The great irony of imperialism

The original idea of imperialism and colonialism was that additional provinces/colonies equal greater wealth.

This has always been quite questionable because that wealth is difficult to transport and a mere illusion if it's far away. The transportation costs were prohibitive for long-distance transportation of everyday goods right up to the 18th century.

The Roman profits off controlling England were mostly restricted to a flow of metals. This flow was probably beneficial for the emperor, but not for free; wealthy men living in England were most likely getting paid for it. The empire had on the other hand to maintain and mobilise armies in order to fend off the Celtic neighbours.

Another example is the Spanish experience in the New World.The initial costs were small and a lot of gold and silver booty was carried home. That was the raiding part; the colonialism looked different.

Few New World goods other than silver were really valuable enough for transportation to Europe. Soon, the balance of colonialism for Spain looked like
* loss of enterprising men, ships, crews, ruler's attention to Europe
* gain of silver shipments

The silver had little intrinsic value. It was important for money (coins), cutlery, dinnerware and mirrors mostly. Spain was able to import wares from other European countries and to pay foreign mercenaries with its silver coins.
The net European wealth gain from Spanish colonialism was probably close to zero, though: More silver did not mean more wealth because it's really just money.

Money has the illusion (and ruler -or state-given guarantee) of being useful as payment for natural goods. The reason for its existence is in part the fact that it's easier to transport money than goods. More money in itself doesn't mean more wealth to a nation or continent; the larger quantity of money is still used for the same role - all payments. The more silver was transported to Europe, the lesser its purchasing power because an ever larger quantity of silver was used for a quite stagnant real goods trade. The amount of wares (and mercenaries, artists) that Spain could import from other European countries every year with its colonial silver dropped year by year.

Spain took severe economic damage in the 16th century because of a neglect of domestic economic development and reforms. It turned out to be a rather mediocre country in the 17th century. The control of most of South America and Central America did not turn Spain into a truly prosperous country.

Spain kept importing mostly silver from its colonies; the few other volume imports were paid for with equal volume of exports. Silver = money = illusion. One could say that colonialism was at that time only about the import of illusions and luxury goods such as sugar.

Maritime trade did intensify later on (especially since the early 19th century) and more goods were traded between homeland and colonies. Repeat; traded. The Europeans who emigrated into colonies did expect proper payment with European goods for their work. The end result was from a European perspective an intensified trade. There were few advantages to Europeans from exploitation of indigenous people because those advantages were largely soaked up by the colonists.

In the end, colonialism and imperialism were stupid. The classical Greeks and the Portuguese were right with their approach of colonies in form of emigrant trading cities and trading posts.

It's interesting with this in mind when one looks at all the wars that were waged over colonial "interests" during the 16th to 19th centuries.

The great irony of all this is of course that imperialism and colonialism became politically unsustainable at the time when the transport of low value goods had finally become affordable!


P.S.: I wrote this years ago, decided to release it with minor tweaks after all instead of having it wasted in the non-public list of drafts.



  1. Thanks for the interesting take.

    And look at Spain's economics today...

    Doesn't this have ramifications for current economic systems and the creation of (artificial) wealth? I.e. Money not based on goods but rather on financial services and so forth.

    It would seem that history holds all the lessons that are there to be learned for those who think.

    Thanks Sven please do publish what you write, I think in general it's really well thought through and from a unique point of view, and therefore important to get out there.

    1. Spain today is still suffering from the opportunities wasted under the fascists.
      (West) Germany today is still benefiting from the opportunities exploited in the 1950's. Many of the famed German machine construction companies were founded (or rebuilt) in the 1950's.

      Spain's economy was real enough, and took a turn towards no sustainability only in the late 1990's or later.

      The youth unemployment rate shows how they kept wasting their new generations for decades, though:

  2. I would argue "true, bit irrelevant".

    The disaster suffered by Spain was a classic case of "dutch disease". Any productive industry couldnt hope to out produce the silver looting that was available.
    Learn farming, spend a year growing crops that sell for 10 pieces of silver
    Learn blacksmithing, spend a year smithing tools that sell for 10 pieces of silver.
    Or learn to, well, not a lot, and spend a year sailing to the new world and back transporting 100 pieces of silver back to Spain.

