by Johan Fourie (Stellenbosch University) and Frank Garmon Jr. (Christopher Newport University)
This blog post is based upon the authors’ article forthcoming in the Economic History Review.
The economic historians Peter Lindert and Jeffrey Williamson famously argued that ‘colonial America was a world leader in income per capita’ by the end of the eighteenth century. But was that indeed the case? Did America already have an advantage by the beginning of the nineteenth century?
In our article forthcoming in the Economic History Review, we test this claim against new evidence. We show, first, that little is known about eighteenth-century settler incomes across the world. While we know much about comparative incomes in the nineteenth century thanks to Angus Maddison and a new generation of economic historians who have reconstructed historical GDPs for several countries, most studies have made comparisons between empires rather than comparing living standards within empires. Figure 1 shows the real GDP per capita figures for some of the largest settler countries at the time. By the end of the eighteenth century, it is quite difficult to predict which countries would be likely to prosper over the next century.
Figure 1. Comparison of real GDP per capita (2011 US$), Argentina, Australia, Canada, United States, and South Africa, 1750-1850
To improve our understanding of comparative levels of income and wealth, we make use of tax censuses from the United States shortly after independence and from the Dutch and British Cape Colony. We find that Cape farmers were, on average, more affluent than their American counterparts. Figure 2 shows the value of crop output for the two regions, with and without wine. Even when wine production is excluded, Cape farmers produced greater quantities and higher value. Of course, the absolute size of Cape output was tiny in comparison. But on a per capita basis, Cape farmers attained higher incomes, a result also reflected in earlier work that compared probate inventories (Fourie 2013).
Figure 2. Comparison of crop output by district, pooled years
Lindert and Williamson also claim that ‘the American colonies in 1774 probably had the most equal distribution of income in the western world – even including the slaves’. Our records allow us to test this assertion as well. We calculate Gini coefficients and find that grain production was evenly distributed amongst New England farmers but more concentrated on the Cape. This is shown in the third panel of figure 3.
Figure 3. Lorenz curves of total livestock, slave, and crop ownership, by country (excluding non-owners)
Livestock too was more unequally distributed at the Cape, reflected in the first panel of figure 3. But, surprisingly, slave ownership was more concentrated in Virginia, as indicated in the second panel of figure 3. Our results complicate the Lindert and Williamson interpretation and suggest it depends crucially on the type of ownership assessed.
There are, as always, limitations to what we do. Our purpose is to compare average settler living standards. Were we to consider average living standards of all inhabitants, including enslaved and indigenous individuals, our results would likely reverse. The Cape tax censuses also do not record acreage, and it may be the case that Cape farms and acres under cultivation were larger than in the early United States. Land abundance may explain some of the differences we have observed. Alternatively, the farms in one region could have been worked more intensively than in another. Our results might appear differently if measured per-worker rather than per-farm.
What explains the high initial level of settler wealth and income at the Cape? As Adam Smith observed, the Cape’s favourable location as a refreshment station for passing ships gave it an advantage. So too did relatively cheap land and access to the Indian Ocean slave trade. The sparsely populated Cape Colony may initially have offered settlers greater access to land and natural resources, that is, until the closing of the frontier in early nineteenth century. The preponderance of slaveholders on the Cape also gave settler households an advantage in agricultural output over their counterparts in New England. The Dutch East India Company also subsidized the costs of a sizeable administrative and military presence. As the Colony expanded deeper into the interior, these advantages became less important.
In heralding the significance to the discovery of America and the route around the Cape of Good Hope, Smith noted that ‘it is impossible that the whole extent of their consequences can have been seen. What benefits or what misfortunes to mankind may hereafter result from these great events, no human wisdom can foresee’. Such was the position of the Cape Colony and the United States at the turn of the nineteenth century. The higher standard of living in the Cape Colony, or the comparative levels of inequality, offered no indication of the reversal of settler fortunes that awaited in the industrial age.
To contact the author:
Fourie, J., ‘The remarkable wealth of the Dutch Cape Colony: measurements from eighteenth‐century probate inventories’, Economic History Review, 66 (2013), pp. 419-48.
Fourie, J. and Garmon, F., ‘The settlers’ fortunes: comparing tax censuses in the Cape Colony and early American republic’, Economic History Review (forthcoming).
Lindert, P. H. and Williamson, J. G., ‘American incomes before and after the Revolution’, Journal of Economic History, 73 (2013), pp. 725-65.
Maddison Historical Statistics (2022): https://www.rug.nl/ggdc/historicaldevelopment/maddison/