IDEAS home Printed from https://ideas.repec.org/p/sza/wpaper/wpapers321.html
   My bibliography  Save this paper

Serving God and Mammon: the ‘minerals-railway complex’ and its effects on colonial public finances in the British Cape Colony, 1810-1910

Author

Listed:
  • Abel Gwaindepi

    (Department of Economic History, Lund University)

Abstract

The resource curse literature underscores the fact that extractive economies face challenges in diversifying their economies. What is less explored are the public finance challenges encountered in these economies when the extractive industries are completely owned by the private sector. Using a recently compiled dataset on public revenues, expenditures and debt, this paper explores the nexus between the privatized extractive sector operations and public finance policies of the Cape Colony between 1810 and 1910. The paper finds that despite the natural resource endowment, the Cape Colony became heavily indebted and had huge budget deficits by the time it joined the Union of South Africa in 1910. After the discovery of diamonds, competition for resource-rents caused a slowdown and in some instances reversed the progress made in consolidating state institutions. The drive towards a national program of development inherent in self-governing colonies was overturned when the competition for resource-rents culminated in rent-seeking led by the interests in the monopolized extractive sector. Rather than being the main source of government revenues and a basis for inclusive economic progress, as expected in a self-governing settler colony, diamonds became a trap through the operations of what I call a ‘Minerals-Railway complex’. The insights from the paper have important implications for our understanding of both settler colonialism in Sub-Saharan Africa as well as the management of natural resources in developing economies.

Suggested Citation

  • Abel Gwaindepi, 2019. "Serving God and Mammon: the ‘minerals-railway complex’ and its effects on colonial public finances in the British Cape Colony, 1810-1910," Working Papers 07/2019, Stellenbosch University, Department of Economics.
  • Handle: RePEc:sza:wpaper:wpapers321
    as

