The Bright Side Of British Colonialism

The Bright Side of British Colonialism

English institutions—the common law, property rights, and banking—led to economic growth in the colonies.

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In most circles, colonialism is considered to be a sad episode in history—where dominant economic powers with sophisticated military might subjugated less developed, more vulnerable societies, turned them into colonies, imposed foreign languages and organizations upon them, and exploited local natural resources and labor. Indeed, Karl Marx argued that mature capitalist economies required such colonies in order to forestall their inevitable stagnation and decline. And there was a heavy price paid by the colonies themselves, with long-term negative consequences that are often pointed to as the reason why many of those societies remain poor today.

But this dark story has now been revised. A recent series of papers co-authored by Hoover Property Rights Task Force members Daron Acemoglu and James Robinson found that there were advantages from colonization as well, especially for those colonies within the British Empire. English institutions, such as the common law, property rights security, contract enforcement, and banking and trading practices provided a positive basis for economic growth in the colonies that has persisted.

As with all cross-country economic-growth comparisons, however, any measure of legal, political, or economic institutions, regardless of their source, must be done at a high level of aggregation with little specific detail. For this reason, it is hard to know why England, as compared to, say, France or Spain, was the possible cause of these benefits; precisely what they were; and how they were transmitted to the colonies.

In a new study in honor of the 1991 Economics Nobel Prize winner Ronald Coase, Dean Lueck, Trevor O’Grady, and I addressed these issues by examining the demarcation of property rights to land, the most basic resource in a developing economy. For any society to become rich, a precondition is that its land must be used productively and that land markets must emerge. Markets direct land to its highest-valued uses, redirect it as those change, and promote the consolidation or breakup of holdings in order to seize new economic opportunities. Secure property rights, of course, are essential, but some demarcation practices are more effective than others. In flat areas, for instance, squares have productive advantages and their uniformity allows for secure property boundaries and standardization for market trades.

The benefits of square demarcation were first seen, as with so many other institutional innovations, by the Romans. In territories conquered by Rome, land was organized into grids to support higher agricultural productivity and, presumably, exchange. But with the fall of Rome, many of its advances were lost. During the “Dark Ages,” property rights to land were insecure and haphazardly defined in irregular shapes by local markers—rocks, trees, streams, and hills, in a practice termed “metes and bounds.” “Metes” refers to property boundaries defined by the measurement of distances between terminal points, and “bounds” refers to boundary descriptions based on topography. After Rome, trade diminished and agricultural output declined in Europe.

Fast forward to the seventeenth, eighteenth, and nineteenth centuries. Although many medieval land practices remained, by the mid-seventeenth century, land in Britain was becoming more valuable and this led to changes in land institutions from traditional practices. These advancements subsequently influenced British colonial policy. The enclosure of scattered and common lands helped to restructure, reshape, and consolidate plots into more useful forms for sheep-raising and large-scale food production. Land markets that had been local and limited became more active and broadly based. Thanks to new survey instruments and practices, boundaries were defined more accurately.

At the same time, Britain, France, Spain, Portugal, and, to a lesser degree, the Netherlands, were acquiring new lands or colonies elsewhere. Within England, the acquisition of vast new territories, especially those temperate lands that could be settled by English or other Northern European colonists, prompted debate over property rights and land management among the leading political economists of the time, including Adam Smith, Jeremy Bentham, John Stuart Mill, Thomas Malthus, David Ricardo, Edward Wakefield, and Robert Torrens.

Their concern was how to best design and manage land distribution and demarcation in the colonies so as to promote orderly settlement, economic growth to accommodate immigration, and generate higher land values and sales revenues. The old advantages of squares or rectangular demarcation were rediscovered and reintroduced. Indeed, the British Colonial Office in the seventeenth and eighteenth centuries issued circulars calling for synchronized, planned settlement and square land demarcation in the temperate British colonies. Not all of these mandates were implemented, but many were. This mixed pattern of institutional transfer and innovation is the focus of our study.

The impact of the Empire was so important because its sheer size allowed British practices to have a profound effect. Although, the British Isles comprise only 121,673 square miles, at its peak, the British Empire covered 14.2 million square miles, or nearly 25 percent of the world’s land area. The colonial area that we examine involved 10.7 million square miles.

Figure 1 The British Empire and Temperate Colonies

The temperate colonies in North America, Australia, and New Zealand were particularly important. Abundant land in these regions offered the possibility of transplanting British farms,

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