Economic Transformation

Political domination did not lead automatically to changes in the economy. To make profit beyond occasional plundering and traditional ways of taxation, a mise en valeur (English: “capitalizing on the colony/valorization”) was necessary, which proved to be difficult in many cases. There are more and less effective ways of making money out of colonies:

  • opening them for trade: an ‘open door’-policy attracts competitors and is therefore, regarding the net effect, an uncertain way to make money; a preferential tariff policy, on the other side, gives trade with the metropole country an advantage, but it usually leads to trade distortion, lower trade volumes and therefore lower duties, as well as higher prices to the disadvantage of the consumers;
  • similarly distortive are policies which give investors from the metropole country advantages over their competitors;
  • the exploitation of their natural resources: From the beginning of European colonialism, the control over gold and silver mines or at least over the bullion trade was in the foreground, but also timber, especially teak, and later petroleum, was sought after.
  • There are two ways of producing cash crops for exports, by setting up plantations, which usually requested high financial investment and were foreign-owned, or by making farmers produce certain crops on their land, by coercion or financial incentives.

Mining and plantations required costly investment in the infrastructure (harbors, streets, railways etc.). All colonial powers followed the idea that these investments should be generally financed by the colony, but the ways to secure the finances were different, among colonies and over time.

We focused on these seven indicators for the colonial impact on the economy:

  • trade policy (TRADEPOL)
  • trade concentration (TRADECON)
  • investment concentration (FDICON)
  • investment in infrastructure (INVEST)
  • plantations (PLANTAT)
  • mining (MINING)
  • gold/silver/diamonds (GOLD)