Did Britain Impoverish India?

Asking “Did Britain impoverish India?” is like asking “Is water wet?” Of course, Britain impoverished India during their rule as the colonial masters of India. To extract wealth from a colony and exploit its people is the primary motivation for colonization.

Expecting the colonial masters to be a benign, self-sacrificing force is delusional. Colonization is not a win-win exchange relationship. It’s a milder, gentler form of slavery; not quite as cancerously malignant but severely chronically debilitating.

British rule had two phases: first the Company Rule which began around 1757 when the British East India Company gained control over parts of the Indian subcontinent; the second when the Crown Rule began in 1858, and nominally ended in 1947. I say “nominally” because while the British Raj more or less came to a formal close in August 1947, India continued (and continues) to be governed by laws that were made by the British during the Crown Rule.

So you could say that the Britain raj lasted nearly two centuries, and that’s enough time to loot a country. But here’s the point of this piece — contemporary India’s poverty has little to do with the crimes the British committed. They committed crimes not just in India but around the world that it dominated. Pressed for time as we are, we can’t read the piles of history books written about that but we can get a sense of how terrible those crimes were by reading the twitter account titled “Crimes of Britain.” 

How much did the British loot from India? Nobody knows precisely, of course, because the number depends on so many assumptions and guesses. You’d find a range of estimates. Utsa Patnaik in a recent piece wrote, “…  the total drain from 1765 to 1938, compounded up to 2016, comes to £9.2 trillion; since $4.86 exchanged for £1 those days, this sum equals about $45 trillion.”[1]

I assume the $45 trillion is in 2016 dollars. But regardless, that’s a large amount. Remember that the world was a much poorer place during the period under consideration. Even today $45 trillion is huge but imagine how much that means in the context of a really poor world of a century or more ago. I would estimate that amount to be larger than the cumulative 200-year GDP of Britain. It reflects a massive transfer of wealth. That’s robbery on a colossal scale that defies comprehension. Perhaps one can claim that Britain’s prosperity and power were achieved at India’s cost.

But that cannot be the whole truth. India had the wealth. It could have but didn’t do what the British did with that stolen wealth. So it’s not just having wealth that matters. What matters is what you do with the wealth you have or the wealth you steal. This is not a justification for British rapacity but a comment on the differences among different groups.

There are two things that bother me greatly. One is that Britain colonized India. India, 20 times geographically larger than Britain, and 20 times the population of Britain, was dominated by Britain.[2] That’s shameful. I can understand if tens of millions of British had invaded a country of a few million people and hauled off the loot. That’s not what happened. Only a few thousand British royally ruled over a population counted in the scores of millions. That’s extremely shameful.

The second thing is even more shameful. Even after the British oppression ended, India continued to be repressed and poor. There’s no justification for India’s failure to prosper post 1947. There’s no justification for why the leaders of India did not do what it takes to free the people of India. Whether it was greed, or stupidity, or ignorance, or a combination of the three is a matter of debate. But the end result was that India was impoverished — made poor — by the people who took over from the British.

Here’s what Nehru and gang could have done but didn’t:

• Written a constitution that made the government the agent, not the master, of the people. That means a constitution that gave Indians economic and social freedom.
• Instituted radical decentralization and transferred all powers to a large number of states — at least 50 states.
• Freed Indian industry from debilitating regulations. India could have had an industrial revolution.
• Freed Indian education from government control. This would have made India 100 percent literate in about 10 years.
• Adopted free-market economic policies. Policies that allowed free trade, and foreign direct investment.

Instead Nehru and gang imposed socialism on India. How much was lost? That loss is easier to estimate. In fact, I did a simple exercise in 2012 and concluded that —

Over the last 60 odd years, India has lost income estimated at $120 trillion by growing at the Nehru rate of growth instead of the easily achievable 6 percent rate of growth. Part of that income would have created infrastructure and other durable assets by now. We would have probably had the best and biggest high speed railway system in the world. We would have had the largest and the most productive educational system in the world. Even things we don’t consider very important – number of Nobel prizes, gold medals in the Olympics, number of world class movies – would have been a reality because all those things require disposable income.

It’s a straight forward exercise. Simple logic and a spreadsheet is all that was needed. You can read all the details here and here, and check my arithmetic. A bit more from there —

Always remember that India is a large country. Large countries have the potential to affect the world. … Given its large population, India could have been the world’s factory, producing cars, computers, TVs, white goods, furniture, and everything. India could have been the home of huge multinational conglomerates, producing big things such as container ships, and commercial jetliners. It could have been one of the world’s great trading nation – with its share of world trade around 25 percent, instead of the around 2 percent “Nehru rate of trade.” (Nehru’s brilliant autarkic economic policies closed India to international trade.)

Wealth buys many things, not the least of which is influence and power. Had India been a middle-income country, given the size of its population, it would have been a formidable military power. Culturally and historically, since Indians are not belligerent and don’t have extraterritorial ambitions, India’s power would have been a force for global stability. Instead of being one of the worst victims of Islamic terrorism, India would have been the one to bury Islamic terrorism for good.

The bottom line is this: if India’s economic policies had been different, not only would we have had an absolutely different India, we would have had an entirely different world. But India’s policies were brain-dead. A brain-dead leader’s brain-dead policies. 

The British looted India. However India could have recovered rapidly from that. Factors affecting growth had changed in India’s favor in the modern world, primarily technology. Contemporary India’s poverty is entirely the fault of the governments of the last 70 years. However much the British damaged India, the leaders of India have done far worse.

What India needs is a bit of soul-searching, and admitting that their sainted leaders are a  bunch of incompetent ignorant fools.

NOTES:

[1] How the British Impoverished India. Hindustan Times. 30 Oct 2018. By Utsa Patnaik, professor emeritus, Centre for Economic Studies and Planning, Jawaharlal Nehru University.

[2] These are guesses. I don’t have the time right now to do the searching for the actual numbers. I will update these later.