Can former colonies truly get out from under the grip of developed countries? How has the economic, technological, and military advantage of powerful countries influenced the long-term development of weaker countries? These and more are the topics explored in this essay.
Introduction
This article demonstrates that neocolonialism is inevitable, given the structure of colonial institutions that were intended to foster dependency, a reality that undermines independent development and the sovereignty of the former colonies. Economically, neocolonialism has some similarities with colonialism, and it is exploitative. It may lead to growth, but due to the dominance of foreign interests, in the long term, it cannot build domestic industries and long-term development. Moreover, corruption, which cannot thrive without foreign support, and nepotism often impede the realisation of long-term economic development in developing countries (Siddiqui, 2015).
It seems that economic and trade relations are important and contributed to the deepening crisis between France and its former West African colonies. In an idealistic situation in the capitalist economic system, international trade and production are supposed to be undertaken independently between countries and no one would have the power to influence and set prices. It is hoped that trade among countries is made to benefit all partners. However, in the real world, this may not be true, and unequal relations exist, including neocolonialism practiced by the economically, technologically, and militarily powerful countries. Neocolonialism leads to undermining the sovereignty of the weaker countries, which makes them a victim of unequal trade, as the more powerful countries use international organisations to plunder the resources of the poor countries (Amin, 1976; Siddiqui, 2022a).
Indeed, unequal trade perpetuates inequality between nations and makes the capitalist system vulnerable and unsustainable over the long term. We look at the neocolonial threat to the independence and sovereignty of Niger, which has been facing inequitable resource outflows to France for a long period. The unfair resource transfer shows that Niger receives only 3.2% of the ultimate value-added of the electricity that the French energy firms generate using Niger’s raw uranium. Niger is the fourth-largest producer of uranium in the world, but its price is determined by the foreign corporations. Niger is also an oil-exporting country since 2010. In contrast to its huge natural resources, Niger is still one of the poorest countries in the world. It seems that richness in resources has been a curse instead of a blessing.
Although many ex-colonial countries gained political independence after the Second World War, global economic structure remained, sometimes taking different forms and shapes. In fact, unequal exchange and devaluation of labour and resources from the developing countries continued. International financial institutions and the West always encouraged them to produce and export primary commodities leading to over-supply and adverse terms of trade. Also, rising foreign debts and the balance-of-payment crisis became endemic. Moreover, food import dependency made poor countries more vulnerable to global food prices. More debts were taken to repay the old debts, but rather than coming out of the debt spiral, the poor countries were caught in the debt trap.
After independence, the poor countries aimed to follow economic self-sufficiency and ‘‘import substitution policy’’ and strengthen the local industries and agriculture but there was a lot of resentment from the West to stop it (Siddiqui, 2021a). In the 1980s and 1990s, many developing countries experienced a debt crisis and undertook neoliberal reforms on the International Monetary Fund´s (IMF) advice. They had to abandon import substitution industrialisation (ISI) and economic self-sufficiency policy in exchange for debt relief. The pro-market reforms included full-scale privatisation, trade, and financial liberalisation. Why are the neoliberal reforms so good for developed countries but damaging for poor countries? Because it allows foreign corporations to enter their economies without any local regulation.
For example, although Sri Lanka’s period of “colonialism” with direct political control by Britain ended with its independence in 1948, the socioeconomic and cultural forces set in place during the colonial period have continued to dominate the island’s development. However, soon after independence, Sri Lankan governments, like those of many ex-colonial countries, introduced policies to nationalise foreign-owned plantations and other foreign-owned enterprises to foster local industries.|
However, in 1977 the IMF and the World Bank asked the newly elected Sri Lankan government to introduce an open economy, meaning giving free rein to foreign investment and imports. Take, for example, Sri Lanka’s 2022 economic crisis largely portrayed by the media as an internal phenomenon due to corruption and mismanagement of the local government. I think the crisis is rooted in the prevailing global economic and financial system. This is not a particular situation in Sri Lanka. The UNCTAD (2022) report points out that 60% of low-income countries are close to facing debt crisis. This means that these governments cannot provide basic needs to their people.
