Scarcity and frontiers how economies have developed through natural resource exploitation

2.1 Timeline for the Agricultural Transition page 50 3.1 Climate change, environmental degradation and the collapse of successive Mesopotamian civilizations, 4.1 The economic consequen

Throughout much of history, a critical driving force behind global nomic development has been the response of society to the scarcity of key natural resources Increasing scarcity raises the cost of exploiting exist-ing natural resources and creates incentives in all economies to innovate and conserve them However, economies have also responded to increas-ing scarcity by obtaining and developing more of these resources Since the Agricultural Transition over 12,000 years ago, this exploitation of new “frontiers” has often proved to be a pivotal human response to nat-ural resource scarcity This book provides a fascinating account of the contribution that natural resource exploitation has made to economic development in key eras of world history This not only i lls an import-ant gap in the literature on economic history but also shows how we can draw lessons from these past epochs for attaining sustainable economic development in the world today

Edward B Barbier is the John S Bugas Professor of Economics in the Department of Economics and Finance, University of Wyoming

He has over twenty-i ve years’ experience as an environmental and resource economist, working mainly on the economics of environment and development issues He is the author of many books on environ-

mental policy, including Natural Resources and Economic Development (Cambridge University Press, 2005) and, with David Pearce, Blueprint for a Sustainable Economy (2000)

How Economies Have Developed Through Natural Resource Exploitation

E dwa r d B B a r bi e r

São Paulo, Delhi, Dubai, Tokyo, Mexico City

Cambridge University Press

The Edinburgh Building, Cambridge CB2 8RU, UK

Published in the United States of America by Cambridge University Press, New York

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© Edward B Barbier 2011

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First published 2011

Printed in the United Kingdom at the University Press, Cambridge

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1 Agriculture–Economic aspects–History 2 Natural

resources 3 Scarcity 4 Economic development I Title

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accuracy of URLs for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is,

or will remain, accurate or appropriate

Aldous Huxley

“The history of almost every civilization furnishes examples

of geographical expansion coinciding with deterioration in quality.”

Arnold Toynbee

“Where there is an open mind, there will always be a

frontier.”

Charles Kettering

List of i gures page viii

1 Introduction: scarcity and frontiers 1

2 The Agricultural Transition (from 10,000 BC

3 The Rise of Cities (from 3000 BC to 1000 AD) 84

4 The Emergence of the World Economy (from

8 The Age of Dislocation (from 1914 to 1950) 463

9 The Contemporary Era (from 1950 to the present) 552

10 Epilogue: the Age of Ecological Scarcity? 663

1.1 The classic pattern of frontier expansion page 10

1.2 Key historical epochs of resource-based development 25 2.1 The origins and expansion of early agricultural systems 48 2.2 The Fertile Crescent in Southwest Asia 53 3.1 The Mesopotamian-Indus Valley trade routes,

3.2 The major silk trade routes, 200 BC to 400 AD 117 4.1 The emerging world economy, ca 1200–1300 163 5.1 Phases of frontier expansion in North and South

8.1 Change in land use, 1700–1950 473 8.2 Global energy consumption, 1900–1950 482 8.3 Global energy production, 1900–1950 483 8.4 Long-run material use trends in the US economy,

9.1 GDP per capita and population, 1960–2006 561 9.2 Long-run global land use change, 1700–1990 572 9.3 Global agricultural and forest land use change,

9.4 Global energy use, 1965–2006 580 9.5 Resource dependency in exports, 1960–2006 584 9.6 The rural poor and population on fragile lands in

9.7 Fragile land population and GDP per capita in

1.1 Magnitudes of global environmental change,

6.3 Atlantic economy commerce, 1501–1850 319 6.4 Destination of British and European exports,

6.5 Estimated populations of major North American

7.1 Estimates of regional demographic and economic

7.2 Global transport cost changes, 1870–1914 376 7.3 Length of railway line in service, 1870–1913 378 7.4 Land use trends for selected regions, 1700–1910 380 7.5 Cropland expansion in frontier regions, 1870–1910 382

7.7 Agricultural land share of national wealth for selected

8.5 Agricultural land share of national wealth for

selected countries (%), 1913–1955 486 9.1 Regional shares (%) of world energy production,

9.6 Developing countries and regions with relatively

9.7 Global greenhouse gas emissions (million tonnes of

CO 2 equivalent), 1990–2005 581 9.8 Global greenhouse gas intensity of economies

(tonnes of CO 2 equivalent per million 2000

10.1 2008–2009 global stimulus packages and green

investments (as of July 1, 2009) 668

10.2 Global greenhouse gas emissions (million tonnes of CO 2

10.3 The emerging environmental tax base in selected

2.1 Timeline for the Agricultural Transition page 50

3.1 Climate change, environmental degradation and

the collapse of successive Mesopotamian civilizations,

4.1 The economic consequences of the Black Death 176 5.1 Overseas migration and the era of Global Frontiers 226 7.1 “Moving frontier” models of economic development

9.1 Resource dependency and economic performance 586 9.2 Frontier expansion and economic performance:

10.1 Institutions and ecological scarcity 686 10.2 Induced technological change and public policy for

10.3 The 2030 blueprint for a clean energy economy 706

The genesis of this book began with another volume, Natural Resources and Economic Development , which was published in 2005

by Cambridge University Press 1 The purpose of the latter book was

to explore a key paradox in the contemporary world economy: why

is natural resource exploitation not yielding greater benei ts to the poor economies of Africa, Asia and Latin America? To better under-stand this paradox, I thought that it might be important to contrast the less successful resource-based development of present times with past epochs of economic development in which the exploitation of natural resources clearly played an important, and more successful, role Thus, in my 2005 book, I included a chapter entitled “Natural resource-based economic development in history.” I published subse-

quently an article based on this chapter in World Economics 2 However, it soon became apparent that a chapter or journal art-icle was not sufi cient to explore the contribution of natural resource exploitation in inl uencing processes of economic development in key eras of world history Nor would it be possible through any short historical review to shed light on the many parallels between these past epochs and the current era of global economic development and patterns of resource use

But what i nally convinced me to write this book was the tion that the role of natural resources in shaping economic develop-ment has been somewhat of a neglected topic in the study of history This omission seems surprising, given that the exploitation of land and other natural resources has clearly been an important feature

realiza-of economic development for most realiza-of global history A study ing on how economies have developed through exploiting natural resources might therefore be a useful contribution to the existing literature

I also felt that such a contribution might be warranted, given two important developments in the study of history First, environmental history – the study of humans and nature and their past interrelation-

to this growing subject area, there are now more studies of how past environmental conditions and events have inl uenced human history and, as a result, a strong interest in understanding this linkage further from an economic perspective 3

