Great Britain: The Largest of Empires at the Service of a Dominant Economy

From Baripedia

There are things that change, if we are no longer in the 17th and 18th centuries especially, but we are in the 19th century and in the first part of the 20th century, the British Empire "changes its skin".

In the 18th century, Great Britain did not have the most extensive colonial domain, but from the 19th century onwards, Great Britain became the greatest colonial power, not only of Europe, but of all the States.

After the second half of the 18th century and its successful industrialization after the Napoleonic Wars, Great Britain will appear to the world as the first industrial nation, but also as the greatest economic, maritime, commercial and financial power. It becomes a dominant economy, the rest until the eve of the Second World War, the relay will be taken by the United States who dislodged it. With the independence of the United States, the hand taken over India, there will be a shift in the centre of gravity of the British colonial empire from the western hemisphere to the eastern hemisphere.

The British Empire is not only the largest and richest empire, it's an empire that is very diverse. It is the only European imperial construction of the contemporary era to include all the major types of colonies: exploitative colonies, including the prototype and India, European settlement colonies with Canada, Australia and New Zealand, and mixed colonies with South Africa where a hegemonic white minority marginalizes a black minority. This is called the heterogeneity of the British Empire.

From the end of the 19th century, something very surprising happened in the British Empire, there are colonies that became richer than the metropolis, that is to say, whose per capita income exceeded that of the metropolis, namely Australia, New Zealand and Canada. From that point on, the differences in development become greater within the colonial domain versus the metropolis.

These are the states where the income disparity trends between the metropolis and the overseas powers; settlement colonies have a per capita income 5% to 10% higher than the metropolis, these settlement colonies have a per capita income 8 times higher than that of India. The differences are greater between parts of the empire than with the metropolis.

On the other hand, Great Britain remains a dominant economy. The predominance of Great Britain over the world economy continues to grow, the industrial revolution was for half a century on the British island which will give it a lead; it is the first industrial power.

Around 1860, with 2% of the world's population, Great Britain accounted for one-fifth of world production and 50% of the world's capital stock. Around 1860, Great Britain had overwhelming superiority. Thereafter the gaps will narrow, but they will not diminish, because a growing number of Western nations are also beginning to emulate the British experience themselves - it is the spread of industrialization that makes the gaps narrow.

An elaborate map of the British Empire in 1886, marked in the traditional colour for imperial British dominions on maps

Great Britain maintains its leadership, but from the last third of the 19th century shows signs of running out of steam.

The contribution of the colonies fluctuates according to the phases of growth of the metropolis; the contribution of the empire to the metropolis varies according to its evolution. It was an empire rather centered on the Americas, which was called a colonial empire of race confined to the Americas and from the first third of the 19th century it became an empire of color much more dispersed. The conquest of India downgrades the West Indies, the conquest of India then other Asian and African colonies drown in the multitude of Asian and African colonies, the dominions.

Around 1830, these settlements are less than 1% of total colonies, now it is Africa and Asia that dominate. Thanks to the colossal Indian takeover, the British Empire held in 1830, 90% of the lands colonized by Europe and controlled 92% of the 95 million inhabitants who populated them; no power of the contemporary era will achieve such supremacy.

It is the largest of the empires at the service of an economy that has become dominant, it will make a change in its tariff policy.

From the end of the mercantilist empire to the free-trade empire[edit | edit source]

The metropolis will turn its back on protectionism and opt for free trade from the middle of the 19th century.

It is necessary to mark it at the beginning in order to analyse the contribution of the colonies. Britain's transition to free trade was a real breakthrough for the economic history of Europe.

There is a whole series of events that herald this transition to free trade, it should also be noted to underline the importance of this event that Great Britain will remain a free trader for a very long time.

On the European continent, there was a phase at the end of the 19th century when countries either adopted free trade or returned to protectionism. Great Britain will remain faithful to free trade for almost a century from 1846, which is the date of the adoption of free trade, until 1931 - 1932, Great Britain is continuously free trade.

Free trade was first enunciated by the declaration of independence of the thirteen colonies, there is the progress of industrialization, which means that Great Britain will enjoy a lead for almost half a century, there is also during the first third of the nineteenth century the abolition of the monopoly of the East India Company, which dated from 1600.

