How much of today’s wealth gap is colonialism’s legacy, and how could we tell?

Was it luck, or was it a bill someone else ran up?

The question that runs under this whole volume, whether the shape of a life was mostly settled by where it began, has a sharper edge for anyone whose family comes from a country that was once ruled by another. If the gap is real, and the last chapters showed how large it is, then part of what looks like the luck of birth is not luck at all. It is inheritance: the borders, the governments, the rules, and the economies that someone else built, often for their own benefit, and left behind. So the felt question is not only “was I lucky,” but “how much of this was decided before my grandparents were born, by people who were not from here?”

That is a moral question and a historical one, and this chapter cannot settle the moral part. What it can do is ask the historical one carefully: how much of the present gap between rich and poor countries can actually be traced to the colonial period, and, just as important, how confidently anyone can trace it. The subject has a genuine body of evidence and a genuine set of limits, and both belong in the answer. The evidence rules out the idea that the colonial past left no mark; the limits rule out the idea that it explains the entire gap. What is left is the question of how much, and how surely, which is what the ledger can show and where the ink runs out.

A reversal of fortune

Start with a fact that unsettles the intuition most people bring to the question. The intuition is that the places Europe colonized were poor to begin with, and Europe either failed to lift them or made them poorer. But among the countries Europe colonized, the ones that were relatively rich five hundred years ago are relatively poor today, and the ones that were poor and empty then are rich now. Around 1500, the densest and most urbanized societies in the colonized world were places like the Aztec heartland of Mexico, the Inca lands of the Andes, and Mughal India, with cities, tax systems, and administrations that dwarfed anything in the sparsely peopled territories that would become the United States, Canada, or Australia. Five centuries later the ranking has flipped almost exactly.

The economists Daron Acemoglu, Simon Johnson, and James Robinson documented this pattern and named it the reversal of fortune. Because no one has income figures for 1500, they measured how prosperous a place was then by two proxies that do survive: how urbanized it was, the share of people living in towns, and how densely it was settled, since only a productive agriculture could feed a dense population. Ranking former colonies by those 1500 measures and then by income today, they found a clear negative relationship: the more urbanized a colonized region was in 1500, the poorer it tends to be now. Their headline estimate implied that a colonized place which was only slightly less urbanized in 1500 tends to be markedly richer today. The crossing shows up plainly in the income data once records begin.

What could turn prosperity upside down like that? Not geography, on the face of it, because the land did not move: the soil and climate that supported dense settlement in 1500 are the same soil and climate that a poverty theory built on geography would expect to keep those places ahead. Acemoglu and his colleagues read the reversal as the fingerprint of institutions. Where Europeans found a large settled population and existing wealth, they built machinery to extract it, taxing, coercing, and mining the labour and resources of the many for the benefit of the few, and left that machinery in place. Where they found land they wanted to settle themselves, they gradually built the opposite: broad property rights, courts, and limits on power, because those were the rules that protected settlers like them. The reversal, on this reading, happened when the modern economy arrived: societies with rules that let ordinary people invest and profit seized the opportunities of nineteenth-century industrialization, and societies built for extraction could not.

Two kinds of colony

That argument has an obvious weakness, and the same authors are the ones who tried to close it. Institutions today might be a result of being rich rather than a cause: wealthy countries can afford good courts, so finding good institutions alongside high incomes proves nothing about which came first. To break the circle you need something that shaped colonial institutions but could not have been caused by present-day income. In their earlier and most-cited paper, Acemoglu, Johnson, and Robinson proposed one: the death rate that European settlers and soldiers had faced when a colony was founded.

The logic is grim but clear. In places where Europeans died in large numbers, mostly from malaria and yellow fever, few chose to settle, and the colonizing power built a thin extractive administration to pull out resources and staffed it lightly, because staying was a death sentence. The Belgian Congo was the type case: a colony run as a machine for extracting rubber and minerals, with no protection for the property or persons of the ruled. Where the disease environment let Europeans survive and bring their families, as in the temperate lands that became the United States, Canada, Australia, and New Zealand, they built societies for permanent living, with the courts, property rights, and representative institutions that such settlers demanded. Those founding choices, the authors argued, hardened into institutions that outlasted the colonizers by a century or more. Using settler mortality as a stand-in for the kind of colony built, across a sample of 64 former colonies, they found a large estimated effect of institutions on income today, large enough that, once institutions were accounted for, being in Africa or near the equator no longer predicted poverty at all.

This is the argument in its influential form: the wealth of nations was shaped, in substantial part, by which institutions colonizers happened to build, and those choices turned on conditions, like the local disease environment, that had nothing to do with the colonized people themselves. It is the same border-split logic the volume has used before, run across centuries instead of across a fence. When one people is divided between opposed sets of rules, as Korea was, their fortunes part (Frameworks, in the chapter on how the rival systems performed in practice); the colonial version asks where a country’s rules came from before anyone alive could choose them, and answers, for much of the world, that they came from the colonizer’s calculation about whether to settle or to strip.

