The Brexit Bill Is not as Bad as the India Bill

Tuesday 20th November 2018 15:27 EST

The UK will be paying the EU a Brexit bill for leaving. What about the bill to India? When I was reading politics at University this was an area of my studies in the subject of British Political History which was one of my chosen subjects. 

Data is the hardest part and of course some economists, a minority, maintain India economically benefited more than the cost of Empire. You can make economics say anything as the Brexiters know. 

But now, this past week an economist has put some figures together. Her name is Utsa Patnaik. And here are the key points highlighted in Mint and other Indian publications and Columbia University Press – and I quote: 

Over roughly 200 years, the East India Company and the British Raj siphoned out at least £9.2 trillion (or $44.6 trillion; since the exchange rate was $4.8 per pound sterling during much of the colonial period).

In the colonial era, most of India’s sizeable foreign exchange earnings went straight to London.

There was virtually no increase in per capita income between 1900 and 1946, even though India registered the second largest export surplus earnings in the world for three decades before 1929.

Because the purchasing power of ordinary Indians was being squeezed by high taxes, the per capita annual consumption of food grains went down from 200kg in 1900 to 157kg on the eve of World War II, and further plummeted to 137kg by 1946. No country in the world today, not even the least developed, is anywhere near the position India was in 1946.

From 1765 up to the takeover by the Crown, the East India Company was using upto a third of net revenue collections to purchase export goods from the peasants. A large part of the producer’s own tax payment simply got converted into export goods, so the Company got these goods completely free. 

How was it possible for Britain to export so much capital—which went into building railways, roads and factories in the U.S. and continental Europe? Its money to these regions were being settled by appropriating the financial gold and forex earned by the colonies, especially India. (Or in the language of economics, the balance of payments deficit with the US and Europe by Britain, was plugged by capital from the colonies with which it ran a current and capital account surplus thanks to some financial instruments engineering at the Bank of England). 

In the Cambridge Economic History of India, for example, there is not a single word on the stringent protectionist policy against Asian textiles that Britain maintained from 1700 to 1846. Nor is there a single word on Britain’s appropriation of India’s entire export surplus earnings for 180 long years from 1765 to 1945.

Now we know the mechanism of extraction of wealth, not just through taxation, but also the double whammy that by removing that capital, you prevent the local economy from importing innovations and modernising. So you dwarf it’s growth and make it even poorer.

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