Mats Lundahl

Directly Unproductive Profit-Seeking Activities

In the preceding chapter we outlined a theory for how individuals (or firms) organize themselves into interest groups when there are public goods for the group which may be produced as a result of putting pressure on the government and the legislators. We will now take one more step in our analysis and see what the economic consequences of this behaviour may be. The activities of the interest groups towards securing favours for the members are known as rent seeking or directly unproductive profit-seeking (DUP) activities.

Towards A Model of Territorial Expansion and the limits of empire

This chapter presents the theoretical foundation: Ron Findlay’s paper about the optimal extension of empire. It introduces the fundamental model with the choice of cultivating a given area or extending the area and the labor force by military conquest, as referred to above.

Natural Resources, ‘Vent-for-Surplus’ and the Staples Theory

This chapter integrates the frontier into a model of staples production (where staples are defined as raw materials in high demand in the international market). Agricultural goods are produced with the aid of land and labor. The land has to be developed with the aid of capital before it can be put to use. Manufactures are produced with the aid of labor and capital (the manufactured good itself). Trade is opened when the price of agricultural goods increases. The frontier is then extended and agricultural production increases at the expense of manufactures. The staples model, however, also deals with factor movements, which in turn open the possibility of industrialization and in the end for a general expansion of the economy (both sectors).

Modeling Global Interdependence: Centers, Peripheries and Frontiers

This chapter argues that, in order to understand the comparative performance of economies, both how they were created and how they interact in an international context needs to be taken into account.

Racial discrimination, dualistic labor markets and foreign investment

Abstract This paper presents a model of racial discrimination in a stylized two-sector dual economy model with direct foreign investment. Racial discrimination is analyzed both in terms of preferences and in terms of regulations that favor one ethnic group at the expense of another. The focus is on the gains to ‘white’ labor that accrue from restrictions on employment of ‘black’ labor, both in a closed economy and in one open to direct foreign investment.

Economic Effects of a Trade and Investment Boycott against South Africa

This paper deals with the effects of three types of economic sanctions on the South African economy: a boycott of South African export goods abroad, an oil embargo and a reduction in foreign investment in South Africa. The impacts of these measures on white incomes are compared to the effects of reducing racial discrimination in the labor market. It is concluded that an effective sanctions strategy may not be an efficient weapon to combat discrimination in the short run unless directed against agriculture rather than industry, since politically influential groups have strong connections with the former sector. In the longer run, industrial sanctions may be more efficient, as agricultural interests move into industry to an increasing extent.

Towards a Factor Proportions Approach to Economic History: Population, Precious Metals and Prices from the Black Death to the Price Revolution

This chapter constructs a general equilibrium model to analyze the impact and historical consequences of the Black Death in the mid-fourteenth century. Population, output and the supply of a commodity money, ‘silver’, are all endogenous variables of the model. The Black Death is an exogenous shock that initially reduces population and output while raising the real wage, thus inducing the eventual recovery of population and output to their original levels. The money supply is also shown to initially contract, leading to price deflation and what historians have called the ‘bullion famine of the fifteenth century’, after which both the money supply and the price level also eventually return to their original levels. The Price Revolution of the sixteenth century is analyzed as an exogenous shock to the supply of commodity money as a result of the discovery of America.

Income and Land Distribution in Haiti: Some Remarks on Available Statistics

The logical starting point for an investigation on distributional issues in Haiti is James Leyburn’s 1941 classic, The Haitian People,1 which divides the Haitian population into two distinct classes: the elite and the peasant masses. This division cannot be based on any single scale of measurement; several criteria must be employed. According to Leyburn,2 the following are the most important distinctions: the elite do not perform manual labor, are educated, speak French, live in towns, are formally married, practice Roman Catholicism, and are (predominantly but not necessarily) light-skinned. The peasants, on the other hand, are manual workers, illiterate speak nothing but Creole, live in the countryside, practice common-law marriage and voodoo, and are black. More importantly, especially as concerns the focus of the present work, the two groups differ dramatically in economic terms: Since the maintenance of a high standard of living is costly, it is obvious that another source of caste3 distinction lies in the inequalities of wealth and property. Wealth is a relative term, however, and the Haitian peasant is so poor that by contrast a few hundred dollars’ income a year will seem like riches. The elite live economically by American standards, yet even parsimonious spending of many may, when governed by a consciousness of social distinctions, make the peak of aristocracy unassailable.4 Even though Leyburn was exaggerating the extent of the cleavage between Haitian societies by referring to a ‘caste system’5 he was, nevertheless, pointing out a fundamental economic fact: the separation of the rich from the poor. Haiti had a patent problem with income distribution.

Economic crisis in Africa : perspectives on policy responses

While the pitiful images of famine victims generally emanate from the very poorest countries in Sub-Saharan Africa, the entire region faces an intense economic crisis. Why is this area in a state of near-permanent crisis and perhaps more importantly, what can be done about it? In Economic Crisis in Africa the authors use country studies to examine how this situation has come about. The book is divided into four parts: Part I presents an overall perspective of the African Crisis and its management; Part II addresses the problems of the external sector; Part III discusses the crises and structural adjustment from a microperspective; and finally, Part IV examines changes in economic systems which took place during the 1980s. At a time when famine again threatens the area, this work offers a valuable insight into a highly complex and critical situation.

Apartheid: Cui bono?

Abstract Economic explanations of racial discrimination in South Africa tend to fall either into the “liberal” category — capitalism is not responsible — or into the “radical” one — the capitalists benefit from the system. The present paper offers a “radic-lib” analysis of apartheid. “Radical,” i.e. basically Marxist, assumptions are combined with a “liberal,” i.e. neoclassical, analytical framework. The main analytical results (predictions) are surveyed. An extension of the analysis — the apartheid bureaucracy as a directly unproductive, profit-seeking activity — is made. Finally, the analytical predictions are compared with the history of South Africa from the mineral discoveries in the late 19th century to the present. It is concluded that neither the “radical” nor the “liberal” approach can explain the entire sequence. A combination of the two is needed.