Colonial legacy, factor endowments, and institutions Political Economy of the Global South Prof. Tyson Roberts

Responses to readings and film What are some topics or questions you are interested in for this class?

What are some ways that the colonial experience can affect economic development and other social outcomes in the Global South?

Some ways that the colonial experience can affect economic development and other social outcomes in the Global South Extractive colonial institutions => extractive post-colonial institutions Arbitrary borders & authority structures => legitimacy challenges in post-colonial states Slavery exports or imports => brutal institutions, weak social capital, ethnic cleavages

Reversal of Fortunes Until the 1800s, many tropical countries were wealthier than temperate countries: North America was considered less valuable than the Caribbean and Latin America. Caribbean island of Guadaloupe (563 square miles) was considered equivalent in value to Canada. In 1790, Haiti had the highest income per capita (including slaves) in the world.

Log GDP/capita: USA vs Mexico Source: Maddison

Log GDP/capita: China vs Canada Source: Maddison

Log GDP/capita: Australia vs India Source: Maddison

Why this reversal in fortunes? One answer: Institutions Where do institutions comes from? One source: Colonial experience

based on a map by Wikimedia/Andrei nacu

based on a map by Wikimedia/Andrei nacu

Typologies of colonization By colonial power: French, British, German, Belgian, Spanish, Japanese According to some, former British colonies have better outcomes because British colonization created superior institutions Evidence is weak/mixed

Typologies of colonization By colonial power: French, British, German, Belgian, Spanish, Japanese Settler vs. non-settler Direct vs. indirect Land lord vs. non-landlord Predatory vs. developmentalist Hegemonic vs. non-hegemonic

Sokoloff & Engerman Settler colonies Often in temperate climates with (relatively) small indigenous populations and available land Large colonial populations Colonial family farms Food crops for local consumption (export surplus) Social equality, for the most part, among colonists Relatively low levels of income inequality Even when social equality was not present at the beginning, their was an expectation of social equality that was successfully realized. For example, in Australia, convict settlers demanded rights that they had in England, such as trial by jury, etc.

Settler colonies Temperate climate with relatively small indigenous population => Credible exit option Food crops for local consumption => Dependent state => Widespread franchise, education, protection of property rights Economic opportunities, investment, public goods, social safety net Industrialization, economic growth, low inequality among settlers

www.history.org When governance under the Articles of Confederation wheezed and wobbled, the states met in 1787 to draft a constitution giving a fresh start to the American experiment in self-rule, one that created a “republican form of government.” That meeting in Philadelphia has been one of the favored subjects of history painters.

Examples of Settler colonies US (especially northern colonies) Canada Australia New Zealand South Africa Argentina Singapore Israel

Typologies of colonization Non-settler colonies Often in tropics w/ large indigenous population and/or soil suited for plantation crops such as sugar => import of African labor for cultivation Small colonial population relative to indigenous or slave population Plantations, mines, or payment of tribute Often crops & minerals for export Social inequality between colonists & indigenous and/or slave populations High levels of income inequality

Applying the EVL game… Non-settler colonies Population density; lack of education & property for the masses=> No credible exit option for the masses in agricultural economies Minerals for export => Autonomous state in extractive economies => Targeted franchise/ education/ protection of property rights Protection of status quo against redistribution, low investment, repressive state Low industrialization, low growth, high inequality

Slave revolt in Haiti

Examples of nonsettler colonies Sub-Saharan Africa, excluding Southern Africa Most of Latin America & Caribbean South Asia (India, etc.) Much of Southeast Asia Much of the Middle East (Southern states in US)

Typologies of colonization Non-settler colonies Direct rule (e.g., British in Africa) and non-landlord revenue collection systems (e.g., Bombay presidency) Indirect rule (e.g., French in Africa) & landlord revenue collection systems (e.g., Bengal presidency)

Acemoglu, Johnson, and Robinson What is the relationship between resource endowments, colonization and prosperity in independent Africa? Acemoglu, Johnson, and Robinson High settler mortality => few settlers => extractive colonial institutions => poor institutional quality post-independence Low settler mortality => more settlers => European-style institutions => good institutional quality post-independence

AJR present cross-national data that supports their argument

Direct rule & non-landlord revenue collection systems Colonial administration collects taxes directly from farmers Low inequality among local population (everyone repressed)

Indirect rule & landlord revenue collection systems Colonial administration delegates tax collection to local elites. Non-hegemonic rule. Increased inequality among local population Protect status quo, low investment, repressive state Low industrialization, low growth, high inequality Examples: Zambia, landlord India, (Mexico), etc.

Determinants of institutions Colonial power (often exaggerated) Factor endowments Settler mortality rates (from tropical disease) Other geographic factors, such as distance Economic structure (inequality, etc.) Pre-colonial history contrast with colonial state Slave trade

What two types of legitimacy does Englebert use in his study?

