Africa’s Counterfactual Economic Trajectory in the Absence of Colonialism

I came across a paper by two French academics, and I spent the last two hours reading it. Very interesting I must say. Perhaps it is time to reread Walter Rodney’s How Europe Underdeveloped Africa, but this time with the backing of actual data.

The working paper, which is titled Unequal Exchange and North-South Relations: Evidence from Global Trade Flows and the World Balance of Payments 1800–2025 by Gastón Nievas and Thomas Piketty may just be the most comprehensive analysis of how colonial transfers and unequal trade terms shaped global economic imbalances over two centuries. By constructing a detailed database of global trade flows and balance of payments, the authors quantify the extraction of wealth from the Global South to Europe during the colonial era and compare it to modern economic relations. Their findings, particularly the counterfactual simulations, offer a compelling framework to explore where Africa might have been economically had colonialism not occurred.

Colonial Extraction and Its Economic Impact on Africa

This paper really spells out how Europe got super rich, a lot of it by taking stuff from its colonies. Sometimes it was a massive one-off payment, like the huge debt France slapped on Haiti. At other times, it was simply steadily siphoning off tax money.

For Africa, we got hit hard. Europe basically made people work for free (think of the first Onicha-Owerri road that James Douglas forced people to build), bought their raw materials like cotton and minerals for peanuts, and just took their resources. This meant African regions couldn’t get a fair price for what they produced. By 1914, Europe was sitting on a mountain of wealth from other countries — about 70% of its whole economy! And yes, a lot of that came from these unfair deals.

Here’s the crazy bit: Sub-Saharan Africa actually lent more money to Europe than it borrowed during this time. But you wouldn’t really know it, because the colonial system was totally rigged. Africa was selling a lot of raw materials like palm oil and minerals, so they had a trade surplus. But then Europe added in all these ‘hidden’ costs: profits that European companies just sent straight back home, and even the cost of running the colonies themselves was billed to the colonies! So, while Africa’s money was propping up Europe’s finances, Africa itself stayed poor.

Scenarios: No Colonial Transfers and Fairer Trade Terms

The paper’s counterfactual simulations provide a stark illustration of how Africa’s economic trajectory could have differed without colonialism. Two key scenarios are explored:

1. No Colonial Transfers: Eliminating the unilateral transfers from Africa to Europe between 1800 and 1914 would have left Europe with a negative net foreign wealth position by 1914, while Africa and other regions of the Global South would have been net creditors. For Sub-Saharan Africa, this would have meant retaining wealth equivalent to 64% of its 2025 GDP (as per the 1970–2025 simulation), which was instead drained through colonial mechanisms.
2. Higher Commodity Prices: A 20% increase in primary commodity prices — a conservative estimate of the value of unpaid labour and unfair pricing — would have transformed Sub-Saharan Africa into a net creditor by 2025, with a foreign wealth position of +48% of GDP, compared to -42% in reality. This adjustment alone would have significantly boosted domestic investment and productivity.

These simulations suggest that Africa’s economic “underdevelopment” was not inherent but a direct result of colonial exploitation. The extraction of resources and suppression of local industries (e.g., textiles in India and West Africa) stifled endogenous growth. Without colonialism, Africa could have retained its wealth, invested in infrastructure and human capital, and developed more diversified economies.

Structural Divergence and Delayed Industrialisation

The paper underscores how colonial trade patterns locked Africa into a role as a supplier of raw materials, a dynamic that persisted post-independence. Europe’s trade surpluses in manufactured goods were built on Africa’s deficits, as colonial policies discouraged industrialisation in the periphery. For example, Britain’s textile exports to Africa undermined local production, while African commodities were sold at prices artificially depressed by colonial monopolies. The authors’ finding that a 20% rise in commodity prices could have reversed this imbalance highlights how small changes in bargaining power might have altered long-term outcomes.

In the absence of colonialism, Africa could have followed a path similar to East Asia, which the paper identifies as a modern counterpart to Europe’s 19th-century industrial rise. East Asia’s accumulation of foreign wealth since the 1970s was driven by trade surpluses in manufactured goods, a trajectory Africa might have emulated had it retained control over its resources and terms of trade. The paper’s “economic simulations” show that reallocating extracted wealth to human capital investment could have led to near-complete convergence in GDP per capita between Africa and Europe by 2025.

The Role of Institutions and Global Systems

The paper also critiques the international monetary system for perpetuating unequal exchange. Colonialism was not just about resource extraction but also the imposition of financial and legal systems that favoured Europe. For instance, the “exorbitant privilege” enjoyed by the US and Europe — earning higher returns on foreign assets than liabilities — has its roots in colonial-era financial dominance. Africa’s integration into this system as a debtor region post-independence mirrors its colonial subjugation.

A non-colonial Africa might have developed alternative institutions, such as regional trade networks or commodity cartels (like OPEC), to negotiate fairer terms. The authors’ proposal for a “Global Clearing Union” or common currency to rebalance terms of trade aligns with this vision. Such institutions could have enabled Africa to capture more value from its resources, as the simulations suggest.

Limitations and Open Questions

While the paper’s counterfactuals are illuminating, they abstract from geopolitical complexities. For example, without colonialism, Africa might still have faced challenges like internal conflicts or uneven resource distribution. However, the core argument holds: colonialism systematically diverted wealth and opportunities away from Africa. The paper’s focus on financial flows also leaves room for further research into cultural, social, and technological impacts of colonialism.

The analysis demonstrates that Africa’s economic marginalisation was a product of colonial extraction, not predestination. Without colonialism, the continent could have been a creditor region with higher GDP per capita, industrial diversification, and stronger institutions. The paper’s counterfactuals underscore the need for reparative economic policies, such as debt cancellation and fairer trade terms, to address historical injustices. While the past cannot be undone, its lessons can inform a more equitable global economy — one where the legacies of colonialism no longer stifle Africa’s potential.

I have downloaded the full dataset and will do an analysis on Nigeria, work permitting. But I have a 10am, so let me run.