Second, economic history – the study of how economic ena evolved from a historical perspective – has experienced a renais-sance in recent years One reason, as cited by the economic historian Nathan Nunn, is the emergence of an exciting new literature that is examining whether historic events and epochs are important deter-minants of economic development today 4 Perhaps it was time to show how the lessons from successful resource-based development

phenom-in the past might phenom-inform our current efforts to grapple with mental problems and their inl uence on present-day economies The focus of this book on how economies have developed through natural resource exploitation, especially by exploiting new fron-tiers of land and natural resources, has received even less attention

environ-in contemporary economics The economists Ron Fenviron-indlay and Mats Lundahl assert that the analysis of frontier-based development “has been used extensively by historians and geographers for a wide var-iety of times and places, but has been neglected by economists.” 5 As

explained in Chapter 1 , the book’s title, Scarcity and Frontiers , was

chosen to emphasize the economic importance of such a pattern of development Throughout much of history, a critical driving force behind global economic development has been the response of society

to key natural resources Increasing scarcity raises the cost of ing existing natural resources, and will induce incentives in all econ-omies to innovate and conserve more of these resources However, human society has also responded to natural resource scarcity not just through conserving scarce resources but also by obtaining and developing more of them Since the Agricultural Transition over 12,000 years ago, exploiting new sources, or “frontiers,” of natural resources has often proved to be a pivotal human response to natural resource scarcity

This long process of history in which i nding and exploiting new sources of land and natural resources has been fundamental to eco-nomic development may hold some lessons for the environmental and resource challenges facing the world economy currently Thus,

a key aim of this book is to demonstrate that examining how omies have developed historically through natural resource exploit-ation may help us understand better the role of scarcity and frontiers

econ-in today’s economies If the followecon-ing book succeeds econ-in this aim,

then perhaps the study of how natural resource use inl uences nomic development, both past and present, will not be such an overlooked topic

References

Acemoglu , Daron , Simon Johnson and James A Robinson 2001 “ The Colonial Origins of Comparative Development: An Empirical

Investigation ” American Economic Review 91 (5): 1369 –1401

2002 “ Reversal of Fortune: Geography and Institutions in the Making

of the Modern World Income Distribution ” Quarterly Journal of Economics 117 (4): 1231 –1294

Barbier , Edward B 2005a Natural Resources and Economic Development ,

especially ch 2 “Natural Resource-Based Development in History.” Cambridge University Press

2005b “ Natural Resource-Based Economic Development in History ”

World Economics 6 (3): 103 –152

Chew , Sing C 2001 World Ecological Degradation: Accumulation, Urbanization, and Deforestation 3000 BC–AD 2000 New

York : Altamira Press

Diamond , Jared 1997 Guns, Germs, and Steel: The Fates of Human Societies New York : W W Norton & Co

2005 Collapse: How Societies Choose to Fail or Succeed London : Allen

4 Nunn ( 2009 ) As we shall see in this book, some of this “exciting new ture” identii ed by Nunn, such as Engerman and Sokoloff ( 1997 , 2002 ) and

litera-Acemoglu et al ( 2001 , 2002 ), has raised important issues concerning the

his-torical relationship between natural resource use and economic development

5 Findlay and Lundahl ( 1994 , p 70)

2002 “ Factor Endowments, Inequality, and Paths of Development

among New World Economies ,” Economia 3 (1): 41 –109

Findlay , Ronald and Mats Lundahl 1994 “Natural Resources,

‘Vent-for-Surplus,’ and the Staples Theory.” In G Meier (ed.) From Classical Economics to Development Economics: Essays in Honor of Hla Myint New York : St Martin’s Press , pp 68–93

Marks , Robert B 2007 The Origins of the Modern World: A Global and Ecological Narrative from the Fifteenth to the Twenty-i rst Century

(2nd edn.) Lanham, MD : Rowman & Littlei eld

McNeill , John R 2000 Something New Under the Sun: An Environmental History of the 20th-century World New York : W W Norton & Co McNeill , John R and William H McNeill 2003 The Human Web: A Bird’s Eye View of Human History New York : W W Norton & Co

Nunn , Nathan 2009 “ The Importance of History for Economic

Development ” Annual Review of Economics , September 2009, vol

Sokoloff , Kenneth L and Stanley L Engerman 2000 “ Institutions, Factor

Endowments, and Paths of Development in the New World ” Journal

of Economic Perspectives 14 (3): 217 –232

I am grateful to a long list of people who have helped in so many ways

to make this book possible

First, and foremost, I would like to thank Chris Harrison of Cambridge University Press for enthusiastically supporting this pro-ject from the outset, commissioning this book and providing useful suggestions and criticisms of earlier drafts of the chapters

I also appreciate the encouragement and advice of Eric Jones, who not only invited me to spend the day with him to discuss my ideas for this book but also agreed to review the entire draft manuscript His evaluation and suggestions were extremely helpful in preparing the

i nal draft

Special thanks go to Joanne Burgess, who read over early drafts

of the manuscript and provided detailed comments, suggestions and edits Her careful attention to the i rst and i nal chapters of this book was immensely helpful and sorely needed In this task, she was ably assisted by her three “insistents,” Becky, James and Charlotte They provided the necessary and welcome diversions from this book, whether it was appreciated at the time or not

A number of individuals provided helpful advice, encouragement and useful exchanges that helped me in producing the book Lara Barbier enthusiastically engaged me in a number of conversations about the ideas in this book, and offered a unique and fresh out-look on the appeal of history from the perspective of an undergradu-ate majoring in the subject When I was just formulating my ideas for this book, I had several useful conversations, exchanges and vis-its with Ron Findlay and Gavin Wright Stanley Engerman, Nick Hanley, Brooks Kaiser, Kevin O’Rourke, Fiona Watson and Jeffrey Williamson also provided useful advice and exchanges

I am indebted to Margie Reis for helping me with preparing the manuscript for publication and, above all, for her tireless dedication

to tracking down obscure references from interlibrary loan and tronic sources

Thanks also to Brooks Kaiser for inviting me to present an view of the main “scarcity and frontier” theme at the Environmental Economics History Session, 32nd Annual Meeting of the Social Science History Association, Chicago, Illinois, November 18, 2007 The research undertaken for this book was facilitated by my sab-batical leave from the University of Wyoming over 2006–2007 My sabbatical research was assisted through the Flittie Award from the Faculty Development Committee, University of Wyoming and a research fellowship from the American Heritage Center, University

over-of Wyoming I am grateful to Nick Hanley and the Department over-of Economics, University of Stirling, Scotland for hosting me on two visits in Fall 2006 to conduct research for this book

