[This essay Some Thoughts on The Drain of Wealth: Colonial India and Imperial Britain was published in the World History Bulletin (WHB) Spring 2004 (Vol XX No1). The WHB is published by World History Association (WHA), USA]

© Anup Mukherjee

Part 1  Part 2  Part 3  Part 4

Imperial Issues & Economic Consequences:

Britain in India was the significant central power. It was significant, because it exercised more powers of direct centralised control than it was ever possible earlier. It was central, because even the princely states that were theoretically independent were peripheral to the emerging and ensuing political scene. At no time earlier was government organised with so technical efficiency. Use of technology and work methods and organisational skills were central to the exercise of this efficiency. This technical efficiency of a government run by bureaucracy was geared to the imperial interests and was totally ignorant and unaccountable to the native country and the people. Many Eurocentric commentators have remarked on the positives of British rule. However I would argue that this technical efficiency was reflection of organisational efficiency. The technological efficiency did not exist in the first place, but was rather a derivative of such an interaction through the imperial enterprise.

Firstly, at political level, the sovereign did not reside in India - and did not have any accountability to the people. It may be argued that even the monarchs of India were not accountable to the people. But the basic difference was that while the monarchs of India could be overthrown by revolts - such could not be done to the sovereign thousands of miles away. On the other hand, all the money that was going out to Britain would remain in India and get reinvested in the economy. This was not happening in case of India in its colonised condition. Also, the foreign sovereign in this case was a bulwark of the reactionary forces in the country. This is visible from treaties of Subsidiary Alliance that protected the native rulers of Indian States from external and internal enemies. Imperialism thus worked as a bulwark against any kind of revolution or as a denial of democratic aspirations of the people as well.

Secondly, some scholars have argued that the drain was a charge for administrative services. This is simply incongruous, based on assumption that India did not have any administrative system or any rules prior to EIC. EIC only introduced a newer form of rules displacing the older system. It would be wrong to assume that rules of the older system were not rational. But in this context what is important is that if India had not come into the net of imperialism, the wealth that got drained away to the imperial country would have remained within and contributed to economic progress and innovation. Prabhat Patnaik has rightly argued that, ‘…India, whose economic structure was not dissimilar to Japan’s could if left alone have conceivably followed the latter’s example, but their very exposure to European capitalism sabotaged this prospect’ [54].

Thirdly, imperialism in India was diffuse to a great extent through policies like Subsidiary Alliance, Doctrine of Lapse etc. British imperialism in India worked through the institutions that it had created. This included the economic structures, the legal system and medium of education. The way the non-economic variables were geared to requirements of imperialism can be gauged through objectives of education as laid down by British policy. Macaulay in his minute of education (2-2-1835), regarding English as a medium of instruction for education said, “We must at present do our best to form a class who may be interpreters between us and the millions whom we govern, a class of persons Indian in blood and colour, but English in tastes, in opinions, in morals and in intellect". It is interesting to note that even after more than a century of introduction of English as a medium of education, the literacy level in India was abysmally low. And not all of who were literate were of the English medium. This meant that the potential for development of human resources and human capital was also stymied. The education system could not emerge in the right direction. The education system that the British introduced in India was no different than the traditional liberal system of India, the only difference was that this time this was in the English medium and non-religious in nature. It continued to have the generalist non-technical orientation of earlier times.

Fourthly, a related issue is that of westernisation/ modernisation. Often it is argued that modernisation of values and mode of living was a consequence of British rule. This is only partly true. If we analyse the major reform movements, we would find that most of these reform movements of 19^th and 20^th century that attempted to modernise the society took place as an internal regeneration process. As K.N. Panikkar has observed, “It was not just an attempt at religious revival and glorification, but an intellectual inquiry into the past, embracing almost every field of social, cultural and political endeavour…to suggest that the present was not an index of what Indians were capable of. Implicit in this was the assumption that regeneration and restructuring of the existing cultural complex was necessary pre-requisites for the realisation of this potential. Hence the Indian mind increasingly turned inward.” [55] Most of the time, the British were hostile to such movements and played a reactionary role, particularly after 1857. And more often than not, these progressive reform movements in some ways or other provided the philosophical inspiration to the freedom struggle. But even such a process was not devoid of the economic idiom and recognised the need of economic regeneration of the country.

These above two issues can be said to be important in the context that there was an inherent recognition of the economic dimension of society and that India was not just ’spiritual’ as is often thought of in the Western myth making of India. This combined with the fact that gradually there would have emerged a stream of technical education in the country had it not come under the imperial folds. This issue can also be related to the issue of proto-industrialisation. It is considered by Historians that India had a situation of proto-industrialisation that resembled similar developments in England relating to methods and organisation of production, at the same period of time during the centuries prior to industrial revolution in Britain. [As an aside, sometimes I feel that going by the nature of active manufacturing and trade that existed in the subcontinent, it seems as if this was the place where materialism was born; infact an active spiritual activity could only exist when there would be funds to subsidise such activities.]

