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Unit 6

6.5 Economic Imperialism

8 min read•june 18, 2024

Eric Beckman

Riya Patel

AP World History: Modern 🌍

577 resources

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Introduction

Economic imperialism refers to the use of economic power to exert control over other countries, regions, or peoples. This can take many forms, including the control of natural resources, the manipulation of trade and investment, and the exploitation of labor and markets. Economic imperialism can also involve the use of economic aid, loans, and other forms of financial assistance as a means of exerting influence and control.

Goal of Economic Imperialism

The goal of economic imperialism can vary depending on the actors involved, the specific historical context, and the methods used. In general, however, the goal of economic imperialism is typically to gain control over resources, markets, and labor in other countries, regions, or peoples. This can be done for a variety of reasons, including:

Access to natural resources: Countries may seek to control resources such as oil, minerals, and agricultural land in other countries in order to secure supplies for their own economies.
Markets for goods and services: Countries may seek to control or dominate markets in other countries in order to sell their own goods and services and increase their exports.
Investment opportunities: Countries may seek to invest in other countries in order to gain access to new markets, resources, and labor.
Political and strategic advantages: Countries may seek to control other countries in order to gain strategic advantages such as military bases, naval ports, or access to key waterways.
Ideological reasons: Some countries may seek to spread their own economic systems, culture and values to other countries, believing that their way of life is superior.

In the past, many imperial powers used economic imperialism as a way to gain control over other countries and peoples for their own benefit, often at the expense of the people living in those countries. Today, economic imperialism is still a concern, especially in the context of global economic inequality and the power imbalance between developed and developing countries.

Causes

The pursuit of resources, markets, and profits by European and American powers
The impact of the Industrial Revolution and the growing demand for raw materials and new markets
The desire to establish colonies and trading posts in Africa, Asia, and the Americas
The need to control strategically important locations, such as ports and transportation routes.
The desire to exploit the resources and labor of colonized peoples and countries
The competition among European powers for global economic and political dominance.

Formal Vs. Informal Economic Imperialism

Formal and informal economic imperialism refer to different ways in which imperial powers exert control over the economies of other countries.

Formal economic imperialism refers to the direct control of a colony or territory by a foreign power through the establishment of a formal political and economic system. This type of imperialism typically involved the colonization of a country, the imposition of tariffs and trade regulations, and the control of resources and labor. Examples of formal economic imperialism include the British colonization of India and the establishment of British trading posts in China during the 19th century.

Informal economic imperialism refers to the indirect control of a country's economy through economic means, such as trade agreements and investments, rather than through formal political control. This type of imperialism typically involved the exertion of economic influence over a country without the need for formal colonization. Examples of informal economic imperialism include the economic influence of the United States in Latin America in the late 19th and early 20th centuries, and the economic influence of China in African countries today.

How Does it Work?

Economic imperialism works by a foreign power exerting control over the economy of another country or territory, typically for the purpose of extracting resources, markets, and profits.

There are several ways in which economic imperialism can be achieved:

Formal colonization: A foreign power establishes settlements and administrative control over a territory, and imposes tariffs and trade regulations, controls resources and labor, and extracts wealth from the colony.
Informal control: A foreign power exerts economic influence over a country through trade agreements, investments, and other economic means, without the need for formal colonization.
Control of strategic locations: A foreign power establishes control over strategically important locations, such as ports, transportation routes, and access to resources, in order to gain economic advantage.
Exploitation of resources and labor: A foreign power exploits the resources and labor of a country for their own benefit.
Control of markets: A foreign power establishes control over a country's markets, either through direct ownership or control of key industries, or through manipulation of trade agreements and tariffs.

Examples of Economic Imperialism

Opium Wars

The Opium Wars were two wars fought by the British and the Chinese in the mid-19th century over the opium trade. The First Opium War (1839-1842) and the Second Opium War (1856-1860) were both sparked by China's efforts to stop the opium trade, which was being conducted by British merchants.

The opium trade had been going on for decades, but it had grown significantly in the early 19th century. British merchants, primarily the British East India Company, had been exporting opium grown in India to China, where it was in high demand. The Chinese government, however, saw the opium trade as a threat to the health and well-being of its citizens and made efforts to stop it.

In 1839, the Chinese government confiscated and destroyed a large quantity of opium held by British merchants. This led to the First Opium War, in which the British, using their superior naval power, defeated the Chinese and forced them to sign the Treaty of Nanking in 1842. The treaty forced China to open several ports to British trade, pay an indemnity to the British, and cede Hong Kong to the British.

The opium trade continued, and the Chinese government continued its efforts to stop it. This led to the Second Opium War in 1856. The British, along with the French, again used their superior naval power to defeat the Chinese and forced them to sign the Treaty of Tientsin in 1858. The treaty forced China to open more ports to foreign trade, legalize the opium trade, and pay an indemnity to the British and French.

