It pays to be free- How the British exploited their colony India
From taxation to opium dens, the British used a variety of ways to loot India. Some of these ways are described in the book ‘The Case for India’ by Will Durant. Will Durant visited India in 1930 to study its cultural history. He was so ‘horrified’ by ‘oppression, bitterer than any to be found elsewhere on the earth’ that he wrote this book. In this note, I will summarize the methods of economic oppression described in the book.
Let us begin with the biggest instrument of oppression — taxation.
Taxation without representation
The British were attracted to India because it was a very rich country. They came here to make their fortunes. In the words of Robert Clive, the first British Governor General of Bengal Presidency (for East India Company),
“When I think,” he said, “of the marvelous riches of that country, and the comparatively small part which I took away, I am astonished at my own moderation.”
Unfortunately, Clive was not really as moderate as he thought. The tax on farmers ranged from one fifth of the produce to half the produce and this tax was extracted ruthlessly. F.J. Shore, British administrator in Bengal, said this in the House of Commons,
“The fundamental principle of the English has been to make the whole Indian nation subservient, in every possible way, to the interests and benefits of themselves. They have taxed to the utmost limit; every successive province, as it has fallen into our possession has been made a field for higher extraction; and it has always been our boast how greatly we have raised the revenue above that which the native rulers were able to extract.” (emphasis mine)
Under the company, the provinces were taxed ‘so exorbitantly that two-thirds of the population fled’. The taxation was often lower in principalities ruled by what were called ‘Native princes’. But these ‘Native Princes’ came under relentless pressure from the British. Large sums of money could be taken by the British to change rulers and then those rulers in turn would tax their subjects. As Durant describes
“Clive had set up Mir Jafar as a ruler of Bengal for $6,192, 875; Clive’s successors deposed him and set up Mir Kasim on payment of $1,001,345; they restored Mir Jafar for $2,500,825; two years later they replaced him with Naji-ud-Daula for $1,151,780.”
In addition to the contributions that the rulers made to the treasury of the company, the British often demanded bribes. For example,
“Warren Hastings exacted contributions as high as a quarter of a million dollars from the native princes to the treasury of the Company; he accepted bribes to exact no more, exacted more and annexed the states that could not pay;”
After the first war of independence in 1857, the British crown took over from the Company. Perhaps, it was because many people in England were appalled at the conduct of Englishmen in India. Or perhaps, it was that many people were reminded of the parable of Goose that laid the Golden egg. In any case, the crown took over and naturally Indians had to compensate the Company.
“England paid the Company handsomely, and added the purchase price to the public debt of India, to be redeemed, principal and interest (originally at 10 ½ %) out of the taxes on the Hindu people (sic). All the debts on the Company’s books together with the accrued interest on these debts, were added to the public obligations of India, to be redeemed out of the taxes put upon the Hindu people.”
The Company and the Crown did not just tax farming, they also smothered manufacturing in India.
Work on your farms peasants
India was a manufacturing powerhouse when the ‘commercial pirates’ from Europe landed here. Here is a quote from the book,
“Nearly every kind of manufacture of product known to the civilized world — nearly every kind of creation of Man’s brain and hand, existing anywhere, and prized either for its utility or beauty — had long, long been produced in India.”
This manufacturing capability was strangled relentlessly by policies. The most obvious policy for this was tariff.
“A tariff of 70–80% was placed upon Hindu textiles imported into free-trade England, while India was compelled, by foreign control of her government, to admit English textiles almost duty free. Lest Indian Industries should nevertheless continue to exist, an excise tax was placed on the manufacture of cotton goods in India. ”
Other than tariff, a host of other policies restricted the development of local industries. For example,
“The Directors of the East India company gave orders that the production of the raw silk should be encouraged, and the manufacture of silk fabrics discouraged; that silk-winders should be compelled to work in the Company’s factories, and be prohibited, under severe penalties, from working outside.”
Over the period of British occupation of India, the world started moving away from handicrafts to factory production. It is reasonable to speculate whether handicraft of India could have competed with the industrial revolution powered mass manufacturing of England. However, the government of India did not even put up a fight. A control on tariff policy would have allowed India time to put up its own factories. A favorable regime would have also supported creation of such industries. After all, this is what happened in free countries such as Germany, the United States and Japan. If the comparison of India with the US, Germany and Japan surprises you, do ask yourself why it is so.
The British controlled Indian government was anything but favorable to Indian industry and it pushed many people from manufacturing to add to the vast number of people already eking out a living from farms.
On an aside, I have commented on how manufacturing is not the first choice of jobs for either blue or white collar workers in India. I wonder whether this societal attitude came about in India over the two centuries of British rule? Did people see that opportunities in this field were very limited and urged their children to do their utmost to get a job in an office?
The taxation of Indians and other policies that devastated the country were backed by force. The army enforcing these ‘laws’ was funded by taxes drawn from the country. Indeed, not just the conquest of India but also the conquest of other countries was funded by the Indian tax payer.
Whose army is it anyway?
The main function of the Indian army was to keep the country subjugated. The expense of maintenance of this army came out of the finances of the Indian government. This armed force was used by the British all over the world. For example, in Afghanistan or Burma or Mesopotamia or France. It was always at the expense of the Indian tax payer.
“During the nineteenth century India paid $450,000,000 for wars fought for England outside of India with Indian troops.” (Emphasis mine)
The first World War was the biggest war for Britain till then. Naturally, the Indian tax payer had to support the Allies.
“She contributed $500,000,000 to the war chest of the Allies, $700,000,000 in subscriptions to war loans, 800,000 soldiers, and 400,000 laborers to defend the British Empire outside of India during the Great War.”