    Its hard to see what the Spanish King could have done to stop the silver importers outbidding other industry for labour, Portugal, France, England, all would have been all too happy to provide men, materials and basing to access the vast wealth, even if it was only inflationary or seigniorage wealth. England spent a great deal of time and resources hijacking those silver shipments.....

    Colonies are a trickier prospect, the idea is to expand the tax base. Its difficult, if not impossible to do in the short term, or even the long term, as colonies are expensive to set up, and are unwilling to pay taxes to the "homeland" for use in the homeland, a share of mutual defence, yes, new sewers for the capital, no.

    Intangibly, English language, English Common law ect ect ect dominate the world, because of our former colonies.

    "(West) Germany today is still benefiting from the opportunities exploited in the 1950's. Many of the famed German machine construction companies were founded (or rebuilt) in the 1950's."
    I'm sure it doesnt hurt that German and French industries are protected by MiPs, tarrifs and duties, whereas Spanish are not.....

    1. That's nonsense. Only a tiny share of the Spanish population went overseas. Silver that was brought back to Europe was almost entirely property of the king, and spent to buy goods and services in Europe.

      And the Spanish industries didn't suffer from lesser protectionism; Spanish exports suffered well into the 80's from Spain being an outcast due to its fascist government.

    2. "That's nonsense. Only a tiny share of the Spanish population went overseas."

      Yes and no; as a percentage of total population yes, but in the 16/17th centuries there were times when up to a third of the Spanish gentry had relocated to the Viceroyalty of Peru. Their genetic trace can be seen in Cuzco and Cajamarca even today.

    3. 2nd and 3rd sons that otherwise would have become mercenaries or monks. Most of them would have been lost to the country in one way or another anyway.

  3. It wasn't all bad:

    1. Well, unless you love tea really, really bad I suppose you didn't quite understand my blog post.

    2. Snarky, but I'm just challenging the article with the most well known East Indian companies (British and Dutch) that had public records of they profits. Those engaged in colonization and imperialism and made they home lands considerable profits.

      The same silver was used in the Far East to buy and sell goods. With Japan being the most profitable customer.

      While it was all about luxury goods at the start by 1700 it was shifted to common goods with a lower margin of profit.

    3. You didn't understand my point at all, and your talk about profits shows it.

      Huge resources from Europe (wood, tow, cloth, food, crafting were needed to set up and maintain imperialism.
      The upside was merely the goods that arrived in Europe, and save for the super-important potato plant these were mostly spices (incl. West Indian sugar), silver, Chinaware (pottery), tobacco and tea: Raw material for currency and luxury goods enjoyed mostly by the top 5% of the population or so (+ the deadly tobacco).

      Your "profits" are about distribution of purchasing power among the Europeans, whereas the real (small) benefits that I wrote about were about natural goods that were shipped to Europe.
      The benefits from imports were small until the late 19th century, and not long thereafter imperialism collapsed already.

    4. Huge resources from Europe could be bought in Europe with said profits. The upside for the nation bringing home the goods was multi fold in case of England and Holland:
      It increased wealth for the population, even if spices were not bought from the general population. The Dutch were the most wealthy Europeans for 200 years from VOC, as the dividends were paid to the small share owners and those could then reinvest them.
      It created a middle class that valued education.

      Over 5000 ships and 1 milion men were used by VOC alone in that timespan, with the distribution of purchasing power allowing the Dutch to defeat the other Europeans and upkeep the colonies.

      So the illusion was quite effective for some.

    5. Obviously, since it's still deceiving you. You're still looking at money, regardless of of often I point at goods flows as relevant indicators.
      BTW, the Dutch had what you call a "middle class" because they had no feudalism and no monasteries.

    6. Money is a good proxy of wealth.

      there is a different approach, with the energy consummation being calculated and used to estimate the progress of a civilization.
      The Dutch were, while playing the game of colonization and imperialism the most prosperous nation in the world and the first in Europe to eclipse the living standard of Roman times.
      The British then eclipsed them, and they were pretty big with game as well.
      Correlation doesn't imply causation, but if that was a waste of energy, it didn't show in the outcome.

