Archive for March 2012
I remember well my first interview as a student journalist for Die Matie Student Newspaper. My first visit to the vice-chancellor’s office, I was a nervous ball of energy, as I – a first-year – had to interview professor Andreas van Wyk after nine turbulent years at the helm. Asked a question about Stellenbosch’s role in the rest of Africa, he answered, ‘it’s a delicate balancing act’, which we also used as the article head. In fact, twelve years later, this remains the most apt phrase to explain Stellenbosch’s continuous struggle with The Language Issue.
‘Afrikaans is under threat’, proclaims one group, either from government (the usual suspect), or from management (which don’t provide enough ‘support‘), or from English-speaking black and white – to misquote Helen Zille – ‘refugees’ who find the tertiary institutions in their own provinces of too low quality. Or who find (and who would deny them?) the Stellenbosch academic, cultural and natural environment simply irresistible. On the other side, the pro-English constituency point out that Stellenbosch’s reputation as an academic institution of excellence is built on the foundations of the Apartheid system, allowing Afrikaans to develop as an academic language which benefited predominantly white, Afrikaans-speakers and excluded most of the black population. If it continues to teach only in Afrikaans, Stellenbosch will remain a place of white refuge, an Afrikaner bastion, a visual reminder of the South Africa of the twentieth century. There is simply no place in the new South Africa for a quality tertiary establishment that exclude the majority of black South Africans, they argue.
Both sides, of course, embody only elements of the truth. The move to English is undeniable. Afrikaans is officially the default language of instruction at undergraduate level, while English is used predominantly at the postgraduate level. In the Economics department where I teach, parallel medium (instruction in English and Afrikaans in separate classes) is standard practice for first-year students, and in a 2011 decision by the Faculty of Economic and Management Sciences, parallel medium instruction (in Economics) will be available for the full undergraduate degree in 2014. (Currently, lecturers are required to teach in Afrikaans but often follow the T-option, using both English and Afrikaans in the same classroom.) This shift is no ideological Rubicon moment by the Rector or any of his employees; instead, I argue, this is a pragmatic (sub-optimal) solution to the forces of the market. Let me explain.
Any market is shaped by supply and demand. On the demand side, in order to be the best university in South Africa, Stellenbosch hopes to attract the best learners from the best high schools in the country. Before 1994 (and even before 2000), most of these students would have come from privileged Afrikaans High Schools. Many still do, but the numbers are changing fast. International borders are also opening rapidly: Stellenbosch hosts more than 3800 students from other countries in 2012, and these numbers have increased at exponential rates since the early 2000s. In short: Stellenbosch is becoming an international university, non-Western Cape and non-South African students attracted by the high academic standards, diverse cultural mix, and beautiful surroundings. This globalisation of our campus has enormous economic, cultural and social benefits for our clients, the students. Our region also benefits from the financial stimulus; in an earlier paper Emile du Plessis calculates the economic gains from visiting international students to several million rand (depending on the multiplier used). Foreigners are also more likely to engage in community outreach programmes, and more likely to build networks that result in positive externalities.
Stellenbosch has just joined the list of the top 500 universities in the world. In a globalised marketplace, this ranking is dependent on us providing exceptional services to our clients, both as teaching as well as research outputs. To do quality research, Stellenbosch must find, employ and be able to hold on to the best researchers, regardless of their mother tongue. With the European crisis, for example, Stellenbosch is becoming a lucrative opportunity for young exceptional researchers that cannot find employment in the developed world. A language policy that inhibits the appointment of such scholars, will also inhibit Stellenbosch’s ability to compete with other top international institutions – and, after a while, even other South African universities.
These market forces are pushing Afrikaans into the margins of undergraduate teaching. But that certainly doesn’t mean that Stellenbosch will not retain its Afrikaans character. The Woordfees continues to expand (there is little correlation between undergraduate teaching and this festival’s success, for example). Varsity Cup rugby at Coetzenburg is very much an Afrikaans affair. There is also no reason that the university could not support other “cultural” activities run by the SRC, or extra Afrikaans classes (already popular with foreign students). There is no reason why Litnet Akademie will not continue to see a rise in Afrikaans paper submissions, or the Akademie vir Wetenskap en Kuns not continue to reward excellent Afrikaans scientists.
