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1. The Economic Impact of Imperialism

   REMEMBER European exploration and colonization have made a profound impact on the modern world GLOBALIZATION
2. Differing Opinions Marxist-inspired: exploitive relationship is fundamentally inherent in colonialism. The central motivation of colonization is the extraction of surplus value from the colonized. Immanuel Wallerstein: colonial exploitation was necessary for the enrichment of Europeans, as well as the impoverishment (making poor) of the rest of the world. No development or underdevelopment of a single region can be measured without “fitting into the cyclical rhythms and secular trends of the world economy as a whole. Eric Williams: The slave trade, specifically, is the source of Europe’s rise in wealth. Profits earned from the slave trade were absolutely central to financing the capital investment that spurred the Industrial Revolution.
3. Mainstream Theory: Imperialism was bad for Europe! Originates from Adam Smith’s Wealth of Nations: “…monopolizing sales to the American colonists benefitted individual British merchants through higher prices, it actually cost the nation as a whole…” While prices did increase slightly due to monopolized sales, colonizers were burdened with “maintaining and defending that empire.” What resulted was a burdening debt greater than any of the profits monopoly “pretended” to bring
4. Making Sense of Imperialism (yeah right………….)
5. Any evaluation of the impact of imperialism is compared to an alternative sequence of counterfactual events (meaning they didn’t really happen) that theoretically would have occurred in the absence of imperialism This process identifies explicitly how imperialism directed the course of world history for that given example. There needs to be a line between imperialist political domination and the more general opening of the world and trade expansion over the past 600 years. Important: remember that world trade increased after WWII without imperial control, so the assumption that world trade would have still expanded is reasonable to assume
6. What are we answering? Did the unequal distribution of power substantially enrich colonizers? Did it significantly impoverish the colonized? Who benefited and lost within each group? Did colonization contribute to the time and location of the Industrial Revolution? How profitable was empire during high imperialism?
7. Did Imperialism Contribute to the Time and Place of the Industrial Revolution? Throughout history, technology has not caused huge population increases because putting pressure on resources kept living standards stable. During the Industrial Revolution, technology, population, and living standards all rose at the same time Technology from the revolution would remain largely in Europe and North America until the end of WWII. While it is tempting to assume that imperialism was a contributing factor to the beginning of the Industrial Revolution, there is no evidence of such a connection SAY WHAT????
8. The colonies Created opportunities for private trade Increased supplies of imports (sugar, tobacco, etc.) Provided extended markets for manufactured European goods Exotic spices became more abundant, $ go down, but the colonies in Asia had little political influence over the native area, so we cannot draw a line of benefit beyond the spice trade Colonial expansion industrial take-offEx. Spain and the rest of Europe suffered severe inflation after New World gold and silver was brought over by the Spanish, causing a European spending boom didn’t lead to industrialization because Spain was a sloth in European industrialization.
9. HOLD ON! This does not mean that the profits of empire, along with other factors, did not contribute to accelerating industrializationBUT Careful examination has suggested that profits of empire were too small to have played an important role in British industrialization
10. Empire Helped…? Finance the accumulation of capital that industry needed Eric Williams: profits from the slave trade were important source of revenue that financed industrial investment Stanley Engerman: calculated that in the 1770s the slave trade accounted for only 0.5% of British international income and only 10% of investment spending It seems unlikely that a 10% difference in the rate of investment would have done much of anything to affect the pace of Britain’s industrialization
11. Empire (con’t) Did provide markets in the colonies, where the powers were able to sell higher quantities of items at higher prices and also buy colonial products at lower prices than would have occurred in a natural, fair trade agreement This too may have been unimportant, because as of 1800 trade with the colonies was simply not large enough to be significant. After 1415, the bulk of trade in the 18th century was between European nations
12. International Trade International trade too only accounted for a small amount of the total economic activity in Europe External trade only amounted to about 4% Gross Domestic Product. This number was higher for maritime powers like Britain, but would not have exceeded 10% of GDP By figuring together the small role of foreign trade and the small contribution of colonial activities to total trade, an upper bound estimate of value of imperial trade is only about 2-3% of GDPConclusion: The contribution of colonial trade to financing the Industrial Revolution must have been small
13. The contribution of colonial trading that was crucial, however, was making available colonial imports needed for industrial production:-spices, sugar, tea, coffee, rice, tropical fruit, hardwood, dyes, gold, and silver. MOST IMPORTANT: COTTON!!!!!!!!! Textiles were among the first industries affected by the Industrial Revolution BUT: By 1841 they only accounted for only 7% of British national income Of course, colonial trade could have exerted a more indirect influence of industrialization-Increased supply in consumer goods people work harder to spend more $$$$$ on new goods (all those really cool exotic things)-Rising demand gave rise to a rising supply of effort, leading to increased industrial output (new technology cyclical pattern increased industrialization)
14. Costs and Benefits Advance in shipping and the spread of railroads encouraged a great increase in international trade At the same time international $$ flowed as European investors funded worldwide manufacturing Had imperialism NOT happened, trade between independent nations would have been possible and even likely Primary benefit: protected markets (larger markets, higher prices) some imported food and raw materials But, but, but: O’Brien: “no commodities delivered from the empire were…unobtainable elsewhere.” British consumers paid competitive prices regardless of the origin of the good
15. Michael Edelstein’s Comparisons Two sets of counterfactual comparisons have been constructed, one labeled “marginal” and the other “strong” to analyze the effects of non-imperialism.
