2.

The Economic Impact of Colonialism

Drain of wealth

Colonialism led to a substantial outflow of financial resources. It is best documented in the

case of British India, where a controversy between Indian historians and defenders of
British colonialism still has not been settled. The economic historian Maddison (1971: 20)
concludes that there was „a substantial outflow which lasted for 190 years“, and. If these
funds had been invested in India they could have made a significant contribution to raising
income levels. According to the ‘drain of wealth’ argument, most of the colonial surplus was
extracted by the metropolitan countries (in the form of interest payments on loans,
repatriated profits, salaries and pensions) and this, by reducing the indigenous capital
accu¬mulation process, had a nega-tive effect on the colonies’ growth prospects. Direct
exploitation also included taxes, tariffs, restrictions on trade and foreign investment, forced
labor, and even enslavement of the indigenous population.” (Bertocchi/Canova 2002:
1852f) .For a sample limited to African countries this “drain” is measured as the GNP/GDP
ratio in 1960 as this “reflects repatriated profits on foreign investment, royalties and direct
exploitation activities” roughly at the end of the colonial period.

Colonialism and Trade

Diamond (1988) emphasizes the establishment of monopolistic state control of cash
crop production and exportation as an important impact of colonialism, as well as the
exclusive control over the mining of minerals and the development of infrastructure.
Thereby, „it discouraged the development of an indigenous capitalist class by favoring
the metropole’s industrial exports and foreign firms, and (…) by curtailing individual
access to the land. The effect of colonialism on trade is assessed by Mitchener and
Weidenmier (2008: 1). They argue that “empires increased trade by lowering
transactions costs and by establishing trade policies that promoted trade within empires.
In particular, the use of a common language, the establishment of currency unions, the
monetizing of recently acquired colonies, preferential trade arrangements, and customs
unions help to account for the observed increase in trade associated with empire.

Plantation economy
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The production of cash crops by peasants need not necessarily to be less exploitive than
plantation work. Especially in the case of agricultural monopsonies via marketing boards,
traders and/or state officials could gain huge rents by underpaying peasants for their
produce. According to Lange et al. (2006: 1443), this “promoted an unproductive economic
elite, weak peasant production, and the preeminence of dysfunctional markets”. The
Belgian Congo, the collection of wild rubber on the huge private concessions “resulted in
the depopulation of entire villages and the perpetration of heinous crimes against
humanity (…). Villages unwilling or unable to meet the assigned daily quotas of production
were subject to rape, arson, bodily mutilation and murder. Plantations were a world
different from the surrounding land, not only because of the comparatively modern
equipment and facilities, but also because of the related work immigration. Working and
living conditions on plantations were in general bad. Many plantation owners used a long-
term debt strategy to bind workers to their enterprise.

Colonial investment
The main transportation technology in 19th century Europe were railways, and they were
to built in the colonies as well. They were also instruments of imperial control, because the
technology and much of the capital came from the metropole country. Between 1865 and
1914, railway expansion absorbed 42% of British capital exports (Huff 2007: i134). There
were purely military and strategic reasons behind certain railway projects. Roads were
also important for the exertion of colonial authority, bringing profound changes even to
remoter villages. Herbst (2000) calculated the average road density for a number of African
colonies. Roads were also important for the exertion of colonial authority, bringing
profound changes even to remoter villages. Herbst (2000) calculated the average road
density for a number of African colonies.

Mining
The control of mining was one of the key interests of colonial powers, and large-scale
mining had a huge impact on the local population. Migrant wage labor, the need for
housing, food and entertainment triggered considerable urbanization, social distortion and
the advent of new forms of sociability and political activity. Mining took a heavy toll on the
workers, due to accidents, but also because of the unhealthy living conditions which
contributed to spreading diseases. The Gold Coast became one of the world’s biggest gold

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producers, but ranked behind another area of the British Empire: South Africa, from where,
around 1910, nearly half of the world’s gold came, and nearly all its diamonds

3. The Social Impact of Colonialism

Some authors emphasize more general effects of colonial domination, such as alienation.
Frantz Fanon, for example, writes. . According to other authors, the social impact of
colonialism depended on the number settlers of European origin, colonially-induced labor
migration and the level of colonial investment in the health and education sector. Related
to that were different practices of ethnic and/or religious discrimination or privileges.

