How do colonial institutions and practices contribute to nowadays economic performance?
Nowadays countries are split between developed and developing countries based on their economic performance. We have as an example United States, Colombia and Haiti. Being the North American country, the developed and the Latin America and Caribbean ones the developing countries. An accurate indicator to see the divergence between these three countries is the GDP per Capita. This is an indicator that allows us to compare the overall economic performance of the countries. First, we have United States which has a GDP per capita average for the 21st Century of 2,9%. Having a cipher of 44.726 USD for the 2000 and 54.579 USD for 2018. Second, Colombia with an average growth of 6%, which is higher than the US, but the numbers are much lower. In 2000, Colombia had a GDP per capita of 4.857 USD and for 2018 was 7,691 USD. Finally, Haiti had an average growth of 3,8%. However, Haitian GDP per capita for 2000 was 467 USD and 868 for 2018 (World Bank, 2020). These indexes can give a perspective on how superior the United States in comparison with Colombia and Haiti in economic matter is. On how superior the outcome of the inclusive colonial institution against the extractive colonial institution is.
This division was determined during
the colonial period in which the colonizers sealed the destiny of the colonized
regions for the long run. This approach can be analyzed thanks to economic
history. This counts with a principal factor that traced the path for actual
issues. These are the nature and objective of the colonizers’ institutions. This
key factor will be compared in the United States, Haiti, and Colombia cases,
which were colonized by the British, French and Spanish empire respectively.
The institutional approach does not only give us an economical perspective, but
also, as Veblen (1899) said, an economic and social behavioral perspective.
The institution applied by each
empire merely relied on the geographic features found in the target regions.
The inclusive institution, led by the British empire, was used in geographical
areas where the natural resources were scarce. In the colonial United States,
the natural resources were not as abundant as in the Caribbean and the Latin
American regions. This availability of resources is translated to incentives
for explorers to migrate to the colonies. As United States did not have large
amount of natural wealth, in comparison to Huancavelica or Potosí, had to
create incentives to have new settlers in the recent discovered areas. As Rosenbloom
(2018) describes, the British crown fostered the creation of companies and
associations to explore, composed by settlers and investors. The benefit that
these companies had was the creation of monopolies on the economic sector or
products they would specialize on. The communication between the settlers in
the Americas and investors on Britain was harsh and very tedious because of the
distance and delays that would present the trans-Atlantic communication. As a
result, the settlers created colonial laws and regulations for their society. Despite
this apparently independent or self-government attitude, the settlers always
felt part of the crown. Once the crown increased its power in the colonial
region, it assured and protected the monopolies that were exploited. This liberal
thinking of the property rights helped to emerge several values that nowadays
are predominant in the American society. The most important one is protection
of individual rights and freedom. This land ownership helped to dynamize the
market for the colonial economy. By 1606 the Virginia Company was founded under
this umbrella of opportunities. This company marked the beginning of a large
and complex economic system for the colonial period. The British empire
attitude towards the British America set the bases for the prosperous economy
that is nowadays. Thanks to the implementation of inclusive institutions that allowed
a free development on the protection of individual rights, freedom, political
equality and participation, and, therefore, economic development. A very
different approach set side by side with the Spanish and French Empire.
The Spanish empire arrived and settled,
at what nowadays is Colombia, in the period of 1500-1560. It was called the
colony of Nueva Granada. A colony in which the natural resources were abundant,
and with various aboriginal groups living in this area. However, according to
Banco de la República de Colombia these aboriginal peoples were reduced by 83%
during this period. Basically, due to several European diseases and abuse from
the Spaniards. Once the Spanish empire settled in the territory, they started
implementing attitudes aiming to the extraction of the natural resources and
taking advantage of the favorable climate for certain agricultural products,
such us cinchona bark, tobacco, cacao, etc. In addition, the Spanish empire
opted for the evangelization and transformation of the indigenous peoples into
the Catholic church. Another fact that led to the diminution of native
population. Several extractive institutions were used during the colonial
times, with a total of 5, each one of them provided more freedom than the last
one but they all restrained them from liberty. According to Kalmanovitz (2015) The
first and oldest one is called La Encomienda. This agrarian organization can be
compared with the Feudal regime, in which an Encomedero (knight) had to oversee
and supervise the production of agricultural products that later will be for
his joy or a superior entity. All of this based on forced labor, starring by
the aboriginal people (peasants) which suffered from brutal punishments and a
very poor quality of life. Here the aboriginal people did not have rights or
votes. They neither had duties, they had obligations. The exchange of
agricultural production and protection was the basis of this organization.
Mainly focused on the central part of Nueva Granada. This cruel organization
disappeared around the 17th century and a new one was established
under the name of “Mita”. This scheme is a little more freely than the previous
one, since the Spaniards claimed the labour force from the indigenous
populations and had a payment for their services. However, the native people
did not have the option to refuse, the work conditions were infra humanitarian,
and the payment was miserable. A big proportion of the indigenous communities
decreased due to these conditions. This was just another kind of forced labor.
The workers were forced to travel very long distances and were not fed
correctly. A bunch of them died during these journeys due to hunger. Other
workers died during the labor hours. Its main economic activity was the
extraction of gold and silver. Later, the Mita was eliminated because the
native population was decreasing dramatically. Subsequently, the Resguardos
were created. Here a Spaniard called “Regidor” will have indigenous peoples
that could work free but paying a special tax called “tributo indigena” and the
“Regidor” will provide them public goods. All Regidores where the owners of the
lands. This was part of the land monopoly. This monopoly is much more closed in
comparison with the property rights of the United States, since the owners
could only be Spanish people or members of the Catholic Church. In addition,
there was a law called “Mayorazgo” which stated that the oldest child of the
owner should be the one that will inherit the land. Resulting on unlimited
concentration of land and stagnating the market economy. The Resguardos were
not dissolved until the first constitution of Colombia came out in 1821.
