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Colonial Exploitation Did Not Fuel the West's Economic Development

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Some intellectuals, especially on the left, continue to claim that the West’s economic development would have been impossible without the resources extracted unjustly from the developing world, also known as the “Third World.” Even nuanced thinkers may automatically presume these assumptions to be true.

Certainly, overt exploitation of conquered victims occurred during the apex of Western imperialism. Yet such examples fail to buttress the claim that the West is the cause of underdevelopment in the Third World. Therefore, to determine the validity of postulates popularized by left-leaning activists we must answer three important questions: (1) Did the West need to exploit the Third World for its development? (2) To what extent can colonialism explain the state of the developing world? and (3) Are critics right to argue that capitalism is hindering progress in the Third World?

Numerous intellectuals aver that the development of the West required the harnessing of resources in the Third World. However in Economics and World History: Myths and Paradoxes (1995) economist Paul Bairoch aptly refutes this trope:

There is a widespread belief that the development of the Western world especially its industrialization, was based for a very long period on raw materials from the Third World….Contrary to widespread opinion, all this is a fairly recent phenomenon. As late as the immediate post-World War II period, the developed countries (even in the West) were almost totally self-sufficient in energy. Until the end of the 1930s, the developed world produced more energy than it consumed and had a sizeable export surplus in energy products, especially coal, while one of the major exporters was one of the most industrialized countries: the United Kingdom.

In fact, Bairoch describes the trading relationship between the Third World and the West as modest by Bairoch. He writes:

During the period from 1800–1938, only 17% of total exports were sent to the Third World and of those, only half to the colonies, which means that only 9% of total European exports went to the colonial empires. Since during this period total exports represented some 8-9% of the GNP of the developed countries, it can be estimated that exports to the Third World represented only 1.3–1.7% of the total volume of production of those developed countries, and exports to the colonies only 0.6–0.9%.

In reality, Third World colonies were actually quite expensive for colonial powers. Philip R.P. Coelho in his article "The Profitability of Imperialism: The British Experience in the West Indies 1768–1772," notes that colonialism was a liability for Britain,

the costs of British colonies in the BWI [British West Indies]were borne by the consumers of sugar and taxpayers…BWI planters were the main beneficiaries of British colonialism. Their benefits consisted of a higher price for sugar than they would have received on the world market, and the protection provided by the British military.

Fellow economists Lance E. Davis and Robert A. Huttenback also agree that imperialism was a wasteful venture.

Colonial adventurism was never a source of vast profit for the imperial governments. The people’s representatives grudgingly accepted a responsibility that was very popular with their constituents, but empires cost a lot of money – and volunteers to share the expense were hard to find.

Instead of enriching Western powers, colonies retarded economic growth. According to Bairoch,

If one compares the rate of growth during the nineteenth century it appears that non-colonial countries had, as a rule, a more rapid economic development than colonial ones….Thus colonial countries like Britain, France, Portugal, the Netherlands, and Spain have been characterized by a slower rate of economic growth than Belgium, Germany, Sweden, Switzerland, and the United States….Thus Belgium by joining the colonial "club" in the first years of the twentieth century, also became a member of the group characterized by slow growth.

Evidently, the evidence indicates that Third World countries were marginal to the West. Moreover, economic historians have long argued that the ingredients explaining the rise of the West were present as early as the medieval ages. When comparing institutional efficiency in medieval Europe, economist Jan Luiten van Zanden writes, “the view that Western Europe had already acquired an institutional framework that was relatively efficient in the Middle Ages – more efficient than institutions regulating the capital market and property rights elsewhere – seems to be confirmed by the evidence on interest rates.’’ Though difficult for some to grasp, economic progress is not the outcome of exploitation, but rather a culmination of diverse factors ranging from geography to institutions.

