1econdevinpostcolonialstates

The Institute for Domestic and International Affairs

Economic and Financial Committee

Economic Development in Post-Colonial States

Rutgers Model United Nations

16-19 November 2006

Director: Kay Chen

© 2006 Institute for Domestic & International Affairs, Inc. (IDIA)

This document is solely for use in preparation for Rutgers Model

United Nations 2006. Use for other purposes is not permitted without the express written consent of IDIA. For more

information, please write us at [email protected]

Introduction _________________________________________________________________ 1

Background _________________________________________________________________ 2 Early History_____________________________________________________________________ 2 Recent History____________________________________________________________________ 5 Unique Problems of Post-Colonial Areas _____________________________________________ 11 Successful Post-Colonial Economic Development ______________________________________ 15 Failed Post-Colonial Economic Development _________________________________________ 20

Current Status ______________________________________________________________ 23 Government Policy Choices________________________________________________________ 23 Open Trade/Market and Economic Development______________________________________ 25 Encouraging Human Capital Growth _______________________________________________ 26

Key Positions _______________________________________________________________ 28 Developed States _________________________________________________________________ 28 Post-Colonial Areas ______________________________________________________________ 29

Summary___________________________________________________________________ 31

Discussion Questions _________________________________________________________ 32

Works Referenced ___________________________________________________________ 33

Rutgers Model United Nations 2006 1

Introduction Post-colonial areas face a number of problems that cause slow economic growth as

a result of being ruled by foreign powers, including the drain of important wealth that

typically occurred during colonial rule. Imperialistic exploited colonial territories by

using what were sometimes scarce resources, and siphoned off the revenue generated

through the export of these goods. Natural resources were taken from the colonized area

and sent back to the mother country, rather than being left in the country to promote

growth. Additionally, imperialistic states directly exploited residents of the area

themselves, leading to a drain in human capital. Enslavement prevented the indigenous

population from being able to gain an education, or other skills necessary in the creation

and operation of a strong economy. High taxes imposed on area residents also led to a

lack of capital with which to invest, causing a major problem in terms of developing a

strong economy after the departure of the colonial powers. Perhaps most damaging is

that while the mercantilist states were exploiting their colonies, they did not build the

necessary infrastructure to sustain the economies once they left. Instead of building

extensive road and commercial networks, the states built only the infrastructure necessary

for the export of specific goods, leaving their former possessions without the resources or

tools necessary to support their own economic development.

The second problem that post-colonial areas face is that the government

institutions left behind by colonial powers were very weak. Institutions are defined as

any set of rules or the establishment that is important in the functioning of society,

including national constitutions, justice systems, and even governing bodies. In terms of

economics, two examples of institutions are a central bank, and a tax code. Weak

institutions made it hard for the governments of new state to establish credibility not only

amongst its own citizens, but also in the international community. It will be necessary

for post-colonial states to overcome these two problems in order to be able to begin

developing and sustaining a strong economy.


The policy dilemma for economic development in post-colonial areas is how these

problems can be overcome and how the international community can aid them in their

efforts. Before the international community can have any real impact on these areas,

institutional changes must first be made that will foster economic progress. A policy

must be adopted that will allow for growth in consumer confidence in domestic

economies, while establishing the state in the global marketplace. These policies must

establish the rule of law in order to guarantee the right of private property, as ownership

is one of the most important aspects to capital development. They must also be

consistent, and not be subject to corruption. Once these institutional changes are

implemented, economic and financial aid from the international community can have a

significant impact on the development of domestic and regional economies. Any state

company or state willing to do business in these states is able to be a catalyst to economic

growth. Although colonial powers have exploited the natural and human resources of the

areas, in most cases they have not done enough damage to render the state unable to

develop. Their practices were certainly detrimental, but given the right tools and support,

any state can develop. As a result, these areas, after establishing their legitimacy, will be

able to attract the foreign capital needed to further develop their economies.

Background Early History

While some scholars consider ancient empires the earliest forms of colonialism,

most generally agree that the roots colonialism are found in the voyages of Portuguese

and Spanish explorers in the

late 15th and early 16th

Centuries.1 This era marked

the beginning of European

involvement in Latin

1 Prasad, Anshuman, ed. Postcolonial Theory and Organizational Analysis: A Critical Engagement. New York:

Palgrave Macmillan, 2003. 3

Mercantilism: A system for using the economy to enrich the state, mercantilism encouraged exports and discouraged imports to amass a surplus of gold. It flourished from the age of European discovery through the early nineteenth century and closely involved governments with their economies. Source: www.politicalscience.utoledo.edu/faculty/lindeen/glos3260.htm


America, where it would remain for centuries. Soon, other European powers followed in

acquiring foreign possessions on which they could capitalize. Based on the theory of

mercantilism, most early colonial holdings were solely for the benefit of the parent nation,

usually functioning to provide a favorable balance of trade. Often, European powers

utilized the myriad resources untapped in the colonial lands until availability of such

commodities were diminished. Such policies were implemented successfully throughout

the 17th and 18th Centuries with Great Britain and France becoming the most notable

colonizers, and areas including North America, the Caribbean, and parts of the Pacific

fell under the control of these empires. The last and most striking wave of colonialism

came in the late 19th Century as western powers scrambled to gain land in Africa and

Southeast Asia. The entirety of modern Africa excluding Liberia and Ethiopia were

colonial holdings while states such as India, Indonesia, Sri Lanka, Burma, Vietnam, and

Malaya were acquired through peace treaties and annexations.2 Within this time frame,

pseudo-colonies developed in the Middle East. The area can be considered as quasi-

colonial because although Western powers were present, the areas were not technically

colonies in some instances. For example, the British were present in Iraq during the early

20th Century, yet were considered to be more of an occupying power than a colonizing

government.3 Similarly, Iran was never technically colonized despite strong Western

influence even as late as the 1970s.

The era of colonization varies within different regions of the world – thus

affecting the manner in which different colonies progressed towards independence and

later developed. The practice of colonialism lasted for more than three centuries in Latin

America but just one in India, while areas of Africa and the Middle East were colonized

for less than seventy years.4 Furthermore, the colonial experience was also shaped by the

nature of the mother country. Great Britain did not make a concerted effort to assimilate

natives into Western culture whereas the French usually sought to spread what they 2 Goldthorpe, J.E. The Sociology of Post-colonial Societies: Economic Disparity, Cultural Diversity, and

Development. Cambridge: The Cambridge University Press, 1996. 45. 3 Dodge. 4 Goldthorpe. 47.


perceived to be a more civilized lifestyle. This philosophy of governing is reflected in

the relationship a colony has with the mother state and the manner in which

decolonization eventually occurred. For example, the French were brutal in the manner

in which they controlled Vietnam which ultimately led to a bloody revolution to

overthrow French colonial authority within the state. Conversely, the British were less

restrictive toward possessions such as Malaysia, thus natives were less hostile toward

colonial rule and even opted to remain within the

British Commonwealth upon a peaceful transition

to independence in 1957. 5 The region being

colonized also shapes the manner in which the

process unfolds. Areas previously unoccupied by

a large population such as the United States, Canada, Australia, New Zealand, and the