16. Marginal Measuring the cost to the British economy by freeing all colonies as a specific date In this case, tariff rates on British imports (by free colonies) would have risen to some level similar to the levels of independent nations like the USA or Germany in the same time period, costing the British GNP 4.9%
17. Wait, what’s a tariff??? Please turn to pages 114 and 115 :D A tariff is a tax that introduces a price wedge between the consumer and foreign producer. When graphed on a price vs. quantity graph, the tariff rate (t) causes the price consumers pay to rise, while that received by foreign producers falls, all the way until the difference is equal to the tariff rate (which is prescribed by the government of course)
18. Results of a tariff Thus, the quantity exchanged between producers and consumers falls, with the new quantity labeled Qt (labeled t because it is the quantity supplied after a tariff is imposed) The loss in revenue of the person exporting the goods to the country with the tariff (the importer) is a shaded area labeled “B” on the graph. The shaded area “A” represents the tariff revenue resulting directly from the tax.
19. Tariffs continued In order to transform that model into an actual estimated number, we need to know what shape the supply and demand curves make and how big the tariff is. The more elastic the demand and supply, the greater impact a tariff will cause
20. Now into the specifics The elasticity of colonial demand was about -1.5 British export supply is assumed to be perfectly elastic (horizontal) This means that resources used in production have zero productivity capacity and cannot be used to produce other goods This would maximize the effects on Britain, so any number calculated is upper bound estimation British colonies, had they been freed, would most likely have imposed a 40% tariff in 1913.
21. Why? Well… In 1913, exports accounted for 33% of British GNP, but colonial exports only accounted for 36% of that 33% colonial imports only 11.9% of GNP Had the colonies been free and imposed a 40% tariff, the British would have lost 4.9% GNP in this marginal non-imperialist example.
22. Strong Approximates a situation in which empire had never existed. In this case, the level of development of the “colonies” (not really colonies because in this example they were never colonized) and their volume of trade with the British would be lower than they really were hence larger (aka stronger) effect on the British economy
23. Because the colonized areas would have developed more slowly, exports from these areas would have only been ¼ as great if the British had never colonized them Cost to the British GNP would have been 6.5% in 1913.
24. The second way that Europeans benefited from the colonies was through investment opportunity British colonies were able to borrow money at a much lower interest rates than independent nations Smaller size of colonial economies would have reduced the volume of spending enough to decrease the GNP by 0.5%
25. Conclusions Altogether, the strong non-imperial case would have caused the GNP to be 7% lower than it was Of course, less $$ would have been spent on militarily protecting the colonies, but an estimation of its cost is only about 0.1-1.3% of the GNP An upper bound estimate of the benefit of the British empire is between 5.7 and 6.8% of GNP in 1913 In 2008 prices, a 6.8% decrease would have been approximately equal to a loss of about16 pillion bounds (didn’t expect it to be that much, did you?)
26. Guess what, this isn’t the best estimation It is better to compare to the rate of growth of the British economy at that time Between 1890 and 1913, the British economy grew roughly 1.8% each year A reduction in income of 6.8% would have set the British back by about 4 years. So, without empire, the British economy in 1913 would have been as developed as imperial Britain had been in 1909 In is clear that the benefits of empire were hardly essential to the long-run economic growth For all intents and purposes, the development of European economy would have been the same had Europe not colonized the rest of the world.
27. Effects of Imperialism on the Colonized PROFOUND EFFECTS Summary: Millions of Africans forced across the Atlantic as bound labor European diseases caused the death and displacement of millions of natives In China: OPIUM ruined lives But remember, the brutal European system usually replaced an equal native regime (Ex. Aztecs relied on systematic brutal exploitation—warfare—and human sacrifices, while the Indian Mughal Empire relied on a less brutal organized system of exploitation.) In many cases, European contact resulted usually in the substitution of one exploitation for another Arbitrary redrawing of boundaries split native tribes or forced together ancient rivals. When independence did come, continuing ethnic tensions have continued, often brutal and bloody, not to mention wasting valuable energy that could be put into the economy.
28. Benefits: Technology transfer Brought the productivity of the Industrial Revolution Railroads, factories, and modern business methods all transferred Institutional and governmental structures Scholars have noticed that there is a direct, positive correlation between protected property rights and economic development (See p.116 Figure 60) Considerable evidence links modern institutional structures to the nature of European colonial regimes established earlier When Europeans encountered dense and prosperous regimes, they tended to establish centralized and hierarchical governmental institutions that provided pretty weak property rights. When they encountered sparsely populated areas, the regimes were more decentralized and property rights more protected, which brought economic growth.
29. Conclusion The European opening of the world after 1400 brought about huge transfers of crops and populations between continents given rise to modern globalization It is important to distinguish between the political arrangements of the time and the economic relationships Growth of empire had only a marginal effect on European nations. It was relatively unimportant when compared to the transformative effects of technological advances that developed European imperialism was hugely important to the way in which globalization unfolded and the terms of global interaction