scarcity, frontiers and development

Scarcity, frontiers and developmentgeoj_462 110..122

EDWARD B BARBIERDepartment of Economics and Finance, University of Wyoming, Laramie, WY 82071, USA

E-mail: [email protected] paper was accepted for publication in February 2012

Resource and land frontiers have always been a significant focus of geography but have becomeoverlooked in economics and economic history. Yet a critical driving force behind global economicdevelopment has been the response of human society to natural resource scarcity, not just throughconserving scarce resources but also by obtaining and developing more of them. A handful oftheories of how such classic frontier expansion has shaped economic development have beenformulated, and these are discussed and reviewed. Evidence from history is cited to illustrate theseeffects, and the implications for resource-based development in the Contemporary Era (1950 topresent) are discussed. Unlike previous eras, the pattern of frontier expansion is dualistic. This hasled to less economy-wide benefits from frontier-based development in the Contemporary Era.

KEY WORDS: dualistic frontier, economic geography, frontier expansion, land and resourcefrontiers, natural resource scarcity, resource-based development

Introduction

How economies have developed throughexploiting new frontiers of land and naturalresources has received little attention in con-

temporary economics compared with other disci-plines (Findlay and Lundahl 1994; David and Wright1997). However, over a century ago, frontier expan-sion was considered central to economic develop-ment, thanks to Turner’s frontier thesis that ‘theexistence of an area of free land, its continuous reces-sion, and the advance of American settlement west-ward, explain American development’ (Turner 1986,1). Webb (1964) further extended this thesis to explainglobal economic development from 1500 to 1900,which he suggested was based on the successfulexploitation of the world’s ‘Great Frontier’ of present-day North and temperate South America, Australia,New Zealand and South Africa.

Geographers and social scientists continue todescribe and analyse frontier-based development inmany areas of the world. In this literature, a frontier istypically defined as

a geographic region adjacent to the unsettled portionsof the continent in which a low man–land ratio andunusually abundant, unexploited, natural resourcesprovide an exceptional opportunity for social and eco-nomic betterment.

Billington (1966, 25)

Thus, processes of frontier expansion or frontier-baseddevelopment are ‘characterized by the initial exist-

ence of abundant land, mostly unoccupied, and by asubstantial migration of capital and people’ (di Tella1982, 212). Nowadays, frontier expansion involvesnot just land and agriculture but also other naturalresources, such as minerals and extractive activities.

Frontier-based development has hardly beenuniform over historical eras and geographicalregions (Barbier 2011). However, this diversity in thehistorical experience with frontiers raises two impor-tant questions: can this historical legacy help usunderstand the economic conditions for successfulfrontier-based development, and are these lessonsapplicable to frontier expansion in developing coun-tries today?

Addressing these two questions is the focus of thispaper, which draws mainly on literature from eco-nomics and geography. As noted above, a major dis-parity exists between the two disciplines on thesubject of frontier-based development. Only a handfulof economists and economic historians have exam-ined the conditions for successful frontier-baseddevelopment, and they have largely analysed the‘classic’ pattern of frontier expansion that took placein North America from the 18th to early 20th centuriesand compared it with development elsewhere duringthe same era. Nevertheless, important lessons can belearned from these studies about the economic con-ditions for successful frontier expansion that are rel-evant to development today.

In comparison, geographers continue to explorehow frontiers influence development both historicallyand in the Contemporary Era (1950 to present).These studies are wide-ranging, focusing on factors

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The Geographical Journal, Vol. 178, No. 2, June 2012, pp. 110–122, doi: 10.1111/j.1475-4959.2012.00462.x

The Geographical Journal Vol. 178 No. 2, pp. 110–122, 2012 © 2012 The Author. The Geographical Journal © 2012 Royal Geographical Society(with the Institute of British Geographers)

influencing the spatiality of frontiers, the geographicalpattern of frontier expansion, the characteristics offrontier raw materials and resources, and spatialimpacts of social institutions and political economy.Synthesising the lessons learned from all these contri-butions is beyond the scope of this paper. Instead, theaim is to contrast frontier expansion in the Contem-porary Era with the ‘classic pattern’ that has inspiredeconomic studies of the conditions for successfulfrontier-based development.

Geographers also emphasise that the pattern ofmodern-day frontier expansion tends to be inherentlydualistic. In many developing economy frontiers,developed, modern and profitable commercial eco-nomic activities coexist alongside more traditional,relatively poor agricultural activities on marginallands. This paper compares the development implica-tions of such dualistic frontier expansion with theeconomic conditions for successful frontier-baseddevelopment. For many developing countries today,this dualistic process of frontier expansion is often lessbeneficial for overall economic development than itshould be, and policy reforms are urgently needed toovercome the structural economic conditions createdby this pattern of development.

The Great Frontier expansion

The few economic studies of frontier-based develop-ment are often inspired by the historical legacy of theGreat Frontier expansion from 1500 to 1900 (Webb1964). Over this 400-year period, Western Europeaneconomies benefited significantly from the exploita-tion of frontiers on a global scale. Many Europeancountries gained a vast array of natural wealth, not onlythrough new lands that provided an outlet for poorpopulations emigrating from Europe in search of bettereconomic opportunities, but also through new sourcesof fishing, plantation, mining and other resource fron-tiers (Barbier 2011; Jones 1987; O’Brien 2006).

The general perception has been that the GreatFrontier regions also gained from exploitation of theirabundant land and resource endowments, which fol-lowed the classic pattern of frontier expansion. Asshown in Figure 1, the first phase involves initialexploration and discovery of the vast areas of land andnatural resources, and small-scale extracting ofnatural resources, minerals and other raw materials.The second phase sees the development of large-scaleextraction activities, usually for commercial export,and transportation networks. By the third phase, agri-cultural conversion of land and the establishment ofpermanent settlements are in full fruition. The finalphase involves the development of industrial activi-ties, large urban centres and modern commercial net-works. Somewhere between the third and fourthphases, the abundance of land and natural resourcesrelative to labour and capital has disappeared, and theformer frontier region has effectively ‘closed’.