Another institution that was parallel to the previous one was the “Hacienda”.
This type of institution was the most important one as it was the most used. It
was like the plantations. However, this one was not based on slave work force
and aimed for external markets, but had a non-forced labor composed mostly of
Mestizos and free poor white people and aimed for local markets. The Hacendado
which was the head of the organization had economic and political power besides
the Mercedes de Tierra, which was the property rights over the land. Some
regions of Colombia used these exclusionary institutions, and some did not. The
ones that did not opt to use them where the ones that had better economic
development overtime.
The main representative region in
which these institutions were not used was Antioquia. Located in between the
Central and Western cordilleras. This region of the colony appeared to have
exponential growth and more indexes of prosperity in comparison with the other
regions where slavery, Mitas, and Resguardos were used.
Figure 1
Production of gold in Cauca, Chocó and Antioquia
during the XVIII century.
This graph can evidence that
Antioquia had an exponential growth in a period of 60 years and even passing by
the leader of gold production in that time that was Cauca. Furthermore, it
might be pointed out that Cauca and Chocó needed a period of almost a hundred
years to reach the final values only for being passed by Antioquia. In Chocó
and Cauca, the predominant institutions were slavery and Mita to produce gold
and the high concentration of land was present. In Antioquia, the work force
was composed by white-poor immigrants, instead of slaves. Furthermore, the
property rights were granted over the people leading to a more dynamized land
market. Nowadays, Antioquia contributes 14,39% of the Colombian GDP while Chocó
and Cauca contribute 0,38% and 1,77% respectively (DANE, 2019). In the gold
mining sector can be appreciated that Antioquia in which the property rights
were respected, and the institutions were not as exclusive as in Choco and
Cauca has had a better socioeconomic performance in the long run.
In the Colombian case was presented
the most important-used institutions in the performance of colonial economic
activity. Most of them had an extractive and exclusive approach that did not
contributed to the amelioration of the colony itself, but the colonizers
interests and greed. However, even if the overall outcome of Colombia was bad,
in a micro scenario inside itself, some regions that decided to use more
inclusive institutions were able to have a better economic performance in the
long run.
A third case will be presented, in
order to have a complete comparison between the three main European empires and
their colonies outcomes. Haiti was the country that had to suffer the most
after its independence. Being labelled as one of the poorest countries in the
world (Henochsberg, 2016). Haiti was left behind by the Spanish empire because
this one decided to focus more on the littoral part of Latin America. By 1697
France gained possession over the western region of Hispaniola. In this region,
the conditions were favorable for “sugar, coffee, tobacco and indigo for
International trade” (Henochsberg, 2016). In other words, agricultural
labor-intensive products. For its production, France decided to import a
considerable number of slaves. Shortly after, the “France Noire” became to be
“two thirds of the French international commerce” (Barros, 1968). Much of the
population were slaves while the white people were a minority but had most of
the wealth. It is important to point out the significance of being a slave with
the “Colbert’s Black Code (…) a slave became a personal property that could not
own anything and had no juridical status” (Henochsberg, 2016). The plantations
based on slavery is the most repressive institution that will lead to a very
poor economic performance in the long run. Having this extreme oppression, the
economy of the colony will be highly dependent on the colonizer and it will not
be able to start developing by itself. The French empire was the maximum
expression of an oppressive empire with this colony since it takes all the advantage,
he could from it, and when they were no more necessary (mainly because the
independence phase was starting) drawback with one condition. A huge debt that
the Haitians had to pay in order to get independent. A debt that was a burden
for Haiti until 1947 that were able to pay the debt. Haiti French colony
suffered from very oppressive institutions that made its economy since its
independence to grow in baby steps and even to make it one of the poorest and
more unequal countries of the world.
The empires attitudes towards their
colonies are the ones that have written the guidelines of the actual economies.
This can be summarized in two kinds of institutions the extractive and the
inclusive. The inclusive institution has allowed the countries, in which it was
applied, to create a direct relationship between the institution and the
societal, political and economic performance. Even once the colonies became
independent. A common factor in which this was applied was in the regions where
natural resources where scarce such as Canada, New Zealand, South Africa, and
United States. The case of this last country is a perfect example of this
direct relationship. In which the British empire opted for institutions and
regulations that allowed to protect individual rights, foster the economy, and
well-structured political bases. On the other hand, extractive institutions overtook
by the Spanish and the French empire have as a result, countries that do not
present a good and stable economic growth. A common pattern that can be seen in
the colonies where this was implemented is the abundant presence of natural
resources. The less extreme case of repression is Colombia. In which some
regions were ruled under the extractive approach while others were not. The
regions where it was ruled, are the ones that present more poverty than the
geographical areas that the institutions were not used. However, in general,
Colombia shows a huge difference in performance in comparison with the United
States. Finally, Haiti was the most extreme case of the repressive institution.
A very important piece for France since it was “the most important of the sugar
colonies of the West Indies” (Smith. A, 1776). Having this important and
strategic colony France wanted it to be merely a production colony, in which
the supervisors, guards and governors were the only free people. The rest were
slaves, people without individual freedom. All this slave dependent mechanism
due to the easiness that crops of tobacco, sugar and cotton was produced and the
amount of natural resources. To conclude, it must be established an inverse
relationship between the presence of natural resources and the existence of
inclusive institutions. Subsequently, a direct relationship must be set up
between the existence of inclusive institutions and a future stable and
successful economic performance. Indeed, a direct relationship between
inclusive institutions and future economic performance should be established.
Furthermore, following this logical process, there is an inverse relationship
between the presence of natural resources and a successful economic
performance. The more the natural resources there are, the worst economic
performance it will has in the future.
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