By the early 20th century, a small number of European states ruled not only the territory and people within their own boundaries but also a large share of the rest of the world. According to one calculation, Europeans conquered some 84 per cent of the world between 1492 and 1914, before losing the vast majority of these territories by 1960 (Hoffman 2015: 2). That same period saw a rapid and substantial divergence in per capita incomes between the poorest and wealthiest countries, with trade and industrialization bringing previously unknown levels of prosperity to some regions while others saw little sustained growth. Together, these two transformations have shaped the world today.
In broad terms, this book explores the link between them. The conquest and rule of so large a share of the world reflected imbalances in political, technological and military capacities which grew during the period of industrialization. It remains the subject of debates whether resources gained by European powers may have aided them in the process of industrialization, or whether empires diverted resources that might have been more profitably invested at home. For the colonies themselves, the impact of colonial interventions varied widely across space and time, which makes it difficult to sustain simplified narratives of resource extraction.
Discussions of the economic impact of colonial rule using a variety of theories and methods are now more than a century old, and can be roughly divided into three groups. In one, the range of different colonial experiences came as a result of European decisions and policies, which provided a solid foundation for economic development in some colonies but not in others. In the second, it was indigenous responses to European intervention which shaped colonial economies
This chapter reviews these debates. It aims to provide a foundation for questions about the origins, experience and legacies of colonial rule, which are the focus of the rest of the book. It begins with a brief review of the historiography of empires and how it has changed over time, before presenting some broad evidence on the economic performance of colonies and empires. It then examines these three groups of scholarship in greater detail, and concludes by posing a further set of questions for understanding the economic history of colonialism and its legacies for the global economy which inform subsequent chapters.
Writing the history of empires
The study of colonialism has come in and out of fashion since the end of imperialism as an ongoing political system made it a subject of historical rather than contemporary study. In the middle of the 20th century, as empires were ending, the topic became rather unfashionable among a group of scholars determined to look either forward, to a modern world of nation states, or back, to the longer histories of Africa and Asia (Cooper 2005). Nigerian historian Jacob Ajayi (1968) observed that ‘in any long-term historical view of African history, European rule becomes just another episode’. However, the failure of many (though not all) former colonies to converge on the levels of income and development enjoyed by the former colonizers has prompted a renewed turn towards colonialism as part of the explanation.
The first debates about the economics of imperialism were contemporary rather than historical. Colonial expansion was controversial, particularly in the era of ‘modern’ imperialism during the 19th and 20th centuries. This period can be distinguished from the imperialism of the early modern by the nature of the relationship between colonizer and colonized. In the earlier period, both the great land-based empires of Asia, as well as the initial overseas extensions of European countries, were primarily relations of tax and tribute. By the 19th century, however, the economic relationships between the industrialized or industrializing ‘core’ and a ‘periphery’ specializing in the production of primary exports had changed, and modern empires reflected the need to protect business interests (Tomlinson 1999).
Empire cannot be run ‘on the cheap’. It entails to the country which enters on the path of imperial expansion a very large and increasing expenditure. Whether that expenditure is worth incurring for the sake of prospective gains is a question which the Government and the country ought to consider carefully before determining on an expansionist policy.1
Others went beyond the purely ‘pounds and pence’ approach adopted by The Economist to consider the ways in which empire both reflected and shaped the economic structures of the day. In Britain, critics like Richard Cobden and J.A. Hobson argued that empire actively undermined the growth prospects of colonizing countries to serve the narrower interests of political and financial elites by interfering with the distribution of resources. Others argued, to the contrary, that empire provided markets for imperial exports and that if Britain did not retain imperial rule, others would capture those markets instead (Cain 2010: 352–3). This was countered by the claim that Britain’s economic and military supremacy was such that it did not need an empire to dominate overseas markets.