Resource development is a neglected topic in economic history To be sure, no economist would be surprised to learn that resource abundance

is a function of extraction and transportation cost as well as of physical availability, and the role of substitution in mitigating resource scarcity is widely appreciated … But natural resources still are viewed as the last of the exogenous factors, governed by the principle of diminishing returns

in an economic growth process whose other constituents have come to be treated both as endogenous and subject to increasing returns

( David and Wright 1997 , p 204)

Introduction

For an early Spring day in Washington, DC in 1913, the weather was overcast but mild The large crowd milling about the Capitol were jubilant and expectant After all, their presidential candidate, Woodrow Wilson, had swept to victory the previous November, oust-ing the incumbent William Taft and soundly beating the third party candidate Theodore Roosevelt

To the average American, Woodrow Wilson embodied the spirit and success of his times His life and career spanned the US Civil War

of the 1860s, the hard post-war years of reconstruction and ation, and, from 1870 onwards, the rapid expansion of the US econ-omy across the North American continent Woodrow Wilson also typii ed the American Dream The son of a southern Presbyterian minister, Wilson grew up in the South but eventually became a pro-fessor at Princeton University and then its President He entered pol-itics and was Governor of New Jersey from 1911 to 1913 He ran for President for the i rst time and won Just like the United States itself, there seemed to be no limits to what this mild-mannered, devout and hard-working American could accomplish

1 Introduction: scarcity and frontiers

The crowd waiting for Wilson’s i rst inaugural address on March 4,

1913 therefore anticipated a rousing afi rmation of all that was good and great about the United States But when he i nally gave his speech,

it was different to what his audience had expected

At i rst, Wilson told the crowd what they wanted to hear He outlined briel y the remarkable achievements of rapid US industri-alization over recent decades Soon, though, he launched into his main message: the need for economic and social reform The human and environmental costs of recent US economic growth had been too high

In particular, Wilson asserted, “We have squandered a great part

of what we might have used, and have not stopped to conserve the exceeding bounty of nature, without which our genius for enterprise would have been worthless and impotent.” 1

The inaugural audience was stunned by this sober pronouncement Hadn’t the United States, through exploiting its bounteous land and natural resources, become the leading industrial power of the world, overtaking even the mighty British Empire? Didn’t the United States still have plenty of land and natural resources left to keep its econ-omy growing? Why was the new President so concerned that US eco-nomic development may have “squandered” its “exceeding bounty of nature”?

Woodrow Wilson’s remarks turned out to be prescient, however The period from 1870 to 1914 had been unique in world economic history, which scholars now refer to as the “Golden Age” of Resource-Based Development 2 The transport revolution and trade booms of the era were primarily responsible for unprecedented land conversion and natural resource exploitation across many resource-rich regions

of the world The result was a long period of global economic growth,

in which many countries and regions benei ted from this pattern

of resource use and development The United States was the prime example of such success; in only a few decades the US had exploited its vast natural wealth to transform its economy into an industrial powerhouse But with the advent of World War I, followed by the Depression years and World War II, the Golden Age came to an end Although the United States continued to rely on its abundant natural resources to spur industrial expansion, by the 1950s the US economy had also become dependent on foreign sources of raw materials, fossil fuels, minerals and ores to support this expansion In the post-war world, possessing an abundant endowment of natural resources no

longer guaranteed successful economic development Over the past

i fty years, increased trade and globalization has resulted in declining trade barriers and transport costs, fostered global integration of com-modity markets, and severed the direct link between natural resource wealth and the development of domestic industrial capacity Or, as the economic historian Gavin Wright maintains, in today’s world economy, “there is no iron law associating natural resource abun-dance with national industrial strength.” 3

Nearly a hundred years after President Wilson’s 1913 inaugural address, public reaction during another democratic election illustrates how contemporary perceptions of natural resources and economic development are very different This time the location was France, and the election was the June 2009 vote for seats in the European Parliament, the legislature of the European Union

A year before the election, the French Government of President Nicolas Sarkozy released its strategic plan for the French Armed Forces over the next several years The plan’s main recommendation was that “the current structure of the armed forces will undergo a controlled reduction, combining on the one hand the effects of con-centration of military bases in France and the rationalization of administrative and support functions and, on the other, the redef-inition of operational contracts A similar reduction will be made in the size of prepositional forces and forces stations overseas.” 4 The result of this recommendation would be a reduction in total French armed forces from 271,000 civilian and military personnel in 2008

to 225,000 in 2014–2015 By late 2008, the French legislature had approved the reductions

One of the obvious targets for overseas troop reductions were the small garrisons stationed in the tiny overseas French possession, les Íles Eparses (the Scattered Islands) 5 These territories consist of four small coral islands and one atoll, dotted around Madagascar in the southern Indian Ocean Although les Íles Eparses are unpopulated and are designated nature reserves, France maintains a military gar-rison of around i fteen troops on all but one of the territories The garrisons establish French sovereignty against rival territorial claims

by Madagascar and Mauritius and may deter the spread of piracy

in the Indian Ocean But the principal function of the garrisons has been to monitor and police the reserves, which are highly valued by the international scientii c community as biodiversity sanctuaries and for studying the effects of global warming With the planned

reductions in French forces stationed overseas, it seemed that inating these expensive outposts in les Íles Eparses was an obvious policy decision

However, the June 2009 European elections in France caused a remarkable reversal in the political fortunes of les Íles Eparses The French Greens received a signii cant share of votes in the elections,

by campaigning for better policies to halt ecological degradation, biodiversity loss and global warming French scientists, including ornithologists, meteorologists, archaeologists, coral reef experts and geologists, capitalized on the public concern over the environment They argued that the pristine les Íles Eparses were of unique scientii c and ecological value, which was well worth the costs of maintain-ing small garrisons on the islands to protect them from poachers and other unwelcome visitors The French public was persuaded by the scientists, and the fate of les Íles Eparses became an electoral issue The Sarkozy Government had no choice but to abandon any plans of eliminating the troop garrisons in les Íles Eparses Despite the exorbi-tant budgetary costs of maintaining troops thousands of miles away

on remote islands, preserving nature reserves of scarce biodiversity and ecological value was warranted By October 5, 2009 the French Government was hosting a symposium on “Scattered Islands: Land

of the Future,” to plan the long-term management of the reserves and regional cooperation of the i sheries in the exclusive economic zone of 640,000 km 2 encompassed by les Íles Eparses

The difference in public attitudes between the American crowd listening to President Wilson in 1913 and the French electorate in