Exploitation of the abundant land and naturalresource wealth of the New World from 1500 to 1914appears to fit this classic pattern of frontier expansion(Barbier 2011). However, it was only the older Euro-pean ‘settlement’ zones of North America, especiallyin the northeastern United States and Canada withfavourable transportation and trade links, that experi-enced the final frontier transformation to urbanisationand industrialisation. In contrast, frontier-based devel-opment in Latin America did not fully complete thefour phases outlined in Figure 1. For example, the‘triangular trade’ of the Atlantic economy fromapproximately 1580 to 1860 contributed to economicdevelopment in the United States and WesternEurope, whereas the benefits to Spain and LatinAmerica of the silver ‘booms’ and the slave trade wereshort-lived (Richards 2003). In comparison to NorthAmerica, the industrial ‘takeoff’ of temperate SouthAmerica failed to materialise, because during theGolden Age of Resource-Based Development (1870–1914), agricultural-based land expansion, settlement

1 Exploration

Surveying Small-scale extraction

2 Large-scale extraction

Transportation networks

3

Agricultural conversion Permanent settlements

4

IndustrializationUrbanization

Frontier expansion

phase

hgiHwoL

Population density/growth

Economic activity/development Pollution/resource-intensity

Land conversion/habitat modification

Figure 1 The classic pattern of frontier expansionSource: Barbier (2011, Figure 1.1)

Scarcity, frontiers and development 111

The Geographical Journal Vol. 178 No. 2, pp. 110–122, 2012© 2012 The Author. The Geographical Journal © 2012 Royal Geographical Society(with the Institute of British Geographers)

and exports did not spur domestic manufacturing andurbanisation in the region (Engerman and Sokoloff1997; Schedvin 1990).

Frontier expansion in Asia and Africa also deviatedfrom the classical pattern. From 1750 to 1914, con-siderable land conversion and extension of agricul-tural cultivation took place in these regions, mainly tosupply Europe with raw materials for industrialisationand growing populations, and in the case of Africa,slaves for the Atlantic economy (Austin 2007; Inikori2007; O’Brien 2006). In the tropical regions, this fron-tier expansion led to the development of agricultural-based colonial economies specialised in a few keyexport crops, often relying on imported or surplusnative labour (Williamson 2006). It was only fromthe 19th century onwards in temperate Australia,New Zealand and South Africa that frontier landexpansion instigated permanent farm settlementsthrough European immigration (Austin 2007; McLean2007; Schedvin 1990). The important ‘fourth phase’of industrialisation and urbanisation never reallyoccurred in Asia and Africa, even during the GoldenAge when some countries and regions boomed fromexport-led development of agricultural and mineralresources.

In sum, as noted by Schedvin (1990, 535), for mostglobal frontiers, ‘the task of successful diversificationfrom an original export base seems to have encoun-tered more obstacles’ than expected, especially whencompared with the United States and other successfulGreat Frontier economies. That is, the classic patternof frontier expansion is not representative of the his-torical process of frontier expansion in many regions,even during the 1500 to 1914 Great Frontier period.Yet, as we shall see next, some important lessonsabout the conditions for successful frontier-baseddevelopment have been gleaned through comparingthe classic pattern of frontier expansion that tookplace in North America, as opposed to the differentprocesses that occurred in other regions, during the18th to early 20th centuries.

The economic conditions for successfulfrontier-based development

Despite their limited geographical and historical cov-erage, economic studies on frontiers offer importantinsights on the conditions for successful frontier-baseddevelopment. Subsequent sections of this paper willexplain why these conditions are relevant to low- andmiddle-income economies today. The purpose of thissection is to highlight these contributions to ourunderstanding of the role of frontier expansion ineconomy-wide development.

Many economic studies focus on the 1870 to 1914era, which is often referred to as the ‘Golden Age’ ofresource-based development. During this period, aworld economic boom occurred, and the subsequentgrowth in global demand for raw materials and food

also fostered economic expansion in various primary-producing developing temperate and tropical regions.In turn, as these regions expanded their capacity tosupply resource-based exports, they required moreimported capital from Europe and immigrant labourand new land for production. Thus the export-ledfrontier expansion that occurred during the 1870 to1914 Golden Age has inspired a number of endog-enous or moving frontier theories to explain suchdevelopment (di Tella 1982; Findlay and Lundahl1994; Hansen 1979). These models assume that addi-tional land or natural resources can be brought intoproduction through increased investment of labourand/or capital, provided that the sufficient rents areearned. Frontier expansion becomes an endogenousprocess within the economic system, and as a conse-quence, changes in relative commodity and inputprices, technological change and transport innova-tions influence this classic pattern.

Not all economic explanations of successfulfrontier-based development are based only on theGolden Age. For example, Domar (1970) proposedthe free land hypothesis, which he formulated as ‘ahypothesis regarding the causes of agriculturalserfdom or slavery’. According to Domar, abundantland and natural resources may attract labour, but‘until land becomes rather scarce, and/or the amountof capital required to start a farm relatively large, it isunlikely that a large class of landowners’ will bewilling to invest in the frontier. Instead,

most of the farms will still be more or less family-size, withan estate using hired labor (or tenants) here and there inareas of unusually good (in fertility and/or in location)land, or specialising in activities requiring higher-than-average capital intensity, or skillful management.

The reason is that the abundance of frontier landassures that

no diminishing returns in the application of labor to landappear; both the average and the marginal productivitiesof labor are constant and equal, and if competitionamong employers raises wages to that level (as would beexpected), no rent from land can arise.

Domar (1970, 19–20)

Thus, with no rents to be earned, owners of capitaland large landowners have little incentive to invest infrontier economic activities.

