Wednesday, November 13, 2013

A CHOGM Post: Did Britain grow rich by exploiting its colonies?

When we were is school we told that the British (and the Portuguese and Dutch before them) invaded the country and exploited its resources and grew rich in the process. This was said as if it were accepted wisdom, simple statements but with no analysis. No one thought this was very important, since it was old history anyway and no one bothered to question this. 

They were rich, we were poor; they colonised us, ergo this must be true. This claim and variants of it is now in the media.

The question that I have been pondering is, if the British were growing rich on the country's resources, why did the country fail to prosper after independence? The easy answer to give is that although the country received political independence, trade and business remained in the hands of the British. A neo-colonial instrument of control that continued after independence.

Some of our leaders believed this and a  wave of nationalisation and land reform saw the end of almost all foreign owned businesses by the 1960's and early 1970's.

Yet we did not prosper.

Indeed the country's fortunes declined further. At independence the country's economy was primarily agricultural, the most important produce being tea, rubber and coconut.  By the 1970's these were all controlled by the local population, either directly or indirectly through the state.

Sri Lanka was not alone in this experience. All over Africa and Asia the European powers retreated from their colonies but their exit did not result in a sudden increase in wealth. Many African nations, despite enormous wealth in natural resources; Nigeria, the Congo, Angola to name just three, are now poorer than they were at independence.

Meanwhile, the nations of Western Europe rebuilt from the ruins of the second world war are, despite all the problems they face now, much richer than they were at the end of the 19th Century. Countries like the United States, Australia and New Zealand, which started off as colonies prospered despite a lack of significant colonial expansion.

The answer to the question of as to how colonial powers grew rich seems a bit more complex than the simple statement that we were taught.

I believe the enormous wealth that was created in Britain between the 17th and the end of the 19th century was due to two factors: the industrial revolution and free trade.

In Britain's case  the colonies did assist trade by creating new markets in which British companies and products had preferred access. Thus British business had an advantage over other European and American companies (and any local businesses that were around) which helped them prosper. This helped but I don't think it was the key determinant of success, ultimately it was trade that created wealth.

The countries that have prospered over the last fifty years did so through increased trade, Japan and East Asia being spectacular successes. In the early 1950's the bet was that it was the African continent, with its abundant resources that would succeed, but it was not to be. Countries that looked inwards, from India until the 1990's to China until 1978, remained stagnant. Once China started to trade its fortunes improved.

At first China started trading internally. Instead of only being allowed to work on the collective farms farmers were allowed to cultivate a part of the land and sell the excess. Food production increased rapidly and soon the private produce exceeded that of the collective farms. This experiment was extended gradually to other areas of the economy and now it is the largest trading nation in the world.

If we close up to the world, try to trade only internally, a popular suggestion these days, we will be doomed. It was tried in the 1960's and 1970's it did not work; it will not work any better now.


Son of the Morning Light said...

but aren't you forgetting natural resources? it was this that made Britain wealthy -- tea, spices, minerals, etc.

also, britain wasn't wealthy when it started to colonize. nor were all colonies poor.

Anonymous said...

When the British left the fundamental value of the Ceylon rupee dropped.... no longer backed by the Bank of England. Further devaluation made production in SL further worthless in sterling pounds.

This was not the case with Aus or New Zealand or Hong Kong

Singapore flourished due to the mandate that every singapore dollar be backed by gold (ie fundamental value)

Trade produces sterling pounds and US$ ....

sbarrkum said...

India, UK and Cotton

India's cotton-processing sector gradually declined during British expansion in India and the establishment of colonial rule during the late 18th and early 19th centuries. This was largely due to aggressive colonialist mercantile policies of the British East India Company, which made cotton processing and manufacturing workshops in India uncompetitive. Indian markets were increasingly forced to supply only raw cotton and were forced, by British-imposed law, to purchase manufactured textiles from Britain

By the 1840s, India was no longer capable of supplying the vast quantities of cotton fibers needed by mechanized British factories, while shipping bulky, low-price cotton from India to Britain was time-consuming and expensive. This, coupled with the emergence of American cotton as a superior type (due to the longer, stronger fibers of the two domesticated native American species, Gossypium hirsutum and Gossypium barbadense), encouraged British traders to purchase cotton from plantations in the United States and the Caribbean.

As time went on to cut labor costs UK imported labor from India to work the mills. Their descendants are the present day Indian underclass by and large.

Jack Point said...

Thanks for the comment Son of the Morning Light.

It was the trade in those resources that made them rich, not the ownership or control of the resources.

The difference is a subtle one.

What the East India Company did was to control the trade in particular resources.

It is useful to remember that the original expansion was by the East India Company, not the Government of Britain or (or Holland or Portugal)

When the Compant messed up badly, resulting in the Indian Mutiny of 1857, the British Government took over the administration of the territories controlled by the Company. A lot of the more enlightened aspects of British rule (education, law, public administration etc) came after the British Government took over the administration.

On the bigger question, natural resources are more a curse UNLESS it is matched with good Governance. (Rulers steal teh resources leavingpeople poor as in many parts of Africa)

See also:

Jack Point said...

Some interesting points, Sbarrkum.

Found your comment only today, in the spam box.