Sunday, July 01, 2012

Did Western colonialism create economic inequality?

There are people who believe that the reason economic inequality exists is that white people exploited others over the centuries and whites therefore became advantaged and non-whites became disadvantaged.

In a recent post I showed why that can't be true. The European economies began to advance by at least the year 1100 AD, long before any colonial contact with Asia or Africa. And there was a big jump in economic growth in about the year 1800 AD, which coincides with the beginning of the Industrial Revolution - which means that it was the innovations in industrial organisation and technique in England and elsewhere which powered the sudden leap in Western economies.

A reader, Chris, sent in a link which provides more evidence that white colonisation does not explain economic inequality. Two American economists, William Easterly and Ross Levine, have undertaken research to discover the economic impact of white colonisation on the long-term prosperity of a country.

What they discovered was that white colonisation predicts improvements in long-term prosperity rather than poverty. In other words, the more whites living in a country in 1700, the higher the GDP of a nation in the year 2000. Whites brought relative prosperity, not poverty.

From the summary:
We find a remarkably strong impact of colonial European settlement on development. According to one illustrative exercise, 47 percent of average global development levels today are attributable to Europeans. One of our most surprising findings is the positive effect of even a small minority European population during the colonial period on per capita income today, contradicting traditional and recent views.

That 47 percent statistic is explained further here:
Using the 2000 population weights, the data and estimated coefficients indicate that 47% of the development outside of Europe is attributed to the share of European settlers during the early stages of colonization ... it is striking how much of global development is associated with Europeans (not even considering the development of Europe itself).

What the statistic means is that if, say, an African country has managed to increase its GDP by $1000 per capita over the period 1700 to 2000, then $470 of that improvement can be attributed to the presence of whites in the year 1700. If there had been no whites active in that African country, then that $470 GDP per capita improvement would not exist.

The researchers found that you could predict economic improvements by the number of whites in a particular country in the early stages of colonisation. They give this example for Brazil:
...consider just a one percentage point increase in Euro share in the case of Brazil. The estimated coefficients suggest that if Brazil had a Euro share of 0.084 rather than 0.074, then its average GDP per capita over the period from 1995 to 2005 would have been $9,798 instead of $7,942.

I am not quoting these figures in order to try to prove that everything about colonisation was positive for the countries affected. But they do provide strong evidence against the claim that the Western nations got rich at the expense of other nations. Nations which were left alone by the Western colonial powers are worse off today in economic terms, not better off.

27 comments:

  1. "Nations which were left alone by the Western colonial powers are worse off today in economic terms, not better off."

    Haiti? Most of Africa?

    These are some of the world's poorest places and were also subject to Western colonialism.

    Colonialism was probably a multifaceted affair, with drawbacks and benefits for all concerned...

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  2. "I am not quoting these figures in order to try to prove that everything about colonisation was positive for the countries affected"

    The broad trend seems to be that the descendants of survivors benefitted, so the Indians benefitted, and modern Australian Aborigines benefit hugely from European colonisation in material terms (although I'm sceptical whether it's a net benefit when moral and spiritual factors are included). But where there was population replacement, the non-existent descendants of the dead clearly did not benefit.

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  3. Simon,

    Agreed. Long-term economic benefit doesn't mean that colonisation didn't do harm in other ways.

    The research is of interest in disproving one particular argument made by whiteness theorists, namely that if there are whites who are well off today it's at the expense of non-whites who aren't well off. The research suggests the opposite is true - that the influence of whites has been to raise the general level of wealth not only in white societies but in non-white societies as well.

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  4. Anon,

    The point is to measure whether the places in Africa that had white colonists early in the colonial history have higher average GDPs per capita today than those which didn't and whether you can predict the average GDP from the number of white colonists early in the colonial period.

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  5. Anon wrote,

    "Haiti?"

    murdered and destroyed all of the white colonists and purposefully tore down the institutions they created. I'm guessing that negated whatever advantages they might have gained through colonization.

    "Most of Africa?"

    had no significant numbers of white settlers, hence turned out exactly as the authors of the study predicted.

