A Re-Examination of the 1929 Colonial Development Act Author(s): George C.

Abbott Source: The Economic History Review, New Series, Vol. 24, No. 1 (Feb., 1971), pp. 68-81 Published by: Blackwell Publishing on behalf of the Economic History Society Stable URL: http://www.jstor.org/stable/2593641 . Accessed: 16/03/2011 08:32
Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at . http://www.jstor.org/action/showPublisher?publisherCode=black. . Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

Blackwell Publishing and Economic History Society are collaborating with JSTOR to digitize, preserve and extend access to The Economic History Review.

http://www.jstor.org

A Re-examination the1929 Colonial of Act Development

BY GEORGE C. ABBOTT

HE

history of British overseas aid goes back a long way and must be read

against the background of British colonial policy. By way of introduction, however, it is not really necessary to go beyond the nineteenth century to show that the nature and form of colonial assistance have undergone considerable modifications in response to basic shifts in the emphasis of colonial policy. Throughout the nineteenth century colonial development was a matter primarily for the colonies themselves. They were required to finance their economic development from the proceeds of sales of their export crops and whatever private international capital they could attract. They were not encouraged to look to the imperial government for financial or economic assistance, nor did the imperial government in turn actively formulate any programmes for colonial develop-. ment. Colonial assistance was only given in cases of national emergency, and was purely of a temporary nature. The appointment ofJoseph Chamberlain as Secretary of State for the Colonies in i895 brought about a very significant shift in British colonial policy. In his famous speech of 22 August i895 he outlined the new policy as follows: I regard many of our Colonies as being in the condition of undeveloped estates, and estates which can never be developed without Imperial assistance... I shall be prepared to consider very carefully myself, and then, if I am satisfied, to confidently submit to the House, any case which may occur in which, by the judicious investment of British money, those estates which belong to the British Crown may be developed for the benefit of their population and for the benefit of the greater population which is outside.' With these words the imperial government had finally accepted the principle of responsibility for the economic development of its colonies. The nature and extent of this responsibility were however very narrowly circumscribed. Firstly, assistance was given on a purely ad hocbasis. And secondly, apart from grants-inaid and emergency relief, imperial assistance was confined principally to the guaranteeing of colonial loans and/or enabling colonial governments to raise funds on the London market at preferential rates of interest. Wicker has estimated that, exclusive of the 3 million made available under the Colonial Loan Act of I 899, the British government advanced the colonies approximately XI -4 million between i875 and I9I5, mainly for improvements to transport and other forms of economic infrastructure.2
1 2

Debates (Commons), 4th ser. XXXVI, Hansard, Parliamentary and Welfare, I929-I957: E. R. Wicker, ColonialDevelopment

64a-2,

22 Aug. I 895. The Evolutionof a Policy. Social and

68

COLONIAL

DEVELOPMENT

69

In the period immediately following the First World War British colonial policy seems to have been torn between several rival philosophies. There was, for example, the doctrine of native paramountcy which proclaimed that "the interests of the African natives must be paramount ... and that His Majesty's Government regard themselves as exercising a trust ... the object of which may be defined as the protection and advancement of the native races."'1Although this doctrine was enunciated specifically in respect of the colony of Kenya, the principle of trusteeship which it incorporated was deemed to apply throughout the British Empire. In fact it predated the doctrine of native paramountcy, having been accepted by the League of Nations in i9i9 as the primary aim of the European powers towards their mandated territories. As a signatory to the convention, the United Kingdom government accepted the concept in its wider sense of applying also to its colonial territories. It seems, though, that the declaration of the doctrine of native paramountcy was neither particularly popular nor opportune. It not only inflamed local opinion but also gave rise to a storm of protest from both the main immigrant groups, the European settlers and the Indian community in East Africa. Serious doubts were also expressed as to the government's real reasons for introducing such a policy. However, without going into details, one need only say that for a number of reasons it was never implemented. By 1924 fresh moves were being made to reformulate colonial policy along different lines. The East African Commission which reported in I925 advocated "the development of the community sense" or "the dual policy" as it has come to be known. This new policy of colonial development stressed the complementary nature of the native and non-native communities: "We are not only trustees for the development and advance in civilization of the African, but we are also trustees for the world of very rich territories. This means that we have a duty to humanity to develop the vast economic resources of a great continent."2 By extending the principle of trusteeship to include the whole of humanity, the dual policy put paid to the doctrine of native paramountcy. More than that, though, it effectively re-established the statusquoante, since basically it did not envisage any change in either the nature or the form of colonial assistance. The government, for example, turned down a recommendation that it should meet the cost of all interest payments for five years on a specific number of loans to be raised by the East African governments. It was however prepared to continue to underwrite loans raised by them as well as by other colonial governments. In fact it guaranteed no less than kI 4 *5 million of colonial loans, CIo million of which represented loans raised under the Palestine and East Africa Loan Act of i926. Assistance was also provided in the form of research and advisory services as well as the establishment of institutions and organizations for the dissemination of technical knowledge. The Imperial Institute of Entomology and Mycology and the Imperial College of Tropical Agriculture (later incorporated into the University of the West Indies), to name only two, were established during this period.
Economic Studies. Institute of Social and Economic Research, University of the West Indies, Jamaica, vol. 7, no. 4 (Dec. I958), I73. 1 Memorandum to in Relating Indians Kenya, Parl. Papers,1923, XIII, IO. 2 Reportof the East AfricanCommission, P.P. I924/5, IX, 2I.