In the first half of the 20th century, the two World Wars weakened European powers and the US (United States) became a new hegemon. Asian and African countries, after gaining independence, participated in the Bandung Conference in Indonesia in 1955, where they stressed the importance of both political and economic independence. Neocolonialism means that the sovereignty of the nations has been robbed and their natural resources are stripped and stolen. The US claims that it supports democracies and human rights in developing countries, but past experiences indicate that the US has overthrown many democratically elected governments (Siddiqui, 1990a) and installed authoritarian regimes in developing countries. For example, the US invaded a number of countries such as Korea (1950), Cuba (1961), South Vietnam (1965), Grenada (1983), Lebanon (1983), Panama (1989), Philippines (1989), Somalia (1992), Haiti (1994), Afghanistan (2001), Iraq (2003), Syria (2014), Libya (2015), (See Figure 1) and the US also organized to overthrow Mosaddegh’s government in Iran (1953), backed military takeovers in Guatemala (1954), Congo (1961), Brazil (1964), Indonesia (1965), Chile (1973), Pakistan (1977), Egypt (2013), Pakistan (2022), and many more.
For example, in 1953 the US and the UK organised a coup to remove democratically elected Iran’s Prime Minister Mr Mosaddegh. The coup destroyed the evolution of democracy in Iran. The US realised that democracy does produce wrong persons and it does not serve US strategic and business interests. The coup was financed by the US and UK intelligence services who then bribed local civilian and military officials to remove the elected government. Mosaddegh was replaced by dictatorial Shah who imposed brutal repression by SAVAK, which was trained and equipped by the CIA. The coup not only crushed peoples’ democratic aspirations but enriched US oil companies by immediately signing to hand over more than 40% of the Iranian oil assets to US oil companies. Iran also bought billions of dollars in weapons from the US.
The President of Indonesia, Sukarno, due to his non-aligned policy and growing ties to China, was not liked by the US and was removed in a military coup in 1965 instigated by the US. The most striking case was that of Thomas Sankara, a military officer and a revolutionary, who came to power in Burkina Faso in 1983 and wanted to end foreign intervention in his country. Sankara was assassinated by one of his own associates, which was supported by the US (Siddiqui, 2019b).
In 1973 Chile’s President, Salvador Allende, was assassinated by General Pinochet, which was followed by large-scale human rights abuses and thousands were killed. Soon after the military coup in Chile, Milton Friedman’s vision of the ‘‘free market’’ economic policy was launched. The IMF, the World Bank, and the US fully supported and provided loans to the military junta. The Pinochet regime embraced ‘‘neoliberalism’’. Chile is rich in natural resources and in 1972 produced nearly 30% of the world’s total output of copper. After coming to power, Allende nationalised copper mines, which adversely affected US business interests. It is worth noting that democratically elected President Allende’s economic programme was subject to extraordinary economic sabotage sponsored by Chilean elites and the US. Prior to the military coup, in 1972, the CIA provided funds for truck strikes, which paralysed the economy, and caused a sharp rise in prices. Foreign companies stopped investing and buying Chilean copper, which adversely affected the foreign exchange earnings of the country. Soon after the coup, the military regime followed neoliberal policy, which led to a devastating economic crisis, and per capita income fell below that of 1960. However, in the 1990s, Chile, as one of the world’s leading copper exporters, witnessed a rise in copper prices. Additionally, Chile is a major exporter of lithium, another commodity that saw prices rise during that period and it helped Chile to rapidly increase foreign exchange earnings. In short, the coup against Allende provides a window into the realities of US foreign policy in practice (Hersh, 1982).
What is Neocolonialism?
Neocolonialism could be explained as the nature of relations between former colonies and colonisers after they became formally independent. The word neocolonialism was described by Kwame Nkrumah, the first president of independent Ghana (1965): “Neo-colonialism is an instrument of imperialism, which like colonialism, is an attempt to export the social conflicts of the capitalist countries. The result of neo-colonialism is that foreign capital is used for exploitation rather than for the development of the less developed parts of the world. Investment, under neo-colonialism, increases, rather than decreases, the gap between the rich and the poor countries of the world.”