Colonial powers which lacked the same status could not make this same argument, and the need to compete against Britain played an important role in the same discussions happening in Paris, Brussels and Berlin. However, this should not suggest that empires enjoyed popular support. One account of French colonial expansion argued that ‘from 1880 to 1930 a minority of die-hard colonialists acquired and occupied a large colonial empire on behalf of a non-committed majority of the French people’ (Marseille 1984, quoted in Dormois and Crouzet 1998: 324). In Brussels, King Leopold II’s colonization of what became the Congo Free State was sufficiently unpopular with Belgian politicians that Leopold initially took on the colony as a personal project, pledging to use only his own funds. The Belgian state was forced to take over governance of the Congo in 1908 only after Leopold’s underestimate of the costs involved resulted in several loans
At the time, with the exception of notorious cases like that of the Belgian Congo, metropolitan discussions focused primarily on the interests of imperial states rather than on the colonies. As The Economist article put it, ‘under ordinary circumstances we should probably pay little heed to the Ashanti difficulties; for, outside a limited commercial circle, few persons can be reasonably expected to pay much attention to that swampy and savage region.’ However, some did consider the impact of colonial rule on the colonies themselves. Editorials published by Karl Marx in the New York Daily Tribune, for example, argued that British rule in India had undermined local industry. His conclusions did not necessarily reflect a consensus view, and others argued just as forcefully that colonialism had contributed to economic growth in the colonies. Allan McPhee, often credited as one of the pioneers of African economic history, argued in his Economic Revolution in British West Africa (1926) that European intervention was the source of economic growth in the region.
Voices from the colonies contributed to this debate in increasing numbers during the 20th century, often though not always as critics. In 1901, Dadabhai Naoroji began his Poverty and Un-British Rule in India by pointing out the benefits – potential and actual – to India of British rule before arguing that the form of colonial government at that time was undermining economic development in the sub-continent. Naoroji was one of the co-founders of the Indian National Congress, which would ultimately lead the fight for Indian independence in 1947. However, in his 1901 book, he imagined ways in which British rule could benefit both India and Britain. In fact, many of the groups initially formed to pressure the colonial state often did so with a view to addressing specific grievances or achieving greater recognition within the colonial system, without necessarily fighting initially for national independence (Gardner 2012: 224–5).
imperial historians have a particular problem: whether to camp in comfort inside officialdom’s lighted circle or go out into the areas of darkness – bush, outback, jungle, suburb – there to mix with the locals and rummage among what C. A. Bayly calls the records of Dustypore, if the termites
haven’t got to them first. The decisions reached shape the history we have.
Those decisions, and consequently that history, have changed over time, such that as early as the 1960s and 1970s it was becoming less acceptable for researchers to complete work on imperial history solely using records produced in imperial capitals. Local archives painted a different picture of how colonial states worked than the formal policy pronouncements found in imperial archives. Instead, they highlighted what was often a messy system of colonial governance in which the actions of indigenous people as well as a range of others, including merchants and missionaries, became more important.
These records have also allowed for the study of a range of related questions on economic development over time which a lack of accessible written records made it difficult to answer (Fourie 2016). In particular, they have facilitated more quantitative approaches to longstanding questions about the link between colonialism and growth, for both colonizer and colonized. The next section uses this evidence to present an overview of long-run economic performance in both groups during the era of colonial rule. These data show the heterogeneous experiences of colonizer and colonized and suggest there is no neat narrative connecting colonial rule and economic growth.
Many colonies, many stories
it seems difficult to believe that in any plausible counter-factual Australia or the United States would today have
higher GDP per capita if they had not been colonized. At the same time, … it is difficult to believe that the income per capita of Botswana or Ghana would not be higher today had it not been colonized.
Complicating such counterfactuals is the fact that this was a period of rapid and substantial economic and technical change which transformed the lives and livelihoods of people in virtually every region of the world. Figure 1.1 gives long-run GDP data for a number
The first figure shows three European colonizers plus Japan, which was the first nation outside Europe or North America to industrialize and build its own empire in Asia during the interwar period. The second shows four countries that were colonized, either formally or informally, at some stage in the colonial period considered here. First, it shows that in 1500, the countries for which data are available were well above subsistence levels of income, in this metric defined as $400 a year (reflecting the World Bank’s 1990 definition of poverty as $1 a day plus a small elite). In the 16th century, Chinese GDP per capita was similar in level to that of European countries, as was that of India and, to a lesser extent, Japan (Broadberry et al 2015; Broadberry et al 2018). The early modern period saw ‘revolutions of imagination, taste and consumption’ in many parts of the world (Bayly 2008: 5). England and the Netherlands broke away from the others during the 17th century while Spain, one of the earliest colonizers, saw its income stagnate until the late 19th century. Meanwhile, the Cape Colony, which was comprised of a comparatively affluent community of Dutch settlers in the early 18th century, suffered a decline through the late 18th and early 19th centuries. The same was true of China and India. The United States, another settler colony, had low levels of GDP per capita in the 17th century but this increased rapidly such that by 1900 it had eclipsed that of Great Britain.