    Did you read the study Mr. Richardson linked? It's wise first to read what you intend to criticize.


    Most of Africa?"

    didn't have

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  6. Surely even Australia's tenured Marxists now realise what their counterparts in Britain and the States, however stupid, now admit: that with every modern empire, colonies were a net drain on the mother country, not a net source of profit. Just as Bismarck (a very reluctant colonist) predicted that they would be. Just as William Cobbett predicted that they would be when Bismarck was still a child.

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  7. Bartholomew hit the nail. White population in Haiti was massacred in the late XVIII century. Haiti poverty shows what happens to a country when europeans are expelled and kept out. As for Africa, the richest african countries are exactly the ones where europeans are more numerous. South Africa is a clear example. In the 80s, the average black south-african lived better (materially speaking) than the average latin american. In the last 20 years, as the white exodus proceeds, South Africa is looking more and more like any other poverty stricken african country.

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  8. Haiti actually was levelled (as is typical) with crippling debt that was forgiven in white countries but aggressively demanded of black countries at great cost to their GDPs and productivity.

    The ways in which white colonialism undermined functional instutitions in African societies and then pretended otherwise is also well documented.

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  9. Anon,

    It's true that Haiti was required to repay debt. I'm not sure which white country debt was forgiven - you need to be more specific.

    But if you look at the history of Haiti then it's obviously wrong to blame white colonialism or even the repayment of debt for Haiti's poverty.

    During the colonial period Haiti was the wealthiest part of the region (it was called the "Pearl of the Antilles"). After the whites were ethnically cleansed (systematically murdered) in 1804, what followed was, first, a failure to maintain a productive economy (Haiti could have paid off its debt by selling sugar as it had done in colonial times, but production had ceased by 1840).

    Second, there was a failure of stable governance. A confusing series of dictators followed each other. For instance, from 1911 to 1915 there were six different presidents, each of whom was either killed or forced into exile.

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  10. @Mark Richardson

    "Where Balck Rules White: A Journey Across and about Hayti" by Hesketh Prichard.
    It is more than 100 years old but worth of reading.

    http://www.archive.org/stream/whereblackrules00pricgoog#page/n4/mode/1up

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  11. "Surely even Australia's tenured Marxists now realise what their counterparts in Britain and the States, however stupid, now admit: that with every modern empire, colonies were a net drain on the mother country, not a net source of profit."

    That is obviously not true. The British Empire was tremendously profitable. The men who ruled Britain in the heyday of colonialism from 1700 to 1900 were hard-headed, unsentimental types; they wouldn't have done it if it wasn't good business.

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  12. Last anon,

    I'm not sure that's true in the economic sense. If you look at the graphs I posted recently the British didn't colonise foreign peoples much until the late 1800s (the scramble for empire period), which came toward the end of British economic supremacy (the US & Germany had just about caught up by then).

    In other words, for most of the colonial period the British were mostly focused on trade and control of the seas (& establishing settlements such as Australia, NZ & Canada) rather than maximising a land empire and ruling foreign peoples.

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  13. the British didn't colonise foreign peoples much until the late 1800s

    Let's leave aside the issue that North America, Australia, and New Zealand, all colonized at least a century before the "late 1800s" did have "foreign people" in them when they were colonized (just not a lot, and they were driven out or subjugated).

    British colonies in the Caribbean (the sugar islands) were established in the 1600s and were highly profitable. They also required the rigorous control of large numbers of imported foreign people, if you know what I mean. =)

    The outstanding example is, of course, India, which Britain began controlling in the mid-1700s and which contained a large number of foreigners.

    Cape Colony acquired in 1806. Malaya, Singapore, and Hong Kong in the early to mid 1800s.

    All of the above were very profitable.

