Capitalism and Colonialism

Capitalism can be defined as a system of economy in which the means of production are owned by private individuals and organizations, whose main goal is to make profits. In a capitalist economy, the determination of investments, income, production, pricing and distribution of goods and services is done through the action of a free market. A capitalist economy is often considered to involve the rights of people and groups of people who act as legal persons or corporations in the trading of capital goods, land, labor and money (Harvey, 1990: 20).

The major defining feature of capitalism is certainly its use of capital. Capital can be defined as currency, which in turn is a means of representing the worth of an individual’s material property to be used for trading. Even though different forms of capitalism subsist in monarchial states, the term capitalism gains its real meaning when it is applied to a democratic system of governance. In addition, even though both socialist and capitalist democracies advocate for arrangements that allow only one vote per person, they differ significantly in the sense that a socialist democracy consists of only a single all-inclusive class of people, while on the other hand, a capitalist democracy divides people into either two or three classes.

The uppermost social class in a capitalist democracy is comprised of the fewest number of people, while the lowest class consists of a majority of the people. The middle social class may be present in some democracies or not present at all.  Capital is disseminated to each social class of people using an approach which ensures that each class’s fraction of the whole capital is inversely proportional to its size as fraction of the whole population. The significance of this method of distribution is to try to ensure that there is a power balance between the different social classes of people. Given that the class with the highest number of people, which is the working class, is also the most powerful class, capital is transformed to an artificial form of power. On the other hand, since most of the capital is owned by people within the highest class, normally referred to as the capital class, this situation tends to bring about a state of equilibrium between the capital class and the working class. The lack of this delicate balance may ultimately lead to the falling out of a capitalist democracy (Harvey, 1990: 28).

Despite the fact that capitalism has maintained its stability in very many countries for fairly long durations of time, some people claim that it is in reality counterproductive to waste a lot of resources in trying to sustain this equilibrium. Other people claim that the system is quite unfair because it selects people who have capital and those who do not have it arbitrarily, such that the capital owners live more lavishly than the rest of the people. Most of the people who criticize capitalism advocate for socialism. Socialists believe in a single class that comprises of all the people.


Colonialism can be defined as the process of establishing and maintaining colonies in a specific territory by people from another distinct territory (Havinden, 1993: 15). As a result, the sovereignty and the economics within the colonies are run and changed by the colonialists. Colonialism is a clear case of lopsided relationships between the colonists and the indigenous people and the colony itself. Historically, colonialism refers to the period between the fifteenth and the twentieth century, when the Europeans established colonies in different countries in various continents especially in Africa. The primary goals of colonialism included the need to gain profits from the colonies, the desire to expand the powers of the metropole and to escape prosecution in the metropole, and the desire to convert the indigenous people to follow the religion of the colonists.

Relationship between Capitalism and Colonialism

According to Samir Amin, capitalism and colonialism are quite inseparable (Harvey, 1990: 34). To him, capitalism has always been colonial or simply imperial during all of its remarkable periods of development. For instance, the subjugation of the Americans by the Portuguese and Spaniards in the sixteenth century, which was subsequently followed by their conquest by France and Britain, was the first modern form of colonization and imperialism. This process was extremely brutal leading to the genocide of the North American Indians. It also led to the Indian societies in Latin America being thrown into slavery, and the slavery of the black people in the entire North and South American continents. According to Samir, pursuing a logical sequence of accurate deployment through the different phases of capitalism in history leads to the conclusion that capitalism has established an unswerving dichotomy of relations between a certain center, which is the heart of the capitalist exploitation system, and the periphery which consists of dominated countries and populations of people.

According to Samir, the system of colonial exploitation has always been based on unequal exchange of manufactured goods which are usually sold at very expensive prices in the colonies by commercial monopolies that are supported by a state, so that it can purchase primary products at affordable prices, since they were produced by cheap labor that was offered by peasants and other workers at the periphery (Harvey, 1990: 38). Throughout all the developmental stages of capitalism, resources have always been plundered by the colonists, while the colonized people have often been oppressed and exploited either directly or indirectly by capital. This essentially remains to be the core feature of the phenomenon of colonialism.

Theories of capitalism began to emerge within the context of Industrial Revolution by Karl Marx and other theorists. Nevertheless, towards the end of the nineteenth century, several German theorists started to develop other concepts about capitalism which differed significantly from the analysis of Karl Marx, with specific concerns on the subject of interest and capital. In the beginning of the twentieth century, Max Weber added a more positive insinuation to the term. Theories of capitalism continued to be enriched and explicated during the Cold War, in a manner that explained, criticized or justified the idea of private ownership of capital (Havinden, 1993: 23-45).

