Thoughts on economics and liberty

While the British did drain economic surplus from India for a while, they left it richer than they found it

The drain theory is correct – at least to an extent. There WAS a fair bit taken out of India.

But first the innovation of the British rule created ADDITIONAL wealth to what was already found in India, and then took out a bit of that additional wealth. The net result was that India was left slightly RICHER than it was before the British came to India.


It is a lie that the West “exploits” the world. The West offers INTEGRITY and OPPORTUNITY – two things that neither India or China offer. That is not exploitation.

As a result of integrity and opportunity, the best brains of India and China come to the West to live and contribute. The history of trade over the past 200 years will also conclusively set right the falsehood about the West “exploiting” the developing world. Most Western nations lost big money in their colonies, but most importantly, most of their trade was WITHIN the developed world, since there was literally nothing of value that the developing countries offered. Look at the flow of world trade in the past and you'll be amazed how little came from the colonies.

These Marxist ideas of “exploitation” – that you are referring to – were introduced by people like Nehru – and he has successfully converted the whole of India into unthinking parrots who chant this mantra of “exploitation”. 

As if there was this huge pile of money in India which the West "took". Well, the fact is that the West has created its wealth almost ENTIRELY (99.99 per cent) through its own innovation and creativity and scientific progress.

Yes, there is some merit in Dadabhai Naoroji’s theory, but very soon thereafter the situation was to reverse badly, leaving England with a big financial drain called India. The fact, though, is that when you grow SIXTY times in 200 years, you don’t do by stealing from another poor man.

Let’s say there are two poor men A and B. Poor man A steals from poor man B. Can A become 60 times richer than B by stealing?

And note that Indians were SLIGHTLY RICHER at the end of British rule than before British rule – by virtue of ordinary osmosis of technology. So the truth is that it was INTERNAL INNOVATION and freedom of the West that created their wealth. And yes, many (not all) were racists, and otherwise contemptible. Just like many Indians today with their deep casteism and religious bigotry are contemptible. Disgusting people have existed (and exist) in all societies. We should pin down individuals and not entire societies. There was ENORMOUS good in the West and there were extremely fine people in the West (and are), just as there are – some – excellent people in India in the midst of the most disgusting corrupt, ignorant and bigots.

And finally this email today:

See attached extract from The World Economy: Historical Statistics by Angus Maddison, the definitive comparative statistics in the field of economics. Maddison, who died a few years ago, spent an entire lifetime mainly on this project – of building up an understanding of the world economy from all possible records he could get hold of. 

According to this book, India's per capita income increased from $533 in 1820 to $618 in 1947. The income varied quite a bit, largely as population changed quite a bit (famines, etc.). For instance, the highest was $728 in 1929. Overall, however, India became SLIGHTLY RICHER after British rule, just as it became slightly richer after Mughal rule. I don't attribute increased prosperity positive actions from the respective government but due to the (slow and steady) spread of technology, including things like railways, steam boats, telegraph, motor cars, etc.

Here is the link (PDF) to the relevant Angus Maddison data cited above.


Could India have become even richer without British rule? This is a deeply counter-factual question to which no one can provide an answer. We can definitely say, though, that without the British, it was highly unlikely that India would have become united as a single nation. Without British rule, it is unlikely that idea of liberty, science and good governance brought by people like Macaulay would have been absorbed in India. It was these ideas which gave India its liberal constitution. Despite the mess subsequently created by Nehru and his socialist godchildren (including Congress, BJP and AAP), the constitution has broadly served India well.

Yes, there would have been fewer famines, fewer atrocities but almost certainly more internal wars.

The key is that the West grew largely OUTSIDE of its colonial relationship/s. Science technology and innovation happened in the West, not in the colonies. The colonies partially benefited from technology but they were not pivotal in the rise of the West.

So Naoroji was perhaps partially right, but he forgot that the key driver of British wealth was its internal ingenuity. It was becoming fabulously rich not because of the colonies but because it had found the secret of wealth creation – within. 

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Sanjeev Sabhlok

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