The Origins of Colonial Investments

The Origins of Colonial Investments Joan Ricart-Huguet∗ September 14, 2016 Abstract Recent literature has documented the economic and political consequences of colonialism, but we know less about the origins of colonial investments. I present evidence that they were very unequally distributed within 16 French and British African colonies, even when adjusted for population. How did colonial powers allocate their investments? Eco- nomic history emphasizes the role of natural resources while recent literature in political economy argues that settlers explain the origin of colonial institutions. I argue that observ- able geographic features|locational fundamentals|led some locations to become centers of pre-colonial trade, which in turn increased colonial settlement and investments not only in infrastructure but also in health and education. Disparities did not diminish during the colonial period because those locations became centers of colonial economic activity and benefited from complementarities between investments, consistent with a logic of increasing returns. JEL: F63, H50, N37, N57 ∗Department of Politics, Princeton University, Princeton, NJ 08540. Email: [email protected]. I thank Carles Boix, Evan Lieberman, Marc Ratkovic and Leonard Wantchekon, Jennifer Widner, Tsering Wangyal Shawa, Bill Guthe, Torben Behmer, Brandon Miller de la Cuesta, Costantino Pischedda and seminar participants at the Contemporary African Political Economy Research Seminar (CAPERS), the Politics and History Network and Princeton University for useful comments. I am grateful to Elise Huillery and Bob Woodberry for sharing the relevant data. Jeremy Darrington and Elizabeth Bennett helped me locate multiple data sources. Seth Merkin Morokoff, Luise Zhong and Bruno Schaffa provided excellent research assistance. 1 1 Introduction The last two decades have seen a surge in the literature examining the economic and political consequences of colonialism, notably in the Americas, Africa and South Asia.1 Existing claims on the effects of colonial institutions, investments and practices are wide-ranging.2 Some of this literature uses arbitrary or \as-if" random variation in a particular aspect of colonial rule to identify those effects, such as spatial discontinuities in agricultural revenue collection systems in India (Banerjee and Iyer, 2005), in extractive forced labor in Peru (Dell, 2010), or in missionary school location (Wantchekon and Garc´ıa-Ponce, 2015). However, colonial investments are generally not random and they are important (i) to better understand the impact of colonialism on subsequent political and economic development, (ii) because they may be mechanisms linking deep pre-colonial explanations to current outcomes, and (iii) because they fundamentally affected welfare and development during colonial rule. I present novel evidence showing that colonial investments were very unequally distributed across and within 16 British and French colonies in East and West Africa.3 This paper focuses on the large within-colony variation in investments among the over 300 districts in those 16 colonies. One important advantage of the within-colony focus is that it allows me to hold institutions constant, since they hardly varied across districts within the same colony. Investments in some districts were orders of magnitude larger than in others within the same colony, even taking population into account, as Figure 1 shows. This highly unequal distribution applies to each of the three main types of investments in both empires: education, infrastructure, and health (Figures 13-18 in the Appendix). Further, these inequalities persisted during the colonial period under study: districts receiving higher investments in the early 1900s continued to receive more decades later. Why did Europeans invest so much more in some districts than in others? It is difficult to answer this question beyond particular cases by examining colonial documents because these lack a systematic investment strategy (Section 3). Scholars have long argued and provided evidence for the role of natural resources. Curtin et al. (1995, p. 447) argue that \European capital was invested where exploitable resources promised the most extractive returns" (Huillery, 2010, p. 271), notably the natural resources of settler colonies such as South Africa and in extractive East and West African colonies such as Guinea and Ghana. It is no coincidence that Ghanaian gold and 1See Nunn(2009) for a concise review of the economic literature on the topic. 2For example, see Acemoglu et al. (2001) and Mahoney (2010) on the effects of colonial institutions; Huillery (2009), Ricart-Huguet (2015), and Cagéand Rueda (2016) on investments; and Guardado (2014) and Wilkinson (2015) on colonial practices. 