What does an octopus have in common with bananas? In the first half of the 20th century, Central American countries nicknamed America's United Fruit Company El Pupo, the octopus. Its tentacles controlled much of their economies and even politics. Indeed, El Pupo turned some Latin American countries into "banana republics"—a derogatory term used to describe economies reliant on the export of a single commodity. The United Fruit Company example demonstrates the powerful way in which economic imperialism works.
Fig. 1 - A propaganda image for the Belgian Congo, “Go ahead, do what they do!” by the Belgian Ministry of Colonies, 1920s. Source: Wikipedia Commons (public domain).
Economic Imperialism: Definition
Economic imperialism may take different forms.
Economic imperialism is using economic means to influence or control a foreign country or territory.
Prior to 20th-century decolonization, European colonial empires directly conquered and controlled foreign territories. They settled, established colonial rule over the native population, extracted their resources, and oversaw trade and trade routes. In many cases, colonial settlers also brought their culture, religion, and language because they believed in "civilizing" the locals.
Decolonization is a process by which a country gains independence in a political, economic, social, and cultural sense from a foreign empire.
After World War II, many former colonies worldwide gained independence through decolonization. As a result, some more powerful states began to exert indirect control over these weaker states. Here, economic imperialism was part of neocolonialism.
Neocolonialism is an indirect form of colonialism that uses economic, cultural, and other means to exert control over a foreign country.
Economic Imperialism in Africa
Economic imperialism in Africa was part of both old colonialism and neocolonialism.
Old Colonialism
Many cultures used imperialism and colonialism throughout documented history. However, from around the year 1500, it was the European powers that became the most prominent colonial empires:
- Portugal
- Spain
- Britain
- France
- Netherlands
Direct European colonialism led to many negative consequences:
- African slavery;
- redrawing borders;
- imposing language, culture, and religion;
- controlling and extracting resources.
Countries that colonized Africa in the 19th and early 20th centuries were:
- Britain
- France
- Germany
- Belgium
- Italy
- Spain
- Portugal
![Economic Imperialism, Fig. 2 - Wells Missionary Map Co. Africa. [?, 1908] Map. https://www.loc.gov/item/87692282/, StudySmarter.](https://studysmarter-mediafiles.s3.amazonaws.com/media/1865576/summary_images/1865576/summary_images/iiif-service_gmd_gmd8_g8200_g8200_ct003086-full-pct_12.webp?X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=AKIA4OLDUDE42UZHAIET%2F20230329%2Feu-central-1%2Fs3%2Faws4_request&X-Amz-Date=20230329T092907Z&X-Amz-Expires=90000&X-Amz-SignedHeaders=host&X-Amz-Signature=a1672fd30f7db072e86c80ac1da89f3ca7605120b143c432babf2b3bbb1136cd)
Fig. 2 - Wells Missionary Map Co. Africa. [?, 1908] Map. https://www.loc.gov/item/87692282/.
Trans-Atlantic Slavery
Between the 16th century and the abolition of slavery in the 19th century in different European countries, African slaves were treated in an inhumane manner and used:
- for work on plantations and farms;
- as household servants;
- for breeding more slaves.
Congo
Between 1908–1960, Belgium controlled the African country of Congo. The colony of Belgian Congo is known for some of the worst and most brutal crimes, such as murder, maiming, and starvation, committed by the Europeans in the entire history of European imperialism in Africa. Congo is rich in resources, including:
- uranium
- timber
- zinc
- gold
- cobalt
- tin
- copper
- diamonds
Belgium exploited some of these resources to its benefit. In 1960, the Democratic Republic of Congo gained independence through postwar decolonization. Congo's leader, Patrice Lumumba, was assassinated in 1961 with the involvement of multiple foreign governments, including Belgium and the U.S. He was murdered for two key reasons:
- Lumumba held left-wing views, and the Americans were concerned that the country would become Communist by allying itself with the Soviet Union, America's Cold War rival;
- The Congolese leader wanted his country to control the rich natural resources to benefit his people. This was a threat to foreign powers.
US Economic Imperialism
In the past, the United States possessed several colonies under its direct control that it captured in the Spanish-American War (1898).
- Philippines
- Guam
- Puerto Rico
The Spanish-American War was, therefore, a key turning point for American imperialism.
However, the U.S. also indirectly controlled other, weaker regional countries without the need to conquer their territories.
Latin America
Two key doctrines have defined American foreign policy in the western hemisphere:
| Name | Details |
| The Monroe Doctrine | The Monroe Doctrine (1823) viewed the Western hemisphere as an American sphere of influence to prevent European powers from additional colonization or re-colonizing their former colonies. |
| The Roosevelt Corollary | The Roosevelt Corollary to the Monroe Doctrine (1904) not only considered Latin America an exclusive sphere of influence of the United States but also allowed the United States to intervene in the domestic affairs of regional countries economically and militarily. |
As a result, the United States primarily relied on neocolonial means in the region, such as using economic imperialism. There were exceptions to American economic domination that involved direct military intervention, such as the case of Nicaragua (1912 to 1933).
Fig. 3 - Theodore Roosevelt and the Monroe Doctrine, by Louis Dalrymple, 1904. Source: Judge Company Publishers, Wikipedia Commons (public domain).