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  14. Anon,

    In Africa there is evidence that colonisation was unprofitable. The British set up companies with shareholders to colonise its territories. But these companies proved to be unprofitable and couldn't return dividends to shareholders:

    There were private companies that were behind colonisation in various parts of Africa. The British South Africa Company (BSAC), being the most famous. It received its royal charter in 1889, however it had to forfeit that charter in 1923 because it had become unprofitable and was unable to payout dividends to shareholders. There was also the lesser known Imperial British East Africa Company founded in 1888 to rule over Uganda, however it too failed to make money and forfeited its rights to the British government in 1895. In West Africa there was the Royal Niger Company, founded in 1886 to colonise what is today Nigeria, it too was a failure.

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  15. North America, Australia, and New Zealand, all colonized at least a century before the "late 1800s" did have "foreign people" in them when they were colonized

    Of course that's true, but my point was that these were settler societies, with the economies of Canada, NZ and Australia being built up by white convict and free settler labour.

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  16. In Africa there is evidence that colonisation was unprofitable.

    Meh. Does every colony everywhere have to be profitable at all times in order to demonstrate the colonialism was profitable? Of course not. Some colonies were acquired for strategic reasons, in order to protect more profitable colonies.

    The idea that colonizing South Africa was not profitable because the British South Africa Company was not profitable in 1889 is laughable. The Dutch and the Brits were there for 250+ years, and I assure you this was not because it was a white elephant.

    my point was that these were settler societies, with the economies of Canada, NZ and Australia being built up by white convict and free settler labour.

    I have no doubt that the Left would argue that the genocide and ethnic cleansing of the natives required in order to build up these nations with white labor imposed not merely a human cost on the indigenes but an economic cost. Put bluntly, the whites stole the land and resources from the natives.

    Sing it!

    The time has come
    To say fair's fair
    To pay the rent
    To pay our share
    The time has come
    A fact's a fact
    It belongs to them
    Let's give it back

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  17. Does every colony everywhere have to be profitable at all times in order to demonstrate the colonialism was profitable?

    No, but if you look at the graphs I posted recently the economies of the West began to develop faster than elsewhere by the year 1100 A.D., a long time before the colonial era, and the British economy began to decline at the time that its land empire was at its height.

    So there is no simple connection between land empire and economic advantage.

    Here's another interesting historical fact that just occurred to me.

    The Ottoman Empire was much more extensive than the British one for most of the modern period - it even colonised a large chunk of Europe. And yet having a greater land empire did not give it the economic resources to hold its position - it declined over time relative to the West.

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  18. the British economy began to decline at the time that its land empire was at its height.

    Land area does not necessarily correlate with profitability. Large areas of Canada and Australia were wasteland. Very small islands in the Caribbean were tremendously profitable. Therefore the claim that the British empire wasn't all that extensive by 1822 does not prove that the imperial acquisitions up to that time were not profitable or responsible for the take-off of the British economy. Also it should be noted that a highly profitable activity (slavery) did not require much in the way of territorial control at all.

    There is a definite increase in the slope of that Western European prosperity line after 1500. To say that this had nothing to do with colonialism at all is asking a lot.

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  19. There is a definite increase in the slope of that Western European prosperity line after 1500.

    The big increase is before 1500, then it slows down after 1500, picks up a bit after 1700 and then climbs quickly with the industrial revolution in 1800.

    I've only done a quick survey of some secondary sources, but it's possible that some of the small pick up after 1700 might have to do with the sugar/slave trade.

    But the British sugar islands were only profitable to about 1775 when other more productive areas took over:

    The disastrous effect upon British West Indies may be judged by the fact that "in 1775 Jamaica had 775 plantations; by 1791, out of every hundred, twenty three had been sold for debt, twelve were in the hands of receivers, while seven had been abandoned; and the West Indian planters, indebted to the enormous sum of twenty millions."

    ...The West Indian monopoly was not only unsound in theory, it was unprofitable in practice. In 1828 it was estimated that it cost the British people annually more than one and a half million pounds. In 1844 it was costing the country 70,000 pounds a week and London 6,000 pounds.