Even this relatively basic overview challenges any simple narratives about colonization and economic development. Not all countries that were wealthy in the early modern period acquired overseas colonies – though China did expand its existing boundaries by conquering neighbouring regions. Further, not all colonizers industrialized early. Some colonies and former colonies were able to achieve high levels of income, suggesting that colonial rule in itself was not necessarily antithetical to growth, either in the first era of empires or the second. Arroyo Abad and van Zanden (2016) find that at least some Spanish colonies in Latin America enjoyed impressive rates of growth during the colonial period, with a few, like Mexico, achieving parity with Spain. The same is true for colonies in Asia and Africa in the 19th and 20th centuries.
For more recent periods it is possible to use measures which take a wider definition of living standards than GDP per capita. Figure 1.2 presents human development index (HDI) measures for countries in Africa and Asia through the colonial period.
Human Development Index in Asia and Africa, 1870–1960
Source: Prados de la Escosura (2015).HDI incorporates measures of education and life expectancy in addition to income to provide a more holistic view of people’s standards of living. The figure shows that even under colonial rule, improvements in HDI were possible. This was partly linked to expansion in trade and export production. As Chapter 6 discusses in greater detail, encouraging such expansion was in the interests of both the colonial state as well as many indigenous producers. There were also at least some improvements in education and life expectancy, the latter through technological advances in medical care.
This does not, of course, mean that colonialism was not a violent and disruptive process. Broad measures like GDP per capita and HDI leave many questions unanswered about the distribution of any gains in income or education, and thus the significance of growth for most of the population. Despite the increased availability of data in recent decades, it remains difficult to construct detailed measures of living standards which take into account patterns of potentially unequal distribution. Measures of inequality under colonial rule remain restricted to a small number of countries, but virtually all show an increase. In their study of Botswana, Bolt and Hillbom (2016) find that inequality rose along with the growth of commercial cattle and beef exports from the 1920s. Using data on heights as a proxy for living standards, Alexander Moradi (2008) shows that while there were improvements in height in Kenya and Ghana during the colonial period, only some regions and ethnic groups seemed to benefit. Roy (2014) finds that regional inequality in India rose during parts of the
The story of economic growth and development during the era of modern imperialism in the 19th and 20th centuries is thus a complex one, and how the two connect to one another has been debated since colonial rule was in place. But how can we explain the differences? Can the impact of colonial policies be distinguished from, for example, geographical features of the countries and regions being studied? How did these two interact? The answers to these questions are often linked to the issues of agency and power raised earlier. The next three sections review different approaches to this question, beginning with what might be called a ‘Eurocentric’ approach, which emphasizes the importance of Europeans and European policies in determining economic outcomes in the colonies.
European origins of comparative development
A focus on the importance of European governments and administrators in shaping the economies of their colonies characterized much early writing on empire. This was one of the reasons why the study of the history of empires languished in the decades after decolonization. Frederick Cooper (2005: 5) writes that ‘in African history, my generation avoided colonial history for fear of being thought to do “white history”’.
