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Freezing Temperatures, Blazing Economies - A Curious Connection?

Humans, as they have evolved, are hard-wired to assign some meaning or value to seemingly banal things. Among such things are pieces of metal or paper assumed to have exchange value. Money. Once only serving as a means to put food on the table, it is now becoming increasingly pervasive with each passing day. It influences not just how successful one is perceived to be or what car one drives but also factors leading up to global power dynamics.

As the world witnessed the Covid-19 Pandemic, the sky-high demand for vaccines led to a vaccine race, a cut-throat chase to the top. While certain ‘rich’ countries had their names at the top of the leaderboard, accumulating sizable amounts of vials from manufacturers early on; for months, ‘third world’ nations anxiously wondered when they would have a ‘shot’ at their first vaccination. The nations with their names at the top were the same ones that proudly don the ‘rich country’ label, boasting of a high HDI and GDP due to an array of causal factors like low population density and industrialisation. However, in terms of raw material and natural resources, one would feel that the picture should have ideally been upside down, as the countries now considered poor are in fact the ones blessed by Mother Nature. That being the case, what makes rich countries rich?

Countries that keep their cool

In a bid to explain what factors lead to the fiscal success of the crème de la crème of the global economy, an interesting observation was made by an Australian YouTube channel, Economics Explained. Developed countries experience colder climates, with all developed countries being situated outside the tropics. Considerable disparity is also found in a side by side comparison of the GDP per capita (PPP) of a developed country like the USA, at $63543.6, 7th in the world, and that of a developing one like India at $6454.3, 122nd in the world (World Bank, 2020).

Eccentric as it may seem, is there some undiscovered link between climate and economic development?

While the theory does apply to most of the countries, some evident exceptions stick out at the edges, proving that it is not infallible. Singapore, for instance, enjoys both a temperate climate and a high GDP. North Korea, contrarily, with its freezing climate and equally frozen economy, shows that between a favourable climate and politics, the latter wins. Another exception includes the gulf countries, where the mercury is rising and so is the GDP. Apart from these nations, if we were to pick a developing country and a developed one at random, putting them side by side, the picture would most probably bear an uncanny resemblance to the theory. Further, it is backed by statistics, showing that as we move closer to the tropics, the average income per capita somehow falls by 9%. Moreover, as the mercury drops by even one degree Celsius, the per capita GDP rises by $762. A peculiar pattern can be observed in most developed, cold countries; one that evokes the curious inquiry ‘Why are cold countries richer?’

Perform or Perish

The proponents of the theory attribute several causes to the rise of the frigid countries; the first of them being the prerequisites for survival. The tropical countries, being warm, were seen as the evident choice for human settlement and thus, saw the emergence of the first civilizations. Survival did not require one to accumulate large amounts of food or obtain wool to beat the biting cold. This is what caused these countries to be densely populated. Further away from the tropics, however, in what seems like a reiteration of the Darwinian survival of the fittest, inhabitants required greater planning and cooperation to survive. Those who were not or did not eventually become industrious to keep themselves warm were pushed into the warm embrace of death. Thus, for the cold countries, innovation was not a mere cherry on top of the cake; it served as their staple, keeping them alive, a day longer. The freezing temperatures made colder countries a no-no for mass settlements. This resulted in a sparse population with farmers owning larger areas of land and each one getting a bigger piece of the natural resource pie and eventually, substantial innovation from the Industrial revolution. Though third world countries were agrarian economies, the gigantic population meant that the natural resources had to be shared by numerous farmers. Lesser resources left hardly any room for infrastructure and the Industrial Revolution did not do much for these nations.


With the advent of the industrial revolution, the economic worth of a country was decided by how much the country produced and sold, with western countries taking the lead. Since colonial powers needed cheap raw material and spices, they had no option but to look eastward. This instigated the development of sea routes, bridging the gap between the west and the east. Markets were opened up, with smaller countries like England, having a huge market for textiles, spices and raw material obtained (read: looted) from India and other Asian colonies.

Many even blame the Columbian exchange of 1492, which brought mosquito-borne diseases to the tropical nations of South America, causing their economic decline. While the Maya and the Aztec flourished before 1492, the year brought with it diseases like dengue, malaria and yellow fever that sailed the seas with European ships and entered South America. Here again, climate favoured the colder countries where the cold would kill the mosquitoes. Japan, where the temperatures plummet during the winters, being the first non-western country to witness industrialization and not China or India, also underlines the effect of temperature on economics.


Since limited research has been conducted on the effect of temperature on economies, each one is free to either validate the theory or be skeptical of it. The general consensus stands divided, with some viewing it as an intriguing insight into the effect of temperature on economics and others, giving it the ‘cold’ shoulder, pun intended. According to the critics, the theory confuses correlation with causation. A cold climate happens to be one of the features characterising developed economies and is far from being the sole catalyst of their economic affluence. Eduardo Natalino Santos, a history professor at the University of Sāo Paulo, writes off the hypothesis, attributing it to the colonial narrative: "This model, in the 19th century’’, he says, ‘’saw itself as the apex of human evolution." Statistics, however, show that the r-squared value of this model (which, in this case, shows the extent to which the richness and poverty of a country are determined by the climate, as opposed to factors not considered by the model) is 0.09, which, though it seems minuscule, is actually quite a solid figure. Thus, based on this data, 9% of a country’s prosperity is dependent upon its climate.

Impact of Climate Change on GDP

The theory finds strong proponents in Marshall Burke, from Stanford University and Solomon Hsiang and Edward Miguel, from the University of California, Berkeley. Their paper, ‘Global Non-Linear Effect of Temperature on Economic Production’, highlights the effect of climate change on the economy. It begins with the premise that temperature has a non-linear effect on economic production. If the two variables are represented graphically, the curve would rise up to 55 degree Fahrenheit (around 12 degree Celsius) and then fall, as the temperature exceeds that limit. Thus, economic production declines as the temperature rises beyond a certain degree. This effect points towards some alarming consequences as the researchers further predict that by the year 2100, owing to lost productivity from climate change, 77% of countries will become poorer, with third world countries having it the hardest.


Though the theory seems quite far-fetched at first, research and real world data endow notable credibility to it, as it presents a drastically changed picture of the future economy. Philosophically speaking, the success story of the cold countries also explains how difficulties actually help us emerge stronger. Conversely, critics do have substantial reasons and exceptions to highlight, as they disregard climate as a make it or break it predictor of economic glory. With all that said, the hypothesis successfully proves that, though some theories may seem crazy at first, they deserve to be looked into, as they might as well be the next breakthrough we have been looking for.

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