Lessons from the Cape Colony

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’.

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The Art of Economic History

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.

To read further click on the following link.