2009

Herbert Frankel: from Colonial Economics to Development Economics

John Toye1

AbstractHerbert Frankel (1903-96) was an economist of long and varied achievement, who, after a distinguished career in South Africa, served as Oxford University first Professor of Colonial Economic Affairs (later Professor of the Economics of Under-developed Countries) from 1946 to 1971. His professional route took him from colonial economics to development economics, making a significant contribution to each. His intellectual trajectory took him from being a critic of colonial economic policies to being a champion of the efficacy of free market liberalism to deliver development. In this he was a true precursor of the counter revolution in development economics of the 1980s. In a number of ways his writings were prophetic, but it was a younger colleague, Peter Bauer, who became the main standard-bearer of neo-liberalism in development economics.

1I gratefully acknowledge comments on an earlier version of this paper by Geoff Harcourt and the late Sanjaya Lall. Warm thanks are also due to two anonymous referees for their stimulating comments and queries.

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Herbert Frankel: from Colonial Economics to Development Economics

Economists come to write on the economics of development by very different routes.

For some, their motive is the intellectual challenge of doing economics in an exotic

society. For others it is the missionary motive of raising welfare levels in poor

countries. In the first half of the twentieth century, however, there was another point

of entry. Some sons (not yet daughters) of European emigrants stumbled into the

economics of development when they found themselves confronting the economic

problems of the land to which their parents had emigrated. Raùl Prebisch did so in

Argentina, where his father, an emigrant from Saxony, had settled. So did Herbert

Frankel, whose parents, who were also German by origin, had chosen to settle in

South Africa. The careers of Prebisch and Frankel, who were very close

contemporaries, show another similarity. Both made their reputations as economists

and economic advisers in their country of birth and the adjacent region in the inter-

war period, but during the Second World War the careers of both men faltered and

both sought new opportunities on the international scene. At that point their destinies

diverged: Prebisch focussed on the external obstacles to development, while Frankel

maintained that markets would bring about development, if only politicians would let

them do so.

Herbert Frankel (1903-96) was an economist of long and varied achievement, who,

after a distinguished career in South Africa, served as Oxford University’s first

Professor of Colonial Economic Affairs. His Chair was re-named in 1956 as

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Commonwealth Economic Affairs, then re-named again in 1963 as The Economics of

Under-developed Countries. His professional route took him from colonial economics

to development economics, making a significant contribution to each. His intellectual

trajectory took him from being a critic of colonial economic policies to being a

champion of the efficacy of free market liberalism to deliver development. In this he

was a true precursor of the counter-revolution in development economics of the

1980s. In a number of ways his writings were prophetic, but it was a younger

colleague, Peter Bauer, who became the main standard-bearer of neo-liberalism in

development economics.

1. Early Life and Education

Sally Herbert Frankel was born in Johannesburg on November 22nd 1903, the eldest

son of a recent German Jewish immigrant to South Africa. Frankel’s father had

cousins in the wholesale grain trade there, and he joined with them in business. The

young Frankel was a diffident youth, physically marked with a harelip and a cleft

palate. Psychologically, he was much influenced by his mother’s cultural aspirations,

but at the same time he was anxious about what his Jewish heritage portended for his

life and career. In fact, when suffering came, his family was targeted for being

German rather than for being Jewish. During the 1914-18 War his father was interned

as an enemy alien, while Herbert had to navigate an uncomfortable secondary

education at the Anglican foundation of St John’s College, Pretoria. This early

experience made him an unwavering opponent of racial and religious discrimination

for the rest of his life.