    Download full text from publisher

    File URL: https://www.ekon.sun.ac.za/wpapers/2019/wp072019/wp072019.pdf
    File Function: First version, 2019
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ellen Hillbom & Jutta Bolt, 2018. "Botswana – A Modern Economic History," Palgrave Studies in Economic History, Palgrave Macmillan, number 978-3-319-73144-5, December.
    2. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    3. Remi Jedwab & Alexander Moradi, 2016. "The Permanent Effects of Transportation Revolutions in Poor Countries: Evidence from Africa," The Review of Economics and Statistics, MIT Press, vol. 98(2), pages 268-284, May.
    4. Jerven, Morten, 2014. "Economic Growth and Measurement Reconsidered in Botswana, Kenya, Tanzania, and Zambia, 1965-1995," OUP Catalogue, Oxford University Press, number 9780199689910.
    5. Johan Fourie & Dieter von Fintel, 2011. "Settler skills and colonial development," Working Papers 213, Economic Research Southern Africa.
    6. Thandika Mkandawire, 2010. "On Tax Efforts and Colonial Heritage in Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 46(10), pages 1647-1669.
    7. Avner Offer, 1993. "The British empire, 1870-1914: a waste of money?," Economic History Review, Economic History Society, vol. 46(2), pages 215-238, May.
    8. Stan du Plessis & Sophia du Plessis, 2017. "Which comes first: good governance or prosperity? A historical experiment from the South African Republic and the Orange Free State," Working Papers 691, Economic Research Southern Africa.
    9. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    10. Besley, Timothy J. & Persson, Torsten, 2013. "Taxation and Development," CEPR Discussion Papers 9307, C.E.P.R. Discussion Papers.
    11. repec:cep:stieop:41 is not listed on IDEAS
    12. Auty, Richard M., 1994. "Industrial policy reform in six large newly industrializing countries: The resource curse thesis," World Development, Elsevier, vol. 22(1), pages 11-26, January.
    13. Leigh Gardner, 2017. "Colonialism or supersanctions: sovereignty and debt in West Africa, 1871–1914," European Review of Economic History, Oxford University Press, vol. 21(2), pages 236-257.
    14. Alfonso Herranz-Loncán & Johan Fourie, 2018. "“For the public benefit”? Railways in the British Cape Colony," European Review of Economic History, Oxford University Press, vol. 22(1), pages 73-100.
    15. Olivier Accominotti & Marc Flandreau & Riad Rezzik, 2011. "The spread of empire: Clio and the measurement of colonial borrowing costs," Economic History Review, Economic History Society, vol. 64(2), pages 385-407, May.
    16. Frederick van der Ploeg & Steven Poelhekke, 2009. "Volatility and the natural resource curse," Oxford Economic Papers, Oxford University Press, vol. 61(4), pages 727-760, October.
    17. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    18. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521662918.
    19. P. J. Cain & A. G. Hopkins, 1986. "Gentlemanly Capitalism and British Expansion Overseas I. The Old Colonial System, 1688-1850," Economic History Review, Economic History Society, vol. 39(4), pages 501-525, November.
    20. Johnson, Noel D. & Koyama, Mark, 2017. "States and economic growth: Capacity and constraints," Explorations in Economic History, Elsevier, vol. 64(C), pages 1-20.
    21. Gary B. Magee & Lorraine Greyling & Grietjie Verhoef, 2016. "South Africa in the Australian mirror: per capita real GDP in the Cape Colony, Natal, Victoria, and New South Wales, 1861–1909," Economic History Review, Economic History Society, vol. 69(3), pages 893-914, August.
    22. Remi Jedwab & Edward Kerby & Alexander Moradi, 2017. "History, Path Dependence and Development: Evidence from Colonial Railways, Settlers and Cities in Kenya," Economic Journal, Royal Economic Society, vol. 127(603), pages 1467-1494, August.
    23. Steven N. Durlauf, 2009. "The Rise and Fall of Cross-Country Growth Regressions," History of Political Economy, Duke University Press, vol. 41(5), pages 315-333, Supplemen.
    24. Hoffman, Philip T., 2015. "What Do States Do? Politics and Economic History," The Journal of Economic History, Cambridge University Press, vol. 75(2), pages 303-332, June.
    25. Gareth Austin, 2008. "The 'reversal of fortune' thesis and the compression of history: Perspectives from African and comparative economic history," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(8), pages 996-1027.
    26. Lorraine Greyling & Grietjie Verhoef, 2015. "Slow growth, supply shocks and structural change: The GDP of the Cape Colony in the late nineteenth century," Economic History of Developing Regions, Taylor & Francis Journals, vol. 30(1), pages 23-43, June.
    27. Lorraine Greyling & Grietjie Verhoef, 2017. "Savings and economic growth: a historical analysis of the Cape Colony economy, 1850–1909," Economic History of Developing Regions, Taylor & Francis Journals, vol. 32(2), pages 127-176, May.
    28. Gardner, Leigh A., 2012. "Taxing Colonial Africa: The Political Economy of British Imperialism," OUP Catalogue, Oxford University Press, number 9780199661527.
