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Poverty from the Wealth of Nations: Integration and Polarization in the Global Economy since 1760

Author(s):Alam, M. Shahid
Reviewer(s):Eng, Pierre van der

Published by EH.NET (January 2003)

M. Shahid Alam, Poverty from the Wealth of Nations: Integration and

Polarization in the Global Economy since 1760. Basingstoke: Palgrave, 2000.

xv + 215 pp.$69.95 (hardcover), ISBN: 0-312-23018-4.

Reviewed for EH.NET by Pierre van der Eng, School of Business and Information

Management, Australian National University.

This book basically seeks to answer a question that has confounded many

authors: Why did the West become so much richer than the rest? Where David

Landes took more than 500 pages to address this question, M. Shahid Alam,

Professor of Economics at Northeastern University in Boston (USA), requires

just 180 pages of text. Of course it is possible to give a brief answer if you

keep it simple. Alam’s answer is simple: today’s less-developed countries

suffered from a lack of autonomy as a consequence of European imperialism since

the mid-eighteenth century. As colonies and dependencies, they were not allowed

to map out their own future, invest in education and infrastructure, and —

more importantly — use trade barriers to pursue import-substituting industrial

policies on which to base their further industrialization and development.

There are some nuances, but that’s basically it.

How does Alam arrive at this conclusion? Not by meticulously dissecting the

economic history of less-developed countries and the processes of colonization,

but by raking over some of the existing literature and by cranking

cross-country panel data in chapter 6 that seems to be the meat in this slender

publication.

The author is so taken by his thesis that every chapter, including the preface,

restates it at some stage in some form. For instance, the introductory chapter

is not a preamble to the issue that will be investigated and the hypotheses

that are to be tested, but is a summary of the rest of the book. Without having

read the substantiation in other chapters, a reader who expects an introduction

may find it hard to understand why Alam churns out one sweeping statement after

another, without substantiation or explanation. For instance: “…lagging

countries which were free [i.e., not colonized] and chose to resist the logic

of international integration — to save, shore up and modernize manufactures,

enterprises and skills — continued to industrialize, to grow and to narrow

their economic distance behind the advanced countries” (p. 5). It is unclear

which countries are meant, or whether any concrete examples actually fit this

typification. Perhaps Japan does, but does Mexico or Afghanistan?

Chapter 2 may be of interest to economic historians, because it surveys the

available literature on the history of global disparities in income and living

standards. For instance, Shahid Alam compares historical estimates of GDP per

capita provided by Bairoch and Maddison. Largely by accepting Bairoch’s

estimates, he establishes that around 1760 per capita incomes in Western Europe

and the rest of the world were broadly comparable and that disparities have

increased since. The author omits a probing of the sources that led Bairoch and

Maddison to arrive at different estimates for the early nineteenth century. Had

he done this, he may not have accepted Bairoch’s estimates for the early period

so readily.

Chapter 3 is an historical overview of the views of economists on international

trade and investment. The bad guys are Smith and Ricardo and ‘orthodox

economists’ who propagated the concept of comparative advantage, and the

benefits of free trade as ideology rather than science, oblivious of the

“growing polarization between advanced and lagging countries” (p. 66). The good

guys include List, Myrdal and Wallerstein who “identify with the interests of

the lagging countries” (p. 66).

Chapter 4 presents a taxonomy of sovereignty, outlining the characteristics of

his categories of sovereign countries, dependencies, quasi-colonies and

colonies. A curious twist is that the author prefers to leave countries such as

Australia and Canada (but not South Africa, which is characterized as a

‘sovereign country’) out of the taxonomy and out of the story, even though they

used to be colonies. His argument is that some colonies, and also the lagging

countries of Europe and South America, escaped this downside of colonization

because of what Alam considers as their racial and cultural affinities with

Western Europe. Hence, due to the racism that was rife in Western countries,

only countries without racial/cultural affinities were colonized and exploited.

Chapter 5 shoehorns countries and regions with lagging economies into this

classification: peripheral European countries and South America are sovereign;

dependencies are in Central America; Africa and Asia are (quasi) colonies. The

chapter provides dates to gauge the length of time since countries were

subjugated in some form by Western countries. It then hones in on the

suggestion that becoming a dependency or colony reduced the sovereignty of

using tariff policies and therefore protection of manufacturing industry.

Chapter 6 uses these categories, the length of colonization and other variables

to crank the cross-country panel data and statistically substantiate the thesis

with which the reader is by now already very familiar. Controlling for a range

of variables, the chapter demonstrates that a lower degree of sovereignty did

enhance the economic integration of a country into the world economy (measured

with the trade/GDP ratio) but not the levels of manufacturing industry

(measured with the share of manufacturing in GDP) and human capital formation

(measured with adult literacy rates and average years of schooling) in 1960 and

1980 or economic growth in general since 1870 (based on Maddison’s data). Alam

even concludes that switching the status of colonies to sovereign countries

would have increased their annual growth rates by 1.59 percentage points (p.

158).

Chapter 7 is not a conclusion but an epilogue. The author compares two phases

of industrialization (1760-1950s and since the 1950s) to argue that the

conspiracy of the West continues. Most of the chapter is a repeat of earlier

chapters, but new are sweeping statements suggesting that since the 1980s

Western countries, led by the United States and assisted by the IMF, World Bank

and OECD, have crafted a new imperialism based on the ‘Washington consensus’ to

delay the process of manufacturing development in lagging countries and to

capture the markets and investment opportunities there.