This approach experienced a revival in the 2000s through new quantitative research investigating links between historical events and current gaps between wealthy and poor countries. Initially, this was a response to research in the 1980s and 1990s which placed the burden of explanation for the poverty of many former colonies on the bad policies adopted by post-independence governments. One example was what is often referred to as the ‘Africa dummy’ debate. In a landmark paper using a global sample of countries to identify the causes of growth, Barro (1991) observed that a dummy variable indicating whether a country was in Africa remained negative and significant even controlling for other factors thought to influence the rate of economic growth. In layman’s terms, something about being in Africa seemed to be bad for growth even accounting for other known contributors to economic growth. Attempts to explain this result zeroed in on various policies adopted by African governments since independence, often linked to rent-seeking and protectionism
In response to these debates, economists turned to deeper historical causes for the wealth and poverty of different countries. In particular, they focused on differences not just in particular policies but to more fundamental issues of institutional structure, drawing inspiration from the New Institutional Economics (NIE) theories pioneered by Douglass North (1990), among others, which argued that economic behaviour is shaped by the ‘rules of the game’ in the societies in which people operate. The history of colonialism became part of this discussion by providing something like a natural experiment in which inherited institutions influenced the economic behaviour of people in each country and thus explain differences between them in levels of income even decades after the end of colonial rule. Perhaps the broadest statement of this argument appeared in the widely cited papers by Acemoglu et al (2001, 2002). Their aim was to identify ‘the fundamental causes of the large differences in income per capita across countries’ (Acemoglu et al 2001, 1369–70). They argue that ‘different types of colonization policies … created different sets of institutions’. These they divide into two categories: ‘extractive states’, which provided little protection of property rights or checks and balances; and ‘neo-Europes’, which replicated European institutions.
In their theory, what determined the adoption of one set of institutions or the other was the mortality rate of settlers. Where settlers were likely to survive, they created institutions which resembled those they had left behind. Where mortality rates were high, however, it was more likely that colonial governments would create ‘extractive’ states. They argue that this relationship creates a source of exogenous variation which allows them to show that the different colonization strategies were the cause of different levels of development in the 1990s. Going further, a follow-up paper (Acemoglu et al 2002) argued that this same mechanism explains a ‘reversal of fortune’ in which regions of the world which were wealthier in 1500 wound up being poorer by 1990.
In both these papers, the definition of ‘extractive states’ and their alternative remains broad. Other work in this area is more precise
Through their use of settler mortality as an instrument for the type of colonial institutions, Acemoglu, Johnson and Robinson (2001) place great emphasis on the role of European settlers in shaping colonial policies. However, beyond broad claims about institutions, they are not explicit about what Europeans actually did in the colonies. Easterly and Levine (2016) link the share of the European population during the colonial period to recent development outcomes, arguing that even small communities of settlers improved development outcomes through the transmission of human capital and technological knowledge.
Emphasis on European initiative as a key foundation for economic divergence between colonies is not restricted to states or settlers. Missionaries are also credited with important influences in the economic legacies of colonialism through their role in the provision of education. As Chapter 6 discusses in greater detail, colonial government investments in education were minimal until the very end of the colonial period. Thus only a relatively small share of colonized people was able to access education. However, those who did so generally did it through mission schools (sometimes subsidized), in which the vast majority of students were enrolled (Frankema 2012). There was an uneven distribution of mission schools both between and within colonies, which has been used to explain later gaps in levels of human capital (Nunn 2014) and the structure of political institutions (Woodberry 2012).
Such broad narratives are always vulnerable to critiques about how these stories fit with the particularities of specific times and places. One source of criticism of much of this work is the data used in the quantitative analysis. Construction of such global datasets inevitably requires reliance on assumptions and proxies to fill gaps in the historical record. Albouy (2012), for example, challenges the settler mortality data used by Acemoglu, Johnson and Robinson (2001). In the legal
In none of this work are indigenous institutions or responses to colonial rule considered in much detail. Rather, it treats precolonial regions largely as clean slates on which to project the ‘modernizing’ potential of colonial rule. This runs counter to the overall tendency in the writing of imperial history in recent decades to de-emphasize the role of European states and instead portray colonial rule as a series of interactions between colonial states, indigenous actors and various other stakeholders, including settlers, merchants and missionaries.
Indigenous origins of comparative development
The validity of claims about the legacies of European rule depends at least partly on assumptions about the capacity of the colonial state and related European actors to implement policies of their choosing. However, such assumptions can be challenged on two fronts. The first is the documented history of indigenous responses to the economic change. Elites in what became European colonies were not oblivious to the opportunities offered by global economic trends. Their responses to these opportunities were independent of the demands of the colonial state but often provided the trade on which the finances of colonial states depended. One example is the introduction of cocoa in West Africa, which would become the leading export for the British Gold Coast, French Cote d’Ivoire and to a lesser extent British Nigeria. Cacao trees are indigenous to the Americas, not Africa, and it was Nigerian merchants who first brought it to the mainland (Hopkins 1978). The importance of indigenous elites and producers in shaping colonial economies was such that Bayly (2008: 8) asks ‘how far were there any truly “colonial” origins of Indian development?’
