Johan Fourie's blog

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Posts Tagged ‘development

We are still on the way up

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I arrived in the USA a day after Donald Trump was announced as president-elect of the United States. I gave talks at Harvard, Mount Holyoke College and MIT, and met with several faculty and students over the four days of my visit. It was eerie. Some students were still in denial, not helped by the fact that they started drinking as soon as the results became evident. Others were in various stages of grief: angry at the nativism of a large chunk of Americans, bargaining in the hope that Hillary might still win, or depressed at how quickly the America of Obama – to whom many at these prestigious institutions look up to as an inspiring intellectual – has given way to the America of Trump – whom they consider to be a coarse, boastful buffoon.

Trump’s victory seems to have been another nail in the coffin of liberty and progress. In America, walls will replace bridges. Despite what Trump has said on the campaign trail, his tax cuts will likely benefit the wealthy elite. And his views on women, on LGBT rights, on climate change, on health care, on trade openness and on immigration is likely to reverse much of the gains in general freedoms the US has made over the last decade.

These trends are not limited to America. Earlier this year the Brexit result revealed the same nativist fear, an anti-open, anti-globalisation vote. Brexit was a vote for a return to the ‘good old times’, however unlikely that is to materialise. It was a vote against intellectualism; liberal London against the conservative hinterland. And in South Africa, the rise of nativist populism on both the extreme right and left reflect a similar frustration with the progressive Rainbow Nation of yesteryear and its liberal (sell-out!) constitution.

Across the globe, it seems, the extraordinary liberty and progress of the 1990s and 2000s are being rejected for a more insular, protectionist conservatism.

We should not be that surprised. Liberty and progress, as a historian at MIT reminded me on my recent visit, is never a foregone conclusion, never an obvious eventuality.  Liberty and Progress is not an Uber ride, taking the shortest, fastest route to a known destination. It is, as the Beatles knew, a long and winding road. Sometimes there are detours, and sometimes we get lost.

Take, for example, Martin Plaut’s latest book, Promise and Despair, the story of the delegation of black leaders that traveled to London in 1909 to fight for representation in the new Union of South Africa. Remember, since 1853, the Cape Colony had had a non-racial franchise, allowing men of all races who had sufficient income or property to vote. When the unification of South Africa began to be discussed following the Anglo-Boer War, many had assumed that the (Liberal) English government would extend the same franchise to all. In fact, this was the promise Lord Salisbury had made in 1899. But politics trumped morals. To secure the support of whites in South Africa in case of war, the English reneged on their promises and turned down the appeal of the delegation. Liberty and progress had to wait.

But to focus on the newsworthy failures of liberty and progress the last few months misses the much bigger story of the last few decades: the incredible improvement in living standards of most of humanity. Johan Norberg, in a new book simply titled Progress, concurs: ‘Despite what we hear on the news and from many authorities, the great story of our era is that we are witnessing the greatest improvement in global living standards ever to take place.’ Life expectancy has risen sharply, poverty and malnutrition have fallen. The risk of death in war or natural disaster is tiny in comparison to our parents or grandparents.

 

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Reasons to be optimistic: Trends for important human welfare measures are all positive in the long run. Source: ourworldindata.org

 

But this does not mean we should be complacent. Says Norberg: ‘There is a real risk of a nativist backlash. When we don’t see the progress we have made, we begin to search for scapegoats for the problems that remain. Sometimes it seems that we are willing to try our luck with any demagogue who tells us that he or she has quick, simple solutions to make our nation great again, whether it be nationalizing the economy, blocking foreign imports or throwing the immigrants out. If we think we don’t have anything to lose in doing so, it’s because we have a bad memory.’

2016 has been a year of setbacks. It reminds us that liberty and progress are never fait accompli, never self-evident. We have to work hard at it, and even then it is not guaranteed. It requires patience and a long-term view. But don’t let 2016 shake your beliefs about humanity’s march forward: we are still on the way up, even if it will take us a little longer to get there.

*An edited version of this first appeared in Finweek magazine of 15 December.

Written by Johan Fourie

December 30, 2016 at 13:21

The remarkable Maori experience

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Moari Haka

Human height provide economic historians with a wonderful tool to measure living standards in the past. A society’s average height, it turns out, is to a large extent determined by the environment it inhabits during the early stages of life; the more proteins (e.g. milk and meat) we eat at a young age , the taller we tend to grow. This was especially true in the past, when people were poorer and nutrition varied more in different parts of the world.