Likewise, the specter of colonialism continues to elicit intense emotions, but few ponder the extent to which colonialism can be held liable for challenges in the developing world. On the other hand, even, fewer radicals do not attribute crises in former colonies to a reason other than colonialism. Colonial rule sought to maintain hegemony by fostering ethnic tensions, thus serving to promote distrust and reduce confidence in the state. To many, the divisive nature of colonial rule is sufficient to indicate that colonialism is the basis of problems in developing countries. Scrutinizing the data, however, will reveal that the matter is far more complicated. The origins of some wars in Africa, for example, are traceable to colonialism but only to a degree. Colonialism cannot explain all forms of violence on the continent. Leading sociologists Matthew Lange and Andrew Dawson in a recent paper found that colonialism is not the underlying cause of violence in all cases:

We provide evidence against sweeping claims that colonialism is a universal cause of civil violence but find that some forms of colonialism appear to have increased the risk and intensity of some forms of civil violence….Whereas our findings provide evidence that a history of colonialism promotes inter-communal conflict, our results for the level of political rebellion and years of civil war per decade are much less conclusive….There is no statistically significant difference in the level of rebellion or years of civil war between former colonies and non-colonies. Moreover, when we divide former colonies according to the identity of the colonizer, we find that there is no statistically significant difference in years of civil war and level of rebellion between non-colonies and former colonies of Great Britain, France, and minor colonial powers.

Scholars must be reminded that in some instances there is not a root cause, but rather a multiplicity of causes. Greater primacy should also be given to the role of precolonial institutions in shaping development in Third World countries. An analysis of the impact of colonialism on Africa reveals that

the relevance of colonial legacies to institutional quality and to per capita income is rapidly disappearing in Africa. Differences in institutional quality or income are explained less and less by colonial legacy, while there is some evidence that pre-colonial social and geographic circumstances are becoming more important.

There may be great consensus in economics that institutions established by colonialists determine contemporary economic growth, but some researchers promulgate a counterthesis worthy of exploration. As one study asserts, “our findings run counter to the institutions hypothesis of economic development, showing instead that geography affected both historic mortality rates and present-day economic output.” If activists are interested in assisting the developing world, then it suits them to pay significant attention to rigorous data and not flippant politics.

Interestingly, whenever colonialism is being discussed, we rarely hear about any of its benefits. Colonialism produced many negative effects, yet the positives cannot be discounted. Research suggests that “on net, any negative extractive effects from minority European settlements on economic development today are dominated by other things Europeans brought with them. We find the positive effect of Europeans during colonization on economic development today becomes larger – not smaller or negative – when examining only former colonies in which the European share of the population during the colonial period was small or zero.” Additionally, Nathan Nunn and other economists have demonstrated that educational attainment increased in the developing world during the colonial period, due to the pivotal role of Protestant missionaries in establishing learning institutions.

Left-leaning critics also claim that capitalism exploits Third World countries, and that development will elude the Third World unless global capitalism is eradicated. This perspective is quite risible, since studies argue that poor countries can become rich by removing barriers to trade and penetrating the global market. Writing for the World Bank, economist David Dollar cogently argues that promarket reforms spur growth in developing countries. “Some of the most compelling evidence comes from case studies that show how this process can work in particular countries. Among the countries that were very poor in 1980, China, India, Uganda, and Vietnam provide an interesting range of examples.” Similarly, an assessment of Sub-Saharan Africa informs us that economic freedom is the best strategy for achieving inclusive growth. According to the study, there is evidence for “a causal relationship from economic freedom to inclusive growth but not the other way around.” Free markets and not centralization improve the conditions of citizens in the developing world.

Western countries were able to pursue colonial ventures, because they were already rich. Hence colonialism was a consequence and not the genesis of Western development. However, myths about the relationship between the West and the Third World persist to advance political agendas. Depicting Third World countries as victims may stroke the egos of incompetent leaders or even boost the profiles of Western politicians who provide foreign aid. But promoting economic and historical inaccuracies will only increase the income gap between rich and poor countries by making Third World leaders unaccountable for their follies. The good news for Third World countries is that the experience of the West shows that progress is possible without exploiting weaker states.


Contact Lipton Matthews

Lipton Matthews is a researcher, business analyst, and contributor to Mises.org, The Federalist, and the Jamaica Gleaner. He may be contacted at lo_matthews@yahoo.com or twitter @matthewslipton

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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