Economic practices of capitalism in Europe became institutionalized between the sixteenth and the nineteenth centuries even though some characteristics of capitalist organization can be traced back in the ancient world. This period coincides with the historical period of colonialism which existed between the fifteenth and the twentieth centuries when as aforementioned, Europeans established colonies in different countries in various continents. From then henceforth, capitalism has appeared to be the dominant economic system in the Western world following the decline of Feudalism, which washed away conventional, religious and political limits of capitalist exchange. Capitalism then progressively stretched from Europe, in particular from Britain, across cultural and political divides. Within the nineteenth and the twentieth centuries, capitalism was the major means of industrialization in the entire world (Havinden, 1993: 47-60).

Capitalism as a concept has a restricted analytic value because of several factors such as its great range of historical cases over which it can be applied, its varying lengths of time, geographical factor, culture and politics. Economists classify capitalism into different forms depending on factors such as the methods that are used to accumulate capital and concentration of economic wealth and power. Many scholars attribute economics as the central focus of the colonial project rather than politics. During the 1970’s, systematic studies began to emerge concerning the African colonial economies. There are three main dominant approaches that were developed. The first approach was mainly based on the neoclassical economic theory and its main focus was on market processes and the troubles encountered during allocation of resources. Anthony Hopkins used this approach to argue that colonialism introduced an open economy in Africa which augmented market opportunities (Thomas, 2000: 48-53).

The second approach, which emerged out of discontent with the existent neoclassical analyses, descriptions and directions for the development of the third world, was known as dependency. Dependency writers used concepts such as unequal exchange, incorporation, center-periphery and development of underdevelopment to stress on exchange relations and external economic linkages with disregard to internal and production procedures. For instance, Walter Rodney depicted colonialism as a new platform in Africa’s unremitting slip into external dependency and structural internal underdevelopment (Thomas, 2000: 53-60).

The third approach was advocated by Marxist scholars who criticized both the dependency and neoclassical writers for their theoretical scantiness, ideological biases and empirical inadequacies. They sought to utilize the concepts of historical and dialectical materialism which aim at establishing the origins of specific systems, their development, functioning and transformation within certain historical periods so as to disentangle the historical realities of Africa (Thomas, 2000: 60-65).

Even though these three approaches differ on their emphases, they depict some common characteristics of the African colonial economies. That is, African colonies were sources of raw materials and market for the colonist economies, yet they were expected to be self-sustaining in terms of finances. The colonial economy was typically mono-cultural and export oriented. It suffered from unbalanced productivity between its different sectors, and with external domination with regard to capital, markets and technology. The colonial economy grew in three different phases: the period up to the First World War, when there was a lot of coercion, taxation, cultivation and forced labor; the interwar years which were highly characterized by interruptions of the Great Depression and the adjustments of the colonial economy; and the period after the Second World War, when policies dealing with colonial welfare and development were developed (Harvey, 1990: 41-45).

After the Second World War, capitalism developed into a new phase referred to as surplus capitalism. According to De Soto, this is a situation where there is no restriction to the amount of goods that corporations can produce. The only problem is to find buyers who are also enticed with credit facilities so that they can buy the commodities (De Soto, 2000: 76). In 1950’s, capitalism developed into yet a new phase. Before that time, poverty was an extensively shared phenomenon. Demand exceeded supply as people were in need of more goods than the economy was capable of providing. As a result, a situation referred to as shortage capitalism emerged.

In the contemporary world, scarcities differ depending on the social class of an individual. For instance, the top scarcities among the middle class people include things like time, community and companionship. There is still a significant scarcity of goods among the poor people. It is however important to note that this lack of goods is not attributed to a deficiency in the capacity to produce, but rather due to the inability of the poor people to pay for the goods. Therefore, the crucial scarcity in this case is income. In a similar way, during the early capitalist periods, a resource such as land and dump sites were abundant yet aggregated capital was very scarce. This is what led to the development of rules and practices which put capital above everything else. Nevertheless, this is not the case in the twenty first century (De Soto, 2000: 77-80).


In conclusion, it is clear that the global and social processes of colonialism, capitalism and consumption have really shaped the way people interact with each other and with their external world in totality.