At the Institute of Economic Affairs, Kristian Niemietz is working on a paper on the economics of empire that, as he shows in this article, indicates that the empire was never a winning economic proposition for Britain as a whole, no matter how well certain well-connected individuals and companies benefitted:
The British Empire in 1914 (via antiquaprintgallery.com)
But is it actually true that imperialism makes countries richer? Does imperialism make economic sense?
This question was already hotly debated at the heyday of imperialism. Adam Smith believed that the British Empire would not pass a cost-benefit test:
The pretended purpose of it was to encourage the manufactures, and to increase the commerce of Great Britain. But its real effect has been to raise the rate of mercantile profit, and to enable our merchants to turn into a branch of trade, of which the returns are more slow and distant than those of the greater part of other trades, a greater proportion of their capital than they otherwise would have done […]
Great Britain derives nothing but loss from the dominion which she assumes over her colonies.
He believed that Britain would be better off if it dissolved its Empire:
Great Britain would not only be immediately freed from the whole annual expense of the peace establishment of the colonies, but might settle with them such a treaty of commerce as would effectually secure to her a free trade, more advantageous to the great body of the people, though less so to the merchants, than the monopoly which she at present enjoys.
The liberal free-trade campaigner Richard Cobden agreed:
[O]ur naval force, on the West India station […], amounted to 29 vessels, carrying 474 guns, to protect a commerce just exceeding two millions per annum. This is not all. A considerable military force is kept up in those islands […]
Add to which, our civil expenditure, and the charges at the Colonial Office […]; and we find […] that our whole expenditure, in governing and protecting the trade of those islands, exceeds, considerably, the total amount of their imports of our produce and manufactures.
If imperialism was a loss-making activity – why did Britain and other European colonial empires engage in it for so long?
Smith and Cobden explained it in terms of clientele politics (or Public Choice Economics, as we would say today). Somebody obviously benefited, even if the nation as a whole did not. And the beneficiaries were politically better organised than those who footed the bill.
This proto-Public Choice case against imperialism was not limited to political liberals. Otto von Bismarck, the Minister President of Prussia and future Chancellor of the German Empire, hated liberals in the Smith-Cobden tradition, but he rejected colonialism in terms that almost make him sound like one of them:
The supposed benefits of colonies for the trade and industry of the mother country are, for the most part, illusory. The costs involved in founding, supporting and especially maintaining colonies […] very often exceed the benefits that the mother country derives from them, quite apart from the fact that it is difficult to justify imposing a considerable tax burden on the whole nation for the benefit of individual branches of trade and industry [translation mine].
In his writing about the economics of imperialism, even Michael Parenti, a Marxist-Leninist political scientist (who is, for obvious reasons, popular among Twitter hipsters), sounds almost like a Public Choice economist:
[E]mpires are not losing propositions for everyone. […] [T]he people who reap the benefits are not the same ones who foot the bill. […]
The transnationals monopolize the private returns of empire while carrying little, if any, of the public cost. The expenditures needed […] are paid […] by the taxpayers.
So it was with the British empire in India, the costs of which […] far exceeded what came back into the British treasury. […]
[T]here is nothing irrational about spending three dollars of public money to protect one dollar of private investment – at least not from the perspective of the investors.”
This leads us to a curious situation. Today’s woke progressives disagree with their comrade Parenti on the economics of empire, but they do agree with Britain’s old imperialists, who argued that the Empire was vital for Britain’s prosperity.
Britain built an empire because it was rich, it did not get rich because it had an empire.
Comment by Perry de Havilland — January 20, 2024 @ 17:37
Yet many people assume — because that’s the way it’s been taught for generations — that the empire came first, then the riches automatically followed, because racism, oppression, looting, etc.
Comment by Nicholas — January 20, 2024 @ 21:26