.
The question most analysts are now asking is what the broader consequences of Italian politics will be. On the one hand, Italy is too big for Europe to bully. On the other hand, Italy is too big for Europe to ignore. I do not have any insight as to how one might succeed or fail at predicting the short-to-medium term financial outcomes of this political situation.
A question that analysts are not asking, though, is whether the geographic realities that are underpinning current Italian and European economics may change as a result of technological developments. To put it directly, will modern technology — the Internet, automation, etc.– alter the economic disparity between mountainous and non-mountainous areas?
If they were to do so, Italy would be in a far more advantageous position than it is today. Its internal economic disparities between north and south would shrink, while at the same it would likely be able to capitalize on its central position within the mountainous Mediterranean region. Its entire territory of 301,000 square km (84 percent as large as Germany’s, but with much greater proximity to the sea) and population of 61 million (74 percent as large as Germany’s) would suggest that Italy’s GDP might not, in the long run, remain as small (53 percent as large as Germany’s) as it is today. For this reason, if current politics cause Italian markets to turn negative, then long-term investment opportunities in Italy may grow.
So, will new technologies help the economies of mountainous areas to catch up with those of non-mountainous economies?
My suspicion is that they will. Companies like Google are now trying to develop technologies that will allow cheap, high-speed Internet to become accessible even in rural and mountainous areas. Logically, it seems plausible that mountainous areas would benefit from high-speed Internet more than non-mountainous areas, as the benefits of virtual accessibility may be more significant in areas where real, physical accessibility is low.
Automation may have a similar impact. If autonomous logistics facilities (warehousing, loading and unloading vehicles) allow for efficient intermodal cargo transportation, it could benefit geographies like Italy by making it easier to transfer goods between ships, railways, or large trucks (which do not operate well or at all in most mountainous areas) and small trucks (which do operate relatively well in mountainous areas, but are generally not efficient elsewhere).
And if transport vehicles themselves become autonomous, it could greatly increase the efficiency of using trucks, and particularly small trucks, and particularly small trucks operating in mountainous areas where speed limits are lower and safety risks are higher, as the labour costs involved in (especially small) trucking are far higher than in rail or sea transport.
In my view, the question of mountainous relative to non-mountainous areas may be the key long-term question in determining the north-south balance in Europe (just as the question of coastal relative to continental areas may be the key long-term question determining the east-west balance in Europe). Non-mountainous areas have performed extremely well economically during the past two centuries, presumably as a result of the spread of canals, railways, and highways, all of which are much better suited to flat landscapes than to mountainous ones.
But we should not assume that flat areas will continue to so outperform mountainous ones going forward. We should try not to lose sight of this long term question; it may ultimately be easier to answer than the questions about what will happen to Italian and European politics and markets in the shorter term.
With all due respect, it’s got absolutely nothing to do with mountains.
A couple of points here:
1. As you can see, northern Italy isn’t exactly flat. The wealthiest areas of Italy are often quite mountainous – some of the richest areas are in Aosta, Piedmont, Trentino, and upland Tuscany. Yes, the southern Appenines are poor, but so is a lot of the southern coast. Look at a GDP map of Italy – there’s very little correlation of altitude with wealth. To the extent that there is some, this seems to be an example of the general rule that border areas are poorer than capital areas, and border are often along mountain ridges – so, for instance, the mountainous ridge dividing Emilia-Romagna from Tuscany is poorer than either region as a whole. But you see the same phenomenon where borders don’t follow mountains – in this case, see the redder shades all around the border of Veneto, including the border with Emilia-Romagna, which is in the middle of a fertile plain.
2. Similarly, the richest areas of Germany are the southern mountains. The richest areas of Austria are the western mountains. The richest area of France outside of Paris is the Rhones-Alpes. Indeed, pretty much all the wealth in France outside Paris is concentrated in hilly areas – the flat, fertile plains of northern France are generally poor. The richest area of Spain outside Madrid and Barcelona is mountainous Navarre – and the hills of Galicia and Asturia are far wealthier than the broad river-valleys of Andalusia. The wealth distribution of the UK has no apparent connection to topography. The wealthiest area of Europe outside the Alps, not counting specific capital cities, is western Norway – extremely mountainous!