In 1846, Great Britain moves to free trade, there is the suppression of the acts of navigation in 1849, in other words, Great Britain is going beyond the colonial pact.

Then there is the abolition of customs preferences, the metropolis when they import a range of products such as sugar for example, there are several producers and exporters, each metropolis favours producers and exporters who are members of the empire.

In the British case, it was Caribbean sugar that was more expensive than other sugars, but had a customs privilege which was the imperial preference.

Between 1854 and 1860, the imperial preference was abolished, bringing Britain into the era of free trade.

Great Britain put an end to mercantilism because it industrialized and became the world's leading economic power. It put an end to the closed system that had governed relations between the metropolis and the colonies since the 17th century.

Map of the British Empire under Queen Victoria at the end of the nineteenth century. "Dominions" refers to all territories belonging to the Crown.

For almost a century, metropolitan products no longer enjoyed a preference on the markets of the exploiting colonies, the dominions had the freedom from 1859 to protect themselves from British products by taxing them at the entry of their borders - since the 19th century, the dominions have had sovereignty which allows them to choose their tariff policy - because they want to promote industrialisation at different times at home.

Great Britain, which is becoming a dominant economy reigning over the world economy, is going to integrate its empire into the world economy.

Between the 18th and 19th centuries, as we move from one world economic system to another, there are several elements that can be used, but special attention must be paid to differences in development.

In the system in place in the eighteenth century, European countries do not have significant differences in development, no one is industrialized, everyone is in the same boat in the system of the old regime, there are obstacles to development, this international economic system is conflictual and marked by strong trade rivalries as well as trade wars.

Things are going to change from the moment that Great Britain industrializes first; remains the only nation to industrialize for a relatively long period of time.

As we move into the 19th century, there are disparities in income and differences in the level of industrialization, there is a system where a "division of labour" emerges.

There are economies that are complementary to Britain and there are economies that are competitive. Denmark is a complementary economy that fits into the system by fulfilling a particular task, Switzerland is a competitive economy.

There is a distribution of roles which is carried out according to the degree of development and the level of exported products, around Great Britain which is a pioneer of industrialization, the other exporting countries find niches.

Within this international economic system, Great Britain maintains relations with a multitude of partners. The British economy will specialize in two main types of export products: coarse and cheap manufactured cotton wool and transport equipment.

The domestic market is not sufficient to absorb all this production that is becoming important thanks to mechanisation, continental Europe and the United States will not absorb this range of products because they are protecting themselves.

So the outlets for this group of export products are the extra-European outlets, of course, the empire, but also other partners such as Latin America, the Middle East and China. Britain also exports products where it has a comparative advantage, such as fine cotton fillets, cast iron, some of the more sophisticated capital goods. This range of items crosses borders and protectionist barriers because Western industrializing countries do not know how to manufacture them or do not manufacture them in sufficient quantities.

We need to look at the colonial contribution to the British economy, but placing the empire in an international economy dominated by Britain.

The British colonial advance in the 19th century is only one aspect of a wider and multifaceted expansion by which Great Britain managed to integrate not only the empire, but also non-European countries as well as Western countries. All this has an impact, whether one considers the two functions of outlet and source of supply in the movement of goods, it gives these two functions relative stability.

Throughout the period under consideration from the mid-19th century to the early 1931s, the share of exports to the colonies and the share of imports from the colonies to Great Britain are stable, the share of exports is around 1/3 and the share of imports from the Empire is 1/5.

As soon as Great Britain adopts a more restrictive policy, trade with the empire will develop.

We try to follow the contribution of the colonies to the economic growth experience of Great Britain according to the phases of this growth: it is a dominant economy, but it will decline in relative terms from a certain point on, especially in terms of industry.

First of all, there is relative stability, which is always around 1/3, but there are other types of stability whether we look at the product or geographical structure. Between the middle of the 19th century and the first third of the 20th century, metallurgical products were the main exports of the empire.

India remains during this period, because of its demographic size, the first outlet of the empire.

There is a difference between the prototype India of exploitative colonies and the European settlements. In view of what we have said, that the European settlement colonies acquire, as time goes on, a position that puts them above the metropolis in terms of income, they are going to become the best customers of British industry.