The past week I attended a conference on Heights and Human Development, organised by Tim Hatton and Martine Mariotti of the Centre for Economic History at ANU in Canberra, Australia. The invited authors used historical heights to measure the diverse impacts of slavery (Rick Steckel), migration (Zach Ward), colonisation (Joerg Baten), social transfers (Diana Contreras Suarez), Chinese industrialisation (Stephen Morgan) and technological change (my own, with Mariotti and Kris Inwood, which will hopefully soon be available as a working paper).

But I particularly enjoyed a paper by Kris Inwood (with two colleagues) that investigated the heights of New Zealand’s Maori over the last two centuries. When the Pakeha (the whites from Europe and their descendants) arrived in New Zealand early in the nineteenth century, they described the native peoples as tall and strong. Yet, as Maori lands were taken up by Pakeha farmers, their stature declined: by the beginning of the twentieth century, Moari people had lost their reputation as a tall and strong people, and Inwood et al’s evidence shows that they were significantly shorter than their white countrymen.

This gap in the heights of the two groups persisted for more than fifty years, but, and this is the surprising result, by the 1970s the gap had narrowed and by the 1980s had closed completely. Children born to Maori parents in the 1980s are today as tall as their Pakeha compatriots. The exact reasons for this convergence in heights are unclear: Inwood suggested that it was due to government social transfers during the Golden Age, but clear causal evidence is lacking. Yet, I would argue, this is an incredibly important event to understand, because it has implications elsewhere, most notably in South Africa.

Whites in South Africa today are about 8cm taller than their black compatriots. There is no reason to expect that this has always been the case; the gap was almost certainly smaller at the beginning of the twentieth century and, although we have limited data, probably much smaller (and possibly even negligible) at the beginning of the nineteenth century. Two centuries of land dispossession and prejudiced policies saw a divergence in the living standards of South Africa’s different race groups. When exactly this happened, and by how much, is the question of ongoing work by myself, students and collaborators. (I will hopefully have more to report later this year.)

Yet Maori convergence suggests that the current discrepancy in height between black and white South Africans is not fatalistic, that aggregate differences in height are not set in stone as most people would tend to think. And more, Inwood et al’s evidence show that this could happen relatively quickly: Maori heights increased by 8cm over a 25 year period (from 170cm to 178cm between 1955 to 1980). If black South Africans experienced the same after the end of apartheid, we would have seen the large divergence in height disappearing within this decade.

By all accounts, though, despite many improvements in the living standards of black South Africans, the height discrepancies remain. We therefore need to learn whether it was better nutrition, female education, a stronger economy, luck, or maybe even a strengthening of Maori identity and pride (as was suggested at the workshop) that led to the remarkable Maori experience of the mid-twentieth century. This is the challenge for us as economic historians. As the Maori would say: Ma tini ma mano ka rapa te whai. By many, the work will be accomplished.

Written by Johan Fourie

March 9, 2015 at 06:05

The renaissance of African economic history

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TimbuktuTexts

The ancient texts housed in Timbuktu. Photo: Candace Feit

Much like the continent’s rapidly growing economies, the study of Africa’s economic past is gaining momentum. But this was not always the case. After much interest during the 1960s and 1970s, African economic history had largely disappeared from the scholarly radar by the 1980s, aside from a few monumental contributions by people like Tony Hopkins and Gareth Austin. This was not entirely coincidental: the fortunes of many African countries were wavering on the back of large debts and several supply-side shocks. Just like the Cold War and colonisation created political factions that resulted in devastating civil wars on the continent, an intellectual war between liberals and Marxists was brewing, suffocating the lasts gasps of a dying scholarly field. When The Economist labeled Africa ‘The Hopeless Continent’ in 2000, it wouldn’t have been unfair to ascribe a similar adjective to the study of African economic history.