2009 illustrates that much has changed over the past hundred years

in how we view the role of natural resources in economic ment In Wilson’s day, associating “natural resource abundance with national industrial strength” was the norm Today, we no longer believe that this association holds Instead, we see our economies and societies potentially threatened by a wide variety of constraints caused by natural resource scarcity Such problems range from con-cerns over the cost and availability of key natural resources, including fossil fuel supplies, i sheries, arable land and water, to the environ-mental consequences of increasing global resource use, degradation

develop-of key ecosystems, such as coral reefs, tropical forests, freshwater systems, mangroves and marine environments, and the rising carbon dependency of the world economy Contemporary unease over nat-ural resource scarcity, energy insecurity, global warming and other

environmental consequences is to be expected, given the rapid rate

of environmental change caused by the global economy and human populations over the twentieth century (see Table 1.1 )

At the beginning of the twenty-i rst century, therefore, we are more accustomed to viewing “the exceeding bounty of nature” to be run-ning out, rather than providing unlimited supplies for “our genius for enterprise.” Rather than enjoying a new “Golden Age” of Resource-

Table 1.1 Magnitudes of global environmental change, 1890s–1990s

Bird and mammal species 0.99 (1% decrease)

Carbon dioxide (CO 2 ) emissions 17

Sulfur dioxide (SO 2 ) emissions 13

Source: Adapted from McNeill ( 2000 , pp 360–361) and McNeill ( 2005 , Tables 1

and 2)

Based Development, we seem to be entering a different era, the “Age

of Ecological Scarcity.”

However, as the quote at the beginning of this chapter indicates, the contemporary concern with natural resource and ecological scar-city also shapes our view of how natural resources inl uence economic development We regard natural resources as “i xed endowments.” These endowments comprise the sources of raw materials, energy and land that are provided in varying amounts freely by nature and geology, and that are distributed randomly across regions and coun-tries Although natural resources serve as valuable inputs into our economies, as the economic historians Paul David and Gavin Wright note, because they are largely i nite in supply relative to demand, we treat these endowments as “exogenous factors” that are subject to

“diminishing returns.” This view appears to be reinforced by rent patterns of resource use and exploitation in today’s economy As

cur-we continue to encroach on and pollute i xed natural environments and habitats, the earth’s natural capacity to sustain a stable climate, absorb emissions, support ecosystems and maintain wild species has declined (see Table 1.1 ) In today’s world, we are more concerned about the impact of economic development on natural resources and global environmental change than how the abundance, or scarcity, of natural resources have shaped economic development

Our preoccupation with present-day environmental and natural resource problems tends to be myopic, however There is mount-ing scientii c evidence that ecological scarcity, global warming and energy insecurity are serious issues that do require immediate atten-tion by the international community But our concern with these con-temporary issues must be balanced with learning from the past We tend to dismiss past uses of natural resources in previous eras, such

as the Golden Age, as artifacts of history and thus irrelevant to our current environmental concerns The result, as emphasized by David and Wright, is that “resource development is a neglected topic in eco-nomic history.”

The purpose of this book is to correct this omission and, in doing

so, show why the relationship between natural resources and nomic development has been fundamental as economies have evolved over the past 10,000 years or so There are two principal reasons motivating this task: i rst, to show that resource development should

not be a neglected topic in economic history; and second, to

demon-strate that the lessons learned from natural resource use and economic

development in past eras are relevant in the present Age of Ecological Scarcity

Scarcity and frontiers

This book’s title, Scarcity and Frontiers , conveys an important

over-all theme Throughout much of history, a critical driving force behind global economic development has been the response of society to the scarcity of key natural resources Increasing scarcity raises the cost

of exploiting existing natural resources, and will induce incentives

in all economies to innovate and conserve more of these resources However, human society has also responded to natural resource scar-city not just through conserving scarce resources but also by obtain-ing and developing more of them Since the Agricultural Transition over 12,000 years ago, exploiting new sources, or “frontiers,” of nat-ural resources has often proved to be a pivotal human response to natural resource scarcity

The concept of natural resource frontiers is therefore signii cant to

this book The term frontier , as employed here, refers to an area or source of unusually abundant natural resources and land relative to

labor and capital Note that it is the relative scarcity, or abundance,

of natural resources that matters to economic development, not their

absolute physical availability The process of frontier expansion , or frontier-based development , thus means exploiting or converting

new sources of relatively abundant resources for production purposes Years ago, the economist Joseph Schumpeter suggested that this pro-cess often contributes fundamentally to economic development, which

he dei ned as “the carrying out of new combinations of the means of production,” one of which is “the conquest of a new source of supply

of raw materials … irrespective of whether this source already exists

or whether it has i rst to be created.” 6 As we shall see in this book,

such resource-based development has proved to be highly successful

in the past for some economies and regions, but less successful for others

In sum, the process of economic development has not just been about allocating scarce resources but also about obtaining and devel-oping new frontiers of natural resources This is particularly the case

if, as noted by the economists Ron Findlay and Mats Lundahl, the concept of a “frontier” extends “vertically downwards” to include mineral resources and extractive activities as well as “horizontally

extensive as in the case of land and agriculture.” 7 When viewed in this way, frontier expansion has clearly been pivotal to economic develop-ment for most of global history

Theories of frontier-based development

The focus of this book on how economies have developed through natural resource exploitation, especially by exploiting new frontiers

of land and natural resources, has received little attention in porary economics 8 In Woodrow Wilson’s time, however, the recog-nition of the role of the frontier in economic development was widely

contem-appreciated, thanks to the frontier thesis put forward by the historian

Frederick Jackson Turner

In his infamous 1893 address to the American Historical Association, “ The Signii cance of the Frontier in American History ,” Turner argued that “the existence of an area of free land, its con-tinuous recession, and the advance of American settlement westward, explain American development.” 9 Critical to this frontier expansion was the availability of “cheap” land and resources:

Obviously, the immigrant was attracted by the cheap lands of the frontier, and even the native farmer felt their inl uence strongly Year by year the farmers who lived on soil whose returns were diminished by unrotated crops were offered the virgin soils of the frontier at nominal prices Their growing families demanded more lands, and these were dear The compe-tition of the unexhausted, cheap, and easily tilled prairie lands compelled the farmer either to go west and continue the exhaustion of the soil on a new frontier, or to adopt intensive culture 10

Turner’s frontier thesis was further extended by the historian Walter Prescott Webb to explain not just American but global eco-nomic development from 1500 to1900 Webb suggested that exploit-ation of the world’s “ Great Frontier ” – present-day North and South America, Australia, New Zealand and South Africa – was instru-mental to the “economic boom” experienced in the “Metropolis,” or modern Europe: “This boom began when Columbus returned from his i rst voyage, rose slowly, and continued at an ever-accelerating pace until the frontier which fed it was no more Assuming that the frontier closed in 1890 or 1900, it may be said that the boom lasted about four hundred years.” 11

