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Research Outline for Ph.D. Thesis
The South African Development Path
- The Impact of the Idealist Tradition
Arno Mong Daastøl
Arno Mong Daastoel, Doktorand, Finanzwissenschaft, Universität Erfurt, Nordhaüser Str. 63, Postfach 900 21, DE-99105 Efurt, Germany
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A short resume PhD Outline: is as follows:
Condensed, the logic of the thesis will look like this:
1. Theory: 2 instances of generalisation
a. Immaterial production factors – competence and credit.
b. Systems analysis (e.g. ”exchange value” v. ”productive powers”)
2. Literature: F. List
3. Practice 1: Southern Africa’s history
a. Competence and taxation- related to a & b above
b. Economic integration - related to b above
c. Credit - related to a & b above and to a & b immediately above
4. Practice 2: Southern Africa’s future:
as for point 3.
A short description;
(Focus will be on economic principles extracted from Euro-American history, South Africa being an interesting case study)
Principal objective and sub-goals
The objective is to find the policies that may lead to success in socio-economic development. I will therefore sort out the practical policies of historical success cases in order to understand the economic principles of development. This will be done by studying the literature of the history of economic development in general, in particular by focusing on the tradition that developed the so-called European Miracle, Mercantilism. One outstanding author and politician in this tradition, Friedrich List, will be singled out for more intense scrutiny. I will then look more specifically at one practical instance, that of South Africa and see how it fits with the mercantilist strategy and with List's strategy. Finally, the relevance of development literature will be discussed in the light of the above.
The first part will focus on an extraction of the general theoretical principles of the idea-oriented tradition in economic policy in essence from times immemorial, from Hamurabi in Sumeria onwards with Ptolemy, etc. This concerns the Idealist & State oriented Mercantilism of the prosper thy neighbour type. This part will be both historical and related to the philosophy of science with special regard to economics.
The second part will be a literature study of the development strategy of one of the most famous writers and propagators in the history of economic development, communication, integration and trade, Friedrich List. He is chosen as a clear representative of the above tradition.
The third part will focus on the impact this tradition eventually had on the original development of South Africa, or more specifically how the principles extracted in the first part of the study eventually came to use or not. Focus will be on public goods production understood as production of the tightly related fields of knowledge and communication. In the history of South Africa these themes stand out as related to customs protection (in addition to education and research, of course), i.e. regulated international trade on the one hand. On the other hand they are related to transportation and customs unification, i.e. free local trade. A core part of this study will be the influence of the Boer strategy in the period 1880-1914 on British economic policy during the period 1880-1914.
The final part will discuss the theory of economic development, i.e. policy recommendations, In light of the above mentioned historically based studies.
- with Reasons for the choice of project, Status of preparation, an outline of themes and a timetable.
A) Reasons for the choice of project
In the main, economic development, in particular of the third world and again particularly after the 60’s, has been faulty and in want of constructive alternatives. This may be found in the forgotten tradition mainly associated with Friedrich List, often termed as “economic nationalism“ although liberal in its political tendency.
In this tradition, knowledge and communication are seen as the main vehicles of progress. The guiding idea is changing natural resource endowments (or the lack thereof, as in Japan) into cultural capital: physical and social and spiritual. The purpose of this thesis is to extract those principles and study their application in some instances.
The theoretical chapter explores the principal conflicts between the main strategies on the background of the (convenient) efforts to generalise the experience of certain nations (then UK, today e.g. USA and EU) to cover quite different circumstances in other nations. The literature chapter on F.List explores the most obvious literature regarding this problem.
The choice of Southern Africa as a historical case study is due to the fact that
1) The development in South Africa to an amazing degree parallels earlier development in the USA, in Germany (and later in the EU) regarding core factors such as integration through currency unification, customs union (“Zollverein”) and railroad construction as well as protection through the very same customs union.