3. Similarly, if you look at the US: here’s a map of US per capita income. See how it lines up with altitudes? No, because it doesn’t. Indeed, often it lines up the wrong way – California’s poorest area is the central valley. Colorado is rich; Alabama isn’t. The poorest parts are the southern river plains. And you can even see how the appalachians form a band of, unexpectedly, wealth – at the micro level, the most remote appalachian areas may indeed be poorer, but at a larger level the hills, and particularly the piedmont around them, are actually wealthier on average than the plains on either side. [eg far western north Carolina, in the appalachians, is richer than eastern Kentucky just down the mountainside].
4. Going back to Europe, let’s look at the large scale: Here’s the distribution of GDP in Europe. As you can see, this doesn’t actually line up with topography at all. Wealth is essentially distributed in a north-south axis, unrelated to the east-west axis of most European mountains.
5. So if it isn’t mountains, what is it? Well, an obvious important factor is agriculture. It’s no surprise that southern Italy and Spain are poor: they’re arid. It’s no surprise the Padanian plain is rich: it’s the most fertile soil in Europe. This certainly doesn’t explain everything – the breadbaskets of France and Ukraine aren’t rich, for example, whereas the rocky islands of Britain are (although on the micro-level, the highest wealth in England does seem to track the cereal and cow-grazing areas, as opposed to sheep country). But it is probably a factor.
6. But the biggest factor is really clear from that GDP map. Because as anyone who knows European history can tell you, that map of GDP is basically a map of the Holy Roman Empire – minus centralised Bohemia and Brandenburg, and plus western Scandinavia and Britain.
Why is this? Well, that’s basically another way of saying “Germanic” (northern Italy was culturally heavily influenced by first the Goths and then the Lombards, and was under the control of Germanic nations until the 19th century). Now of course, I’m not saying it’s due to race, or language. But what I am saying is: look at Germanic inheritence patterns. Traditionally, Germanic land-owners divided their territory between their children on their death (the old ‘King Lear’ tactic). Traditionally, most of the rest of Europe largely followed primogeniture – land went to the eldest, and more generally inheritence laws tended to favour reconsolidation, whereas Germanic land tended not to revert to the senior branch until the last possible instance.
What was the consequence? Well, look at a political map of European history. Charles divided his empire between his sons – one got France, and one got Germany (another got northern Italy, but that part of the empire tended to get subsumed by the others). France more or less remained France: a core of France always remained, losing control only of a few big chunks (most notably Burgundy) that it eventually reclaimed. But Germany? Germany rapidly exploded. Heir after heir broke up their territory between their children, and everything went all exponential. Maps stop showing the different polities of Germany and just show the outline of the HRE, because there were THOUSANDS of independent countries there at one point.
Why does that matter? Probably because the economics of big and small countries is different. Big empires and kingdoms tended to have two features: one, they had a powerful class of landowners who were often able to outvote the kings; and two, they tended to centralise their wealth in the royal seat – Paris, or Madrid, or St Petersburg, or Istanbul. Those cities thrived and grew, but the rest of the country often didn’t – wealth was sucked up everywhere through the landlords, funnelled into the court and the crown, and dropped down where the court lived.
In smaller countries, that cycle was less ‘efficient’ – the ‘capital’ was smaller and closer to the ‘periphery’. When the local count only controls the local valley, and has his castle in that valley, money never gets far from where it starts out; but when the count lives in Paris, the local money goes all the way to Paris. Similarly, when the territory is smaller, land-holding is smaller, and it’s harder to support a rentier class – landowners find it harder to consolidate across political borders (even when they do so in theory, they often have to delegate power and wealth to local representatives). More wealth thus tends to reside with city corporations, guilds, local gentry, merchants and private farmers – and less with mega-rich aristocracy. [The most extreme form of this was in the mountains of Switzerland.]
[Britain was sort of a halfway state. It was theoretically centralised. But for most of its history the king struggled to maintain control over local potentates, who in turn had less power over their populace. The king in England was far weaker vis a vis the nobles than the king in France (compare the powers of the relevant parliaments!), and likewise ordinary farmers and townspeople had far more rights than their French equivalents. The same can largely be said of Scandinavia, at least until the rise of the centralised monarchy in Sweden (and then, consider the differences in the early constitutions of absolutist Sweden with liberal Norway!)]
In turn, this has two effects. One is that the lack of political centralisation made it harder to exert ideological control, which lead to more innovation. Look at the spread of printing, Protestantism, and peasant revolts in those fractured areas. [yes, Italy is all Catholic now; but northern Italy had a large protestant minority for a long time; Venice was a hotbed of Protestantism early on].