Historians, geographers and social scientists have continued to modify the ideas developed by Turner and Webb to describe processes

of frontier-based development in many areas of the world, ing Latin America, Russia, Canada, South Africa, Australia and New Zealand 12 Although there is considerable debate over whether the frontier thesis as envisioned by Turner and Webb is still relevant for all regions, a consensus has emerged in this literature over both the dei nition of a frontier and its signii cance for economic development

A frontier area is typically dei ned as “a geographic region adjacent

to the unsettled portions of the continent in which a low man-land ratio and unusually abundant, unexploited, natural resources provide

an exceptional opportunity for social and economic betterment to the small-propertied individual.” 13 Or, as summarized by the econo-mist Guido di Tella , throughout history “processes” of frontier-based development “were characterized by the initial existence of abundant land, mostly unoccupied, and by a substantial migration of capital and people.” 14

It is not surprising that most theories of frontier-based development draw on the historical legacy of the Great Frontier expansion from

1500 to 1900, as described by Webb, for their inspiration

As will be discussed further in Chapter 5 , over this 400-year period Western European economies benei ted signii cantly from the exploitation of frontiers on a global scale Many European coun-tries gained a vast array of natural wealth, not only through new lands that provided an outlet for poor populations emigrating from Europe in search of better economic opportunities but also through new sources of i shing, plantation, mining and other resource fron-tiers For example, as suggested by the economic historian Eric Jones, during this era Europe had at its disposal four main global “fron-tiers” that provided “vast, varied, and cheap” supplies of “extra-European resources”: ocean i sheries, including whale and seal

i sheries; boreal forests around the Baltic, Scandinavia and Russia; tropical land for plantation and smallholder commercial crops, such

as sugar, tobacco, cotton, rice and indigo; and temperate arable land for grains 15

The general perception, too, has been that the exploitation of the Great Frontier from 1500 to 1900 eventually benei ted the regions that contained the abundant endowments of natural resources and land Such a benei cial frontier-based development process, as outlined in

Figure 1.1 , can be termed the classic pattern of frontier expansion

As shown in Figure 1.1 , the i rst phase involves initial exploration and discovery of the vast areas of land and natural resources, and small-scale extracting of natural resources, minerals and other raw materials The second phase sees the development of large-scale extraction activities, usually for commercial export, and transpor-tation networks By the third phase, agricultural conversion of land and the establishment of permanent settlements are in full fruition The i nal phase involves the development of industrial activities, large urban centers and modern commercial networks Somewhere between the third and fourth phases, the abundance of land and nat-ural resources relative to labor and capital has disappeared, and the former frontier region has effectively “closed.”

Various phases of European exploitation of the abundant land and natural resource wealth of the New World from 1500 to 1914 appear

to i t this classic pattern of frontier expansion (see, for example, Chapter 5 and Figure 5.1 ) 16 The i rst phase, from 1500 to 1640, included much of the initial exploration and conquest of the New World, as well as the establishment for the i rst important resource-extractive enclaves, the Spanish silver mines and “sugar economy” of Portuguese Brazil 17 The second phase (1580–1860) corresponded to the spread of the slave-based plantation economy from Brazil to other tropical and subtropical regions of South America , the Caribbean and southern North America This economy was an agricultural-based export enclave on an extensive scale, and became an important leg of the Atlantic “ triangular trade ” between Europe, Africa and the New

3 Agricultural conversion Permanent settlements

4 Industrialization Urbanization

Frontier expansion

phase

Low High

Population density/growth Economic activity/development Pollution/resource-intensity Land conversion/habitat modification

Figure 1.1 The classic pattern of frontier expansion

World, by which slaves were sent from Africa to the Americas, raw materials from the New World to Europe, and manufactured prod-ucts from Europe to the other two regions (see Chapter 6 ) Although colonization continued throughout the second phase, the mass immi-gration and frontier settlement boom occurred in the third phase, from 1830 to 1900 Immigration, settlement and expansion of the agricultural frontier took place mainly in the favorable temperate cli-matic and environmental zones of North and South America Finally, the older “settlement” zones, especially in the northeastern US and Canada with favorable transportation and trade links, experienced the i nal frontier transformation of urbanization and industrializa-tion, from 1870 to 1914 The western frontier expansion and urban development phases interlinked in the late nineteenth century to fos-ter successful resource-based development of the temperate regions of North America

However, as we shall see in this book, the classic pattern of tier expansion is really only applicable to North America Frontier-based development in Latin America did not fully complete the four phases outlined in Figure 1.1 For example, the “triangular trade” of the Atlantic economy contributed to economic development in the United States and Western Europe, whereas in contrast the economic benei ts to Spain and Latin America of the silver “booms” were short-lived (see Chapter 6 ) In comparison to North America, the industrial

fron-“take-off” of temperate South America failed to materialize, because during the Golden Age of Resource-Based Development (1870–1914), agricultural-based land expansion, settlement and exports did not mutually reinforce domestic manufacturing and urbanization in the region (see Chapter 7 )

Frontier expansion in Asia and Africa also deviated from the sical pattern described in Figure 1.1 From 1750 to 1914, considerable frontier land expansion and extension of agricultural cultivation took place in Asia and Africa, mainly to supply Europe with raw materials for industrialization and growing populations (see Chapters 5 and

7 ) In the tropical regions, this frontier expansion led to the ment of agricultural-based colonial economies specialized in a few key export crops, often relying on imported labor from Asia or sur-plus native labor It was only from the nineteenth century onwards

develop-in temperate Australia, New Zealand and South Africa that frontier land expansion instigated permanent farm settlements, almost all of whom were immigrants from Britain and other European countries

The important “fourth phase” of industrialization and urbanization never really occurred in Asia and Africa, even during the Golden Age when some countries and regions boomed from export-led develop-ment of agricultural and mineral resources

