Manufacturing Wealth: The Economics of Urbanization

That’s the title of the course I am conducting at the Indian School of Business, Hyderabad. It is a small class of about 15 students. It’s a half-credit elective in the final term of the year.

We have had two lectures so far. I am having fun — which is another way of saying that I am learning quite a bit. I think I will share some of what I have learned on this blog in the next few weeks.

The title of the course is pretty descriptive of the content. Manufacturing is what leads to material wealth. India is poor because India is not an industrialized economy. Why it is not an industrial country is a question worth investigating. Whatever the answer to that question, there is little doubt that for India to become industrialized, one of the necessary conditions is that it has to urbanize. Manufacturing requires the urbanization of the population.

More to come. But for now, here’s something that talks about India’s manufacturing. It is from an article from over 100 years ago. It appeared in The Atlantic in October 1908: The New Nationalist Movement in India by Jabez T. Sutherland.

Another cause [aside from taxation] of India’s impoverishment is the destruction of her manufactures, as the result of British rule. When the British first appeared on the scene, India was one of the richest countries of the world; indeed it was her great riches that attracted the British to her shores. The source of her wealth was largely her splendid manufactures. Her cotton goods, silk goods, shawls, muslins of Dacca, brocades of Ahmedabad, rugs, pottery of Scind, jewelry, metal work, lapidary work, were famed not only all over Asia but in all the leading markets of Northern Africa and of Europe. What has become of those manufactures? For the most part they are gone, destroyed. Hundreds of villages and towns of India in which they were carried on are now largely or wholly depopulated, and millions of the people who were supported by them have been scattered and driven back on the land, to share the already too scanty living of the poor ryot [small farmer]. What is the explanation? Great Britain wanted India’s markets. She could not find entrance for British manufactures so long as India was supplied with manufactures of her own. So those of India must be sacrificed. England had all power in her hands, and so she proceeded to pass tariff and excise laws that ruined the manufactures of India and secured the market for her own goods. India would have protected herself if she had been able, by enacting tariff laws favorable to Indian interests, but she had no power, she was at the mercy of her conqueror.

The article is worth reading. It has breadth and more importantly, it is still relevant today. Change some of the names and the nationality of the rulers, the story of exploitation and extraction of wealth — instead of creating wealth — remains the way it was a long time ago.

We have forgotten the history and therefore are doomed to repeat it.

5 thoughts on “Manufacturing Wealth: The Economics of Urbanization

  1. pankaj Tuesday March 3, 2009 / 11:16 am

    Atanu i agree with you but manufacturing cannot be built if there is no strong agricultural base ie the agricultural production has to go up while employing less and less people , we have to see only USA as to the no of people directly employed by agriculture.
    Our rulers are very greedy,very selfish no doubt but are our people any less,rulers don’t come from some other country they come from the population.ultimately nations wealth is not manufacturing but the build world class nations we require world class people which we are unfortunately not.


  2. Srini Tuesday March 3, 2009 / 10:01 pm

    Hi Atanu,
    Would it be possible to post videos of these lectures online.
    That would help a lot of people like me to delve into this subject and learn.


  3. Atanu Dey Wednesday March 4, 2009 / 8:03 pm


    They don’t capture these lectures on video here at the ISB. In any event, the important bits are the class readings. I will post the complete reading list for the class on this blog in a few weeks.


  4. ashish Thursday March 5, 2009 / 11:25 pm

    Hi Atanu

    if not the video, any slides or PDF material? your hand notes for example, may be useful to economics learners. perhaps even i may understand a few lines.

    teaching can be enjoyable, it all depends on the teacher and students. have fun!


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