3. LONG-TERM DETERMINANTS OF PRESENT POVERTY AND PROSPERITY Alternative Perspectives on Imperialism and Industrialization Gareth Austin 26/09/2012

Central Question Did colonialism, and/or the general economic development of the West, hinder or help the economic development of the Rest?

PART I A RANGE OF THEORIES

Optimism: Colonial Rule as Diffusion of ‘Modernisation’ Colonizers’ self-description: re technology and institutions Echoed in part rather than in whole in most of the literature Recent versions/variations on this view: Niall Ferguson, Deepak Lal, especially re markets (esp. British ‘imperialism of free trade’)

Optimism (2): ‘Tragic Optimism’ of Orthodox Marxism Thesis: the advance of the productive forces requires capitalism; which could only be established in counties lacking a feudal background by coercive intervention from outside, by existing capitalist countries Classic statement by Karl Marx on British India View reiterated, especially in 1980s by ‘orthodox’ marxists attacking Dependency theory: Bill Warren, John Sender, Sheila Smith

Radical Pessimism: Dependency ‘The development of underdevelopment’ (A. G. Frank) i.e. the development of the West was simultaneously the underdevelopment of the Rest Beyond Latin America: Walter Rodney, Samir Amin Origins of this ‘marxist heresy’ via Lenin and Latin American economic structuralism Prebish-Singer claim that the terms of trade tend to move against primary-product producers Some parallels with nationalist writings, but a basic difference For nationalists, political independence is usually a solution, whereas for dependistas it is an illusion (‘neo-colonialism’)

Radical Pessimism (2): Rational-choice institutionalist ‘Reversal’ AJR’s thesis (2001, 2002): Among the parts of the world that the Europeans later colonized, those that were the richer c1500 are the poorer today Their explanation is that this outcome was a function of whether the Europeans established private property rights, as they did where they were able to settle in large numbers … or whether the Europeans contented themselves with rent-seeking, as they did (according to AJR) in those colonies in which they could not settle in large numbers

A Sideways Perspective: Colonialism in context of long-term ‘Paths’ of Development Sugihara 2003, 2007 ‘Capital-intensive’ path led to the original industrial revolution So K-intensity an advantage for early industrialization; no accident that industrialization began in West ‘Labour-intensive’ path accounts for the global diffusion of industrialization, especially to and within Asia: from Meiji Japan to today So labour-intensity, responding to labour/land ratio and inscribed in choice of technique (e.g. in wet rice production) and institution (labour-absorbing family farming)… Was an advantage when it came to rapid adoption of industrialization Definition of ‘labour-intensive’ path: using the more labour-intensive method wherever there is a choice

PART 2 DISTINCTIONS AND CONTEXTS, METHODS AND ASSUMPTIONS Some issues to consider in relation to the theories above

Basic Distinctions Pre-colonial and colonial ‘Formal’ and ‘informal’ rule (Gallagher & Robinson) ‘Settler’ and non-settler colonies Argentina an example of the former Case of ‘Settler colonies’ in Africa ‘Direct’ and ‘indirect’ rule

Basic Chronologies Colonization: e.g. 1492, 1757/1763/1818, 1879/1884 Independence: Latin America in contrast to South & SE Asia, and Sub-Saharan Africa Was colonialism in Latin America (mainly C16th-eC19th) fundamentally different from colonialism in Sub-Saharan Africa (mainly c1880/1900 – c1960)? E.g. Were the Iberian colonizers capitalist already?

Technological Diffusion Question: Would it have happened with or without colonial rule? Considerations: Counterfactual method: what makes a good counterfactual? Requirements for successful transfer of the technology concerned: Factor requirements, institutional requirements? Compare maize and railways

Institutional Diffusion Was it ‘necessary’? Case of land tenure in British West Africa Was Marx right in thinking that capitalism outside Europe could come only from outside?

Biological Consequences of Empire Contrasting demographic effects in New World and – eventually – in Old Crosby’s ‘empire of the dandelion’

‘Underdevelopment’ The distinction between relative decline, as in neglect; and active retardation Perhaps a genuine difference between Dependency theory (emphasising the latter) and AJR’s ‘reversal of fortune’ (needs/posits only the former)

[Dubious] Theoretical Assumptions Labour theory of value (Marxism, Dependency) ‘Economic rent’ as necessarily antagonistic to economic growth (AJR’s version of rational-choice institutionalism; not true of all R-C institutionalists) Question: how much do the theories concerned depend on these assumptions?

Different Approaches to Causality, Different kinds of long-term Comparison Contextualized, continuous comparison (Bloch) Ultra long-term comparative statics, and cross-’country’ regressions (AJR)

The Econometric Hunt for IVs What is an instrumental variable, and what is the point of it? A genuine IV is unaffected by the dependent variable, so no risk of reverse causation to contaminate the analysis So in AJR: the dependent variable is the distribution of prosperity today, the independent variable is whether individual property rights were established during the colonial period, and the IV is settler mortality rates Why go back so far to look for an IV to help identify the causes of wealth and poverty today? The problem of likely endogeneity with more recent variables (current example: Haber’s ‘rainfed democracy’ hyphothesis)

Problems in Ultra-Long Term Comparative Statics ‘Compression of history’: so much happens in between the moments studied that it is extremely unlikely that the hypothesised causal relationship is stable any causal thread is likely to have been tangled, diverted, and over-ridden Distance from real empirical evidence entailed by the layers of data construction involved, e.g. use of late C20th national units use of non-income proxies to estimate income in 1500 (AJR) So I suspect omitted variables, and a lack of robustness (when re-test at different periods) Historians’ approach is to accept that causality runs in different directions, and that things change, in medium and short as well as ultra-long terms: so make more limited, contextualised claims of causality

Completing the Explanation – Do the Exceptions ‘Prove’ the Rule? A limitation of relying purely on cross-country regressions is that you end up with an explanation based on probability, which may not account for the outliers Yet the outliers may be contrary instances, which (as Popper would say) falsify the theory To their credit, AJR devoted a paper to one of the biggest outliers, the consistently successful post-colonial economy of Botswana; But the argument on Botswana is quantitatively flawed (P. Richens)

Eurocentrism v. Indigenous Agency Dependency & AJR’s theories are accounts of How Europe Underdeveloped Africa (in Rodney’s phrase), Asia and Latin America Allowing no room for the possibility that the colonized populations themselves helped determine their own history Despite typically very low numbers of European officials on the spot, & huge communications constraints

Importance of Indigenous Agency Indigenous entrepreneurship in non-settler colonies limited scope for foreign economic activity, & contributed to development of economy, e.g. Indian textile factories (and Tata Iron and Steel Company, 1907) West African rural capitalism in cocoa farming In the interests of colonial governments to take advantage of this, for prosperity and stability: e.g. British policy on property rights in West Africa changed between 1851 & 1910s primarily because of African agency: success in cash crop production using African institutions (& in absence of direct taxation) defeated the economic case for imposing European ones

CONCLUDING THOUGHTS How far, or in what sense, was capitalism indigenous in the colonies anyway? Was it institutions that determined economic outcomes, or resource endowments that shaped the ‘choice’ of institutions in different ways: Engerman & Sokoloff, and Sugihara?