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Although already curious about economics, Herbert Frankel took his B.A. degree in

History at the University College of Johannesburg, (which was soon to become the

University of the Witwatersrand). While taking his first degree he was greatly

impressed by W. M. Macmillan’s The South African Agrarian Problem and its

Historical Development (1919), which sought to explain South Africa’s political and

economic backwardness. Macmillan had laid heavy stress on the isolation of the

farmers in the period before the gold discoveries of the 1870s and 1880s, caused by

lack of markets, primitive transport and the physical insecurity resulting from

sporadic wars. He argued that the gold rush, and the wave of immigration that

followed it, all of a sudden imposed a modern economic psychology on a society

whose agriculture continued to be structurally backward. In terms of economic

motivation and behaviour, Macmillan saw South Africa as a divided society caught in

the on-rush of modernisation, and Frankel absorbed that perspective and made it his

own.

Frankel’s interest in economics was fuelled both by practical experience and by

academic study. Practically, he learned about the working of the market by watching

and helping his father, who was struggling to keep his grain merchant business afloat

through the vagaries of the weather and pest infestations. Academically, he learned

his economics from R. A. Lehfeldt. As Prebisch also discovered in Argentina, trained

economists were thin on the ground outside the metropolitan countries at this time,

and it was unusual to be taught by one. Lehfeldt was not a trained economist, but

rather a physicist who had successfully turned himself into an economic statistician.

Lehfeldt encouraged Frankel to blend his practical and academic knowledge by

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writing his M.A. Economics thesis on the degree of competitiveness in local maize

marketing.

The thesis was published as Co-operation and Competition in the Marketing of Maize

in South Africa (Frankel, 1926). In it, Frankel noted that the co-operative system in

agriculture had been introduced recently and funded by the government, but that this

had happened without any initiative for it from, or much understanding of it by, the

farmers themselves. After carefully examining of the economic functions of a

marketing system, and analysing such statistics on costs and profits as he could

assemble, he found no evidence that co-operative societies either raised average

producer prices for maize, compared with commercial wholesaler prices, or provided

sustainable agricultural credit for their members. However, what he did notice was

that the co-operative system fostered strong associations that had a tendency to ask

the government to provide them with economic privileges that would not be extended

to the commercial grain traders. He became aware of the creation of vested interests,

the power of lobbying and the political economy of economic institutions.

In 1923, Lehfeldt advised him to go to England for further study. The London School

of Economics was selected, on the grounds that Oxford University was then rather a

backwater in economics. With a small scholarship from Wits, he enrolled at the LSE.

There he met Harold Laski and Hugh Dalton, whom he admired as teachers, while

being highly sceptical of their socialist politics. He also encountered Theodore

Gregory, Edwin Cannan, and Lilian Knowles, whom he thought much less politically

naive. Originally, Frankel had chosen to do his doctoral research on the financing of

the gold mining industry, but at the instance of the Transvaal Chamber of Mines, he

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changed his Ph.D topic. His new subject was the pricing policy of the South African

railways, which he researched under the supervision of W. Tetley Stephenson.

His dissertation, published as The Railway Policy of South Africa (Frankel, 1928),

was a critique of institutional failure. The early South African railways were

fragmented, and built and run with political goals in view. However, in the

constitution of the new Union of South Africa was a requirement that henceforth the

railways be operated in the national interest, and for the purpose of binding together

the different parts of the country. In Frankel’s view, this meant that they should

henceforth be run by an independent agency on “normal business principles”. His

book demonstrated that this had not happened, and that the government - to provide a

source of additional revenue at the expense of rail users - manipulated the Railway

Board’s accounts. Its capital investment programme was decided in the light of

political considerations rather than according to expected rates of return, and its

employment policy was constrained by the government’s “whites only” directive.

Frankel ended by recommending that the railways should remain in public ownership,

but with a new and much more independent management, and a new tribunal to

investigate rate-setting issues. In today’s terminology, one might say that Frankel

created a blueprint for an agency of restraint on discretionary government intervention

in the sector.

