Colonialism describes the distinct stage in the modern historical development of the colony that intervenes between the traditional economy and the modern capitalist economy. Under this the basic control of the economy and society is in the hands of a foreign capitalist class.  Colonial economy was neither pre-capitalist nor capitalist, it was colonial, i.e., a hybrid creation.


Colonialism is a social formation in which different modes of production coexist from feudalism to petty commodity production to agrarian, industrial and finance capitalism. Under colonialism surplus is appropriated by virtue of control over state power.

Basic Features of Colonialism

  • The colony is integrated into the world capitalist system in a subordinate position.
  • There is unequal exchange between source and destination (drain of wealth).
  • Source produced goods of low value and productivity with low technology (raw material) while the destination produced goods of high value with high technology (manufactured goods).
  • Foreign political domination is the fourth feature of Colonialism.

Bal Gangadhar Tilak, the Indian nationalist leader, described this as decorating another’s wife.

Under colonialism all the indigenous classes of the colony suffer domination. The colonial state guaranteed law and order and its own security from internal and external dangers. The Colonial State took up the important task of the transformation of the social, economic, cultural, political and legal framework of the colony so as to make it reproductive on an extended scale.


India went through only the first and second stages, Egypt only through the third stage, and Indonesia the first and third stage.

First Stage: Monopoly Trade and Plunder Colonialism: it included buying cheaper inputs, controlling exports with high duties, keeping local traders outside the trade, defeating other European powers for gaining monopoly. Through drain of wealth, economy was plundered.

Second Stage: Era of Free Trade: In this stage changes in the economy, polity, administration, social, cultural and ideological structure were initiated to enable exploitation in the new way. The slogan was development and modernization. Capitalists were allowed to develop plantations, trade, transport, mining and industries. The system of transport and communications was developed. Liberal imperialism was the new political ideology.

Third Stage: Era of Finance Capital: Large-scale accumulation of capital in the metropolis necessitated search for avenues for investment abroad. Benevolent despotism was the new ideology according to which the colonial people were seen as children who would need guardians forever. The third stage often did not take off. Colonialism had so wrecked the economies of some colonies that they could hardly absorb any capital investment.



British territories in Africa consisted of Nigeria, Gold Coast, Gambia, Sierra Leone, Kenya, Tanganyika, Nyasaland, Uganda, North and South Rhodesia and South Africa.

Algeria, Morocco, Cameroon, French-Congo, Tunisia, and Madagascar were some of the main French colonies.


The impact of colonialism in Africa was tremendous.

  • The self-sufficient African economies were destroyed, transformed and subordinated by colonial domination. Debt burden on economies were high (e.g., Suez canal)
  • Class differentiation appeared.
  • The links of African countries with each other and with other parts of the world were disrupted.

Case of Egypt

Britain developed Egypt as a supplier of cotton for her textile industry. Being a single crop economy was disastrous as Egypt became dependent on imports for her essential food supply. The control of foreigners over cotton was total, from owning or controlling the land it was grown on, the cotton processing and cotton cleaning industry and the steamships it was transported in. Egypt was enmeshed in indebtedness because of exploitation by foreign powers.


Colonialism is as modern a historical phenomenon as industrial capitalism. While the metropolis experiences growth under capitalism the colony undergoes underdevelopment. Colonialism is more than foreign political domination; it is a distinct social formation in which control is in the hands of the metropolitan ruling class. In short, colonialism is what happened in the colony and imperialism is what happened in the metropolis.

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