Economic Legacy of Colonial Rule Revisited

Author(s): TIRTHANKAR ROY

Source: Economic and Political Weekly, Vol. 50, No. 40 (OCTOBER 3, 2015), pp. 75-78
Published by: Economic and Political Weekly
Stable URL: https://www.jstor.org/stable/24482630
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DISCUSSION

transformation of these places over

Economie
Economic Legacy of 200-250 years from fishing villages to

Colonial Rule Revisited

trading ports to leading Asian hubs of
modern business is one of the most
extraordinary facts of Indian history and
has few paralles in the tropical world. By
tirthankar Roy 1914, the fourth largest cotton textile
TIRTHANKAR ROY

mill industry in the world financed and

Continuing thedebate
Continuing the debate
on on
thethe "IT thank the three authors ("Historio- managed by Indians had come up in
rule, I 8raphy sans History: A Response to Mumbai. A third of the cotton spindles
economic legacy of colonial rule
. . j -, . Alirthankar Roy", Banerjee et al) of a in use outside Western Europe and the
the author responds to Banerjee
e au or respon S Ο anerjee review of my paper ("The Economic United States was installed in India, and
et
et al's
al Scritique
critiqueof of
hishis
essay, also also Legacies of Colonial Rule in India: over half of the spindles installed in the
essay,
published ininepw.
published EPW. Another Look," Roy 2015) for writing a tropics was in India. The transformation
wide-ranging essay on how economic of these cities cannot be fully under
change in colonial India may be rethought, stood by reducing it to the number of
There are insightful reflections in the machines or factories. The process inclu
article, pointing out areas of enduring ded growth of corporate banking, insur
debate on the long-term pattern of eco- ance, technical schools, hospitals, uni
nomic change in India. The particular versities, and public services,
theme on which the intervention is at Second, India was a net exporter of
its best is the link between ideology and goods and a net importer of services dur
historiography. The essay can be seen as ing much of this time span. The port cities
a stand-alone piece in that respect, and in particular attracted skilled services as
acknowledges as much by stating that it well as capital from abroad, and these
uses my article only as "a point of entry." payments and remittances were paid for
Fair enough. Yet, much of the essay is in by a trade surplus. Third, agriculture wit
fact a criticism, and not only of the article nessed little growth (Chart 1). Agricul
to which this is a response, but also my tural productivity was among the lowest
views on other topics in Indian economic in the world, and remained stagnant,
history published earlier. These views are There was growth in agricultural produc
presented in the review without a serious tion, encouraged by exports and public
discussion of the evidence that I had investment, but this growth was enabled
used. Thus dismembered, my research mainly by bringing new land under culti
may appear to the reader as a bundle of vation. It stopped when public investment
assertions. I will let this pass, and restrict slowed and the land frontier was reached,
myselftoabriefrejoinderonthetwomain These three stylised facts derive from
questions in Roy (2015). First, what did I standard national income and balance
say about economic legacy and on what of payments datasets, with which no se
grounds did I say it? Second, how should rious disputes exist. At any rate, Banerjee
that thesis change the mode of writing et al do not question these facts,
economic history? I will suggest that
Baneijee et al misread both the thesis Openness of Port Cities
and the analytical narrative in my paper. Roy (2015) tried to bring these three
stylised facts into a consistent story. The
History keyword is openness or cosmopolitan
The thesis on colonial legacy in Roy ism of the port cities. The British Empire
(2015) is based on three stylised facts, was a highly open economy. It also
First, between 1900 and 1946, private served private enterprise better than the
enterprise outside agriculture more than postcolonial state did.1 The property and
doubled in size (Chart 1, ρ 76). The most commercial laws set up during the colo
Tirthankar Roy (t.roy@lse.ac.uk) teaches at striking aspect of that development was niai times did not discriminate against
the London School of Economics and Political industrialisation in the three port cities, people by ethnicity. Regulatory laws
Science
1 Mumbai, Kolkata and Chennai. The were minimal and formal freedom of
Economic & Political weekly Q253 October 3, 2015 vol l no 40 75

