Why Did Small European Colonies Not Perform Better? GDP Estimation for Cyprus and Malta During the Interwar Period (1921-1938)

Abstract

This article presents the first attempt to create historical national accounts for Cyprus and Malta. It is part of an ongoing effort to place the unusually violent period of these two small British colonies in a greater Mediterranean and Colonial perspective, by providing macroeconomic aggregates. GDP estimates for the period 1921-1938 enable new interpretations regarding the islands’ economic growth and structural change. The estimates are converted into international currency units and a long run GDP series (1921-2008) is created to prove that the development level of the islands in the interwar period was much lower than what was previously thought, being poorer than Greece and Turkey. The islands’ performance is then evaluated in the context of South Eastern Europe, suggesting that the economic growth was slow considering the islands were far less exposed to the economic and political effects of the First World War. The ultimate reasons of growth performance differed: Cyprus experienced a prolonged agricultural crisis, but participated in the post-depression recovery through the rapid expansion of the copper mining industry, while Malta’s growth was slow due to a combination of declining British military expenditure and accelerated demographic growth. These differences notwithstanding, the islands were ultimately affected by common problems. Their small size, in combination with the islands’ status as British colonies, had a negative effect on their performance as global protectionism increased.