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The Impacts of Colonialism on Modern African Economy

Colonialism has impacted the political and economic conditions of the contemporary Africa. Although colonialism in Africa was brief, lasting less than a century for most of the continent. Many view imperialism as responsible for almost all of Africa’s current evils. The African economy was significantly changed by the Atlantic slave trade through the process of imperialism and the economic policies that follows.

Colonial rule dominated the African continent from 1885 until the second half of the 20th century. Not until 1990 did the last dependency, Namibia, achieve independence. Years of intense and primarily European rule spread Western culture, government, industry, religion, and medicine across the continent. The relatively recent exodus of Western powers left the continent with artificially constructed nations and alien forms of government, still dominated by remote economic powers.

The Berlin Conference of 1884-1885 formalised what has become known as the ‘Scramble for Africa’. European powers arbitrarily divided up Africa between themselves and started administrating their new colonies. Seventy years later they bequeathed to native Africans countries that looked remarkably different from how they looked in 1880. And, albeit with some exceptions, these countries are among the poorest in the world today.

Africa’s commercial transition was inextricably connected to the rising demand for industrial inputs from the industrialising core in the North Atlantic. Revolutions in transportation (railways, steamships), a move towards liberal trade policies in Europe, and increasing rates of GDP growth, enhanced demand for (new) manufactures, raw materials and tropical cash crops. African producers responded to this demand by increasing exports of vegetable oils (palm oil, groundnuts), gum, ivory, gold, hides and skins. Palm oil, a key export, was highly valued as a lubricant for machinery and an ingredient in food and soap.

During and after the scramble, the range of commodity exports broadened to include raw materials like rubber, cotton, and copper, as well as cash crops such as cocoa, coffee, tea and tobacco. The lion’s share of these commodities went directly to manufacturing firms and consumers in Europe. Meanwhile, technological innovations also reduced the costs of colonial occupation. These included the Maxim gun, the steamship, the railway and quinine, the latter lowering the health risks to Europeans in the disease-ridden interior of the ‘dark continent’.

Colonial map made little sense bred conflict, and the West has often approached Africa as a patron, rather than a partner. It furthermore created single-crop economies, which sentenced African economies to market-based fluctuations. Through direct control of African economy and political administration made possible colonialism. Forced integration of developing states into the international trading arena augmented the already prevalent inequality between developed and developing states.

The most fundamental resource change initiated during the colonial era was one for which colonial governments had some responsibility, though it is hard to know how much: the beginning, sometime after the 1918 influenza pandemic, of the population take-off that has moved sub-Saharan Africa towards labor abundance. The equivalent institutional change of the colonial period was the replacement of slave by wage-labor markets, gradual as it was. Colonialism increased the capacity of states: for example, despite the common charge of “balkanized” and artificial boundaries, the states of 1960 were usually larger than those the Europeans had overthrown, and the borders have become socially embedded. But colonial states remained weak, and their rulers tended to regard them as “territories” comprising discrete “tribes” (themselves partly of colonial creation). Forging national identities was hardly on the agenda of alien rulers.

The peasant-statist regimes, especially prominent in parts of East Africa and the whole of West Africa, were characterised by being exporters of primary goods. A very basic infrastructure was made available to these communities by the colonisers and taxes were imposed so that the areas could eventually support themselves. However, the local communities had no control over what was grown and exported. They also had no say regarding the prices or profits of the goods that they had grown.

Africans experienced a severe deterioration in living standards as the consequence of colonialism. Indeed, given the extent of land expropriated from Africans by Europeans, living standards might have fallen by about 50%. These calculations are supported by evidence on real wages. Falling African incomes in conjunction with rising average incomes implies that there was a huge increase in inequality as the consequence of colonialism. Outside of the settler colonies the situation was different. There is evidence that nominal and real wages in the formal
sector increased in British West Africa. This evidence of course tells us little about what was happening to the living standards of the vast mass of rural people. However, other evidence on development outcomes is relevant here. For instance, recent research has shown that the stature of military recruits increased in Ghana and also British East Africa during the colonial period. Since military recruits
likely represented a much more representative cross-section of society than those paid formal sector wage rates, this evidence is consistent with much more general improvements in living standards.

