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What is the impact of colonialism on the economic development of Sub-Saharan Africa (Africa) or more
generally the colonized countries? This is a question which has reverberated though the social sciences for
over a century. In the context of the late 19th Century “Scramble for Africa”, Marxists like Lenin formed
an unlikely consensus with colonial administrators in believing that European colonization would have very
positive effects on African economic development. By 1926 a British academic was writing of an “Economic
Revolution in British West Africa” unleashed by the colonial powers on backward Africa (McPhee, 1926).
This consensus between left and right continues to the present, with Lenin being replaced by nd
Resnick (1975), Warren (1980), and Sender and Smith (1986), who argue that the empirical evidence is
consistent with the Marxist view that imperialism has dragged Africa closer to capitalism, and colonial
administrators being replaced by Bauer (1972) and Ferguson (2002, 2011). Interestingly, these scholars
refer to many of the same empirical outcomes though starting from a different set of presumptions about
the intentions of the colonizers. Perhaps even more interesting, they often have the same counter-factual
in mind – without colonial intervention Africa would have stayed backward. Opposed to this eccentric
consensus is a vast literature blaming colonization for all the ills of former colonies, including persistent
poverty and dictatorship.
Colonialism is neither a European phenomenon, nor is it restricted to the Scramble for Africa (which
may itself not have been a completely European phenomenon since one can argue that Ethiopia under
Menelik II also took part). Modern China is an Empire constructed over millennia primarily by the Han
Chinese. The Ottomans constructed a vast empire in the late middle ages and Early Modern period which
stretched from the Gates of Vienna to Iraq, Yemen and Tunisia. The Russians colonized Siberia and large
parts of Central Asia and in the 100 years before the conquest of the Americas the Incas created a huge
empire stretching from southern Colombia to Chile and northwestern Argentina. Britain was colonized by
the Angles, Danes, Jutes and Saxons and subsequently the Normans.
In this essay we restrict attention to European colonization and focus on Africa since this has been the
crucible of much of the academic debate and where the literature spans the entire spectrum of answers.
We also restrict our attention to formal colonization rather than more general ‘interaction’ with potential
colonial powers or the type of ‘informal empires’ postulated to exist by Gallagher and Robinson (1953).
This means we leave a lot out. In the context of African development for instance we put aside the issue
of the impact of the Atlantic and other slave trades on the development of Africa (Lovejoy, 1989, Nunn,
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2008) except to the extent that it molds the initial conditions at the time of colonization. We also set
aside the question of whether the huge adverse health effects of colonialism were really just due to ‘contact’
(and thus would invariably have happened in the wake of simple trade expansion) or can be attributed to
colonialism. We also focus simply on the impact of colonialism for the development of the colonies not
the colonizing country, even though this is an important topic (Williams, 1944, Acemoglu, Johnson and
Robinson, 2005).
The obvious reason for the very wide dispersion of views about the role of colonialism is that it is
very difficult to construct a convincing research design to examine its impact. Without such a systematic
approach ideology has much more scope for allowing scholars to pick and choose facts which fit into their
view of the world. Central is the problem that there is not a well defined counter-factual to answer the
question: what would the income per-capita of Ghana be today if it had not been colonized? Though a
few countries were not colonized by the Europeans such as China, Iran, Japan, and Thailand, one cannot
use these as a control group because it is surely not a coincidence that these countries were not colonized,
potentially biasing the findings. In other cases, such as Barbados or Mauritius which were uninhabited at
the time of colonization, the counter-factual question becomes exceedingly speculative.
Nevertheless, it is also clear from Acemoglu, Johnson and Robinson (2001, 2002) that colonialism had
very heterogeneous effects. It seems difficult to believe that in any plausible counter-factual Australia or
the United States would today have higher GDP per-capita if they had not been colonized.1 At the same
time, as we will argue in the essay it is difficult (for us) to believe that the income per-capita of Botswana
or Ghana would not be higher today had it not been colonized (as we argue in detail later). Even though
Botswana has been an economic success since independence in 1966 this was not because of colonialism, but
despite it (Acemoglu, Johnson and Robinson, 2003, Leith, 2005, Parsons and Robinson, 2006). Other cases
are of course much more ambiguous. Most parts of Africa did not have the types of centralized political
institutions that Botswana or Ghana had and even when they did they were often much less accountable
and militarized, as in Buganda, Rwanda or Zululand.
Because colonialism was such a heterogeneous phenomenon taking different forms and interacting with
different circumstances this means that it is not very interesting to inquire as to what the average effect
of colonialism was on development. Of course this would not be true if ones approach was normative.
We do not believe that colonialism could have ever have been good according to any coherent normative
1This is not a statement about welfare since it is easy to argue that the indigenous people are much worse off than they
would have been absent colonialism. In both Australia and the United States the vast majority of indigenous people were
wiped out by the diseases imported by the Europeans and their ancestors today experience levels of human development
far below the average of their societies. In Australia, for example, life expectancy of aboriginal people is 17 years less than
non-indigenous people and average income about 62% of the non-indigenous level (see Australian Human Rights Commission,
2008).
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criteria. When the focus is on development, income per-capita, average educational attainment, or average
life expectancy, however, one cannot generally say colonialism was good or bad independent of context. If
one accepts this position, then our inability to propose a definitive identification strategy to estimate “the
causal effect of colonialism on development” turns out to be less of a problem. There is no one causal effect,
but rather different effects working through different mechanisms and channels. Sometimes the net effect of
these in a country is (almost surely) positive (Australia) sometimes it is (probably) negative (Botswana and
Ghana). The more interesting thing is to conceptualize the mechanisms via which colonialism influenced
development and try to investigate empirically how these worked. Providing causal estimates of the impact
of specific mechanisms may be much more feasible and, subject to issues of external validity, it may even
then be possible to aggregate these as one way to come to a conclusion about the net effect of colonialism.
That being said when the focus is on Africa the types of heterogeneity which characterize colonialism
more generally are muted. There is no success story like Australia or the United States from which
economically dynamic settler economies emerged. Moreover, we believe that it is possible to make some
sensible counter-factual conjectures. This will be far from a definitive empirical exercise and it is offered
more in the spirit of focusing the issues where we believe they should be focused. This being the case we
do not restrict ourselves simply to mechanisms but also construct what we believe what the development
consequences of colonialism were in Africa in the light of plausible counter-factuals.2
We emphasize four basic points that are critical in evaluating the African experience. First, at a purely
factual level the impact of colonialism on development differed greatly within Africa. The broad pattern
of GDP per-capita is that on average this increased in the places for which there is reliable data relative to
the base year of around 1885. This is quite plausible. Europeans brought technology, such as railways and
mining techniques and integrated their colonies more fully into world trade taking advantage of existing
patterns of comparative advantage. Agriculture and mining exports certainly expanded relative to what
they were at the time of the scramble for Africa. Nevertheless, the rates of economic growth were extremely
modest. Existing incomplete data also suggests that stature and life expectancy improved as did literacy
and educational attainment from very low bases de la, 2011, brings much of the available
evidence together).
Second, and still at a factual level, that this happened on average does not imply that everybody’s
living standards increased. Of particular relevance is the impact on African living standards. This appears
to have differed depending on the type of colony. In Southern Africa and the white settler colonies simple
calculations about theimpact of land expropriation and the creation of ‘dual eco