The cost of fighting this unstoppable force, though, is high. Already, my Faculty will need to spend several millions of rand extra to teach parallel classes to groups of 40 students that can easily fit into a single class. Resources will thus be diverted from its main objective of supporting science (not scientific language). Stellenbosch will remain a good university (at least in comparison to other South African universities), but won’t be able to compete with the best internationally. We have this exceptional opportunity to be a gateway into Africa and a gateway for Africans into the wider world; viewed differently, an opportunity to welcome the world in Afrikaans rather than to isolate ourselves because of it. Indeed a delicate balancing act.
As Andreas van Wyk mentioned in his interview, the international academic language today is English. To compete for the best students and staff members, Stellenbosch will have to adopt it as language of instruction if it is to remain competitive. Not from government pressure, but because of market forces. That doesn’t mean that Afrikaans will die. Instead, I believe, it will continue to flourish in unforeseen, ironic spaces. Look at the remarkable success of Afrikaans music and movies and festivals. Consider Kobus Galloway’s Idees Vol Vrees (image above). Afrikaans will not survive because it is being taught at undergraduate level to a bunch of Afrikaans kids in separate classes. It will survive because it is beautiful, friendly, versatile and fun. Lekker, rather than lectured.
A lot has been written about the negative consequences of the slave trades, both for the origin regions (Nunn 2008) and for their destinations (Engerman and Sokoloff 2011; Fourie 2011). But investigating slavery can add to our understanding of economic theory: Suresh Naidu, for example, use newspaper reports of runaway slaves in the United States to argue that the weak enforcement of property rights in people (i.e. slavery) discouraged investment in slaves and encouraged investment in manufacturing and infrastructure. Instead of the traditional link between strong property rights and economic growth, Naidu’s research suggests that the weak enforcement of “bad” property rights can also lead to a favourable long-run outcome. Listen to him here.
In a recent ERSA Working Paper, Joerg Baten and I have a slightly different aim: we want to know what the levels of comparative eighteenth century development was like for different Indian Ocean regions. Slave records usually reveal very little useful information that allow economic historians to ascertain relative standards of living of the countries slaves originate from. Heights have been used as the most reliable proxy (Steckel 1995), but is often only available for the US South whose slaves originate from the West Coast of Africa. (I visited Dakar in 2007. Both pictures were taken on the island of Goreé, entrepot of the early slave trade off the coast of Dakar, Senegal. The top picture is of a window in a slave house, the one below of the monument marking the abolition of slavery).
Joerg and I use a novel technique known as age heaping to ascertain differences in the levels of human capital (education) of the slaves brought before the Cape Courts of Justice. Cape inhabitants did not only include slaves from other African regions (Mozambique and Madagascar) and several Indian Ocean countries (modern India, Malaysia, Indonesia, and even China), but also included the native Khoe and San and European settlers. This hodgepodge of individuals allows for a unique comparison between contemporaneous levels of 18th century development across three continents.
We find high levels of numeracy for European settlers at the Cape Colony, similar to their counterparts in the regions of origin in Holland and northwestern Germany. Yet, the most revealing results are for eighteenth century slaves of various origins. Slaves from India, Indonesia and Mozambique had significantly lower levels of numeracy than slaves born in the Cape Colony, while Chinese slaves performed slightly better (although sample size issues may be problematic). Formal education in the slave lodge, imitation behaviour and, perhaps, better nutritional status may explain the relatively better performance of locally born slaves. The lower numeracy scores towards the end of the eighteenth century reflect a change in international trade patterns, with new trade routes and slave middlemen being responsible for the selectivity bias. Perhaps surprisingly the native Khoesan did not perform significantly differently from Cape-born slaves, although a sharp fall in their numeracy-levels is found for the period following their integration into the settler economy.
Such records, techniques and results begin to open a window into a richly textured world previously hidden from our view.
I spent most of the second half of 2010 in a small apartment in Utrecht calculating the average level of wealth of the settlers of the Dutch Cape Colony, the result of which is now – 18 months later – available as an ERSA Working Paper. So why have I spent the last two years calculating the average ownership levels of settler households that have long since disappeared? What contribution can such historical research make to the very important issues, such as poverty, inequality and unemployment, that face the developing world today? In short, has this research any policy relevance?
As you might imagine, I’ve asked these questions several times to myself, not always able to provide a satisfactory answer. In short, I guess, the answer is ‘not much’: there is little direct link between 300-year old inventories and modern policy debates. But, rereading the paper once more last night, I think I’ve perhaps shed some light on the trade-offs that any developing society face between short-term gains and longer-term productivity and growth. Let me explain.