2) Southern Africa provides a classical case of the interaction and conflicts of interests between a national quest for industrial progress on the one side and on then other side the traditional “colonial interests” of commodity export.
3) South African economists to an amazing degree understood the basics of List's ideas and actually refined them in several respects until the present. The fruitful South African dialogue between this work and the post WW-II mainstream Anglo-American tendency is perhaps without parallel in the western world.
4) As a by-product, the case of Southern Africa offers an insight into the nesting ground for the emergence of a new trade strategy for the British Empire, leading up to WW I.
The choice of Southern Africa as a present case study is due to the need for an alternative policy to established mainstream ideas imposed on Southern Africa after the fall of the Apartheid state in Southern Africa in 1991.
B) Status of preparation (as of Nov. 2000 )
Chapters 1(methodology in economics) and chapter 2 (Friedrich List’s strategy) are written, but need polishing. Chapter 3 on South African History has been outlined and written in the main. Chapter 4 on South African present situation has not been written. Extensive material has been collected for chapters 3-4.
C) An outline of themes
The chapters are:
(Drafts to be found at the listed websites)
1. Theoretical discussion: Generalisation v. Empirical Diversity
2. Literature Study: F. List v. Adam Smith
3. Historical Case Study: South Africa’s Development Path 1880-1910
4. Modern Case Study: Southern Africa
1. Theoretical discussion: Generalisation v. Empirical Diversity
The methodological focus and core theme of the dissertation is the scientific endeavour of generalisation (and formalisation) as opposed to the need to be realistic and thereby practically minded. A core theme of List’s criticism of A.Smith was the latter’s repeated and (conveniently) faulty generalisations, a matter repeated with “The Ricardian Vice” and today the methodological core of mainstream economic science.
a) Immaterial production factors
A first sublevel methodological theme concerns the core role of immaterial production factors in economic development and their frequent character as public goods. Examples are 1) Creation of knowledge, productive competence and 2) Establishment of credit as a catalyst of growth (not as a commodity but a part of infrastructure, as with e.g. law and taxation).
List repeatedly (somewhat unfairly) attacked Smith’s generalisation of principles of for instance, material production factors and production of private goods. This point connects to the philosophical outlook of economists, more specifically their ontology –“what to generalise over and to”. The point also connects to:
b) Systems analysis
The second sublevel theme concerns the methodological question of standard economic materialistic individualism versus a combination of immaterial individualism and systems analysis (“methodological collectivism”) as the starting point of economic exploration. This concerns among other themes the difference between business economics and national economics or in more modern terms, “shareholder value” v. “the common good”, “general welfare” . List used his notion of “productive powers” (systems analysis) to repeatedly attack Smith’s generalisation of principles of business economics (exchange value).
More practically, this concerns, in particular, promotion of various types of (interconnected) infrastructure, e.g. knowledge, credit, and transport. The interconnection for instance consists in the need to direct credit to productive consumption in areas such as knowledge and transport, i.e. public goods.
On the historical side this concerns an exploration and extraction of the best economic principles of the practical tradition of economics from various kinds of mixed markets associated with the tradition following the (Idealist) Renaissance and (State) Mercantilism, also called Industrialism, Modernism, Economic Nationalism, Continentalism, Protectionism, and Dirigisme.
In the last two Centuries with economics also as an academic science, the traditions counted-posed are on the one side the rationalist tradition (introspection, deduction) connected to “English” liberalism (also Austrian, French etc) seen as an outgrowth of a zero-sum type of mercantilism, originally developed in merchant based circles (e.g. East India Companies). On the other side this concerns the more (wide) empirically oriented tradition (induction) related to a “plus sum” type of “neo-mercantilism”, originally developed in State Treasury based circles. Modern historical examples of the latter are, for instance, the German and British Historical-Ethical Schools, the French L’Ecole Polytechnique tradition, the American System (“protectionist”) tradition, the Russian Witte-Stolypin tradition, the Chinese Kuomintang tradition after Sun Yat-sen and the Japanese Meiji tradition.