Entrepreneurship is an act of being an entrepreneur, or “the owner or manager of a business enterprise who, by risk and initiative, attempts to make profits”.^[6] Entrepreneurs act as managers and oversee the launch and growth of an enterprise. Entrepreneurship is the process by which either an individual or a team identifies a business opportunity and acquires and deploys the necessary resources required for its exploitation. Early-19th-century French economist Jean-Baptiste Say provided a broad definition of entrepreneurship, saying that it “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield”. Entrepreneurs create something new, something different—they change or transmute values.^[7] Regardless of the firm size, big or small, they can partake in entrepreneurship opportunities. The opportunity to become an entrepreneur requires four criteria. First, there must be opportunities or situations to recombine resources to generate profit. Second, entrepreneurship requires differences between people, such as preferential access to certain individuals or the ability to recognize information about opportunities. Third, taking on risk is a necessity. Fourth, the entrepreneurial process requires the organization of people and resources.^[8]

The entrepreneur is a factor in and the study of entrepreneurship reaches back to the work of Richard Cantillon and Adam Smith in the late 17th and early 18th centuries. However, entrepreneurship was largely ignored theoretically until the late 19th and early 20th centuries and empirically until a profound resurgence in business and economics since the late 1970s. In the 20th century, the understanding of entrepreneurship owes much to the work of economist Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich von Hayek. According to Schumpeter, an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship employs what Schumpeter called “the gale of creative destruction” to replace in whole or in part inferior innovations across markets and industries, simultaneously creating new products including new business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. The supposition that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such is hotly debated in academic economics. An alternative description posited by Israel Kirzner suggests that the majority of innovations may be much more incremental improvements such as the replacement of paper with plastic in the making of drinking straws.

The exploitation of entrepreneurial opportunities may include:^[9]