To overcome this problem and foster large-scaleinvestment and development of frontier lands, stateintervention is required. In past eras, institutions suchas slavery and serfdom were often implemented inconjunction with frontier-based development in manyregions, such as the Roman Empire (300 BC to AD 476),agricultural expansion in feudal Western Europe (800to 1300), the tropical New World and the AmericanSouth (17th to 19th centuries), and the Russian steppes

112 Scarcity, frontiers and development


(16th to 18th centuries).1 The scarcity of labour relativeto land meant that the ruling elite could not afford tohire labour at the going market wage. In contrast,where land was not abundant, and subject to dimin-ishing returns from employing more and more labouron the land, there was no need to employ slavery,serfdom or other methods of coercing labour to work.The scarcity of land relative to labour ensured thatworkers were paid a minimum, subsistence wageregardless of whether they were free or not.

But the existence of an ‘abundant’ frontier of landand natural resources cannot on its own guaranteeprofitable exploitation. Instead, realising the potentialeconomic gains from frontier expansion requires ‘asubstantial migration of capital and people’ to exploitthe abundant land and resources, which can onlyoccur if this exploitation results in a substantial‘surplus’ or ‘abnormal’ economic rent (di Tella 1982,212). Drawing on Latin American experience sincethe late 19th century, di Tella (1982, 216–17) agreeswith Domar that ‘abnormal rents’ can be generatedfrom frontier exploitation ‘if the previous populationcan be enslaved, or through some other legal artificemade to work for a wage below its marginal produc-tivity’. But there are other ways, too, including ‘out-right discovery of a new land, agricultural or mineral’,‘military pacification of the new lands’, ‘technologicalinnovation of the cost-reducing kind’, and finally,‘price booms’ for land and minerals. The result is that‘the greater the rent at the frontier the more intensewill be the efforts to expand it, and the quicker will bethe pace of expansion’.

However, to be profitable, economic activities,institutions and technologies must also adapt tovarying frontier environmental and resource condi-tions. This explanation is called the factor endowmenthypothesis (Engerman and Sokoloff 1997). The rangeof economic activities introduced and adopted suc-cessfully in frontier regions is determined not only bythe quantity, or relative abundance, of land andresources but also by their quality, including the typeof land and resources found and the general environ-mental conditions, geography and climate in frontierregions. These broader environmental conditions canalso determine whether profitable frontier activitiescan also lead to lasting, economy-wide benefits.

For example, in North America

both the more-equal distributions of human capital andother resources, as well as the relative abundance of thepolitically and economically powerful racial group,would be expected to have encouraged the evolution oflegal and political institutions that were more conduciveto active participation in a competitive market economyby broad segments of the population.

Engerman and Sokoloff (1997, 268)

In contrast, the factor endowments of the other NewWorld colonies led to highly unequal distributions of

wealth, income, human capital, and political power earlyin their histories, along with institutions that protected theelites. Together, these conditions inhibited the spread ofcommercial activity among the general population, less-ening, in our view, the prospects for growth.

Engerman and Sokoloff (1997, 271–2)

But a major limitation of the factor endowmenthypothesis is that it still treats land, natural resourcesand general environmental conditions ‘as the last ofthe exogenous factors’ in economic development(David and Wright 1997, 204). In contrast, successfulresource-based development not only adapts andapplies technologies and knowledge to exploit specificresource endowments but also creates backward andforward linkages between frontier economic activitiesand the rest of the economy (Barbier 2005; David andWright 1997; Gylfason 2001; Wright 1990; Wright andCzelusta 2004). The ‘fixed’ land and resource endow-ments available to an economy must be transformedinto endogenous components of the developmentprocess, thus generating constant or even increasingreturns (Barbier 2005; David and Wright 1997). Thereappears to be three key factors in this process.

First, country-specific knowledge and technicalapplications in the resource extraction sector can effec-tively expand what appears to be a ‘fixed’ resourceendowment of a country. For example, Wright andCzelusta document this process for several successfulmineral-based economies over the past 30 to 40 years:

From the standpoint of development policy, a crucialaspect of the process is the role of country-specific knowl-edge. Although the deep scientific bases for progress areundoubtedly global, it is in the nature of geology thatlocation-specific knowledge continues to be important. . . the experience of the 1970s stands in marked contrastto the 1990s, when mineral production steadily expandedprimarily as a result of purposeful exploration andongoing advances in the technologies of search, extrac-tion, refining, and utilisation; in other words by a processof learning.

Wright and Czelusta (2004, 34–5)

Second, there must be strong linkages between theresource sector and frontier-based activities and therest of the economy. The origins of rapid industrial andeconomic expansion in the United States over 1879–1940 were strongly linked to the exploitation of abun-dant non-reproducible natural resources, particularlyenergy and mineral resources.

The United States was the world’s leading mineraleconomy in the very historical period during which thecountry became the world leader in manufacturing(roughly from 1890 to 1910); but linkages and comple-mentarities to the resource sector were vital in thebroader story of American economic success . . . Nearlyall major US manufactured goods were closely linked to



the resource economy in one way or another: petroleumproducts, primary copper, meat packing and poultry, steelworks and rolling mills, coal mining, vegetable oils, grainmill products, sawmill products, and so on.

Wright and Czelusta (2004, 8)

Others also note the importance of such linkages inpromoting successful resource-based developmentduring the 1870–1914 era (Barbier 2011; di Tella1982; Findlay and Lundahl 1994).

Third, there must be substantial knowledge spill-overs arising from the extraction and use of resourcesand land in the economy. For example, David andWright (1997, 240–1) suggest that the rise of theAmerican minerals-based economy from 1879 to1940 can also be attributed to the infrastructure ofpublic scientific knowledge, mining education andthe ‘ethos of exploration’. This in turn created knowl-edge spillovers across firms and

the components of successful modern-regimes ofknowledge-based economic growth. In essential respects,the minerals economy was an integral part of the emerg-ing knowledge-based economy of the twentieth century. . . increasing returns were manifest at the national level,with important consequences for American industrialisa-tion and world economic leadership.

