Garett Jones  

Why Didn't the British Empire Industrialize? Mark Koyama Edition

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Why didn't 19th and early 20th century empires massively raise productivity per worker in their colonies?  Why have the big improvements in productivity almost always happened after the imperialists either left or genuinely turned over power to the locals?  This is a topic where Marxian thought naturally overlaps with public choice theory: Battles between elites and masses get fought out across the political and economic arenas.  

An example: My excellent Public Choice Center colleague Mark Koyama passes along his summary of the work of Avner Offer, an historian who followed up Adam Smith's line of thinking that the British Empire gave little benefit to Britain overall.  I'm excerpting from Mark's email to me with his permission: 

My recollection of Offer's argument (as much from discussions with him as from the article and this is my personal slant on his argument) is that one reason why the empire was possible was that it provide[d] a psychic rent to the British population as a whole.....this psychic rent permits greater inequality at home than otherwise would have been tolerable. 

Frames of reference matter for debates over inequality: It's easier to moralize over the CEO who earns hundreds of times more than the average U.S. worker if you neglect the fact that the average U.S. worker earns about a hundred times more than the planet's bottom billion.  But if citizens feel that some of the world's poorest people are within their polity--even a little--that might make the average worker feel like she doesn't have it quite so bad.  

Empire placed the British working class higher in the British pecking order.  For a status-conscious species this matters.  

Back to Mark: 

What this means is that the British public would be willing to tolerate the empire on the condition precisely that it does not industrialize.  Hence British elites might have an incentive to keep India (say) poor even though they could have benefited from allowing it to develop more manufacturing or to educate its workers as that would have allowed them to extract more. 

A hypothesis worthy of further reflection.  In a world of politics, the words "They're doing it so they must benefit" isn't an answer.  It's an object of meditation.  


COMMENTS (19 to date)
Brett writes:

It's probably because virtually all of the late 19th century colonies were an insignificant fraction of the overall economy of the British Empire, aside from India. Aside from particular key sectors (such as oil), they just didn't offer good environments for the investment of British capital and technology, which mostly flowed into other "rich" countries (like the US and Europe).

Hugh writes:

Drawing conclusions from territories as disparate as Canada, India, Jamaica and Hong Kong looks like an uphill struggle to me. One that can be left to Marxians.

By the way, what is a Marxian? If you really meant Martian the post certainly makes more sense.

Bedarz Iliaci writes:

The population of India began its secular increase in 1921. That is 26 years before the independence.
This fact alone (and remember that by population, India was a very large component of the British Empire) tells me that the premise
"Why didn't 19th and early 20th century empires massively raise productivity per worker in their colonies? Why have the big improvements in productivity almost always happened after the imperialists either left or genuinely turned over power to the locals? "
is suspect.

The British period is, in fact, still remembered as a Golden Age in India.

Mark Koyama writes:

Thanks Garett. It would perhaps of been more accurate had I said that my argument was a Marxian take on Offer's (as I have no idea if he would identify himself in those terms!).

As Garett notes, this argument is also Smithian. After all Adam Smith noted:

`In great empires the people who live in the capital, and in the provinces remote from the scene of action, feel, many of them, scarce any inconveniency from the war; but enjoy, at their ease, the amusement of reading in the newspapers the exploits of their own fleets and armies. To them this amusement compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace. They are commonly dissatisfied with the return of peace, which puts an end to their amusement, and to a thousand visionary hopes of conquest and national glory, from a longer continuance of the war' (Bk V. iii)

It is important to note that the fact that British did some good things in India is entirely consistent with this hypothesis. But unlike the idea that the British were Olsonian maximizers it is also consistent with the fact that the British did not invest in education or industry in India.

On education for example see

http://mruniversity.com/education-colonial-india

The British established internal peace (after 1857 at least), suppressed practices link human sacrifice and wife burning and built an excellent railroad network. They did not however invest in education or in manufacturing and there was very little per capita income growth during the colonial period.

Shane L writes:

In Ireland the situation was probably quite different from other colonies, since some kind of Norman-English power had been present since the 12th century. Thus colonial settlements were earlier than in many other colonies.

One aspect of that was the deliberate discrimination against Irish Catholics, who were the vast majority of the population, with land seizures and the Penal Laws. These included kinds of prohibitions on education, so the development of a sophisticated economy was made almost impossible. Most industrialisation occurred in Protestant communities in the north east of Ireland.

Needless to say some Irish nationalists were pretty irritated when 19th century British commentators pondered the poverty of the Irish! The Catholics had been paying rent on shrinking patches of land robbed from their ancestors, denied education and other basic rights, little wonder they were poor.

This changed in the 19th century, though, as more enlightened British government policies enfranchised the Catholics, redistributed land back to the poor majority, etc. Ireland didn't industrialise for a long time, though, and was one of the poorest West European nations until the 1990s - after many decades of independence.