United Fruit Company
The United Fruit Company is the most prominent example of American economic imperialism that dominated its industry in the western hemisphere in the first half of the twentieth century.
The company was essentially a monopoly in Latin America. It controlled:
- Banana plantations, giving rise to the term “banana republic”;
- Transportation such as railroads;
- Treasuries of foreign countries.
The United Fruit Company also engaged in illegal activities:
- Bribes;
- Using the Colombian army to shoot laborers on strike in 1928;
- Regime change (Honduras (1911), Guatemala (1954);
- Undermining labor unions.
Fig. 4 - United Fruit Company advertising, Montreal Medical Journal, January 1906. Source: Wikipedia Commons (public domain).
Cochabamba Water War
The Cochabamba Water War lasted from 1999-2000 in Cochabamba, Bolivia. The name refers to a series of protests that occurred because of the attempted privatization of the water supply through the SEMAPA agency in that city. The deal was backed by the firm Aguas del Tunari and an American giant, Bechtel (a major foreign investor in the area). Water access is a basic necessity and a human right, yet its prices have grown substantially at that time. The protests were a success, and the decision to privatize was canceled.
Two large international institutions were involved in this case:
| Institution | Details |
| International Monetary Fund (IMF) | The IMF offered Bolivia a $138 million package in 1998 in exchange for austerity (government spending cuts) and privatization of vital resources like its oil refineries and the water supply. |
| World Bank | As water prices grew in Bolivia because of privatization, the World Bank argued against offering the country subsidies. |
Middle East
There are many examples when economic imperialism results in direct meddling in the politics of a foreign country. One well-known case is the 1953 regime change in Iran.
Iran
In 1953, the U.S. and British intelligence services carried out a successful regime change in Iran by overthrowing Prime Minister Mohammad Mosaddegh. He was a democratically elected leader. The regime change gave Shah Mohammad Reza Pahlavi more power.
The Anglo-Americans overthrew Prime Minister Mohammad Mosaddegh for the following reasons:
- Iran's government sought to nationalize that country's oil industry by removing foreign control;
- The Prime Minister wanted to subject the Anglo-Iranian Oil Company (AIOC) to an audit to ensure its business dealings were entirely legal.
Before overthrowing Iran's Prime Minister, Britain used other means:
- international sanctions on Iran's oil;
- plans to capture Iran's Abadan oil refinery.
This behavior demonstrates that as soon as a country attempted to take control of its natural resources and use them for its own people's benefit, foreign intelligence agencies mobilized to overthrow that country's government.
Other Economic Imperialism Examples
In some cases, international bodies are part of economic imperialism.
IMF and the World Bank
The experience of Bolivia means that greater examination of international financial bodies is required. The International Monetary Fund, IMF, and the World Bank are often impartial. Their backers claim that these organizations offer economic mechanisms, such as loans, to countries experiencing financial troubles. The critics, however, charge the IMF and the World Bank with being the tool of powerful, neocolonial interests that keep the Global South in debt and dependent.
- Global South is a term that replaced the derogatory phrase like the Third World. The term refers to developing countries in Africa, Asia, and Latin America. "Global South" is often used to highlight the socio-economic inequalities that remain after the legacy of European colonialism.
To meet the loan conditions, international financial institutions often require a policy of economic austerity by cutting government spending in key areas, which harms the ordinary people. The critics of IMF policies argue that such measures lead to increased poverty. For example, the scholars at Boston University analyzed 79 qualifying countries between 2002 and 2018:
Their findings show that stricter austerity is associated with greater income inequality for up to two years and that this effect is driven by concentrating income to the top ten percent of earners, while all other deciles lose out. The authors also found that stricter austerity is associated with higher poverty headcounts and poverty gaps. Taken together, their findings suggest the IMF has neglected the multiple ways its policy advice contributes to social inequity in the developing world." 1
Economic Effects of Imperialism
There are many effects of imperialism. Supporters, who refrain from using the term "imperialism," list the following positives, in their view:
- infrastructural development;
- a higher standard of living;
- technological advancement;
- economic growth.
The critics disagree and argue that economic imperialism results in the following:
- countries are used for their resources and a cheap labor force;
- foreign business interests control resources like commodities, land, and water;
- socio-economic inequalities are exacerbated;
- imposition of a foreign culture;
- foreign influence on the domestic political life of a country.
Economic Imperialism - Key Takeaways
- Economic imperialism is using economic means to influence or control a foreign country or territory. It is part of both old colonialism and neocolonialism.
- Powerful states engage in economic imperialism to control foreign countries indirectly, for instance, through preferential business deals.
- Supporters believe economic imperialism improves its target country through economic growth and technological development. Critics argue that it worsens socio-economic inequalities and takes away control over one's natural resources and commodities from the native population.
References
- Poverty, Inequality and the IMF: How Austerity Hurts the Poor and Widens Inequality,” Boston University: Global Development Policy Center (2 April 2021) https://www.bu.edu/gdp/2021/04/02/poverty-inequality-and-the-imf-how-austerity-hurts-the-poor-and-widens-inequality/ accessed 9 September 2022.
- Fig. 2 - “Africa,” by Wells Missionary Map Co., 1908 (https://www.loc.gov/item/87692282/) digitized by the Library of Congress Prints and Photographs Division, no known restrictions on publication.
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