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Extractive colonial economies and legacies of spatial inequality

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Extractive colonial economies and legacies of spatial inequality

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Extractive colonial economies and legacies of spatial inequality: Evidence from Africa

Philip Roessler, Yannick Pengl, Robert Marty, Kyle Sorlie Titlow, Nicolas van de Walle 06 December 2020

There has been a resurgence of research in economics on the ‘long shadow’ cast by European colonialism on development. (Michalopoulos and Papaioannou 2017a, 2017b) At the heart of much of this literature is a focus on the long-run effects of imperial extraction – the institutions and systems, such as the slave trades and mining and plantation economies, designed to extract primary commodities to supply to markets in Europe. At the country level, extractive institutions have been a key source of underdevelopment via their legacies of political and economic inequality, societal fractionalisation, and poor property rights (Engerman and Sokoloff 1997, Acemoglu et al. 2001, Nunn 2008). Likewise, exploitative and violent schemes within countries such as the Peruvian mita (Dell 2010) or rubber plantations in the Belgian Congo (Lowes and Montero 2016) caused enduring harm on local economies. Other studies, however, suggest that colonial investments in extractive economies, especially in infrastructure and agricultural processing, produced positive path-dependent effects as it engendered economic agglomeration, urbanisation, and in some cases industrialisation (Dell and Olken 2020, Jedwab and Moradi 2016).

How can we make sense of these seemingly contradictory effects? Did localised agglomeration spurred by colonial investments ‘counterbalance’ colonialism’s negative macro-level effects (Dell and Olken 2020)? Or did subnational extraction reinforce weak institutions via the emergence of enclave economies and a legacy of spatial inequality (Rodney 1972, Hirschman 1977), thus dividing societies and weakening their collective capacity to usher in country-level institutional reforms? We address these questions in a recent working paper by analysing the spatial implications of colonial extractive economies across 38 countries in sub-Saharan Africa (Roessler et al. 2020). 

The cash crop revolution and colonial extraction in Africa        

Extractive colonialism in Africa was connected to two economic revolutions that took off in the 19th century prior to the Berlin Conference: the mineral and cash crop revolutions. The former emanated from South Africa with the discovery of diamonds in Kimberley in 1867. The latter began decades before that in West Africa as the region’s economies underwent a structural transformation away from the slave trades to agricultural commodity production (Hopkins 1973). While Africa’s mineral riches tend to gain more notoriety, cash crops proved much more important to colonial economies. By one estimate, at the end of colonialism cash crops accounted for 63% of total exports across 38 states (Hance et al. 1961).

A common reference on the long-run effects of colonial cash crops on development is Engerman and Sokoloff’s (1997, 2000) analysis in the Americas. Yet, Africa diverged from the Latin American model. Plantations, especially in West Africa, proved inefficient and generally failed. Instead cash crop production was dispersed across millions of smallholder farmers, and thus more closely resembled the family farms of food staples in New England. Moradi et al. (2013) find that, in the cocoa producing regions of Ghana at least, this generated significant improvements in households’ living standards. We find households in cash crop regions across Africa continue to experience higher levels of wealth today (see Figure 1). But these centres of commercial agricultural production did not stimulate the economic differentiation and horizontal economic growth that staples did in the US and Canada. If anything, they more closely approximated the enclave economies of Latin America. 

What accounts for this? For one – and in line with the classical staples literature in economics – Africa’s commercial agriculture was exclusively for export, limiting the emergence of domestic production linkages (North 1959). But these market structures and their effects cannot be isolated from the imperial trading regimes in which cash crops were embedded (Hirschman 1977).

As the trade in agricultural commodities took off in West Africa in the 19th century, lifting up smallholder farmers, it also pulled European trading houses deeper into the region beyond the coastal ports where they were located during the slave trades (Akyeampong 2014). Occurring at the height of imperialism, European merchants leveraged mercantilist practices and institutions – such as gunboat commerce, trading monopolies and oligopolies, foreign-financed infrastructural investments, and, ultimately, formal colonisation – to dominate Africa’s agricultural markets (Rodney 1972). European-financed transportation infrastructure, especially railways, fuelled the cash crop trade and the competitiveness of African farmers (Jedwab and Moradi 2016). But, this new transportation infrastructure was designed to vertically integrate agricultural zones with African ports. Together with protective trade policies (e.g. limiting exports to bulk, raw commodities), it further displaced local forward production linkages outside of Africa, thwarting local processing, manufacturing, and domestic economic differentiation that otherwise might have resulted (Hirschman 1977). Beyond the prized cultivation zones and trading hubs, other areas were either neglected or relegated as a labour reserve and intentionally underdeveloped to create a cheap supply of labour to work in cash crop and mining enclaves (Amin 1974). 