70

GEORGE

C. ABBOTT

There were also various individuals and pressure groups attempting to influence opinion and policy in the direction of a more positive and systematic approach to colonial development. For example, in I923 Viscount Milner, a former Secretaryof State for the Colonies, suggested that the governmentshould pursue a more vigorous policy of colonial development and establishan Imperial Development Fund for the purpose of extending credit to the colonies.' Then there were the humanitarianswho, distressedat the way things had gone in South Africa, wished to see greater emphasis placed on the social and economic development of the colonial peoples. The socialists and the Fabians also shared the same broad views and objectives. Notwithstanding the effortsof these groups as well as the monumental work of such individualsas SidneyWebb, the United Kingdom government cannot really be said to have evolved a coherent or consistent colonial policy until it enacted the i929 Colonial Development Act. Until then assistancewas given primarily in responseto a particularneed originating in particular colonies, arising for example from a hurricane, an earthquake,or a major crop failure, or for some specific project such as a new railway. Each application for assistancewas considered on its own merits and, if approved, covered by a separateparliamentaryvote. The I 929 Colonial Development Act was the firstreal attempt to formalize the Chamberlain ad hocapproach to colonial development. Colonial assistancewas now given only after a systematicexaminationof all schemesand projectsput forward by colonial governments. The act introduced a greater degree of selfconsciousness and systematization. It also created the machinery for the examination of all projects. More important, however, it introduced an entirely new concept of colonial development in which the provision of annual grants and loans would prove mutually advantageous to the United Kingdom and to the colonial territories. The idea of doing somethingfor the colonies while at the same time serving the interestsof the United Kingdom governmentwas formallyrecognized in the dual objectives of the Act, which was enacted specifically "for the purpose of aiding and developing agriculture and industry in the colony or territory and thereby promoting commerce with or industry in the United Kingdom".2 There has howeverbeen some doubt as to the extent or priorityof the mutuality of interests which the Act envisaged. For example, the Lord Privy Seal, who introduced the Bill after only four weeks in office, regardedit as a measurewhich was specificallyintended to assisthim in dealing with the appalling conditions of unemployment at home: "This Measure has been introduced by a Labour Government,not only because we believe in Colonial Development and because it is urgent, but because I think it will assistme in carryingout my idea of dealing with unemployment."3Similarly Lord Passfield, the Secretary of State for the Colonies, informed the House of Lords that "the principal motive for the introduction of this measure is connected with the lamentable condition of unemployment in this country, and this is an attempt to stimulate the British export trade."4
1

Viscount Milner, Questions the Hour (I923), of pp. I55-6. 2 Colonial Development Act I929, Section I(i). 3 Hansard, Parl. Deb. (Commons), 5th ser. ccxxix, 1300, I2 July 4 Hansard, Parl. Deb. (Lords), 5th ser. LXXV, I 75, 23 July I929.

I929.