Until recently, the eighteenth-century Dutch Cape Colony was seen as an ‘economic and social backwater’, ‘more of a static than progressing community’, a slave-based subsistence economy that ‘advanced with almost extreme slowness’. The view is that while pockets of wealth did emerge close to Cape Town during the century, this relative affluence was overshadowed by the increasing poverty of the frontier farmer who, ‘living for the most part in isolated homesteads, gained a scanty subsistence by the pastoral industry and hunting’. In the most recent Economic History of South Africa, Charles Feinstein, for example, relegates a discussion of the Cape Colony in the period under Dutch rule to just three pages of his 250-page volume, concluding that before the 1870s ‘markets were small, conditions difficult and progress slow’.
This view is somewhat ameliorated by recent contributions by economic historians, the most prominent of these being the quantitative contributions of Ross and Brunt. More recently, Du Plessis and Du Plessis and De Zwart, using wage and price data, show that the Cape settlers enjoyed a high, and improving, living standard compared to many of their counterparts in Europe or the new settler economies of North America. These studies support the claim that the Cape was more dynamic and prosperous than previously envisaged. Yet the generally accepted view of the Dutch Cape Colony is still that it was a disparate society, as Leonard Guelke succinctly notes: ‘At the top of the European population was a pocket of rich farmers with large estates and many slaves’, while ‘the average hard-working farmer could only with some effort eke out a subsistence living’.
I use 2,577 newly digitized Cape household probate inventories, which are detailed lists of settlers’ household assets at death, and auction rolls to show that the average Cape settler attained higher standards of living than mere subsistence. In fact, these records reveal a society that is comparable to some of the most prosperous regions of eighteenth-century England and Holland. The Blettermanhuis (pictured), part of the Stellenbosch Museum, is a good visual guide to the prosperity of this period. The view of the Cape as a ‘social and economic backwater’, I argue, needs revision.
The relatively high level of early Cape wealth that I find raises a number of intriguing questions about its causes and consequences. What enabled poor immigrants to prosper so quickly after settlement? Willem H. Boshoff and I (2010) show that the strong demand for Cape products by ship traffic in Table Bay drove agricultural production, while Dieter von Fintel and I (2011) show how the viticulture skills of the French Huguenots boosted the output of wine production. Company support for emerging farmers – through generous loans and lowering input costs (notably of labour through importing slaves) – certainly also played a role.
But what of the consequences? Why did early settler prosperity not translate into an affluent nineteenth-century Cape economy? One answer that has been suggested is that the substitution of slave labour for wage labour at the start of the eighteenth century enabled rapid short-run productivity increases, driving the high levels of wealth reported above (see Fourie 2012). But these advantages were short-lived. Slavery created growth-debilitating institutions; Sokoloff and Engerman point to the high levels of inequality (even among the settler population) as indicative of a lower future development trajectory. Also, as Adam Smith noted, slaves have little incentive to innovate, nor have farmers with cheap access to labour. Instead of investing in technologically innovative capital goods, the settlers invested their surplus in slaves.
What is clear from our early history – and links well with economic theory – is that productivity improvement is what drives development. One obvious way to improve productivity, like Smith proposes for his pin factory, is to augment labour with capital, to give workers tools and equipment and skills. To enjoy consistent growth, continuous investment in innovation, technology and education is required.
South African economic policy emphasizes labour-intensive production, primarily sectors that create large amounts of unskilled jobs. But the Cape Colony shows that a society that incentivise unskilled jobs over physical or human capital may lead to a highly stratified society (settler versus slave), with the affluent enjoying high standards of living (as my paper shows), but where the society have few prospects of economic growth. While I find remarkable levels of wealth for the small group of Cape settlers of the eighteenth century, these settler households lacked incentives that would drive productivity-enhancing technological investment – why would you if you could enjoy high living standards (including lots of leisure). The decision to import slaves vis-a-vis European labour or even capital equipment was rational as it yielded immediate gains (to the settlers), but in the long-run this decision would backfire, resulting in a society with lower growth potential and, for most of the early nineteenth century, stagnation. As John X. Merriman would note a century later, the development of the Cape might have been very different had the Company (who decided to import slaves) considered the long-run view.
