Imperialism

Genuine plunder of one nation or people by another has been all too common throughout human history. During the era before the First World War, when Germany had colonies in Africa, only 4 of its 22 enterprises with cocoa plantations there paid dividends, as did only 8 of 58 rubber plantations and only 3 out of 49 diamond mining companies. At the height of the British Empire in the early twentieth century, the British invested more in the United States than in all of Asia and Africa put together. Quite simply, there was more wealth to be made from rich countries than from poor countries. For similar reasons, throughout most of the twentieth century the United States invested more in Canada than in Asia and Africa put together. Only the rise of prosperous Asian industrial nations in the latter part of the twentieth century attracted more American investors in that part of the world. Perhaps the strongest evidence against the economic significance of colonies in the modern world is that Germany and Japan lost all their colonies and conquered lands as a result of their defeat in the Second World War—and both countries reached unprecedented levels of prosperity thereafter. Wealthy individuals in poor countries often invest in richer countries, where their money is safer from political upheavals and confiscations. What we call “foreign aid” are transfers of wealth from foreign governmental organizations to the governments of poorer countries. The term “aid” assumes a priori that such transfers will in fact aid the poorer countries’ economies to develop. Because it is a transfer of wealth to governments, as distinguished from investments in the private sector, foreign aid has encouraged many countries to set up government run enterprises that have failed. The vast sums of money dispensed by foreign aid agencies such as the International Monetary Fund and the world Bank give the officials of these agencies enormous influence on the governments of poorer countries -- regardless of the success or failure of the programs they suggest or impose as preconditions for receiving the money. Sometimes a richer country takes over a whole poorer society and heavily subsidizes it, as the United States did in Micronesia. So much American aid poured in that many Micronesians abandoned economic activities on which they had supported themselves before, such as fishing and farming. If and when the Americans decide to end such aid, it is not at all certain that the skills and experience that Micronesians once had will remain sufficiently widespread to allow them to become self-sufficient again. One of the leading development economists of his time, Professor Peter Bauer of the London School of Economics, has argued that, on the whole, “official aid is more likely to retard development than to promote it.”