Fifthly, the question in regard to economic betterment is, to what extent could India have improved on its condition, if the factor of British imperialism was not there. This relates both to the economic dimensions as well as the industrial dimensions. For sure, the drain would not have occurred. India’s ability to translate this wealth into one of international competitiveness would have depended on to what extent could Indian technologies have improved (and also innovated) by the capital accumulation and continued to compete or even challenge the goods of industrial revolution. It was more likely that India could have gone the way of industrialisation akin to one found in other countries of Europe- this was because, India already had the proto-industrial, entrepreneurial and commercial setup. And in a competitive economic situation, increase in population would have meant that as in countries like France and Germany, it would have encouraged adoption of the technologies that had transformed Britain. However British involvement in India led to a situation where due to various reasons of economic impoverishment, it also impacted on the population trends that remained either stagnant or even showed declining tendencies.

Equally valid question is that could Britain continue with its industrial revolution in absence of subsidised raw materials from its colony? Wouldn’t have Britain needed to buy those raw materials in a competitive market, if the market would have worked according to the laws of demand and supply? And in such case could it bear the costs of translating the technological innovation into factory production? When we think of industrial revolution, we need to segregate the scientific know-how to that of commercial product that involves translating that science into technology that has commercial application or utility is an economic environment of the market. It was here what we call the ‘industrial revolution’, where the factories would need to function within the ambit of the market with large-scale production that goes beyond the serendipity of scientific innovation. This transformation of science, to that of technological application, was a direct development largely deriving from political subjugation of the colony. The political factor was too important in deciding the economic fortunes and the trajectory of development, than the purely technological or economic factor. To put it in a more understandable manner- in our times, we have many environmental friendly technologies, or more precisely scientific know-how. But these currently have no use. This is because their manufacturing costs are prohibitive and consequently their market is either non-existent or extremely limited (who wouldn’t wish to have a electric fuelled car or be happy with sea water converted to potable water?) What actually transforms the future technologies to current technology? Is it just the technology per se? Now a similar analogy holds for Britain if it had not undertaken the imperial enterprise. Development of technology is no guarantee for its success in the market place. If the raw material like cotton was not available cheaply, or political tariff differentials were not used, the presence or absence of technology would have hardly been a significant variable for the Lancashire manufacturers. Burns et al point out that, “The English possessed a merchant marine capable of transporting goods across the world, and a navy practiced in the art of protecting its commercial fleets…English entrepreneurs and technicians responded to the compulsion by revolutionising the production of cotton textile goods. Although far less cotton goods were made in eighteenth century England than wool…Tariff prohibiting the importation of East Indian cottons, imposed by Parliament to stimulate the sale of woollen goods, had instead served to spur the manufacture of domestic cotton.” [56].

One advantage leads to another. So we get a highly subsidised manufacturing base that was driven by cheap raw materials from the colony. The other dimension of this is equally relevant. The colony worked as a captive market for those manufactured textiles and later on other products like the railways. If such were not available, then the whole business would have again faced tremendous difficulties, hardly worth the trouble to keep running the revolution, if it was not paying enough. It is after all the market that decides the manufacture- not the other way round. It is hardly useful to think that a non-colonised India would have preferred imported cotton goods over its own domestic production- when such cotton goods even without machine technology (and despite of the tariff restrictions & the process of de-industrialisation) could hold on their own in Britain till the early 19^th century. Left to itself, it is quite possible that the trajectory of industrial development in Britain would have followed a slower path as was followed by others.

In the larger context of imperial-colonial relations, it also explains why the countries of South, the erstwhile colonies, would be poor despite their resources and raw materials. Imperialism thus has deep economic implications that adversely affect all facets of life by creation of enduring unequal structures.

Bibliography:

[1] George Campbell (1882), John and Richard Strachey (1882), Henry Maine (1887), W.W.
Hunter (1880), Gen. Chesney, Lord Curzon, T. Morrison etc.

[2] Bipin Chandra (1979), Nationalism and Colonialism in Modern India (New Delhi:
Orient Longman), p. 84.

[3] R.J. Barandse (2002), The Arabian Seas: Indian Ocean World of The Seventeenth Century, (New York: M.E. Sharp) p. 299

[4] R. Palme Dutt (1940), India Today, (Calcutta: Manisha Granthalaya; First Published in England by Victor Gollancz, 1940) p. 106

[5] Adam Smith, The Wealth of Nations, p. 176, (Penguin, 1986)

[6] Radha Kamal Mukherjee, Chap XXI, The History and Culture of Indian People (ed. R.C.
Majumdar), (Bombay: Bhartiya Vidya Bhavan), Vol 8, p. 749

[7] Radha Kamal Mukherjee, p. 747

[8] ibid, p. 748

[9] Tara Chand (1961, 1965), History of Freedom Movement in India, vol-1, (New Delhi:
Publications Division), p 290

[10] Quoted in R. Palme Dutt, 108

[11] Eric Stokes, The English Utilitarians and India, (Oxford University Press,
Delhi, 1989), p. 87

[12] Sumit Sarkar (1983), Modern India 1885-1947 (Macmillan India), p. 33

[13] R.C. Dutt (1901, 1903), The Economic History Of India, Vol I & II, (New Delhi:
Publications Division), I: 262

[14] Brij Narain’s series of prices of coarse rice in Bengal, Indian Economic Life Past
and Present (1929), mentioned in Irfan Habib, p. 302.