Like my few months in a small Utrecht apartment, sometimes the long-run rewards are worth the short-run sacrifices.
I read Nicholas Crafts’ ‘Economic History Matters‘ last night again. (This essay will appear in the special conference issue of Economic History of Developing Regions prepared for the World Economic History Congress 2012 to be held in Stellenbosch from 9-13 July.)
What struck me was his emphasis on the unique contribution economic historians can make to understanding economic growth (or the lack there-of), and which policies ignite or contract growth. He notes the example of Japan:
If continual reform is needed to achieve full catch-up, it is very possible that countries find catch-up easy to start but difficult to complete. Japan, where catch-up of the United States stalled 20 years ago, epitomizes this problem (Chen, 2008). Idiosyncratic features of the Japanese economy such as lifetime employment, the main bank system, business groups, industrial policy, and the absence of competition in non-tradables were no longer advantageous in the 1990s but were hard to reform (Ito, 1996). This suggests that predictions of catch-up and convergence of China with the United States – which is taken to be a done deal by the general public – might be viewed sceptically by economic historians. Similarly, the projections of future catch-up by the so-called BRICs economies, popularized by Goldman Sachs (Wilson and Purushothaman, 2003), have a mechanistic flavour which abstracts from the political economy of development. Exploring the sustainability of catch-up growth processes in the light of historical experience is an area where economic historians have important insights to offer.
In short: be less optimistic about the long run growth prospects of BRICS or, at the very least, about theirs being a homogenous experience. Catch-up is not simply following a widely known blueprint, as the disgruntlement with the Washington Consensus has shown. Incidentally, Crafts in another 2011 paper argues that the original Washington Consensus has much in common with the Marshall Plan which famously helped Europe recover rapidly after the Second World War. Proof, again, that what might be very successful economic policy in one period, may be totally ineffectual at another time.
Theory and evidence often don’t overlap. Endogenous growth theory allows us to investigate the fundamental causes of growth (improving human capital, for example), but country-level economic histories shows that good-intentioned policies may sometimes have less than great outcomes, their success ruined by (the interaction of) idiosyncratic domestic factors (Japans culture of life-time employment, for example) or exogenous external shocks (the international economic environment or climate change). Perhaps another truism we should reflect on is that, apart from institutions and history, timing matters. This makes economic history such an ambivalent science, and transforms economic policy-making from formulae to art.
When we talk about tourists in South Africa, we tend to think of uppish Northern Europeans and loud Americans. We might also think of large groups of Japanese or Chinese tourists exhibiting Sony’s technological frontier. In a recent working paper, María Santana-Gallego and I argue that this view is only half-true: African tourists are an important component of South African tourism statistics and that this is a potentially large export market for South African travel services (see figure, showing Africans as proportion of total tourist arrivals).
We use a standard panel gravity equation of 175 origin/destination countries between 1995 and 2008, 37 of which are African, to identify the factors that drive African-inbound (arrivals to Africa from other continents) and within-African tourism (arrivals from and to an African country). The determinants of African-inbound and within-African tourism are fundamentally not all that different from global tourism flows; repeat tourism, income, distance, land area and the standard dummy variables (such as language, border and colonial effects) not only drives global or OECD tourism, but also tourism within Africa.
Given the proximity of other African countries to South Africa, and the rapid rise in African incomes, don’t be surprised if, over the next few years, other tourism stereotypes emerge: the African businessman, African shopper or African happy-snapper on safari in Kruger.
Does COSATU really care about the poor? If you read between the lines in Francis Teal’s latest CSAE blog post, the answer is a definitive no. He argues that labour unions – in the spirit of the International Labour Organisation – claims to fight for “decent jobs” for poor people. It sounds noble, but it has the effect that only “the lucky (well-educated) few who get these good jobs” benefit at the cost of the rest. These capital-intensive “decent jobs” could have benefited millions more. He cites South Africa as prime example: while the country “has by far the largest number of decent jobs in sub-Saharan Africa, it also has one of the highest unemployment rates in the world.”
Instead, consider Ghana. Poverty levels have fallen dramatically, mostly as a consequence of what Teal labels “bad jobs”, i.e. jobs that “paid poorly, had no security, weren’t unionised (unlike those in South Africa) and provided a very volatile income stream”. However, they reduced poverty because they could be rolled out to many more individuals who still found them an improvement on what was previously available to them.