    7. The Dutch were wealthy for many more (other) reasons than their East India company. They had the best transportation infrastructure in Europe with their many inland waterways, cheap energy, the motivation source of Calvinism, economic freedom and mostly rule of law. Their government was influenced greatly by merchants and represented commercial interests well. They dominated European maritime trade with about 5,000 ships in the 17th century, only a tiny fraction of them engaged in East Indies trade.
      They were essentially the NW European equivalent to Venice, which was rich for very similar reasons without any non-European trade posts or colonies.

      And frankly, I'm an economist and should be predisposed to overemphasize monetarisation. But in this case the costs and benefits of imperialism are much better understood by looking at material and labour input and the material output. Money is rather a means of distribution (of purchasing power).
      Your emphasis on money (then: gold and silver coins) is proved to be ill-advised by the example of the erroneous mercantilist economic theory.

    8. I'm not an economist, but the theory has to match the historic facts. The superior infrastructure was a direct result of the need of the capital owners to reinvest they profits, and that same capital financed the expansion of the shipbuilding that directly lead to the superior fishing industry etc...

      The VOC had 50 warships around the time of the second Anglo Dutch war. The English had 85 warships and the biggest issue was paying for that fleet. The trade within Asia was so profitable that the ships sent to Europe were not needed to break even.
      Venice had Mediterranean African colonies, but to be fair that was considered part of Europe in Roman times.
      However it was quite dependent on the trade with the Ottomans to sustain they wealth.

    9. No, the Dutch infrastructure was so fine because it's a lowland. The rivers and canals provided the best transportation network in Europe. Energy was so cheap because wind power was easily available.
      That's not the result of reinvesting East Indian Company profits at all.

    10. Well from my readings it was the other way around. The finance the VOC the first stock exchange and national bank were created in Amsterdam. As the profits were huge but it was considered risky the Dutch stock owners diversified they wins.
      Improving the canals, improving they transport capabilities and reclaiming lost lands were the major beneficiaries.

    11. The dense network of canals already existed by the time of the independence war in the 16th century.

      Besides, no Dutch canal and no Dutch windmill was built with material or labour from overseas. It was all a domestic effort.

  4. The Spanish conquista of the New World seemed so fantastically lucrative enterprise due to European monetary system at the time. Europeans used precious metals, gold or silver, as a method for exchange. So when the conquistadors found huge gold treasures owned by the native Americans or discovered silver mines in the Andes they essentially discovered an enormous supply of money.

    Then as now money can get you things from other people and it makes other people do things you want, ie money is power.

    Obviously Spain didn't find an everlasting source of power but a lot of metals that started to lose value thanks to oversupply.

    Later colonies were more or less monopolies to trade. The Dutch controlled spices from Indonesia and the English tea from India etc. Some "colonies" such as Belgian Congo were were just plain ol' robbing and pillaging.

    Nowadays economic value is added mainly by human effort which means conquering territories makes even less sense.


  5. So basically given that actual goods where not being shipped to europe any profits derived were purely inflationary?

    1. Inflationary was the importation of silver, much of which went into coin production.

      The dividends of for example the Dutch East Indian Company merely allocated purchasing power to its investors, whereas other Europeans who consumed the company's import products (spices and chinaware mostly) had some of their purchasing crowded out.
      In the end, it was an exchange of European raw materials (special wood products, hemp textiles and tows) and labour (seamen) for luxury goods. All that effort could have been directed at other activities, benefiting Europe in other ways.

  6. The territories that became colonies of the West became so because they were power vacuums, not because of any economic advantage they could bestow to the mother country at large. In the case of Britain, at least, their benefit (or lack thereof) to the colonial power was beside the point. The formal British Empire typically followed in the wake of traders, settlers, missionaries, etc., and not always whole-heartedly, either. Even at the height of the Victorian era, there were plenty of voices in Britain questioning the wisdom of Empire. The real question is not why or how European states colonized the world, but how they could have stopped it from happening in the first place.