“In 1929, 64% of the total revenue of India was devoted to this army of fratricides”
Incidentally, when England had to send soldiers to India in 1857 to help subdue ‘rebels’, it charged India with the cost of transporting them to India, maintaining them and then transporting them back. England also charged India with their maintenance for six months before they sailed.
The officers in the Indian army were mainly British. Most senior civil administrators in India were also British. Most of these people found India a tough place to live and work in. So naturally, Indians had to compensate them for this hardship.
Hardship allowance and more. Much more.
Many Britishers came to India as administrators, soldiers or traders. Most of them made fortunes in India and then went back to their country to spend it. What’s more, pensions were paid to government employees after retirement. The condition for retirement was twenty four years of service including four years of furlough. The pensions could be quite a lot.
“In 1927 Lord Winterton showed, in the House of Commons, that there were some 7500 retired officials in Great Britain drawing annually $17–500,000 in pensions from the Indian revenue.”
The pension money was not spent in India but that is not all. Even during their service, the wives and children of the employees might live in England supported by salaries paid by the India government. So most of the expenditure of the British in India was on non Indian goods.
But was the British rule all negative? Did the British not create the extensive network of Indian railways? Indeed they did.
Railway and other transport
Did you know that the rail density in India is higher than that in China? There is no doubt that this is at least partly due to the fact that the British created an extensive network in pre independence India. But of course, the network was not created for the benefit of Indians. But, Indians had to pay for it.
Will Durant claims that the transportation of goods was cross subsidized by the ticket prices of the third class passengers. The low tariff on goods was a boon for manufacturers in England. In manufacturing if you can get raw material at a cheaper rate than your competitors, then you can obliterate them. China is showing that to the world in modern times. The British governed the railways very tightly and ensured that no Indian was on the governing board.
Sea shipping in and out of India and ship building and repair were similarly tightly controlled. A monopoly on sea trade ensured that the British had yet another policy lever over India. After all, if you have a monopoly over transport, you can charge a buyer a price multiple times what a seller gets. As an example in a very different context, Indian Railways is able to charge some power plants a transport tariff which is 2–2.5 x of what the seller of the coal is charging at the mine!
The British recognised that the conditions created by their rule could be stressful for Indians. They had a solution for this.
Tension mat lo yaar — Alcohol and Opium
From the very beginning, the East India Company opened saloons for sale of rums and made handsome profits from the sale of Alcohol. Even after the Crown took over, it depended on the saloon for a large part of the revenue. To make sure that the saloons did well, the government encouraged drinking and it worked. Here is Will Durant
“The Government revenue from such licenses has increased seven-fold in the last forty years; in 1922 it stood at $ 60,000,000 annually — three times the appropriation for schools and universities.”
It was not just alcohol. The British government also sold Opium to Indians. The sale of Opium bought one ninth of the government’s annual revenue.
“…there are seven thousand opium shops in India, operated by the British Government, in the most conspicuous places in every town.”
When Mahatma Gandhi reduced the sale of Opium in Assam through a peaceful campaign, his efforts were halted by the government and his supporters jailed. Indians were not free even to fight against addiction.
It pays to be free
Will Durant uses the pithy phrase ‘It pays to be free’ repeatedly throughout the book. Indian peasants paid back breaking taxes because they were not free. Indian manufacturing was decimated because the country was not free. This indignity was imposed on the country using an army paid for by Indians themselves. We paid foreigners handsomely to come and crush us and then we paid them to drown our sorrows in addiction. Indeed, it pays to be free.
Today, when we are free, it may behoove us to pay attention to the policies of the day. Do the taxes and duties of the day favor domestic manufacturers? Do the policies of the country make the raw materials and inputs like land, finance and energy costly for domestic manufacturers putting them at serious disadvantage? Do other countries have advantages in critical minerals today as Britain had a century ago?
Questions that should be asked and answered every day.
I am aware that history in general is contested. Let alone a book written nearly hundred years ago. While Will Durant extensively referenced his mainly British sources, I have not personally verified them. Could he have been wrong? Possibly. He was definitely biased. As he says in the beginning of the first chapter, “I wish to speak, in this chapter, with unaccustomed partiality and passion”. I would not be surprised if many of the figures quoted in this article are disputed. However, I think that they are directionally accurate. My main purpose of writing this article is to remind ourselves of what can happen if the rulers of a country do not care for it.
‘The Case for India’ is not only about Economics and was written with a lot of passion. The book was written with the sensibility of its time and today, it is sure to upset followers of all kinds of ideologies (and that thought brings me cheer). For example, it uses the phrase ‘Hindu people’ and not ‘Indian people’. Or that it compares “Mohammedan domination’ of the country favorably as compared to the British one. Or that while the author for most of the book argues for freedom for Indians, in the last pages he ends up saying that at least initially the freedom should be limited as Indians don’t have the capability for full freedom.
Most Indians will find it difficult to suppress a plethora of emotions when reading the book, as I did. More than the economic exploitation itself, it was difficult to read about its societal consequences. It was also difficult to read about the wretched and pathetic state that our countrymen were reduced to. However, I believe that at some time one has to accept the past as it was and live in the present. Perhaps, the words of Swami Vivekanand may help.
“The less passion there is, the better we work. The calmer we are, the better for us, and the more the amount of work we can do. When we let loose our feelings, we waste so much energy, shatter our nerves, disturb our minds, and accomplish very little work. The energy which ought to have gone out as work is spent as mere feeling, which counts for nothing.”
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