The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor

by David S. Landes

  The second assertion, that Europe needed these acquisitions for capitalism’s sake, is simply nonsense. Some businessmen made money in these strange and distant places; many more did not. But European economies as economies gained little if anything from these exotic connections. Good businessmen knew it. When Belgium’s King Leopold, venality wearing a crown, invited the German banker Gerson Bleichröder to help with his huge domain in the Congo, Bleichröder politely declined. He was as interested as any good banker in the opportunities of such a partnership, but he could spot a clinker a long way off. A few years later (early 1880s), Bismarck thought to pick up some pieces in far-off Africa and among the Pacific islands. Would Bleichröder help? Here the banker had to be more forthcoming, because Bismarck was his private client and patron; even so, he asked for a guaranteed minimum return.

  The public was a different matter. You can fool some businessmen some of the time; politicians much of the time; and voters almost all the time. Listen to Paul Leroy-Beaulieu explain to the French electorate why imperialism was a good thing: “The most useful function that colonies perform…is to supply the mother country’s trade with a ready-made market to get its industry going and maintain it, and to supply the inhabitants of the mother country—whether industrialists, workers, or consumers—with increased profits, wages, or commodities.” So colonial expansion became a leitmotif of electoral blather. No coy political correctness in those innocent times, but little accuracy either. Today’s historians and political economists should know better than to take these campaign promises seriously.

  Must one take a country to make a market? Here, too, scholarship has offered a reinterpretation. Where once historians wrote of (formal) empire, now they began to look more closely at informal dominion.9 Take the history of European presence and influence in the Middle East. The region included the Ottoman empire, independent in name but increasingly subject to European demands; and Egypt, under Ottoman suzerainty but really in the European sphere of influence. No history of nineteenth-century Egyptian economic and political development would make sense that did not attend to the impact of informal, virtual controls.10 The same for Persia, never a colony, but like the Ottoman empire more independent in memory than in reality.

  One could say the same of European dominion in Latin America. Here an entire continent, once largely divided between Spain and Portugal, became formally independent by the 1820s except for a few minor gores and islands in the Caribbean. What’s more, the very possibility of new territorial grabs in the western hemisphere was largely excluded by the Monroe doctrine.* Not that European powers were absolutely cowed by this unilateral declaration of the president of the American republic. One could perhaps get around it by using strawmen, as the French tried with Maximilian in Mexico.’† But the threat of American intervention now entered the calculus, a deterrent to imperialist ambitions. No matter. More money could be made by trade: public works concessions, loan contracts, favorable market arrangements. It is no accident that much of the literature on dependency has been the work of Latin American economists and political scientists. They feel, with some justice, that their part of the world, though nominally free, has been put down and looted by stronger partners.

  Formal empire is now a great rarity. Much here depends on definition (is Puerto Rico a colony of the United States?), but one still finds odd pieces (Guam, Samoa, Bermuda, the French DOM-TOM [départements and territoires d’outre-mer]) that come under someone else’s rule. Sometimes, as with Bermuda, or New Caledonia, or Puerto Rico, the dependents prefer it that way because dependency pays.* Panama, after years of “working for the Yankee dollaaaah,” as the old song has it, is also thinking twice about American departure from the Canal Zone. But most lands that were once colonies, dependencies, protectorates, dominions, metropolitan departments, or overseas departments are now free. Given the sensibility of once subject populations and accumulated resentments of subjugation and humiliation, material advantages have rarely stood up to separatism.

  A wave of liberations more than tripled the world’s nations after World War II. Each of these newcomers, however small and artificial, was sovereign and enjoyed a vote in the United Nations. Freedom promised growth and prosperity to countries once exploited, and—the important reverse of the coin—portended shrinkage to the capitalist nations that had thrived on oppression of others and would now have to make it on their own. Justice would be done.

  Things have not worked out that way. Once-imperialist economies have prospered as never before. And most of the former colonial nations have found it hard to get on track. Their colonial masters, afraid of their incipient nationalism and contemptuous of their abilities, had not taught them much—barely enough to do the subaltern tasks of government. White rulers dreaded educated natives: detribalized, filled with “inappropriate” aspirations, they were, in the words of one British official (1886), “the curse of the [African] west coast.”11 The British, for all their reliance on local elites, systematically excluded these déracinés (uprooted ones) from posts of responsibility in government and trade.

  So, although the colonialists often left behind an infrastructure of roads, ports, railroads, and buildings, maintenance was another matter. The ability of the ex-colonies to neglect and run down their material legacy was stunning, as visitors could attest. (The same thing happened in central and East European countries drawn into the inept bureaucratic world of socialism.)12 Much of what these subject populations learned in the schools and universities of the colonial master was political and social discourse rather than applied science and technical know-how—the makings of revolution rather than production. And maybe that was the first priority: freedom first, economy later; because freedom is a necessary if not sufficient condition of development.