Yet the high rates of economic growth achieved by many African countries in the 2000s have been mirrored by a revival in the quest to understand Africa’s economic past. Rekindled by a new enthusiasm for the long-term impact of historical events, leading scholars began to explore the root causes of Africa’s stagnation. These contributions, like Acemoglu, Johnson and Robinson’s The Colonial Origins of Comparative Development (the 38th most cited paper in Economics) and Nathan Nunn’s work on slavery, led a new generation of economic historians, using large datasets and the economist’s standard tool set, to explore colonial records and, increasingly, long-neglected African archives. Several economic historians are busy constructing new series from these records, including African population numbers, prices, real wages and GDP statistics.

Morten Jerven, for example, recently wrote ‘Poor Numbers: How We Are Misled by African Development Statistics and What to Do about It’. He shows how historical African statistics, because of incompetence, weak resources and political interference, rarely reflected reality, which have had serious implications for development policies. Ewout Frankema and Marlous van Waijenburg calculate real wages in nine British colonies to show that the populations of several African countries, notably in West Africa, attained real wages at the end of the nineteenth century higher than those of Asia. Ewout and Marlous’ efforts were recently rewarded with the prestigious Arthur H. Cole Prize for the best article in The Journal of Economic History (June 2012- June 2013).

As African countries continue to grow, the interest in its economic past will grow too. This is why the African Economic History Network (funded generously by Sweden’s Riksbank) has decided to put together a beginner’s textbook that will invite future generations of economists and historians into the field: the textbook – The History of African Development – is available for free on their website. The book provides a simple introduction to the economic changes that has happened in African history, with special chapters on the slave trade, the Scramble for Africa, and urbanisation, for example. It is currently being trialled at the Mountains of the Moon University in west Uganda.

I’ve written the chapter on the history of education in Africa. It begins with the very basics of economics: how education allows us to specialise. Instead of using thousands of workers to build the pyramids of Ancient Egypt, we can build similar structures with fewer but more skilled workers. Education makes each individual more productive. I then plot how formal education in Africa can be traced back to the influence of Islam and the later Christian missionaries. I also highlight how important education is for the future success of the continent. The chapter is available here.

It’s not inevitable that all African countries will continue to prosper. But as we unearth more of the continent’s rich economic histories, the belief that Africa is destined to be poor looks increasingly implausible. The more we look to the future, the more we will want to understand our past.

Why you should not get married before you’re 25

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Wedding“When a girl stays in secondary school, she is 6 times less likely to marry young,” UNICEF tweeted on Thursday evening. Education, and especially female education, is one of the pillars of development, with countless positive externalities for society, including, as the UNICEF tweet notes, an older age at marriage. Getting married at an older age may seem inconsequential, but a recent literature has shown that it may partly explain why Western Europe first escaped the Malthusian trap and led to the Industrial Revolution.

During the early-modern period, women in Western European countries began to marry at an older age. While this observation was first made by John Hajnal in 1965, it is only recently that scholars have begun to consider the causes and consequences of this shift. Tine de Moor and Jan Luiten van Zanden in ‘Girl Power‘ argued that because of the preachings of the Catholic Church which promoted marriage based on consensus, the rise of labour markets, and institutions of property rights that encouraged women to work before they marry, Western European women changed the average age at which women married from around 20 to around 25 years. A higher age at marriage meant a shorter period of fertility for women, meaning fewer children were born and a shift thus occurred from having a higher number of children to having fewer children but investing more in them by, for example, sending them to school.

This is a compelling thesis, but the causal direction is not clear. Did women not simply react to the development of labour markets and, if so, what caused such development? Investigating this, Jeanne Cilliers and I considered the Dutch Cape Colony marriage pattern (the paper is only available in Afrikaans). In South Africa, Dutch immigrants (obviously of Western European origin) settled, bringing along their own institutions, like property rights. Yet the Cape did not have a wage labour market similar to Holland, which, we argue, provides a nice experiment to test their theory. We find that the Cape did not exhibit a European marriage pattern throughout the eighteenth and early nineteenth-centuries. It was only after the shift to a wage economy, helped by the discovery of minerals in the interior of the country, that a marriage pattern similar to Europe emerges. This suggests that it is labour markets that causes marriage patterns, and not the other way round.

So here’s some marriage advice from Dr Phourie. Unsure about when to get married? Don’t do it before you’re 25. You may not start an industrial revolution, but, on average, you will have fewer but more educated kids (which is what society needs more of).

Africa 2050

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I had the opportunity recently to talk to a group of local and international students about Africa’s past and current development trends; an economic history peep show of everything from the neolithic revolution and Jared Diamond, through slavery, colonialism, independence, and dictatorship, to the rapid growth of the last decade. As a final assignment, I asked the following question: This is the year 2050. Write a history of African development, 2010-2050.

Perhaps because we are an optimistic species (and because our generation believe that the future is malleable, that we have agency to affect change), the general impression I get from reading the students’ responses is that our children will live in a better Africa than the Africa of our parents and the Africa of us. This, I want to emphasise, is a remarkably different world than the one inhabited by our great great grandparents, who could wish for little more than that most of their offspring live to childbearing years. In good times, this happened. But when famine or war or disease struck, the best one could hope for was survival. This is certainly not the future of Africa that my students envisage, however. According to the sample of experts in my class, the Africa of 2050 will be an improved, more prosperous place to live.

Several themes appeared repeatedly: a more stable political environment, investments in power generation, better transport and telecommunications infrastructure and greater skill levels. US-student Matthew DeAngelis writes:

After access to electricity became essentially universal, high-speed Internet access was quick to follow. While much of Africa is still using slower broadband connections rather than the faster fibre optic technology which is the standard in most of the world, this access to information has quickly and cheaply revolutionized almost every aspect of African life. First, the Internet has changed education in Africa. Historically, rural Africa has faced a problem with its schools not being able to afford basic libraries or educational materials. As computers and Internet access became incredibly cheap in the 2020s, these schools now had access to knowledge which was simply unimaginable previously. This access to information allowed hundreds of millions of Africans to get the basic education necessary to pursue careers in skilled and semi-skilled industries, and was one of the most important factors in lifting rural Africa out of poverty.

Second, as more jobs were created in online companies, a lot of employment became decentralized, and many Africans began working online from home. This meant that people no longer had to move to the cities to find decent employment. With basic skills and a decent Internet connection, one could make a living practically anywhere in the world. This opportunity for employment meant that many rural families now had the education and the money to begin sending their children to receive tertiary educations. While the vast majority of students attending university are still urban and upper class or middle class, many more poor and rural students are receiving degrees from technical colleges. The employment prospects for individuals with these degrees have been very good since Africa’s technological revolution, as semi-skilled and skilled labour is necessary to maintain and upgrade the existing infrastructure.

While some of highlighted the rise of industries, Ama Serwaa Kusi of Ghana believes Africa’s success will be due to investments in agriculture:

The continent at this stage even though still remains agriculturally-oriented, has implemented the necessary technology to better assist production. Agriculture-tech schools have been established in many of the countries, where young men and women are taught how to operate on large scale of lands with complex and simple technology, which is effective. A larger percentage of other agricultural workers are those who have studied abroad in Scandinavian countries and have come back to successfully implement the ideas they have studied overseas. Due to this, brain drain has rapidly dropped in many of these African countries and has successfully contributed to production.

South Africa’s Nandipha Piliso believes Africa will also finally realise its comparative advantage in tourism:

Africa, has over the past forty years established itself as a major tourist destination, this has also influenced the continent’s economic growth. The tourism industry has led not only to economic growth but also a commitment to the establishment of infrastructure. Greater investment into infrastructure ensured that the continent was and still is capable of hosting tourists from across the world. After the 2010 Soccer World Cup that was hosted in South Africa, tourism increased not only in South Africa but on the continent as a whole. Many African leaders realised that hosting international sporting events was the best way to further increase tourism on the continent. In light of this, African leaders united and decided to help the city of Durban in South Africa bid for the 2024 Olympic Games. The games were hosted successfully; once again the continent experienced a boom in tourism. Other African countries were encouraged to bid, although Africa has not hosted another Olympic Games, countries such as Morocco and Kenya are hopeful that they will be hosting the upcoming Olympic Games on the continent.

Through private-public partnerships, says US-student Jorgia Hanlin, these economic gains will also translate into better living standards:

By 2030, many African nations could realistically say their populace had access to the most basic needs aforementioned. As stressed, no one approach was adopted by all; each country went about achieving this basic development depending on the structures already in place. For many countries, this required finding a balance between the private sector development and government intervention. For development to become a possibility, the government first had to reach out to these areas before the private sector could enter the market. The government first established health care, supplemented nutrition, and education systems that would help bring rural children into the world of health, literacy, and modern technology. To accomplish all of this, the government enlisted the help of the private sector to physically make these things possible. The government paid firms to construct buildings, provide food, create schools, build infrastructure, and also train and employ the people necessary for the upkeep of these facilities, which included teachers, custodians, cooks, doctors, nurses, and technicians. This allowed development to occur toward a specific goal—higher standards of living for everyone—while still allowing the market to operate efficiently and stimulate economic activity.