Jim Rose writes:

P.T. Bauer disputed the lack of development in British colonies. He attacked the late colonial state for introducing statutory marketing boards.

Bauer argued that much of British colonial Africa was transformed in the colonial period: before British rule, there were no rubber trees in Malaya, no cocoa trees in West Africa, no tea in India:

“Before colonialism, Sub-Saharan Africa was a subsistence economy, because of colonialism it became a monetized economy. Before colonialism, the absence of public security made investment impossible.

After it, investment flowed. So too was scientific agriculture introduced by colonial administrations, or by “foreign private organizations and persons under the comparative security of colonial rule, and usually in the face of formidable obstacles.” (Bauer 1981, p. 167)

See Bauer at his best in http://historytoo.files.wordpress.com/2009/07/the-economics-of-resentment.pdf

RPLong writes:

If you look at the history of Bangladesh, for example, the British didn't try to "industrialize" it, per se, but they did try to turn it into a massive agrarian bread box. The problem the British ran into is that the Bengali delta a huge mass of shifting swamps. The land is very fertile, but the ebbing-and-flowing of the water shelf means that no one patch of land can be made to produce crops year after year after year.

To get around this, Bangladeshis were accustomed to migrating around the landscape as it changed. They produced their crops very well for thousands of years. Then the British came in and started putting fences around everything. They chopped down the trees and halted the natural human migration that had been "the norm" in the area for a good 5000 years. Suddenly, Bangladesh wasn't producing at its maximum potential yield.

It's hard for British people (and we Americans, Canadians, etc.) to understand because we don't live on a delta and we like the idea of putting up a fence and calling whatever's inside it "ours." But this kind of system is COMPLETELY ILLOGICAL in the Bengali Delta. The land shifts too frequently for this kind of thing to be practicable. Today's field is tomorrow's lake bed. Welcome to a nation built on a flood plain. Even the Bangladeshi government today can't enforce property rights in the rural areas the way governments are accustomed to doing it.

So, while I agree that political interests are always at work, I don't think you can discount the fact that governments aren't just opportunistic - they are also incompetent. The British didn't industrialize because in many cases they had no idea what they were dealing with, and they just bungled it.

Brian Moore writes:

Perhaps I'm only recalling the simple descriptions from HS history, but wasn't the entire concept of colonies and mercantilism one of specialization? The British saw their colonies not as separate countries that needed their own agriculture/industry/educational systems, but as one part (the farmer, raw material production part) of one empire.

India produced spices, America produced cotton, Canada produced furs, Australia produced high security prisons. These things were then transported to industrial Britain to be refined/consumed, and leveraged to support their legal system, government, education. Farmers don't need all those things. They didn't industrialize/modernize their colonies for the same reason we don't put factories and stock exchanges in the middle of Iowa cornfields. If Iowa seceded, they might though.

Tracy W writes:

RPLong's explanation I find very compelling. For a more moderate example, I think of my uncle-in-law complaining about building codes written in Canberra and Sydney being imposed on Queensland, Australia, which is a much more tropical climate.
Or the totally different attitude of Kiwis and Aussies to possums, which are an endangered species in Australia and a major pest in New Zealand to farming, commercial forestry and native forests.

William Barghest writes:

How much did the British government invest in its own industrial development? I thought 19-th century Great Britain was notoriously laissez-faire. Also it appears that primary education was not state subsidized in Great Britian until 1891.
http://en.wikipedia.org/wiki/History_of_education_in_England#19th_century.

It hardly seems fair to accuse them of colonial neglect if it was not something they were doing in their own country.

P.S. It seems that unlike in India, the domestic British railroad network was constructed privately.

http://en.wikipedia.org/wiki/History_of_rail_transport_in_Great_Britain

RH writes:

Two problems:

1) Like all theories based on "class interests," it needs a stronger microfoundation. "Classes" don't sit around and think about what is in their best interests, individuals do. All upper class individuals acting in their own interests might lead to a result that is worse for their class as a whole.

2) The theory is so complicated that it's unrealistic to think that anybody ever thought like this. It assumes that the upper class knew that people cared about relative rather than absolute wealth, that they only tend to compare themselves to others in the same polity, and that people would see subjects of the empire as part of the same polity.

Furthermore, if the British upper class was organized enough to act in its own interests and sophisticated enough to enact this plan, it could have easily accomplished the same goal through more certain and less complex means, such as, for example, propaganda or indoctrination of the masses.

It reminds me of a debate I had with someone who said that the oil companies planned 9/11 so we would go into Iraq and they could get the oil. Surely, if they were that powerful, competent, and evil, the oil companies could've lobbied for subsidies or tax breaks that would have cost the country a fraction of the Iraq War and were more sure to pay off.

