History, Law and Economics

We know that history, law and politics interact to shape modern economic institutions. The question is not whether history "matters", or whether it is "relevant" in understanding economic development, but how precisely it shapes the present and future.

​The colonial history of the British Empire is of course relevant to understanding economic development in former colonies, but how that history should be understood is an open question. Understanding history is interesting in and of itself, for its own sake. It also helps us to understand how we arrived where we are now, how to avoid the mistakes of the past, and how to forge different paths in the future.

​A key issue is understanding the links between capitalism and colonialism. Capitalism may be defined as "an economic system characterised by comprehensive private property, free-market pricing, and the absence of coercion" (Sternberg). By this definition the coercive element of colonialism was a feature of colonialism, not a feature of capitalism. African socialism rightly rejected colonialism, but mistakenly rejected capitalism under the erroneous presumption that colonialism and capitalism are indistinguishable.

Because of the failure to set forward a clear definition of capitalism, critics often blame the free market for practices and policies in fact alien to it.

David Gordon 'What’s in a Name? Why the Definition of Capitalism Matters​'
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The British Empire was not simply a system of coercive control in its intention or design. It was also a system of trade and commerce.

Britain was a free trader, of course, but even other than that, it was a major capital exporter. British Empire was founded on this idea of economic exchange and transactions.

Tirthanker Roy Ideas of India: Law and the Economy

The perception that colonialism, with all its legal institutions including commerce and the rule of law, were purely about coercion goes a long way in explaining the fear of capitalism and free market exchange.

​The fear of the market is very palpable, very strong, very intense...it’s often a case of an imagined situation. The imagined world is full of exploiters rather than free contracting people. That’s a mental block. It’s a mindset that has been with us for a long time. It partly comes from fear of the colonial history or partly from fear of the state, partly from real life situations as well.

​Tirthanker Roy
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Fear of being exploited, fear of missing out, fear of being left behind as the world marches on, fear of losing everything.

​The ethos of fear largely explains the preference for a strong protective state and strong protective legislation.