David and Wright (1997, 240–1)

To summarise, generating profits from frontierexpansion may be a necessary condition for successfullong-run economic development, but it is not suffi-cient. The frontier economy must not become an iso-lated enclave. The profits earned from frontieractivities should be invested in other productive assetsand sectors, such investments must foster a more diver-sified economy, and complementarities and linkagesneed to be developed between the frontier and otherproduction sectors. As we shall see next, such neces-sary and sufficient conditions for successful frontier-based development have been largely absent in mostof today’s low- and middle-income economies.

Frontier expansion in the Contemporary Era

The Contemporary Era, from 1950 to the present, hasproduced a major conundrum for global economicdevelopment. On the one hand, just as during theGolden Age of resource-based development, theglobal economy has boomed and world demand forraw materials and food has grown substantially. Yet,since 1950, few low- and middle-income economieswith abundant endowments of land, mineral and fossilfuel resources have achieved successful resource-based development (Barbier 2005 2011; van der Ploeg2011). For example, Gylfason (2001) has examined thelong-run growth performance of 85 resource-richdeveloping economies since 1965. Only Botswana,Malaysia andThailand managed to achieve a long-term

investment rate exceeding 25% of GDP and long-runaverage annual growth rates exceeding 4%, which is aperformance comparable with that of high-incomeeconomies. Malaysia and Thailand have also managedsuccessfully to diversify their economies throughre-investing the financial gains from primary produc-tion for export. Botswana has yet to diversify itseconomy significantly, but has developed favourableinstitutions and policies for managing its natural wealthand primary production for extensive economy-widebenefits. Although many other developing countriesstill depend on finding new reserves or frontiers of landand other natural resources to exploit, very few appearto have benefited from such frontier-based develop-ment. It appears that the Contemporary Era posesan intriguing paradox: why should economic depen-dence on natural resource exploitation and frontierland expansion be associated with ‘unsustainable’resource-based development in many low- andmiddle-income countries today, especially as histori-cally this has not always been the case?

One reason is that the modern process of frontierexpansion has deviated significantly from the classicpattern of successful frontier-based developmentdepicted in Figure 1. An early criticism of the wide-spread applicability of this classic pattern was thehollow frontier hypothesis, which James (1969) firstused to describe the expansion of the coffee frontier insouthern and central Brazil. Although these areaswere originally settled by smallholders, they werelater displaced to more remote regions by wealthylandowners through property aggregation, which ledto a relatively depopulated and ‘hollow’ frontier. Evi-dence of this process has been found in the BrazilianAmazon not only for coffee, but also for ranching andother forms of large-scale commercial agriculture(Aldrich et al. 2006; Browder et al. 2008; Casetti andGauthier 1977; Wood 1983).

A related concept is the speculative or capital pen-etration motive for frontier expansion (Aldrich et al.2006; Bridge 2008; Browder et al. 2008; Bunker 19841989; Cleary 1993; Foweraker 1981; Hirsch 2009). Ifinstitutions and economic policies encourage largeprofits from frontier expansion, then ‘well-capitalizedinterests, including land speculators and ranchers,consolidate the properties of subsistence farmersthrough market transactions or outright expulsions’(Aldrich et al. 2006, 272). However, such large-scalecapital investments, which include plantation agricul-ture, ranching, forestry and mining activities, oftenresult in export-oriented extractive enclaves with littleor no forward and backward linkages to the rest of theeconomy (Bridge 2008; Bunker 1989). These enclavesare more tied to the ‘global production network’ thatfocuses on exploitation of agricultural and mineralresources for the world market or domestic consump-tion in urban and industrial centres (Bridge 2008).

Government policies have actively promotedcapital investment in commercially oriented frontier



agricultural and extractive activities.2 For example, inthe Brazilian Amazon,

spatial differentiation in the pattern of developmentwould be largely influenced by the State, in its infrastruc-ture investment decisions (e.g., roads and utility exten-sions into the frontier) and in fiscal incentive policiestargeted to specific regions that would invite capitalinvestment there.

(Browder et al. (2008, 1472)

State programmes to improve property rights and theefficiency of land markets increase land values andattract additional frontier investments, including forspeculative purposes (Bromley 2008; Gould et al.2006). Government policies have supported theexpansion of large-scale soy bean cultivation andmechanised agriculture in Amazonia (Bulte et al.2007; Carr 2009; Hecht 2005; Killeen et al. 2007;Walker et al. 2009), oil palm, coffee and other cashcrops in Asia (Agergaard et al. 2009; Barney 2009;Coxhead et al. 2002; Curry and Koczberski 2009;Hirsch 2009; McCarthy and Cramb 2009), cocoa,cotton and other cash crop frontiers in Africa (Bromley2008; Knudsen and Fold 2011; Mosley 2005), ranch-ing in Latin America (Bulte et al. 2007; Caviglia-Harrisand Harris 2008; Killeen et al. 2007; Schmook andVance 2009; Walker 2003; Walker et al. 2009; Was-senaar et al. 2007), and extractive frontiers globally(Bridge 2008; Campbell 2009; Wunder 2003).

Frontiers are also the means for marginal landexpansion as a ‘safety valve’ outlet for the rural poor.As noted by Coxhead et al., ‘the land frontier has longserved as the employer of last resort for underem-ployed, unskilled labor’ (2002, 345). This process wasfostered by colonial policies in many developing

regions, yet has continued unabated since the 1950s(Austin 2007; Barbier 2011; Bunker 1984; Etter et al.2008; Foweraker 1981; Hansen 1979; James 1969;Williamson 2006). The result has been a large con-centration of the rural poor on low-quality land foragriculture, characterised by traditional farmingmethods with negligible marginal productivity, zeroland rents or profits, and informal or non-existent landtenure arrangements, inadequate transport and infra-structure and other market imperfections (Barbier2005 2007; Carr 2009; Coxhead et al. 2002; Gouldet al. 2006; Maertens et al. 2006; Mueller 1997;Jepson 2006; Schmook and Vance 2009).