COLONIAL

DEVELOPMENT

71

It would seem therefore that far from being a specific objective of the Act, colonial development was envisaged rather as a means by which to achieve the more immediate objectivesof reducing the level of unemployment at home and of stimulating British exports. Several authorshave neverthelesssuggested, firstly,that colonial development was in fact the primary objective of the Act and, secondly, that membersof both sides of both Houses welcomed the Bill as a long-overdue measure. Wicker, for example, finds it extremely difficult to believe that the government would have considered 5,000 to 6,ooo jobs more important than encouraging the economic development of the colonies. Indeed he feels that the overwhelming emphasis which Members placed on the contributionwhich the Bill was expected to make towards either easing the problem of unemployment in Britainor stimulating exports was unnecessary and largely irrelevant. In short, Members would have voted funds for colonial development whether or not the Bill was linked with the problem of unemployment at home, and regardlessof the state of the domestic economy. Such a suggestion does not however accord with his overall conclusionswhich read in part: "The exigenciesof domestic economic policy appear in almost every instance to have outweighed considerationsof colonial economic development. The tempo of development spending in the colonies was conditioned primarilyby short-termfactors,namely the economic climate at home."2 Writing on a related theme, Niculescu suggests that the evolution of a conscious policy of colonial development as embodied in the I 929 Colonial Development Act was due largely to the growing preoccupationwith the problem of unemploymentin Britain,especiallyafterthe onset of the Great Depression.Having said this, though, he appearsto contradict himself almost immediately by claiming that "both the Government and Opposition were fully aware that the contribution of the Colonial Development Act to the alleviation of unemployment in Britain at the time could only be insignificant."3 If the contributionwas expected to be insignificant,why then the haste? Why should the new government, immediately upon taking office, rush through a measurewhich was essentiallyexternal in orientation and long-term in its economic impact, and, even more important, unlikely to benefit the domesticeconomy either immediately or even significantly? Colonial development was, after all, not an issue in the I 929 general election, and the government could conceivably and quite easily have waited until it had got "the feel of office"beforeintroducing the Bill. This would certainly have made more sense considering that colonial development was a new and unfamiliar field. Morgan, the author of the Overseas Development Institute publication on colonial development, adopts a more positive and consistent line. There seems to be no doubt at all in his mind that the desireto promote the economic development of the colonies was the main reason for introducing the Bill. All other considerations were of secondary importance. As he says, "the interest in colonial development was largely and essentiallyfor its own sake."4
1 Wicker, op. cit., p. I75. His estimate of the number of jobs which Ji million (the maximum yearly expenditure allowed under the Act) would have provided seems to have been taken from an article by for J. M. (later Lord) Keynes which appeared in the EveningStandard i9 March I 929. 2 Wicker, op. cit. p. i90. Planning: A Comparative Study (I958), p. 59. 3 Barbu Niculescu, Colonial 4 D. J. Morgan, British Aid-5. Colonial Development (O.D.I., I 964), p. I 6.

72

GEORGE

C. ABBOTT

Such an interpretationseems, though, to take the Bill out of its propercontext, and to render a grave disserviceto its political, social, and economic significance. There is no doubt, for example, that rising unemployment and falling export markets were the major domestic issues facing the government. Members of Parliament as well as the public at large were constantly reminded of these painful facts by the weekly publication of the number of personsout of work. It was thereforeincumbent upon the new government to take all necessarysteps to deal with these pressingdomestic problemsas expeditiouslyand on as broad a front as possible; hence the reasonfor introducing the Bill after only four weeks in office. Hence, too, the obvious desire of the Lord Privy Seal to rush the measure through Parliament. Not only did he repeatedly stressthe need for early action, but he went so far as to incorporate a provision into the Bill by which unspent balances would return to the Treasury at the end of each financial year. The intention of this provision,as he informedhis colleagues, was to ensurethat colonial governments expedited the placing of their orders for exports of capital equipment fromthe United Kingdom. He also made it abundantlyclear that he did not intend to run the riskof his predecessorin officeof appearingnot to do everything in his power to reduce the level of unemployment. "The situation", he said, "was serious,and demanded action on all fronts."Everythingpossiblewas already being done on the home front, and the new measurewas simply an extension of the attack to the overseasfront.' In the light of these rather strong views of the principal sponsorof the Bill, it does seem a curious reading of the debates to suggest that the Bill was passed primarily for the purpose of promoting the economic development of the colonial territories. What these studies do suggest, taken together, is that there was a fundamental dichotomy between the intention of the Act and the spirit and substance of the debates on the Bill. They consider, firstly, that the Act was passed specifically for the purpose of promoting colonial development as an end in itself, with any benefitslikely to accrueto the United Kingdom economy as a sequential and subsidiaryfactor. And secondly, that the Bill would have passed through Parliament whether or not it was tied to the majordomestic issuesof unemployment and falling exports. There is absolutely no doubt, however, that the debates in both Houseswere conducted against the backclothof the need for urgent action, and of the prospects of the immediate benefits which the proposed legislation would bring to the domestic economy. There is also no doubt that Members considered this to be the main reason for introducing the Bill so early in the life of the new Parliament. They regarded it as another weapon in the government's armoury, and they voted for it precisely because it was supposed to reduce the level of unemployment at home and to stimulate exports. In short, they looked upon it as a means rather than as an end in itself. Indeed, it is difficultto see how else the Bill would have passed through Parliament so easily, given the appalling economic and social conditions at home. But there really was no dichotomy between the intention of the Act and the spirit and substanceof the debates. A carefulreading of its provisionsshowsthat it was envisaged as operating along the lines of the then fashionableeconomic concept of "the multiplier". In other words the government hoped by providing
1 Hansard, Parl. Deb. (Commons), 5th ser. ccxxix, 9i-I
i0, I255-I306,

3 and i2 July i929.