The criterion changes, one considers British exports to Australia and New Zealand per capita, there is a gap. Around 1860, British exports to these destinations were per capita 100 times higher than those to India. India is still the main market, but the best customers, taking into account the differences in per capita income, are in the European settlements. The same stability characterises imports, with total foreign purchases from the metropolis hovering around 1/5.

The empire can be considered to be fulfilling its function of supplying raw products: wood from Canada, coffee, tin from Malaysia, cotton from the West Indies and cotton and silk from India. Over time, the range supplied by the empire expanded to include tea, rubber from Asian plantations, seeds from West Africa, jute and foodstuffs from Canada, Australia and New Zealand.

  • What would have happened if Britain had not had these opportunities? Would it have lost or won?

This is called imperial accounting, but it is also about scenarios, history versus fact, we "suppose that", it is a cost-benefit analysis which is an Anglo-Saxon speciality.

This exercise of imperial accounting can be undertaken for the period from 1870 to 1914, during this phase the costs and benefits of colonial trade are evaluated on the one hand.

The first situation assumes that overseas possessions would be either independent or in the hands of other colonial powers. In other words, Britain is deprived of its empire on the assumption that these colonies are either independent or in the hands of other powers, so what happens?

Great Britain, if it wanted to trade, would be subject to tariffs, if we look at the situation at the time, these tariffs would be around 20% to 40%, so the metropolis would lose the benefits of openness.

The second scenario is that it is assumed that in the absence of an empire, British overseas possessions would be less integrated into the world economy. In this case, it is estimated that exports of goods and services to the settler colonies would fall by 30 per cent and those to the exploiting colonies by 75 per cent. These are simulations based on data.

  • Possession of the empire would bring the gain; what is this gain and what should it be reported to?

In the first scenario, the gain would be 1.6 per cent of British gross national product in 1870 and 3.8 per cent in 1914. In the situation where the volume of trade is assumed, the gain would be 3.4 per cent in 1870 and 3.6 per cent in 1913.

The gain generated by imperial trade in 1870 and 1913 is between 3 % and 5 % of the gross national product. Great Britain, in building its railway network, gained between 3 per cent and 5 per cent, the contribution of the railway network to GDP is 3 per cent to 5 per cent.

These branches have aged in terms of the techniques used. From the second half of the 19th century onwards, other manufacturing branches were dynamic and driving industries that appeared in the second industrial revolution.

It is an old argument that acknowledges that colonial trade generates a gain, but disputes the brilliance of this gain which would be tarnished by the composition of the exported products.

We can guess the core of the argumentation, colonial markets are easily accessible markets, they are non-competitive markets, there is the superiority of the British economy which no longer needs imperial preference, in addition Great Britain has, at least in India, the privilege of sovereignty. These are easy markets held simply on the political level.

There is a strong temptation for declining and ageing manufacturing industries that no longer want to fight in open markets to seek refuge in easy markets. We are going to talk about an imperial refuge accused of softening British exports in the face of European and American protectionism and mishandled from the last third of the 19th century onwards by competition from new industrial countries such as Germany, the United States and Japan.

Easy access to colonial markets would have a softening effect by diverting exporters from genuinely competitive markets. This ease of access favoured slow-growth industries at the expense of fast-growing branches contributing to the relative decline of the British economy.

After having been engines of growth, colonial markets are now acting as a brake and a hindrance.

Retreat to the empire[edit | edit source]

We're going from the 19th century to the 20th century, something is changing.

What is going to happen is that Great Britain, which remained a free trader until the early 1930s, will see its position deteriorate. Britain is no longer triumphant, no longer going to be content to integrate its empire into an international economy that it outrageously dominates.

As soon as its dominant position crumbles and relative decline affects industry and finance, as soon as Britain no longer has control over its own affairs, it will be tempted to withdraw into the empire.

The retreat into the empire will become very apparent when Britain moves into protectionism. Then we get back to the situation where colonial markets are once again seen as preferential markets.

Of all Britain's partners, the overseas possessions will appear as faithful and strong partners to rely on and to fall back on.