The successful examples of frontier-based development from the nineteenth and early twentieth century have inspired some economic theories of how successful exploitation of natural resources can fos-

ter economy-wide development These include the staples thesis and the vent for surplus theory 18 The staples thesis maintains that the development of some countries and regions with abundant land and natural resources has been led by the expansion of key commodity exports, or “staples.” The vent for surplus theory suggests that trade was the means by which idle resources, and in particular natural resources in underdeveloped countries and regions, were brought into productive use through the expansion of export opportunities Both theories are relevant to the economic analysis of frontier-based devel-opment, because they focus on the existence of excess supplies of land and other natural resources that are not being fully exploited by a closed economy International trade allows these surplus sources of land and natural resources that previously had no economic value to

be exploited, for increased exports and growth

Both the staples thesis and the vent-for-surplus theory were cerned mainly with the existence of surplus natural resources as the basis for the origin of trade and export-led growth during the Golden Age of Resource-Based Development For example, the staples the-ory attempted to explain the substantial inl ows of capital and labor into the “regions of recent settlement,” i.e Webb’s “Great Frontier”

con-of Canada, the United States, Argentina and Australia, that occurred largely in the nineteenth and early twentieth centuries 19 According

to the economist Hla Myint , the classical vent-for-surplus theory of trade is a much more plausible explanation of the start of trade in an otherwise “isolated” country or region with a “sparse population in relation to its natural resources” such as “the underdeveloped coun-tries of Southeast Asia, Latin America and Africa when they were opened up to international trade in the nineteenth century .” 20

More recently, economists have developed theories that ize an “ endogenous” or “moving” frontier as the basis for attracting inl ows of labor and capital into a region or economy 21 Such models assume that additional land or natural resources can be brought into production through investment of labor and/or capital, provided that

character-the resulting rents earned are competitive with character-the returns from native assets Thus frontier expansion becomes an endogenous pro-cess within the economic system, with the supply and price of land and other natural resources determined along with the supplies and prices of all other goods and factor inputs (e.g capital and labor) As

alter-a consequence, chalter-anges in relalter-ative commodity alter-and input prices, alter-as well as exogenous factors such as technological change and transport innovations, can inl uence expansion of the land and natural resource frontiers As with most economic theories of frontier-based develop-ment, these endogenous frontier models have been used mainly to explain trade and development in the nineteenth and early twenti-eth centuries, and export-led colonial agricultural development in certain tropical countries during the Golden Age of Resource-Based Development 22 However, a variant of the endogenous frontier model has also been employed to explain the pattern of frontier-based eco-nomic development in low- and middle-income economies during the Contemporary Era from 1950 to the present (see Chapter 9 ) 23 However, if the process of frontier expansion has been pivotal to economic development for most of global history, then economic explanations of successful frontier-based development must look beyond models applicable just to the Golden Age or to the classic pat-tern of frontier expansion in North America

One such theory that links frontier expansion with economic

devel-opment in other historical eras and places is the free land esis proposed by the economist Evsey Domar , which he viewed as “a

hypoth-hypothesis regarding the causes of agricultural serfdom or slavery.” 24 According to Domar, abundant land and natural resources may attract labor, but “until land becomes rather scarce, and/or the amount of capital required to start a farm relatively large, it is unlikely that a large class of landowners ” will be willing to invest in the frontier Instead, “most of the farms will still be more or less family-size, with

an estate using hired labor (or tenants) here and there in areas of unusually good (in fertility and/or in location) land, or specializing

in activities requiring higher-than-average capital intensity, or skillful management.” The economic reason for this outcome is straightfor-ward: the abundance of land in the frontier assures that “no diminish-ing returns in the application of labor to land appear; both the average and the marginal productivities of labor are constant and equal, and

if competition among employers raises wages to that level (as would

be expected), no rent from land can arise.” 25 Thus, in the absence of

opportunities to earn rent from frontier economic activities, owners

of capital and large landowners have little incentive to invest in these activities

In order to resolve this problem, and to foster large-scale investment and development of frontier lands, a deliberate intervention by the state is required Under certain conditions, the “ideal” intervention

is to encourage methods of economic production suitable to ing abundant frontier resources without “free labor.” That is why,

exploit-as Domar maintains, in many frontier regions, such exploit-as the American South from the seventeenth to the nineteenth century and the Russian Ukraine in the eighteenth century, institutions such as slavery and serfdom were often implemented in conjunction with frontier-based development The scarcity of labor relative to land meant that the ruling elite could not afford to hire labor at the going market wage

In contrast, where land was not abundant, and subject to diminishing returns from employing more and more labor on the land, there was

no need to employ slavery, serfdom or other methods of coercing labor

to work The scarcity of land relative to labor ensured that workers were paid a minimum, subsistence wage regardless of whether they were free or not

As we shall see in this book, there are periods and places in history that seem to i t Domar’s hypothesis well Some of the more successful examples of frontier-based development were accompanied by institu-tions such as serfdom and slavery that repressed “free labor” to ensure sizeable surpluses For instance, the Roman Empire (ca 300 BC to

476 AD) utilized slave labor in large-scale plantations and extractive industries to exploit fertile, unoccupied land as well as abundant min-eral resources, timber forests and other natural resources that utilized slave labor (see Chapter 3 ) The feudal system was developed in tandem with the expansion of agricultural land in Great Britain and Western Europe in the centuries before the Black Death, from 800 to 1300 (see Chapters 3 and 4 ) Russia instituted serfdom in the sixteenth cen-tury during its rapid “frontier expansion” across the Eurasian steppes (see Chapter 5 ) Finally, the rise of the Atlantic economy, from 1500

to 1860, and exploitation of New World land frontiers in the ical and subtropical regions of South America, the Caribbean and southern North America were not possible without the adoption and spread of slavery-based plantation agriculture (see Chapter 6 ) 26 But Domar’s free land hypothesis also contains a more general obser-vation relevant to many other patterns of successful frontier-based

trop-development throughout history The existence of an “abundant” frontier of land and natural resources does not in itself guarantee that

it will be exploited for a windfall gain or proi t 27 Instead, as pointed out by the economist Guido di Tella , realizing the potential economic gains from frontier expansion requires “a substantial migration of capital and people” to exploit the abundant land and resources, which can only occur if this exploitation results in a substantial “sur-plus,” or “abnormal” economic rent 28 This observation is the basis

of di Tella’s disequilibrium abnormal rents hypothesis ; i.e since

fron-tier expansion takes time, there must be “disequilibrium” periods in which abnormal rents (proi ts well in excess of costs) can be exploited

to simulate further frontier investments

Drawing on Latin American experience since the late nineteenth century, di Tella agrees with Domar that one way such “abnormal rents” from frontier exploitation can be generated is “if the previous population can be enslaved, or through some other legal artii ce made

to work for a wage below its marginal productivity.” But di Tella also suggests there are other ways of ensuring large proi ts or surpluses from frontier expansion, including “outright discovery of a new land, agricultural or mineral,” “military pacii cation of the new lands,”

“technological innovation of the cost-reducing kind,” and i nally,

“price booms” for land and minerals Any of these factors can ensure that “the greater the rent at the frontier the more intense will be the efforts to expand it, and the quicker will be the pace of expansion.” 29 Moreover, as di Tella observes, such a process of frontier expansion through exploiting “abnormal rent” is applicable not just to agricul-tural land but also to minerals, oil and any abundant natural resource

“frontier.”