COLONIAL

DEVELOPMENT

73

funds for colonial development to stimulate the demand for exports of British machineryand capital equipment. These ordersfor Britishcapital goods and services would then provide income and employment for personsdirectly employed in the export sector. Operating on the principle of the multiplier effect, this primary wave of expenditure in the export sector would in turn set off secondary increasesin income and employment in other sectorsas it workedits way through the economy, thus achieving the basic objectivesof the Act insofaras the domestic economy was concerned. The multiplier was also expected to operate in the colonial territoriesby providing, firstof all, income and employment for people in agriculture and industry, and then by gradually working its way through the economy to promote the development of the colonies. Conceptually, therefore, the 1929 Colonial Development Act was regardedas a sort of multiplierwith both forwardand backwardlinkage effects, a twin concept which is now quite familiar to development economists. Moreover, the operative phrase "thereby promoting commerce with or industry in the United Kingdom" leaves no doubt at all that the primary beneficiariesof the Act were expected to be the United Kingdom economy in general, and Britishexportersin particular.The need for colonial development was freely admitted as long overdue. It seems, though, that colonial development was considered basically as the expenditure on imports of Britishmachinery and capital goods for the implementation of one or two majorprojects (forexample the Zambesi Bridge), if these were likely either to reduce the level of unemployment at home or to stimulate exports. The Colonial Development Advisory Committee, the body which was appointed to consider and report upon all applications for assistance, certainly appearsto have operated on this basic principle. The committee thought it desirable,in accordancewith the general policy in the matter of Government grantsto publicworks,to makeit an expressconditionof assistance fromthe ColonialDevelopment Fundthat, savein exceptional all circumstances, for orders importedmaterials etc., shouldbe placedin the United Kingdom;and that the plant, machineryand materials,etc., be of Britishoriginand manufacture.'

An examination of its annual reportswill show that the committee adhered to this principle rather closely. Up to 3I March I939, the last complete year of operations before the committee was forced by the worsening international political situation to curtail its activities, the figure for estimated expenditure in the United Kingdom was approximately L5 -65 million of a total estimated cost of Li 6 million, or about 35 per cent of all projects.2 *During the eleven years of its existence the committee reported favourably on no less than 596 schemes involving an estimated total expenditure of over LI *9 3 million (excluding supplementary schemes and reallocations). The amount of
1 First InterimReportof the ColonialDevelopment Advisory Committee, P.P. I 929-30, VIII, I9. 2 Figures for the estimated expenditure for the period i April I 939 to I 7 July I 940, the final period of the Act, are not available, so it is difficult to give an accurate estimate of the total amount of expenditure in the United Kingdom which the committee sanctioned. However, there is no reason to suggest that estimates of total expenditure for the full period would be very different from that of the first ten years.

74

GEORGE

C. ABBOTT

financial assistance recommended from the Colonial Development Fund was placed at ?8 *8 million, of which ?5 6 million took the form of grants and the rest was by way of loans. A breakdown of the amounts recommended under the specific categories mentioned in the Act is given in the following table. Table
i.

underSpecificCategories Analysis of AssistanceRecommended

Act Development I929-40 of theColonial

Headingunderthe Act (a) Agricultural development etc. (b) Internal transport and communication
(c) Harbours

Amount(?) 534, I I 8
2,658,290 474,245
I 56,630 I o6,640

Percentage 6
30 5 2
I

(d) Fisheries (e) Forestry

(f)

Surveys

(g) Land reclamation and drainage (h) Water supplies and water power (i) Electricity
(k) Mineral resources

253,375 444,I00 923,4I7 I 63,608 770,050

5
IO

2 9

(1) Scientific research etc.

(m) Public health

597,654
I,460,338 332,6I8

7
i6

(o) Miscellaneous Total

4
I00

$8,875,083

Source:Abstracted from EleventhandFinal Reportof theColonialDevelopment P.P. I 940-I, IV, II, Table C. Committee, Advisory

By far the largest single share, 30 per cent, was allocated to internal transport and communication. Next in importance was public health with i6 per cent, reflecting the committee's view that "wise expenditure on public health was essential to economic development." A further i o per cent for water supplies and water power underlined not only the emphasis which the committee placed on basic infrastructure but also its marked preference for schemes involving imports of heavy machinery and capital equipment. The development of mineral resources and scientific research, both of which were essentially capital-intensive and export-oriented industries, accounted for another i 6 per cent between them. In comparison, the promotion of agricultural development, which was supposed to be one of the main objectives of the Act, got only 6 per cent of the total amount recommended. It is also very significant that fisheries and forestry, two of the most important natural resources of the colonial territories, received a mere 2 per cent and i per cent respectively. If, as has been suggested, colonial developmentper se was the primary objective of the Act, then one would have expected these "local" industries to feature more prominently in the allocation of funds. In fact there is ample evidence of the very marginal role which colonial development (or conversely of the overwhelming importance which domestic economic considerations) played in the operation and administration of the Act. This can be illustrated by two major points. The first of these relates to the actual amount of funds provided. Although the committee recommended a total expenditure of some J8 875 million, total parliamentary provisions amounted to only ?6 65 million. The committee, it seemed, worked on the assumption that the maximum figure of i million would be available each year for financing its recommendations. In fact, though, apart from the two financial years of 1935/6
.

