Abstract
How profitable were foreign investments in plantation agriculture in the Netherlands Indies during the late colonial era? We use a new dataset of monthly quoted stock prices and dividends of international companies at the Brussels stock exchange to estimate the returns to investment in tropical agriculture (1919–1938). We adopt the Dimson–March–Staunton method to compute real geometric annual average rates of return and assess our estimates in an international comparative perspective. We find that returns to colonial FDI in the Netherlands Indies during 1919–1928 were impressive (14.3 %), being almost 3 percentage points higher than the world average. In the following decade 1929–1938 fortunes reversed, with a rate of return of −2.8 % compared to a world average of 2.2 %. Over the entire period the returns to colonial FDI (5.4 % in 1919–1938) were about a factor 2.5 higher than returns to investment in the Dutch domestic economy (2.1 % in 1920–1939). We argue that these returns should be interpreted in a colonial context of systematic labour repression, but that they may also partly reflect a higher risk-premium of investments in colonial commodities.
Highlights
In the mid-19th century, when the Portuguese and Spanish empires were crumbling and the heydays of French, German, Belgian and Japanese imperial expansion were yet to come, the Netherlands were regarded as the second most important imperial power after Britain
We find that returns to colonial FDI in the Netherlands Indies during 1919–1928 were impressive (14.3 %), being almost 3 percentage points higher than the world average
In this paper we have presented new estimates of the return on investment in the Netherlands Indies for the late colonial era (1919–1938)
Summary
In the mid-19th century, when the Portuguese and Spanish empires were crumbling and the heydays of French, German, Belgian and Japanese imperial expansion were yet to come, the Netherlands were regarded as the second most important imperial power after Britain. The historical debate on the late colonial era, with which we engage in this study, has been deeply affected by the idea that after the gradual abolition of the cultivation systems after the 1860s, the Dutch kept reaping exceptional returns on colonial investments, most of it hinged on private capital investments instead of state-directed programs of forced cultivation (Gerretson 1938; Vandenbosch 1938; Boeke 1940a, b; Derksen and Tinbergen 1980 [1945]; Haccou 1961; Maddison 1989; Gordon 2010) This view has been scrutinized by a revisionist literature that has criticized the data and estimates that have been used to assess various aspects of colonial FDI in the late colonial era (Baudet and Wijers 1976), as well as attempts to place the discussion on the ‘colonial drain’ in the wider context of mutual economic interdependence (van der Eng 1998a, b).
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