Colonialism is referred to as the direct political control of a country by a foreign country. The coloniser monopolises political power and keeps the subordinated country’s economy and its people under its control. Until the Second World War, most of the developing countries were colonies or semi-colonies of the European countries. For example, British colonial rule in India lasted for nearly two centuries and India gained independence in 1947. After independence, Britain was determined to continue to maintain some sort of influence in India and other colonies that would ensure that its enormous economic interests in the country were safeguarded. Neocolonialism undermines their sovereignty and is closely tied to their inability to develop economically and improve the living conditions of their people (Siddiqui, 2020a; 2020b).
The economic development in Latin America has been described as how Europe and the US underdeveloped the region. And how they imposed authoritarian and market-oriented economic policies to serve their strategic and business interests (Siddiqui, 2022b; 1998). It seems that the developed countries have used their technological and military superiority to ruthlessly exploit the region’s economic resources to enrich their corporations (Siddiqui, 1998).
Latin America from 1880 until 1929 is described as the period of ‘‘neo-colonialism’’. This is to distinguish what was happening from the “old” colonial period during which Latin America was ruled by Spain and Portugal. Moreover, it was a combination of economic exploitation of Latin American states by industrialising countries (Britain, France, and the US) and after they became independent, selective military intervention was carried out to protect and expand their economic interests. The industrialisation in Western Europe in the 19th century brought major changes to Latin America. The industrialising European countries i.e., Britain and France, increased their industrial share in their economies and increasingly became highly dependent on the importation of agricultural commodities, including food from their colonies (Siddiqui, 2021a; 2021b). Between the 1880s and 1929, Latin America experienced a dramatic rise in exports of primary commodities to the Western markets, also known as the “export boom”. For example, Mexico’s trade rose 900% between 1880 and 1910. Brazil too became the world’s top exporter of coffee, and an estimated two-thirds of the world’s coffee came from Brazil by 1930. Cuba became the world’s leading exporter of sugar, and the country was producing around five million tons of sugar annually by 1930. Chile exported iron, copper, and nitrates to Europe and the US, the supplies of these raw materials were seen as important for the building of railways and automobile industries. Between 1900 and 1930, Argentina exported on an average 22000, tons of wheat annually to Europe.
The currency union with France at an over-valued exchange rate doomed West African countries to a permanent absence of industry. No industrial goods could be produced domestically in any Western African country because it was always cheaper to import them from France. On the other hand, the primary commodities that were exported from these countries had to be sold at competitive prices in the global market. An over-valued currency simply meant that domestic wages had to be suitably adjusted downwards to keep these countries competitive in primary commodity markets.
In Guinea, Mali, Chad, and Burkina Faso, new anti-imperialist governments that want French troops out of their countries have come to power in the last couple of years. Niger is the latest country to join this group. The coup in Niger has been widely welcomed by the local population, the overwhelming majority of whom want to see France’s interference come to an end. French intervention in West Africa, for example in Niger, is to control the country’s resources. Niger produces uranium and gold, but the production of both these commodities is controlled by French companies. France hugely relies on nuclear energy, which is produced by uranium.
Nigeria is a leading oil-exporting country, but most of the country’s population remains extremely poor. Congo is another example of mismanagement and widespread corruption. It appears that Congo has suffered the worst rip-off of its minerals such as diamonds, uranium, and cobalt which were smuggled and sold abroad. It is estimated that nearly 8 million people have been killed in Congo related to dirty money since 2000. Globally, Niger is the world’s largest producer of uranium, a raw material used mainly in nuclear energy, but also in cancer treatments and the marine industry. Niger produced 2,020 metric tonnes of uranium in 2022 alone. Niger’s position was as France’s third largest uranium supplier between 2005 and 2022. France generates 75% of its domestic electricity needs from nuclear power. Whilst France is fully electrified and enjoys constant power, 80% of people in Niger have no access to electricity.