2. Private and Public Service in South Africa

Railway Policy showed that Frankel had a clear grasp of simple economic principles,

and the confidence to apply them thoroughly and carefully to complex problems of

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national importance. After Lehfeldt’s unexpected death, Frankel returned to Wits,

becoming in 1928 a Senior Lecturer, and then in 1930, when he was still only 28

years old, Professor of Economics and Economic History. His LSE credentials had

launched him on to a high professional trajectory within South Africa. He was

immediately much sought after in South Africa as a consultant. In particular, his

services were demanded by Sir Ernest Oppenheimer, who wanted his advice on how

worsening world economic conditions would affect the prospects of the diamond

marketing monopoly that he had recently created. Frankel’s devotion to “business

principles” did not lead him to recoil from such an invitation – rather the opposite: he

embraced it. As a result, he wrote an annual review of the Union budget for

Oppenheimer regularly for many years thereafter.

In 1928, he began a long career as a member of commissions of inquiry. He served on

the South African Road Transport Commission (1928), the South African Railways

and Harbours Affairs Commission (1933), the Palestine Royal Commission (1936),

the South African Miners’ Phthisis Commission (1941-2), and the Mining Industry of

Southern Rhodesia Enquiry (1945). His appetite for public service extended well

beyond commissions of enquiry, however. While an undergraduate, Frankel had been

impressed with the enlightened thinking of Jan H. Hofmeyr, Provincial Administrator

of the Transvaal. Under the aegis of Hofmeyr, Frankel joined the group of younger

white liberals, both English and Afrikaans speakers, who produced a liberal manifesto

entitled Coming of Age (Brookes, 1930). It was a brave attempt to chart a course

towards a non-racial future for South Africa. Yet it was too radical for the vast

majority of white South Africans and too timid a promise of advance for the Africans,

since the natives were still to be obliged to pass some test of “European civilisation”

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before they would be given the franchise. Hofmeyr, moreover, proved to be an

enigmatic father figure for Frankel, not only in this endeavour, but also in subsequent

years.

Private consulting and public service on this scale led to unintended delays in the

publication of Frankel’s next substantial work of economics, Capital Investment in

Africa (Frankel, 1938). Intended as an input into Lord Hailey’s An African Survey, it

came too late to influence any but the later chapters. The bulk of Capital Investment is

the presentation of a mass of detailed statistics on investment in Africa, by sector and

by dependency. This was a major feat in itself, but the statistics aside, the book has

been criticised because it “seems by later standards to lack a central organizing

principle” (Fieldhouse, 1982: 160). While this is a fair comment, Frankel did

demonstrate empirically how much foreign investment into Africa was linked to

minerals discoveries, how much came from Britain and how much went to, or

through, South Africa – three features of African foreign investment that endure

today. He saw foreign investment not in mere financial accounting terms, but –

following Macmillan - as the catalyst of a revolution by means of which Africa was

being incorporated into the capitalist system of world income generation. By

extension, he later forecast that minerals discoveries would trigger a similar process in

Britain’s African colonies (Frankel, 1954).

The critical problem for attracting foreign investment, Frankel believed, was the

creation of a supply of indigenous labour. This requirement had been addressed by

using various forms of compulsion, which in turn had created vested interests and

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artificial industries. It was this specific South African history of labour coercion that

rendered useless a standard economic analysis.

“Investment in Africa is thus bound up with very wide political and

sociological issues. It cannot be regarded as dependent only on the

normal incentives which are assumed to govern the application of

capital under freely competitive conditions.” (Frankel, 1938: 15)

.

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Between 1933 and 1946, Frankel was joint editor with Robert Leslie of the new South

African Journal of Economics. In terms of his own contributions to the journal, the

most interesting were published during the war years, when he volunteered to work

for Hofmeyr, who by this time had become Minister of Finance in Jan Smuts’

government. As a member of the South African Treasury Advisory Council, Frankel

served as Hofmeyr’s unpaid and unofficial adviser on national income and budgetary

matters. From 1941 to 1945 some of his national income estimates appeared in the

SAJE (Frankel, 1941, 1943a, 1945; Frankel and Herzfeld, 1943 and 1944). This was

valuable foundational work, although it needed quite a few adjustments later in order

to be brought into line with the UN System of National Accounts (Franzsen, 1954:

115-6).