Depending on the period one chooses, while keeping the same metropolis, while asking the same question, what changes is the empire, its size, its composition, what can also change are the gaps between the metropolis and some of its colonies. Sometimes the empire appears to play a supporting role during a phase of growth, for example during the industrial revolution, the colonies at that time contribute positively and support economic growth and above all are supports for new, dynamic economic branches; sometimes the empire can appear as a companion in bad times, as a reliable and faithful partner.

Each time, depending on the period chosen, there are different theses to defend: when the colonies are there to give a phase of the metropolitan economic growth experience all its vigour and state, then it is the thesis of support, of the impetus given, or if we consider the empire in troubled times, it is the companion of bad days. When a prosperous phase returns the empire appears in less use.

The empire may at one time be presented for certain branches of manufacturing as a refuge and an easy way out, the empire would contribute to the relative decline of Britain because declining branches occupy the markets.

There is no valid thesis for the whole period when Britain has an area whose composition is changing, but the changing economic structures of the metropolis must also be taken into account.

We must not discredit imperial outlets in this way, first of all because the decline of British industry, which was particularly marked during the last third of the nineteenth century, was not accompanied by an increase in the empire's share of metropolitan exports.

At the time when British industry - in the last third of the nineteenth century - was in decline, this decline should have been accompanied by a decline in exports, but this was not the case.

In terms of outlets, the empire is relatively stable.

The imperial outlet, because it is easy to present it as a refuge, will induce structural rigidities, that is to say, it will somehow sclerotize some branches that contribute to putting rigidities in the economic structures of the metropolis. At the time of colonization, these rigidities should have disappeared, but this is not the case.

These structural rigidities attributed to distant markets supposedly languishing remain until decolonization and even after the "loss" of the empire; the decline continues until after decolonization and beyond.

To blame colonial outlets for the poor performance of British exports in competitive markets would be like "blaming the hospital bed for making the patient sick".

We can recall that the colonial outlet in certain circumstances plays a primordial role, renders a service to the metropolis, we find Great Britain as a dominant economy adapted from free trade having supremacy over a world economy trading with different partners, but with its different partners not recording the same results.

When we look at the contribution of the economy, we have to make cuttings, in time, at the level of the production apparatus, we have to reposition the empire as one of Great Britain's many partners and determine what role this imperial partner plays.

The role that the empire plays is in a global clearing system, the accepted term is a multilateral settlement system.

Great Britain has many trading partners and does not perform equally well with its partners, with some partners it has trade deficits, with other partners it has a surplus balance of trade in goods.

Where Britain has deficits at the centre of a trading system only because Britain is a free trader, then it will be able to balance deficits with surpluses.

Britain has deficits with the United States and continental Europe, from which it buys an increasing amount of manufactured goods, some industrializing countries will choose to specialize, Britain continues to trade with these industrializing countries.

Britain also has trade deficits with Canada, South Africa, Argentina and New Zealand.

On the other hand, it has surpluses with other partners such as India. If there is one territory that allows Great Britain to balance its balance of trade in goods, it is India, but also Australia, Malaysia, the West African colonies, China, Japan and Turkey.

This system allows Great Britain to use surpluses from its trade with India to make up its deficit with its other partners.

In terms of goods, it is the compensation system that serves Great Britain in order to achieve the necessary balance, but that is not enough.

There is the movement of goods, there is also the balance of capital transactions, what Britain places as capital abroad earns interest.

Basically, the empire allows Great Britain not only to balance the balance of payments, but also to accumulate surpluses.

There is other income from invisible exports which comes from the sale of services to other countries and on the other hand from the income of British capital investments abroad: these are the transport of goods, commercial, financial and insurance services, there are commodity exchanges such as in London and Liverpool, there are services provided by British services located abroad, British banks finance a large part of international trade in the short term.

The empire can fulfil the function of safe and profitable investment of metropolitan capital.

If we consider the exchange of goods between the metropolis and the colonies, there is no upheaval between the mercantilist empire and the free-trading empire. On the other hand, if we consider the movement of capital, this changes to the extent that the empire will attract more and more metropolitan capital from the second half of the 19th century onwards.

Until the middle of the 19th century, investments in the empire were negligible, but then between 1870 and 1814 they increased. On the eve of the First World War, investment in the metropolis accounted for some 45% of British assets abroad, with European investment in the empire moving towards the European settlements.