    ...Whilst, under the American flag, Cuban and other neutral sugar still found a market in Europe, British West Indian surpluses piled up in England. Bankruptcies were the order of the day. Between 1799 and in 1807, 65 plantations in Jamaica were abandoned, 32 were sold for debts, and 1807 suits were pending against 115 others. Debt, disease and death were the only topics of conversation in the island. A parliamentary committee set up in 1807 discovered that the British West Indian planter was producing at a loss. In 1800 his profit was 2 1/2 per cent, in 1807 nothing.

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  20. According to one article I've just read the British settlements in the West Indies, which began in the 1620s and 30s, were not economically successful initially:

    Early colonial populations on the islands were shaped by economic downturns and high death rates. Agricultural colonies such as Barbados began growing tobacco as an export crop, but, after the tobacco boom collapsed Barbados's planters, leaving them with only poor-quality tobacco to sell, they turned to experimenting with cotton, then with indigo. However, during the 1640s these commodities became early casualties of Britain's civil war, with the market for imports collapsing.

    The colonists then tried sugar. But the planters initially had low profits and could not afford to buy slaves - so they used white indentured labour instead:

    In the first stages of settlement, narrow profit margins left little room for extensive slave purchases. The early planters used white workers. Unemployment in Britain and Ireland during the 1630s produced a succession of English, Irish, and some Scots willing to mortgage their future labor in exchange for a passage to the West Indies and the hope of a new start at the end of their service.

    It wasn't until the late 1600s that the supply of white indentured labour decreased and African slave labour increased. In other words, the colonies were not founded on slave labour - that came later.

    And even then natural disasters, disease and war limited profitability. Much money had to be spent on defence.

    The islands appear to have been more profitable in the 1700s, but declined after 1783, due to competition from the East Indies and from sugar beet in continental Europe.

    So it's a mixed report. The first 30 years were unprofitable, then European labour was used to establish a sugar industry and then disease, hurricanes and war devastated the islands in the late 1600s.

    The sugar islands were, though, profitable for a period of time in the 1700s, but profitability declined from the 1780s.

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  21. Williams states,

    The triangular trade thereby gave a triple stimulus to British
    industry. The Negroes were purchased with British manufactures; transported to the plantations, they produced sugar, cotton, indigo, molasses and other tropical products, the processing of which created new industries in England; while the maintenance of the Negroes and their owners on the plantations provided another market for British industry, New England agriculture and the Newfoundland fisheries. By 1750 there was hardly a trading or a manufacturing town in England which was not in some way connected with the triangular or direct colonial trade. The profits obtained provided one of the main streams of that accumulation of capital in England which financed the Industrial Revolution.

    The West Indian islands became the hub of the British Empire, of immense importance to the grandeur and prosperity of England. It was the Negro slaves who made these sugar colonies the most precious colonies ever recorded in the whole annals of imperialism. To Postlethwayt they were "the fundamental prop and support" of the colonies, "valuable people" whose labor supplied Britain with all plantation produce. The British Empire was "a magnificent superstructure of American
    commerce and naval power on an African foundation."


    And this is the book you cited to support the claim that colonialism was not profitable?

    Not sure we read the same book there, my friend. =)

    The idea that the British would persist, for centuries, in doing something "unprofitable" does not speak well for their intelligence. And yet they were, during the same period of time, the richest and most powerful country on Earth, which does speak well for their intelligence. Hmmm, how to resolve the dilemma? Could it be that they actually did derive positive economic and strategic benefits from colonialism after all?

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  22. I confess I did not know who Eric Williams was. After reading the wiki article about him, I feel the book's assertion that the slave trade and the sugar islands in the West Indies were less profitable after the American Revolution must be treated with skepticism.

    Indeed, one might be inclined to reverse his logic: slavery was not abolished because slave-produced sugar in the West Indies was no longer profitable, slave-produced sugar in the West Indies was no longer profitable because slavery was abolished.

    That argument was made here:

    Econocide: British Slavery in the Era of Abolition
    By Seymour Drescher

    In this classic analysis and refutation of Eric Williams's 1944 thesis, Seymour Drescher argues that Britain's abolition of the slave trade in 1807 resulted not from the diminishing value of slavery for Great Britain but instead from the British public's mobilization against the slave trade, which forced London to commit what Drescher terms "econocide." This action, he argues, was detrimental to Britain's economic interests at a time when British slavery was actually at the height of its potential.