Among the numerous ways ‘‘neocolonialism’’ manifests itself in Nigeria, several forms of foreign intervention are especially conspicuous. One is the interference in Nigeria’s affairs through the instruments of financial debt. As a result of the country’s economic distress in the 1980s, caused by low oil prices and a decline in agricultural production, Nigeria increasingly relied on foreign loans to solve its balance of payment crisis. The IMF and the World Bank extended loans and asked Nigeria to adopt neo-liberal economic policies, known as ‘‘Structural Adjustment Programmes’’, including the promotion of austerity measures, large-scale privatisation, trade liberalisation, and the opening of the domestic markets (Siddiqui, 2021c).
Tax Justice Network based in London estimated that between 1992 and 2010, Russia witnessed the largest theft of public resources that has ever taken place, in a short period of fewer than two decades, of more than US$ 500 billion. This was accomplished by under-pricing Russian exports such as oil, gas, diamond, aluminium, tin, timber, zinc, and other commodities. In 2014, Ukrainian President Viktor Yanukovych did not accept the IMF’s bailout of US$ 17 billion in exchange for an agreement that needed his government to impose very harsh austerity measures. He described the agreement as an attack on the nation’s sovereignty and refused the IMF’s offer. Instead, he accepted Russia’s offer of a US$15 billion aid package. Yanukovych’s refusal to accept the IMF proposal proved to be a fatal blow to his capacity to hold on to power. A colour revolution broke out and within months he was deposed which was orchestrated by the US and the EU (Siddiqui, 2023).
W.W. Rostow (1960) was known for his anti-communism. He insisted that all countries could pass through five stages of economic growth, culminating in a US-style age of high mass consumption. He argued that the rich country can assist them with Foreign Direct Investment (FDI) and the transfer of new technology would increase investment. Rostow did not say a word on why these former colonies had become poor and backward in the first place and why colonisers would have sudden changes of heart and would support economic development in the poor countries.
The mainstream economist theories being taught at the universities in the West, such as Todaro and Smith (2003) suggest that more saving and investment can accelerate growth rates in developing countries. They emphasise factors like price, resource allocation, competitive markets, and efficiency. Lewis (1954) says economic transformation takes place until all surplus labour in agriculture is absorbed in expanding the industrial and service sector. His model assumes diminishing returns in the industrial sector whereas empirical studies do not support Lewis’s hypothesis and show increasing returns in manufacturing.
Paul Baran (1967) and Gunnar Frank challenged the neo-classical theories, and they criticised that underdevelopment and poverty are the outcomes of the very expansion of capitalism to the poor countries i.e., former colonies, who supplied primary commodities to developed countries (see Figure 2). The expansion of productive forces in the colonies was limited to investments in mining and plantation, not in modern industries until the 1950s (Siddiqui, 1990b).
Capitalism is not only about the establishment of private property and hiring wage labour with the sole purpose of obtaining profits, therefore, a cheap supply of raw materials, and access to larger markets becomes very important. This means capitalists are constantly seeking new regions to expand markets for their products and new sources of raw materials. This specific nature of domination for such a purpose is called imperialism. As Patnaik & Patnaik (2016: 148) notes: “Imperialism is an actual historical phenomenon no doubt entailed many things, including the dispossession of Amerindians, the original inhabitants of the temperate lands of the new world so that the petty producers and peasants of the metropolis unabsorbed by metropolitan capitalism could migrate here… the imposition of income deflation on the periphery so that the tropical goods can be obtained by the capitalist sector without any threat on an increasingly supply price continued unabated. This is the relationship that existed at the inception of capitalism, that exists today and that will continue to exist as long capitalism remains”. They further argue that trade between the core economies of the global North and the global South and the Northern demand for commodities from the South has perpetuated and solidified an imperialist relationship (Patnaik & Patnaik, 2016).
Since the early 1990s globalisation and trade liberalisation, there has been a shift in the nature and direction of industrial development, which is largely characterised by increased automation and capital-intensive technology in the manufacturing process. This has contributed to jobless growth in the developing countries. As a result, the increase in productivity benefitted largely capital compared to labour. Therefore, currently, growth in the manufacturing sector does not expand levels of employment and raise incomes, while the growth of the service sector alone is unable to reduce unemployment levels in developing countries. In services, particularly in finances and IT, demand for labour is typically more biased towards skilled labour.