How could we tell?

Now the second half of the title, which tests the argument as hard as the argument itself does. How much weight can this evidence actually bear? Here the picture is more uncomfortable, and the discomfort is part of the answer.

Take the settler-mortality study, the keystone that turns a correlation into a claim about cause. In 2012 the economist David Albouy re-examined the mortality numbers themselves and found them shakier than the argument needs. Of the 64 countries in the sample, he showed, 36 were assigned death rates borrowed from other countries, often on the strength of mistaken or conflicting evidence, so that fewer than half the figures came from within the country they were meant to describe. Worse, the rates mixed populations that are not comparable: soldiers dying in barracks in peacetime in some cases, soldiers dying on campaign or labourers and bishops in others, and the higher, campaign-era figures tended to land on exactly the poor, high-extraction colonies the theory needed to look deadly. One notorious data point put the mortality of Mali at 2,940 per thousand a year, annualized from a single disastrous two-month expedition in 1878 in which nearly half a French column died of yellow fever, where a defensible figure was closer to 480. When Albouy corrected these problems, the statistical link that carried the whole argument weakened to the point that, in his reworking, the estimates became unreliable, with confidence ranges so wide they were effectively unbounded. Acemoglu, Johnson, and Robinson replied in the same journal, defended their coding, and disputed his corrections, though they acknowledged that adopting all of his changes at once produced confidence sets too loose to interpret. The exchange has not been resolved, and it sits under the most cited quantitative evidence in the field.

The proxies for the deep past are rough in the same way. Urbanization and population density around 1500 are reconstructed from fragmentary records, and reasonable scholars dispute the numbers; when Sanghamitra Bandyopadhyay and Elliott Green reworked them, they found the reversal robust, at best, only for a handful of temperate settler colonies and weak or absent across the rest. And the cleanest logical move, treating the disease environment as an accident unrelated to the colonized people, is not as clean as it first looks, because the same environment shaped the economy directly, not only through the institutions built on top of it. Geography and institutions are tangled together at the root, since the very ecology that decided whether settlers lived also decided which crops grew and which diseases stayed. So when the two are hard to separate, part of what looks like an institutional effect could be geography acting through a different channel.

There are rival accounts of the same history, too, and they are not cranks. Some economists, Edward Glaeser and colleagues among them, argue that what colonizers really transplanted was human capital, the schooling and skills of the settlers, rather than political institutions as such, and that the two are easy to confuse in the data. Others, following Stanley Engerman and Kenneth Sokoloff, locate the lasting damage not in a binary of extractive versus inclusive rule but in the extreme inequality that plantation and mining economies created, which then wrote itself into schools, voting, and law. And the historian Gareth Austin warned that lumping five centuries and a whole continent into a single variable called “colonialism” compresses histories that were wildly different, from a few decades of rule in one place to centuries in another, in ways a regression cannot see. Each of these is a reason the true figure, the share of today’s gap you could lay at colonialism’s door, cannot be pinned to a number, and a clean percentage would claim a precision the evidence cannot support.

What the ledger can and cannot say

So where does that leave the felt question the chapter opened with? Not with nothing, and not with everything. The reversal is documented, though its strength is contested: the places that were richest in the colonized world five centuries ago are among the poorer countries now, and the most natural way to read that pattern is through institutions that were made, remade, or frozen under colonial rule and then persisted. The border-split cases, from Korea to the contrast between settler and extractive colonies, point the same way, that rules a country did not choose can set its long-run course. That much the evidence supports, and it is not a small thing to have established.

What the evidence cannot do is give the question a number, or make colonialism the sole author of the gap. The instrument that would prove causation cleanly is contested; the deep-past measurements are rough; geography and institutions and human capital run together; and the colonial experience was too varied to reduce to one lever. Some former colonies grew rich, some places never colonized stayed poor, and the timing of the reversal implicates the industrial era as much as the colonial encounter itself. Colonialism looks like one of the larger forces that channelled the modern distribution of income, working mostly through the institutions it left behind, and at the same time like one force among several whose separate weights no one can reliably total. Both of those hold at once, and that pair, rather than either half on its own, is what the evidence supports when it is read to its edge and no further.

Where the argument goes next

If the rules a country inherited can set its course for centuries, the next question is what happens when a country’s circumstances change suddenly, for better or worse, on top of whatever institutions it already has. One such change is a windfall: a country strikes oil or finds diamonds, and a flood of new wealth meets whatever state and rules were already there. Why that windfall so often leaves a country poorer and less free, rather than richer, is the subject of the next chapter, and the institutions this chapter and the last one traced are a large part of why the same discovery blesses one country and curses another.