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DISCUSSION ξ

Chart 1: National
Chart 1: National Income
Income 1900-46 1900-46
(Rs million (Rs
at 1938-39 million at 1938-39 Prices) India's emergence in distinct discourses that agreed on the
Prices)

i4,ooo the way described point that the British Empire impover
~HB and quantified above ished India by transferring surplus from
10,000
cannot be explained India to Britain via factor payments
by textbook theories (called drain) and by destroying indige
8,000
of late development, nous industry to promote British exports
■ Economic moderni- (called deindustrialisation). There were
H sation needed capi- factor payments no doubt, and there was
■ tal and certain kinds some decline of industry. But these do
of skills, which were not explain the broad pattern of eco
Primarysector
Primary sector Government
Government Private
Private non-agriculture Scarce and expen- nomic change. There Was Overall
non-agriculture
Basedonondata
Based data
in SinSivasubramonian,
S Sivasubramonian,
NationalNational
Income ofIncome
India in of
theIndia m the
Twentieth Twentieth
Century, Century, SlVe in îçth Century growth, not decline, of non-agricultural

New Delhi: oxford university Press, 2000. India. How these enterprise despite drain and deindustri
New Delhi: Oxford University Press, 2000.

enterprise much greater than in the late obstacles were overcome is a puzzle that alisation. What was called drain was
20th century. Modern capitalistic enter- theorists of late development have not dominated by payment for skills that
prise gained from the open economy, by tried to solve. Followers of Alexander Gers- contributed to capitalistic enterprise,
accessing scarce skilled services more chenkron, who have coined phrases like Further, in my story, drain and deindus
cheaply and more easily than otherwise, "developmental state" tend to be fixated trialisation cannot explain Indian pov
Openness delivered growth impulses by on the activist government. For many of erty, because these processes cannot
reducing transaction costs in knowhow. them world history is the history of the explain why land yield was low and
And the import of new skills and knowl- South Korean state. They have not at- stagnant. The colonial state failed, not
edge was funded by the commodity tempted to explain the origins of Indian because it maintained an open economy,
trade surplus. industrialisation, behind which the state but because it chose to remain small,
If manufacturing industry and urban had little direct contribution, in a seri- which made it incapable of delivering an
services were the areas most touched by ous way. Marxists have missed noticing agricultural revolution, if at the tax
commodity and factor market intégra- the counter-intuitive nature of colonial payer's expense.
tion, agricultural productivity, being set India's emergence. My story of factor At a broader level, the left-nationalist
by geographical conditions and there- market integration explains both the critique of colonial economy stemmed
fore less responsive to imported skills, emergence as well as why the growth from a fixation with industrialisation
did not change. Raising land yield in a impulse was restricted to the port and, in turn, from an implicit belief that
monsoon tropical region was a problem cities mainly. the British model of economic moderni
that did not have a solution until the I do not find anything in Banerjee et al sation was the universal model for the
Green Revolution of the 1960s. In turn, that disputes the three stylised facts that rest of the world to follow. Economic
the Green Revolution succeeded in rais- my story builds upon. In turn, their use historians have steadily discarded that
ing productivity of land thanks not only of facts I find naïve. For example, they Anglocentrism, and moved closer to a
to new knowledge, but also to massive cite Paul Bairoch's finding that India view first articulated by Simon Kuznets
subsidisation of inputs by the state. It made 20% of world manufacturing out- that the defining feature of "modern"
needed a large state willing to cross- put in 1800 and 2% of it in 1900, and economic growth was acceleration in
subsidise agriculture with taxes charged suggest that this indicates changing productivity, with or without industrial
on non-agricultural incomes. The Empire specialisation, perhaps an Indian decline, isation. Kuznets thought that the devel
was constrained by its own ideological It does nothing of the sort. All that this opment and spread of knowledge were
biases to remain a small state and avoid statistics says is that world gdp grew important factors behind the accelera
fiscal innovations. four-fold between 1820 and 1913, led tion in productivity. Roy (2015) suggests
Openness as such was nothing new in by huge increase in industrial produc- that modern economic growth did hap
India, as Banerjee et al rightly point out. tivity in Western Europe and North pen in India, but in areas where trade
But the scale of factor and commodity America, and the rest of the world fell costs were low, and which were moreo
movements was many times larger in behind in productivity growth. The rest ver exposed to factor movements and a
the 19th century world than in periods of the world included colonies like India cosmopolitan milieu,
before. And an open border to skills in and free countries like China. If the The view that openness and cosmo
the 19th century meant access to a dif- world became divided between rich and politanism were good things led me to
ferent level of capability than in times poor between these years, colonial say that the retreat from cosmopolitan
before, because of the scientific and agency cannot be inferred from these ism after 1947 was bad for Indian devel
technological revolution that was under percentages.2 opment. Banerjee et al suggest that the
way in the more recent times. What was Roy (2015) a critique of? My 1950s and the 1960s were good times for
Why do I emphasise openness and factor target was a body of ideas that I desig- foreign firms in India. I think they are
movements so much? I do so because nated "left-nationalist," meaning two wrong. It is true that many multinational