Falkland Islands became settler colonies where the entirety of the population was wholly

of European descent.6 Areas like India or Egypt, or non-settler colonies, tend to be more

subject to internal racial and political turmoil. Usually, settler colonies do not fall victim

to the same problems that non-settler colonies face. This generality can be attributed to

the concept that states were hesitant to exploit their own peoples who were seen as

racially or socially equal, but willing to abuse foreigners perceived as savages. Moreover,

colonies in which the population is comprised of both European and indigenous

populations confront unique challenges as ethnic conflict often arises where one race

attempts to dominate the other. An example of unsuccessful cohabitation between

settlers and non-settlers is South Africa, where race and ethnic relations have historically

been strained and continue to be an issue today. In non-settler colonies, the degree of

complexity and longevity of an established national identity found in the native

5 Janet Mathews Information Services. Quest Economics Database. Asia & Pacific World of Information. October

6, 2003. <http://web.lexis-nexis.com/universe/document?_m=40c94fef28fe8a05e5ed9cc4722f124e&_docnum=2&wchp=dGLbVzb-zSkVb&_md5=5f5e1913c1b8869bd8736488e967306b>

6 Schwarz, Henry and Ray Sangeeta, ed. A Companion to Postcolonial Studies. Malden, MA: Blackwell Publishers Inc., 2000. page 362

British Commonwealth: an association of nations consisting of the United Kingdom and its dependencies and many former British colonies that are now sovereign states but owe allegiance to the British Crown. Source: wordnet.princeton.edu/perl/webwn


population affected the style which colonizing powers used to govern.7 Societies that

were relatively well-developed in terms of government and legal institutions were given

more domestic political control than those that showed few indicators of development.

Recent History Decolonization occurred in areas during different periods; however the quest for

independence quickly grew once states began to free themselves from their colonial

masters. Colonial revolution began in the North American colonies and soon spread.

South America soon gained independence as the majority of the continent was liberated

during the 1820s. While Portugal peacefully granted Brazil independence in 1822, Spain

struggled to retain many of its colonies in a series of bloody wars which were ultimately

lost. 8 The early 20th Century witnessed an Indian independence movement led by

Mahatma Gandhi that eventually realized success in 1950 when India, along with

Pakistan became independent republics. During the mid-20th Century, other Southeast

Asian territories followed suit and claimed independence. While British colonies were

usually relinquished peacefully, France struggled to retain control resulting in bloodshed

and suffering for both France and its colonial possessions. In Africa, violence ensued in

Algeria as the French desperately clung to their colonial control rather than granting

independence. Just as in Southeast Asia,

the mid-20th century also proved to be an

era of liberation in Africa as the 1950s and

1960s marked the independence of nearly

the entire continent. The correlation

between the decolonization of Africa and the conclusion of World War II is notable

because many European powers relinquished their colonial holding in the wake of the

conflict, and after the United Nations established the Trusteeship System. The United

7 Randall, Vicky and Robin Theobald. Political Change and Underdevelopment: A Critical Introduction into Third

World Politics. Durham, NC: Duke University Press, 1998. page 12. 8 Chamberlain, M.E. Decolonization: The Fall of the European Empires. Malden, MA: Blackwell Publishers Inc,

1999. page 90.

Trusteeship Council: The United Nations Trusteeship Council, one of the principal organs of the United Nations, was established to help ensure that non-self-governing territories were administered in the best interests of the inhabitants and of international peace and security. Source: en.wikipedia.org/wiki/Trusteeship Council


Nations established the Trusteeship Council as a forum in which states would be

overseen by benevolent advisors while moving towards independence.

There is a practical theory which asserts that in the face of such domestic hardship,

many western states could not concern themselves with colonies. However,

sentimentalist will forward a view which purports that after fighting for freedom and

making the world safe for democracy, conscience could not allow the policy of

colonialism to persist. Perhaps a blend of both these theories works in conjunction with

the idea that Africa was ripe for revolution to explain the surge of independence during

this period.9

Upon gaining self determination, many new states were unable to achieve or

maintain stability because colonial legacy left them unable to function economically and

politically. While economic prosperity was not always the sole factor behind

colonization, it was certainly a predominant consideration. It was necessary that colonies

be worth, in monetary terms, the attention and resources they demanded from a parent

state. Understandably, economic vitality was desired within a colony to serve as a tax

base from which western powers could derive revenue. Because the quality and

availability of many African products were uncertain, colonizers began to depend on the

plantation system by which a single crop could be mass produced. The plantation, which

was undoubtedly owned by European interests, was seen as an extension of a company

found within the western world. The profits generated by such plantations were used to

pay the salaries of western workers or used to purchase foreign products. Thus demand

on local markets was nearly non-existent. A European manager oversaw the operation

of the plantation which almost unerringly insured that non-native workers, skilled and

unskilled alike, received better pay than those indigenous laborers. Often workers would

be brought in from other countries, contributing to unemployment among native

populations. While the plantation system did yield prosperous results, raising the average

9 Ibid.


income for a few select natives, it was overall ineffective in fostering lasting prosperity

within a region.10

Also, the plantation system coupled with mining practices also robbed natives of

access to land and resources that had previously been relied upon for sustenance. With

no means of sustaining themselves, natives were thus forced to accept low wage positions

and or placement as indentured servants. While it is true that the plantation system was

the most efficient use of land in many instances, European practices lead to exploitation

of workers. Also, because plantations often produced only a single export, newly

independent states likewise only have the ability to cultivate a single crop making them

dependent upon a single product. Furthermore, while the economic interests of European

powers did lead to the development of some infrastructure, such growth was not

conducive to promoting stability in independent colonial states. While railways, roads,

and bridges were built by European powers, these transportation methods were designed

to carry products from plantations to ports for export to European markets. Former

colonies thus lack means to transfer products to local or regional markets which would be

more within the scope of the current economic ability. Also, most western governments

forbade economic competition from colonial possessions which obviously limited the

economies of colonies.11

The results of post-colonial states being designed to produce a single product to

profit the mother state is seen throughout the globe as economies struggle, often times

despite exporting profitable commodities. This can be seen in Middle Eastern states such

as Iraq where petroleum is dependent upon for export. This phenomenon is also seen in

areas of South America that rely on peasant cash crops, such as Costa Rica. In the

Caribbean states, tourism is often the largest and most fruitful area of the economy –

although this phenomenon is not a colonial holdover. An additional economic problem

related to previously established infrastructure within a post-colonial state is that many

locales were maintained for defense purposes, especially strategic islands used as military 10 Goldthorpe. page 54 11 Ibid. page 66


bases. These economies are then centered around a huge military complex making

transitioning to a regularly functioning economy challenging. This shift proved difficult

for the former British colony of Malta which had previously been used as a military

fortress in the Pacific.12

Within post-colonial states today are a wide variety of economic problems.

However, there are several problems that are characteristic of nearly all poor states thus

making these particularly important to consider. The importance of village life in post-

colonial societies creates an “informal” sector of the economy which is comprised of

small scale private enterprise in contrast to the formal state sector or massive private

corporations. A “black market” sector which consists of the illegal economic activity

such as smuggling, laundering, tax evasion, drug dealing, and et cetera. Also, within

underdeveloped states there exists a difference between cash and subsistence sectors.