It was claimed by mainstream economists that with the free market and globalisation, corruption and nepotism would end. However, rather than declining corruption in developing countries, it has risen sharply. Baker (2005) in his book titled, Capitalism’s Achilles Heel described corruption by Prime Minister Mohammad Nawaz Sharif in the 1980s and 1990s to be worth US$ 418 million from the national exchequer and this money was transferred abroad. According to him, Mr Sharif also took a commission worth US$ 160 million from the Lahore-Islamabad Motorway project. In addition, he siphoned some US$ 140 million from Pakistani banks as loans and took US$ 60 million from the national exchequer on subsidies given for the export of sugar. The scandal of Hudabia Papers Mills was mentioned in detail in the book and millions of US dollars were looted from the national exchequer and spent on the development of the private residence of Nawaz Sharif at Raiwind (Baker, 2005).
Samir Amin (1976) and Arghiri Emmanuel (1972) described this as a “hidden transfer of value” from the Global South, which sustains high levels of income and consumption in the Global North. The drain takes place subtly and almost invisibly, without the overt violence of colonial occupation and therefore without provoking protest and moral outrage. During the 1980s and 1990s, neoliberal structural adjustment programmes were imposed across the global South. Today, the global North drains from the South commodities worth US$ 2.2 trillion per year, in Northern prices. For perspective, that amount of money would be enough to end extreme poverty, globally, fifteen times over. Over the whole period from 1960 to today, the drain totalled US$ 62 trillion in real terms. If this value had been retained by the South and contributed to Southern growth, tracking with the South’s growth rates over this period, it would be worth US$ 152 trillion today.
Conclusion
At independence, for instance, Zambia had no universities, with only 0.5% completing primary education. The country’s copper mines were mostly owned by British companies. After colonialism ended, foreign aid and loans were given to the developing countries to keep the influence of the former colonisers and to continue the production and export of a few primary commodities and raw materials. But all primary commodities exported by the developing countries are bought by four to five big corporations with a monopoly buying structure and these monopolies collude and force the producers to produce the same commodities. These foreign corporations keep control of prices to maximise profits.
The international financial institutions destroyed food self-sufficiency in developing countries by pressurising them to remove food subsidies given to farmers. The aim is to make these countries dependent on food imports. For example, Malawi experienced a severe famine in 2002 and many died due to lack of food. In fact, the country was asked to remove food stocks and was advised to allocate more resources including land to produce cash crops for exports, which resulted in a decline in food output, and drought and crop failure led to the death of thousands of people. This was the result of Malawi’s giving up food self-sufficiency and relying on food imports, which led to food dependency and vulnerability to global food prices and drain on foreign exchange. The strategy was to benefit a handful of foreign corporations at the cost of food sovereignty and food self-sufficiency.
The neo-colonialism in operation is a system where the human and material resources of the exploited country are set up to be the main conduit for the benefit of the outside colonising power (See Figure 3). A primary example of this is cocoa production in Ghana. In 2022, chocolate products produced from Ghanaian cocoa account for 75% of all chocolate products consumed within the US. However, all value addition is done by foreign companies and they dominate the cocoa production in Ghana. The unequal relations including neo-colonialist practices by the economically, technologically, and militarily powerful countries are still taking place.
Unequal trade perpetuates inequality between nations and makes the capitalist system vulnerable and unsustainable over the long term. For instance, the unfair resource transfer shows that Niger receives only 3.2% of the ultimate value-added of the electricity that the French energy firms generate using Niger’s raw uranium. Niger is the seventh-largest producer of uranium in the world, but its price is determined by the foreign corporations. Niger is also an oil-exporting country since 2010. In contrast to its huge natural resources, Niger is still one of the poorest countries in the world.
