The economic basis of neo-colonial politics
In dependency theory, as will be shown later, there is the view that imperial-
ism had created economies that had been and still are positively and actively
underdevelopedby dominant economies. Neo-colonialism as an interpreta-
tion of post-colonial history did not express itself in those terms. It did, how-
ever, recognize a failure on the part of colonialism to develop the economies
of the colonized territories beyond the small but important sectors needed by
the European economies and for which colonial rule was imposed.
At independence colonial economies were left in a highly specialized con-
dition, with one or two major commodities oriented towards export earnings
and therefore foreign exchange (Harrison, 1979, ch. 18). Further develop-
ment of the economy required foreign exchange which had to be acquired
from the export of a very limited range of primary products. In the case of
Ghana, for example, 61 per cent of its total export earnings came from one
commodity, cocoa, as late as 1970. In Zambia in the same year 97 per cent of
export earnings came from copper. Furthermore, these were commodities for
which world prices fluctuated alarmingly. This feature of neo-colonialism
continued throughout the 1980s as the world market prices of the primary
products on which the economies of so many Third World societies are
dependent for their foreign exchange earnings declined. For example, during
the 1980s Africa’s exports rose by 25 per cent in volume, but fell in value by
30 per cent.
As the purchasing power of post-colonial economies fell foreign
exchange crises could only be averted by borrowing, foreign investment and
aid. But this led to growing demands on export earnings to service debts
rather than finance imports from developed countries of industrial equip-
ment or consumer goods which tended to increase in cost. In some cases
a post-colonial economy needed all of its earnings from exports to repay
foreign debts.
Foreign capital (investment and aid) substituted for inadequate domestic
savings rather than supplementing them. Domestic investors put their
money into low risk, high profit multinationals rather than weak indigenous
enterprises. Hence the modern and dynamic sector of the neo-colonial econ-
omy came increasingly under the control of multinational corporations. The
backward sectors are left to local capital (Roxborough, 1979, p. 59). So if
profits arereinvested locally this increases the share of domestic industry
controlled by foreign capital. Foreign investment, when combined with debt
and aid, ‘decapitalized’ the host economy through a net outflow of capital,
with more being extracted in excess profits than being invested locally
Neo-colonialism and Dependency 77