  The first post-freedom numbers for product and income per head were encouraging, but probably misleading. They reflected more appearance than reality. As more transactions became commercialized, for example, as more product went to market rather than to home consumption, the results showed up in the data where they had not before. Economic pundits predicted bright futures for such ex-colonies as Nigeria (oil), Ivory Coast/Côte d’Ivoire (cocoa), Algeria (oil and gas).

  Then disappointment. Few of these ex-colonies maintained consistent growth per head,* and their dependence on highly variable terms of trade (agricultural commodities vs. manufactures) inflicted painful swings in income. As President Julius Nyerere of Tanzania complained in 1976, why should his country have to give twice as many bales of sisal this year as last to buy the same farm tractor? Of course, he had not complained earlier (1970-74), when the price of sisal rose more than four times in four years.13 (Mercurial commodity prices were an old story. Between 1925 and 1928, the world price of rubber fell from 73 cents to 22 cents a pound, and then with the Great Depression, to less than 3 cents a pound in 1932.14 The plantations of Southeast Asia [Malaya, East Indies, Indochina] took a beating. But from there the price could only go up, as it did up to and into the war. War is hell on tires and great for the rubber business.)

  In the face of freedom’s disappointments, the law of undiminishing conviction took over. Those accustomed to blame material failure on foreign wrongs now decided that exploitation had merely assumed new guises. The old colonial areas were only nominally free, they said, still bound to exploiters by invisible ties of unequal trade and dependency; also by subventions and bribes in return for political allegiance and loyalty. Hence failure.

  Some critics of this new colonialism (neocolonialism) even argued that all exchanges between the advanced industrial nations and the backward “Third World” are intrinsically unfair. Logically, the poor should cut all commerce with the rich.15 No better recipe for poverty maintenance could have been found, and fortunately most Third World governments knew better than to shut themselves off from trade in goods and knowledge; also from loans, gifts, and subsidies. One exception was Burma (Myanmar), where a self-imposed embargo made it necessary to cannibal
ize vehicles to keep them running, and to use gasoline so crude that black gouts of poison spout into the streets. Only the light traffic saves the lungs of passersby.

  Since independence, the heterogeneous nations that we know collectively as the South, or as the Third World (and sometimes the Third and Fourth worlds, to distinguish between poor and very poor), have achieved widely diverse results. These have ranged from the spectacular successes of East Asia to mixed results in Latin America to outright regression in such places as Burma and much of Africa.

  This diversity of outcomes shows that colonization in itself, even enslavement, does not dictate failure.* In the long sweep of history, this is the heart of the matter: down is not out. Some countries have made something of the colonial legacy; of the heritage of social overhead capital, education, ideas; even of their own anger, resistance, and pride.† Others have run down what the colonial power left behind and have not learned to replace it. Still others were left little, usually be cause the colonial power did not see the payoff to improvement. Still others were too poor even to attract the cupidity of stronger nations.

  The example of a few thriving ex-colonies has little consoled the failures. For them, the whole experience has been humiliating, enraging; and subsequent disappointments have only aggravated their resentments. They have a point. But having sucked on it, they would do well to spit it out. None of this had to do with intentions, good or bad. It was built into the logic of the situation, and all would have argued, from the heart, that they were doing the best for everyone else.

  Take the French. They thought of themselves as bearers of universal reason and virtue, to say nothing of the highest literary culture; and while they did little to educate their subject peoples, that little was inspired by a sense of mission and infinite perfectibility—you too can be French. Classroom instruction was typically in French, which produced a class of literates estranged from parents and native culture—one of the teachers called it an “alienation machine.” Substance consisted in French historical cliches—“Nos ancetres les Gaulois [our ancestors the Gauls]…” and such literary classics as Racine’s Andromaque and Corneille’s Le Cid.16 The best students, those who did well enough to win fellowships to French universities, learned the treasures of French republican virtue, just the kind of thing that would lead them to hate their status if not themselves and turn them into leaders of rebellion. Witness the careers of Ho Chi Minh in Vietnam or Pol Pot in Cambodia.

  What’s the balance sheet? Has imperialism been good or bad for subject peoples? Let me attempt a series of propositions:

  (1) A principal aim of imperialism has been to extract wealth and labor, more than was available at a free market price. The results have not always matched expectations. On the other hand, in (almost) every instance, a few people have done well—tough traders, concessionaires, functionaries, intermediaries (compradores), local elites—on both sides of the divide between rulers and ruled, stronger and weaker.

  (2) Almost all imperialisms have brought material and psychological suffering for the subject people; but also material gains, direct and indirect, intended and not. Some of these gains flowed from opening and trade. To cite John Stuart Mill, writing from a British/Smithian perspective in the middle of the nineteenth century, “…the tendency of every extension of the market [is] to improve the processes of production.”17

  All of these trade effects depended on the nature of colonial rule. Some masters were richer and more ambitious. The colonials typically built useful things—roads, railroads, port facilities, buildings, water supply, waste disposal units, and the like. They made the natives pay for these improvements in labor and taxes, but they could have just kept the money. Meanwhile the gain to natives was incidental, for such improvements were made primarily for the ruling power and its commercial interests; after all, one had to make these distant places livable and profitable, defend the frontiers, maintain order. It was nonetheless gain. The same holds for health facilities, which initially served the masters (note, however, that roads and clearances could help spread disease). Yet motive matters less than consequences. No one can segregate the benefits of such efforts. Also, builders and doctors had their own sense of duty to the larger society.

