The Benefits Of British Colonialism

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In most circles, colonialism is considered to be a sad episode in history—where dominant economic powers with sophisticated military might subjugated less developed, more vulnerable societies, turned them into colonies, imposed foreign languages and organizations upon them, and exploited local natural resources and labor. Indeed, Karl Marx argued that mature capitalist economies required such colonies in order to forestall their inevitable stagnation and decline. And there was a heavy price paid by the colonies themselves, with long-term negative consequences that are often pointed to as the reason why many of those societies remain poor today.

But this dark story has now been revised. A recent series of papers co-authored by Hoover Property Rights Task Force members Daron Acemoglu and James Robinson found that there were advantages from colonization as well, especially for those colonies within the British Empire. English institutions, such as the common law, property rights security, contract enforcement, and banking and trading practices provided a positive basis for economic growth in the colonies that has persisted.

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As with all cross-country economic-growth comparisons, however, any measure of legal, political, or economic institutions, regardless of their source, must be done at a high level of aggregation with little specific detail. For this reason, it is hard to know why England, as compared to, say, France or Spain, was the possible cause of these benefits; precisely what they were; and how they were transmitted to the colonies.

In a new study in honor of the 1991 Economics Nobel Prize winner Ronald Coase, Dean Lueck, Trevor O’Grady, and I addressed these issues by examining the demarcation of property rights to land, the most basic resource in a developing economy. For any society to become rich, a precondition is that its land must be used productively and that land markets must emerge. Markets direct land to its highest-valued uses, redirect it as those change, and promote the consolidation or breakup of holdings in order to seize new economic opportunities. Secure property rights, of course, are essential, but some demarcation practices are more effective than others. In flat areas, for instance, squares have productive advantages and their uniformity allows for secure property boundaries and standardization for market trades.

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