    29. Ferguson, Niall & Schularick, Moritz, 2006. "The Empire Effect: The Determinants of Country Risk in the First Age of Globalization, 1880–1913," The Journal of Economic History, Cambridge University Press, vol. 66(2), pages 283-312, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abel Gwaindepi & Johan Fourie, 2020. "Public Sector Growth in the British Cape Colony: Evidence From New Data on Expenditure and Foreign Debt, 1830‐1910," South African Journal of Economics, Economic Society of South Africa, vol. 88(3), pages 341-367, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abel Gwaindepi & Johan Fourie, 2020. "Public Sector Growth in the British Cape Colony: Evidence From New Data on Expenditure and Foreign Debt, 1830‐1910," South African Journal of Economics, Economic Society of South Africa, vol. 88(3), pages 341-367, September.
    2. Stelios Michalopoulos & Elias Papaioannou, 2020. "Historical Legacies and African Development," Journal of Economic Literature, American Economic Association, vol. 58(1), pages 53-128, March.
    3. J. Fourie, 2018. "Cliometrics in South Africa," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 42(2), pages 1-14, August.
    4. Dorinet, Elizavetta & Jouvet, Pierre-André & Wolfersberger, Julien, 2021. "Is the agricultural sector cursed too? Evidence from Sub-Saharan Africa," World Development, Elsevier, vol. 140(C).
    5. Gwaindepi, Abel, 2019. "Domestic revenue mobilization in Sub-Saharan Africa and Latin America: A comparative analysis since 1980," Lund Papers in Economic History 209, Lund University, Department of Economic History.
    6. Bolt, Jutta & Gardner, Leigh, 2019. "African institutions under colonial rule," CEPR Discussion Papers 14198, C.E.P.R. Discussion Papers.
    7. Johan Fourie & Nonso Obikili, 2019. "Decolonizing with data: The cliometric turn in African economic history," Working Papers 02/2019, Stellenbosch University, Department of Economics.
    8. Bhattacharyya, Sambit & Hodler, Roland, 2014. "Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions," World Development, Elsevier, vol. 57(C), pages 101-113.
    9. Cockx, Lara & Francken, Nathalie, 2014. "Extending the concept of the resource curse: Natural resources and public spending on health," Ecological Economics, Elsevier, vol. 108(C), pages 136-149.
    10. Ali, Merima & Fjeldstad, Odd‐Helge & Shifa, Abdulaziz B., 2020. "European colonization and the corruption of local elites: The case of chiefs in Africa," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 80-100.
    11. Adrian Boos & Karin Holm‐Müller, 2012. "A theoretical overview of the relationship between the resource curse and genuine savings as an indicator for “weak” sustainability," Natural Resources Forum, Blackwell Publishing, vol. 36(3), pages 145-159, August.
    12. Broms, Rasmus, 2017. "Colonial Revenue Extraction and Modern Day Government Quality in the British Empire," World Development, Elsevier, vol. 90(C), pages 269-280.
    13. Edwards, Ryan B., 2016. "Mining away the Preston curve," World Development, Elsevier, vol. 78(C), pages 22-36.
    14. Dwumfour, Richard Adjei & Ntow-Gyamfi, Matthew, 2018. "Natural resources, financial development and institutional quality in Africa: Is there a resource curse?," Resources Policy, Elsevier, vol. 59(C), pages 411-426.
    15. Kaznacheev, Peter, 2013. "Resource Rents and Economic Growth: Economic and institutional development in countries with a high share of income from the sale of natural resources. Analysis and recommendations based on internatio," EconStor Research Reports 121950, ZBW - Leibniz Information Centre for Economics.
    16. Bolt, Jutta & Gardner, Leigh, 2020. "How Africans shaped British colonial institutions: evidence from local taxation," LSE Research Online Documents on Economics 107519, London School of Economics and Political Science, LSE Library.
    17. Andersson, Jens & Lazuka, Volha, 2019. "Long-term drivers of taxation in francophone West Africa 1893–2010," World Development, Elsevier, vol. 114(C), pages 294-313.
    18. Badeeb, Ramez Abubakr & Lean, Hooi Hooi & Clark, Jeremy, 2017. "The evolution of the natural resource curse thesis: A critical literature survey," Resources Policy, Elsevier, vol. 51(C), pages 123-134.
    19. Boschini, Anne & Pettersson, Jan & Roine, Jesper, 2013. "The Resource Curse and its Potential Reversal," World Development, Elsevier, vol. 43(C), pages 19-41.
    20. Laszlo Szalai, 2018. "Institutions and Resource-driven Development," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 4(1), pages 39-53, June.

    More about this item

    Keywords

    public finances; fiscal capacity; elite power; economic development; natural resources; African colonialism; Cape Colony;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sza:wpaper:wpapers321. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/desunza.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Melt van Schoor (email available below). General contact details of provider: https://edirc.repec.org/data/desunza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.