However, in order to successfully earn substantial proi ts or pluses, economic activities, institutions and technologies must also adapt to the varying environmental and resource conditions found

sur-in different frontier regions The type of economies, sur-institutions and technologies adopted in frontier regions can, in turn, determine whether the resulting frontier-based development is ultimately suc-cessful in generating wider economic and social benei ts

For example, as discussed further in Chapters 5 – 7 , the inl uence

of differing environmental and resource conditions on the pattern of frontier-based development is relevant to an important puzzle in eco-nomic history: why was slavery not adopted universally throughout the New World, such as in much of the temperate region of North

America? These regions also had abundant land and other natural resources and scarce labor, so it seems perplexing that slavery was not used more widely as an economic solution to harnessing these frontier resources to create larger landholdings and commercial proi ts In the mid-eighteenth century Great Britain was the sole colonial power in North America, and given its dominance of the trans-Atlantic slave trade and the development of the slave-based “sugar” economy in the West Indies, Britain certainly had the means to introduce plantation economies and slavery in the North Why then did Britain not inter-vene to do so? 30

The explanation of this paradox is the factor endowment esis proposed by the economic historians Stanley Engerman and Kenneth Sokoloff 31 The range of economic activities introduced and adopted successfully in frontier regions is determined not only by the

quantity , or relative abundance, of land and resources but also by their quality , including the type of land and resources found and the

general environmental conditions, geography and climate in frontier regions These broader environmental conditions can also determine whether frontier expansion activities that generate substantial rents

or surpluses lead to lasting, economy-wide benei ts

For example, Engerman and Sokoloff have suggested that the same environmental conditions that made tropical Latin American colonies – from Brazil to the West Indies – ideal for slave-based plan-tation systems and other resource-extractive activities also account for their poor long-term economic performance relative to the United States and Canada Engerman and Sokoloff consider that the rele-vant “factor endowments” inl uencing long-term development were not only the relative abundance of land and natural resources to labor in the New World but also “soils, climate, and the size or dens-ity of native populations.” The extremely different factor endow-ments found from North to South America – i.e the very different environments in which Europeans established their colonies in the New World – “may have predisposed those colonies towards paths

of development associated with different degrees of inequality in wealth, human capital, and political power, as well as with different potentials for economic growth.” 32 That is, the key causal relation-ship is between differences in factor endowments (i.e resource and environmental conditions), social and economic inequality and thus the development of key institutions that generate long-term economic development and growth

Engerman and Sokoloff argue that, as a result, in the United States and Canada “both the more-equal distributions of human capital and other resources, as well as the relative abundance of the polit-ically and economically powerful racial group, would be expected

to have encouraged the evolution of legal and political institutions that were more conducive to active participation in a competitive market economy by broad segments of the population.” The authors consider this to be “signii cant” because “the patterns of early industrialization in the United States suggest that such widespread involvement in commercial activity was quite important in realizing the onset of economic growth In contrast, the factor endowments

of the other New World colonies led to highly unequal distributions

of wealth, income, human capital, and political power early in their histories, along with institutions that protected the elites Together, these conditions inhibited the spread of commercial activity among the general population, lessening, in our view, the prospects for growth.” 33

Thus, Engerman and Sokoloff felt that their factor endowment hypothesis explained why some of the New World colonies, e.g the United States and Canada, developed faster than others, e.g Latin American and the Caribbean countries However, this hypoth-esis has been expanded into a general argument for the “compara-tive advantage” of development of all former colonial countries in the modern world, following the hypothesis that such differences in environmental conditions and factor endowments affected whether

or not overseas colonies would be suitable for European settlement or not: “settler mortality affected settlements; settlements affected early institutions; and early institutions persisted and formed the basis of current institutions.” 34

But a major limitation of the factor endowment hypothesis is that

it still treats land, natural resources and general environmental ditions “as the last of the exogenous factors” in the economic devel-opment process In contrast, successful resource-based development not only adapts and applies technologies and knowledge to exploit specii c resource endowments but also creates backward and for-ward linkages between frontier economic activities and the rest of the economy 35 The “i xed” land and resource endowments available

con-to an economy must be transformed incon-to endogenous components of the development process, thus generating constant or even increasing returns 36

Various examples of successful resource-based development, from the Golden Age of Resource-Based Development to the present, high-light the three key factors in this process

First, country-specii c knowledge and technical applications in the resource extraction sector can effectively expand what appears to be

a “i xed” resource endowment of a country For example, Wright and his fellow economic historian Jesse Czelusta document this process for several successful mineral-based economies over the past thirty

to forty years: “From the standpoint of development policy, a cial aspect of the process is the role of country-specii c knowledge Although the deep scientii c bases for progress are undoubtedly glo-bal, it is in the nature of geology that location-specii c knowledge continues to be important … the experience of the 1970s stands in marked contrast to the 1990s, when mineral production steadily expanded primarily as a result of purposeful exploration and ongoing advances in the technologies of search, extraction, rei ning, and util-ization; in other words by a process of learning.” 37

Second, there must be strong linkages between the resource sector and frontier-based activities and the rest of the economy As Chapters

7 and 8 discuss further, the origins of rapid industrial and economic expansion in the United States over 1879–1940 were strongly linked

to the exploitation of abundant non-reproducible natural resources, particularly energy and mineral resources

Not only was the USA the world’s leading mineral economy in the very historical period during which the country became the world leader in manufacturing (roughly from 1890 to 1910); but linkages and complemen-tarities to the resource sector were vital in the broader story of American economic success … Nearly all major US manufactured goods were closely linked to the resource economy in one way or another: petroleum prod-ucts, primary copper, meat packing and poultry, steel works and rolling mills, coal mining, vegetable oils, grain mill products, sawmill products, and so on 38

Similarly, Findlay and Lundahl note the importance of such ages in promoting successful “ staples-based ” development during the 1870–1914 era: “not all resource-rich countries succeeded in spread-ing the growth impulses from their primary sectors … in a number

link-of instances the staples sector turned out to be an enclave with little contact with the rest of the economy … The staples theory of growth

stresses the development of linkages between the export sector and an incipient manufacturing sector.” 39