In sum, frontier-based development during the Con-temporary Era has evolved into a dualistic pattern offrontier expansion. This outcome was first highlightedby Hansen (1979) to describe colonial land use indeveloping regions, and then by Wood to characterisefrontier development in Amazonia:

A central feature of the contemporary settlement of theBrazilian Amazon is the simultaneous expansion intothe region of capitalist enterprises and peasant farmers.Thedual character of the frontier is, to a large extent, a conse-quence of the development policies adopted by the state.

Wood (1983, 259)

As noted by Aldrich et al., the outcome of this dual-istic process of frontier expansion is often frontierstratification: ‘Although the smallholders who initiatefrontier settlement are poor, they share their poverty inrelative equality until the aggregation of propertycauses the distribution of land to be skewed anddrives social stratification’ (2006, 72).

This dualistic pattern of frontier expansion isdepicted in Figure 2. Coexisting in most frontiers are

1

Exploration Surveying

Small-scale extraction

2 Large-scale

extraction Transportation

networks

3

Agricultural

conversion Permanent settlements

4

Dual frontier economy

Frontier expansion

phase

Low productivity,

traditional agriculture

utilizing poor quality, marginal land (e.g.

small-scale subsistence

agriculture)

High productivity,

commercially oriented

economic activities utilizing high quality

land and natural

resources (e.g. plantation agriculture,

ranching, forestry,

mining, etc.)

Labor

Figure 2 The dualistic pattern of frontier expansion



highly developed, modern and profitable commercialeconomic activities along with more traditional, rela-tively poor agricultural activities on marginal lands.That is,

according to the dualist model the frontier is comprised oftwo different economies: the traditional, non-capitalistsector, which is subsistence-oriented and has minimal tiesto the marketplace; and the modern, capitalist sector,which is market-oriented and follows the logic of profitmaximization.

Wood (1983, 262)

Although these two types of economic activities differsignificantly and may also be geographically sepa-rated, they are linked by labour use. This linkage isimportant to the dynamics of frontier expansion, as itmeans that rural poor on marginal land form a largepool of surplus unskilled labour that can be employedin commercial frontier activities (Barbier 2005; Carr2009; Coxhead et al. 2002; Hansen 1979; Maertenset al. 2006; Pichón 1997).

The dualistic pattern of frontier expansion hasimportant implications for economic development inmany low- and middle-income countries today.Before discussing these implications, it is useful toexplain why this marginal land thesis of dualistic fron-tier development, first modelled by Hansen (1979),leads to a very different outcome than the free landhypothesis proposed by Domar (1970), which as dis-cussed previously explained successful frontier-baseddevelopment in past eras.

Differing land-use conditions in a frontier economy

Assume that cultivation on the frontier requires twoinputs, land (N) and labour (L); any capital input isfixed. Both inputs are required for frontier agriculturalproduction, Q, which is determined by a functionwith the normal concave properties and is homoge-neous of degree one:

Q Q N L Q Q i N Li ii= ( ) > < =, , , , ,0 0 (1)

Clearing more frontier land for production alsorequires labour, and it is assumed that increasing Nincurs a rising input of L:

L b N b b= ( ) ′ > ′′ >, ,0 0 (2)

where b′(N) is the marginal labour requirement ofclearing a unit of land, which is a convex function ofthe amount of frontier land that is cleared.

Letting p be the price of agricultural output and wthe wage rate, it follows that total profits, P, in frontieragricultural production are:

Π = ( ) −[ ] = ( )( ) −[ ]−L pq n w L pq b L L w1 (3)

where q and n are output and land per labour,respectively. It is assumed that frontier agriculture is

competitive, and so profit-maximising must resultin:

q n q nb N

n q n q n n N

wp

( ) + ′( )′( )

−⎡⎣⎢

⎤⎦⎥

= ( ) − ′( ) − ( )[ ]

=

11 ε

, (4)

where a is the rental price of land and

ε NNL

LN b n

( ) ≡ ∂∂

=′1

is the elasticity of frontier land

conversion, i.e. the percentage increase in land inresponse to proportionately more labour devoted toclearing.

There are two special cases. In the case envisionedby Hansen (1979), frontier land is very poor in quality,by which he means that its marginal productivity iszero. This implies that the neoclassical properties ofthe production function with respect to the land inputare violated in (1) and (4) so that QN = q′ = 0. In analternative case, suggested by Domar (1970), frontierland is fertile and productive, but so abundant that itcan be increased proportionately with labour. That is,the convex properties of (2) are violated, and instead∂∂

= =LN

LN

b . It necessarily follows that e(N) = 1. Both

cases arrive at the same outcome for (4): There are nodiminishing returns to labour in frontier agriculturalproduction, and real wages are invariant to ruralemployment (the number of farmers and/or labourinput) and determined by the average product oflabour, i.e.

q nwp

( ) = . (5)

But the way that these two special cases arrive atthis classic frontier condition (5) is crucially different,and has implications for how production might beorganised at the frontier. In Hansen’s case, the condi-tion q′ = 0 will fix the land–labour ratio on the fron-tier. Moreover, because real wages are determined bythe average product of labour, from (3) farmers will bemaking zero profits. Finally, in the average product oflabour relationship (5), the fixed land–labour ratio willdetermine the nominal wage rate w for any givenoutput price p. Thus, the best that farmers and theirfamilies on the frontier can do is either to sell theirlabour to each other and obtain an equilibrium realwage w/p, or alternatively, farm their own plots ofland and earn the same real wage. Since there is littleadvantage in selling their labour, farmers will tend touse their and family labour to farm their own land.Hence, under Hansen’s marginal land frontier condi-tion, small family farms will predominate. Unless thepopulation increases, no more land will be broughtinto production and there will be surplus land.

