from the gap the resource rent - between their low production costs and – those of the least efficient producer. In later decades, Alfred Marshall (another giant of economic theory), developed theory of rent, and showed Ricardo’s that rents are not just a gift of nature. They could be created through investments - the quality of land could be improved through landscaping and irrigation. But more significantly, the application of knowledge to production processes in agriculture, industry and services and in the development of improved machinery has meant that the creation of “innovation rents” provides the source of economic advantage. Joseph Schumpeter, an Austrian economist writing in the mid-twentieth century, extended this idea of purposefully created rents by focusing on “gales of is, new technologies continually eroded existing creative destruction”. That innovation rents so that the policy agenda confronting individual entrepreneurs, farmers, and indeed whole economies, was the need to achieve dynamic rents, and this could only be achieved through the development of dynamic capabilities. Unless they could achieve these dynamic rents, they would be subject to intense competition and find it difficult to survive in a competitive market. The pursuit of is “dynamic capabilities” now the primary driver of corporate strategy in many sectors across the global economy. What relevance do these writings of classical economists have for African producers in the 21st century? First, there is enormous potential benefit to be gained from successfully participating in global export markets. This offers the prospect not just of reducing production costs through reaping scale economies, but also of growing capabilities as a consequence of specialisation and through learning in global export markets. However, without the capacity to continually, and repeatedly, generate and appropriate rents, participating in global export markets in this era of globalisation may offer little scope for enhancing incomes. The dangers that a mistaken insertion into global exports markets poses can be seen from the experience of central American export processing zones in the 1980s and 1990s, witnessed in the challenges faced by a Dominican Republic garment exporting firm (Box 1).
from the gap – the resource rent - between their low production costs and those of the least efficient producer. In later decades, Alfred Marshall (another giant of economic theory), developed Ricardo’s theory of rent, and showed that rents are not just a gift of nature. They could be created through investments - the quality of land could be improved through landscaping and irrigation. But more significantly, the application of knowledge to production processes in agriculture, industry and services and in the development of improved machinery has meant that the creation of “innovation rents” provides the source of economic advantage. Joseph Schumpeter, an Austrian economist writing in the mid-twentieth century, extended this idea of purposefully created rents by focusing on “gales of creative destruction”. That is, new technologies continually eroded existing innovation rents so that the policy agenda confronting individual entrepreneurs, farmers, and indeed whole economies, was the need to achieve dynamic rents, and this could only be achieved through the development of dynamic capabilities. Unless they could achieve these dynamic rents, they would be subject to intense competition and find it difficult to survive in a competitive market. The pursuit of “dynamic capabilities” is now the primary driver of corporate strategy in many sectors across the global economy. What relevance do these writings of classical economists have for African producers in the 21st century? First, there is enormous potential benefit to be gained from successfully participating in global export markets. This offers the prospect not just of reducing production costs through reaping scale economies, but also of growing capabilities as a consequence of specialisation and through learning in global export markets. However, without the capacity to continually, and repeatedly, generate and appropriate rents, participating in global export markets in this era of globalisation may offer little scope for enhancing incomes. The dangers that a mistaken insertion into global exports markets poses can be seen from the experience of central American export processing zones in the 1980s and 1990s, witnessed in the challenges faced by a Dominican Republic garment exporting firm (Box 1).