Third, there must be substantial knowledge spillovers arising from the extraction and use of resources and land in the economy For example, David and Wright suggest that the rise of the American minerals-based economy from 1879 to 1940 can also be attributed

to the infrastructure of public scientii c knowledge, mining cation and the “ethos of exploration.” This in turn created know-ledge spillovers across i rms and “the components of successful modern-regimes of knowledge-based economic growth In essential respects, the minerals economy was an integral part of the emer-ging knowledge-based economy of the twentieth century … increas-ing returns were manifest at the national level, with important consequences for American industrialization and world economic leadership.” 40 Wright and Czelusta maintain that the development of the US petrochemical industry illustrates the economic importance

edu-of knowledge spillovers: “Progress in petrochemicals is an example

of new technology built on resource-based heritage It may also be considered a return to scale at the industry level, because the search for by-products was an outgrowth of the vast American enterprise of petroleum rei ning .” 41

However, in the Contemporary Era from 1950 to present, many economies with abundant endowments of land, mineral and fossil fuel resources have had difi culty in achieving successful resource-based development (see Chapter 9 ) There are signs that four large emerging market economies, Brazil , China , India and Russia – the so-called BRIC economies – are beginning to reap economy-wide ben-

ei ts from exploiting their vast sources of land and natural resources But these economies are unusual compared to most developing coun-tries because of the sheer scale of their populations, economies and resource endowments Although since the 1990s the economic growth performance of the BRIC countries has been impressive, it is unclear whether this growth is the result of successful and sustainable man-agement of their large natural resource endowments, or simply due

to them having such large endowments to command for economic development

Unfortunately, not many smaller resource-abundant economies have performed as well (see Chapter 9 ) For example, the economist Thorvaldur Gylfason has examined the long-run growth perform-ance of eighty-i ve resource-rich developing economies since 1965 42

Only Botswana , Malaysia and Thailand managed to achieve a term investment rate exceeding 25 percent of GDP and long-run average annual growth rates exceeding 4 percent, which is a perform-ance comparable to that of high-income economies Malaysia and Thailand have also managed successfully to diversify their economies through reinvesting the i nancial gains from primary production for export Botswana has yet to diversify its economy signii cantly but has developed favorable institutions and policies for managing its natural wealth and primary production for extensive economy-wide benei ts Although many other developing countries still depend on

long-i ndlong-ing new reserves or frontlong-iers of land and other natural resources

to exploit, very few appear to have benei ted from such frontier-based development It appears that the Contemporary Era is a historical anomaly that poses an intriguing paradox: why should economic dependence on natural resource exploitation and frontier land expan-sion be associated with “unsustainable” resource-based development

in many low- and middle-income countries today, especially as ically this has not always been the case?

To explain this paradox, I have proposed the frontier expansion hypothesis , which is in effect a corollary to the three factors for suc-

cessful resource-based development outlined above 43 For based expansion to be ultimately successful, it must lead to efi cient and sustainable management of natural resource exploitation cap-able of yielding substantial economic rents Moreover, the earnings from such resource-based development must in turn be reinvested

frontier-in productive economic frontier-investments, lfrontier-inkages and frontier-innovations that encourage industrialization and economic diversii cation Thus the key hypothesis as to why the pattern of resource-based development and frontier expansion in many developing economies has failed to yield sufi cient economy-wide benei ts during the Contemporary Era

is that one or both of these conditions have not been met That

is, in most of today’s low- and middle-income economies, frontier expansion has been symptomatic of a pattern of economy-wide resource exploitation that: (a) generates few additional economic rents; and (b) what rents are generated have not been reinvested in more productive and dynamic sectors, such as resource-based indus-tries and manufacturing, or in education, social overhead projects and other long-term investments The reasons for this failure during the Contemporary Era are complex, and they are explored in more detail in Chapter 9

Necessary and sufi cient conditions for successful

it, and the quicker will be the pace of expansion.” 44

Based on the various theories of frontier-based development, throughout history the necessary conditions for ensuring “abnormal rents” from investment in frontier land and natural resources depend

on one or more of the following factors:

• Institutional developments, in the form of serfdom, slavery, draft labor and other means of “repressing” the returns to “free labor” (Domar)

• Economic developments, such as “discoveries of land, agricultural or mineral, discoveries of technology, and restrictions on free competi-tion,” or additional windfall gains arising from “military pacii cation”

of new lands and resources and “price booms” for land and primary commodities (di Tella)

• Adapting and developing specialized economic activities, institutions and technologies to accommodate heterogeneous frontier conditions and endowments (Engerman and Sokoloff)

However, generating surpluses, or proi ts, from frontier expansion and resource exploitation may be a necessary condition for successful long-run economic development but it is not sufi cient The key to such success is that the overall economy does not become overly dependent

on frontier expansion Critical to avoiding such an outcome is ing that the frontier economy does not become an isolated enclave :

• First, by ensuring that sufi cient proi ts generated by the resource and land-based activities of the frontier are invested in other productive assets in the economy

• Second, by ensuring that such investments lead to the development of a more diversii ed economy

• Finally, by facilitating the development of complementarities and ages between the frontier and other sectors of the economy

The dangers to long-term development of a frontier economy becoming an isolated enclave are also noted by di Tella : “One of the obvious factors which inl uence the impact of the frontier on the over-all growth process is the relative economic importance of the expan-sion compared with the previous size of the economy The smaller the economic signii cance of the frontier expansion and the larger the previous size of the economy, the greater will be the likelihood that growth will not suffer at the end of territorial expansion.” 45

To illustrate this point, di Tella contrasts the development ence of the United States and Argentina during the Golden Age of Resource-Based Development, from 1870 to 1913 In the United States during this era, “the frontier expansion was huge in absolute terms, but its economic signii cance compared with the rest of the economy was not so great.” In fact, after the close of the frontier,

experi-“industry – the non-resource based activity” of the economy “will have attained considerable dimensions being able to become its lead-ing sector.” In contrast, for Argentina , “at the end of expansion, the country’s non-resource based sector was of only minor importance,

so that, even despite that it grew at a signii cant rate, it was not in a position to replace the central role which the expansion of the frontier had had in the past.” 46

As this book illustrates, there are many historical examples from eras other than the nineteenth and twentieth centuries that also i t the above necessary and sufi cient conditions for successful frontier-based development

This is certainly true for the Sung (or Song) Dynasty in China (960

to 1279), which is discussed further in Chapters 3 and 4 Military conquest ensured that Sung China had amassed a huge “internal fron-tier” of agricultural land and other abundant natural resources, such

as iron ore, coal, timber, fuelwood, salt, i sh and metals But Sung rulers did not just exploit these frontiers for windfall gains; they also invested the tax revenues earned from frontier expansion into devel-oping canals, waterways and an effective inland transport system, as well as innovations in l ood control and irrigated paddy rice produc-tion These developments in turn fostered substantial l oodplain and lowland arable land expansion throughout southern China , which