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At the same time, he also published two remarkable Presidential Addresses to the

South African Economic Society (Frankel, 1942 and 1943b). Taking his cue from the

recently proclaimed Atlantic Charter, Frankel noted the change in rhetoric away from

‘securing the freedom of nations’ towards ‘securing the economic welfare of all

people’. He welcomed the change because it recognised the interdependence of

income-generating activities throughout the world. “The extent of the incomes of [any

state’s residents] does not . . .depend any longer on separate national policies, but

rather in a continuously increasing degree, on the income-creating activities of

individuals all over the world” was his major theme. His minor theme was that the

illusion that national income was something created inside national boundaries gave

sustenance to short run beggar-my-neighbour policies (Frankel 1942: 182-3).

Buoyed up by this vision of “transnational economic development” – what we now

call globalization - he surprisingly brushed aside national income accounting as an

economically meaningless nationalist illusion, even while being engaged in

constructing South Africa’s national income accounts. This paradox later puzzled

Peter Bauer (1954: 584).

Frankel not unreasonably expected some official national recognition by the South

African government of his heavy and unrequited wartime labours for Hofmeyr, once

the war was over. That recognition never came, and Frankel became a deeply

disappointed man.

3. The move to Oxford and Development Economics

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At the second Commonwealth Relations Conference in Australia in 1938, Frankel had

suggested setting up a Chair of Colonial and Commonwealth Economics, to explore

economic problems that were common to many British dominions and colonies.

When a new chair in Colonial Economic Affairs was established at Oxford University

in 1945, it was offered to Frankel. Hofmeyr’s ingratitude, along with the slow drift of

South African public opinion towards Afrikaner nationalism, decided Frankel to

accept the Oxford chair, which was later coupled with a Professorial Fellowship at

Nuffield College. His move to Britain in July 1946 brought him into an intellectual

climate that was in many ways unsympathetic to him, but for different reasons from

those that had led him out of South Africa. In Britain, faith in the free market was at a

low ebb. Apart from John Jewkes, he found few colleagues in Oxford who shared his

veneration of the market mechanism and his distrust of development planning, state

expenditure and socialism. It is said that Thomas Balogh, one of the more left-wing

economics dons, scheduled his lectures on development economics to coincide with

Frankel’s, to prevent his students hearing what Frankel had to say! His situation was

improved in 1950 when Hla Myint was appointed a University Lecturer. With Myint,

Frankel conducted a development economics seminar regularly for the next fifteen

years (Frankel 1992: 246). Myint’s emphasis on the importance of international trade

in stimulating economic development was quite compatible with Frankel’s vision of

transnational economic development.

In the main, however, Frankel had to look elsewhere for an intellectual network

within which he could feel comfortable. He found it in the Mont Pelerin Society, the

nucleus of which was formed in 1947 by some of the younger economists who had

been at the LSE in the nineteen-thirties. Here he mixed again with some of his former

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contemporaries – Arnold Plant, Theodore Gregory, Frank Paish, Lionel Robbins and

Friedrich Hayek – with whom his laissez-faire opinions could be readily ventilated

and nourished. Hayek, the student of von Mises, was a strong influence in reinforcing

Frankel’s rejection of positive economics. The Mont Pelerin group became closely

associated with the Institute of Economic Affairs after its foundation in 1955, and

ultimately played a part in paving the ideological way for the economic policies of

Margaret Thatcher’s premiership (Cockett, 1994: 30 and 210; Frankel, 1992: 68).