Cash sectors, as the name suggests, involves transactions concerning monetary exchange

whereas subsistence sectors involve services rendered in the form of bartering, goodwill,

sentiment, or honor. Ergo, a large amount of labor performed is done without monetary

transaction specifically by members of the household. This practice, although important,

is becoming increasingly antiquated as large scale economic development requires

monetary transactions. 13 Unfortunately for many post-colonial states, the modern

economy is represented by a single commodity which is ultimately economically

unhealthy.14

Industrial development within a state would provide capital by which a state could

develop economically is often a means by which a state can develop itself economically

however this option presents a challenge to many post-colonial governments, which are

often home to transnational corporations. These companies are usually owned by a

developed western power who utilizes labor, resources, and location of impoverished,

underdeveloped states. Because these transnational corporations dominate the industrial

12 Mayall. 129. 13 Goldthorpe. page 78 14 Shafer.


sectors of many post-colonial economies, local grassroots companies have no

accessibility. Also problematic, is the immense military expenses post-colonial states

incur. Military spending in these states is enormous and one estimate purports that it

reaches $125 billion. This money would be able to provide a range of services were it

allocated toward social programs instead of military expenditures. It could provide basic

health care, immunization, and sanitary drinking water, help improve adult literacy and

implement universal primary education, and also help to teach people about family

planning in hopes of stabilizing the population.15 The reliance upon an overly developed

military in post-colonial states has implications reaching far beyond the realm of

economy as many unstable governments feel they must use a bolstered military to rule

with autocracy.

Governance in post-colonial states is also a huge challenge. Political volatility is

fairly prevalent in post colonial states as a power vacuum is created upon the exit of the

colonial state. Often, the colonial government was mostly administrative and small scale,

thus transitioning to a broad federal system was an overwhelming adjustment. Many

colonies win their independence through violence and thus upon victory are left with

many factions competing for power in an atmosphere of turmoil. Algeria is the most

prominent example of this type of occurrence. In the case of the Congo, Belgian

authorities vacated the territory without making any provisions for government. The

natives, unaccustomed to self rule, waged a violently brutal civil war to determine which

competing power would control the government. Post-Colonial states are in a state of

vulnerability directly after their independence during which they are weak, ergo they are

not capable of meeting the demands of the people and the state will fall into unrest. Due

to this unrest, it is difficult for leaders to establish a political foundation with a popular

mandate from the public and many times a government will resort to undemocratic

practices to achieve their aims.16

15 Goldthorpe. 82 16 Randall.


The need for strong government in post-colonial societies often led to the rise of

military governments. While most countries that won their liberty in the mid-twentieth

century initially were democratic multiparty systems, this form of government could not

be maintained. “By 1970, half the independent countries in Africa had military

governments.”17 Such governments are usually associated with violence and have little

respect for human rights. To assert their legitimacy, military governments resort to

shows of power over those who oppose them and use fear as a mechanism by which they

rule. Military governments develop from one-party systems in which the population is

given limited choice as to who can govern them. While some single parties develop by

virtue of a single party gaining a monopoly on power and holding dominion over the

government, other states implicitly mention in their political framework that only a

solitary party can exist. The governments in post-colonial states are also, generally

speaking, riddled with corruption. Many post-colonial governments consolidate and

privatize businesses or provide unfair incentives to certain companies. Rather than taking

the proper measures to safeguard economic health, many governments will take the

course of action that is easier and provides instant gratification.18

Many post-colonial states have been unable to install legitimate governments, and

those that are valid face prospects of overthrow. Haiti, the poorest state in the western

hemisphere, has seen political turmoil throughout nearly all of its history. After finally

gaining autocracy in the mid-twentieth century, an oppressive dictator came to power

followed by a military government. Free elections occurred in 1990 however the

candidate who won the office was ousted by a coup d’etat and only later returned to

power. Recently in Haiti, the popularly elected president Aristide was forced to flee from

the island after rebellion and the country was led by an interim government until

presidential elections were held in early 2006. Cuba also shares a tumultuous political

history as power struggles broke out after independence. The Batiste regime was

17 “Politics and Government in Post-Colonial Africa.” Exploring Africa: African Politics and Government. 27

January 2005. <http://exploringafrica.matrix.msu.edu/curriculum/lm10/student/stuactfour.html> 18 Goldthorpe.


overthrown and Fidel Castro installed as a military dictator who presently controls the

government. Libya also failed to promote methods of good governance. Although it

claims to be a socialist state, it is actually a dictatorship in which the military asserts

control over the people. Libya does not even have a constitution, nor is there a technical

head of state. Iraq, until recently, was also under the leadership of a political dictator

who asserted his will through force rather than by popular mandate. Often in post

colonial states free elections do not live up to their name as the government excludes

certain groups of voters, disallows secret ballots, or tampers with results. Such a

situation arose in Zimbabwe in March of 2005 as both American and European

governments condemned the elections as unfair.19 These types of government come to

power out of desperation and remain in power through exercises of might. These

governance problems largely contribute to fueling economic hardships.

Unique Problems of Post-Colonial Areas Before looking at problems that post-colonial areas face, it is necessary to

illustrate traits of a region that lead to successful economic development. Most

economists agree that private property, the rule of law, and free markets lead to the

success of developed nations. However, there are two other main arguments that explain

why some nations remain poor, and others prosper. The first theory is dependent on the

physical position of the state. This theory states that the proximity of a region to the

coast, the climate, and the geography of the region allows it to prosper.20 These three

factors allow for the exploitation of natural resources and raw material that will

ultimately allow for a region’s economic success.21 They allow for the discovery of

valuable commodities that could help jump-start a region’s economy and help a region’s

agricultural sector, a major component of a developing states economy. This argument is

shown when looking at Africa’s economy as a whole. Africa has fifteen out of fifty-three 19 Reuters. New York Times. 20 Jeffrey Sachs and Andrew Warner. “Natural Resource Abundance and Economic Growth,” Center for International Development and Harvard Institute for International Development. http://www.geog.byu.edu/shumway/Geog331/Readings/Natres&EG.pdf (accessed April 4, 2006). 21 Ibid.


landlocked countries.22 There are also a range of harsh climates and geographies across

the countries. These unfavorable characteristics cause many African states to have

trouble with economic growth.

The second theory as to why some countries remain poor while others prosper is

that the institutions and the demography within a region will either promote or deter a

country’s economic success. Institutions are defined as any set of rules or an

establishment that is important in the functioning of society. Specifically, the institutions

that allow for a region’s success include a polycentric government, which is a

government that is comprised of numerous branches, the rule of law, and respect for

private property.23 The demography of a region allows for its economic success as those

areas with a united demography tend to have fewer conflicts that would get in the way of

economic development such as racism and war.

Considering these two ideas, a final theory argues that a mixture of both play a

role in determining the success of a region’s economy. Generally, it is believed that both

geography and demography determine the quality of institutions, which determine a

region’s economy.24 Applying this specifically to colonial areas, it is believed that during

colonial times, because of the harsh geography and unfavorable demography, colonists

established weak institutions that were designed for only their own short-run interests.

