Globalization II: Colonization

Acemoglu, Johnson, Robinson

Argue that type of colonial regime is what decides persistent effects on economic development

Effects of the Disease Environment

Europeans struggled to settle regions with disease like malaria & yellow fever, had a positive correlation with creation of extractive industries

Settler Colonialism

A distinct type of colonialism that functions through the replacement of indigenous populations with an invasive settler society that, over time, develops a distinctive identity and sovereignty.

Institutions in Settler Colonies

Brought over resources like judges, parliamentary bodies, etc. to benefit settlers who wanted the same access to rights and services as those at home

Extractive Colony Institutions

All infrastructure that was built was done with the purpose of extracting wealth, did not want to build up resources for the people

Encomienda System

Spanish & Portuguese crowns grant land and forced labor rights to conquistadors.

Aspects of Latin American Extractive Colonies

Encomienda system, monopolies, restrictive trade regulations

Criticisms of AJR's paper

No mechanism is listed for how something that happened 200+ years ago affects today nor do they list how average expropriation rate was calculated

Irigoin & Grafe

Bounded Leviathan: discussed the costs of coercion & revenue and argued that there is an optimal level of coercion for maximum revenue before it becomes "predation" and revenue is lost

Irigoin & Grafe's views on British, French, & Spanish Colonies

British and French were predatory, Spanish weren't

The Beginnings of Colonialism

Small groups of European traders set up in already active trading regions, competing with local merchants

Constraints on Early Colonists

Had to engage on the terms of local traders, had to learn customs and develop relationships with local rulers to earn trading rights

Early Colonial Trade Competition

Mostly done with local and/or non-European traders

Causes for Increasing Violence in Colonies

Competition for Trading Rights led colonial traders to use force in "bigger gun diplomacy"

Slavery in Antiquity

People were generally political/war prisoners doing household tasks

Purpose of Slavery in Antiquity

Was a cheaper alternative to building large prisons

Start of the Slave Industry

Increasing European demand for slaves drove prices up which lead to the creation of slave monopolies in Africa (ex. Kingdom of Dahomey)

Whatley & Gillezeau

Argued slave economy increased distrust between Africans who then turned to absolutists states for protection

Transition for Traders to Governments

Colonial powers support local groups and trading companies who worked mostly for their own interests with own allies and against own rivals.

Violence over trading rights

Companies fight with each other in proxy wars over trading rights (ex. Battle of Plassey)

Popularity of colonialism among colonizer populations

Some, like Adam Smith, saw it as a waste of resources that could have otherwise been spent on the population at home, so the governments had to frame colonies as having net benefits.

Adam Smith's Views on Colonization

Argued that colonies only exist to provide a captive export market to support a handful of British companies, and did not provide net value to the British populace

Ways Colonies Earned Revenue

Direct, indirect, and trade taxes, infrastructure fees, land/royalties

Issues with Early Colonies

Low population density, under-developed markets, multiple currencies in use & little pre-existing infrastructure

Issues with the Colonial Governments

High administrator salaries, military and transportation costs, legitimacy and local knowledge issues

Frankema

Colonial Taxation, a report on the profits of British colonies in Africa determined most colonies had budget deficits

Labor Costs in Colonial Countries

Convincing Europeans to take colonial posts required high salaries, so colonizers often worked with local groups willing to act in colonies interests

Problems with using local labor

Back by colonial power, local actors could create unfair legislation to reinforce their own agendas

Direct Tax Advantages

Burden is split up equally among all people within the colony

Direct tax disadvantages

Need a common currency, high population density, to pay admin salaries, and infrastructure to support a wage economy

Indirect Tax Advantages

Government hypothetically earns money from every transaction that occurs

Indirect tax disadvantages

Requires high demand for goods within a region and a populace with the money to spend on them

Trade Taxes Advantages

Easy to monitor so administrative costs are low, infrastructure is generally already in place to support trade of these goods

Trade Taxes disadvantages

Only really works in port cities, no taxes raised from transactions within the region

Infrastructure Tolls Advantages

Subsidizes the cost of creating ways to improve trade revenues

Infrastructure Tolls Disadvantages

Needs to be built and maintained so there a high upfront and ongoing cost

Advantages of land/royalty deals

Easy to monitor and maintain, government generally gets the money up front

Disadvantages of Land/Royalty deals

Lots of local opposition, generally removes competition for a given industry for the region

Amin

Provided classification of how local conditions shaped economic strategies in colonial Africa

Africa of the Colonial Trade Economy

Cash crop regions that raise funds through trade and indirect taxes (W. Africa)

Africa of the Concession-Owning Economies

Regions that raise funds through land/royalty deals (Southern Africa)

Africa of the labor reserves

Settler colonies that provide the manpower for colonial trade economy (Northern and Eastern Africa)

Concession Companies

Colonizers would grant private firms the right to extract resources in exchange for revenue

Workforce for Concession Companies

Needed specialized skilled labor, so imported it from other regions

Import of Indian Labor

Lower population densities of Africa, SE Asia and the Caribbean hampered production, but immigration of Indian laborers could mend that

Why Indians moved across the world

There were famines and limited opportunities in India at the time, but potential for high wages later down the line if they emigrated

Colonization Effects on Cotton

By the end of the colonial period, India is no longer the largest producer of cotton products, the UK is.

How the UK cornered the cotton market

Calico acts ban Indian cotton in British lands and UK put high taxes and tariffs on Indian producers

Expenditure on Local Populations

Nearly no expenditure on public goods, infrastructure was focused on revenue raising, schools were run by volunteer missionaries, and indigenous govs given little to no funding

Spanish Colonialism

Stakeholder empire where people invested in the longevity of the state (less extractive)

England & French Colonialism

Shareholder empires where people invested in public debt (bonds) and most of revenue was siphoned back to large companies back in Europe

Running a low-cost empire

Entice local elites to be stakeholder, take over some industries but keep taxes low, bargain with local govts and allow local regions to retain power and the ability to allocate taxes

How colonialism overcame Malthusian limits

Use of 'ghost acres' allowed for increasing production without overcrowding

How colonialism spurred the Industrial Revolution

Gave UK access to new materials, product sources, markets, and space. Also spurred the slave trade which Britain used to increase profits

Tax Revenues from a Trading Empire

Navigation acts (UK had to be used as entrepot for colony exports), had to use English built ships with English crews