Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (62 page)

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Authors: Niall Ferguson

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Consider too the role of the British Empire in facilitating capital export to the less developed world. Although some measures of international financial integration seem to suggest that the 1990s saw greater cross-border capital flows than the 1890s, in reality much of today’s overseas investment goes on within the developed world. In 1996 only 28 per cent of foreign direct investment went to developing countries, whereas in 1913 the proportion was 63 per cent. Another, stricter measure shows that in 1997 only around 5 per cent of the world stock of capital was invested in countries with per capita incomes of 20 per cent or less of US per capita GDP. In 1913 the figure was 25 per cent. A plausible hypothesis is that empire – and particularly the British Empire – encouraged investors to put their money in developing economies. The reasoning here is straightforward. Investing in such economies is risky. They tend to be far away and more prone to economic, social and political crises. But the extension of empire into the less developed world had the effect of reducing such risks by imposing, directly or indirectly, some form of European rule. In practice, money invested in a
de jure
British colony such as India (or a colony in all but name, like Egypt) was a great deal more secure than money invested in a
de facto
‘colony’ such as Argentina. This was a better ‘seal of good housekeeping approval’ even than membership of the gold standard (which effectively guaranteed investors against inflation) – though most British colonies ultimately had both.
For all these reasons, the notion that British imperialism tended to impoverish colonized countries seems inherently problematic. That is not to say that many former colonies are not exceedingly poor. Today, for example, per capita GDP in Britain is roughly twenty-eight times what it is in Zambia, which means that the average Zambian has to live on something less than two dollars a day. But to blame this on the legacy of colonialism is not very persuasive, when the differential between British and Zambian incomes was so much less at the end of the colonial period. In 1955, British per capita GDP was just seven times greater than Zambian. It has been since independence that the gap between the colonizer and the ex-colony has become a gulf. The same is true of nearly all former colonies in sub-Saharan Africa, with the notable exception of Botswana.
A country’s economic fortunes are determined by a combination of natural endowments (geography, broadly speaking) and human action (history, for short): this is economic history’s version of the nature-nurture debate. While a persuasive case can be made for the importance of such ‘given’ factors as the mean temperature, humidity, the prevalence of disease, soil quality, proximity to the sea, latitude and mineral resources in determining economic performance, there seems strong evidence that history too plays a crucial part. In particular, there is good evidence that the imposition of British-style institutions has tended to enhance a country’s economic prospects, particularly in those settings where indigenous cultures were relatively weak because of thin (or thinned) population, allowing British institutions to dominate with little dilution. Where the British, like the Spaniards, conquered already sophisticated, urbanized societies, the effects of colonization were more commonly negative, as the colonizers were tempted to engage in plunder rather than to build their own institutions. Indeed, this is perhaps the best available explanation of that ‘great divergence’ which reduced India and China from being quite possibly the world’s most advanced economies in the sixteenth century to relative poverty by the early twentieth. It also explains why it was that Britain was able to overhaul her Iberian rivals: precisely because, as a latecomer to the imperial race, she had to settle for colonizing the unpromising wastes of Virginia and New England, rather than the eminently lootable cities of Mexico and Peru.
But which British institutions promoted development? First, we should not underestimate the benefits conferred by British law and administration. A recent survey of forty-nine countries concluded that ‘common-law countries have the strongest, and French-civil-law countries the weakest, legal protections of investors’, including both shareholders and creditors. This is of enormous importance in encouraging capital formation, without which entrepreneurs can achieve little. The fact that eighteen of the sample countries have the common-law system is of course almost entirely due to their having been at one time or another under British rule.
A similar point can be made about the nature of British governance. At its apogee in the mid-nineteenth century, two features of the Indian and Colonial services are especially striking when compared with many modern regimes in Asia and Africa. First, British administration was remarkably cheap and efficient. Secondly, it was remarkably non-venal. Its sins were generally sins of omission, not commission. This too cannot be wholly without significance, given the demonstrable correlations today between economic under-performance and both excessive government expenditure and public sector corruption.
The economic historian David Landes recently drew up a list of measures which ‘the ideal growth-and-development’ government would adopt. Such a government, he suggests, would
1. secure rights of private property, the better to encourage saving and investment;
2. secure rights of personal liberty ... against both the abuses of tyranny and ... crime and corruption;
3. enforce rights of contract;
4. provide stable government ... governed by publicly known rules;
5. provide responsive government;
6. provide honest government ... [with] no rents to favour and position;
7. provide moderate, efficient, ungreedy government ... to hold taxes down [and] reduce the government’s claim on the social surplus.
The striking thing about this list is how many of its points correspond to what British Indian and Colonial officials in the nineteenth and twentieth century believed they were doing. The sole, obvious exceptions are points 2 and 5. Yet the British argument for postponing (sometimes indefinitely) the transfer to democracy was that many of their colonies were not yet ready for it; indeed, the classic and not wholly disingenuous twentieth-century line from the Colonial Office was that Britain’s role was precisely to get them ready.