Frankel’s brand of economic liberalism derived, via the LSE, from the epistemology

of the Austrian school of economics. He rejected the idea of the economy as a

mechanism, whose motion could be represented by a set of equations. He perceived

this metaphor as a key epistemological error, but he attributed it (incorrectly) only to

advocates of economic planning. In his South African period, his liberalism had been

a compound of a belief in spontaneous, self-generating economic progress plus a

statistically based critique of the paternalism of colonial governments. This

paternalism seemed to take the existence of markets for granted and to feel little

gratitude for the services of the heroic entrepreneur.

After his translation to Oxford, however, the intellectual tenor of his writing changed.

It became more philosophical and reflective. He soon abandoned the idea of writing a

monograph on national income accounting in South Africa, and came to depend on

philosophical argument, a mode that did not come to him easily, since he was

philosophically and mathematically untrained. Distancing himself from the positivist

economics that had begun to emerge in the 1930s, he claimed that it involved a

category mistake, as elucidated by Gilbert Ryle, then the doyen of Oxford linguistic

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philosophy. In Capital Investment, Frankel had already cautioned against careless use

of abstractions like ‘capital’ (1938: 2). He now stressed that economic behaviour was

inherently embedded in the particularities of individual societies, and thus could not

be abstracted and represented mechanically. The theme of the social embeddedness of

economics has survived and been elaborated most recently in the economic sociology

of Granovetter (1992).

Thus, while Frankel’s scepticism about governments, and his belief that they blocked

change in order to serve vested interests, played well with those who were converting

to the “New Right” in the 1970s, Frankel never agreed with Mrs Thatcher that “there

is no such thing as society”. On the contrary, his underlying theme was that the

individual can be creative only in society, and progress is the discovery of new and

better forms of social co-operation. To study economic activities is to look at but one

aspect of behaviour, abstracted from social life, which cannot be properly understood

without reference to particular shared values and purposes. Mathematical models are

therefore deeply misleading. As he put it:

“It is this false analogy with mechanics and mathematics that accounts

for the facile belief that the problem of living and working together as

a community is similar to the problem of finding, by abstract thought

or logical deduction, the ‘unknown’ factor in an equation. In the realm

of organic life, there is, and can be, no final solution – other than death

itself.” (Frankel, 1953: 155-6)

In his autobiography, Frankel saw his first book on the institutions of grain

marketing as sounding an early warning against the economic damage to the

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African agricultural sector that state-created marketing organisations,

originally set up by colonial governments, can cause (1992: 42). Yet it is

noteworthy that he took no part in one of the last great debates in the field of

colonial economics, on the merits and demerits of stabilizing the incomes of

primary producers. The protagonists were Peter Bauer and Frank Paish (1952;

1954). Their criticisms of the operations of West African crop marketing

boards and proposals for improvements drew rejoinders from Polly Hill

(1953), Peter Ady (1953), Milton Friedman (1954) and others. In one aspect of

the controversy, Winston Churchill allegedly participated (Williams

1953: 50). Interestingly, Peter Ady was the sole Oxford contributor, basically

defending the colonial marketing boards’ practice of accumulating large surpluses, a

position to which Frankel would surely have been opposed.

By this time colonial economics was being supplanted by development economics.

Arthur Lewis had written the report of a United Nations expert group on “Measures

for the Economic Development of Under-developed Countries” (UN 1951). It

established a powerful paradigm of the process of economic development, based on

the idea of transferring surplus labour out of agriculture into an expanding capitalist

industrial sector, funded by large international transfers of public capital. In terms of

Frankel’s vision of market-oriented agriculture, this paradigm was misconceived.

This time Frankel initiated the critical attack, in which he was soon joined by Bauer.

Frankel thought that the report represented conventional mid-twentieth century

economic opinion – “something like an Official Concept of Progress” (Frankel 1952b:

302). He contested its main tenets – that progress could be measured in national

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income terms; that it always depended on government action; that progress had to be

paid for by some unspecified groups. He disputed the validity of the report’s

underlying assumptions in the African context – the near exhaustion of the supply of

cultivable land; the need for government planners to decide whose incomes should be

increased; the benefit of very rapid change; the relevance to development of large

imports of additional capital. Indeed, Frankel accused the report of condoning

economic policies in Africa that inhibited the flow of private capital. He concluded

with the following proposal to modify aid agreements.

