matches and edible oils (McCartney, 2011:42). A large number of developing
countries after the 1960s built capacity in heavy industry, including iron and
steel, petrochemicals, lorry-making, aircraft industries, locomotives, cement,
electrical machinery and heavy non-electrical machinery. The net result was
that the balance of power shifted away from the dominance of a few major
imperialist countries towards a more even distribution of power. Imperialism
declined as capitalism grew (Warren, 1973:41). Many have argued this trend
was reversed with liberalization, particularly of trade and FDI in the 1980s and
1990s and that MNCs have regained control over many developing countries.
Colonialism and development: the debate
The key thematic debates about the impact of colonialism on development in
the colonies are the drain of surplus, deindustrialization, diversity and isola-
tion,and human development.
Colonialism and the drain of surplus
Lenin argued that the export of capital from developed to developing countries
characterized colonialism and exploitation. The more enduring argument has
been that a drain of surplus has been a key mechanism enforcing economic
stagnation in colonized countries.
Between 1609 and the beginning of the eighteenth century,the Dutch
gained control of most of the Indonesian archipelago but did not rule directly
except in Batavia-Java. This allowed them to achieve an effective monopoly of
trade. They enforced the delivery of spices and other crops at low prices and
managed to prevent the growth of alternative indigenous industries. Data up to
1939 showed persistent trade surpluses (exports to the Netherlands exceeding
imports),which is an approximate measure of the transfer of surplus to the
Netherlands. The influential Indian historian Irfan Habib argues that what
came to be called the ‘tribute’ or ‘drain of surplus’ was the primary objective of
the British conquest of India (2006:23). In the eighteenth century the East
India Company converted tax revenue from the conquered areas into goods
and shipped them overseas. The excess value of British imports from East
India over exports was around £4 million per annum by the late eighteenth
century. With the advent of more settled colonial government, the tribute/drain
became composed of ‘home charges’ such as the expenditure on the Secretary
of State’s establishment of British staff, pensions paid to British officials, and
expenses incurred on using the British Indian army on campaigns outside
India. Habib argues that British investment in Indian railways was deliberately
distorted to generate ‘excessive’ profits. Land for railway companies was given
free by the government and investors were also guaranteed a return of 5 per
cent on capital paid at a fixed exchange rate (2006:36). The result was an
excess of exports over imports which amounted to 30 per cent of total imports
198 Patterns and Determinants of Economic Growth