Source: static.flickr/30/42699438_5b6c0cc023.jpg

1. Econ 336- Economic Development TOPIC TWO: Colonialism The Spanish Conquest of the Inca Empire (Peru) Source: http://static.flickr.com/30/42699438_5b6c0cc023.jpg

2. Overview • Timeline • Marx on Primitive Accumulation • Types of Colonialism • Spanish colonialism in Latin America • British-Dutch colonialism in Asia • British-French-Belgian colonialism in Africa • Institutional Mechanisms of underdevelopment • Unproductive spending • Lack of spending on social infrastructure • Transfer of profits out of country • Deindustrialization

3. Reversal of fortune (From Bowles, Edwards and Roosevelt, Understanding Capitalism: Competition, Command, and Change, Oxford U Press, 2004) In 1800, the European Powers effectively controlled 55 % of the total global land mass. By 1878 this had increased to 67 %, and by 1914, it was 84.4 %.

4. Spanish Colonialism • Earliest phase of European colonialism • From 16th to 18th century • Starts before the establishment of capitalism in Europe. • Gold, silver, other precious metals extracted in massive quantities via forced, slave labor. • Support Spain’s feudal economy • Demographic crisis in LA: population declines from around 70 million (1540) to 3 million (1690)

5. Spanish Colonialism • “Spain owned the cow, others drank the milk.” • "A late seventeenth-century French document tells us that Spain controlled only 5% of the trade with "its" overseas colonial possessions, despite the juridical mirage of its monopoly: almost a third was in Dutch and Flemish hands, a quarter belonged to the French, the Genoese controlled over one fifth, the English one tenth, and the Germans somewhat less. Latin America was a European business.” (Eduardo Galeano: Open Veins of Latin America p.24). • “Spanish capitalists did not invest their capital in industrial development. The economic surplus went into unproductive channels.”

6. Flow of Latin American gold and silver in the 16th-18th centuries

7. British and Dutch Colonialism • Mercantile Capitalism (17th to 19th century), later Industrial Capitalism in 19th century. • Mercantile Capitalism: • Emphasis on accumulating a trade surplus by buying cheap and selling dear. • Unfree trade: • Underpayment for purchase of raw materials (e.g. Dutch coffee) • Overcharging for finished goods (captive market) • Adam Smith argues against the mercantilist policies of the British and Dutch East India Companies.

8. Marx on Unfree Trade • The English East India Company obtained, besides the political rule in India, the exclusive monopoly of the tea-trade, as well as of the Chinese trade in general. • The monopolies of salt, opium, betel and other commodities, were inexhaustible mines of wealth… • Great fortunes sprang up like mushrooms in a day; primitive accumulation went on without the advance of a shilling.

9. Some causes of underdevelopment under colonialism • Resources diverted to unproductive uses • “Home charges”: costs of British civil and military establishment in Britain maintained by Indian revenues. • 25% of India’s public expenditures went to support police and military. • From 1757 to 1947 (period of British colonialism in India) per capita income did not grow and life expectance declined. • Booming agriculture, followed by famine. • Forcible cash crop production for export, neglect of subsistence farming and food production. • Famine fund diverted to fight war in Afghanistan

10. Some causes of underdevelopment under colonialism • Transfer of profits to the “mother country” • British profits from slave trade - £50 million • British profits from sugar plantations – £200-300 million • Profits from India - £500 million to £1 billion • Paul Baran: colonial plunder gives impetus to Europe’s industrial revolution: • “That Western Europe left the rest of the world far behind was by no means a fortuitous accident. It was determined by the nature of Western European development itself.” • The realisation of the enormous surplus from India, Indonesia and Egypt was an integral part of the mechanism by which the white-settled colonies were populated and equipped

11. Some causes of underdevelopment under colonialism • Deindustrialization • 70-80% tariff on Indian textiles imported into Britain, but free entry to British cloth into India. • “Bones of the handloom weavers are bleaching the plains of Bengal.” • Share of countries such as India and China in world manufacturing output declines precipitously. • Artisans either take to agriculture or survive by reducing their living standards. • Creation of the divide between industrialized powers and agricultural (underdeveloped) economies.

12. Scramble for Africa • Between 1881-1914 • European imperial powers, France, Britain, Spain, Portugal, Belgium as well as rising powers Germany, Italy struggle for control over African wealth. • “Berlin Conference” of 1884-1885 sets up some rules on which parts of Africa shall be colonized by which European power. • It does not resolve the conflict between powers completely. • Leads to First World War.

13. European Claims in Africa: 1913 Source: Eric Gaba – Wikimedia Commons user: Sting

14. Writing responses • Well-constructed paragraphs that make an argument. • Minimal use of direct quotes, and if used cited properly as: author, year. • Specific examples (countries, numbers, etc.) • No “hand-waving” explanations and colloquialisms.

