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Racism and Development


Recently this website asked the rhetorical question for one of the contests,

Is Racism Good or Bad for Development?

It’s an issue that no one wanted to touch with a ten-foot pole.

There are good reasons for this.

Capitalists have historically profited from racism.

This means that racism has in many cases has not only been good for development, but has been excellent for development.

Racism also hurts development, and in some cases, has been disastrous for development.

But you can see the potential danger here.

Some yoyo picks up on the argument that racism is good for development – and argues we need more of it so everyone can be rich, and minorities should just shut up and take what’s coming to them.

That would be like saying slavery was good for development, so we should just bring back slavery. That would suit some white nationalists just fine.

Let’s walk through all the arguments concerning racism and development.

Racism allows some groups to massively enrich themselves by intentionally impoverishing others.

It is a short-term rational, long-term irrational strategy.

Capitalism has historically made massive use of racism as a tool to create early economic growth. This is because early capitalism depended on raiding. Early capitalism depended on land seizure. Early capitalism depended on forced labor. Early capitalism essentially consisted of militarily strong people conquering other people, taking their economic assets, and reducing them to forcibly grow crops for the conquerors. Because the victims were going to be treated with far less humanity and decency than the conquering people would be treating their own people, they needed an ideology that would emphasize the animal nature of people to be redefined as “savages”. Thus, racism allowed for the creation of two groups of people, the haves and the have-nots and allowed capitalism to grow from the brutalization of the have-nots.

The earliest forms of capitalism that occurred in late Medieval Europe grew by demonizing Moslems as “Saracens” and “Infidels”, justifying endless military raids on the Saracens to seize everything they had. The most explicit form of this was the Crusades – but the military Christianization of wealthy Moslem Spain was not much different. The Catholic Italians were more than happy to offer the courtesy of “treatment as infidels” to the Christian Orthodox Byzantines. From Moslem and Orthodox Christian alike, armies stole mines, ports, specie and even craftsmen who were forced to work for the victorious Genoans or Venetians.

The discovery of the Americas and Subsaharan Africa opened up more of the same.   Consider four of the most lucrative businesses that drove capitalist economic growth before the twentieth century.

1. Silver. The discovery of the Mexican and Peruvian silver mines increased by hundred and thousandfolds the amount of money that was available in Europe. This monetary expansion was the key event that ended the Middle Ages and brought on the economic expansion of the Renaissance. The seizure of Indian land and concomitant destruction of the Indians was the origin of the modern capitalist age.

2. Sugar. Sugar was arguably the most valuable economic commodity in history. Sugar in the seventeenth century was substantially more valuable per ounce than cocaine. Europe had limited access to sweeteners before the commercialization of sugar. (You have had desserts sweetened only with honey. Only a few of those are good.) In the 1600’s, Europe went made for desserts made with sugar and the price soared. Sugar was grown on plantations – generally with slave labor. (There was outright slavery in Brazil and the Caribbean. In Dutch Indonesia, locals were made to work on the sugar plantations as one of a limited number of options for paying Dutch-imposed taxes.) The demand for slaves for sugar plantations is what made the African slave trade viable.

3. Cotton. The Industrial Revolution was based on factory textiles. Those textiles were made of wool and cotton. The cotton came primarily from the United States, with secondary contributions from India and Egypt. That cotton was grown by slave labor. The profits from the cotton trade were recycled back into the American economy and fostered America’s own industrialization.

4. Wheat. The second great burst of American economic growth came from wheat. (Canada shared in the wheat boom as well.) American farmers expanded westward into the Great Plains, found one of the greatest ecosystems in the world for growing massive amounts of wheat and corn, produced vast quantities of cereal grains at a very low cost and flooded European markets, driving most European wheat farmers out of business. The wealth from grain fostered secondary investments in “grain-cognates” such as meat production, breakfast cereal, or packaged cookies. These too flooded world markets.

There was no slave labor in wheat or corn production. But wheat and corn both required land. That land was taken from Indians. (For that matter, the land for cotton plantations was taken from Indians too.) The construction of Indians as “savages” to whom anything could be done was essential for the building of American agriculture which in turn created the economy of one of the wealthiest nations in the world.