Settler and labor immigration

In settler and plantation colonies, there was a considerable amount of expropriation of land
in different forms. The concentration of land ownership was higher where horticultural
societies were colonized than in areas with higher population densities and more complex
agricultural technologies. The latter were also less prone to the importation of labor. The
colonially-induced labor immigration has a strong regional bias. The government always
favored the amalgamation of smaller groups into one of the larger categories, usually along
religious cleavages, i.e. all Muslims were considered to be ethnic Malays. This policy, on the
other side, contributed to the formation of an identity among the numerous distinctive and
often rival indigenous ethnic groups (ibid., 253). Lange et al. (2006) conclude.
Unsurprisingly, in these ‘plural societies’, the anti-colonial nationalist movements came to
see the ‚non-national’ communities as reminders of foreign domination. Many of these
minorities became targets of the new governments’ policies and, often enough, victims of
government-sponsored or -tolerated pogroms.

Artificial borders
The artificiality of colonial borders is one of the popular truisms about the effects of
colonialism. According to Englebert et al. (2002: 1093), there is “little disagreement that
the boundaries of contemporary African states are unusually arbitrary as a result of their
largely colonial origins“. The colonial borders proved to be long-lasting and have not been
changed, except for very few exemptions not included in our sample (Eritrea, East Timor).
This has been a deliberate policy by the Organization of African Unity and by the United
Nations. As a consequence of this fixation, according to Herbst (2000) neither colonial nor
post-colonial administrations have incentives to invest in the periphery of their territories,

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causing inefficiency and weak institutions. The colonial borders furthermore created
landlocked states, in Africa more than in any other region. And they created large countries,
increasing the likelihood of civil wars.

Health and education

Many authors see the investment in the education and health sectors as the most positive
impact of colonialism. According to the new estimations by Bolt/Bezemer (2009), ‘colonial
human capital’ is the most important colonialism-related determinant of long-term growth
in sub-Sahara Africa. However, it has to be kept in mind that education under the colonial
government was not primarily meant to improve the knowledge of the indigenous
population or to open the ways to European universities but to recruit and to train
clerks/officials for the administration. Education policies were guided by the practical
needs of colonial society. E.g. in Egypt, the British „attempted to confine the Westernized
schools to the training of the future civil servants and to direct the bulk of primary school
graduates into vocational institute. The exception was the privileged upper strata across all
ethnic groups who, through English-medium instruction, were also enabled to fill their
specific role in colonial society.

Proselytization
Cultural allies” were also the parts of the population that converted to the religion of the colonizers.
Missionary activities belonged to the repertory of the European colonizers from the beginning in
15th century , and in many places their collaborators and subjects accepted their religion as
‘superior’ – and/or for opportunistic motives. In many areas, missionaries came with the
colonizers, in some before them, and in others again colonization (or semi-colonial rule) brought
religious freedom and the protection of missions, for all kinds of Christian churches and sects. A
relation too close with the colonizers could be a disadvantage for the mission. In India after
independence, the Christian Church “has become free from the stigma that it was an ally of the
‚foreign’ rulers“, while during the British colonial domination, it “was often looked upon as an ally of
an alien imperialism” (World Christian Handbook 1949: 150f). How far-reaching the change of life
related to conversion to Christianity really was, is difficult to assess. The impact of missionary
activities was big in areas which were not converted to one of the “high” or scriptoral religions
(Islam, Hinduism, Buddhism etc.) already, i.e. mainly areas in south of the Sahel belt in Africa (with
the exception of the East African coast), in Southeast Asia (in the Archipelago the Philippine and
some Indonesian islands, on the continent the so-called “mountain tribes”) and in Oceania

