Capitalism and Colonialism

It's a familiar notion, at least on the economic left, that capitalist industrialism was built on the surplus extracted from Europe's colonies. I wonder if the truth might not be almost the reverse: that the colonies were build from the surplus extracted from industrialization.

Spain and Portugal were the foremost early colonial powers, and extracted fantastic fortunes from their brutally oppressive colonies. The trouble with extractive colonialism in the model of the various East India companies is that they give enormous profits to a few individuals but at great cost to economic efficiency. Rent extraction adds little or nothing to technology or production, but it also penalizes all sorts economic productivity, especially in the colonies, but also in the colonizers.

Settler colonialism, in the model of the US, Canada, and Australia has generally been a big success - for the colonizers, though of course catastrophic for the victim nations). They have developed industrially without the dubious benefits, in most cases, of foreign colonies of their own.

The word colony has it's root in a Roman word for settled land, and much colonization has been driven by population pressure at home. That kind of colonialism tends to be more catastrophic for the colonized, but practically guarantees that the colonies will becomes clones and rivals of the metrepole, or colonizer.


  1. Even Yale University was built on an East India Company derived fortune.


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