Colonial legacy, factor endowments, and institutions

1. Colonial legacy, factor endowments, and institutions Political Economy of the Global South Prof. Tyson Roberts

2. What are some topics or questions you are interested in for this class?

3. Themes to look for in class films • What were some crises that occurred in the country? • Which groups were adversely affected by these crises? Which groups were favorably affected or unaffected? • What policies did they pressure for the government for? How did they apply this pressure? • Did the government respond? • If the government did not respond favorably, did the adversely affected groups change the government or regime? If so, how?

4. Mobutu example • Crisis: Copper production falls, Cold War aid ends • Unfavorable effect on soldiers & civil servants (salaries unpaid), students (no scholarships), etc. • Groups put pressure on government for relief • Government policies enrich Mobutu and family at cost of other groups • Pressure for change in political leadership or regime

5. What are some ways that the colonial experience can affect economic development and other social outcomes in the Global South?

6. Some ways that the colonial experience can affect economic development and other social outcomes in the Global South • Resource endowments or cash crop conditions => extractive colonial institutions => extractive post-colonial institutions • Arbitrary borders & authority structures => legitimacy challenges in post-colonial states

7. Reversal of Fortunes • Until the 1800s, many tropical countries were wealthier than temperate countries: • North America was considered less valuable than the Caribbean and Latin America. • Caribbean island of Guadaloupe (563 square miles) was considered equivalent in value to Canada. • In 1790, Haiti had the highest income per capita (including slaves) in the world.

8. Log GDP/capita: USA vs Mexico Source: Maddison

9. Log GDP/capita: China vs Canada Source: Maddison

10. Log GDP/capita: Australia vs India Source: Maddison

11. Why this reversal in fortunes? • One answer: Institutions • Where do institutions comes from? • One source: Colonial experience

12. based on a map by Wikimedia/Andrei nacu

13. based on a map by Wikimedia/Andrei nacu

14. Typologies of colonization • By colonial power: French, British, German, Belgian, Spanish, Japanese • According to some, former British colonies have better outcomes because British colonization created superior institutions • Evidence is weak/mixed

15. Typologies of colonization • By colonial power: French, British, German, Belgian, Spanish, Japanese • Settler vs. non-settler • Direct vs. indirect • Land lord vs. non-landlord • Predatory vs. developmentalist • Hegemonic vs. non-hegemonic

16. Sokoloff & Engerman • Settler colonies • Often in temperate climates with (relatively) small indigenous populations and available land • Large colonial populations • Colonial family farms • Food crops for local consumption (export surplus) • Social equality, for the most part, among colonists • Relatively low levels of income inequality

17. Settler colonies • Temperate climate with relatively small indigenous population => Credible exit option • Food crops for local consumption => Dependent state => Widespread franchise, education, protection of property rights • Economic opportunities, investment, public goods, social safety net • Industrialization, economic growth, low inequality among settlers

19. Examples of Settler colonies • US (especially northern colonies) • Canada • Australia • New Zealand • South Africa • Argentina • Singapore • Israel

20. Typologies of colonization • Non-settler colonies • Often in tropics w/ large indigenous population and/or soil suited for plantation crops such as sugar => import of African labor for cultivation • Small colonial population relative to indigenous or slave population • Plantations, mines, or payment of tribute • Often crops & minerals for export • Social inequality between colonists & indigenous and/or slave populations • High levels of income inequality

22. Examples of nonsettler colonies • Sub-Saharan Africa, excluding Southern Africa • Most of Latin America & Caribbean • South Asia (India, etc.) • Much of Southeast Asia • Much of the Middle East • (Southern states in US)

23. Typologies of colonization • Non-settler colonies • Direct rule (e.g., British in Africa) and non-landlord revenue collection systems (e.g., Bombay presidency) • Indirect rule (e.g., French in Africa) & landlord revenue collection systems (e.g., Bengal presidency)

24. What is the relationship between resource endowments, colonization and prosperity in independent Africa? Acemoglu, Johnson, and Robinson • High settler mortality => few settlers => extractive colonial institutions => poor institutional quality post-independence • Low settler mortality => more settlers => European-style institutions => good institutional quality post-independence

25. AJR present cross-national data that supports their argument

26. Determinants of institutions • Colonial power (often exaggerated) • Factor endowments • Settler mortality rates (from tropical disease) • Other geographic factors, such as distance • Economic structure (inequality, etc.) • Pre-colonial history contrast with colonial state • Slave trade

27. Did Congo-Zaire have a settler or non-settler colonial experience? How did this affect political institutions after independence?

28. What two types of legitimacy does Englebert use in his study?

29. Horizontal & Vertical Legitimacy • Horizontal legitimacy • Consensus about "the definition of the community over which rule is to be exercised." • Agreement over borders of states • Vertical legitimacy • Agreement over "the principle(s) upon which the 'right to rule’ is based." • No mismatch between colonial and precolonial states

30. African states with vertical legitimacy • Never colonized: Ethiopia • No human settlement prior to colonization: Islands such as Mauritius and Cape Verde • Colonial states with similar arrangement to precolonial system: Botswana, Lesotho, Swaziland, Rwanda, Burundi

31. Horizontal Legitimacy • Percentage of population which belongs to an ethnic group that was NOT split between at least two countries.

32. Does Congo-Zaire vertical and/or horizontal legitimacy based on its colonial experience? How did this affect political institutions after independence?

33. Somalis were divided among five different states

34. Many large ethnic groups were split by the colonial state borders of Congo-Zaire

35. Tuaregs in North Africa were split into four different states

37. The challenge for illegitimate states(p. 11) • “From colonialism, they inherited the instruments of statehood but not the power that came with it in colonial days.” • “contestations of policies by social groups, opposition parties, or interest groups tend to turn into challenges to the state itself …. Military takeovers, disputes about recruitment patterns in the administration or armed forces to armed rebellions, and arguments on the allocation of national resources to secession and irredenta attempts.”

38. Why do (sometimes arbitrary) institutions endure? • Path dependence • QWERTY keyboards • Vested interests • Winners want to keep winning

39. Some symptoms of low development • “Bad” policies • Poor institutions • Low investment in education, health care, infrastructure

40. Income level & institutions

42. Poor institutions, bad policy Low economic development

43. High economic development Strong institutions or good policy

44. A solution: identify exogenous or “first” causes • Colonial experience • Natural resource endowments • Geography • Ethnic cleavages

45. For example, Geographic factors Colonial experience Institutional quality Low economic development

46. Short-term vs. long-term growth • Colonial history is not destiny • Haiti & Dominican Republic have same geography & similar colonial experience (200 years ago), yet different outcomes

47. The Haitian-Dominican Border

48. Short-term vs. long-term growth • Colonial history is not destiny • Haiti & Dominican Republic have same geography & similar colonial experience (200 years ago), yet different outcomes • North and South Korea were a single kingdom, and then colonized by the Japanese, yet different outcomes

50. Conclusions • Colonial history has an important effect on post-colonial state institutions • Institutions tend to endure or affect the development of new institutions • Institutions affect social interactions, including politics and economic transactions, thereby affecting social outcomes such as economic development, political rights, and civil liberties