Ironically, COSATU knows this. In a speech early in 2011, Vavi noted “the creation of decent jobs must be central to any strategy to get rid of poverty. To the individual, employment not only brings an income but self-respect, self-confidence and personal dignity. To society, lower unemployment brings more people into the market economy as they spend their wages on goods and services, which in turn creates more new jobs to meet the growing demand.” Vavi also knows the answer to this dilemma: “The main reason why we have failed to create such jobs, and on the contrary have been losing jobs, is that we have remained trapped in an economic structure which we inherited from the days of colonialism and apartheid.”
Correct. Ignoring the political benefits of trade unions, their rise during the 1970s imposed a high wage structure on the economy that is responsible for the high unemployment rate. (Of course, the high wage levels can be justified if human capital improves, increasing productivity. But given South Africa’s sorry state of education, this has not happened.) COSATU is a trade union and it is their obligation to fight for the rights of their members, which they say now total 2 million. It is, never was and never should be their duty to care about the unemployed. If it was, they could not respect the wishes of their members.
The truth is that South Africa’s stringent labour laws and high wage structure is the cause of our high unemployment. High unemployment is the cause of poverty. If you want to reduce poverty, as Francis Teal explains, ignore COSATU’s call for “decent jobs” (and high wages). Any job will do.
In a recent NBER Working Paper, Nathan Nunn explains why economists need to (re)consider culture as causal explanation for a country’s economic performance. Historical shocks, such as the adoption of plough agriculture, the slave trade, or missionary activities, he argues, affects culture, and culture affects economic activity. In the spirit of Acemoglu, Johnson and Robinson, Nunn suggests that culture (instead of institutions, as AJR argues) is one mechanism through which historical events influence economic development today.
But what is culture? Nunn builds on a large literature to define culture as ‘fast-and-frugal’ decision-making heuristics or ‘short-cuts’. When faced with a decision, individuals rely on their past experiences to reduce the high ‘cognitive cost’ of making the decisions. But their past experiences are not only shaped by their own past decisions, but also by the decisions of those individuals around them, the members of their society, i.e. culture is a collective for a society’s gut-feel of what is the right thing to do. With this in mind, Nunn argues that this collective gut-feel is influenced by historical events. The slave trade, for example, “altered the cultural norms of the descendants of those exposed to the trade, making them inherently less trusting”. The possibility of being captured by your neighbour reduced your willingness to trust them, an important precondition for a functioning market society. Or, to use another example, Avner Greif (1994) shows how differences between the Genoa and Maghribi traders have their origins in the “different strategies undertaken by medieval merchants to prevent overseas agents from behaving opportunistically during long-distance trade”. Whereas the Maghribi merchants relied on collective enforcement to punish any agent who had cheated, the Genoese merchants followed an individual punishment strategy. The two systems resulted in two distinct cultural trajectories. Nunn argues that such cultural trajectories still matter today. In earlier research, for example, he shows that lower trust in African communities that were worse affected by the slave trade are still poorer today. He’s results show that both institutions and culture explain this, but that the cultural component (i.e. lack of trust) explains most of the variation.
These ideas have interesting relevance for the South African situation, with its plethora of cultures. Of course, culture has often been used to support racial prejudice, most regrettably as a justification for Apartheid and the homelands policy. Investigating culture, and especially its positive and negative impact on economic performance, remains a sensitive issue, but should not stand in the way of interesting research. One question would be to ask how exactly these policies of segregation shaped cultural traits – the collective gut-feel of individuals in the different cultural groups. For example, is there more mistrust of whites in areas where violent contact during Apartheid was more intense? Or more trust in areas that have a longer history of heterogenous groups living side-by-side?
Another question would be how these cultural traits have influenced post-Apartheid integration and economic performance. Is the trust in political leaders associated with the anti-Apartheid struggle not a collective gut-feel shaped by Apartheid policies? Or disrespect in schools not a consequence of a “liberation before education” struggle? Answering these questions will no doubt be tough, requiring interdisciplinary work with sociologists, historians, psychologists and economists. Moreover, understanding that culture matter is only the beginning; we need to know what incentives drive (positive) cultural change. How do we improve, for example, the “culture” of education in poor-performing schools? History might cause cultural shorthand, but understanding the past allows us to interpret why we make the decisions we do and, hopefully, prescribe policies that are cognizant of the ways peoples of diverse cultures react to incentives.