William Barghest writes:

Correction.

In August 1833, Parliament voted sums of money each year for the construction of schools for poor children, the first time the state had become involved with education in England and Wales.

In 1839 government grants for the construction and maintenance of schools were switched to voluntary bodies, and became conditional on a satisfactory inspection.

The Forster Act of 1870 required partially state-funded board schools to be set up to provide primary education in areas where existing provision was inadequate.

The Free Education Act 1891 provided for the state payment of school fees up to ten shillings per week.

Steve Sailer writes:

Gregory Clark's "Farewell to Alms" has a chapter on the failure of attempts to industrialize in Victorian India. He blames low worker productivity. Mehemet Ali had bought steam engines and milling machinery for Egypt in the first half of the 19th Century. Poor maintenance and dust storms meant it kept breaking down. In general, it often takes a workforce more than one generation to develop skills needed for a radically new mode of work.

Glen S. McGhee writes:

I'm surprised that no one has considered British expansion into North America (Jamestown, 1607), where the initial foray was to extract wealth (in the form of gold, silver, etc) as conveniently and as quickly as possible. What is the point of industrialization if you are there for the easy pickings?

It took a few years before they realized that there was no gold, no silver, and tobacco became a substitute. On the other hand, the colonies served as a convenient dumping ground for London's orphans and foundation sponsored apprentices -- all of whom had no future where they were.

Would that we had such an option for our own millions of unemployed youth.

Jim Rose writes:

The white settler states in South Africa and Rhodesia are intermediate examples.

Very successful for the white settlers.

The local economies moved from substance to exchange economies but investment in education of the indigenous population was small.

Ken B writes:

In 1776 the colonists were richer than Britons on average, yet independence was resisted.

Taeyoung writes:

Re: India -- in the late 19th century, there certainly seems to have been a perception that industrialisation was coming to British India. William Wilson Hunter's book England's Work in India (you can find copies in Google Books) has, in its second chapter a recitation of various economic advances in India, e.g. a increase in total exports, increases in cotton exports, transition of the population away from subsistence agriculture, introduction of steam powered looms in the textile industry, and the development of huge tea plantations. From the colonists' perspective (Hunter was a member of the Imperial Civil Service), the British had massively raised per-worker productivity in India; those gains were just swamped by the worldwide gains in productivity in the middle of the 20th century.

ChrisA writes:

The British Empire was a burden on the common British man, that's for sure, all the benefits, if any, that accrued to the vast majority of the British population could have been achieved by trade. On the negative side there were taxes and wars associated with the maintenance of the empire. This was recognised even in the time of the empire by many politicians even within the house of commons.

There was one group that did benefit though in prestige and power, which was the elite in Britain, the aristocracy and bureaucrats. They only paid a small part of the burden but got most of the benefits. They got to go to important conferences and quoted in the newspaper. They got large staffs and respected listening to their opinions.

Situations like this when the benefits are concentrated and the costs diffuse are quite stable for long periods. Actually, because of Britains industrial leadership at the time, and the nature of the countries ruled, and naval war being cheap, the cost was remarkably small as a percentage of GDP. After the second world war, this ceased to be true, and the uk, being a democracy, abandoned the empire hobby.

There are many parallels with the US today, the numerous wars being fought now and the very large standing military remain tolerated by the American population because the costs are pretty small given the vast size of the us economy compared to all others. Just like today the benefits accrue to a small elite. They have so far conflated their prestige with the larger population. But which of us have been respectfully listened to in major power conferences, took part in horse trading with opposite numbers in European chancelleries on, say Burma and so on? I remember reading recently in the NYT a repectful article on how Hillary Clinton had revitalized the state department formal dinners, bringing in star chefs and new exotic ingredients. Which of us wouldn't enjoy that kind of power and prestige?

I hear similar arguments in the uk at the moment about how Britains prestige and influence would be reduced if they left the European union. Of course what they mean is the power and prestige of the government officials and bureaucrats, the common many wont get his influence reduced as he didn't have any in the first place.

Of course none of this has anything to do with whether the colonization by Britain did any good or not. Typically this is not really a question asked about empires, I mean isn't the whole purpose of an empire pillaging? It seems a strange test to ask the British Empire to be held to a different standard to the rest. I think, maybe because it was the only empire, probably it did less harm than most. If it did bring any benefits, as Greg Clarke says, whether they took seed depended on the national characteristics.

Stoffe writes:

One of the primary reasons for colonies (financialy speaking) was to have a market that you can dump your goods on. Britain could control the market and use it to make profit since the industrialisation made for an ever growing produktion in Europe.

If Britain pushed for industrialisation in for example India the goods produced in Britain would not have a big market to dump it on. You bring an interesting argument to the table but i fail to se the importance in it. Inequality was existing in regions with no colonies and the result did not neccesary deviate.

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