Notoriously, output per head in Sub-Saharan Africa is the lowest of any major world region and has, on average, expanded slowly and haltingly since 1960. But there have been important changes, and variations over space, in policy and performance. There were notable exceptions to the general growth trends, both before and after the turning-point in the early to mid-1970s. Côte d’Ivoire and Ghana made a particularly interesting contrast: similarly-sized neighbours with relatively similar factor endowments and geographical features, but with different colonial heritages. Côte d’Ivoire underwent what might loosely be described as a magnified version of the standard growth trajectory. It averaged an annual GDP growth of 9.5% from 1960 to 1978 but then had several years of stagnation followed by civil war.

Meanwhile, Ghana did almost the opposite. Ghanaian GDP per capita was barely higher in 1983, when it began structural adjustment, than at independence in 1957. However, as one of the two most successful cases of structural adjustment in Africa (the other being Uganda), Ghana averaged nearly 5% annual growth during the quarter-century after 1983. Thus, roughly, while Côte d’Ivoire was rising Ghana was falling, and vice versa. Only one Sub-Saharan economy, Botswana, sustained growth over three, indeed four, decades since its independence, which was in 1966. Botswana averaged 9.3% annual growth.

In policy, structural adjustment in the 1980s marked a watershed: a fundamental shift from administrative to market means of resource allocation. The change, however, was less dramatic in most of the former French colonies, where (except in Guinea) the maintenance of a convertible currency had enabled governments to avoid some of the supplementary price and quantity controls which had increasingly been imposed in the mostly former British colonies outside the franc zone. In performance, aggregate economic growth rates in the region were pretty respectable until 1973-75. Ironically, in the decade or so following the adoption of structural adjustment they were stagnant or negative, before the Chinese-led boom in world commodity prices eased the region into 12 years of gross domestic product (GDP) growth at an average of 5% a year before the crises of 2007 (rising fuel and food prices, then the beginning of the international financial crisis) and 2008 brought about a “great recession” in 2009, according to IMF.

Because manufactured goods with increasing technological content account for much of global trade, the continued reliance on colonial-era “extractivist” development models has marginalized Africa in the global economic and trading environment. It has also markedly increased the region’s exposure to global volatility and risks associated with long-term deterioration of commodity terms of trade the ratio between a country’s export prices and its import prices. The combined GDP of the continent, which crossed the historical threshold of $2.0 trillion in 2011 and rose to $2.4 trillion in 2014, decreased to $1.9 trillion in 2017, owing primarily to sharp downturns in natural resource-dependent economies triggered by the end of the commodity boom in the second half of 2014.

Likewise, total African trade, which exceeded $1.0 trillion for the first time in 2011, fell to $820 billion in 2017. The region’s contribution as a share of global trade was equally affected by commodity price gyrations in world markets. Though already dismally low, Africa’s share of world trade decreased from 2.78% in 2013 to 2.34% in 2017. Africa’s relative contribution to global trade is now less than that of South Korea, which had 2.93% of total international trade in 2017. The region’s aggregate GDP and total trade figures are yet to return to pre-crisis level.

Postcolonial economic development on the continent has also resulted in combined and uneven development that has concentrated industrial growth in key centers such as Nigeria and South Africa and left other regions far behind. According to the World Bank, those two countries together have accounted for 55% of the industrial value in sub-Saharan Africa, while the other fifty-two countries share the remainder. Africa’s manufacturing exports nearly tripled from $72 billion in 2002 to $189 billion in 2012, but a mere four countries Egypt, Morocco, South Africa, and Tunisia accounted for a full two-thirds of these exports. Class polarization has expressed itself most sharply in these centers, with enthusiastic ruling-class support for market-based neoliberal reform on the one hand, and higher levels of working-class resistance on the other.

In fact, within those centers, the class contradictions are profound. In South Africa, more than 40% of the population languishes in extreme poverty while the top quarter of the population earns 85% of the country’s wealth. In Nigeria, 80% of the nation’s oil wealth is concentrated in the hands of 1% of the population.

The requirements of the continent’s new ruling classes accentuated by the structural constraints inherited from colonialism could by no means escape the competitive pressures of the broader system, particularly as it lurched into crisis. It is in the mass-based workers’ struggles and social movements of today that we must look to find a way out of this impasse.

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