It is a point worth emphasizing that to a significant extent British rule did have that benign effect. According to the work of political scientists like Seymour Martin Lipset, countries that were former British colonies had a significantly better chance of achieving enduring democratization after independence than those ruled by other countries. Indeed, nearly every country with a population of at least a million that has emerged from the colonial era without succumbing to dictatorship is a former British colony. True, there have been many former colonies which have not managed to sustain free institutions: Bangladesh, Burma, Kenya, Pakistan, Tanzania and Zimbabwe spring to mind. But in a sample of fifty-three countries that were former British colonies, just under half (twenty-six) were still democracies in 1993. This can be attributed to the way that British rule, particularly where it was ‘indirect’, encouraged the formation of collaborating elites; it may also be related to the role of Protestant missionaries, who clearly played a part in encouraging Western-style aspirations for political freedom in parts of Africa and the Caribbean.
In short, what the British Empire proved is that empire is a form of international government that can work – and not just for the benefit of the ruling power. It sought to globalize not just an economic but a legal and ultimately a political system too.
The final question to be addressed is whether anything can be learned from the British imperial example?
It must be said that the experiment of running the world without the Empire cannot be adjudged an unqualified success. The post-imperial age has been characterized by two contradictory tendencies: economic globalization and political fragmentation. The former has certainly promoted economic growth, but the fruits of growth have been very unevenly distributed. The latter tendency has been associated with the problems of civil war and political instability, which have played a major role in impoverishing the poorer countries of the world.
Overall, the world experienced higher growth in the second half of the twentieth century than at any other time. Much of that was undoubtedly due to the very rapid growth achieved in the period of reconstruction after the Second World War. According to the best available estimates, the average annual rate of growth of world GDP per capita was 2.93 per cent between 1950 and 1973, compared with the miserably low figure of 0.91 per cent for the depressed and war-torn years 1913 – 50. The entire period from 1913 to 1973 was a time of economic disintegration, however, flanked on either side by periods of economic globalization. These delivered remarkably similar rates of growth in per capita GDP: 1.30 per cent from 1870 to 1913; 1.33 from 1973 to 1998. However, the earlier period of globalization was associated with a degree of convergence in international income levels, particularly between the economies on either side of the Atlantic Ocean, whereas the recent period has been associated with a marked global divergence, particularly as the rest of the world has pulled away from sub-Saharan Africa. In 1960 the average income in Sierra Leone was around a seventh of what it was in Britain. After forty years of independence, it is a mere sixteenth. There can be little doubt that this is due in part to the lopsided nature of economic globalization – the fact that capital flows mainly within the developed world and that trade and migration are still restricted in many ways. This was less true in the pre-1914 age of globalization when, partly under the influence of imperial structures, investors were encouraged to put money into developing economies.
On the eve of the First World War, imperialism had reduced the number of independent countries in the world to fifty-nine. But since the advent of decolonization there have been sustained increases in that number. In 1946 there were seventy-four independent countries; in 1950, eighty-nine. By 1995 the number was 192, with the two biggest increases coming in the 1960s (mainly Africa, where twenty-five new states were formed between 1960 and 1964) and the 1990s (mainly Eastern Europe, as the Soviet Empire disintegrated). And many of the new states are tiny. No fewer than fifty-eight of today’s states have populations less than 2.5 million; thirty-five have less than 500,000 inhabitants. There are two disadvantages to this political fragmentation. Small countries are often formed as a result of civil war within an earlier multiethnic polity – the most common form of conflict since 1945. That in itself is economically disruptive. In addition, they can be economically inefficient even in peacetime, too small to justify all the paraphernalia of statehood they insist on decking themselves out in: border posts, bureaucracies and the rest. Political fissiparity – the fragmentation of states – and its attendant economic costs have been among the principal sources of instability in the post-war world.
Finally, although Anglophone economic and political liberalism remains the most alluring of the world’s cultures, it continues to face, as it has since the Iranian revolution, a serious threat from Islamic fundamentalism. In the absence of formal empire, it must be open to question how far the dissemination of Western ‘civilization’ – meaning the Protestant-Deist-Catholic-Jewish mix that emanates from modern America – can safely be entrusted to Messrs Disney and McDonald.
These tendencies provide the best explanation for the failure of history to ‘end’ with the collapse of the Soviet Empire in 1989 – 91 and the persistent instability of the post-Cold War world – the most spectacular symptom of which was of course the attacks of 11 September 2001 on the World Trade Center and the Pentagon.
A New Imperialism?
 
Less than a month after those attacks, the British Prime Minister Tony Blair made a messianic speech to the Labour Party’s annual conference at Brighton. In it he spoke with fervour of the ‘politics of globalization’; of ‘another dimension’ of international relations; of the need to ‘re-order this world around us’. The impending war to overthrow and replace the Taliban regime in Afghanistan, he suggested, was not the first step in the direction of such a re-ordering; nor would it be the last. Already there had been successful interventions against other rogue governments: the Milošević regime in Serbia and the ‘murderous group of gangsters’ who had attempted to seize power in Sierra Leone. ‘And I tell you’, he declared, ‘if Rwanda happened again today as it did in 1993, when a million people were slaughtered in cold blood, we would have a moral duty to act there also’. The cases of Kosovo and Sierra Leone were plainly to be understood as models of what could be achieved by intervention; the case of Rwanda as a lamentable example of the consequences of non-intervention. Of course, he hastened to add, Britain could not be expected to carry out such operations on a regular basis. But ‘the power of the international community’ could ‘do it all ... if it chose to’:
It could, with our help, sort out the blight that is the continuing conflict in the Democratic Republic of Congo, where three million people have died through war or famine in the last decade. A Partnership for Africa, between the developed and developing world ... is there to be done if we find the will.
 

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