These institutions either remained or failed after the colonizing power left. In most

regions, these institutions failed, but in other areas, they remained, but were weak. The

general qualities of areas where the institutions failed are in regions with large and

diverse populations, difficult geography, and regions where colonists faced high mortality

22 “Major Activities Undertaken By ECA Related To The Transit Transport Needs And Problems Of Land-Locked Countries In Africa,” United Nations Economic Commission for Africa. http://www.uneca.org/eca_resources/Publications/RCID/transit_transport_need_&_problems_of_landlocked_countries_in_africa.htm (accessed April 23, 2006). 23 Douglass North. Institutions, Institutional Change, and Economic Performance, New York: Cambridge University Press, 1990. 24 Scott Beaulier. “Explaining Botswana’s Success: The Critical Role of Post-Colonial Policy,” Cato Journal, Vol. 23, No. 2 (2003), 227.


rates.25 On the other hand, institutions generally remained in places that were easier to

settle. These areas had a higher life expectancy for colonists, favorable geography and

demography. Though these institutions were weak, they still did survive, which helped

lead to the development of a successful economy.

Taking these three theories, it is now necessary to examine the unique problems

that post-colonial areas face as compared to other developing countries. There are two

main problems that post-colonial regions face as a result of being colonized. The first

problem is that during colonization, the mother country, as well as individual colonists

tended to exploit the region, both directly and indirectly. They exploited the region’s

natural resources which deprived the area of growth prospective. They also directly

exploited regions through imposing “taxes, tariffs, restrictions on trade and foreign

investment, forced labor, and even enslavement.”26 These abuses led to a drain of wealth

from the region, both in resources and human capital. It has been found that from “1930

to 1940, Britain had kept for itself 2,400,000 pounds in taxes from the Copperbelt, while

North Rhodesia received from Britain only 136,000 pounds in grants for development.”27

This taxation exerted a negative effect on colonies, as the money necessary for economic

development disappeared from the region. The second unique problem that post-colonial

regions face is that while these colonies were created, colonial powers failed to take into

account the previous territorial divisions. As a result, they created “weak institutions,

rent-seeking elites, and ethic conflicts.” 28 These three problems make it very hard for a

post-colonial economy to not only competes with other world economies, but also remain

efficient enough within their own regions to maintain a decent quality of living. In order

to develop a post-colonial economy, it will be necessary to confront these problems and

offer solutions.

25 Daron Acemoglu, Simon Johnson and James Robinson. “The Colonial Origins of Comparative Development: An Empirical Investigation,” http://econ-www.mit.edu/faculty/download_pdf.php?id=144 (accessed April 4, 2006) 26 Graziella Bertocchi and Fabio Canova. “Did Colonization Matter for Growth?” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=35765 (accessed April 4, 2006). 27 Andrew Roberts. A History of Zambia, London: Heinemann, 1976. 193. 28 Ibid.


The problem of exploitation is one that directly affects the success or failure of

post-colonial economies. This problem can be seen with the colonial experiences of

Latin America and Africa, as compared to the experiences of areas such as in the United

States, Australia, and New Zealand. The main objective of colonists in Africa and Latin

America was to obtain valuable commodities from the regions. The Spanish and

Portuguese sought to obtain gold and other valuables from America, and ended up setting

up a system of monopolies and trade regulations in their own colonies in order to ensure

that the valuables gained went back to the motherland. 29 Additionally, in Africa,

colonists concentrated on exploiting the slave trade and other valuables. The names

alone of regions in Africa such as the Gold Coast and the Ivory Coast reflect this trend.30

The states that were set up in these regions were termed extractive states. There was not

much protection of private property, nor was there a strong balanced government. The

only purpose of the state in these colonies was to transfer as many resources of the colony

to the colonizer. Regions that were not exploited for its natural resources tended to

perform better after gaining independence. Rather than exploiting these regions for

selfish purposes, colonists decided to replicate European institutions, encourage private

property, and emphasize a strong government. Examples include the United States,

Australia, New Zealand, and Canada. In these countries, there was a mass migration of

Europeans.31 After they migrated, they decided to replicate European institutions for

their own well-being. Because these institutions were replicated, the economies in the

areas prospered, as shown by the United States’ standing as the strongest economic

power in the world. Australia, New Zealand, and Canada are also considered developed

countries with strong economies to this day.

The problem with post-colonial economic development lies not with the regions

that enjoyed considerable economic freedom during colonialism, but with regions that

29 Daron Acemoglu, Simon Johnson and James Robinson. “The Colonial Origins of Comparative Development: An Empirical Investigation,” http://econ-www.mit.edu/faculty/download_pdf.php?id=144 (accessed April 4, 2006). 30 Ibid. 31 Alfred Crosby. “Ecological Imperialism: The Biological Expansion of Europe 900-1900.” New York: Cambridge University Press, 1986.


were exploited and left with weak institutions. These regions will need considerable aid

in developing the weak institutions left behind by colonists, and in building up their

economies. This is a very feasible goal. A number of post-colonial areas have

successfully overcome their difficulties and developed their economies. The one factor

that would lead to a successful economy that could be affected by aid would be the

development of institutions within the areas. As a result, there needs to be a strong

emphasis placed on the leadership of the nation. Only if a region has strong and credible

leadership will they be able to create strong institutions that would be key to developing

their economies.

Successful Post-Colonial Economic Development The role that institutions play in the success of post-colonial economies cannot be

stressed enough. One benefit that post-colonial regions have over other developing

nations is the fact that institutions were created, no matter how weak or strong. The sunk

cost of developing institutions has already been taken up by the colonial power, so the

only thing left for the independent state to do is to maintain and strengthen the institution.

It has already been established that there are three definite factors that lead to successful

economic development – a polycentric government, the rule of law, and a respect for

private property, thus post-colonial regions can make progress by implementing these

factors.32 First, it will be necessary for the government to provide institutions that protect

the economy from diversions. These diversions can range from simple lawlessness in the

form of thievery, to protection against high taxation and corruption. Through laws and

regulations, the government can achieve this, but it must also keep in mind that too many

laws and regulations will lead to more diversions for the economy. 33 In fact,

government interference in production might actually slow the rate of growth in many

economies. 32 Scott Beaulier. “Explaining Botswana’s Success: The Critical Role of Post-Colonial Policy,” Cato Journal, Vol. 23, No. 2 (2003), 227. 33 Robert Hall and Charles Jones. “Why Do Some Countries Produce So Much More Output per Worker than Others?,” National Bureau of Economic Research. http://links.jstor.org/sici?sici=0033-5533per cent28199902per cent29114per cent3A1per cent3C83per cent3AWDSCPSper cent3E2.0.COper cent3B2-S (accessed April 4, 2006).


One post-colonial economy that has been developed successfully is that of

Botswana. Botswana is a landlocked nation in Africa with a population of 1.6 million

people. Most of the nation is inhabitable except for about 16 per cent of the land mass.34

As a result, much of the population is concentrated along the eastern border of the state.