15. Proletarianization • Demographic crisis: From 1650 to 1850 Africa's share of world population fell from 18% to 8% partly as a result of the slave trade (Cypher and Dietz, The Process of Economic Development). • How was an African working class created? • Coercion by capital and State • Taxation by State leading to wage labor and cash crop farming • “To force locals into paid employment, at lower-than-market rates, households were taxed or their land was appropriated (Congo, Rhodesia, South Africa, and Kenya). [This] forced men to work for ‘‘a bachelor wage,’’ [and] forced women to farm alone at home. This led to low productivity, divided families, prostitution, penury, and disease. (Amsden) • “The migrant labor of the mines, farms and plantations was secured at the expense of the previously autonomous village and local economies. Thereby, capital avoided the cost of production of labor. As in slavery, labor arrived fully formed from outside the capitalist system as such.” (Rodney p. 344)

16. International Division of Labor • “Colonialism confined African colonies to the production of primary goods for export and in turn kept them dependent upon the developed capitalist countries for manufactures and technology.” Rodney p. 346 • Monoculture production of a single commodity such as cotton, sugar, coffee, rubber, etc. • “As the colonial economy became firmly rooted in the 1920s, Africans were producing that which they did not consume and consuming that which they did not produce.” Rodney p. 346

17. Disarticulation • Development took place in a lopsided fashion. • The railroads were not laid down to facilitate internal trade. All roads and railroads led down to the sea. (Cypher and Dietz) • The rail network was built to facilitate extraction of wealth from Africa: • Germans in Togo named railway lines after the commodity which they transported: cotton line, cocoa line, coconut line, iron line, palm-oil line. (Claude Ake, A Political Economy of Africa) • To extract mahogany, ivory and rubber form the Congo, Leopold (King of Belgium) built a 241-mile railway line. In the first two years of construction 3,600 of the 60,000 workers died. (Cypher and Dietz)

18. Marx on Primitive Accumulation • The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalised the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation.

19. Marx on Primitive Accumulation • The different momenta of primitive accumulation distribute themselves now, more or less in chronological order, particularly over Spain, Portugal, Holland, France, and England. • In England at the end of the 17th century, they arrive at a systematical combination, embracing the colonies, the national debt, the modern mode of taxation, and the protectionist system. These methods depend in part on brute force, e.g.,the colonial system. • But, they all employ the power of the State…to hasten, hot-house fashion, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society pregnant with a new one. It is itself an economic power.

20. Why are some countries poor? Is it geography? Is it culture? • Why its not culture: • Cultural stereotypes of “laziness,”“dishonesty,”“non-enterprising” nature etc., have always been used. • See Optional Reading by Ha-Joon Chang. • Why its not geography: • “It cannot be that the climate, ecology, or disease environment of the tropical areas condemn them to poverty today, since these areas, with the same climate, ecology, and disease environments, were richer than the temperate areas 500 years ago.” (p. 26)

21. Acemoglu, Johnson, and Robinson: Institutions, not geography explain underdevelopment • What are “Good institutions”: • Enforcement of property rights for a broad cross section of society- incentives to invest, take part in market • Constraints on actions of elites, politicians etc.- cannot expropriate incomes of others • Some degree of equal opportunity for broad segments of society • Why “bad” (extractive) institutions persist: • Institutions affect both size of the pie and how it is distributed. • Elites who benefit from extractive institutions block change.

22. “Natural Experiments” • How to distinguish between correlation and causation? • Geography, institutions are both correlated with per capita income. • Colonization as a “natural experiment” that set up different institutions in different places. • But had no effect on geography.

23. Colonialism and Institutions • Two types of institutions • Extractive institutions: Belgian rule in Congo, slave plantations in the Caribbean, forced labor in Latin American mines • Good institutions: North America, Australia • “Institutional reversal”: Richer, urbanized, more industrialized places ended up with worse institutions. Sparser populated, less industrialized places with better ones. • Two types of colonies • Settler colonies: • Europeans did not face adverse disease and climatic conditions (rather were carriers of disease). • Native population sparser, could be conquered through war • North America, Australia • Extractive colonies: • Europeans faced adverse conditions, did not settle • Native population dense, pressed into forced labor • Sub-Saharan Africa, South Asia

24. Disease, Mortality, Development • AJR argue that Europeans faced much higher mortality rates in those places where they ended up establishing extractive institutions. • E.g. 8.55 per 1000 in NZ, versus 49/1000 in India, 500/1000 in West Africa • Mortality rates for native populations were not different from rates for Europeans in their home countries.

25. Marxist response to AJR thesis • Property Rights • In name of securing property rights, dispossession may actually take place. • AJR framework does not question distribution of property which is as important as its security. • Assumes that the market is the best way to allocate resources. • Industrialization • AJR contend: reversal of fortune is a result of industrialization in the 19th century, not colonial plunder which preceded it. • However, plunder (and captive market) are important for industrialization, which in turn is responsible for the divergence in the world economy. • Continuing effects of colonialism • Colonialism did not simply set up “bad institutions” at some point in history. • The relationship between ex-colonies and ex-colonial powers is still unequal.