In Domar’s case, as long as land is sufficientlyabundant so that for every frontier farm the labour



required for clearing new land remains L = bN, thenthe outcome will be the same as in Hansen’s case.That is, output per labour is q(n) = q(1/b), and becausethe land–labour ratio is fixed, once again q′(1/b) = 0 incondition (4). Farmers who hire labour will not makeany money, and small family farms will predominate.But unlike in Hansen’s case, the abundant frontierland is fertile and has a positive marginal productivity,i.e. in (1) the neoclassical property QN > 0 still holds.Under normal production conditions, with both landand labour sufficiently scarce to display diminishingreturns, then the latter condition would yield a posi-tive rent, or profit, from the land for the farmer. Butwith abundant land conditions so that L = bN, thispotential profit from the fertile land is ‘dissipated’through the high real wages paid to labour.

To see this, rewrite the profit function (3) asP = pQ(bL, L) - wL. The corresponding first-ordercondition for profit-maximising, combined with (5), isnow

bQ Qwp

q nN L+ = = ( ). (6)

Because farm labour is still paid a real wage equal toits average product, this wage absorbs any of theadditional productivity gained through bringing morefertile land into production. The farmer’s rent, orprofits, still remain zero.

However, the farmer can turn frontier agricultureinto a profitable enterprise if labour is paid a wageless than its average product. As suggested byDomar, suppose institutions such as slavery orserfdom exist on the frontier, so that labour is paid abare subsistence wage wS < w. It follows from (5)that the value average product of additional serfs orslaves working the land is still pq(n) = w, but sinceeach worker is compensated at the subsistencewage, profits are always positive, i.e. P = pQ(bL,L) - wSL > 0. As long as the average product of allworkers exceeds the subsistence wage necessary tofeed them, the farm will keep expanding both itsworkforce and proportionately the land for farming.The farm will stop expanding, however, whenbQN + QL = wS/p = q(1/b). As the left-hand side ofthis expression indicates, this is likely to occur whenthe farm grows so large that it starts bringing intoproduction less fertile frontier land and obtains lessproductive workers, so that the lower marginal pro-ductivities QN and QL bring down the average pro-ductivity of labour to the level of the subsistence realwage. Note that the land–labour ratio remains con-stant, but the total number of workers and landemployed will be much larger than a family frontierfarm.

Of course, in the Contemporary Era there is norecourse to slavery or serfdom to generate suchabnormal rents (profits). Instead, as argued in theprevious section, state-sanctioned policies, incen-tives and institutions are used deliberately to encour-

age market-oriented and profitable activities utilisingthe best quality land and natural resources while atthe same time allowing marginal land expansion tobe utilised for absorbing the rural poor. Unfortu-nately, this not only perpetuates the prevailing dual-istic pattern of frontier expansion in many regionsbut also has important implications for economicdevelopment.

Economic development implications of thedualistic frontier

To summarise, in the dual frontier economy, becausethere are no diminishing returns to labour in the use ofmarginal land for agricultural production, real wagesare invariant to rural employment. As long as thereremains abundant marginal land to absorb morefarmers and employment, the use of land relative tolabour on this land will determine nominal wagesthroughout the frontier. The implication is that, withgiven international prices for the marketed-orientedactivities, the real wage and thus the amount ofunskilled labour employed by these activities will befully determined. The pool of surplus labour on mar-ginal lands is essentially a barometer of frontier-baseddevelopment. As long as there are abundant marginallands for cultivation, they serve to absorb ruralmigrants, population increases and displacedunskilled labour from elsewhere in the economy. Onthe other hand, expanding commercial activities thatexploit more resources and land on the frontier canabsorb more workers from the pool of surplus labourexisting on marginal frontier lands.

Since 1950, the estimated population in developingeconomies on ‘fragile lands’ has doubled (World Bank2003). These fragile environments are prone to landdegradation, and consist of upland areas, forestsystems and drylands that suffer from low agriculturalproductivity, and areas that present significant con-straints for intensive agriculture. Today, nearly 1.3billion people – almost a fifth of the world’s popula-tion – live in such areas in developing regions (Barbier2011, Table 9.10). Almost half of the people in thesefragile environments (631 million) consist of the ruralpoor, who throughout the developing world outnum-ber the poor living on favoured lands by 2 to 1 (Com-prehensive Assessment of Water Management inAgriculture 2007, Table 15.1).

The result is that marginal land expansion in frontierareas continues to be the main basis of absorbingnumbers of rural poor, whether they are displacedfrom more favourable lands or simply growing innumber (Barbier 2011; Carr 2009; Pichón 1997).Although the poor on marginal lands could poten-tially serve as a pool of surplus low-wage labour forcommercial activities, including those in frontierregions, the results are increasingly mixed. Forexample, in Southeast Asia, agricultural and extractiveactivities in the lowlands rely on labour from marginal



uplands, and thus technological and economicchanges in lowland agriculture significantly impactagricultural expansion and deforestation in theuplands (Barney 2009; Coxhead et al. 2002; Maertenset al. 2006). Oil palm expansion on the Malaysianand Indonesian frontiers has depended on off-farmlabour provided by agricultural smallholders and poormigrants (McCarthy and Cramb 2009). If suchemployment opportunities are sufficiently large andsustained, they can actually reduce long-term mar-ginal land expansion. For example, in Columbia,since 1970 high-input, intensified, highly mechanisedcropping on the most suitable land, as well expansionin cattle grazing, has drawn labour from more tradi-tional agriculture, so that ‘areas of marginal land areslowly being abandoned and left to revegetate’ (Etteret al. 2008, 17). In contrast, evidence suggests thatexpansion of large-scale commercial agriculture infrontier regions globally, especially for ‘boom’ cropssuch as grains, sugar, soy, palm oil and rubber, hasdone little to create employment for the rural poor (Li2011). In such activities, acquisition of cheap landand generating immediate investment returns are themain concerns, not poverty reduction throughemployment creation.

