Can capitalism reconcile with colonialism?
By: Taylor Hayes
Tags: Socialism, Colonialism, Economics, Communism, Capitalism

“Without Africa, France will slide down into the rank of a third [world] power.” Former Prime Minister of France Jacques Chirac

As the global capitalist economy continues to advance, expanding into new markets and capitalizing on old ones, it seems the springs of which material wealth flow are ever abundant. Many would describe this as an era of unprecedented growth and happiness, where countries like the Nordics seem to have achieved the highest quality of life known to man. Equality reigns. As we examine the further developments of capitalism in the 21st century and its effects, we must consider two questions: 1) What is the cost of this wealth that flows in the Global North? and 2) Is life really getting better for everyone?

Capitalism’s inherent link to colonialism and imperialism cannot be denied. It would take willful ignorance to deny any such connection. A thesis by Joshua Dwayne Settles at the University of Tennessee Knoxville affirms that, “European powers ..: encourag[ed] the development of a commodity based trading system, a cash crop agriculture system, and by building a trade network linking the total economic output of a region to the demands of the colonizing state.” Here we see the advent of capitalism in Africa, with the production and circulation of commodities, and with it an era of colonialism that has stunted the continent for centuries.

In Defense of Capitalism

However, many people — billionaires and proletarians alike — will praise this new era of gilded-age capitalism, repeating statistics such as that from the World Bank, that demonstrate equality is growing, and more people are being lifted out of poverty than ever. Bill Gates (a billionaire, an unbiased source) is one of them.

Jason Hickel, a professor at the London School of Economics who studies inequality, goes in depth to debunk this claim that uses misleading statistics to propagate a false narrative that life is getting better for most people under capitalism. A short excerpt from his article in The Guardian:

“What Roser’s numbers actually reveal is that the world went from a situation where most of humanity had no need of money at all to one where today most of humanity struggles to survive on extremely small amounts of money. The graph casts this as a decline in poverty, but in reality what was going on was a process of dispossession that bulldozed people into the capitalist labour system, during the enclosure movements in Europe and the colonisation of the global south.

Prior to colonisation, most people lived in subsistence economies where they enjoyed access to abundant commons — land, water, forests, livestock and robust systems of sharing and reciprocity. They had little if any money, but then they didn’t need it in order to live well — so it makes little sense to claim that they were poor. This way of life was violently destroyed by colonisers who forced people off the land and into European-owned mines, factories and plantations, where they were paid paltry wages for work they never wanted to do in the first place.”

Professor Hickel’s claims are accurate, and can be examined in pre-colonial societies. Prior to British colonization, experts such as K.N. Chaudhari write that India was central to an expansive world economy long before European traders ever arrived. But after British colonization, the Indian life expectancy dropped a stunning 20 percent from 1872 to 1921. The aforementioned thesis essay also states that, “Prior to the “Scramble for Africa,” or the official partition of Africa by the major European nations, African economies were advancing in every area, particularly in the area of trade. … The development of colonialism and the partition of Africa by the European colonial powers arrested the natural development of the African economic system.”

It gets worse, somehow. The ‘decline in poverty’ that many flaunt as one of capitalism’s successes is not a statistic truly representative of growing equality. The “poverty line” depicted by this graph is set at $1.90 USD a day, far below the level of money needed to sustain human life. Scholars have called for a more reasonable poverty line at around $7.40 USD, although some, such as Harvard economist Lant Pitchett, believe the poverty line should be set even higher at $10 to $15. However, settling at this $7.40 poverty line, we can actually conclude that since 1981, more than a billion people have gone into poverty, from 3.2 billion to 4.2 billion.

Saving Capitalism

And yet, some of capitalism’s fiercest defenders will state this can be solved. Sure, Keynesian and social democratic policies domestically combined with trade agreements to protect workers internationally can reduce inequality somewhat, but will we eliminate poverty? In short, not any time soon, or ever. A paper by David Woodward from the World Economics Association states as such: “On the basis of optimistic assumptions … [poverty] eradication will take at least 100 years at $1.25-a-day, and 200 years at $5-a-day. While this could in principle be brought forward by accelerating global growth, global carbon constraints raise serious doubts about the viability of this course, particularly as global GDP would need to exceed $100,000 per capita at $1.25-a-day, and $1m per capita at $5-a-day. The clear implication is that poverty eradication, even at $1.25-a-day, and especially at a poverty line which better reflects the satisfaction of basic needs, can be reconciled with global carbon constraints only by a major increase in the share of the poorest in global economic growth, far beyond what can realistically be achieved by existing instruments of development policy — that is, by effective measures to reduce global inequality.” A more liberal estimate, such as $10-a-day, only further indicts the global economic system’s inability of reconciling the underdevelopment of the Global South with the resource extraction from the Global North. Considering a billion people in the past 4 decades have actually gone into poverty rather than out of it, this study’s optimistic assumptions are unlikely to prove true in reality. Hickel’s studies find that since 1960, the real per capita income gap between the Global North and South has quadrupled. In short, it seems no amount of milquetoast liberal policies can reconcile the disparity between these two halves of the world.

A final indictment of the capitalist extraction from the Global South is found in yet another article written by Jason Hickel. Using data from the Centre for Applied Research at the Norwegian School of Economics and Global Financial Integrity, the “most comprehensive assessment of resource transfers ever undertaken”, Hickel states that in 2012, developing countries received a total of 1.3 trillion dollars — while sending 3.3 trillion dollars to the rest of the world.

He states, “If we look at all years since 1980, these net outflows add up to an eye-popping total of $16.3tn — that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $16.3tn is roughly the GDP of the United States.” What is the source of this? “unrecorded — and usually illicit — capital flight. … developing countries have lost a total of $13.4tn through unrecorded capital flight since 1980. Most of these unrecorded outflows take place through the international trade system. Basically, corporations — foreign and domestic alike — report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions, a practice known as “trade misinvoicing”. … In 2012, developing countries lost $700bn through trade misinvoicing, which outstripped aid receipts that year by a factor of five.” Hickels concludes the paper stating that for every $1 of aid developing countries receive, they lose $24 in net outflows.

Capitalist Permanence

Capitalism’s priorities of infinite growth and profits to the wealth of the Global North can only ever come with expense to the Global South. Colonialism brought with it capitalism, and capitalism only seeks to drive down expenses while maximizing profits. It finds it easiest to do so when abusing the scarred post-colonial nations of South America, Africa, and Asia.

As Hickel puts it, “the global economy has been organized to facilitate the North’s access to cheap labour, raw materials, and captive markets in the South — today just as during the colonial period. Sure, some important things have obviously changed. But the countries of the North still control a vastly disproportionate share of voting power in the World Bank and the IMF, the institutions that control the rules of the global economy. They control a disproportionate share of bargaining power in the World Trade Organization. They wield leverage over the economic policy of poorer countries through debt. They control the. majority of the world’s secrecy jurisdictions, which enable multinational companies to extract untaxed profits out of the South. They retain the ability to topple foreign governments whose economic policies they don’t like, and occupy countries they consider to be strategic in terms of resources and geography.” This is neocolonialism today.

But, there is no fixing a system that is working perfectly as designed. Because while the poorest 60% saw their income grow $1,200 in sixty years, the richest 1% gained one hundred times their annual income in that same timeframe. This is no mistake. But don’t find solutions in the wrong places. Understand that not even the social democratic capitalism of politicians such as Bernie Sanders, blatantly mislabeled as socialism, will not fix this issue either.

The only solution is a world void of capitalism, void of undemanding infinite growth, and void of profit and wealth over the well-being of all. Otherwise, the abuse of the Global South continues. You make the choice.