Botswana was one of the few African colonies where colonials respected pre-colonial

divisions and developed a state using those divisions. There was already an institution in

place before the arrival of the British, which consisted of a chief and his people. It can be

argued that this respect by the colonial powers led to Botswana’s success after being

liberated from colonization. From 1965 to 1995, Botswana had the fastest growing

economy in the world. Its annual rate of growth was 7.7 per cent and the country moved

into a position as an “upper middle income” nation from being the third poorest state in

the world.35

This growth can be explained in a number of ways. The first is by using the

theory that considers a region’s geography and institutions as paramount in allowing for

economic growth. Using this theory, Botswana’s success can be explained by the fact

that the region possessed pre-colonial institutions that placed restraints on colonial

powers and prevented over-exploitation by the colonists.36 Additionally, after gaining its

independence, Botswana’s government favored a system of free trade and guarantee of

private property, reflecting how strong institutions help lead to an economy’s success.

Finally, Botswana was rich in diamonds, which attracted investment from the

international community following the withdrawal of the British. The choices that the

government in Botswana made following gaining independence established credibility in

not only the region itself, but also worldwide. The government opened up its diamond

mines to foreign investors, and lowered and maintained a constant tax policy.37 As a

34 “Botswana,” CoutryWatch. http://www.countrywatch.com.proxy.libraries.rutgers.edu/cw_country.aspx?vcountry=23 (accessed April 4, 2006). 35 Ibid 231. 36 Daron Acemoglu, Simon Johnson and James Robinson. “The Colonial Origins of Comparative Development: An Empirical Investigation,” http://econ-www.mit.edu/faculty/download_pdf.php?id=144 (accessed April 4, 2006). 37 Scott Beaulier. “Explaining Botswana’s Success: The Critical Role of Post-Colonial Policy,” Cato Journal, Vol. 23, No. 2 (2003), 235.


result, investor confidence grew, and more foreign investment flowed into the country in

areas apart from the production of primary goods. It can be seen, that in order for a post-

colonial region to successfully develop its economy, investment is needed. The only way

to gain foreign investment is if the institutions within the region, more specifically, the

government, establishes its credibility and gains favor from the international community.

Another post-colonial state that has mixed success in regards to economic

development is the South American state of Argentina. Argentina was an appealing

territorial attraction in the early sixteenth century due to its abundance of silver and rich

resources ripe for exploitation. Argentina was colonized by the Spanish in 1580 and

became an important area economically. Buenos Aires was a thriving port city and a

fairly diverse selection of products composed the Argentine colonial economy.

Argentina declared independence in July of 1816 following political upheaval in the

parent country. The newly independent state was faced with turmoil and uncertainty and

it was not until 1853 that Argentina adopted and promoted a formal constitution. At this

time, Argentina was characterized by a rural economy that raised livestock such as cattle

and sheep. Although the land could have supported cash crops such as cereal, the labor

force could not sustain such intensive production. Still, animal husbandry proved vital to

the newly formed state’s economy as livestock commodities became an important export

that allowed for healthy economic growth.

Immigration was critical in the economic development of the country. An influx

of immigrants in the late 1800s provided a fresh labor supply that led to the cultivation of

cereal crops and other commodities within the arable sector. The introduction of this new

labor supply allowed for the diversification of commodities produced within Argentina.

This diversification meant that the economy was less susceptible to fluctuations within

world markets. The economic stability helped foster development within Argentina

between the late 1800s and early 1900s. Foreign investment was equally as critical as

immigration in the development of Argentina’s economy. Capital investment within the

economy came from foreign states who purchased bonds or invested capital directly.


While manufacturing and service sectors received attention from foreign investors,

farming was largely ignored. This is because foreign investors concentrated their funds

on sectors that were involved with the exportation of valuable Argentine goods to their

country such as railways or packaging. Although foreign investment was substantial, its

impact on the Argentine economy was especially marked because of how little domestic

investment existed. This lack of domestic support and reliance on foreign investment

proved devastating for Argentina. The World Wars prevented foreign states from

continuing investment within Argentina and the domestic economy was at that point still

incapable of compensating for the absence of foreign capital.38

After the Second World War, the fragile Argentine economy rebuilt itself through

a policy of import substitution industrialization (ISI). ISI is a proactive approach to

economics that counters laissez faire theories. ISI is comparable to the basics of

mercantilism in that the basic goal for a state is to export more than it imports in order to

promote national prosperity. The objective of the policy is to substitute products that are

normally imported with commodities that are produced by local industry, thus stimulating

domestic economic growth. This policy entails having a monetary policy that ensures

that domestic currency is overvalued. Moreover, protectionist measures in the form of

tariffs and quotas are instituted to give domestic industry a competitive advantage.

Several key industries were also nationalized by the federal government. The

government must also be active in communicating with the industrial sector to create

plans by which certain goods are subsidized in addition to determining which import

products are going to be substituted through local industry. ISI can be considered a form

of economic isolation in that it strongly endeavors to limit economic dependency on

international actors and factors.39

Although the policy of ISI worked for a period, by the early 1990s, the Argentine

economy was once more in turmoil. External doubt and runaway inflation caused crisis

38 Bulmer-Thomas, Victor. The Economic History of Latin America since Independence (New York: Cambridge University Press). 2003. 39 Ibid.


to loom. The government at the time attempted to cure Argentina’s economic ails

through a policy of trade liberalization. Such an undertaking requires the elimination of

trade distorting measures such as tariffs or quotas. Deregulation within Argentina during

the early 1990s was widespread, as was the privatization of industries that had previously

been state run. In 1991, the Argentine peso was pegged to the United States Dollar

(USD) and outlawed the growth of the monetary base beyond the growth in reserves.

These measures had the desired effect of stimulating economic growth during this era.

Although there was new investment in the service and industry sectors, this new policy

presented problems with unemployment and balance of trade.40

New problems arose in 1999 when the Gross Domestic Product fell by three per

cent, causing recession. The newly elected president proposed tax increases and

spending cuts. Large public debt as also a controversial issue within Argentina, and

confidence in the national currency was questionable. Faith in the Argentine peso

faltered, and people began withdrawing large sums of money from bank accounts. When

access to bank accounts was limited to prevent the flight of capital out of the country,

extensive protests ensued, culminating in the resignation of the president. Days later in

late 2001, the interim president declared a debt moratorium; however, Argentina soon

defaulted on $93 billion of its debt. In 2002, the convertibility plan was rescinded and

the peso was un-pegged causing it to devalue immediate which then led to inflation to

rise sharply. The situation was finally managed by newly elected president Nestor

Kirchner who implemented various measures to stabilize the economy. Unlike ten years

prior, Argentine exports were cheap and competitive because of the high exchange rate,

although imports were now discouraged. As during post-WWII era, import substitution

was utilized by the government to promote domestic industry and foster national wealth.

The government strove to make credit available through business and worked tirelessly to

40 Ibid.


reform the tax system to create an influx of revenue. These measured caused the

Argentine peso to steadily (albeit slowly) revalue.41

Failed Post-Colonial Economic Development It can be seen that many post-colonial regions do not have successful economies.