“Grants-in-aid should carry with them definite obligations by the countries

receiving them to co-operate in all those directions necessary for the integration

of their countries into the free world economy . . . agreed rules to ensure that

governments . . . shall adhere to agreements intended to promote international

economic intercourse, and shall refrain from pursuing autarchic and

discriminating policies which undermine the movement of factors of production

. . .” (Frankel 1952b: 324).

In this proposal we can see the germ of the idea of policy-conditioned aid, in which

policies of economic liberalisation are required as the quid pro quo for aid.

Frankel applied his epistemology to the analysis of various problems of economic

development – to bring to light hidden implications of technical change, to emphasise

that investments do not automatically and necessarily produce an income return and to

cast doubt on the usefulness of making international comparisons of national income.

Writing on ‘psychic’ and ‘accounting’ concepts of income and welfare, he challenged

the view that income yields utility as excessively individualistic. Because it was

16

inappropriate to societies where satisfaction is derived from communal activities and

shared purposes, it led to income comparisons that had no real meaning (Frankel

1952a, reprinted in Parker and Harcourt, 1969: 83-105). Although the symbolism of

economic calculation and accounting might be internalised tolerably well in Western

societies, to assume that this was true of other societies was a form of self-deception.

Nevertheless, the assumption was constantly made, leading to analyses that were

materialistic and mechanical, and policies that were wasteful and damaging.

One particular target of this criticism was the East African ground nuts scheme. Its

grandiosity made it a soft target for easy ridicule. Against this sort of gigantic

agricultural scheme, Frankel (along with Arthur Gaitskell) put forward an alternative

in the report of the Royal Commission on East Africa (1955), of which both were

prominent members. It was a vision of a market-oriented agriculture, distant both

from the mammoth development schemes of the planners and from the existing

subsistence cultivation. Frankel believed that the promotion of individual enterprise,

facilitated by unimpeded markets, would prove to be the key to economic

development in Africa. He also held that “the most essential factor in the transition

from a subsistence to a modern [agricultural] economy [was] the need to register

individual land ownership and individual land tenure” (Frankel 1992: 270).

The lectures and papers of his early Oxford period were published in 1953 as The

Economic Impact on Under-developed Societies. Peter Bauer gave the book a mixed

review in the Economic Journal. As was to be expected, Bauer was sympathetic to

Frankel’s Hayekian epistemology, praising his emphasis on the spontaneity and

organic nature of economic growth as being “on a much deeper level than most

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contemporary discussion”. However, he pointed to weaknesses in the essays, in that

they stopped short of answering the questions that they raised. If the income-creating

activities of individuals and groups are fundamentally complementary, he asked, how

does one explain the prevalence of economic conflict between groups? Is it caused by

ignorance, the desire for relative rather than absolute advantage, or simply by a drive

for power? Further, if the power of governments to influence economic development

was as limited as Frankel claimed, how could some government interventions produce

severely adverse consequences? And how could benign but costly measures (such as

individual land titling), which a mass of smallholders could not undertake for

themselves, ever be implemented? Bauer identified some key political economy

questions in the field of development and exposed the inconsistencies in Frankel’s

approach to them (Bauer 1954: 580-5).

Publication of The Economic Impact marked the high point of Frankel’s academic

fame. In the same year he travelled to the United States and received offers of chairs

at Princeton and the University of Baltimore. He declined both from, he said, a sense

of loyalty to Oxford (Frankel 1992: 253). He continued with his teaching on the

Colonial Services Programme, which trained personnel for the Colonial Services and

was therefore outside the mainstream of undergraduate teaching. After Ghana’s

independence, it became clear that this would be a declining need. Frankel’s

autobiography shows him devoting his energies to commissions of inquiry, advisory

reports and papers for international conferences, plus the associated international

travel – to the USA, South America, Japan, Israel and South Africa among other

destinations.