26. Lasting economic effects of colonialism orPath Dependency of Development • Destruction of domestic educational, political and legal systems. • Replaced with coercive, extractive, centralized institutions. E.g. Indian police, prisons, judiciary, army, and civil administration are all British. • Deindustrialization, lop-sided investment • “Dual societies” consisting of a small “modern” sector and a large “informal sector.” • Regress (opposite of progress) in human development: • Increase in illiteracy, decline in life expectance and reduced calorie consumption. • Per capita food-grain absorption in British India which was 199 kg. at the beginning of the twentieth century (1897-1902) declined to 136.8 during 1945-6. • Benefits conferred on a tiny minority (how many people do you think can speak English in India?) • Model of development that requires “internal colonies” and resource grab. • Continued subordinate position in the global economy.

27. Amsden: Institutional underpinnings of underdevelopment • Profits generate from colonial labor fled the colony: • “Without a surge in domestic economic growth, foreign profits from mineral extraction and agriculture had no reason to remain behind and were repatriated back home.” • “This was a death knell for learning, because investments in new plant and equipment are the reason behind acquiring technology.” • The settler colonies received much more investment than the “extractive colonies.” • “Almost 30 percent of Europe’s savings—a huge sum of money—became available for overseas investment by the time of World War I. But almost all of it went to white “regions of recent settlement” —Australia, the United States (north of the Mason-Dixon line), Canada, New Zealand, Rhodesia, and South Africa. Africa and Asia got $11 per capita compared with $131 per capita in European offshoots.”

28. Amsden: Institutional underpinnings of underdevelopment • Democratic double standards • Values of the French and American Revolutions (liberty, equality, democracy) were espoused fervently, but denied to the colonies. • Haiti: “The ex-slaves of Haiti took the French revolutionary slogans more literally than did the French themselves. • When French soldiers (sent by Napoleon to suppress the rebellion and restore slavery) approached the black army of (self-)liberated slaves…they heard an initially indistinct murmur coming from the black crowd. The soldiers at first assumed it must be some kind of tribal war chant; but as they came closer, they realized that the Haitians were singing the Marseillaise [the French National Anthem], and they started to wonder out loud whether they were not fighting on the wrong side.” Slavoj Zizek, First As Tragedy, Then As Farce

29. Amsden: Institutional underpinnings of underdevelopment • Lack of human development • In 1950, adult illiteracy was 3 to 4 percent in the United Kingdom, Belgium, and the United States, but 51 percent in Brazil, 62 percent in Malaya, and as high as 83 percent in India. • Being literate was not important earlier, it became much more important during precisely the period that colonial administrations neglected basic schooling. • European colonies suffered from a ‘‘color bar’’ that emaciated the class of professionals and entrepreneurs that was necessary for modernization. • Denial of opportunity to learn skills, denial of market access to local entrepreneurs • E.g. Indian shipping and steel: London would not allow India to develop its own steel industry, for fear that it would displace British steel exports to India. • Americans owned about one-fourth of the Iraq Petroleum Company in the 1930s.

30. Imperialism without colonies • Once the coercive integration of Asia, Africa, Latin America had been achieved by military force… • Then economic forces- the international market, financial system- were by themselves sufficient to perpetuate the relationship of dominance and exploitation between ex-colonies and ex-colonizers. • Political independence did not mean economic independence.

31. Imperialism without colonies • Why and how imperialism persists • A few large multinational corporations still control the global economy (see article on wiki “The Network of Global Corporate Control) • Competitive pressures and business strategy dictate expansion and control over resources and markets (no conspiracy of “world domination” is needed) • Institutions such as the IMF and the WTO play an important role in guaranteeing access to markets and resources across the world. • Local elites in all developing countries play a role in maintaining the hierarchy between center and periphery (recall AJR’s bad institutions and why they persist).

32. American Imperialism • “The hidden hand of the market will never work without a hidden fist. McDonald's cannot flourish without McDonnell Douglas.” • The U.S. has over 600 overseas bases in 38 foreign countries (US Military Base Structure Report). • Military personnel in a 100 countries including Belgium, Germany, Italy, Spain, Turkey, the United Kingdom, Japan, Bahrain, Djibouti, South Korea, Iraq, Afghanistan and Kuwait. ("Active Duty Military Personnel Strengths by Regional Area and by Country.”) • Some important Third World leaders assassinated or deposed by the US: • Patrice Lumumba (Congo) • Salvador Allende (Chile) • Mohammad Mossadegh (Iran) • Kwame Nkrumah (Ghana) • Daniel Ortega (Nicaragua) • Sukarno (Indonesia)