The question then is what separates these regions from the post-colonial areas with

successful economies. Going back to the point that colonizing nations established

institutions, it can be seen that many of the institutions created by the colonizing powers

actually favored a small number of elites within the area. These elites frequently became

the ruling class in the area after it gained independence. In places like Botswana, the elite

made good choices which allowed for the area’s economic development. Seretse Khama,

the ruler of Botswana following independence “clearly had economic interests consistent

with his people’s economic interests,” which was successful economic development but,

“it is easy to find many corrupt African leaders who had a similar economic incentive at

work.” 42 Due to corruption, many leaders chose not to adopt policies which would allow

for a free market and a successful economy, and rather, turned to a centrally planned

economy which allowed for their maximum personal gain. This observation coincides

with the theory that institutions allow for success of a post-colonial economy. The

problem did not lie in the fact that power lies in the hand of a few elite. Instead, the

problem lies with the institutions that the elites decide to establish after gaining power.

Post-colonial economic development has been shown to fail when the elites gain and lose

power. With each new group of governance comes new economic policies, governing

policies, and basically, a lack of stability. This lack of stability does not encourage, nor

provide for development.

Post-colonial regions in Africa show the least chance for success and survival after

gaining independence. Of the twenty-three lowest growth rate per capita GDP countries, 41 Teunissen, Jan Joost and Age Akkerman, ed. “The Crisis That Was Not Prevented: Lessons for Argentina, the IMF, and Globalisation.” Forum on Debt and Development (FONDAD). January 2003. Accessed 26 August 2006. http://www.fondad.org/publications/argentina/Fondad-Argentina-BookComplete.pdf 42 42 Scott Beaulier. “Explaining Botswana’s Success: The Critical Role of Post-Colonial Policy,” Cato Journal, Vol. 23, No. 2 (2003), 235.


sixteen are in Africa, and all sixteen were colonies. 43 Essentially, in the 19th century,

Africa was taken and divided up amongst imperialist powers. 44 Resources in

commodity-rich areas of Africa were monopolized by the colonizing powers, and

colonizers failed to take into account ethic differences when drawing state borders. As a

result, ethic conflicts caused instability within the states themselves, which did not help

in establishing a credible government. The colonizers also exhausted primary resources

in many region, leaving them with no attractive commodities to attract foreign investment.

Not only were primary resources exhausted, but taxes were established. For example, in

the Congo tax rates were about 60 per cent of income during the 1920s and 1930s. 45

This wealth drain during colonial times, therefore, led to a lack of wealth to invest within

the country following the withdrawal. Without the means to invest with, Africans were

unable to sustain their own economy. Additionally, without the means to invest with,

economic development can not be sustained after it is first started. As a result, economic

development will often stagnate or decline unless further means of investment is provided.

Foreign aid has the potential to help post-colonial areas. However, this foreign aid

must be applied correctly. Africa has constantly been criticized for its poor government

policies and economic ideas. However, foreign nations and donors fail to take into

account that much of Africa’s woes could be attributed to the less than adequate help that

it has received. Take into account the various goals for Africa that the World Bank and

other outside planners have had. In the 1960s, the World Bank believed in “development

planning”. With this, infrastructure was emphasized, as well as the other basic needs of a

developing economy. In the 1970s, this goal changed to “basic needs”, which

emphasized the needs of every citizen within the area. The World Bank decided to

pursue an effort which would provide every citizen with food, clothing, and healthcare.

This had the potential to help an area’s economy, if it were not for the policy change in

43 Graziella Bertocchi and Fabio Canova. “Did Colonization Matter for Growth?” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=35765 (accessed April 4, 2006). 44 Ibid. 45 Daron Acemoglu, Simon Johnson and James Robinson. “The Colonial Origins of Comparative Development: An Empirical Investigation,” http://econ-www.mit.edu/faculty/download_pdf.php?id=144 (accessed April 4, 2006).


the 1980s. In the 1980s, focus shifted towards “structural adjustment”, which coincided

greatly with the goal of the 1960s. This goal focused on creating free markets. Seeing as

how a free market can greatly benefit an economy, this goal would have been feasible,

but in the 1990s, the goals once again changed. This time, “good governance” was

stressed. It was believed that with good governance, would come stable governments,

and so a stable economy. With stable economies, foreign investments would be

encouraged, as well as domestic investment.46

The ambiguousness of foreign aid from organizations such as the World Bank and

donor nations has caused much failure amongst economic development. Had one goal

been created in the 1960s and abided by, it is possible that Africa would not be in the

shape it is in today. Rather, there is a possibility that many nations in Africa have

economies very similar to Asian economies. With the Taiwan example, the government

had one very clear goal

– development of

capital. This goal has

proven successful in

the end, as Taiwan

certain does have a

very thriving economy.

Perhaps the

development of capital

is not the appropriate

goal for every African

nation, but there is no

question that in order for economic growth to come about, it is necessary to develop one

very clear goal rather than attempting to try every solution. As various nations and

46 Jeffrey Sachs, “Growth in Africa: It can be Done,” The Economist, Vol. 339, Issue 7972 (1996). 19.

Analysis of Economic Development in Select Post-Colonial States Former Colony

Colonial Master

Year Independent

Per Capita GDP

Growth Rate of

Real GDP

Sea Access?

DR Congo Belgium 1908 $800 6.5% N Niger France 1960 $800 3.8% N

Sierra Leone UK 1961 $900 5.5% Y Côte d’Ivoire France 1960 $1,500 0.8% Y North Korea Japan 1945 $1,800 1.0% Y

India UK 1947 $3,400 7.6% Y Morocco France 1956 $4,300 1.2% Y

Egypt UK 1954 $4,400 4.7% Y Botswana UK 1966 $10,000 3.3% N

South Korea Japan 1945 $20,400 3.9% Y Canada UK 1867 $32,900 2.9% Y

Hong Kong UK 1997 $37,400 6.9% Y Australia UK 1901 $42,000 3.5% Y

United States UK 1776 $42,000 3.5% Y Source: CIA World Factbook


organizations “experiment” on Africa, and other post-colonial areas, their continually

sink deeper into economic distress.

Current Status Government Policy Choices A number of factors could lead to favorable conditions in a post-colonial area for

economic development. However, in the end, it is up to the post-colonial areas

themselves to establish legitimate institutions that will help attract foreign capital into the

areas. As can be seen in the previous example with Botswana, a nation in Africa which

grew from the third poorest nation in the world to being classified as an “upper middle-

class” nation, it is about the policy choices that a government makes that allows for the

economy’s ultimate success.

One main policy that the government of post-colonial areas must adopt is to make

their country as investor-friendly as possible. When Botswana gained its independence,

its leader immediately established the government as a “financially viable entity”. He

also opened up the country’s natural resources to foreign investors, and established

international ties with other governments. 47 Additionally, the government must work to

disengage itself from international political turmoil. By doing so, the government frees

itself from any engagement that would cause a loss of investors based on political

principles. It also prevents from having to fight a military engagement, which would lead

to the instability of the developing economy. Finally, the government must learn that it

cannot only depend on natural resources for development. Leaders in Botswana

“embarked on a massive program in search of more diverse foreign aid, more private

capital investment, and more guarantees of protection if Botswana were to be pulled into

a conflict with its neighbors.” 48 Leaders also lowered taxes on industries in the country,

and maintained a relatively stable tax code, which promoted investor confidence. As the

47 Scott Beaulier. “Explaining Botswana’s Success: The Critical Role of Post-Colonial Policy,” Cato Journal, Vol. 23, No. 2 (2003), 234. 48 Ibid.


government’s credibility was established, more foreign investment entered the country.