The other is that the lack of economic centralisation impaired the development of big cities, but encouraged the development of smaller towns. These were more dependent on merchants and craftsmen than on court patronage, and were frequently controlled by guilds. This encouraged both competition between towns, and economic co-operation through trade.
The end result of this is that the part of Europe formerly controlled by petty barons, counts and dukes – from the city-states of northern Italy up to the Hanseatic league in the north – plus the relatively weak and fractured monarchies of Britain and western Scandinavia – developed an innovative and competitive, geographically and socioeconomically decentralised, generally liberal economic and political culture. Those areas now have high GDPs.
Meanwhile, the areas controlled by the great, centralised kingdoms – Portugal, Spain (note that independent Navarre and traditionally autonomous Catalonia are the richest areas!), France (note that the richest area outside Paris is the old independent Duchy of Savoy – part of the HRE), the Two Siciles (/Naples), Poland-Lithuania, Russia, Wallachia, Hungary, and the Ottoman Empire – developed a more conservative, absolutist, aristocratic culture. They now largely have, to varying degrees, lower GDPS, with the exception sometimes of their traditional capital areas.
Certainly, inheritence law isn’t the only factor in European economic history. The role of the late age of marriage in western europe after the black death also can’t be discounted, for instance (and specifically is relevent to the north/south divide in Italy). I mean, for one really simple map, just look at this map of the main Hajnal line and excluded areas, which is a pretty good foundation for any economic map of Europe today. [the red line is the Hajnal line. West of the Hajnal line, in late mediaeval and early modern europe, women married late, often never married, and had few children. East of the Hajnal line, they married early, almost always married, and had many children. Areas that had remained under Islamic control longest, in southern Italy and Spain, lay west of the line but were ‘eastern’ in pattern, as were ‘barbaric’ Finland and Ireland.]
But I think it’s a much, much better explanation than “mountains”. Particularly given how much European wealth is concentrated in the Alps and their foothills…
Hmmm. Those are all great points, and I had never heard of the Hajnal line, so you’ve given me a lot to think about. I will concede that my point of view here may be incorrect, or at least less correct than I had thought. But I’d still like to cling to it for as long as I can, so I’m going to try to rebut some of the points you made, and try to clarify what my view really is.
First off, I’d say that the key point about mountains isn’t altitude, it’s accessibility. The two correlate, but they do not correlate anywhere near 100%. A highland region next to a key mountain pass — including examples you mentioned, like Tuscany or Savoy or Denver or Austria — can have a highly accessible position to capitalize on, in spite of altitude.
In the opposite way, a place like Andalusia, being relatively inaccessible to or from the wealth of northern Europe (because of a series of intervening mountain ranges and canyon river valleys, including the Pyrenees, which are much less passable than the Alps), is in a much more difficult position despite Andalusia’s having relatively large (by Spanish standards) coastal lowlands. Plus, in warmer latitudes, a higher altitude area can be a boon in terms of climate.
From an accessibility point of view, the key fact of Europe is perhaps that the Alps are passable. This means that the large, mostly flat region including the North Sea coastlands, the German interior lands, northern Italy, and perhaps to a lesser extent places like Catalonia and parts of Eastern Europe, can form a vast economy of scale. For Southern Italy to access this economy of scale, it has to cross a series of mountains and valleys.
(And, unlike Norway, which is also a peripheral mountain region, southern Italy does not have a combination of extreme resource wealth, extreme maritime accessibility via fjord harbours, a tiny population among which to share the wealth, and easy access from Oslo to Sweden and Denmark).
Finally, I don’t think your points about the relative poverty of the California Central Valley or flat areas of northern France disprove the geographical view of things. I think of it as sort of being like that the wealth of the Central Valley or France’s North European Plain has pooled in individual parts of those flatlands — notably, in the Bay Area, in Paris, in Los Angeles just across the mountains at the southern exit to the Valley. But if you consider the Valley as a whole, counting not only the poorer interior areas of the Valley but also San Francisco, then the wealth of population and economic activity that is facilitated by that very large, very flat, very well-located valley is immense. And if you count Paris, then the wealth of France’s flatlands is immense too.
And even from a historical perspective, perhaps it was the geography that helped condition France to be more politically centralized as compared to Britain or Germany. Europe. A much larger share of France’s land is part of a single, flat plain in France than in Britain or Germany. And a much smaller share of France’s land is coastal than in Britain, so France’s territories would have had a more difficult time engaging with the outside world independent of Paris than Britain’s would independent of London.