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Demography

4. Indicators for the Impact of Colonialism

1 Duration of Colonialism
The Length of Colonial Domination (COLYEARS)
It is common to declare the year of the formal declaration of a colony or protectorate as starting
point of colonialism. We think this legalistic approach is not adequate to the problem. If political
domination is crucial to colonialism, that its onset should be the point in time when political
sovereignty was de facto significantly reduced by a foreign power over a significant part of the
territory and/or population. This is more often than not before any de jure declaration, and by
contrast in certain cases even significantly after this point. For political domination, a certain
degree of enduring control over significant parts of the autochthon population is important.
Single military attacks with plundering and retreat . Similar to our variable ONSET, we define
the end of colonialism (COLEND) as the point in time where the vast majority of the autochthon
population regained full sovereignty over internal and foreign affairs, with or without the
participation of foreign settlers. At that moment, it should be in principle possible for a country
to conclude alliances with whatever foreign power it wants. Of course, sovereignty does not
automatically mean the end of all political and/or economic dependencies, e.g. in foreign trade
and direct investment. It is not important whether foreign administrators are present or not, but
whether this presence is decided by the colonial power or by a sovereign government.

2.Political Transformation

In the political sphere, we consider four aspects as crucial: the form of political domination
reflecting steps of intensification (DOMFORM), the level of violence related to colonialism,
from the onset to decolonization (VIOL), the degree to which colonial administration created or
reinforced division of functions between ethnolinguistic and/or religious groups (ETHNFUNC)
and the way the transfer of sovereignty was organized during decolonization (INDTRANS).

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 Form of political domination (DOMFORM)
Political domination is a crucial aspect of colonialism; as mentioned, without a significant
reduction of the level of political sovereignty, we would not even speak of colonialism.
From a sociological viewpoint, the historical pattern of foreign control does not depend on
the official claim or de jure control. We treat all so-called “mandates” as colonies. Apart
from Mongolia, which was in 19th/20th century mostly under Chinese supremacy, all
countries of our sample had an experience of being dominated by one or several colonial
powers.

 Our concept focuses on different levels of intensification of political domination; coded

was the maximal impact:
 0 = no colonial domination / not applicable
 1 = semi-colonialism
 2 = indirect rule with little interference in internal affairs v
 3 = indirect rule with strong interference in internal affairs
 4 = direct rule
Level of Colonial Violence (VIOL)
Colonization was confronted with a broad variety of resistance, triggering often, but not
exclusively, violent reactions by the colonial power. “We must distinguish, of course, between (.)
wars fought against the incoming whites and later protracted rebellions. In many instances the
initial war was fought with the traditional military system. We are less interested in the character
or amount of resistance, but in the varying impact of colonial violence against these resistance
movements, measured with our variable (VIOLCOL). VIOLRES measures the resistance against
measures of colonial domination such as taxation, expropriation, forced cultivation, forced
recruitment or forced labor. This form of resistance is often carried by peasants, workers and/or
women or, quite common in sub-Saharan Africa, messianic movements.

 We coded for the three variables different levels of colonial violence:

 0= not applicable/no colonial violence
 1= moderate colonial violence
 2= massive colonial violence

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Colonial Instrumentalization of ethnolinguistic/religious Cleavages
(ETHNFUNC)
Colonial powers instrumentalized ethnolinguistic and/or religious cleavages mainly in three
areas: army/police, administration/education, and in the economy. As important this aspect of
colonial domination is, it is difficult to measure its impact. Going beyond a simple differentiation
between a low/moderate and strong impact would be hazardous.
 0 = no indicators for such colonial policies / not applicable
 1 = low/moderate impact
 2 = significant/strong impact
Related to this variable is the coding of colonially induced work immigration (for the army,
infrastructure project, plantations etc.) because the colonial policy in this regard followed similar
considerations.

