Common Error No. 69


69. "Britain's wealth came from exploiting its colonies, and should be repaid to some degree."

The source of this error is interesting. When the British economy neither collapsed  nor produced greater poverty as Marx had predicted, communist theorists invented the imperial excuse. The British had postponed the evil day by exploiting their empire as a source of cheap raw materials, and as a captive market for their finished goods.

The theory ignores the facts. During most of that imperial period the rates of return on capital were higher in advanced countries such as the United States or Germany, or in undeveloped areas outside the empire, such as Argentina. When the British did invest in the empire, in many cases it was against their economic interest. In other words, they invested in the empire because they believed in it, not because it was where the greatest return was to be made. Indeed, in opportunity terms, this is equivalent to the empire costing Britain money.

The empire also cost money to administer, to police, and to develop with roads, railways, bridges and harbours. In many cases these were done for military and political purposes which owed more to Britain's self-perception as a world power than to any economic gain. Furthermore, much of the wealth that did accrue from Britain's colonies was not wealth until the processes and products were developed which needed it. The rubber trees in Malaysia had negligible value to the native inhabitants. Only an industry which used rubber turned them into wealth. The ore deposits in central Africa had far less value to the indigent population who walked and hunted over them than they did to the British, who were developing industries to use them.

The world did not have a fixed supply of wealth, and Britain's was not 'taken' from other countries. It was created by trade and manufacture, for which Britain should not be apologetic but proud.