The continuing encouragement of commercialactivities to exploit frontier land and natural resourcesis impacting environmental change, especially defor-estation. For example, the main ‘agents of deforesta-tion’ globally are now plantation owners, large-scalefarmers, ranchers and timber and mining operations,assisted by government policies (Bulte et al. 2007;Chomitz et al. 2007; DeFries et al. 2010; Food andAgriculture Organization (FAO) 2001 2003; Rudel2007). There are nevertheless important regional dif-ferences (FAO 2001). In Africa, much deforestation(around 60%) is due to the conversion of forest for theestablishment of small-scale permanent agriculture,whereas direct conversion of forest cover to large-scale agriculture, including raising livestock, predomi-nates in Latin America and Asia (48% and 30%,respectively). As well as directly causing forest degra-dation and loss, many large-scale resource-extractiveactivities, such as timber harvesting, mining, ranchingand plantations, initially open up previously inacces-sible forested frontier areas to permanent agriculturalconversion (Barbier 2005; Wassenaar et al. 2007;Wunder 2003). Small-scale farmers usually followbecause forest and other land are now available andmore accessible for conversion (Verburg et al. 2004;Walker 2003).

Dualistic frontier expansion also promotes boom-and-bust cycles of economic development (Agergaardet al. 2009; Barbier 2005 2007 2011; Barney 2009;Ha and Shively 2008; Hall 2009; Knudsen and Fold2011; Rodrigues et al. 2009; Wunder 2003). State-sponsored promotion of commercial activities oftenensures that frontier expansion occurs rapidly andgenerates growth in marketable outputs. However,

this initial ‘economic boom’ is invariably short-lived.Once the frontier is ‘closed’ and the valuable land andnatural resources have been fully exploited or con-verted, some economic retrenchment is inevitable.Under certain conditions, the ‘bust’ may start evenbefore profitable frontier opportunities are exhausted.Such boom-and-bust cycles associated with rapidfrontier expansion are further exacerbated if the com-mercial activities are isolated enclaves, as any produc-tion and profits generated will have limited impactson economy-wide investment, innovation andgrowth. The short-term windfall benefits of a com-modity price rise will further reinforce this outcome.In addition, during the expansion phase, commercialactivities may generate employment opportunities forunskilled labour and off-farm work on the frontier, butwith the inevitable bust and contraction, marginalland expansion once again becomes the main outletfor absorbing the rural poor. As cultivation of suchlands generates little rents and productivity gains, eco-nomic livelihoods and incomes are not improved sig-nificantly in the long run.

Such boom-and-bust patterns of frontier expansionhave occurred for cocoa, coffee, palm oil and shrimpin Southeast Asia and Africa (Agergaard et al. 2009;Barney 2009; Ha and Shively 2008; Hall 2009;Knudsen and Fold 2011). Oil price booms have inter-acted with agricultural expansion and deforestation ina range of tropical countries, but with only short-livedeconomy-wide gains (Wunder 2003). Long-run agri-cultural land expansion and oil and natural gasreserve expansion appear to be associated with boom-and-bust cycles in a number of low- and middle-income countries (Barbier 2007). Finally, a study of286 municipalities in the Brazilian Amazon found aconsistent boom-and-bust pattern in levels of humandevelopment (Rodrigues et al. 2009). Relative stan-dards of living, literacy and life expectancy increaseinitially as forest conversion for cattle ranching,logging and agriculture proceed. However, theseimprovements appear to be transitory; developmentlevels decline in the post-frontier municipalities tolevels similar to those in pre-frontier municipalities.As the authors conclude,

this ‘bust’ is likely to reflect the exhaustion of the naturalresources that supported the initial ‘boom’, compoundedby the increasing human population. Accordingly, percapita timber, cattle and crop production also exhibitboom-and-bust patterns across the deforestation frontier.

Rodrigues et al. (2009, 1436)

Conclusion

Historical cases of successful frontier-based develop-ment are well known. Such cases indicate that success-ful frontier expansion leads to efficient and sustainablemanagement of natural resource exploitation yielding



substantial economic rents. But such rents must also bereinvested in productive economic investments, link-ages and innovations that encourage industrialisationand economic diversification.

However, frontier expansion in most of today’s low-and middle-income economies often generates onlyisolated enclaves of profitable economic activities,and the rents generated are not reinvested in moreproductive and dynamic sectors, such as resource-based industries and manufacturing, or in education,social overhead projects and other long-term invest-ments. The result has been a dualistic frontier (seeFigure 2). This dualistic pattern is persistent and diffi-cult to overcome, and has distorted many developingregions and sectors within low- and middle-incomeeconomies. The result has often been to stalleconomy-wide development.

Frontier agricultural land expansion in many devel-oping economies is occurring largely through conver-sion of forest, wetlands and other natural habitat.Some of this land may be productive, but much of it islikely to yield mainly ‘marginal’ or ‘fragile’ landexhibiting low productivity as well as significant con-straints for intensive agriculture. To the extent thatsuch land conversion is occurring in fragile environ-ments and resulting in marginal agricultural land, itappears to be mainly serving to absorb the growingnumber of rural poor in many developing economies.The evidence in support of this phenomenon is strong.Around a quarter of the population of developingregions, and around two thirds of the rural poor inthese regions, live on such unproductive land (seeBarbier 2011, Table 9.10). It is unlikely, therefore, thatpoor rural households subsisting on such marginalland generate substantial earnings from their agricul-tural activities.

If such frontier agricultural land expansion gener-ates little in the way of economic rents, then it clearlylimits the ability of the poor farmers working this landto invest in endowment-specific knowledge toimprove the productivity and sustainable exploitationof frontier land. In addition, if frontier land expansionserves mainly as an outlet for the rural poor, thenmuch of the agricultural output is either for subsis-tence or local markets. This in turn limits the incentivefor government agricultural research and extensionactivities to be directed towards improving the pro-ductivity and sustainable exploitation of frontier landand resources used by the rural poor. Historically,such has been the pattern of public agricultural invest-ment in the developing regions. Research, extensionand agricultural development has largely been ori-ented towards major commercial and export-orientedcrops in an economy, not targeted for improving sub-sistence agricultural systems or farming in less favour-able environments. Yet such improvements cansubstantially improve the livelihoods of the poor,increase employment opportunities and even reduceenvironmental degradation (Barbier 2005; Carr 2009;

Caviglia-Harris and Harris 2008; Coxhead et al. 2002;Dercon et al. 2009; Maertens et al. 2006; Pichón1997).

