Natural resources and economic performance: Anthony Trollope’s observation

The great Victorian novelist Anthony Trollope (and senior public servant in the British Post Office) visited Australia and New Zealand in 1871 and 1872.  His son had become a New South Wales sheep farmer, so the trip was partly about family, and partly an income-earning opportunity to write a book about the Antipodean colonies.

Much of the material from the New Zealand leg of the trip –  two months travelling from Bluff to Auckland –  was reproduced in With Anthony Trollope in New Zealand 1872, edited by A H Reed, and published in 1969.  I read the book over the weekend (having dipped into it, and found some quotes on railways and the incentives facing officials and politicians, here).

In 1872, it was only 32 years on from the Treaty of Waitangi  –  as close as 1984 is today to 2016.  All the New Zealand and Australian colonies were young –  it was only 84 years since the Sydney penal colony –  and whenever I read about the period I’m struck by how rapidly development occurred in many of these places.

By 1872 New Zealand had already been through some turbulent times.  The 1860s had brought the South Island gold rushes, and the huge influx of miners, but they were also the time of the worst of the land wars in the North Island –  where the burden on manpower and government finances was so severe that one sometimes wonders why the British government persevered. Trollope records contemporary British estimates that the New Zealand “wars with the Maoris…have been declared by competent authorities at home to have cost England twelve millions [and] have cost that colony nearly four millions and a half”.   Nominal GDP for New Zealand is estimated to have been only £4.4m in 1859 and £16 million by 1870.    Fortunately for the New Zealand taxpayer, Britain bore most of the fiscal cost.

One of the issues often debated is the role of natural resources in explaining the wealth of nations.  Natural resources alone don’t make a country prosperous –  think Bolivia, Angola or Iran –  but it can help a lot, especially in a country with a fairly small population –  think Equatorial Guinea, Kuwait or Brunei.  The natural resources have always been there, but it takes technology, management. and capital to utilize them, and really bad governance can impede all of that, and see any gains rapidly dissipated.  Among advanced countries, I think there is little doubt that Norway (in particular) and Australia would not have reached their current living standards without the natural resource endowments their people and institutions have enabled those countries to tap.  I’m going to come back to the case of Australia in the next few days.

Trollope was writing about the situation in 1872, and he included an interesting couple of paragraphs (pp38-39) about what we might term a “natural experiment” –  contrasting the performance of the province of Otago (which at the time had its own provincial government, with quite extensive powers) with that of the colony of Western Australia.

I will quote a few words from a printed dispatch respecting Otago, sent home by Sir George Bowen, the Governor of the colony, in 1871 – “after the lapse of only twenty-three years” –  from the first settlement of the province, – “I find from official statistics that the population of Otago approaches nearly to 70000, that the public revenue, ordinary and territorial, actually raised thereon exceeds  £520,000; that the number of acres farmed is above a million; that the number of horses exceeds 20000; of horned cattle 110.000; and of sheep 4,000,000.  The progress achieved in all the other elements of material prosperity is equally remarkable; while the Provincial Council has made noble provision for primary, secondary, and industrial schools; for hospitals and benevolent asylums; for athenaeums and schools of art; and for the new university which is to be opened in Dunedin in next year”.  I found this to be all true.  The schools, hospitals and reading-rooms, and university, were all there, and in useful operation; – so that life in the province may be said to be a happy life, and one in which men and women may and do have food to eat, and clothes to wear, books to read, and education to enable them to read the books.

The province is now twenty four years old…. Poor Western Australia is forty-five years old, and, with a territory so large, that an Otago could be take from one of its corners without being missed, it has only 25,000 inhabitants, and less than one million sheep, –  sheep being  more decidedly the staple of Western Australia than of Otago. I do not know that British colonists have ever succeeded more quickly or more thoroughly than they have in Otago.  They have had a good climate, good soil, and mineral wealth; and they have not had convicts, nor has the land been wasted by great grants…  And in Western Australia gold has not been found.  I know no two offshoots from Great Britain which show a greater contrast”

Western Australia was settled a little before Otago, and was materially closer to Britain (making it cheaper to immigrate to).  The cultural backgrounds of the settlers were very similar, and both operated under British law and institutions.  And yet Otago had prospered and Western Australia had underperformed.  There seems little real doubt that natural resource discoveries –  gold primarily – was the difference at the time.

Natural resources very rarely make a country or region rich forever –  usually only human skills and capability do that.  The South Island gold didn’t last long, on any scale, and in time Western Australia would become a major exporter of mineral products –  which couldn’t readily be exploited with 1860s technology.  Today, partly as a result, Western Australia has around 2.5 million people, and the Otago and Southland regional council areas (roughly the old Otago Province) have around 270000 people.

2 thoughts on “Natural resources and economic performance: Anthony Trollope’s observation

  1. I was quite impressed, some years ago, driving around Holland, to note the development of the agricultural resource there. The country has a population of over 16 million and is around the size of Southland, and is a similar distance from the equator. Yet it is still a large net exporter of food. I read it as a testimony of the power of a system of governance that is conducive to efficient capital formation. (Around the same time, I had also visited the farms of Ukraine, a country with a much better natural endowment but a much worse system of governance).

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    • Thanks. I’ve long had a mental note to try to understand that Dutch agriculture better. Some of it is a lower cost of capital and associated competitive real exchange rate – so we’d have a more capital intensive farm/food sector if we removed the persistent demand pressures. Some is probably location – a lot of people with a taste for good food very close by. But I suspect there is more to it than that.

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