This percentage was already significant on the eve of the First World War because Britain was the world's leading banker.

The investments were mainly portfolio investments, placed in basic facilities such as infrastructure rather than direct investments. British investment in the colonies facilitated their opening up to international trade. It is European investment that helps to facilitate openness and develop international trade.

The settlements that were to become dominions concentrated about 70% of investment in the empire, compared with 20% for India. The difference becomes more pronounced if one chooses the criterion that amounts to calculating per capita investment. Around 1914, European investment in Australia, Canada and New Zealand was about 65 times higher than in India.

Investment in the empire serves the metropolis because these investments yield interest and dividends, in that they contribute to making the balance of payments of the metropolis largely in surplus with its overseas possessions.

This global system of multilateral settlements becomes viable because there is this surplus accumulated by Britain in its overseas possessions. This system allows Britain to pay its debts to countries with which it has deficits or debts.

So far we have looked at trade in goods, we have tried to see what the benefits and gains are from trade relations between the metropolis and its colonies.

In order to complete this exercise, we must do two other things: try to see what is the gain from the metropolitan investment in the empire, retain the same phase from 1870 to 1914, there are also the costs especially calculated for maintenance, namely the costs of management and administration of the empire.

By subtracting the costs from the profits, we have the net gains; by giving another way of looking at things, we put the results obtained into perspective.

What is the gain of the investment in the empire for the metropolitan economy? In the best of cases, that is, in the "radical" counterfactual situation involving a lower level of investment in the empire, owning one ensures a gain for Britain of 0.3% of GNP in 1870 and 0.5% in 1913.

The cost of managing and administering the empire must be taken into account; how much does it cost? 3 per cent of British national income between 1870 and 1813.

The balance sheet of colonization for the British Empire could be established in the following way: a maximum total gain, we must add the gain of trade and the gain of investment giving about 5.5% of the GNP, we remove the gain of real which is 1.5%, we get 4% of the GNP which is the net gain, that is the contribution of the empire.

Between 1870 and 1914, 4% of the GNP is not negligible, but it is not decisive either.

We can go beyond this exercise, by going beyond this kind of calculation we can consider another way other than the empire's contribution to Great Britain.

What has been presented concerns rather the nineteenth century, for historians the nineteenth century begins in 1815 and ends in 1913.

We are going to look at the period after the First World War. There are signs of a decline in British power, basically, the very foundations of this supremacy are being called into question, all of which will give the empire a value and a usefulness that the metropolis is now taking full measure of.

After the First World War, Great Britain had great difficulty in restoring its external balance. In the end, it will let go, i.e. it will decide to turn its back on free trade.

Free trade is less and less suited to Britain's declining position in a world that has changed because it is bristling with economic barriers of all kinds.

There was an international economic system that was set up in the 19th century that was dominated by Great Britain for a long time, and it benefited from it with the contribution of the empire. Britain no longer had the capacity to derive all the benefits of the international system, so in September 1931 the free convertibility of the sterling pound was suspended.

The pound sterling will float on the foreign exchange market constituting a de facto devaluation. With this decision of September 1931, which will be followed by others, dogmas will be abandoned, religion will be changed on the economic level, this abandonment is imposed by the imbalance of external payments, we can no longer make compensations and arbitrations.

The decision concerning the convertibility of the pound sterling was followed very quickly by another renunciation between November 1931 and February 1932 : the renunciation of free trade which is a "quasi-religious symbol of the old competitive society". Great Britain, after nearly a century, returned like others to protectionism.

The protectionist system put in place gives the empire a special treatment: the system of imperial preference will be dug up, trade with the empire will be favoured, capital invested abroad will be directed and destined for overseas possessions, and the empire will become a safe bet.

File:Canada-Stamp-1932-Ottawa Conference.jpg|thumb|180px|right|Postage stamp, Canada, 1932: commemorative overprint for Ottawa Conference].

In the summer of 1932, a few months into the protectionist era, Great Britain begins negotiations with the dominions, Canada, Australia and New Zealand to establish a system of imperial preference, the Ottawa Accords. The metropolis got the dominions to lower their customs barriers in front of the British, in exchange the dominions would get Britain to buy given quantities of agricultural commodities and to tax them lightly at the entrance to British ports.

