Colonialism led to a substantial outflow of financial resources.
It is best documented in the case of British India. The economic historian
Angus Maddison concludes that there was "a substantial outflow which lasted for
190 years", and: "If these funds had been invested in India, they could have
made a significant contribution to raising income levels."
The so-called “Home Charges”, the official transfers of funds by
the colonial government to Britain between 1858 and 1947, consisted mainly of
debt service, pensions, India Office expenses in Britain, purchases of military
items and railway equipment.
Debt service occurred not only because of investment in
infrastructure, but also due to costly wars and architectural extravagances
like the building of New Delhi. Government procurement of civilian goods,
armaments and shipping was carried out almost exclusively in the home country;
there were no efforts at developing industrial enterprises in India which could
have delivered these goods at probably lower prices. Of these official
payments, therefore, service charges on non-productive debt, pensions and
furlough payments can be considered as a balance of payment drain due to
colonialism.
For the 1930s, Maddison estimates these home charges in the range
of £40 to £50 million a year. In addition, there were private remittances,
probably about £10 million a year, and dividend and interest remittances by
shipping and banking interests, plantations, and other British investors.
Diamond (1988) emphasizes the establishment of monopolistic state
control of cash crop production and exportation as an important impact of
colonialism, as well as the exclusive control over the mining of minerals and
the development of infrastructure. Thereby, “it discouraged the development of
an indigenous capitalist class by favouring the metropole’s industrial exports
and foreign firms, and (…) by curtailing individual access to the land”.
The effect of colonialism on trade is assessed by Mitchener and
Weidenmier. They argue that “empires increased trade by lowering transactions
costs and by establishing trade policies that promoted trade within empires. In
particular, the use of a common language, the establishment of currency unions,
the monetizing of recently acquired colonies, preferential trade arrangements,
and customs unions help to account for the observed increase in trade
associated with empire”. Trade between the colonial power and its colonies was
regulated in different ways: with tariff assimilation/customs union, with
preferential tariff policies and/or with “open door” policies.
Chase-Dunn sees the impact of colonial trade policy in a shift
towards a more “bilateral (colonial) structure”, typically occurring in phases
of global economic slow-down and increasing competition.
Fieldhouse discusses long-term change in colonial trade policies,
but – with some exceptions – a stronger protectionism of French colonialism
compared to British.
Grier supports this argument and suggests for Spanish colonies a
strong mercantilist approach. In cases in which industrially manufactured
products from the metropole economy were cheaper, as in the case of British textile
exports to India, a ‘deindustrialization’ in the colony was the consequence.
Plantations were core elements of the colonial economy. In
general, a plantation “is owned by a legal entity or individual with
substantial capital resources, the production techniques are based on
industrial processing machinery, and the labour force consists of wage laborers
resident on the estate”. The development of a plantation economy required
expropriation, which took place in different forms, implying displacement of indigenous
population. For example, in British-Ceylon (Sri Lanka), the plantation boom of
the “coffee era” (1830-1880) was enabled through a combination of a special
land-sales policy and financial control through banks and agency houses:
“In 1815 the colonial government assumed ownership of all
uncultivated land. In 1844, the price on Crown land was raised high enough that
buying was effectively limited to Europeans with enough capital. Since banking
was British controlled, the banks perpetuated British policy by making almost
all their loans to European planters and export-import-traders and not to
Ceylonese peasants. As a result, most export production remained in British
hands.”
Plantations were a world different from the surrounding land.
Working and living conditions on plantations were in general bad. Many
plantation owners used a long-term debt strategy to bind workers to their
enterprise. Tropical diseases were widespread and accidents common.
Sugar, tea, sisal, and palm oil were typical plantation products,
while wet rice, coffee, rubber, tobacco and cacao were also or mainly produced
by small farmers. While in some colonies, governments assisted actively in
setting up large estates, in others they favoured small production units. The
production of cash crops by peasants need not necessarily to be less exploitive
than plantation work. Especially in the case of agricultural monopsonies via
marketing boards, traders and/or state officials could gain huge rents by
underpaying peasants for their produce.
In the Belgian Congo, the collection of wild rubber on the huge
private concessions “resulted in the depopulation of entire villages and the
perpetration of heinous crimes against humanity (…). Villages unwilling or
unable to meet the assigned daily quotas of production were subject to rape,
arson, bodily mutilation and murder” (Nzongola-Ntalaja). The situation was the
private domain of King Leopold and in the neighbouring French Congo was
similar.
Opening plantations in the interior depended on adequate means of
transport and communication to get the produce to the ports. This was a
challenge especially in the mountainous areas where coffee and tea were
produced.
The main transportation technology in 19th century Europe were
railways, and they were built in the colonies as well. These were also
instruments of imperial control, because the technology and much of the capital
came from the metropole country. Between 1865 and 1914, railway expansion
absorbed 42% of British capital exports (Huff 2007). There were purely military
and strategic reasons behind certain railway projects, e.g. in British-India
the line leading up to the Khyber Pass to Afghanistan or the Mombasa-Uganda
railway intended to ensure British claims on eastern Sudan against the
progressing French.
Compared with the huge land masses of the Indian peninsula and
Central and South Africa, the situation in Southeast Asia (and to a certain
degree in West Africa) was different: In the archipelago, the plantations were
never far from the coast, and the most of the rice for export was grown in the
deltas of the rivers Irrawaddy (Burma) and Mekong (Indochina).
The control of mining was one of the key interests of colonial
powers, and large-scale mining had a huge impact on the local population.
Migrant wage labour, the need for housing, food and entertainment triggered
considerable urbanization, social distortion and the advent of new forms of
sociability and political activity. Mining took a heavy toll on the workers,
due to accidents, but also because of the unhealthy living conditions which
contributed to spreading diseases.
The main arguments regarding the economic impact of colonialism
are the ‘drain of wealth’, expropriation (mainly of land), the control over
production and trade, the exploitation of natural resources, and the possible
improvement of infrastructure.
India’s share of world GDP fell from 27% in 1700 to 3% by 1947 (at
the time of independence). But Britain’s share of world GDP increased from
about 3% in 1700 to 9% in 1870. Today (2020) Britain has 2.17% of global GDP
(in PPP terms) while India’s GDP is 8.27% of global GDP (PPP terms). On a per
capita basis the picture is rather different.
What can we learn from this? Colonialism is not a desired outcome.
Today we have MNCs doing the same thing in vulnerable, third world nations. The
WTO is controlled by large nations, even the U.S. is displeased with it. There
must be a social conscience of restoring past indiscretions with positive
contribution to the welfare of those who were exploited previously. A sort of
repentance and reconciliation. And that starts with an apology. Will the
colonizers do that? And truly build a commonwealth of nations!
Reference:
1. The Economic
Impact of Colonialism, https://www.worlddevelopment.uzh.ch/
2. Shashi Tharoor
(2017), Inglorious Empire: What the British Did to India
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