According to the World Bank (2008), rural povertyrates in developing economies have declined over thepast decade but remain high in South Asia (40% in2002) and Sub-Saharan Africa (51%). Reductions inrural poverty in most countries and regions are largelydue to rural development and not rural–urbanmigration. In Brazil, Ecuador, Thailand, Malawi andVietnam, poverty rates are higher in remote areas, andin general, poverty incidence is greater in rural areaswith less favoured land. These findings confirm that‘the extreme poor in more marginal areas are espe-cially vulnerable, and until migration provides alter-native opportunities, the challenge is to improve thestability and resilience of livelihoods in these regions’(World Bank 2008, 49).

At the other extreme, highly profitable enterprisesin frontier regions, whether timber operations, large-scale commercial crop plantations or extractivemineral and energy concessions, have tended tooperate as export enclaves separate from the rest ofthe economy. Such frontier activities generaterevenue through promotion of agricultural and rawmaterial exports and cheap inputs for domestic indus-trial development. The consequence can often be apattern of resource-based development that leads toinsufficient reinvestment of the proceeds from theprimary commodity earnings into economic diversi-fication. The windfall gains from commodity pricebooms or the discovery of natural resources can alsobe detrimental to diversification efforts. Such resourcebooms further reinforce extractive frontier enclavesseparate from the rest of the economy, the over-reliance on natural resource exploitation to generaterevenues, and government policies supporting thesetrends.

However, there are signs that the dualistic pattern offrontier expansion is changing. For example, accord-ing to Hecht (2010, 163),

it can be argued that today there are four overarchingtypes of tropical rural spaces in Latin America withvarious degrees of salience in the political arenas: theenvironmental, the ‘socio-environmental’, the agro indus-trial, and peasant landscapes.

She suggests that

the prospects of the ‘environmental economies’ seembuoyant as transfers for carbon trading regimes, certifica-tion programs, and other potentially large scale paymentsfor environmental services to mitigate climate change andreduce biodiversity loss seem increasingly active

and correspondingly ‘indigenous and traditional peo-ple’s economies largely piggy back onto environmen-tal and niche markets for socially and ecologically



certified products in international commodity circuits’backed by ‘rural investment for NGO projects for lesscapitalized small scale rural producers’ (Hecht 2010,164). But others are less sanguine that such ‘environ-mental economies’ offer a realistic future for frontierregions. Limits to financial viability and high risksoften affect the viability of such schemes reaching therural poor in frontier areas (Phelps et al. 2011;Pokorny et al. 2011). A review of market-based con-servation projects across the Bolivian, Brazilian, Ecua-dorian and Peruvian Amazon found that only a limitednumber of poor rural families provided with highlevels of support have been able to overcome thetechnical, institutional and financial hurdles to benefitfrom existing market opportunities (Pokorny et al.2011).

Market-based conservation efforts, payments forecosystem services targeted at the poor and environ-mental trading regimes may have a role to play indiversifying the current dualistic pattern of frontierexpansion in developing regions. But until policymak-ers understand why such a pattern is inimical toeconomy-wide development, and instigate reforms tochange it, mismanagement of frontier lands andresources will continue to be one of the key obstaclesto economic progress and poverty alleviation.

Perhaps as a guide to such a strategy, policymakersshould look to the three successful, resource-richsmall open economies discussed earlier – Botswana,Malaysia and Thailand. Although these countries stillface problems in managing their natural resources andovercoming dualism and poverty, several lessons forimproving the sustainability of other small resource-dependent developing economies can still be learnedfrom these three country examples.3

First, the type of natural resource endowment andprimary production activities is not necessarily anobstacle to implementing a successful strategy.Botswana’s economy is largely dependent on miner-als, Thailand started out as almost exclusively anagricultural-based food exporter and Malaysia built itssuccess first on mineral and timber reserves, thenplantation tree crops, and finally, by developing ahighly diversified economy.

Second, because resource endowments, primaryproduction activities and the historical, cultural, eco-nomic and geographical circumstances of eachcountry are different, the type of successful develop-ment strategy adopted will also vary for differenteconomies. For example, Thailand and Malaysia ini-tially embarked on similar strategies to encourage sus-tainable primary production and resource use, but theprimacy of agriculture in Thailand plus differing eco-nomic and social conditions meant that its diversifi-cation strategy eventually diverged from that ofMalaysia.

Third, the development strategy has to be compre-hensive. Targeting the main primary productionactivities of an economy to improve their competi-

tiveness, attain their export potential, limit resourceover-exploitation and waste, and generate increasedreturns and revenues is necessary but not sufficient.All three countries’ policies show that the financialreturns and funds generated from primary productionactivities must be re-invested in the industrial activi-ties, infrastructure, health services and the educa-tion and skills necessary for long-term economicdevelopment.

Finally, no strategy is perfect. In all three econo-mies, important sectors and populations have yet togain significantly from improving the sustainability ofthe main primary producing sectors. In Malaysia,there is concern about the continuing destruction offorests, especially in the more remote Sabah andSarawak Provinces, and the plans to expand oil palmplantations. In Thailand, the loss of mangroves,growing pollution problems and the failure to instigatedevelopment in upland regions are major issues.Botswana has still to grapple with a stagnant agricul-tural sector, large numbers of people living in fragileenvironments and widespread rural poverty. Findingways to broaden the economy-wide benefits andimprove the sustainability of resource-dependenteconomies is an ongoing challenge for such smallopen economies.

Acknowledgements

I am grateful to Klaus Dodds and four anonymousreviewers for helpful suggestions and comments.

Notes

1 See Barbier (2011).2 The state’s interest in developing, settling and investing fron-

tiers has also been motivated by national security issues (seeAustin 2007; Bunker 1984; Cleary 1993; Foweraker 1981;Hall 2009; Rudel 2007; Wood 1983).

3 For further discussion, see Barbier (2005 2011).

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