In the previous period, the empire functioned in a somewhat loose way where there was a whole series of partners, after the First World War and especially in the 1930s Great Britain will reserve and intensify the links with the empire.

This system of preference was extended to other possessions such as India, Ceylon and Malaysia, which was to continue until the 1960s.

During the Free Trade Empire the trade links with the empire remained stable both on the export and import side, after the First World War there was an intensification of trade.

In 1911 - 1913, compared with 1949 - 1951, the Empire's share of British exports increased from 36% in 1911 - 1913 to 49.5% in 1949 - 1951, while imports increased from 20.4% in 1911 - 1913 to 49.5% in 1949 - 1951.

The retreat from the empire can be illustrated in terms of trade by this tightening and intensification of trade relations. The same is true of the movement of capital.

From the 1930s onwards, Great Britain only partially fulfilled its role as the world's banker, but investment in the empire resumed and accelerated until it became the empire's preferred investment location.

More than 2/3 of the foreign capital invested abroad went to the empire between the 1930s and the 1970s. If we consider the empire's share of Britain's total foreign assets, in 1870 38% of Britain's total foreign investment went to the empire and in 1950 it was over 50%.

There is imperial preference in trade and a concentration of investment in the empire in terms of capital movements.

This privileged investment in the empire acts as a cushion, allowing the metropolis to better withstand the turbulence of the Great Depression and to better face the ordeal of the Second World War, to better meet the challenge of reconstruction afterwards. The empire appears as a companion for bad days.

If we want to denigrate the role of the empire at that time, we can present the empire as crutches that would support a battered metropolitan economy in difficult times. These imperial crutches would no longer be necessary from the 1950s because after the Second World War no one expected that.

During the Second World War, think tanks were set up in Europe and the United States to prospect and imagine the situation after the Second World War. They imagined unrest, crises, turbulence, declining growth and massive unemployment. No expert was optimistic, everyone feared deep and lasting crises, and the measures advocated were to alleviate them.

After the Second World War, there was a miraculous period of rapid growth, with a less unequal redistribution of wealth for thirty years.

In other words, after the Second World War, Great Britain was to benefit from the beginning of the Glorious Thirty. It is going to reap all the benefits of this phase of rapid and relatively harmonious economic growth. This allowed Great Britain to do without the imperial crutches, they became useless and that is why Europe decided to decolonise because its salvation was in Europe, the empire appears to be a burden.

In the 1950s - 1970s the empire appears as a burden and we are going to get rid of it. From an accounting point of view, the empire is a burden, hence the greater ease of getting rid of something that has been called a "crutch".

The usefulness of the empire in the British case has never been greater than during the phase of economic decline of the metropolis. From the early 1930s to the late 1950s, the empire emerged as a lifeline that kept the British economy afloat.

We must take into account the results that we obtain because it gives us an order of magnitude, which is a given in historiography today.

  • What is the weight of the empire for Britain? The order of magnitude is 5% of GNP.

The colonies also add something to Great Britain in terms of resources, we can go beyond the cost/benefit balance and propose another way of presenting.

What do these entities add as resources to Britain? 30% to Britain's population and national income in 1913 and about 50% to Britain's population and national income in 1950.

Colonization led to the creation of new countries that are sometimes called "New Britannia". Britain was able to seize this opportunity, the opportunity presented itself to Britain between the late 18th and early 19th centuries to take advantage of the immense agricultural and subsoil resources of these "new" countries.

In order to meet the needs of the urban markets of old Europe, Great Britain was going to exploit them by sending its men and capital to them.

2 to 3 million Indians in Canada, aborigines in Australia and Maoris in New Zealand will pay with their lives for the development of these new lands.

What Britain will do is to establish with these English-speaking overseas entities, as it had done with the United States, economic, social, political and sentimental ties that will foster a lasting kinship system.

For a historian of British colonization, the fact that Prime Minister Tony Blair joined the Americans during the second Iraq war makes sense when one remembers the ties that had been developed.

What these distant extensions bring to Britain far outweighs by far what the empire can bring to the metropolitan economy itself.

Colonization and its history allow us to understand certain current situations.

Annexes[edit | edit source]

References[edit | edit source]