On account of the five percent guarantee on the Indian Railway debt, the motto became “Spend as much as you want; steal as much as you can”. The original estimate, as proposed by Dalhousie, the Governor- General in India, was flouted beyond measure. Instead of the £ 8,000 per mile estimate, the actual cost went as high as £ 18,000 per mile for lines built by 1868 and the five percent dividends were paid on top of that. The capitalists had a field day and the Indian tax payer, the ryot, the planter; the peasant was sent to the cleaners. The English politicians mortgaged the life of the Indian peasants so that the British capitalists could make obscene profits. The political and the national financial interests of the British monarchy happily coincided with pecuniary interests of the British capitalists. The Indians themselves would have done the same job at a much smaller cost, but Charles Trevelyan had already predicted that India was at Britain’s mercy and she could charge her whatever she wished and charge they did. Britain charged obscene amounts to the India’s railway debt ignoring any or every rule or guideline they ever had in that nation. Any expense, any commitment, political or military they had east of the English shores been dumped to the Indian railway debt. The debt that had no relationship to the Indian railways at all. After the mutiny of 1857, they ruled by military force and all the charges of the military stationed in India as well as seventy thousand British soldiers stationed in England were charged to the Indian railway debt. They spent another £ ten million (in today’s money, it may be close to £ twenty billion) to build barracks for those troops. Must be some barracks. The British East India Company transferred its rights to the Crown after the mutiny and the price of those rights became India’s railway debt. It is like a retailer charged for a merchandize but kept the goods too.
The list of those charges is very long but ridiculous. They dumped the cost of the State visit of the Sultan of Turkey to London and the cost of the Mediterranean Fleet to the Indian Railway debt. They had no restraint and who were they. They were the merchant bankers, the members of the British Government, freebooters and the military people, who wore different hats at the same time. But they had the same singular mission. India was at their mercy and they stole India’s wealth and enriched their own country. They even charged the cost of the simultaneous wars in China and Abyssinia to the India’s railway debt.
Britain had built Railways in their own country as well and their outlay was somewhere between twenty to forty million pounds as the issues were floated from time to time between the years 1830 to 1840. In comparison, Britain showed expenditures of over two hundred million pounds for the India’s railway debt and that did not include some thirty or more million pounds paid in dividends. The amounts charged to Indian railway debt were outrageous and fraudulent, like everything else they did in India. The remarkable part was that they were able to hide the theft. The other part of this fraudulent story was that they did not build much for those quarter billion pounds. The total length of the line built by the G.I.P. Railway was less than six hundred miles and another incomplete portion was another seven hundred miles. The B.B. & C.I railway built only three hundred miles from Bombay to Ahmedabad but it worked under joint jurisdiction of Rajputana State, the line was built at both ends, namely Bombay on one side and Surat on the other and there were gaps in between. The company was anxious to fill the gap. The country, through which B.B. & C.I. railway was to pass, was one of the most abundant in the raw staple and the cotton famine in Lancashire desperately needed that cotton. It was determined by the European merchants in cotton trade, that the only way to help Lancashire was to expedite the railway between Surat and Bombay, so as to tap all the cotton growing in Gujarat and kattyawar region. Before B.B. & C.I could complete that gap, it needed land. It was under that pressure that the government of Bombay sanctioned the Back Bay Reclamation project so that the missing link could be constructed. To pay for that reclamation, the government instituted Income tax in India. In 1859, they collected over six million pounds and in 1863, they collected additional fourteen million pounds in taxes. So, instead of the Rail Company paying for the line, the Indian taxpayer provided the money and the benefit of that taxation went to not only the shareholders of the British Railroad Company, but the money became the debt of India as well. If one ever wanted to know double dipping, this would be an excellent example.
The other railroad was built near Calcutta as they wanted to link Calcutta with Delhi. The East India railway up to Raniganj, a distance of 120 miles was built in 1855. But on account of the Mutiny of 1857, the British expedited the construction of the railroad and the military argument won and Howrah to Delhi line was constructed in 1866, a distance of 900 miles. The East India Railway was taken over by the Government in 1880 and the grand Indian Peninsular in 1900. The Commercial and military interests of Great Britain decided the scope of the Indian railways and not the needs of the population. A private Indian shipper could not secure a wagon for shipment without offering a ‘bribe’.
The Railways had a profoundly negative effect on the lives of the natives. The British merchants started bringing in manufactured goods from England and the local hand made goods could not compete with machine made merchandize. It led to sudden loss of jobs in towns and village and there was little avenue for any other work. The railways also enabled the British merchants to export the Indian crop surpluses, leaving little for storage to safeguard against draught and crop failure. Previously, India’s abundant crops were stored locally to provide for the day when the rains failed; with the railways in operation, surpluses and commercial crops were sent by rail to ports for export. Reserves were depleted and when the rains failed in1870 and 1890 devastating famines followed. Railways prevented industrialization of the country. The British merchants had the vested interest to prevent any industrialization of India so that they could exploit the vast market of India by bringing in the British manufactured goods. Railways brought misery to the Indian masses.
