Hopes of political aggrandizement, dreams of treasure and even competitive faddism can explain the invasion and colonization of the relatively backward nations by the European powers in the seventeenth, eighteenth and nineteenth centuries. The economic reasons for colonization and attempts to colonize were often important and sometimes necessary and sufficient. Whatever the motivation behind the original action, the enduring benefit of a colony — short of some sort of despoilation or tribute — can be explained in terms of international economics. The process of colonization benefited the mother country and her expatriate nationals in three main ways — through gains from international trade between the colony and the mother country, by factor migration, and by commercial policy. Trade benefited the citizens of the developed, colonial power primarily through the ability of the colony to supply non-competitive goods to the mother country. Migration of factors permitted both industry-specific and generic mobile factors to be moved to combine with the industry-specific immobile factors located in the colonies. Commercial policy benefited the mother country (usually) by reserving for her, the primary role in determining the pattern of the colony’s trade.
KeywordsFactor Endowment Commercial Policy Competitive Good Trading Relationship Colonial Power
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