Alam describes himself as a crusader against ‘Eurocentrist’ explanations of

underdevelopment. A b?te noire is David Landes, who is dismissed as “the chief

defender of the Eurocentric faith” (p. xiii). In a twisted way, Alam seems to

be more Eurocentric than Landes. Unlike Landes, he makes no serious effort to

understand the past development problems of any less-developed country in

particular. Moreover, his book assumes that only Western Europe engaged in

colonialist pursuits. It says nothing about colonization by non-Western

European countries, for instance Russia’s colonization of Siberia and Central

Asia, Japan’s colonization of Korea, Taiwan and Manchuria, or China’s

colonization of Mongolia and Tibet.

The tone of the book is defensive. It seems that Alam’s crusade has been

fraught with difficulties, because the academic world does not subscribe to his

views and analysis. In the preface of the book, the author’s recounts his

struggle to expose that “the social sciences” have justified and perpetuated

“Western hegemony” in understanding underdevelopment (p. xii). It mentions the

author’s efforts in getting his papers, on which this book draws, published in

peer-reviewed established academic journals. He suggests that his views and

analysis were not accepted, presumably by the ‘orthodox economists’ who

determine editorial policies of journals. After receiving refusal after

refusal, he tried instead to get book publishers interested: “Predictably, they

offered a warmer welcome” (p. xi). At US$70 for a slender booklet, that may not

be surprising.

A major problem with the book is that Alam does not make an effort to write

history. His only discussion of historical developments serves the purpose of

establishing the date when colonization started or ended. The complex processes

of colonization and the economic histories of countries are simply reduced to a

few dummy variables that represent the time since independence until 1960 or

1980. A selected number of variables in those two years is assumed to represent

the outcomes of earlier decennia of colonization. They ignore that colonization

was largely a pre-World War II phenomenon, and that ex-colonies since felt the

economic impacts of World War II and independence wars, and, worse, the

consequences of poor economic management since independence, often exactly

because they tried to implement what the author perceives as the successful

strategy towards sustained economic growth: inward-looking, import-substituting

industrialization.

Consequently, implicit in Alam’s analysis are various assumptions that are not

probed in any depth. For instance, the author implicitly assumes that, before

they were colonized, countries inhabited by non-European races were all heading

for industrialization, education, and economic growth, had it not been for the

West European colonization drive. This of course assumes that nation states

existed, which had enlightened national governments that were imbued with the

will and ability to further economic development through the kind of industrial

policies pursued by, say post-Tokugawa Japan. The book does not contain any

hint of counterfactual analysis to make this seem plausible. Of course, that

would have been a difficult task, as it requires detailed knowledge of the

areas that became colonized countries.

Still, the issue could have been addressed by contrasting the development

record of countries that never fell under colonial rule — such as Ethiopia,

Afghanistan, Nepal or China — with that of countries that did. In fact, Alam

could for that purpose have drawn on existing literature. For instance, Lloyd

Reynolds’ (1983, 1985) extensive survey of the problems of underdevelopment

based on detailed scrutiny of secondary literature for individual countries

addressed this issue. Surprisingly, Reynolds’ work is entirely missing in the

references of Alam’s book. Why? Perhaps because Reynolds (1983, p. 957)

answered his question ‘Would these areas have developed faster before 1950 if

they had been completely independent countries rather than colonies?’ as

follows: ‘There is no magic in independence.’

Anyone interested in simple explanations for economic underdevelopment will

like this book. It offers some new nuances, but basically confirms the view

that the West is to blame for the problems of underdevelopment in the world.

Anyone interested in a more profound understanding of such problems will find

this a frustrating book. It ignores the wide range of factors that play a role

in a holistic explanation of underdevelopment in the past and present: low

rates of capital formation, high population growth, low agricultural

productivity, low formation of domestic markets due to poor infrastructure

development, poor or rigid financial systems, internal political turmoil etc.

Except as variables in the regression, the book largely ignores the

idiosyncrasies of individual less-developed countries.

References:

Landes, David (1998) The Wealth and Poverty of Nations: Why Some Are So Rich

and Some So Poor. New York: W.W. Norton.

Reynolds, L.G. (1983) “The Spread of Economic Growth to the Third World:

1850-1980,” Journal of Economic Literature, 21 (3), pp. 941-980.

Reynolds, L.G. (1985) Economic Growth in the Third World, 1850-1980. New

Haven: Yale University Press.

Pierre van der Eng is Senior Lecturer at the Australian National University

and is currently visiting professor at Seikei University in Tokyo. Research

interests include various aspects of the economic history of Southeast Asia, in

particular Indonesia. Recent publications include “Food for Growth: Trends in

Indonesia’s Food Supply, 1880-1995,” Journal of Interdisciplinary

History (2000); “Indonesia’s Growth Performance in the Twentieth-Century”

in Angus Maddison et al. (editors) The Asian Economies in the Twentieth

Century (London: Edward Elgar, 2002); and “Bridging a Gap: A Reconstruction

of Population Patterns in Indonesia, 1930-1961,” Asian Studies Review

(2002).

Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII