The result of neocolonialism is that foreign capital is used for exploitation rather than for the development of the less developed parts of the world. Investment under neocolonialism increases rather than decreases the gap between the rich and the poor countries of the world.

Neocolonialism Neocolonialism

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    - Kwame Nkrumah, the first Prime Minister and President of Ghana

    Today, only 0.1% of the world's population lives under colonial rule. Colonialism as historically known is out of practice, yet this statistic does not mean that there are no contemporary forms of exploitation and imperialism. In the current globalized world, what may be seen as foreign investment for the good of humanity may ultimately have ulterior motives

    Neocolonialism Definition

    Neocolonialism happens behind the scenes because it is an indirect form of control. It continues systems of exploitation through financial means.

    Neocolonialism: a foreign power indirectly controlling or influencing a territory and its people, usually through financial means.

    There are numerous contemporary examples of ongoing neocolonialism.

    Neocolonialism Examples

    Here are some examples of neocolonialism.

    Chinese Neocolonialism

    From the fourteenth to seventeenth centuries, the Ming Dynasty was an imperial dynasty of China. The Ming Dynasty established numerous tributary states around the globe. Funded by the Emperor of China at the time, the Yongle Emperor, Chinese explorer Zheng He led massive expeditions across the globe. As a result of Zheng He's early fifteenth-century expeditions, dozens of territories paid tribute to the Ming Emperor, including Japan, Cambodia, Siam, and Vietnam.

    China was a victim of European colonialism in the nineteenth and twentieth centuries. For instance, the Opium Wars of 1839-1842 and 1856-1860 forced China to open its territory to foreign trade. In this case, foreign trade meant the diffusion of an addictive opiate whose consumption brought wealth to Britain.

    The territories of Macau and Hong Kong are reminders of European imperialism in China, as they are former European colonies of Portugal and Britain, respectively. Neighboring Japan also brutally colonized territory in China around the time of World War II. Yet, the China of the twenty-first century is different. The East Asian country has risen to become a behemoth on the world stage in terms of economic, political, and military might.

    Neocolonialism Europeans scramble for China StudySmarterFig. 1 - This cartoon pictures European powers competing for colonial control of China.

    China, led by its current President Xi Jinping, has embarked on a project known as the Belt and Road Initiative (BRI). This infrastructure project is promoted as boosting domestic and international investment opportunities through the funding of major infrastructure projects such as highways, railroads, bridges, and ports. Not only does it bring wealth to China, but the BRI seeks to undo centuries of humiliation at the hands of foreign powers by projecting Han Chinese dominance abroad.

    The Belt and Road Initiative has now spread beyond neighboring Asian countries to Africa, Southwestern Asia, Eastern Europe, and Latin America. In typical neocolonial fashion, BRI investment projects often lock underdeveloped countries into unfair financial contracts and debt with China.

    Neocolonialism China Belt and Road Initiative StudySmarter Fig. 2 - Map of China's Belt and Road Initiative in Eurasia and Africa.

    Cold War

    The Cold War saw the world split into two opposing blocs. While the competing superpowers of the United States and the Soviet Union did not establish colonies around the world, they did use financial investment and diplomatic pressure to increase their quantity of alliances across the globe. This was accomplished through the proliferation of foreign aid and investment in allies.

    For instance, after World War II, the United States rebuilt Europe through an economic plan known as the Marshall Plan.

    Instead of hard power, which is the use of the military to achieve goals, goals were achieved through soft power. Instead of influencing countries through militarization, it was through economics, diplomacy, and culture. That is how neocolonialism works.

    Banana Republics

    Another type of neocolonialism is banana republics. This referred originally to Central American countries whose economies were dominated by foreign banana-exporting corporations. It has since become a term for underdeveloped countries dominated by foreign corporations.

    Notorious examples of banana republics were Honduras and Guatemala. These neighboring Central American companies were victimized by the United Fruit Company, a US multinational corporation. The United Fruit Company is known as Chiquita now. This company exploited the internal politics of these countries to create vast banana plantations that exported cheap bananas to the US. They left a legacy of intractable poverty, environmental devastation, and health problems.

    While these multinational companies did not directly colonize countries in the traditional sense of colonialism, it was still an exploitative and violent process to establish plantations and export resources abroad. Scholars and critics argue that Neocolonialism frequently entails the use of violence. For instance, when banana workers struck Colombia to protest their inhumane work conditions, the Colombian military, backed by the United Fruit Company, fired into the crowd and killed at least 47 workers. This is known as the Banana Massacre.

    The United States Central Intelligence Agency served as the enforcer of US imperialism abroad. The CIA was involved in coups across Latin America to maintain and promote US economic interests in this region. Both Presidents Truman and Eisenhower were responsible for supporting the 1954 Guatemalan coup to overthrow a democratically elected president. President Arbenz was targeted because he was responsible for agrarian reform that granted uncultivated United Fruit Company land to landless peasants. This reform threatened US business interests. After this coup, Guatemala was run by an unelected military junta supported by the United States.

    Neocolonialism vs Colonialism

    There is a difference, and it is important to know what it is because their practices look different even if at the core there are many commonalities. In colonialism, imperial governments have direct control in the governing of colonies through government appointees, legislation, and the stationing of military forces.

    Meanwhile, neocolonialism is much more subtle. Neocolonialism involves indirect influence. Neocolonialism can often be just as harmful to developing countries' economies as colonialism was, and it is in practice throughout the world as wealthy countries seek to exploit greater access to resources and new consumers.

    Neocolonialism in Africa

    The African continent has long been subjugated by foreign imperial powers, including North Africans, Arabs, and Ottomans. However, Europeans were especially damaging. Europeans ripped Africans from their homelands and sent them to the New World to work on colonial plantations. They practiced chattel slavery: commodifying humans into property that could be bought, sold, and owned.

    Later on, the continent was directly colonized by Europeans. For instance, the Berlin Conference of 1884-1885 divided the continent into spheres of influence for European powers to later divide up as they wished. The Berlin Conference spurred colonial expansion and integrated Africa into the global capitalist economy. European powers carved up the continent up and commodities such as palm oil, rubber, cocoa, and gold were exported to European manufacturers from the colonies.

    Check out our article on the Berlin Conference for more in-depth information about European colonialism in Africa.

    Neocolonialism Berlin Conference Colonialism StudySmarter

    Fig. 3 - The Berlin Conference carved Africa into spheres of influence for European powers.

    Paradoxically, countries with an abundance of natural resources often have worse development prospects than countries with fewer natural resources. This is known as the Resource Curse. Resource dependence is associated with poor economic performance and greater socio-economic inequalities. Economies dependent on resources are vulnerable to changes in resource prices, corruption, mismanagement, and taking on burdensome loans. Thus, resource-rich areas are more susceptible to exploitation and political uncertainty. For instance, Equatorial Guinea's entire economy is structured around its oil exportation.

    The decolonization of British, French, and Portuguese Africa occurred from 1950 to the 1970s. While countries were granted independence, in numerous instances this was only nominal. Former colonies gained only limited sovereignty. , since former colonizers remained involved in their former colonies internal affairs. In essence, African sovereignty is still under siege from foreign governments and corporations. However, this does not mean that African nations do not have agency or are permanently stuck as being victims of wealthier countries.

    Methods of Neocolonialism

    As long as imperialism exists, it will, by definition, exert its domination over other countries. Today, that domination is called neocolonialism."

    - Che Guevara

    On the surface, foreign investment in an underdeveloped nation's economy may seem beneficial to both parties. However, the benefit soon diminishes as underdeveloped nations can become financially reliant on the investor. The investor will exploit the project to boost their trade opportunities and products to new customers.

    Structural Adjustment

    Often, to be eligible for foreign investment by US-dominated international financial institutions such as the World Bank or International Monetary Fund (IMF), countries must privatize state-run firms, end subsidies, reduce tariff barriers, cut the funding of social programs, and limit state regulation of the economy. Thus, countries reform their internal affairs to be accepted by the neoliberal global capitalist system.