Botswana is just one example of a nation where a stable political and government

situation leads to a stable economy. With this stable economy comes the prospect for

growth, as investors began seeing the potential for the country.

The situation in Botswana verifies that there are two main governmental policies

that must be adopted in order to attract foreign capital. The first policy is to make the

domestic market as transparent as possible. Put in economic terms, reduce the moral

hazard for investors. When investors cannot monitor their investments to the extent that

they wish to, investment will be lower, and will directly depend on the per capita wealth

of the nation. Meaning, poorer states with un-transparent economies and governmental

policies will receive less money, and richer states will only receive as much as they are

worth. This puts a handicap on investment as if foreign investors are handicapped “in

terms of domestic market information, they tend to under-invest.” 49 The second

governmental policy that must be adopted is to reduce the sovereign risk for investing.

This is a policy that is directly dependent on the government. Sovereign risk is defined

as when the state either defaults on loan contract with foreigners, “seizes foreign assets

located within its borders, or prevents domestic residents from fully meeting obligations

to foreign contracts.” 50 This causes a problem for investors because if they cannot be

sure that their assets are protected by the government, they will choose to invest

elsewhere. By passing policies that guarantee the protection of assets and the

government’s commitment to free trade, sovereign risk is reduced, and investors will not

be as hesitant to invest. Also, by ensuring a corruption-free government, investors will

also be more likely to invest.

Governments, in general, other than promoting investment through the ways

specified above, should generally stay out of markets. It has been shown that when

comparing a free market to a centrally planned market, free markets are more efficient, 49 Laura Alfaro, Sebnem Kalemli-Ozcan and Vadym Volosovych, “Why doesn’t Capital Flow from Rich to Poor Countries? An Empirical Investigation,” http://www.imf.org/external/np/seminars/eng/2004/ecbimf/pdf/voloso.pdf (accessed April 4, 2006). 50 Ibid.


and allow for better development of the economy. However, there are some instances

where the government should get involved. Specifically, the government should get

involved to protect investor’s assets. It should also get involved in the economy to

protect workers, and the indigenous population. In order to facilitate confidence in the

economy, it should work against monopolies and other forms of business scandals that

would undermine the economy. Most importantly, the government should attempt to

keep control over inflation, and promote domestic savings. 51 These policies are all

designed to keep the economies within post-colonial areas stable, to encourage

investment after stability has been achieved.

Open Trade/Market and Economic Development Post-colonial areas that have adopted open trade such as Botswana, Mauritius,

Morocco, Bangladesh, and India have constantly out-performed other post-colonial

areas.52 It can be seen, then, that open trade and globalization will help post-colonial

areas develop their economies and begin seeing growth. Fortunately, the matter of open

trade is one that the international community can, and should aid these nations with.

One of the biggest threats against open trade is protectionism. Developed

countries raise tariffs and taxes, which are designed to help only their own economies

when certain post-colonial economies desperately need access to these closed markets.

Higher tariffs and taxes end up discouraging these areas from even attempting to export

to these areas, and from purchasing gods from the international community. Developed

nations that wish to aid post-colonial areas should establish a preferential trading policy

for developing economies. Post-colonial areas rich with commodities and natural

resources will be able to benefit from this policy. Additionally, post-colonial areas

looking to focus on more of a manufacturing sector economy will also benefit, as they

now have a new export market. Those that do not have either have the capability to

51 “The United Nations on Revitalizing Economic Growth in the Developing Countries,” Population and Development Review, Vol. 16, No. 2 (Jun. 1990). 52 Jeffrey Sachs and Andrew Warner and Anders Aslund and Stanley Fischer. “Economic Reform and the Process of Global Integration,” Brookings Papers on Economic Activity, Vol. 1995, No. 1, (1995).


obtain cheaper goods from the international community, allowing them to concentrate on

building up their own domestic economies based on anything they could possibly

specialize in, rather than attempting to provide every means for themselves.

The tax policy of post-colonial areas themselves should also be revised. Rather

than setting high taxes, which are detrimental towards open trade, the government should

consider setting lower taxes that serve to promote investment. As mentioned before,

setting a low income tax, but high consumption tax is a valid idea. With a low income

tax, the savings rate will be raised within a nation, and future investment will be spurred.

Additionally, in order to facilitate industrial growth, governments should consider setting

lower corporate taxes. Currently, in Africa, corporate tax rates average 40 per cent and in

Eastern Asia, range between 20 per cent and 30 per cent. 53 High tax rates are likely to

be avoided, and pave the way for corruption. They also provide less of an incentive

towards starting businesses in the area. High tax rates generally, as a rule of thumb, do

not work well in any economy – both developing and developed. The United States, has

never attempted to collect 40 per cent in taxes from its corporations. If it were to do so,

one can only imagine the decline in businesses that operate within the country. With

responsible tax policies, domestic, as well as foreign, business will be more encouraged

to invest and develop capital within the country.

Encouraging Human Capital Growth A major issue in the development of post-colonial economies is the development

of human capital. A problem that post-colonial economies face is the lack of skilled

human capital. While the labor force their economies might be large, most are only

skilled at one professor – the profession that the colonizing country exploited the area for.

As a result, it is necessary for the international community to offer their assistance in

developing skilled human capital.

53 Jeffrey Sachs, “Growth in Africa: It can be Done,” The Economist, Vol. 339, Issue 7972 (1996). 19.


Two shortfalls that post-colonial economies have in terms of developing human

capital is their lack of access to science and technology. 54 While colonials did bring

some forms of science and technology during colonization, since gaining independence,

this science and technology has become outdated and useless in developing any area’s

economy. With the introduction of science and technology to an economy, the economy

will become much more productive. It will not only grow, but will also attract attention

from international investors, helping to bring even more capital into the area. The

question then is how to successfully introduce science and technology into an area’s

economy. The best way to do this is through education. Developed countries wishing to

help post-colonial areas need to promote and provide education in these two subjects.

Because in most successful economies, there have been a small number of educated elites

leading the government and businesses, it will only be necessary to even just educate a

handful of people. If developed nations and the United Nations could simply offer

education programs within the areas, or even educate a group of those interested in

education in foreign countries, it will become much more likely that post-colonial are be

able to create and sustain a profitable and growing economy that can serve to aid its

citizen’s best interests.