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He continued to find much that was useful and fulfilling to do at Oxford. He found

satisfaction as a popular lecturer, who was helpful to his students and genial with his

colleagues. He was a central figure in the campaign to establish Queen Elizabeth

House in Oxford for the promotion of colonial and Commonwealth studies, and to

provide facilities for those concerned with such studies. Making use of his

longstanding association with Sir Ernest Oppenheimer, he persuaded the latter to

donate £100,000 of the money needed to do so. The Oppenheimer donation was

supplemented with a grant of £50,000 from the British government’s Colonial

Development and Welfare Fund, and Queen Elizabeth House was constituted by

Royal Charter in 1954. QEH has not only survived since then it has transformed itself

into a fully-fledged university department, comprehending not just Commonwealth

studies, but the study of international development globally.

In the 1960s Frankel produced his last work of statistics. It marked the fulfilment of

the plan he had had originally for his doctorate, namely a study of Investment and the

Return to Equity Capital in the South African Gold Mining Industry (Frankel 1967).

This was the topic on which his teacher Lehfeldt had done pioneering work, and on

which Frankel had written an earlier article (1935). The question at issue was whether

returns to capital invested in the South African gold mines were random, or whether

they were comparable with what could have been earned in other available

investments. The answer required a large amount of data by the standards of the time

– the returns from more than a hundred mines for many decades; plus a computer

programme to process the calculations. The South African Chamber of Mines

provided the data and A. J. Merrett and Allen Sykes (1966) provided the algorithm.

Frankel was able to conclude that returns from gold mining tended to equality with

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other investment returns over the long run, and that international private capital

movements were an efficient mechanism of foreign investment.

4. Money and Trust

As he approached retirement from his Oxford Chair, Frankel was appointed

Distinguished Visiting Professor at the University of Virginia, where he met G.

Warren Nutter. Now Frankel turned to a subject new to him, the philosophy of

money, applying to it his insight of the social embeddedness of economic life. The

result was his last two academic books Money: Two Philosophies (Frankel, 1977) and

Money and Liberty (Frankel, 1980). The two philosophies of money that he contrasted

were those of Maynard Keynes and of Georg Simmel. He rejected the first for its

alleged authoritarian implications. He claimed that “Keynes made respectable the

deliberate creation, by the State, of Money Illusion to influence saving, investment

and the rate of interest”, a form of social deceit that “must, finally, subvert the

monetary order” (ibid. p. 77). He embraced the views of Simmel, who, by contrast,

interpreted the monetary order as an embodiment of generalised trust, which was

vulnerable to damage both from large-scale monetary manipulations, and to

unrealistic expectations of what money could achieve for its possessors.

That the international and national monetary turmoil of the early 1970s should have

provoked tendentious criticisms of Keynes’s alleged views and public clamour for a

return to “sound money” is perhaps unsurprising. Frankel’s contribution, given his

aversion to discussing the policy options of fixed or flexible rates, gold or paper

standards, the methods and results of deflation and so on, was to insist on the link

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between the social psychology of money and the prospects for a free civil society.

This was valuable as a reminder that money must be studied in the context of political

economy. It was also a preparation for subsequent interest in creating agencies of

restraint, and in the feasibility of politicians imposing on themselves self-denying

ordinances in the monetary field. This interest culminated in widespread moves to

independent central banks and policies of inflation targeting in the 1990s, including in

South Africa.