3. Economic Transformation
We focused on these seven indicators for the colonial impact on the economy:
 trade policy (TRADEPOL)
 trade concentration (TRADECON)
 investment concentration (FDICON)
 investment in infrastructure (INVEST)
 plantations (PLANTAT)
 mining (MINING )
 gold/silver/diamonds (GOLD)

Trade Policy (TRADEPOL)

Due to the poor data quality for many colonies, we decided to classify the cases in five
categories:
 0 = trade concentration under 25%, no colonial trade effect is discernible, three quarter
of goods exchanged with third countries/areas
 1 = trade concentration 25-40%, a moderate trade effect
 2 = trade concentration 40-50%, a significant trade effect
 3 = trade concentration 50-66.5%, a strong trade effect
 4 = trade concentration 66.6-%, a very strong trade effect

Investment in Infrastructure (INVEST)

. Because of the different situations and needs for infrastructure, we decided not to refer to specific historical data

(railway miles etc.) but to code more general colonial investment in infrastructure as ‘not significant/modest/huge’:

 0 = no significant colonial investment in infrastructure / not applicable

 1 = moderate colonial investment in infrastructure (e.g. some streets and bridges, not more than one railway line
to the coast, only isolated irrigation measures)

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 2 = huge colonial investment in infrastructure (e.g. a railway net and streets linking major parts of the colony, sea
harbor(s), and/or channels/irrigation measures in a significant part of the colony)

Investment Concentration (FDICON

As in the case of trade concentration, we classified the cases in five categories:

 0 = investment concentration under 25%, no colonial investment effect discernible, three quarter of investment
from third countries/areas
 1 = investment concentration 25-40%, a moderate investment effect
 2 = investment concentration 40-50%, a significant investment effect
 3 = investment concentration 50-66.5%, a strong investment effect
 4 = investment concentration 66.6-%, a very strong investment effect

Plantations (PLANTAT)
. In almost all colonies, setting up some kinds of plantations has been tried, often unsuccessfully.

 0 = no or a some small, isolated plantations / not applicable

 1 = plantation economy of moderate size (regarding areas occupied and share of total export)
 2 = plantation economy of significant size (regarding areas occupied and share of total export)

Extraction of Natural Resources (GOLD, MINING)

. We coded these natural resources thus in one variable (MINING) and gold, diamonds and silver in another (GOLD)..

 0= not applicable
 1= moderate colonial extraction
 2= extensive colonial extraction

Expropriation, Financial Exploitation

To cover the costs of colonial administration and investment in infrastructure (and
often further conquest), all colonial governments relied on different forms of resource
organization out of the colony. Most colonies relied initially on corvée, forced labor, and
substituted that in course of time through paid labor.

4. Social Transformation
Colonial Immigration (FORPRE)
Colonies can be distinguished regarding the presence of people from the colonizing
country. Following the construction of other variables, we transformed the data into a
pentatomy:
 0 = colonial population under 1%
 1 = colonial population 1-2%
 2 = colonial population 2-5%
 3 = colonial population 5-10%
 4 = colonial population over 10%

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Colonial Mission (MISSION)
In general, missionaries of any Christian church were protected by the colonial government.
Therefore, we coded all converts to Christianity as ‘impact of colonialism’. ”. Following the
construction of other variables, we transformed the data into a pentatomy:
 0 = no colonial missionary activities / not applicable
 1 = colonial missionary activities with little effect (Christian population under 2%)
 2 = colonial missionary activities with significant effect (Christian population 2-7%)
 3 = colonial missionary activities with big effect (Christian population 7-50%)
 4 = majority converted (Christian population over 50%)
Labor Immigration (WORKIM)
Beyond some special cases (such as Malaya and Southern Africa), there are no systematic
data for colonially induced labor immigration. We had to make rather crude estimations
based on colony-specific sources:
 0 = no indicators for colonially induced labor immigration / not applicable
 1 = low level of colonially induced labor immigration
 2 = high level of colonially induced labor immigration (high figures, big groups; also cases in which some
functional groups completely consisted of foreign laborers )

Centralization and Partition (FIRSTCEN, BORDERS)

Centralization

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