COLONIAL

DEVELOPMENT

75

annual payments into the and I936/7 (when the figure rose to J90o,ooo) Colonial Development Fund averaged less than halfthe maximum figure allowed by the Act. Further, issues from the fund came to only ?6 *525 million. This rather substantial gap between recommended and actual expenditure reduced the extent of assistance to considerably less than that envisaged when the Bill was originally introduced in Parliament. More significantly, though, the major cuts in expenditure came at a time when the colonies were themselves most in need of funds to make good the shortfalls in government revenues due to the universal depression of world commodity export prices, as well as to provide work (e.g. road construction and so on) for the many thousands who were unemployed. In I 93 I, for example, the grant to the Colonial Development Fund was reduced to ?750,000 for the financial year I 932/3 following the recommendations of the Committee on National Expenditure.' Included among the proposals to reduce the level of national expenditure was the following: "The grant to the Colonial Development Fund will be reduced to ?750,000 next year (saving ?250,000). The Advisory Committee will be invited to concentrate their recommendations on schemes which will give the greatest and speediest benefit to this country."2 These proposals were formally communicated to the committee in October I93I. It was informed at the same time that it had been decided to restrict the amount to ?700,000. The amount actually provided was even less, ?6oo,ooo. The following year the figure was further reduced to ?400,000, the lowest annual figure ever paid into the fund. Had it not been for the amount of savings realized by under-expenditure on schemes already approved, as well as the amount repaid by the colonies, the fund would not have been able to meet all the demands made upon it. Consequently the financial year I 932/3 saw the lowest point in the committee's activities. The aggregate cost of all schemes considered was put at ?445,624 as against ?I,369,997 in I93 I/2. This period of retrenchment corresponded to the years of maximum fluctuations in world prices for agricultural products, the main exports of colonial territories. One would normally have expected to see an inverse relationship in the movements ofthese two sets ofvariables, that is, as the prices of agricultural products on the world market fell, the amount of funds for colonial development would have increased to offset the shortfalls in export earnings, or at least would have remained constant. The second instance of the way in which domestic considerations completely dominated the operation and administration of the Act lies in the committee's attempt to determine what impact, if any, its activities had made upon the problem of unemployment in Britain. This exercise was undertaken with information drawn from the half-yearly progress reports supplied by the Colonial Office. Some very crude estimates are produced in the Fourth Annual Report (para. 8), though the committee immediately disclaims any validity for them by concluding that while it attached "due importance to the estimated amount to be spent in this country upon the carrying out of the project under consideration, it would be unsa fe to assume that the amount to be spent is necessarily a reliable index of the
1 Report of the Committee National Expenditure, PP. I930-I, on
2 XVI.

in to Memorandomon the MeasuresProposedby His Majesty's Government SecureReductions National ExI 930-I, XVIII,

P penditure, .P.

8.

76

GEORGE

C. ABBOTT

ultimate value of the project to the United Kingdom".' However, what is important is not so much that it was unable to quantify the benefits to the United Kingdom (itself a very difficult exercise), but rather the fact that the committee was sufficientlyexercisedabout the problem to make the attempt after only four years of operations. Significantly enough, no such exercise was attempted in respectof the Act's contributionto colonial development. It is difficult,therefore, in the light of the evidence to sustainthe claim that colonial development was the principal objective of the Act. Indeed one could take precisely the opposite point of view, and argue that instead of promoting the development of the colonies, the I 929 Colonial Development Act actually militated against it. There are at least three argumentsto support this view. Firstly, the Act was too restrictivein scope to make any effective contribution to the problem of colonial development. For example, it excluded investment in social development in general and in education in particular. It did, of course, allow for expenditurein such related fields as technical education, health, and research,but some of the most urgent and fundamental problems of colonial development could not be tackled as they fell outside the scope of the Act. Secondly, the Act seemsto have placed too much emphasison the material and physical aspectsof development. The overwhelming concentrationon economic infrastructureand capital projectshas already been mentioned. It should neverthelessbe pointed out that the committee consideredthe stipulationthat it should concernitself primarilywith ''schemesof a capital nature and which were related to a policy of materialdevelopment", as one of the mostseverelimitationsimposed by the termsof the Act. It would thus appear that the Britishgovernment saw its role and responsibilityfor the development of its colonial territoriesas being confined primarilyto providing the basic infrastructure without which private enterprise would not be willing, nor could be expected, to operate. In many respects, therefore, the nature and scope of colonial assistance under the I929 Colonial Development Act seem to have hardly changed from the days of the nineteenth century, when railways and economic infrastructurewere the major exceptions to the predominantlylaissez-faire concept of colonial development. Thirdly, for purposesof processingapplicationsthe committee made the broad distinction between works of (i) a developmental nature and (ii) an ordinary administrativecharacter. Whereas the former would qualify for assistancefrom the fund, the latter was considered to be more properly financed from local resources. However, such a distinction proved to be completely unrealistic and unduly restrictivegiven the rather parlous economic conditions of most of the colonies. It also led to some rather glaring inconsistencies and distortions. For example, expenditureon public health was consideredas work of developmental nature, while education, including the building of schools and agricultural colleges, was classifiedas ordinaryrecurrentexpenditure. Similarly, an application for the replacementof a government steamerwas refusedon the ground that as a replacementchargethis should be more properlymet fromcurrentlocal revenues. The distinction as to whether an application was for developmental or ordinary administrative purposes was rendered even more unrealistic in the case of the
1 FourthInterimReportof

