October 20, 2006


Master of the Island: Which country is the best colonizer? (Joel Waldfogel, Oct. 19, 2006, Slate)

One of the deep questions in economics is why some countries are rich and others are poor. It is widely believed that institutions such as clear and enforceable property rights are important to economic growth. Still, debates rage: Do culture, history, government, education, temperature, natural resources, cosmic rays make the difference? The reason it's hard to resolve this question is that we have no controlled experiments comparing otherwise similar places with different sets of legal and economic institutions. In new research, James Feyrer and Bruce Sacerdote, both of Dartmouth College, consider the effect of a particular aspect of history—the length of European colonization—on the current standard of living of a group of 80 tiny, isolated islands that have not previously been used in cross-country comparisons. Their question: Are the islands that experienced European colonization for a longer period of time richer today? [...]

Feyrer and Sacedote's key findings are that the longer one of the islands spent as a colony, the higher its present-day living standards and the lower its infant mortality rate. Each additional century of European colonization is associated with a 40 percent boost in income today and a reduction in infant mortality of 2.6 deaths per 1,000 births.

By itself, the relationship between longer colonization and higher living standards could arise either because European contact raised living standards or because European explorers colonized the most promising islands first. The authors cleverly reject the latter possibility by noting that the sailing of the day relied on wind, which meant that islands located where wind is weak were "less likely to be discovered, revisited, and colonized by Europeans." Thus, wind conditions, rather than island promise, determined which islands were colonized first, and so which islands remained as colonies longer. The relationship between colonial duration and wealth reflects the effect of colonization on material living standards, rather than the other way around.

So, what did the Europeans do right? The authors conclude that there's no simple answer. The most plausible mechanisms include trade, education, and democratic government. When the study directly measures these factors, some of them help to explain income differences among islands—for example, the places that traded only basic agricultural products in colonial times now have lower living standards. But even after accounting for these concrete determinants, longer European colonization has some extra pro-growth effect. Exposure to European colonizers, it appears, benefits living standards for reasons apart from the direct effects of government, education, and markets. [...]

The authors also compare the experiences of separate Pacific islands with eight different colonizers: the United States, Britain, Spain, Denmark, Portugal, Japan, Germany, and France. Their verdict is that the islands that are best off, in terms of income growth, are the ones that were colonized by the United States—as in Guam and Puerto Rico. Next best is time spent as a Dutch, British, or French colony. At the bottom are the countries colonized by the Spanish and especially the Portuguese.

Cool work by Friends Feyrer and Sacerdote, not least because so politically incorrect...

Two questions arise:

Doesn't some of the work of Alberto Alesina, and I think Mr. Sacerdote with him, suggest that islands often have significant advantages in economic development anyway -- all that Size of Nations stuff -- so how badly do you have to screw yourselves over to be a backwards island nation?

And isn't the divider between the more and less successful colonies generally which were colonized by Protestant nations and which by Catholic? Lawrence Harrison suggests even such things as Confession may influence that tendency, with Protestants believing that their sins stick with them so avoiding them more assiduously.

Posted by Orrin Judd at October 20, 2006 9:39 PM

Religion may be a factor--hello, is that Weber knocking?--but I suspect the difference must also lie in the prevailing political and economic system in place at the time of colonization. The Spanish and Portuguese empires created their colonies in an era when government was monarchial and hierarchical and markets were hardly liberal. Contrast that with the tenor of the times when the US established its own colonies, when different ideas existed concerning the way a country and economy should be run.

Inertia matters, in other words. So, then, it was better for Puerto Rico to have been wrested by the US than to have gone on to become an orphan of Old Spain.

Posted by: Pontius at October 20, 2006 11:01 PM

Of course, America is just a product of a monarchy as well, but a protestant, capitalist, parliamentary one.

Posted by: oj at October 20, 2006 11:07 PM

Actually the respective Roman Catholic and Protestant doctrines of remission of sins are the opposite of of the described above. The Protestant idea is that sins are forgiven sola fide, completely a matter of grace, you know. For the Catholic, there is no absolution without contrition.

Contrition includes the purpose of amendment. The one living in sin who aurally confesses his sins on Saturday, takes communion on Sunday, then returns to to his mistress on Monday, as he had intended all along, not only has failed to obtain remission of his earlier sins, but has offended further by his false confession and his abuse of the Eucharist. You could look it up, as they say. http://www.newadvent.org/cathen/04337a.htm

There are good reasons why rule by Men of the West is uplifting. There are good, historical reasons why rule from the Anglosphere is the best of all. The sacrament of Penance is not one of the reasons. The divergence of northern from southern European folkways was well established before the so-called, self-proclaimed "Reformation."

Posted by: Lou Gots at October 20, 2006 11:20 PM

People aren't theologians. Catholics think they're off the hook after Confession. Protestants think that God's grace is demonstrated by their behaving in a goodly manner and that they'll be judged later. The doctrine of Grace alone would have been a great evil, but thankfully they cooked up ways around it.

Posted by: oj at October 20, 2006 11:26 PM

Another aspect that is frequently left out of these discussions is the unique political and cultural experience of Spain/Portugal. The Iberian penninsula had been occupied by Muslims for 800 years. Spanish/Portuguese relations with Islamic rulers and populations and the effort to end this occupation was the primary focus of Iberian attention for that entire time. The Reconquista was not finally accomplished until 1492. As a result, Spain/Portugal missed out on a lot on the cultural, economic and political progress that other Christian countries enjoyed during the previous centuries. As Rodney Stark and others point out, Spain became a great military power in the colonial period but was in all other ways a very backward nation.

Posted by: L. Rogers at October 21, 2006 11:48 AM

Spain's downfall was the source of its greatness - the riches of the New World. American gold severely distorted the Spanish economy. It also swelled the monarchy's coffer to the extent that it could indulge whatever whim it had, and did not need to compromise with democratizing influences. Both England and the Netherlands, lacking ready wealth, had to listen to its commercial class to raise revenue from them. American gold was the oil wealth of the 16th century.

If you need to work for your wealth, good habits follow. When you can simply have peons take it out of the ground, bad habits follow.

Posted by: Chris Durnell at October 23, 2006 1:13 PM

Commodities kill.

Posted by: oj at October 23, 2006 1:22 PM