Nevertheless, since any writer as well as any economist may be categorised in different ways, the only fair way of counter-posing methodological and policy strategies, in economics as in science generally, is according to principles – not according to persons.
2. Literature Study: F. List v. Adam Smith
List’s criticism of A.Smith in his main works are discussed and criticised, with a particular focus on the factors mentioned in § 1(generalisation, immaterial production factors, systems analysis). Consequences for economic policies for emerging nations are extracted and discussed. List is seen as a critical student of Adam Smith, still a liberalist at heart.
3. Historical Case Study: Southern Africa’s Development Path 1880-1910
The industrialisation of Southern Africa, around the turn of the 20th century offers an interesting practical case of the principles mentioned above. Focus is on production of public goods understood mainly as the tightly related fields of knowledge (competence) and communication.
In the history of South Africa these themes stand out as production of public goods as related to, on the one hand, the creation of industrial competence through regulated trade. This for instance entailed implementation of various instances of taxation, such as tariffs and customs protection against foreign industrial supremacy. An indication of the tightness of the above themes is the fact that custom tariffs and railroad tariffs were explicitly considered as one and the same question. The chapter deals with the Boer tariff related industrial strategy in the period 1880-1914 and its influence on global British economic policy during the period 1880-1914 (called “Imperial Zollverein” and “Imperial Preference”) as a practical strategy to deal with the threat to British hegemony from emerging industrial powers.
This point relates to the theoretical chapter’s point of immaterial production factors, but it also relates to the point of systems analysis, opposing business economics with national economics by promoting “long-term competence” (cf. “common good”, “general welfare”) as opposed to short-term gains (“shareholder value”).
b. Economic integration
On the other hand these themes stand out as related to transportation and customs unification, integrating the former separate provinces and thereby increasing the size of markets, making economy of scale worthwhile.
This point relates to the theoretical chapter’s point of systems analysis of opposing business economics with national economics, namely whether policy (and banking considerations) should be focused narrowly on shareholder’s value or the common good through developing infrastructure and accompanying positive externalities.
As today, anywhere, financing infrastructure (the railroad structure) and industry is a core question and connects railroads as one core type of infrastructure with another, no less important type of infrastructure, namely credit. An “eternal” question in this regard is whether public goods were financed through debt to the international “private” capital market (“Dutch speculative banking”) or through domestic and “social” creation of credit (“Industrial banking” a la Proudhon and St. Simon). The latter involves utilising the monopoly power of the state to create and channel credit and enjoy the benefits of seigniorage. It may also relate to the state’s legal opportunity to regulate taxation of land and thereby finance infrastructure.
This point relates to the theoretical chapter’s point of systems analysis of opposing business economics with national economics, again; namely whether banking considerations should be focused on shareholder’s value or the common good, in other words if the banking system has social responsibility.
4. Modern Case Study: Southern Africa
The last chapter will be used for a study of modern applications of the above principles, on the basis that,
“The guiding idea is changing natural resource endowments (or the lack thereof, as in Japan) into cultural capital: physical and social and spiritual. The purpose of this thesis is to extract those principles and study their application in some instances.”
The present “non-development“ of Southern Africa under the influence of “Western” economic ideology gives an opportunity to point to an alternative policy with long and proven success, also in Africa itself.
Of special interest is the crucial role of infrastructure development as creator of markets and as prime mover of activity in general. Lessons from former experience in constructing infrastructure must be drawn (e.g. regimes of Bismarck, Lincoln, Witte), particularly concerning railroads structure and how they were financed therefore also involving the credit system.
The established infrastructure in South Africa regarding transport, law and credit may be improved and expanded into neighbouring areas with due respect for the established political circumstances in neighbouring regions. The long efforts to establish a common market in Southern and Eastern Africa (COMESA) may be a step in the direction that the USA, Germany and EU have trodden before - and which MERCOSUR and ASEAN is going as well.