3The eight French West African (AOF) colonies are Benin (formerly Dahomey), Burkina Faso (Upper Volta), Cote d'Ivoire, Guinea, Mali (French Soudan), Mauritania, Niger and Senegal. The eight British colonies are the main territories under the British Colonial Office (CO): Ghana (Gold Coast), Kenya, Malawi (Nyasaland), Nigeria, Tanzania (Tanganyika), Sierra Leone, Uganda and Zambia (Northern Rhodesia). 2 Cote d'Ivoire Public health staff Public health staff per 100,000 people 40 50 40 30 30 20 20 10 10 0 0 Man Kong Man Daloa KongLahou DaloaGuigloLahou Tabou Guiglo Indenie Assinie Tabou Gouros Baoule Gouros Baoule AgnebyIndenie Assinie SeguelaOdienne Agneby Bassam Lagunes OdienneSeguela BassamLagunes Nzicomoe Nzicomoe Tagouanas Bondoukou Sassandra BondoukouTagouanas Sassandra Nigeria Students Students per 100,000 people 15,000 2,000 1,500 10,000 1,000 5,000 500 Figure 1: Public health and education by district (1910-1939) 0 0 Oyo Oyo Niger Ilorin ZariaKano Warri IjebuOndo Kano Ilorin NigerZaria Warri Ijebu Benue KabbaOgojaBornu LagosBenin Owerri Benue Bornu Ogoja Kabba Owerri OndoBenin Lagos Plateau Katsina Bauchi Sokoto Onitsha Calabar SokotoBauchi Plateau Katsina Onitsha Calabar Adamawa Abeokuta Adamawa Abeokuta Cameroons Cameroons Sierra British had for a long time been snapping up the best coastal sectors. [...] Britain took possession of the territoriesLeonean with thediamonds richest ended resources up in and British best future,hands. although \With a withoutgreat sense any of geographical the practical, the ties: the Niger delta, basis of future Nigeria; the Gambia estuary, Sierra Leone and the Gold Coast" (Chi-Bonnardel, \colonial infrastructure can be predicted [...] by the presence of extractive resources (mines and quarries) but not by soil quality. This is in line with conventional wisdom in economic history: colonial powers were not after farmland but minerals." ever, theirNatural role resources in non-extractive are a plausible investments explanation such as for health colonial and investments education is in less infrastructure. clear. In fact, How- why did the colonial state invest in health and education in these extractive colonies at all? There 1973, p. 50). More recently, are several reasons. First, the 1885 Berlin Conference declared the principle of Effective Occupa- tion, by which claims to the territory depended on actual presence (Young, claims gain veracity if the conqueror builds facilities such as schools or infirmaries. Second, public health investments have positive externalities that reduce the risk of contagious disease among Wantchekon and Stanig (2015, p.5) show that 3 1994, p. 100). These Africans and Europeans. Third, the French created a class of \évolués"(evolved) just like the British created a class of \Europeanised"|two racist terms with similar meanings|who would become colonial civil servants thanks to their European education. Some attribute these expen- ditures partly to the \white man's burden"|the presumed European responsibility to educate at least some among the colonized (Lugard (1922), Suret-Canale (1971)). A more prosaic reason was the need to reduce the colonial payroll and maximize revenue by having Africans rather than Europeans occupy junior civil service positions. The most influential argument to explain variation in non-extractive colonial investments such as public health and education focuses on the size of settler communities: more settlers led to more inclusive colonial institutions (Acemoglu et al., 2001) and higher levels of district colonial investment (Huillery, 2010), both of which rely on partly exogenous variation in settlement size. The former article argues that European settler mortality rate was lower where disease environment was more favorable, while the latter argues that the number of settlers was higher in areas where local chiefs offered less resistance or were less hostile. Indeed, settlers not only had a voice in the colonial government but sometimes even acted as a lobby, affecting the decisions of the colonial administration (Gardner, 2012). The settlers and natural resources explanations are not without problems, however. Settlers can hardly be a fundamental explanation for investments since most arrived in East and West Africa in the late 19th and 20th century, centuries after European exploration and conquest had begun. There were very few settlers pre-colonially, unlike in neo-Europes and in many Latin American colonies, and settlement was very low even in the 20th century, with all 16 colonies except Kenya populated by less than 10,000 settlers prior to 1940. Their late arrival means that colonial settlers influenced but also responded to levels of investments, with causality running both ways. Data show that a couple of districts

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