[15] Report of the Commission of 1892 into the working of the Deccan Agriculturists’ Relief
Act, evidence of how the Land Revenue is Paid, table given in R. Palme Dutt, pp. 250-51

[16] R. Palme Dutt, pp. 252-53

[17] Particularly authors like Morris D. Morris,Tom Kessinger etc. in Cambridge
Economic History of India, Vol-II, Cambridge, 1982

[18] R.C. Dutt, I: 29

[19] Quoted in R. Palme Dutt, p. 118

[20] R. Palme Dutt, p. 119,

[21] R. Palme Dutt, p. 203,

[22] Roy Macleod and Deepak Kumar (1995), Introduction: Western Technology and British Rule, in Technology and the Raj eds. Macleod and Kumar (New Delhi: Sage
Publications, 1995), p. 11

[23] Daniel R. Headrick (1981), The Tools of Empire: Technology and European Imperialism in
the Nineteenth Century (New York: Oxford University Press), p. 10, 206

[24] Satpal Sangwan, The Sinking Ships: Colonial Policy and the Decline of Indian
Shipping, 1735-1835, p. 138, in Technology And The Raj.

[25] Regulations for the Registry of Ships built in India and the Employment of Lascars (1814),
ibid, p. 152

[26] Sumit Sarkar, ibid, p. 37

[27] R.C. Dutt, I: 206

[28] Quoted in R.C. Dutt, II: 248.

[29] Sumit Sarkar, p. 38

[30] ibid, p. 38

[31] ibid, p. 37

[32] Ian Derbyshire, The Building of India’s Railways: The Application of Western
Technology in the Colonial Periphery 1850-1920, in Technology And The Raj, p. 201

[33] Arthur Cotton in front of a Select Committee (1872) headed by George Hamilton reported
to it, “The Railway account now stands thus:

For which we have about 7,500 miles, or at the rate of £ 23,000 per mile. At the present cost to the Treasury in interest on share capital 4 ½ millions, and on land and debt at 4 per cent, 3 millions; total 7 ½ millions. From which deducting net receipts, 4 ½ millions, leaves three
millions a year as the loss on the money sunk.” Quoted in R.C. Dutt, II: 254. As R.C. Dutt observes in the following p. 255, “But the great point which Sir Arthur Cotton made was that railways were no protection against famines”

[34] R.C. Dutt, I: 206

[35] Ian Derbyshire, p. 202

[36] Arun Kumar, Colonial Requirements and Engineering Education: The Public Works
Department, 1847-1947, in Technology And The Raj, p. 229

[37] Gregory Clark and Robert Feenstra, Technology In The Great Divergence, Working
Paper 8596 http://www.nber.org/papers/w8596
Prepared for the conference “Globalization in Historical Perspective.”

[38] Saroj Ghose, Commercial Needs and Military Necessities: The Telegraph in India,
in Technology And The Raj, p. 153.

[39] Bipin Chandra, pp. 97-98.

[40] Bipin Chandra et al p. 96

[41] I use the term power-arrangement, because after 1833, EIC was striped of its commercial
interests, and was to continue its function of territorial government as an agent of the sovereign British power

[42] R.C. Agarwal (1991), Constitutional Development And National Movement Of India, (New
Delhi: S. Chand & Co.), pp. xxvi-xxvii,

[43] B.L. Grover & S. Grover (1999), A New Look At Modern Indian History, (New Delhi: S.
Chand & Co.), p. 625

[44] Quoted in R.C. Dutt II: 399

[45] Bipin Chandra et al, p. 97

[46] Sumit Sarkar, p. 38

[47] A. Tripathi, History and Culture of Indian People, ed. R.C. Majumdar,
Vol-IX, p. 1097 (Bombay: Bharatiya Vidya Bhavan)

[48] ibid. p. 1098

[49] Sumit Sarkar, p. 39

[50] Bipin Chandra et al, p. 56

[51] Tara Chand, III: 49-50

[52] R. Palme Dutt, p. 118

[53] Quoted in R.C. Dutt II: 393, 395

[54] Prabhat Patnaik (1995), Whatever Happened to Imperialism and Other Essays, (New
Delhi: Tulika, 1997), p. 16

[55] K.N. Panikkar, Culture, Ideology, Hegemony: Intellectuals and Social Consciousness in Colonial India, (Tulika, paperback 1998), p. 107

[56] Burns, Ralph, Lerner and Meacham (1986) World Civilization Seventh Ed. p. 950

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