76 October 3, 2015 vol l no 40 mAvi Economic & Political weekly

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 DISCUSSION

companies came in. But that was not The truth is that the post-independence The small quantity of research in eco
because the government was particularly growth in India owed in a large meas- nomic history emanating from Indian
friendly, but the multinationals wanted ure to taxpayer's money spent on agri- universities and published in interna
to jump the tariff wall and sell goods cultural inputs and low productivity tional journals shows how badly,
to Indians. It is also true that many tech- projects, whereas the free market growth Banerjee et al do not go quite as far as
nical collaborations were signed in these was based on commercial and corporate that, but stay close to the moralistic
years. This was because approved tech- profits. The latter was a more sustain- approach. They intend to expose "the
nical collaboration agreement was more able pathway. role of ideology in economic history
or less the only way that technology Where did the aggressive cocktail writing." They then criticise me for impli
was allowed to come in. It was increas- of xenophobia and statism in India come citly denying "the possibility of any inter
ingly difficult, almost impossible, to buy from? The answer lies in a misreading pretation or narrative of Indian economic
machines and hire engineers, managers of the colonial Indian economic history, history serving imperial imperatives"
or scientists from the world market, which This brings me to the issue of histo- (p 124). I have nowhere denied that
was easy enough to do around 1900. I riography. history can and did serve the Empire
cannot assess their aggregate data when it existed. Nor can anything that
because these come from dated sources. Historiography Roy (2015) said be construed as an eco
As far as I know, foreign direct invest- One of my complaints against the Indian nomic history serving the imperial im
ment as a proportion of capital stock was Marxists is that they do not want to con- perative, whatever that phrase means,
nearer 10% before World War 11, dropped duct an honest debate on economic My article said that openness and cos
sharply to 2% after independence history. Consider the following example, mopolitanism delivered good economic
(Twomey 2000: 118), remained depre- The Empire was many things at once—it results. That does not amount to saying
ssed, and regained the interwar level was a despotic rule and it was an agent that the lack of liberty under the Empire
around 2002 or 2003. There is plenty of of economic globalisation. My view is was either necessary or benign. Freedom
evidence showing that British firms were that the open economy during colonial of enterprise and the freedom to choose
disturbed by the new tax laws, capital times had more benefits than has been governments are two distinct qualities
controls, and forced Indianisation of acknowledged, and that Indian poverty of a political economy, and economists
management. There was attrition of cannot be attributed to openness. This still have not finished understanding
capital and loss of value of tangible and position does not, and does not need to, whether or not there is any stable and
intangible assets of a large number of comment on whether colonialism as a universal relationship between them at
exporting British firms after they were political system was either good or bad. all. To reiterate, Roy (2015) simply made a
taken over and mismanaged by incom- Critics of my work on economic history, case for openness. That case has nothing
petent and often corrupt Indian business however, label me (as a person I sup- to do with being for or against the
houses. This particular cost of state fail- pose) as "neo-colonial" and an "apolo- Empire as a political system. That politi
ure has never been properly assessed. gist of colonialism" (Bagchi 2010 and cal debate ended a very long time ago.
I called the ideological package that Mukherjee 2010). There is a subterfuge And in any case it does not matter to
led to a retreat from cosmopolitanism here. To someone who has not read my what I was doing.
"economic nationalism." Banerjee et al work, the labels will give the impression I hope I have made my position clear,
criticise this approach on the ground that that I defend despotic rules, which is a But I cannot quite place where Banerjee
protectionism has a strong and proven terrible thing to do. Having captured the et al come from. They say that they are
case, even within economic history. In- moral high ground, the Marxist critics using my article as "a point of entry."
deed it has. That argument does not af- win the intellectual argument even before Point of entry into what? It is certainly
feet my case that free factor markets it has begun. But if abusive personal not economic history in the way my pro
helped India's economic modernisation, labels are a good battle strategy, they fessional colleagues understand it. Reas
Furthermore, nationalism was much are a conversation-stopper. And as such, suringly for me, among the historiogra
more than protectionism; it consisted the strategy has served research badly, phies they seem to disapprove of, there
of a regulatory state, closure of factor
markets, and raising tariffs so high as to EPW Index
hurt exports. That particular mix did not
exist in the 19th century world. Econo An author-title index for EPW has been prepared for the years from 1968 to 2012. The PDFs of the