Causes of Opium Wars

The first Opium War (1839-1842) was sparked by China's efforts to halt the illegal importation of opium, a highly addictive drug that was being smuggled into the country by British merchants. The British, who had a massive trade deficit with China, saw the opium trade as a way to balance the books and were unwilling to give it up.

The second Opium War (1856-1860) was triggered by a dispute over the rights of foreign diplomats and traders in China.

The causes of the Opium Wars can be traced to the economic and political tensions between China and the British Empire. The British saw China as a source of valuable goods, such as tea and porcelain, but had little to offer in return. This led to a trade deficit that the British sought to address through the opium trade.

Effects of Opium Wars

The effects of the Opium Wars were far-reaching and long-lasting. China was forced to open its ports to foreign trade and cede control of Hong Kong to the British. The country also had to pay large indemnities to the British and allow foreign diplomats and traders to operate in China with few restrictions. These concessions weakened the Chinese government and made it more vulnerable to foreign influence. The opium trade also had a devastating impact on Chinese society, as addiction and crime rates soared. The wars also solidified the western powers' position of economic and political dominance over China for the next century.

Treaty of Nanjing (1842)

The Treaty of Nanjing was a peace treaty signed in 1842 between the Qing dynasty of China and the British Empire, following the First Opium War. The treaty was the first of the "unequal treaties" imposed on China by foreign powers, which forced China to open its ports to foreign trade, cede the island of Hong Kong to the British, and pay a large indemnity to the British. The treaty also granted extraterritorial rights to British citizens in China and gave the British the right to set up a consulate in the city of Canton (Guangzhou).

Treaty of Tientsin (1860)

The Treaty of Tientsin, also known as the Treaty of Tianjin, was a series of treaties signed in 1858 and 1860 between the Qing dynasty of China and a number of foreign powers, including the United Kingdom, France, and the United States, following the Second Opium War.

The Treaty of Tientsin expanded on the provisions of the Treaty of Nanjing. It further opened Chinese ports to foreign trade and residence, established diplomatic legations in Beijing, and ceded the Kowloon Peninsula to the British. It also forced China to pay a large indemnity to the foreign powers, legalise the opium trade, and give foreign Christian missionaries freedom to propagate their religion. The treaty also extended extraterritorial rights to the citizens of all countries, not just the British.

Port of Argentina and Foreign Investment Debt Trap

During the second half of the 19th century, Argentina heavily relied on foreign direct investment (FDI) for infrastructure projects and business investment. Great Britain was the largest investor in Argentina, and Barings Bank and Investment, based in London, was one of the largest investors. They invested in railway, roads, government buildings, and the Buenos Aires Water Works (water, sewage, and pumping systems) and played a crucial role in the development of modern infrastructure in Argentina.

During the 1880s, Argentina wanted to build a new port in Buenos Aires, and there were two competing proposals for where and how to build it. The British-backed proposal ultimately won more support and built the port nearest to British factories and warehouses, making the import and export of their products cheaper and more efficient.

In 1889-1890, Argentina experienced a currency crisis brought on by high government debt levels that the government could not repay. Barings bank, which owned much of Argentina's debt, in London almost collapsed. Argentina sent a government delegation to London to renegotiate the terms of Argentina's loans. To have another loan extended to the country by British Banks, Argentina had to agree to not borrow any additional money beyond what they were borrowing from the British, prevent local and municipal governments from taking on additional debt, raise the gold reserves in the government central bank by withdrawing paper money from their economy, send London a percentage of their customs revenues and buy back the Buenos Aires Water Supply and drainage company from Barings bank.

These measures satisfied the Argentine government's short-term needs but resulted in a further crisis for the ordinary people. When many Argentinian's attempted to withdraw their money from the bank, they realized it was gone as many banks did not have enough reserves to cover their deposits. Many banks went bankrupt and closed down. It took nearly a decade for Argentina's economy to recover.

Browse Study Guides By Unit

🐎Unit 1 – The Global Tapestry, 1200-1450

🐫Unit 2 – Networks of Exchange, 1200-1450

🕌Unit 3 – Land-Based Empires, 1450-1750

🍕Unit 4 – Transoceanic Interactions, 1450-1750

✊🏽Unit 5 – Revolutions, 1750-1900

🚂Unit 6 – Consequences of Industrialization, 1750-1900

6.0Unit 6 Overview: Consequences of Industrialization

6.1Rationales for Imperialism

6.2Expansion of Imperialism

6.3Indigenous Responses to Imperialism

6.4Global Economic Development from 1750 to 1900