Colonial Economy – Concept, characteristics and Latin America

We explain what the colonial economy is, its history and characteristics. Also, how was the colonial economy in Latin America.

colonial economy
The colonial economy exploits the natural resources of the colonized territory.

What is the colonial economy?

By colonial economy is understood that disposition of the productive forces of a region that obeys the mandates of colonialism, that is, that It is proposed in unequal and extractive terms, to favor the colonial metropolis, to the detriment of the colonized territories.

These types of economies were implanted on numerous occasions during human history, but perhaps the most tangible example is that of the European colonies in America, Asia and Africa, between the 15th and 19th centuries, which were politically, economically and socially controlled by the great empires of the old continent.

Broadly speaking, a colonial economy is characterized by:

  • Extractive type productive activities. In general, the economy of the colonies develops towards the exploitation of natural resources and their transportation to the metropolis, where they contribute to industrial development and are transformed into manufactured products with greater added value. Thus, the colonies remain in a pre-industrial state, essentially dedicated to mining, agriculture and livestock.
  • Trade monopoly with the colonies. To a large extent, the colonies are forced to trade directly with the metropolis, and they tend to have prohibitions on trade with third parties, so that wealth is always placed according to the well-being of the colonizers.
  • Trade balance favorable to the metropolis. The colonial economy is designed, simply, to benefit the metropolis more than the colonies, and this is also reflected in the application of fees, levies, taxes and other methods of economic control that are imposed from the colonial center.

The colonial economy in Latin America

In the case of the Latin American continent, colonization by Hispanic hands led to the so-called “Colonial Pact”, in which an economic system controlled from Spain was established.

This contract involved a kind of exchange: the colony had to supply the metropolis with sufficient resources to pay for the “investment” in its administration, establishment and development, along with a surplus or profit. TO Instead, the metropolis had to administer the system fairly and adequately, so that the relationship would be mutually beneficial.

Needless to say, this agreement was not fulfilled, or perhaps it was not destined to be fulfilled. The metropolis controlled the colonial economy with an iron fist, obeying the mercantilist theory that linked the wealth of a country with the gold that was deposited in its coffers.

Thus, Spain did everything possible to accumulate the gold of the Americas, while delivering American soils in encomiendas and other administrative systems for exploration and exploitation of resources.

Hence, the Latin American colonial economy consisted of the employment of indigenous labor in conditions of semi-slavery (or frank slavery). Later the African workforce was added. Both were used for the mining, farming and fishing of highly coveted inputs in Europe, such as gold, silver, pearls, tobacco, coffee, cocoa, sugar and other products.