Luisa Wu of Taiwan argues that this progress in living standards was helped by innovation in health care:

In 2050, it is very possible that a treatment for wiping out HIV in the human body would have been found. Recent research have found that patients who accept stem-cell transplants unexpectedly get rid of the HIV virus in their bodies. Although stem-cell transplant will not directly become a treatment because of its extremely expensive cost, scientists will learn from these stem cell transplant cases and find a treatment.

 

And, finally, US-student Kristin Buhrow notes South Africa’s role in the future history of Africa:

Initiative in research and government policy has positioned South Africa as not only the “Gateway to Africa” but Africa’s gateway to the world through its progressive vision of continual development.  With careful action and a continued focus upon education, trade, and infrastructure, the growth exhibited in the past forty years will not stop for many years to come, and the goal of African development, equality, health, and economic growth will be reached by way of continual, gradual advancement in many fields.

Are these pipe-dreams or the blueprint of our future?

PS: I help coordinate a Doing Business in Southern Africa five-week course at Stellenbosch University every July. The course brings together academics from various fields and includes several field trips to companies and incubators. Visit our International Office Summer School page for more information.

Written by Johan Fourie

July 18, 2013 at 07:37

Experiencing history

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The South African Economic History Annual, a new publication by the Economic History Society of Southern Africa, was published today. The Annual brings together news of recent and upcoming events, ideas and research by scholars across several disciplines (and hopefully this will expand in future), and one or two personal accounts and interviews.

2012 was a great year for economic history research in Africa. The World Economic History Congress was held in Africa for the first time and, as Sophia du Plessis writes, shifted the focus to African economic histories neglected for too long. New data sources are being unearthed and digitised, more South African universities are offering undergraduate or graduate programmes in economic history, and several South African students are enrolled in economic history programmes abroad.

As Africa’s future prospects brighten, so does the interest in African economic history.

But, as regular readers of this blog would know, economic history is not only about things that happened in the past. Development is a process – a non-linear, staccato process of trial and error – that fits the mercury-in-the hand cliché very well: as soon as we seem to be closer to describing it, understanding it, explaining it, the development process inevitably changes, affected by time, terrain and technology. It is constantly changing, and although our past affects our present (and there are several reasons to understand this), our present will in all likelihood affect our future in very different ways. Which is all the more reason why economic historians can ill afford to cosily hide in ivory towers, sneaking out for a quick trip to the archives. Or to only travel from comfy conference to conference, presenting our work to (predominantly) Western scholars with the (exclusive) aim of publishing in the top journals. (Not that it’s a bad thing to publish in those journals, given the increasingly important tenure and/or ratings incentives.)

But Felix Meier zu Selhausan’s fascinating account of his experience at Mountains of the Moon University in Western Uganda is a reminder that economic history – in addition to its research and teaching component – should also be experienced. Felix has spent the last two years at MMU, a seven year old university funded by the local community, teaching various undergraduate courses and, over a few beers in Stellenbosch a while ago, he explained to me how he has seen the difference tertiary education has made. Not measured, not surveyed, not deduced from national census data. Seen. Isn’t that more gratifying than any journal publication? Incidentally, by physically being there, Felix also stumbled upon some very unique datasets that will help his own research – and begin to shed new light on Uganda’s colonial (and, potentially, pre-colonial) period.

Not everyone has two years to spend in the Pearl of Africa. But perhaps we – and I’m actually referring here mostly to economists like myself – should make an effort to engage more with the communities we investigate. I suspect the learning curve will be much steeper, and more rewarding.

PS: The Mountains of the Moon University would appreciate support, in whatever format. Books, exchanges, funding. Send Felix a mail if you have any ideas.

Written by Johan Fourie

November 29, 2012 at 20:16

Lessons from the Cape Colony

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Johan FourieI 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.

Written by Johan Fourie

March 15, 2012 at 12:30