It should be said in Frankel’s favour that his particular brand of economic liberalism

avoided endorsing many of the simplistic formulas for monetary policy that were

associated with the economic liberalism of Milton Friedman and his many followers,

in particular, that inflation could be managed through government control of the

money supply. The defence of economic liberty by appeal to Friedman’s kind of

positive economics had no attraction for Frankel. However, it is remarkable that

Frankel saw the danger to the fabric of financial trust as coming solely from monetary

manipulation by the authorities. He was completely blind to the danger to the

monetary order that could arise from profit-seeking financial entrepreneurs, whose

innovations, when they go wrong, can easily destroy trust within the financial system

itself and create recession in the real economy. This is especially so when the rigour

of financial regulation is being relaxed in pursuit of the liberalisers’ favourite policy

agenda. Presumably, Frankel failed to see this because financial regulation in colonial

economies had been so very strict.

5. Conclusion

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Frankel was a great believer in the economic value of migration, even to the point of

over-riding his objections to government intervention and proposing in a short period

of high idealism a World Migration Office to facilitate and (yes!) to subsidise

migration. This was an emphatic endorsement of the belief that he who is transplanted

shall flourish. All the same, one cannot avoid asking whether Frankel’s own migration

to Oxford did allow him the better to flourish. Once at Oxford his appetite for applied

analysis seemed to weaken and his broad liberal economic vision gradually give way

to philosophical over-ambition and to rather shrill partisanship in a sub-Hayekian

mode. It may be that the atmosphere of Oxford failed to evoke his intellectual

strengths, either as a practical economist or as a liberal visionary. Or it may be that he

felt he had to do more to project his brand of economic liberalism in the souring

atmosphere of the Cold War.

I have hinted that contemporary development economists should be able to recognise

many valuable ideas that were anticipated by Frankel, though his life and career are

now largely forgotten. The insight that economic behaviour is socially embedded; the

imperative need to accumulate human as well as physical capital; the dangers of

regulatory capture and unproductive forms of rent seeking; and the value of, and the

difficulty of creating, agencies of restraint, the desirability of economic globalization;

the proposal of policy-conditioned aid - these contemporary themes are all readily

identifiable in his writings. There is therefore an undeniable element of truth in his

favourite description of himself and his writings as “prophetic”.

His highly original perspectives, however, remained fragmented and unelaborated.

He was not able to build them into a new system of ideas about development. It is

22

easier to see this by comparison with the trajectory of Peter Bauer. The two men had

much in common. Bauer, like Frankel, began his career as a critic of colonial

economic policy – policies that discriminated against smallholder agriculture in West

Africa and Malaya. Like Frankel, through his association with LSE, he came under

the influence of Hayek and became a member of the Mont Pelerin Society in 1950

and of the Institute of Economic Affairs (Cockett 1994: 116, 143). Like Frankel, he

wrote a critique of the Lewis model of economic development at a time when such

fundamental criticism was unusual and unfashionable (Bauer 1953; 1956). However,

the younger man went on to write three highly polemical books which together

constituted a major assault on the edifice of development economics (Bauer 1972,

1981 and 1984). For this Mrs Thatcher rewarded him with a seat in the House of

Lords. By contrast, Frankel never attempted such a grandstanding finish.

At the end of his career, Frankel found satisfaction in promoting the study of the

Jewish religion at Oxford. After retirement from his Chair until 1989, he served as

Chairman of the Board of Governors of the newly founded Oxford Centre for

Postgraduate Hebrew Studies. Here he found his last incarnation, one consonant with

his lifelong Zionism. His lively and amusing Autobiography (1992; 329) records: “I

doubt whether I ever worked so hard to further the interests of an academic

organisation as I did during my chairmanship” of the Oxford Centre. It was a

personally satisfying finale, but one that denied him serious influence in national level

politics at the very moment of economic liberalism’s triumph.

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23

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24

Brookes, E. H., 1930, Coming of Age: studies in South African citizenship and

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25

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26

1967, Investment and the return to Equity in the South African Gold Mining Industry,

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27

Granovetter, M., 1992, “Economic Action and Social Structure: the Problem of

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