    Geographer David Harvey is highly critical of this process of privatization of economies because countries often transfer property from public ownership to private ownership. Now what used to be available to the public is commodified as a product assigned a monetary value to be bought and sold.


    Foreign investment can also make an underdeveloped nation financially reliant and indebted to the investor due to unpaid loans and debt. For instance, Honduras received a loan from the British in the mid-1800s that took over 100 years to be repaid. Haiti also had to pay France billions of dollars for its sovereignty. Haiti was a lucrative slave colony for France, but a successful slave revolt earned Haiti its hard-fought independence. Held at gunpoint by a flotilla of French ships sent by King Charles X in July 1825, Haiti was forced to take out loans to pay for freedom. Haitian slaves and their descendants had to pay the equivalent of $25 billion in today's dollars. It took Haiti 122 years to pay off these loans.3 Once one of the world's richest territories, Haiti is now one of the least developed nations in the world.

    Rather than being assisted, developing countries accept unfavorable conditions out of desperation. While they may have foreign investment, the forced austerity measures that include diminished investment in social programs to be eligible for loans means that poverty often increases, which makes countries further indebted to foreign aid. This is known as a debt trap.

    Post-Colonial Relations

    Often, neocolonialism is enacted through former colonial rulers' continued subtle subjugation of former colonies. France still has a lot of influence in its former colonies, especially in Central and West Africa. France once ruled colonies across the continent, but now France administers currencies used by twelve former colonies in Africa. These former colonies fall into two groups - one that uses the West African CFA Franc as a currency and another that uses the Central African CFA Franc as its currency.

    Neocolonialism West Africa Franc Central African Franc Map StudySmarter

    Fig. 4. - Franc currency zones in Africa. The green area is where the West African Franc is used, and the blue area is where the Central African Franc is used.

    Because these currencies are administered elsewhere, wealth often leaves the countries and benefits France instead. France has direct control over the money supply in its former colonies. Wealth and resources flowing from former colonies to the imperial homeland are described by dependency theory. It theorizes the process of resources flowing from the underdeveloped "periphery" to the developed "core." Due to this relationship, the nominally independent countries constituting the periphery have dependent roles in the global economy.

    Neocolonialism - Key takeaways

    • Colonialism is largely nonexistent, but neocolonialism is common around the world.

    • Africa's countries may have gained independence, but often the independence may only be nominal. Former colonies' independence does not necessarily mean sovereignty.

    • Superpowers of the Cold War competed through neocolonialism. Modern-day superpowers such as China and the US also continue to engage in neocolonialism. US neocolonialism is aided by the World Bank and International Monetary Fund. China engages in neocolonialism through its vast Belt and Road Initiative, which has invested in 147 countries.

    • France plays a very active role in controlling its former African colonies through administering the Franc currencies used in 22 countries.


    1. Fig. 2. Map of China's Belt and Road Initiative ( by Lena Appenzeller, Sabine Hecher, Janine Sack. Licensed by CC-BY-SA 4.0 (
    2. Fig. 3 The Berlin Conference (,_1885.jpg) by Zz1y, Draner. Licensed by CC-BY-SA 4.0 (
    3. Rosalsky, Greg (2022): "'The Greatest Heist In History': How Haiti Was Forced To Pay Reparations For Freedom", NPR,
    Frequently Asked Questions about Neocolonialism

    What is Neocolonialism? 

    Neocolonialism is when a foreign power indirectly controls or influences a territory and its people, usually through financial means.

    What is an example of Neocolonialism? 

    An example of neocolonialism is France controlling the Franc currency used by 22 independent nations. 

    What is the difference between colonialism and neocolonialism?

    Colonialism is the direct control of a territory and its people through governance, and it is usually violent. Meanwhile, neocolonialism is more subtle. Instead of direct control, neocolonialism sustains exploitative financial systems through indirect influence. 

    How has neocolonialism affected Africa? 

    While the African continent is home to 53 independent state, many of these have limited sovereignty. Africa continues to be exploited by foreign powers. 

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