The upshot is that while Africa’s cash crop revolution boosted economic agglomeration in areas highly suitable for such agricultural commodities, it tended to engender weak domestic production linkages and limited positive spillover effects. Even worse, the exploitative nature of colonial economic institutions may have left nearby non-cash crop areas worse off than they otherwise would have been, entrenching inequality. 

New data on Africa’s cash crop revolution

To test this argument, we have built a comprehensive dataset of historical African economic geography, including detailed geospatial information on sites of cash crop production and mining. The latter data was extracted from a map published in 1961 depicting the source location of more than 95% of all exports across 38 African states (excluding South Africa), standardised in 1957 US dollars. Constructed by a team led by renowned geographer of Africa, William Hance, the map draws on “hundreds of sources…including maps, articles, agricultural yearbooks, reports of commodity boards, and product and regional studies” (Hance et al. 1961). As far as we know, the Hance dataset is the most exhaustive and granular representation of the spatial diffusion of the cash crop revolution across Africa but has never been systematically analysed. We validated Hance’s map by independently collecting administrative data from colonial records and other historical sources on the volume and value of the most important agricultural commodities and minerals produced by each state standardised in 1960 US dollars and aggregated at the level of subnational administrative units. The geographic distribution of cash crop agriculture and mining sites at the end of colonialism is depicted in the upper-right panel in Figure 1.

To analyse the effects of historical primary commodity production on spatial patterns of development in Africa, we regress contemporary economic outcomes (e.g. quality roads, satellite-detectable luminosity at night, a city with at least 10,000 inhabitants, and household wealth) measured across 28,166 quarter-degree grid cells on binary indicators of historical cash crop or mineral production (at least some versus none) and a host of geographic and historical control variables. To account for the potential endogeneity of historical cash crop production, we use mean agro-climatic suitability across the eight most important African cash crops (cocoa, coffee, cotton, groundnuts, oil palm, sugarcane, tea, tobacco) to instrument for observed production. Cash crop suitability can be seen as nature’s intention to treat certain areas with cash crops – which is plausibly exogenous with respect to contemporary urbanisation rates, state building, infrastructure, and economic activity.  

Results

The four maps in Figure 1 visually present the central argument and empirical approach: cash crop suitability (upper-left panel) at least partially shaped the distribution of historical cash crop production (upper-right panel), which in turn structured colonial infrastructure investments and the development of export-oriented cash crop enclaves (lower-left panel) that have wrought severe and persistent subnational variation in economic development (lower-right panel). Figure 2 reports coefficient plots derived from four different statistical methods (see Roessler et al. 2020 for details). Our baseline OLS models in row 1 indicate that colonial cash crop cells had a 16 percentage points higher probability of having a quality road in 1998, close to a 20 percentage point higher likelihood of emitting night-time lights in 2015, a 19 percentage point higher likelihood of having a city in 2015, and 14% of a standard deviation greater household asset-based wealth. Historical cash crop production exhibits a comparable effect on contemporary roads, electrification, and cities as colonial mineral extraction, despite the more capital-intensive nature of mining.

Figure 1 Cash crop suitability, colonial resource extraction, and colonial and post-colonial infrastructural development across Africa

Extractive colonial economies and legacies of spatial inequality 1

Figure 2 Estimates of colonial resource extraction on contemporary patterns of development in Africa 

Extractive colonial economies and legacies of spatial inequality 2

Figures 1 and 2 suggest a strong path-dependent effect of colonial extraction on local long-run development. In our working paper, we show that a large share of this effect operates through the colonial investments in roads, railways, and power plants (Roessler et al. 2020). To better understand the distributional implications of these findings, we investigate regional spillover effects of colonial cash crop production. We re-estimate our baseline models including variables for proximity to cash crops (i.e. for each grid cell, whether it falls within 0-25, 25-50…225-250 km of a colonial cash crop point). Across all outcomes, we find positive and significant spillovers but only up to 50 km. For night-time luminosity and urbanisation, we find negative and mostly significant spillovers between 75 and 250 km from colonial cash crop sites. These results suggest that concentrated investments in colonial cash crop enclaves crowded out development in other areas, which appear worse off today than predicted by geographic conditions and precolonial factors. 