Note that the United States and Canada were not alone in taking land from aboriginal people. Spanish and Portuguese speaking people seized most of South and Central America leaving the original residents with very little. The British slaughtered aboriginal people in Australia, New Zealand and South Africa. The Russians seized land from a wide variety of smaller groups in their push from Moscow to the Bering Sea.

Does this mean that becoming an ethnic supremacist is the key to creating long term economic growth?


*  *  *

The economic downsides of racism are massive.

1. Racism devastates the economies of the people who are being enslaved or the people who are being dispossessed. People who have to work for free don’t have very much money to spend. People with no money provide very little market demand. Entrepreneurs who want to invest and build businesses in these regions simply have very little to work with because they must rely on such a small percentage of the population which can actually afford to consume anything.

2. Racism lowers the skills and human capital of the labor force. No one bothers to educate slaves – because slaves are paid to do physical labor rather than think. Low education means low productivity. Low education means low entrepreneurship. Low education means having an economy that can be dominated by technologically superior rivals who have monopoly products for which they can charge monopoly rent. If one country is selling medical equipment and another country is selling cashews grown by slaves, the medical equipment country will get far higher prices for its output than the cashew country will get for its cashews. Money will drain from the technologically primitive economy to the technologically advanced economy.

3. The nation of slavers and direct economic exploiters will also suffer from low human capital and low productivity. It does not take very much managerial skill to crack a whip and make people underneath you work harder. It takes more skill to engineer superior products or to engineer production equipment that can increase efficiency and produce greater value. So managers in slave or cheap labor economies end up being less technologically proficient, and less administratively proficient, allowing themselves to be out competed by managers who did not have the “cheap” option of just sweating labor.

If you are looking for evidence to support points 2) and 3) consider that for most of American history, the American South was much poorer than the American Northeast or Midwest. It is hard to find a reason for this that is not based on race-relations or the long term legacy of slavery or its post-Civil-War replacement, debt-peonage-based sharecropping.

4. Ethnic oppression produces ethnic resistance. The violence used to capture people and exploit them turns into more violence later as people fight back over secondary status.

Ethnic hostility is a real thing. Ethnic violence is a real thing.

To quote Gregory Hooks, “War is Development in Reverse”.

Consider the case of Indonesia. The Dutch colonized Indonesia, forced the Malays to work on Dutch plantations and handed the manufacturing and commercial sectors to overseas Chinese. The Chinese developed a long history of bad treatment of Malays. The Malays have returned the favor by at various times rising up and killing members of the Chinese upper class. How good can this ethnic violence have possibly been for Indonesian economic development?

5. And let’s not forget the most obvious cliché of equal opportunity. It is, however, a legitimate truth. Economies do better when the most qualified person for a job gets the job. Take the most amazing “great man” or “great woman” you can think of in any ethnic group you like. Imagine if they had been kept from entering their chosen field because of their ethnicity. Think about what would have been lost to the world.

(Okay, when I do that exercise, I always think of Shakira and what would have happened if Colombians were not allowed to make it big in the United States. Undoubtedly, you, reader, can come up with better and more profound examples.)

*  *  *

So one can see that the long term effects of racism on growth can be pretty devastating. However bad ethnic treatment has been associated with some of the most fundamental economic expansions in capitalist history. Our modern high standards of living were constructed on the backs and sweat of racially-defined slave labor, and on the lands of the ethnically dispossessed.

Racism has historically paid.

It, however, has its price.

For More Information

Most of this essay reflects arguments that are familiar staples of critical race theory. I particularly like Manning Marable’s How Capitalism Underdeveloped Black America or Walter Rodney’s How Europe Underdeveloped Africa.

For an explicit link between global capital accumulation and the dispossession of First-Nations peoples see James Fenelon’s Indigenous People’s and Globalizations.

For a grand four volume view of the rise of capitalism with the adverse incorporation of non-Western Europeans into the world system, see Immanuel Wallerstein’s magisterial Modern World System.

For the tie of American growth to agricultural growth on a global scale, including the rise of American and Canadian wheat, see Dieter Senghaas, European Experience: a Historical Critique of Development Theory.

For the early Indonesian experience, see Clifford Geertz, Agricultural Involution. For the subsequent ethnic violence, see Amy Chua, Worlds on Fire. This excellent book also demonstrates how the Indonesian experience has parallels throughout the world.

On how sweated labor produces low managerial quality and hurts economic growth, see Wolfgang Streeck, Social Institutions and Economic Performance.

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