A second objection to Eurocentric approaches to empire is that empirical research on the history of colonial governance has consistently shown that in many parts of the world, the comparative advantage that
These two arguments are both linked to the question of colonial legacies, and in particular the extent to which colonial institutions and economies were really shaped by the relatively skeletal European presence. Bayly (2008) stresses the importance of an indigenous commercial class in explaining comparative economic development, whether in Japan or in India. At the same time, comparatively weak colonial states relied on these same elites to maintain their rule. John Iliffe (2007: 193) describes colonial states before 1914 in Africa as ‘mere skeletons fleshed out and vitalized by African political forces’. Historian David Killingray jokes that the ideal exam question for a course on African colonialism might be: ‘During colonial rule, Africa was mainly governed by Africans. Discuss’ (Institute of Commonwealth Studies 2013).
Building on these arguments, a parallel literature has argued that it was not the comparatively weak European institutions that shaped development outcomes, but rather the indigenous institutions to which people turned to resolve disputes and enforce their rights in the absence of a strong central authority. For India, Iyer (2010) compares areas in India which were under direct British rule with those under indirect rule, and finds that provision of roads, schools and health centres was more generous in the latter.
The anthropological data used as a measure of ‘precolonial’ centralization is potentially questionable. For Africa in particular, the period of observation of the societies included in the Murdock Atlas starts in 1830 at the earliest, with the 1920s as the most common decade of observation (Henderson and Whatley 2014). By the earliest point of observation, therefore, African states had undergone numerous upheavals linked to globalization and the slow end of the slave trade. The 19th century saw migrations, conflicts and political instability in various forms through much of the sub-Saharan region (Iliffe 2007: 164–92).
All of these papers explain their findings with reference to systems of indirect rule. However, ‘indirect rule’ is a phrase with many meanings. The ways in which indigenous institutions were incorporated into the colonial state ranged from the Indian princely states or the Kabaka of Buganda, who governed with little intervention from colonial officials, to indigenous appointees with little power outside their association with the colonial government. One example of the latter was the ‘warrant chiefs’ of colonial Nigeria, who were so called because the only authority they had came from a colonial ‘warrant’. In this case there were also differences between colonial powers in the extent to which they prized the apparent legitimacy of indigenous rulers. Britain, in general, paid more attention to establishing this than the French, though this varied and they did not always get it right.
These debates aside, what this literature establishes is that the European presence in most colonies was minimal and, despite advantages in terms of technology and coercive capacity, often under-resourced. This leaves little room for the kinds of top-down explanations for divergences in economic development presented in the previous section. As Bayly
Local conditions and decisions
A third category of explanations for differences in colonial administration, and thus differences in economic paths after independence combines the first two approaches, in which local circumstances – particularly but not exclusively geographical and environmental – influenced the decisions that both colonial administrators and indigenous actors made. The emphasis in this area of work is often on the varying geographic resources or endowments of what were a far-flung and diverse set of colonies, and the argument is that different types of colonial institutions emerged in response to the incentives created by these resources. This was not necessarily the result of deliberate decision-making by European governments, but rather the outcome (sometimes unintended) of a series of decisions made by a range of actors, both European and indigenous.
Perhaps the best example of this work are the theories of Stanley Engerman and Kenneth Sokoloff (2013), who use this approach to try to explain an apparent reversal of fortune in the Americas. In the early modern period, the colonies of South America and the Caribbean seemed to contemporary observers significantly better off than those of North America. However, in the long run, it was the latter that achieved sustained economic growth and ultimately acquired colonies of its own. They argue that the climate and soils of the southern colonies, along with the survival of larger indigenous populations, favoured the production of crops by large slave plantations. This economic structure led to high levels of inequality during the colonial period, which ultimately underpinned policies aimed at maintaining those levels of inequality, for example limited investment in public schooling. In much of North America, where the biogeography favoured relatively small mixed farms, levels of inequality were low, and governments adopted more growth-promoting policies later on.
Engerman and Sokoloff (2013: 66–7) give as one of their motivations for this study their doubts about what they call ‘a traditional and popular explanation’ for the divergence between North and South America which ‘credits the success of the North American economies to the superiority of English institutional heritage, or to the better fit
Other contributions also challenge the idea that French or Belgian colonial rule differed, for example, from British or Spanish. Rather, all colonizers adapted their policies to the circumstances they faced in each place. Ewout Frankema and Marlous van Waijenburg (2014) use the structure of tax systems in British and French colonies in Africa to compare the two strategies of governance, and find more systematic differences between the coastal and inland colonies of both colonizers rather than a specifically French or British ‘blueprint’, with coastal colonies relying more heavily on the taxation of imports while inland colonies developed systems of direct taxation. Chapter 4 returns to the use of tax systems as a way of understanding colonial institutions.
The notion that economic resources, rather than some ex-ante policy decisions, shaped colonial strategies is not new. Samir Amin (1973) proposed what remains a widely used classification of African colonies based largely on their economic resources and colonial strategies to develop them. ‘Labour reserve’ colonies were those in which foreign enterprises, from capital-intensive mines to plantations to settler farms, required large supplies of indigenous labour. A second category comprised those colonies without minerals or large settler populations, where colonial policies and economies were oriented towards the export trade. The third category, which Amin referred to as ‘Africa of the concessionary companies’, included colonies with limited export production and low population densities where the responsibilities of governance were effectively outsourced to private concession companies in exchange for various monopoly rights. Each of these styles of colonial rule, he argued, had different legacies for post-independence states.
This approach, which considers the dynamic relationship between local conditions and colonial policies, can also offer a different perspective on some of the issues raised in the previous two sections. For example, the presence of settlers was not necessarily the result of a one-off decision at the beginning of colonial rule. Rather, it was shaped by an ongoing negotiation between potential settlers, indigenous people and the colonial state (Frankema et al 2016). Similarly, mission locations shifted over the course of the colonial period based on both economic conditions on the ground and African demand for their services (Jedwab et al 2019). Systems of indirect rule and parallel legal systems did not preserve indigenous
Finally, and perhaps more importantly, is the link between these interactions and the kinds of geographic conditions central to Engerman and Sokoloff. John Tosh (1980) argues that the extent to which West African producers could respond to new demand for agricultural and forest products depended to a significant degree on geography, particularly proximity to export hubs and the length of the growing season which influenced opportunities to produce for export without reducing food supplies. Geographic endowments were also influential in structuring the indigenous institutions and capacities (Fenske 2014). Roy (2014) finds that variation in geographic resources accounts for much of the variation in economic performance which Iyer (2010) attributes to institutions in her comparison of direct and indirect rule.
According to work in this area, economic divergences between colonies and former colonies are difficult to attribute to the actions of one set of actors alone. Rather, colonial institutions across the colonial period represented the outcome of a dynamic process by which both indigenous actors and Europeans responded to the constraints and opportunities of local environments. Most colonial economies depended heavily on the export of a few commodities in which that particular location specialized. Thus the methods of production of those commodities, whether small farms or plantations or large capital-intensive mines, had important implications for who held power and which institutions mattered.
Conclusion
The study of colonialism and its links with the emergence of large gaps between countries has experienced a revival after several decades of relative neglect. The overall aim of this chapter is to demonstrate the complexity of the question. New data on the economic performance of countries in a variety of regions over time suggests there is no neat linear narrative connecting colonial rule and economic change. differences in European policies, indigenous institutions, or geography and climate
Subsequent chapters address themes and questions raised here in greater detail. What explains the rise of ‘modern’ European empires and how does this link to the broader economic changes of the period related to industrialization, globalization, and changing business structures (Chapters 2, 3 and 9)? How did European governments motivate and justify their decisions during the colonial period and who gained and lost from their policies (Chapters 4 and 5)? What determined the structure of colonial states and the ways they reacted to a rapidly changing world (Chapters 6 and 7)? How and why did empires end (Chapter 10)?
Note
‘Responsibilities of empire’, The Economist, 16 June 1900, p. 843.
