My apologies for the bad scanning job; the above graph is taken from Douglass C. North, Understanding the Process of Economic Change (Princeton: Princeton University Press, 2005), p. 95.
One of the dominant “sides” in the debate within development economics argues that a, or the, major determinant of the relative wealth of nations is geography. One of the most popular works associated with the “geography argument” is Jared Diamond’s 1997 book Guns, Germs, and Steel. Without getting into detail, the underlying thesis is that geography, a long with things that come with geography — disease, evolutionary traits unique to particular geographies, et cetera —, dictates, to a considerable extent, the position a society is in to achieve a certain level of development. At least, the argument helps explain why certain societies achieved substantial economic progress while others seemingly stagnated. The “geography argument,” though, is not without its critics, including, notably, Daron Acemoglu and James Robinson in their 2012 contribution, Why Nations Fail.
The graph reproduced above, I think, provides some evidence against the geography argument. At the very least, it lends some evidence towards eroding the explanatory power attached to geography. Geography should impact societies from the very beginning, although geography can change. As such, we should see divergences between different societies from very early on, rather than just following the 18th century. What we see is the exact opposite. In fact, the graph above provides quite a bit of visual evidence in favor of the institutional argument (although, North does favorably cite Diamond, suggestive of the fact that the two can be complimentary theories), as we see the beginnings of the bifurcation between developed and undeveloped during the period in time that several European polities began developing the institutions that would lead to market success.
Of course, someone could make the argument that it is geographic features which make the difference in deciding which societies develop the right institutions. I see some merit in the argument, but I’m not entirely convinced. Also, I thought that geography has more explanatory power when applied to early human societies, as developments in trade should mitigate physical disadvantages. But, the graph above suggests that the geography argument has very little explanatory power for early human development, since societies were more-or-less equally “well off” prior to c. 1000 C.E. In reality, social change is multicausal, but the direction of the debate and the evidence points to the decreasing relevance of “geography” in explaining the wealth of nations.