and twentieth centuries some
nations were able to take
advantage of the Industrial Revolution and the technologies
and methods of organization that it brought while others
were unable to do so. Technological change is only one of
the engines of prosperity, but it is perhaps the most critical
one. The countries that did not take advantage of new
technologies did not benefit from the other engines of
prosperity, either. As we have shown in this and the
previous chapter, this failure was due to their extractive
institutions, either a consequence of the persistence of their
absolutist regimes or because
they lacked centralized
states. But this chapter has also shown that in several
instances the extractive institutions that underpinned the
poverty of these nations were imposed, or at the very least
further strengthened, by the very same process that fueled
European growth: European commercial and colonial
expansion. In fact, the profitability of European colonial
empires was often built on the destruction of independent
polities and indigenous economies around the world, or on
the creation of extractive institutions
essentially from the
ground up, as in the Caribbean islands, where, following
the almost total collapse of the native populations,
Europeans imported African slaves and set up plantation
systems.
We will never know what the trajectories of independent
city-states such as those in the Banda Islands, in Aceh, or
in Burma (Myanmar) would have been without the
European intervention. They may have had their own
indigenous Glorious Revolution
or slowly moved toward
more inclusive political and economic institutions based on
growing trade in spices and other valuable commodities.
But this possibility was removed by the expansion of the
Dutch East India Company. The company stamped out any
hope of indigenous development in the Banda Islands by
carrying out its genocide. Its threat also made the city-
states in many other parts of Southeast Asia pull back from
commerce.
The story of one of the oldest civilizations in Asia, India,
is similar, though the reversing of development was done
not by the Dutch but by the British. India was the largest
producer and exporter of
textiles in the world in the
eighteenth century. Indian calicoes and muslins flooded the
European markets and were traded throughout Asia and
even eastern Africa. The main agent that carried them to
the British Isles was the English East India Company.
Founded in 1600, two years before its Dutch version, the
English East India Company spent the seventeenth century
trying to establish a monopoly on the valuable exports from
India. It had to compete with the Portuguese, who had
bases in Goa,
Chittagong, and Bombay, and the French
with bases at Pondicherry, Chandernagore, Yanam, and
Karaikal. Worse still for the East India Company was the
Glorious Revolution, as we saw in
chapter 7
. The monopoly
of the East India Company had been granted by the Stuart
kings and was immediately challenged after 1688, and
even abolished for over a decade. The loss of power was
significant, as we saw earlier (
this page
–
this page
),
because British textile producers
were able to induce
Parliament to ban the import of calicoes, the East India
Company’s most profitable item of trade. In the eighteenth
century, under the leadership of Robert Clive, the East India
Company switched strategies and began to develop a
continental empire. At the time, India was split into many
competing polities, though many were still nominally under
the control of the Mughal emperor in Delhi. The East India
Company first expanded in Bengal in the east, vanquishing
the local powers at the battles of Plassey in 1757 and
Buxar in 1764. The East India Company looted local wealth
and took over, and perhaps even intensified, the extractive
taxation institutions of the Mughal rulers of India. This
expansion coincided with the
massive contraction of the
Indian textile industry, since, after all, there was no longer a
market for these goods in Britain. The contraction went
along with de-urbanization and increased poverty. It
initiated a long period of reversed development in India.
Soon, instead of producing textiles, Indians were buying
them from Britain and growing opium for the East India
Company to sell in China.
The Atlantic slave trade repeated the same pattern in
Africa, even if starting from less developed conditions than
in Southeast Asia and India.
Many African states were
turned into war machines intent on capturing and selling
slaves to Europeans. As conflict between different polities
and states grew into continuous warfare, state institutions,
which in many cases had not yet achieved much political
centralization in any case, crumbled in large parts of Africa,
paving the way for persistent extractive institutions and the
failed states of today that we will study later. In a few parts
of Africa that escaped the slave trade, such as South
Africa, Europeans imposed a different set of institutions,
this time designed to create a reservoir of cheap labor for
their mines and farms. The South African
state created a
dual economy, preventing 80 percent of the population from
taking part in skilled occupations, commercial farming, and
entrepreneurship. All this not only explains why
industrialization passed by large parts of the world but also
encapsulates how economic development may sometimes
feed on, and even create, the underdevelopment in some
other part of the domestic or the world economy.