    Originally published in 1977, Drescher's work was instrumental in undermining the economic determinist interpretation of abolitionism that had dominated historical discourse for decades following World War II.

    See also

    http://www.h-net.org/reviews/showrev.php?id=31617

    When originally published in 1977, Drescher’s work took on the delicate and contentious task of beginning to dismantle the “Decline Thesis” of abolition advanced by the highly respected Eric Williams. Using data produced by scholars responding to Williams’s assertions, Drescher contended that abolition of the slave trade and slavery by the British Parliament occurred when both practices were at their most profitable. For decades, scholars had accepted and formulated new understanding of the abolitionist movement in Britain based on the theory that free market capitalism trumped mercantilist capitalism, rendering slavery unprofitable.

    Ergo, the West Indies were profitable colonies before Parliament undermined the source of their profitability (slave labor).

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  23. My last post appears to have disappeared into the spam bin...

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  24. Anon, thanks for alerting me - you were right, it was in the spam folder.

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  25. And this is the book you cited to support the claim that colonialism was not profitable?

    No, I have allowed the possibility that the sugar islands were profitable for a period of time in the 1700s.

    The quote you gave from Eric Williams needs to be read in the knowledge that Williams was a political leader of African descent who wrote his history from a Marxist perspective.

    I have already pointed out that the British sugar islands, for the first 70 years of their existence, relied on white indentured labour for their development.

    Was colonialism pursued because those who did so believed it to be profitable in some way?

    The short answer, obviously, is yes. But I've pointed out already, that the private company colonies in Africa proved to be unprofitable; that the extensive Ottoman colonies did not prevent Ottoman decline; and that British decline coincides with the highest point in the expansion of its land empire.

    If you look at the maps, the British seemed to shy away from the task of taking administrative control over subject populations for much of the colonial era. They mostly stuck to the coasts and when they did assume land control it was mostly as British settler societies, as in Australia and Canada.

    Western development was not based on the slave economy of Barbados in the 1700s. That's an unlikely claim. The charts show that the West started to diverge economically from other regions in the world from 1100 AD and that Western growth slowed slightly for the first 200 years of the colonial era.

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  26. The quote you gave from Eric Williams needs to be read in the knowledge that Williams was a political leader of African descent who wrote his history from a Marxist perspective.

    Well yeah, but you quoted him too! Capitalism and Slavery is the source of your quotes (5 July 2012 10:19:00 AM AEST) on the decline in profitability of the West Indies islands. Williams clearly had a political agenda to show that the British abandoned slavery not for moral reasons but because it was no longer profitable to Evil Capitalists, and thus he had to make the case that the islands were not profitable in the late 1700s and early 1800s. This case has been refuted.

    British sugar islands, for the first 70 years of their existence, relied on white indentured labour for their development.

    Not sure how this establishes that they were unprofitable.

    the private company colonies in Africa proved to be unprofitable

    Which does not mean that the colonies were unprofitable, only that particular form of enterprise at that particular time.

    the extensive Ottoman colonies did not prevent Ottoman decline

    The Ottomans did not decline because their empire was unprofitable but because other imperial powers grew much more powerful... by exploiting their larger and better colonies!

    That bigger empires eat smaller ones does not prove that smaller ones are unprofitable.

    British decline coincides with the highest point in the expansion of its land empire

    Britain did not decline because her empire was huge and unprofitable. She declined because she fought two wars with Germany. Neither war was inevitable and neither war resulted from the large size of the British empire. If she had not fought WW1 or WW2 then her empire would very likely still be in existence today.

    the British seemed to shy away from the task of taking administrative control over subject populations for much of the colonial era

    This was one way of making imperialism profitable...

    Western development was not based on the slave economy of Barbados in the 1700s. That's an unlikely claim.

    No, but the connection between empire, wealth, and world power has been convincingly made many times.

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