Horizontal & Vertical Legitimacy Horizontal legitimacy Consensus about "the definition of the community over which rule is to be exercised." Agreement over borders of states Vertical legitimacy Agreement over "the principle(s) upon which the 'right to rule’ is based." No mismatch between colonial and precolonial states

African states with vertical legitimacy Never colonized: Ethiopia No human settlement prior to colonization: Islands such as Mauritius and Cape Verde Colonial states with similar arrangement to precolonial system: Botswana, Lesotho, Swaziland, Rwanda, Burundi

Horizontal Legitimacy Percentage of population which belongs to an ethnic group that was NOT split between at least two countries.

Somalis were divided among five different states

Many large ethnic groups were split by the colonial state borders of Congo-Zaire

Tuaregs in North Africa were split into four different states http://news.bbc.co.uk/2/hi/africa/7784641.stm

http://www.polgeonow.com/2012/04/new-country-azawad-declares.html

The challenge for illegitimate states (p. 11) “From colonialism, they inherited the instruments of statehood but not the power that came with it in colonial days.” “contestations of policies by social groups, opposition parties, or interest groups tend to turn into challenges to the state itself …. Military takeovers, disputes about recruitment patterns in the administration or armed forces to armed rebellions, and arguments on the allocation of national resources to secession and irredenta attempts.” Definition of IRREDENTA : a territory historically or ethnically related to one political unit but under the political control of another  

What is the relationship between the slave trade and prosperity in independent Africa? Perhaps the slave trade targeted areas with weak African states? Slave trade Weak precolonial state Weak postcolonial state

A large share of slaves came from the west coast of Africa

Many of the strongest precolonial states were in West Africa

Most slaves were taken from densely populated areas; Population density is generally associated with economic development Source: Nunn 2008

What is the relationship between the slave trade and prosperity in independent Africa? Perhaps the slave trade targeted areas with weak African states?

What is the relationship between the slave trade and prosperity in independent Africa? Nunn: Raids and continuous warfare, with associated demographic depletion, resulted in weakened and underdeveloped political structures Slave trade led to intercommunal conflict, preventing formation of large ethnic groups and increasing fractionalization

Countries in areas that had intensive slave exports (in years 1400-1900) had weaker precolonial states in the 1800s

Countries that inherited weak states due to high slave exports failed to develop; countries that inherited relatively stronger states due to low slave exports have been more successful

Countries in areas that had intensive slave exports tend to have higher ethnic fractionalization

Many countries with low income levels have high ethnolinguistic fractionalization

Why do (sometimes arbitrary) institutions endure?

Why do (sometimes arbitrary) institutions endure? Some reasons: Transaction costs Vested interests Focal point

Some symptoms of low development “Bad” policies Poor institutions Low investment in education, health care, infrastructure

Income level & institutions

Poor institutions, bad policy Low economic development

Strong institutions or good policy High economic development

A solution: identify exogenous or “first” causes Colonial experience Natural resource endowments Geography Ethnic cleavages

For example, Ethnolinguistic fractionalization Weak institutions Low economic development

Some former colonies do better than others Korea had high population density, and yet Japanese colonizers were “developmental” and not purely extractive Why?

Stationary vs. roving bandits (Olson) Stationary bandits invest in infrastructure, bureaucracy, etc. to grow the economy and tax that growth over time Roving bandits extract heavily in the short-term Korea’s proximity to Japan facilitated a “stationary bandit” approach whereas the distance of Latin America & Africa from Europe may have encouraged a “roving bandit” strategy

Short-term vs. long-term growth Colonial history is not destiny India had extractive colonizers but is now technologically successful Independent China went from economic disaster to powerhouse Argentina was a settler colony but has lost ground to former extractive colony Brazil Chad & Ghana found oil after independence Haiti & Dominican Republic have same geography & similar colonial experience (200 years ago), yet different outcomes

The Haitian-Dominican Border

Colonial history is not destiny All of Korea (N & S) was colonized by the Japanese The Japanese shifted the manufacturing base from the South to the North But…

Conclusions Colonial history has an important effect on post-colonial state institutions Institutions tend to endure or affect the development of new institutions Institutions affect social interactions, including politics and economic transactions, thereby affecting social outcomes such as economic development, political rights, and civil liberties

Other good readings on origins and effects of colonial institutions “The Colonial Origins of Comparative Development: An Empirical Investigation.” Author(s): Daron Acemoglu, Simon Johnson, James A. Robinson Source: The American Economic Review, Vol. 91, No. 5 (Dec., 2001) “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution.” Authors: Daron Acemoglu, Simon Johnson, James A. Robinson. Source: The Quarterly Journal of Economics, November 2002