mists glibly justify that mix by saying Index have been uploaded, year-wise, on the EPW website. Visitors can download the Index for

that gdp growth rate was higher in the all the years from the site. (The Index for a few years is yet to be prepared and will be uploaded

post-war period than in the free market when ready.)

era. This is one of the many half-truths

EPW would like to acknowledge the help of the staff of the library of the Indira Gandhi Institute
peddled in a 2011 book written by the
of Development Research, Mumbai, in preparing the index under a project supported by the
Cambridge economist Ha-Joon Chang— RD Tata Trust.

an author cited in Banerjee et al (2015).

Economic & Political weekly EQQ3 October 3, 2015 vol l no 40 77

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is New Institutional Economics, as well there may be useful stuff here. But col- Banks Ease of DoingBank's Ease of
Business Doinghttp://
index, Business Index, http://
r t, I,·, j ι ι ι · ι ι ■ , ι·· r www.weforum.org/reports/global-competi
www.weforum.org/reports/global-competi
as a range of recently published books lectively this reference list is as far away tiveness-report-2014-15, https://www globa
tiveness-report-2014-15, https://www.globa

., 1 rτ*. · · · j· · 1· τ · · Home, http://www.doingbusiness.org/reports

linnovationindex.org/content.aspx?page=GII
on the British Empire, which emphasise from ongoing debates and controversies linnovationindex.org/content.aspx?page=Gii
Home, http://www.doingbusiness.org/reports
the role of the Empire in connecting peo- in my discipline as I can imagine. (all three aPccessed on 205July
(all three 2015).
accessedfhe rank.
on 20 July 2015). The rank
pie and creating entrepreneurial choices. ings reflect in a large ings
measure
reflect in a the regulatory
large measure the regulatory
Their aDDroved list contains Errwire bv Conclusions regime erected
1 neir approveu hsl contains Empire oy 2 The mQSt rehable estimatesafter 1947.
regime erected after 1947.
that
The most reliable we that
estimates now have
we now have
suggest
Michael Hardt and Antonio Negri. This It is necessary to reiterate, and I say this suggest that between 1750that
andbetween 1750 and
1800 there was1800 there was
a growth of GDP in industry and commerce in
is a book written ,o question Ameriean in all sincerity, th., Banerjee e. al have India (about 30%), and that between 1800 and
1850 there
influence rather than write the history of produced a fine piece of scholarship. 1850 there was a decline was20%),
(about a decline
but(about
nei 20%), but nei
ther episode left a significant impact on total
European expansion in the 19th century. Well-read and often thoughtful, it does GDP.See^BroS^
GDP. See S Broadberry et al °" t0ta'
(2015).
The book has been more or less ignored what a good critique ought to do, which
by journals in economic history. As for is, not to demand agreement, but to aid references
REFERENCES

politics, it makes a thesis that, in the reflection and rethinking. But I also Bagchi, Amiya (2010):Bagchi,
Colonialism andColonialism
Amiya (2010): Development,
and Development,