P.P. I 932-3, X, Z. the ColonialDevelopment Committee, Advisory

COLONIAL

DEVELOPMENT

77

grant-aid territories,since by definition these colonies could not even provide for ordinary administrativepurposes. Notwithstandingthese obvious difficulties,the committee was very firm on the point of not allowing its resourcesto be used as an annual subsidy for ordinary administrativeservices. It is hardly surprising,therefore, that one of the major criticismsof the committee was that its refusal to countenance "schemesfor the maintenance and replacement of capital stock" led to the partial sterilizationof the fund at a time when it was most needed, that is when the colonies would in all probability have benefited most from the early injection of funds. It is true of course that the committee subsequently agreed that: As a primarymeasureduringthe presentperiodof economicand financialdemerit pression, and within the limits of the fundsavailable,schemesof sufficient will not be rejected themsolelyon the grounds by thattheymay involveassistance towards recurrent expenditure overa limitedperiodof yearsor that theymakeno provisions financialparticipation an impoverished for by ColonialGovernment.' Psychologically,however, the damage had already been done. The stipulation that colonies should meet the cost of maintenance on projectsplaced an intolerable financial and psychological constraint upon those colonies whose financial resourceswere weakest and who were most in need of assistance. In fact it influenced their whole thinking and approach to the fund. Many of them, it appeared, were not prepared to commit their resourcesfor a number of years in advance, or to over-extendtheir credit beyond the bounds of financial prudence. Consequently they became unduly cautious in the administration of their finances. They not only refrained from submitting applications for perfectly legitimate development schemes but also tended to settle for orthodox financing, namely reducing the amount of their annual subvention and balancing their budgets. The fact that some of the colonies were not taking full advantage of the assistance offered by the Act did not escape the committee's notice. Its first Annual Report stated: While the Committeehas no reasonto be dissatisfied with the progress thus far realised, is not convinced it thata sufficient numberof newprojects a sufficiently of ambitious characterwill be coming forwardfor considerationto enable full advantageto be taken of the wide vision with which Parliamenthas offered fi,ooo,ooo each yearfor the purposes Colonialdevelopment.2 of It accordingly recommended that the Colonial Office should take the opportunity to impress upon the colonial governors, who were shortly to meet in London, "the generousnature of the assistance"which the Act allowed. It would seem, though, that in spite of the Colonial Office's efforts and other official promptings, some colonial governmentswere still not showing sufficientinterest in the Act, for the committee returnedto the theme of colonial non-responsein its next annual report. It attempted to measurethe extent to which colonial governments were taking advantage of the Act by the comparatively simple indexes of (a) the number of applications placed before the committee and (b) their estiYiSecond InterimReportof the ColonialDevelopment Advisory Committee, P.P. 1930-I, 2,First InterimReportof the ColonialDevelopment Advisory Committee, P.P. 1929-30,

X, I 6. VIII, 44.

78

GEORGE

C. ABBOTT

mated total cost. It then proceeded to give three reasonsfor the notable decline which the figures showed. (i) The implementation of one or two large projects within the first few months of operation; the Zambesi Bridge Scheme alone cost over ?3 million. (ii) The lack of managerial and skilledpersonnelto supervisethe projects in the colonies; more particularly, though, the lack of adequate local resources to meet subsequent changes of maintenance. (iii) The universal depressionof price levels prevailing for the staple colonial products.' A follow-up exerciseundertakenin I 932 confirmedthese views. The committee was however disposedto add the further comment that the increasingfinancial stringency with which Colonial Governmentswere faced ... and the consequentdifficultywhich they experiencein bearingtheir intensified shareof new enterprises wasinevitably year; ... duringthe succeeding the strugglefor economicsurvivalhas necessarily precludedall thoughtof largescaledevelopment morefortunately placed exceptin the case of thoseterritories than the majority.2 The Act seemsto have had a completely differentbut equally deleteriouseffect upon the larger and richer colonies, in that it increased their burden of indebtedness at a time when they could ill be afforded. They were the ones most likely to benefit from it since the majority of them could afford the maintenance and replacement costs which the Act considered an essential prerequisite and had a greater potential for absorbing the type of project assistancewhich the Act envisaged. Further,the annual provisionof/i million created a senseof open-ended long-term financial commitment on the part of the United Kingdom government. As a result many of them tended to undertakelarge capital projectswhich they would not otherwise have done. Not unnaturally, as world economic conditions deterioratedthey found that they had not only over-extended themselves financially but were also in fact facing bankruptcy.Agriculturewas depressed,industry virtually non-existent, and the volume of trade correspondinglyreduced by the fall in export earnings. It was thereforenecessaryto cut back the level of government expenditure and reduce their development horizon. However, repayments in respect of loans and interest charges still had to be met, and this placed an intolerable burden on their already depleted finances. The figures in the following table are extremely revealing. to Table 2. Summary Assistance and of issuedfrom Repayments the

