Geography report holds lesson for NZ investors

IONCE worked for a brief period in Tanzania, East Africa. At the time, the country was the fourth poorest in the world, despite having a wealth of base and precious metals and masses of fertile land.
One of the  biggest issues was a poor transport system. Most  roads were unpaved and seemed to consist of a series of potholes joined together by dirt. As a result, it was virtually impossible to move crops from the hinterland to the population centres on the coast, or to ports to be exported.
On the other hand, wealthy economies  such as the US and Europe have excellent transport networks. Where did that wealth come from and why do  many other countries not achieve it?
Political, economic, and military intelligence company Stratfor has looked into the geographical benefits of the world's largest countries and believes the US will always have the strongest economy.
The most important aspect of the US is not simply its sheer size, but the size of its usable land, which is much larger than any other country's.
As well, it has a fortuitous combination of an extensive river network in the midwest, and three of the world's largest and best natural harbours. The result is a free transport system that allows crops to be moved quickly to much of the country or overseas.
Thirdly, having neighbours who are less wealthy and powerful,  Canada and Mexico, the US has not required a large standing army to protect its borders, leaving more funds available for stimulating capitalistic endeavours.
Significantly, major nations such as Russian and China also lack  the US' natural advantages. Russia, although large, suffers climatic conditions much more hostile to habitation and agriculture and has no river network to allow for easy transport of products.
It also has no meaningful external borders and has Europe on one side and China on the other.
Because Russia lacks a decent internal transport network that can rapidly move armies if needed,  geography forces it to maintain massive standing armies on all  borders to protect against external threats.
China also faces  hurdles. Its core is the farmland of the Yellow River basin in the north, a river that is not readily navigable and is flood-prone.
Simply avoiding periodic starvation requires a high level of state planning.
China's geography has also encouraged separate development by various parts of the country, so its rulers are constantly using carrots and sticks (in the form of cheap loans and a large army) to hold the place together.
Europe has  rivers that are easily navigable, providing a wealth of trade and development opportunities. But they don't interlink,  retarding political unification.
Stratfor doesn't mention Australia or New Zealand   but we can learn lessons from its report. One is that Australia (wide, with lots of resources) is likely to be continually more successful than skinny little New Zealand. All our attempts to catch up with the lucky country's per capita income are doomed.
For this reason among others, investors should look to put a sizeable portion of their money into Australia, then  think about doing the same in the US.
David McEwen is chief investment officer of Investment Research Group.  View online: www.irg.co.nz. A free disclosure statement is available  on request.