To boost real estate values, and economies, just add water

July 15, 2015 admin

There are 45 landlocked countries in the world, and almost all of them are poor.

Yes, rich and largely landlocked Germany specializes in high-value manufacturing and has friendly euro zone neighbors who would never consider denying German exports unfettered access to shipping ports. And landlocked Switzerland prospers by specializing in finance, which has become an entirely digital, cloud-based business that travels the globe at speeds air, land and sea transporters could not even begin to fathom.

But these are exceptions. It is quite an irony that land is most valuable when it runs into the sea and, to a lesser extent, other water bodies. We gather on the beaches, on the coastlines, along navigable rivers and great lakes. We prosper as a result. Coastal countries of similar geography and composition with landlocked neighbors generate a GDP that is, on average, 40 percent higher, according to the Human Development Index.

The Economist has reported on the topic and had this to say: Landlocked countries’ “most obvious handicap is in moving goods to and from ports. International treaties promise access to the oceans, but responsibility for implementing them lies with the governments of the ‘transit states.’ They have little incentive to build infrastructure that would mainly help their neighbors.”

There are also the historical deficits endured by landlocked countries. Long before mass communication systems were invented, the flow of people and ideas that propelled innovation in maritime countries were slow to reach landlocked countries, if they reached them at all.

Even within U.S. borders, powerhouse state economies are found in California, Florida, New York and Texas, which have vast access to the sea, while low GSP (gross state product) states such as the Dakotas, Montana, Wyoming are basically waterless. (It should be noted, though, that some of the smallest GSPs belong to states with significant coastal access, including Alaska, Hawaii, Maine and Rhode Island.)

Also take into account the research of Peter Zeihan, author of The Accidental Superpower, which places enormous emphasis on the importance on the land/water combination. He argues that the United States is the world’s largest economy because its land mass is gushing with navigable rivers. Transporting goods by water is 12 times cheaper than by land, helping explain why human civilizations have always flourished along rivers. The United States has more miles of navigable waterways (17,600) than any other country. China and Germany each have about 2,000 miles of rivers suitable for shipping, and the entire Arab world has only 120 miles.

Clearly, dehydration tends to be bad for one’s economic health.

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MikeCfinalwebMike Consol is editor of Real Assets Adviser.

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