[josu]

>The second problem with the "free migration solves everything" hypothesis is that the wealth and health of a nation exist as a direct consequence of the existence of the barriers, both political and cultural, rather then some arbitrary geographic accident.

There is a very nice example in Spain, there are two autonomous regions next to each other (there isn't any kind of border): Cantabria and the Basque Country[1], the former has a GDP per capita of 20,855 euros while the latter one 29,683euros. The same language is spoken in both [2], and the cultural diferences are minimal.

The reason while wealth of nation exists nobody knows, and nobody may ever know.

[1] http://es.wikipedia.org/wiki/Anexo:Comunidades_y_ciudades_au... [2] While some government jobs may require being able to speak Basque, 2/3 of the Basque Country don't speak Basque, and there isn't any kind of discrimination.

[hibikir]

In that case, it's not very difficult: Bilbao is a better port than Santander by a significant margin, drastically better communications to Madrid and France, both road and rail, and more natural resources. Santander doesn't have much of a competitive advantage, and as such, does worse. Having a nationalist party in one, while not in the other, also makes a big difference in national investment too. You don't have to pay a lot of attention to see that infrastructure investment goes to different places depending on the government in charge. Cantabria is electorally unimportant, and no big politicians came from there, so good luck getting any investment.

It's also important to know that advantages and disadvantages carry over with time, so a place might be doing much better than another because of semi-arbitrary decisions over the years. Like why does Madrid do better than Toledo? Once the capital moves to Madrid, investment moves towards Madrid, and the one real reason they keep doing better it's this original investment, that brings people, which brings more investment.

Sometimes the differences aren't so arbitrary, but are down to bad bets. In the 1800s, Chicago bet on the power of Rail, St. Louis on the river. The river became less important, while rail became more important, so Chicago got way bigger.