Social Capital and Economic Development in Cape Town and New Amsterdam (c. 1640-1680)

Historical studies usually stress the influence of economic development on social inequality. This paper would like to argue the other way round and will look at the influence of inequality and social bonds on the early modern economy. More concrete, the results in this paper suggest that social relations fostered economic developments in two early modern Dutch colonies (New Amsterdam and Cape Town). The comparison of these two colonial towns offers interesting perspectives, because they were both founded by Dutch settlers, but they followed different economic trajectories. New institutional economics are currently regarded as the main explanation for this kind of economic divergences, but it remains unclear why European settlers erected various institutions all over the world, even if they originated from the same European country. This paper takes the conceptual framework of Engerman and Sokoloff as the starting-point. These authors argue that diverse factor endowments resulted in different levels of inequality in colonial settlements all over the world. According to them, these social differences explain institutional variations and are thus responsible for economic inequality in the world.

This paper combines Engerman and Sokoloff’s theoretical framework with Robert Putnams ideas about social capital and economic development. Colonial records enable us to gauge different forms of social capital in New Amsterdam and Cape Town during the first century after their establishment. The scope, strength and hierarchy of social relations are taken into account and make it possible to refine existing theories. At this point, it is not possible to make a connection between different institutional arrangements and forms of social capital, but the preliminary results of this study show that new indicators of social capital can be used to explain various economic trajectories.