. i· · r ι · Banerjee, Arindam, Chirashree Das Gupta and

New Delhi: Oxford University Press.
words of one reviewer, "orbit[s] so far from think that my piece and their response New Delhl: 0xford University Press.
Banerjee, Arindam, Chirashree Das Gupta and
the concrete realities of contemporary speak at cross purposes. I am trying to surajit Mazumdar (2015): "Historiography sans
Surajit Mazumdar (2015): "Historiography sans

, j 1 · 1 . . 1 11·/* 1 1 nomic & Political Weekly, 50(35), pp 124-32.

History:
change that...readers see little but clouds, construct a story from facts. Their inter- History: a Response toATirthankar
Response to Roy,"
Tirthankar
Eco Roy," Eco
nomic & Political Weekly, 50(35), pp 124-32.
hazy seas, and nothingness beyond est is in the belief systems that produce Broadbeny, s, J Custodis and S,ΒJGupta(2015):"India
Broadberry, Custodis and Β Gupta (2015) : "India
(Tilly 2002). Banerjee et al take inspira- stories. Like my peers in the field, I have and the Great Divergence: An Divergence:
and the Great Anglo-Indian An Anglo-Indian
Comparison of GDP Per Capita, 1600-1871," Ex
tion from Nicholas Dirks, who, to the my biases, and may be such biases are Comparison of gdp Per Capita, 1600-1871," £x
J J plorations in Economic History,
plorations in55(1), pp 58-75.
Economic History, 55(1), pp 58-75.
best of my knowledge, has not published killing economic history. But a critique Ha-Joon, Chang (2011):Chang
Ha-Joon, 23 Things
(2011): They Don't
23 Things TellDon't Tell
They
anything in a journal that economic so disengaged from professional dis- You About Capitalism,.Penguin,
You About Capitalism, Penguin.
Mukherjee, Aditya (2010): "Empire: How Colonial
historians usually read. courses is unlikely to convince me, or India Made Modern Britain", Economic & Political
To cut the story short, Banerjee et al anyone, to rethink the biases. Weekly, 45(50), pp 73-82.
Weekly, 45(50), pp 73-82.

have a selection bias issue that they Roy, Tirthankar (2015): "The Economic
Roy, Tirthankar Legacies
(2015): "The of of
Economic Legacies
Colonial Rule in India: Another Look," Economic
either do not see or do not acknowledge,
NOTES notes & political Weekly, 50(15), pp
& Political 51-59.
Weekly, 50(15), pp 51-59.

They approach the subject from an angle l Threeι comparative

Three comparative
indices indices on institutional
on institutional Tilly,
Tilly, Charles Charles
(2002): (2002): "Review
"Review of Empire,"
of Empire," Canadian
Canadian
quality Journal of Political Science, 35(1), pp 224-25.
represented bv an eclectic mix of Marxist quality a11 rankallIndia
rank low
Indiain
low in recent
recent years.
years' Journal of Political Science, 35(1), pp 224-25.
" y These are the Global Competitiveness
TheseIndex, Twomey,
are the Global M (2000):
Competitiveness Index, A Century
Twomey,of Foreign
M (2000): Invest
A Century of Foreign Invest
and postcolonial writings. Individually the Global Innovation Index, andIndex,
the Global Innovation the World
and the ment
World in the Third World,
ment Abingdon:
in the Third Routledge.
World, Abingdon: Routledge.

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