Was colonialism good for growth?

Bill Easterly and Ross Levine add to the literature with a new paper.

A large literature suggests that European settlement outside of Europe shaped institutional, educational, technological, cultural, and economic outcomes. This literature has had a serious gap: no direct measure of colonial European settlement.

In this paper, we (1) construct a new database on the European share of the population during the early stages of colonization and (2) examine its impact on the level of economic development today. We find a remarkably strong impact of colonial European settlement on development.

According to one illustrative exercise, 47 percent of average global development levels today are attributable to Europeans. One of our most surprising findings is the positive effect of even a small minority European population during the colonial period on per capita income today, contradicting traditional and recent views.

There is some evidence for an institutional channel, but our findings are most consistent with human capital playing a central role in the way that colonial European settlement affects development today.

I read hastily, but see important new data and patterns. I don’t really buy the instrumental variables (sorry, Bill) but then again I don’t really buy any of the historical instruments people use to get around thorny causality issues. That doesn’t make me a total party pooper–I just think we have to take all the causal claims and mechanisms pretty cautiously.

Some people rankle over any rosy glow put on colonialism. Most of the authors of the long run growth papers know this acutely, but it bears repeating that “good for growth” necessarily applies to peoples not exterminated.

If you are still angry about the rosy glow, it’s also helpful to put in colonialism perspective: Development in most places in most of history has basically been a process of violence and coercion, either by your own elites or invading ones. When historical events are “good for growth” they are often very bad for the generation that experienced them, in Africa or elsewhere. So “good for growth” does not necessarily mean “good”.

This leads me to think: What is interesting about modern growth policy is that it is one of the first to try to respect human rights. I wonder to what extent growth take-offs require a trade-off between welfare of people alive today versus welfare of future generations. There are reasons to think there are some win-win solutions (e.g. education investments) but I am not so sure it is true generally.

I think a lot of development policy requires trickier trade-offs between those alive today and  unborn future generations than is commonly appreciated. More on that on that elusive day when I have more time to write.