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"Impending ruin" or "remarkable wealth"? The role of private credit markets in a settler colony

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  • Christie Swanepoel and Johan Fourie

Abstract

Credit markets develop hand in hand with a market economy. Pre-industrial credit markets, like credit (and capital) markets today, developed in order to smooth consumption, ease trade, and enable long-term investment. Yet in the eighteenth century Cape Colony, a Dutch settlement at the southern tip of Africa, commentators of the day were skeptical about what an active credit market could contribute to the economy: for them, borrowing was a sure sign of poverty. Historians have expressed the same view. We present a different picture of the Cape Colony. We use 4,160 probate inventories, listing 12,637 credit transactions and 12,580 debt transactions, to show that the main reason for borrowing was long-term capital investment in property through bonds, and that a particular driver of the Colony's extensive use of credit was slave ownership. We also show that those who benefited from the Colony's thriving credit market were rich, not poor.

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  • Christie Swanepoel and Johan Fourie, 2015. ""Impending ruin" or "remarkable wealth"? The role of private credit markets in a settler colony," Working Papers 517, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:517
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    File URL: http://www.econrsa.org/node/1063
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    Cited by:

    1. Johan Fourie, 2018. "Cliometrics in South Africa," Working Papers 14/2018, Stellenbosch University, Department of Economics.
    2. Jeanne Cilliers & Johan Fourie, 2017. "Social mobility during South Africa’s industrial take-off," Working Papers 04/2017, Stellenbosch University, Department of Economics.

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