Colonial Development 1929-40 Fund,

Assistance issued Total Grants Loans
All colonies 6,523 3,779 2,744

7000?

as Total net Repayments Total repayments assistance % of loans

1,012

5,511

36.9

Source: Annual Abstracts of Accounts of Receipts Into and Issues Out of the Colonial Development Fund.

The total net assistance Of C5/ 5 million was approximately 50 per c(ent of the maximum possible expenditure over the life of the Act. However, the really significant point about this table is the final column which shows that
2

Committee, cit. pp. 14-I5. Advisory op. 1lSecond InterimReport,ColonialDevelopment Advisory Committee, P.P. 193 I-2, VI, 2, Third InterimReportof the ColonialDevelopment

COLONIAL

DEVELOPMENT

79

repaymentsran to 36 *9 per cent of all loans made. Of course, the burden of indebtednessdid not fall equally on all colonies, but in some instancesrepayments (including interest charges) actually exceeded loans. In the case ofJamaica, for example, total repaymentsexceeded loans by nearlyJgj,ooo. Nevertheless,it does give some indication of the rather stiff terms and conditions of the assistance offered, and of the tremendousfinancial problemswhich faced some colonies. In addition, most of the colonies were already saddled with heavy repayment charges in respect of debts which had been contracted before the I929 Colonial Development Act came into being. As the 'thirties wore on, the problem of colonial indebtedness began to assume unmanageable proportions and so gave rise to much social and economic distressin the colonies. Matters came to a head in the wave of strikes and social unrest which swept through the West Indian colonies during the latter half of the 'thirties, necessitatingthe appointment of a Royal Commission "to examine and report on the social and economic conditions ... and all matters connected thereto". Although the commissiondealt specifically with the West Indian colonies, the appalling economic and social conditionswhich it unearthed were consideredto be fairly typical of the colonial territoriesin general. The report' itself had to wait until after the war to be published, but its principal findings and recommendationswere considered sufficiently important to warrant immediate publication.2The reaction of the British governmentwas both positive and commendable. It not only accepted the main proposalsbut went furtherand undertooka complete review of its colonial policy and the need for economic development. This review appeared as a White Paper in February I 940,3 and formed the basis of much of the new thinking which was incorporatedin the Colonial Development and Welfare Act of that year. In the formulation of the new Act the opportunity was taken to review the whole question of the colonies' indebtedness in the light of their precarious financial and economic situation. As a result of this review the I940 Colonial Development and Welfare Act authorized the remission of approximately JJII million owed by colonial governmentsin respectof outstandingloans. As Wicker puts it, "The BritishGovernmenthad decided to clear the decks on a substantial part of the colonial loans outstanding and to make an effortto reduce the amount of outstanding debt. Such debt acted as a sizeable drain on annual revenues and tended to inhibit economic development."4 It would seem, therefore,that insofaras the largerand richercolonieswere concerned, the main effect of the I 929 Colonial Development Act was to aggravate their financial and economic problems, and make the problem of indebtedness ratherthanthe promotionof economicdevelopmenttheir primarypreoccupation. In this connexion it is probably not out of context to indicate the remarkably close parallel which conditions presently obtaining in many of the developing countries bear to those which faced the British colonies during the 'thirties, mainly as a result of the operation of the I929 Act. It may perhaps be a little too nativeto suggest that the developed donor nations contemplate a similar gesture of " clearingthe decks"in respectof their more questionableformsof "loan" aid.
1 Report of the R.C. on WestIndia, P.P. I944-5, VI. 2 Recom mendations the WestIndia R.C., PP. I 939-40, of
V. I939-40,

3 Statementof Policy on ColonialDevelopment Welfare,P.P. and

X.

'4 Wicker,

op. cit. p. I8I.