Figure 3 Spillover effects of colonial cash crop production on contemporary development across Africa 

Extractive colonial economies and legacies of spatial inequality 3

Overall, our analysis helps to reconcile the seeming differences between national-level and local-level impacts of extractive colonialism. Rather than offsetting negative institutional effects, the subnational extractive processes likely made them worse by forging regional inequalities. With colonial production also re-constructing and sharpening ethnic identities (Pengl et al. 2020), ethno-regional inequality would thwart the formation of cross-cutting social coalitions necessary to bring about institutional reform. The legacy of the colonial economy in Africa was thus a negative feedback loop of weak institutions and spatial inequities. 

 

References

Acemoglu, D, S Johnson and J A Robinson (2001), “The colonial origins of comparative development: An empirical investigation”, American Economic Review 91(5): 1369-1401.

Akyeampong, E (2014), “Commerce, credit, and mobility in late nineteenth-century Gold Coast: changing dynamics in Euro-African trade”, in E Akyeampong, R H Bates, N Nunn and J Robinson (eds), Africa’s development in historical perspective, Cambridge University Press, 231-263.

Amin, S (1974), Modern Migrations in Western Africa: Studies Presented and Discussed at the Eleventh International African Seminar, Dakar, April 1972, Oxford University Press. 

Dell, M (2010), “The persistent effects of Peru’s mining mita”, Econometrica 78(6): 1863-1903.

Dell, M and B A Olken (2020), “The development effects of the extractive colonial economy: The Dutch cultivation system in Java”, The Review of Economic Studies 87(1): 164-203.

Engerman, S L and K L Sokoloff (1997), “Factor endowments, institutions, and differential paths of growth among New World economies”, In S H Haber (ed.), How Latin America Fell Behind: Essays on the Economic Histories of Brazil and Mexico, 1800- 1914, Stanford University Press, 93-117.  

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Hirschman, A O (1977), “A generalized linkage approach to development, with special reference to staples”, Economic Development and Cultural Change 25:67-98.

Hopkins, A G (1973), An Economic History of West Africa, Columbia University Press. 

Jedwab, R and A Moradi (2016), “The permanent effects of transportation revolutions in poor countries: evidence from Africa”, Review of Economics and Statistics 98(2): 268-284.

Lowes, S and E Montero (2016), “Blood rubber: The effects of labor coercion on institutions and culture in the DRC”, Working Paper.

Michalopoulos, S and E Papaioannou (2017a), The Long Economic and Political Shadow of History, Volume 1, a VoxEU.org eBook, CEPR Press.

Michalopoulos, S and E Papaioannou (2017b), The Long Economic and Political Shadow of History, Volume 2, a VoxEU.org eBook, CEPR Press.

Moradi, A, G Austin and J Baten (2013), “Heights and development in a cash-crop colony: living standards in Ghana, 1870-1980”, African Economic History Working Paper 7/2013.

North, D C (1959), “Agriculture in regional economic growth”, Journal of Farm Economics 41(5): 943-951.

Nunn, N (2008), “The long-term effects of Africa’s slave trades”, The Quarterly Journal of Economics 12 3(1): 139-176.

Pengl, Y, P Roessler and V Rueda (2020), “Cash crops, print technologies and the politicization of ethnicity in Africa”, CEPR Discussion Paper DP15162. 

Rodney, W (1972), How Europe Underdeveloped Africa, Bogle-L’Ouverture Publications.

Roessler, P, Y Pengl, R Marty, K Titlow and N van de Walle (2020), “The Cash Crop Revolution, Colonialism and Legacies of Spatial Inequality: Evidence from Africa”, CSAE Working Paper WPS/2020-12.

Sokoloff, K L and S L Engerman (2000), “Institutions, factor endowments, and paths of development in the new world”, Journal of Economic Perspectives 14(3): 217–232.

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