The study finds that the accumulation of capital has always required the taking of land and raw materials from non-capitalist sectors/countries. History has shown, from the beginnings of colonialism half a millennium ago to today’s neoliberal regimes, that for capitalism to exist, it must expand to non-capitalist regions both to acquire resources and new markets. Even after slavery was legally abolished, millions of people in the Global South still fell prey to the continuing exploitation. After the Second World War, decolonisation led to the end of the so-called colonialism and formal control of the Global South, but gradually neoliberal policy stepped in to reclaim the Global South, imposing drastic “austerity” measures on the people.
About the Author
Dr. Kalim Siddiqui is an economist specialising in International Political Economy, Development Economics, International Trade, and International Economics. His work, which combines elements of international political economy and development economics, economic policy, economic history and international trade, often challenges prevailing orthodoxy about which policies promote overall development in less-developed countries. Kalim teaches international economics at the Department of Accounting, Finance and Economics, University of Huddersfield, UK. He has taught economics since 1989 at various universities in Norway and the UK.
References
- Amin, Samir (1976). Unequal Development: An Essay on the Social Formations of the Peripheral Capitalism, New York: Monthly Review Press.
- Baker, R. (2005). Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free-Market System, New Jersey.
- Baran, Paul (1967). The Political Economy of Growth, Monthly Review Press.
- Emmanual, Arghiri (1972). Unequal Exchange: A Study of the Imperialism of Trade, Monthly Review Press.
- Hersh, Seymour (1982) “The Price of Power: Kissinger, Nixon, and Chile”, The Atlantic, December.
- Patnaik, U. & Patnaik, P. (2016). A Theory of Imperialism, Columbia University Press.
- Perkins, J. (2004). Confessions of an Economic Hit Man, Ebury Press.
- Siddiqui, K. (2023). “The New Cold War: Struggle for Global Domination”, Part 1 & Part 2, The World Financial Review, June/July & July-August.
- Siddiqui, K. (2022a). “Capitalism, Imperialism, and Crisis.” The European Financial Review, June/July.
- Siddiqui, K. (2022b). “Comparing the East Asian & Latin American Countries: The Role of Agricultural Reforms in the Economic Transformation.” The World Financial Review, July/August.
- Siddiqui, K. (2021a). “The Import Substitution Policy in the Post-Colonial Countries.” The World Financial Review, Nov/Dec.
- Siddiqui, K. (2021b). “The Political Economy of Industrial Policy.” The World Financial Review, May/June.
- Siddiqui, K. (2021c). “The Importance of Industrialisation in Developing Countries.” The World Financial Review, Jan/Feb.
- Siddiqui, K. (2020a). “Britain’s Trade with China in the 18th & 19th Centuries: A Review of the Opium Wars.” Asian Profile 48(3): 207-221, Sept.
- Siddiqui, K. (2020b). “The Political Economy of Famines under Colonial India: A Critical Analysis.” World Financial Review, July/August.
- Siddiqui, K. (2018). “Capitalism, Globalisation and Inequality” The World Financial Review, Nov-Dec, p.70-77.
- Siddiqui, K. (2019). “The Political Economy of Global Inequality: An Economic Historical Perspective.” Argumenta Oeconomica Cracoviensia, 21(2): 11-42.
- Siddiqui, K. (2016). “Will the Growth of the BRICs Cause a Shift in the Global Balance of Economic Power in the 21st Century?” International Journal of Political Economy, 45(4): 315-338.
- Siddiqui, K. (2015). “Foreign Capital Investment into Developing Countries: Some Economic Policy Issues.” Research in World Economy, 6(2): 14-29.
- Siddiqui, K. (1998). “The Export of Agricultural Commodities, Poverty and Ecological Crisis: A Case Study of Central American Countries.” Economic and Political Weekly, 33(39): A128-A137, Sept 26.
- Siddiqui, K. (1990a). “Political Economy of Terrorism.” (Ed) V. D. Chopra. Genesis of Indo-Pakistan Conflict on Kashmir, pp.212-225, New Delhi.
- Siddiqui, K. (1990b). “Historical Roots of Mass Poverty in India.” (eds.) C.A. Thayer, J. Camilleri, & K. Siddiqui. Trends and Strains, 59-76, New Delhi.
- Todaro, M.P. & Smith, S.C. (2003). Economic Development, Pearson Addison.