8o

GEORGE

C. ABBOTT

This would probably be asking too much. One cannot, however, help feeling that even a partial write-off of some of the outstanding debts would go a long way towards facilitating the developmental problems of many of the developing countries. It would also lead to a more realistic assessment of the nature and scope of aid as a specific governmental activity. The third and final argument supporting the view that the I929 Colonial Development Act actually militated against the development of the colonies is the fact that the Act was too rigidly administered to allow any scope for local variations of schemes consistent with new developments in the colonies. Although the committee repeatedly emphasized the need for decentralized control, as well as the importance of generating local interest and financial participation by colonial governments wherever possible, it appeared to adopt a rather intransigent attitude on the question of a colonial government's ability to vary the details of a scheme after it had been approved. It took the view that its recommendations were based on the consideration of a very specific set of proposals and the amount of assistance determined accordingly. If the details of the scheme had been different, it would in all probability have made different recommendations. It considered it advisable, therefore, that once a scheme had been approved there should be no undue departure from the general lines laid down, "and no reduction in the rate or scale of expenditure in the United Kingdom, should be authorised without prior reference to [itself], and to the competent Department of His Majesty's Government".' Once a scheme was approved, then, there was very little that colonial governments could do but get on with the job as best they could. However, considering that the committee had no comprehensive picture of a colony's needs or its resources, this seems an unduly inflexible and unrealistic approach to adopt. It certainly left little or no scope for local initiative to cope with such problems as shortages of skilled personnel and local materials. Consequently, when local bottlenecks did in fact develop there was very little that colonial administrations could do except postpone the scheme or apply to the competent department in the United Kingdom for permission to vary it in the light of changed local circumstances. Needless to say, much time, energy, and valuable resources were lost in the process. It is of course largely a hypothetical question, but one cannot help wondering whether it would not have made more sense to trade off a possible loss of administrative and financial orthodoxy against the prospect of accelerated development, which the encouragement of local initiative would have induced, given the fact that the need for early action was one of the main reasons for introducing the Bill originally. It would seem more reasonable, therefore, to incline to the view that the I 929 Colonial Development Act was in fact conceived and administered as an extension to the overseas front of the government's all-out attack upon the domestic problems of rising unemployment and falling export markets. The fact that it not only failed to achieve either of the specific sets of objectives mentioned in its p-rovisions but also that it may have actively militated against the economic deveLopment of the colonies does not in any way invalidate this basic proposition. Rather, it points to a fundamental misconception of the nature and causes of the economic
1 Third InterimReport,Colonial. Development AdvisoryCommittee, cit. p. 7. op.

COLONIAL

DEVELOPMENT

8i

crisis which faced the government. It also shows that the government had no clear idea of what all colonial development entailed. Of course, Members welcomed the idea of doing something for the colonies, but there is no evidence to suggest that either the government or the opposition had thought about the problem seriously. No one, for example, questioned whether there was any functional relationship between colonial development and unemployment in Britain, that is whether creating jobs in Britain would automatically, or even necessarily, have stimulated the development of the colonies, or vice versa. No one even questioned whether there were alternative and more economical ways of achieving either or both of these major policy objectives. Had these questions been thoroughly examined Members would undoubtedly have realized that colonial development and domestic unemployment were in fact two separate and independent issues each requiring its own peculiar strategy, and that it was virtually impossible to link them together except perhaps in a rather superficial and not very meaningful way. These conceptual problems were not, however, the only reasons for the failure of the Act. There were a number of what one might call environmental and psychological factors as well. For example, the speed with which the Bill was passed through Parliament does certainly give the impression that it was really a panic measure. In addition, the early 'thirties had perhaps the worst possible environmental and psychological conditions in which to launch a programme of colonial development. It amounted to trying to run counter to the overall world movement towards protectionism and isolationism induced by the financial and economic chaos of the Great Depression. This was clearly impossible given the very limited resources at the disposal of the fund. Further, as world economic conditions improved, a completely new set of environmental considerations began to affect adversely the administration of the Act. On the outbreak of hostilities in 1939, it was decided to suspend operations of the committee "until the future was a little clearer". This was followed by a complete review of all schemes in order to eliminate those which were not considered essential to the war effort. However, with the appearance of the White Paper on colonial policy in February 1940 the committee resumed operations, though it was specifically requested to consider only those schemes which could be regarded as of real importance and urgency, and which did not interfere with the prosecution of the war. The committee finally ceased operations when the I940 Colonial Development and Welfare Act came into force. Even allowing for the very adverse economic circumstances in which the Act operated, it is quite possible that, given clear-cut policy objectives and overall priorities, it might have succeeded in achieving either one of its major objectives. To attempt to achieve both was not only unduly optimistic but also clearly beyond the financial means of the Act. In fact the evidence strongly suggests that by attempting to tie colonial development to unemployment and falling exports in Britain, the government hopelessly muddled both priorities and objectives, thus ensuring that neither objective would be achieved; the classic example of that well-worn adage "between two stools we come to the ground" ! Universityof Glasgow