Capitalism and Colonialism - what's the relationship?

For years I have wondered about the historical context is that has created the world in which we live. I’ve explored it from the context of maritime history and anthropology, but this the first time looking at it through the lens of economics. Having said that, it is often difficult to know what the causation of events are. We humans are very gifted storytellers and create wonderful narratives to draw correlations between events. Then those stories propel us forward, seemingly providing legitimacy for our future choices.

This leads me to something Jill said in one of our first classes. She posited that there was a relationship between colonialism and capitalism. In Capitalism: A Very Short Introduction James Fulcher talks about 3 stages of capitalism in Britain. I can't help but notice that the first stage, Anarchic Capitalism (pg. 38), began as Britain became a naval superpower sailing around the world claiming land, resources, and people.

During the second stage of capitalism, Managed Capitalism (pg 41), most of the world's land was controlled by a powerful nation-state with a military to defend borders and trade. And the third stage, Remarketed Capitalism (pg 47), took place post-WWII when many former colonies gain independence.

In the 1970’s and Remarketed Capitalism old colonizers shifted from Keynesian ideas of big government and unions, low unemployment rates, and high taxes to new ideals of free-markets, low taxes, and low inflation. They then took these ideas and infused them into International Monetary Fund (IMF) and the World Bank lending practices. As told by the documentary Life and Debt, these newly independent countries needed money to pay bills, but had little money to do so. The only institutions willing to lend them money required countries, such as Jamaica, to undergo huge social and economic changes based on neoliberal policies. To be eligible for IMF loans Jamaica was forced to open their markets to foreign trade, increase inflation rates and stop subsidizing local goods and services. As a result potatoes, milk, and meat grown in Jamaica cost more to purchase than American subsidized potatoes, milk and meat imported from the US. England gave Jamaican bananas preferential treatment so that they were cheaper to purchase in England.

As a result, the infrastructure to grow milk cows, chickens, and potatoes were taken over to growing bananas. Bananas were the only Jamaican food that the old colonizers wanted to eat, thus Jamaica’s agricultural diversity was crippled and ability to effectively feed themselves abolished.

In Globalization: A Very Short Introduction Manfred Steger discusses the ways in which globalization itself has been converted into a commodified ideology. One of the main tenets of this ideological argument is that globalization (the process) and free-markets benefit everyone and spreads democracy. According to Steger, in 1989 more than half of all imports to the US from the global South were from democratic countries. Yet in 1999, ten years later with more democratic countries in the world, the US trades with fewer democratic countries from the global South. Almost two-thirds of all imports from the global South come from dictatorships where wages are lower, unions are less prevalent, and environmental laws are less stringent (pg. 111). This brings up the question, how do free-markets and globalization really support democracy and who is really benefiting?

Another main tenets supporting globalization is that it is inevitable and irreversible. This has the effect of de-politicising the conversation and perpetuating colonialist mindset that justified stealing land, resources, and people. When globalization is described as unstoppable it ends up furthering the erroneous 19th-century notions that there are “inexorable laws of nature favouring Western civilization, the self-regulating economic model of perfect competition, the virtues of free enterprise, the vices of state interference, the principle of laissez-faire, and the irreversible evolutionary process leading up to the survival of the fittest” (pg 101).

A number of big changes happened in the global North during the 1970’s. There was high inflation, low economic growth, national deficits, energy crisis and a number of major political shifts (Globalization, pg 39) and there was increase international competition (Capitalism, pg 48). Both books seem to agree that these crises lead to changes which ultimately transitioned away from Keynesianism and towards neoliberalism. These changes in the global North, which required the heavy hand of government to implement, were also forced on to countries in the global South looking for IMF and World Bank loans.

The question I keep coming back to why did the global North think that what they thought was the best economic path forward for the North, would also be good for the global South? What are the correlations that policy makers mistook for causations? Did they think that by resorting to a kind of “free-market” cowboy mentality of 18th-century Anarchic Capitalism would jump start national and global economies, which was based on a time when unrestricted growth was fueled by theft and poverty in so much of the world? Or were policy makers hoping that by controlling economic policy in independent countries they could control international competition in a way that benefited them?

It seems to me that erroneous mental models set into motion centuries ago are still playing out today. And their effect, as seen through colonialism, neoliberalism, and free trade are just perpetuating old power relationships. It is necessary for us to understand these mental models if we are to find powerful leverage points to make profound changes.