An example where human capital was developed was in South Korean. South

Korean has one of the world’s leading economies. Its GDP per capita is $20,400 and has

a growth rate of 3.9 per cent per year.55 Korea’s human development program was

actually part of a larger science and technology development program. In 1971, South

Korea’s government established the Korea Advanced Institute of Science (KAIS) in order

to further science education and to train engineers and scientists. Today, the KAIS

includes a graduate school program to train leading scientists and engineers. 56

Additionally, the government sponsors several industrial research institutes that 54 “The United Nations on Revitalizing Economic Growth in the Developing Countries,” Population and Development Review, Vol. 16, No. 2 (Jun. 1990). 55 “South Korean,” World Factbook. http://www.cia.gov/cia/publications/factbook/geos/ks.html (accessed April 23, 2006). 56 Walter Arnold, “Science and Technology Development in Taiwan and South Korea,” Asian Survey, Vol. 28, No. 4 (Apr., 1988).


specialize in all fields ranging from machinery, to telecommunications, to marine

sciences. All are designed in order to keep Korea developing leading technology for each

respective sectors. 57 South Korea’s programs to develop human capital has certain

proved to be useful, as its economy has been consistently growing.

Key Positions Developed States

Developed states are nations that are most likely to have been the colonizing

powers behind post-colonial situations. These former colonial powers have realized the

impact of their rule, and will generally support any actions necessary to develop the

economies of their former colonies. They can help post-colonial economies in two main

ways. The first way is by making their own economies friendlier towards these

developing economies. In order to do this, developed nations must realize the benefits

behind having an open market, and should begin reducing taxes and tariffs that would

discourage post-colonial areas from being able to trade within their markets.

Additionally, if possible, developed nations should look to enact preferential trading

rights with post-colonial areas in order to help investment flow into the area. The second

way for them to help post-colonial economies is by providing and funding education for

the people. Because developed nations are at the top when it comes to technology and

education, it will be up to them to help the post-colonial areas receive access to the same.

After post-colonial areas receive necessary education and technology, its people would

finally have the needed skills to advance the economies.

Developed states should serve as a model of desirability for post-colonial areas.

They must show post-colonial nations that it is only with a stable government that

economic changes can come about. This stable government must be able to enact policy

that can help foster efficient economic growth. Developed states should guide post-

colonial areas into developing these same policies. It should steer post-colonial areas

57 Ibid.


away from having a planned economy, and rather, have it develop a free economy. In the

end, it is up to individual investors within developed states to choose where they wish to

invest and in what. Governments of developed nations cannot tell investors in their

respective nations where to invest; however, they can help the conditions abroad that

would entice investors.

Developed states take a large interest in helping post-colonial areas develop

economically. For one, it has been shown that after post-colonial areas develop, they

quite often have strong economies, such as in the case of Taiwan and Korea. These two

nations invest heavily in other nations. As an example, Taiwan is a “major investor

throughout South Asian”, which goes to show that after one post-colonial area develops

its economy, it can also begin helping other former colonial states begin recovery. 58

They also serve as strong trading partners for other developed nations. Both Taiwan and

Korea trade extensively with China and the United States, which serves as a mutually

beneficial relationship. Not only are there economic perks to developing a post-colonial

area, but the technology developed in these two post-colonial areas have been applied

worldwide, adding to the overall knowledge base of the world. Developed nations

recognize the value that a new developed economy has to offer the world economy, and

so will promote their development.

Post-Colonial Areas Successful post-colonial areas have dealt with the same problems as failed post-

colonial areas. These problems include having to deal with a wealth drain caused by their

colonizing powers, to having to deal with low human capital, and an uneducated

government. Successful and unsuccessful post-colonial areas have experienced many of

the same institutional problems, and had the need to establish strong and powerful

institutions. As a result, successful post-colonial areas can help unsuccessful post-

colonial areas develop their economies, providing first-hand experience and advice.

While successful post-colonial areas will provide the same advice as developed states, 58 “Taiwan.” World Factbook. http://www.cia.gov/cia/publications/factbook/geos/tw.html (accessed April 23, 2006).


they will recognize the need for one clear goal of development. Rather than attempting to

solve every problem in the area at once, successful post-colonial areas recognize that it is

necessary to take one step at a time. In many case, successful post-colonial areas still do

not have strong enough economies to be able to invest in unsuccessful post-colonial areas.

Unsuccessful post-colonial areas have a number of problems that need to be dealt

with. At home, they are likely battling their own security problems which include threats

from its neighbors, to civil war, to ethnic unrest. Because of their problems, it is very

hard for them to develop their own economies. Post-colonial areas will accept any help

that the international community provides, as the only thing of concern to them is to

achieve stability at the time, which will hopefully lead to economic growth. They have

resources to provide the world such as commodities and other natural resources. As a

result, they will be very much in favor of the international community opening up its

markets. With the absence of protectionism, it will be much easier for post-colonial areas

to trade with more affluent nations.

After post-colonial nations achieve economic prosperity, they will be able to have

much more of an impact on the world. They would be recognized and respected by the

world community, rather than being seen as an “experiment.” Individual residents of the

areas would see their own wealth grow, and would begin living a better standard of life.

Education would enable the majority of citizens climb up the economic and social ladder

as well. With economic prosperity would come political stability, so generally, there

would be peace within the area itself. Post-colonial nations have a large stake in having

their economies be developed. However, they also need to realize the difference between

good action, and useless action and begin voicing their own opinions with development

as in the end, it is their own areas that are being affected.


Summary In the end, it can be seen that post-colonial areas have been left with a number of

problems from colonial occupation. These problems range from the exploitation of

resources to the establishment of weak institutions. With these problems, it becomes

difficult for post-colonial areas to develop their economies. At first, it will always be up

to the post-colonial area to establish credibility in their government and economies. In

order to do this, the government must create strong institutions from what colonial

powers left behind, and work to ensure that the rule of law applies within the area, and

that there is a protection of private property. The government will also have to work to

invite foreign investors into the nation by making their economies as attractive as

possible. Certain post-colonial areas have the advantage of natural resources and

commodities such as oil and valuable gems, and can therefore attract investors easily.

However, governments should not only encourage investment at the primary stage of

production and in the exportation of raw resources. It should also encourage investment

at other stages of production in order to create a more diversified economy. Post-colonial

areas without the advantage of natural resources can still attract foreign investment by

simply offering low tax rates, and a hands-off government policy. So long as a favorable

governmental condition is created in a country, investment will flow into the area.

Post-colonial states have much work ahead of them in order to create a self-

sustainable economy. The only aid that foreign governments and the United Nations can

provide until they develop a strong governmental institution that favors economic growth

is to offer recommendations for creating those governmental institutions. Following the

establishment of favorable institutions, the United Nations and the international

community can help these developing economies by providing direct investment.

Additionally, lower tariff rates can be introduced for these developing economies, as in

the beginning, most of these states will start as an exporting economy.


Discussion Questions

• Were there any advantages of colonization for the post-colonial areas? • What unique problems do post-colonial areas face as compared to other developing

nations?

• What political and economic changes will be necessary in order for economic development of post-colonial areas?

• How can the UN and the international community offer its assistance to post-colonial

areas in order to promote economic development? What kind of assistance should be offered? What type of discretion should be taken in offering assistance, if any?

• Who is concerned about the economic difficulties of post-colonial areas other than the

areas themselves? • What type of incentives can post-colonial areas offer for foreign countries to invest in

their economies? • How can developed countries revise their own countries’ policies in order to help

post-colonial areas? • How can human capital be developed in these areas? What advantages are there to

developing human capital?


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