  Would more of these facilities have been built if these countries had been free? Under the precolonial regimes, unlikely. Even now, when development has become a universal religion and business enterprise stands ready to respond, public works in former colonies too often disappoint. Worse, successor regimes have allowed the colonial legacy to deteriorate. The great exceptions have been the postcolonial societies of East and Southeast Asia: South Korea, Taiwan, Singapore. And, of course, new technologies have made for inexorable improvement—airports and air transport, for example.

  In ex-colonies, however, such projects are often the conspicuous consumption of rulers who prefer to spend (other people’s money) for new, rather than care for old. We are left with a succession of layers on the middens and ruins of an earlier generation. The usual archeological pattern of successive civilizations is now revived in the ill-prepared societies of the twentieth century and will presumably be the delight of future diggers. Among the future ruins: lavish hotels, already displacing caravanseries and the kind of inn that sets the stage for adventure novels and cinema. Today’s business travelers and bureaucrats expect one-class service around the globe; also CNN broadcasts and Sky-News.

  (3) The map of the colonial world was drawn by Europeans. The boundaries did not reflect the realities of place and people. This was particularly true of Africa (but India and Burma too), where tribes were split and others joined (including the young tribe of white settlers and immigrants), laying the basis for irredentism and strife. Freedom, when it came, came to peoples ill-prepared to live together. And yet the new nations saw these artificial boundaries as sacred, for fear of what might replace them. Quite right: the record of territorial disputes in ex-colonial areas shows much ado about little and heavy penalties for both winners and losers.18

  (4) The energy, resources, and potential goodwill of these successor states have been depleted in the process of defining themselves. A very few (the best example is Korea) already had something of a national or ethnic identity at the time the colonial power took over, and could build their resistance on it or pick it up again after the outsiders left.* The others have suffered the instability and violence that accompany uncertain identity and legitimacy, careening from coup to coup, from one explosion to another.19 Meanwhile the advanced industrial nations have mouthed pieties, succored victims, propped up tyrannies, created new victims, wrung their hands, generally botched every intervention—done good as well as bad and both at the same time, consoling themselves the while with virtuous intentions, larger causes, and the satisfaction that comes with moral superiority. (That is the point of the exercise.) Pictures of starving and fly-specked children fill the public prints and the TV screen. The supply of charitable causes exceeds the supply of funds. Little goes beyond first aid.

  (5) Let us try the counter factual: the economically backward nations would have grown and progressed (in the sense of technique and productivity) faster had they never known colonialism. The argument pro rests on hypothesis: on the assumption that these subject peoples would otherwise have been free of domestic as well as of foreign exploitation; also able to learn and change. The argument con rests on history: imperialism has not prevented a few colonies from developing as autonomous centers and from learning and inventing the techniques of an industrial economy.20 Hence the British colonies in North America, Finland as part of the Russian empire, Norway under Sweden, Hong Kong under Britain. The first example of a non-Western nation to do so, Japan, though remaining independent (no small matter), did it under the tariff limits of an informal imperialism. But then again, as everyone knows, Japan is special.

  History suggests that tutelage can be a school. Of course, a lot depends on the teacher. Some imperial nations were better rulers than others and
their colonies did better after independence. This criterion would have the Spanish and Portuguese bad, the Dutch and French less bad, and the British least bad because of their willingness and ability to invest in social overhead (railways in India, for example) and their reliance on local elites to administer in their name. In 1900, India had thirty-five times the railway mileage of nominally independent China—a salute to Britain’s sense of imperium and duty.21 (A cynic might argue that these railways were intended primarily to get raw cotton and other primary products to port and soldiers to points of unrest. Still, the linking of Indian markets eased food distribution in a country vulnerable to local famines. And sometimes it might take a famine to get a line built.)*

  By this standard, however, the best colonial master of all time has been Japan, for no ex-colonies have done so well as (South) Korea and Taiwan, where annual growth rates per head from 1950 to 1973 exceeded those of the advanced industrial nations (Japan itself excepted). This achievement reflects in my opinion the culture of these societies: the family structure, work values, sense of purpose. (I say this even though many economists do not accord importance to culture, which cannot be measured and, for these experts, just gets in the way of good ideas.) These values were already there under Japanese rule, partly in reaction to it, and showed in the response to profit opportunities whenever the alien master gave the natives some working room.22 But the postcolonial success also testifies to the colonial legacy: the economic rationality of the Japanese administration, which undertook in the colonies “the superbly successful modernization effort which Japan itself had undertaken.”23

  To be sure, the inhabitants of Korea and Taiwan would not agree with this. They remember tyranny, torture, and abuse—memories embittered by an “in-your-face” Japanese refusal of regret or remorse.24 Remorse for what? The system worked.25 Besides,