Japan built its Railways at about the same time and had a very beneficial effect as it had domestic orientation and they were built at a very low cost in comparison. Indian railway net work was also small; it was built to serve the interests of the Imperial hegemons for military purposes, or for exporting tropical raw materials or to bringing in the manufactured goods from England. Indian needs were not factored in to the railway equation.
With the advent of steam ship and the railway, the colonial capitalists hastened the accumulation of capital in Britain. The plantations, the trade and commerce and the revenues, as stated earlier generated about £150 million per year to the British Exchequer and the various British Managing Agencies for the next one hundred years. Britain did no spend one penny on industrialization in India or on any public sector project. England was not remiss; it just did not care. It amassed wealth at India’s expense. They exploited women and children in coalmines; they exploited them in the jute mills and they exploited them in the tea gardens. The wages paid were scandalously low and no mining equipment was installed. Humans were used as beasts of burden. This historical narrative is not an attempt to prepare a comprehensive balance sheet of India’s loot taken to Britain that is for Britain to do. This narrative just shines the light on a very compelling story which has never been told. It also shines a light on the huge stockpiles of gold amassed at the Thread Needle street and Leaden Hill Street Vaults and elsewhere.
The money coming from India also raised the national income of Britain without any expenditure of public funds to spur that growth. The Keynesian Revolution- the deliberate strategy of using Public borrowings to raise the level of domestic demand - was based on that falsehood. The Indian loot was never acknowledged publicly in the Keynesian theories of public spending. The deficit financing and the surplus national budgets at the same time is at odds and exposes that fallacy. The British raised a quaint hope that one could walk and chew the gum at the same time. During the entire nineteenth century, the British government hardly ever ran a deficit of Gross National Product.
In fact, Britain had budget surpluses throughout the nineteenth century and the surpluses were much larger than posted if payments for debt services and contribution to sinking funds were accounted. The sinking fund was like putting money in the piggy bank for future prosperity, as Britain wisely recognized that the looting of India would come to an end some day. The continental countries on the other hand ran budget deficits for most years, so did every one else who tried the Keynesian revolutionary theory. A careful analysis would put a number on the amount of money that flowed to Britain from India in the nineteenth century.
After Britain amassed a monumental amount of wealth at India’s expense, which it had never publicly acknowledged, it went about explaining how Britain got so rich. Britain used a two pronged approach. First, Britain used its Civil Service working in India, to portray India as an oversexed beggar country and thus suggest that there was nothing to loot. Katherine Mayo wrote a disparaging book “Mother India”, which became a compulsory reading. Mayo, the daughter of a mining engineer in Dutch Guyana (Surinam), spent eight years among indentured Indian coolies who were possibly whisked out of India, to replace the slaves after the abolition of slavery. While her father was mining the mineral wealth in Surinam, she joined the forces to damage the Indian freedom struggle. She described Indians as an oversexed Hindoo culture, manifest in practices such as early marriage, masturbation and homosexuality.
Secondly and suddenly, Britain came up with an idea of the ‘Industrial Revolution’, being the source of the Britain’s wealth. It became very fashionable to talk about the Industrial Revolution and it became a part of the daily lexicon. In reality, it was no more than a myth as far as Britain was concerned. Yes indeed, there was industrial revolution in other countries, but not in Britain other that the advent of railways and the cotton spinning machine. But that does not explain the enormous wealth Britain amassed, nor could those two inventions change the economic order for Britain. The Industrial Revolution is covered in the next chapter to expand that argument.
CHAPTER SEVEN:
INDUSTRIAL
REVOLUTION IN ENGLAND
A MYTH
In the nineteenth century, what the British called the century of miracles, Britain had a spectacular increase in the foreign trade, fueled by the Plantation industries, mining and mineral industries of India. That foreign trade was further boosted by using India as a dumping ground for the British manufactured goods. In 1848, John Stuart Mills, an English economist, used the term industrial revolution for the very first time in that country. While writing Principles of Political Economy, he was amazed to discover that the foreign trade was bringing in changes like an industrial revolution. He understood that political economy for Britain was colonial economy. His amazement was on account of the foreign trade and not the industrial revolution on account of the increased foreign trade. In Britain soon thereafter, the aristocrats and the merchant bankers found it convenient to explain the sudden prosperity and riches of Britain and they started attributing it to the industrial revolution. The real reason for the prosperity was thus conveniently pushed under the rug because it could not have been explained without the truth.
In those days, the term industrial revolution also had a negative connotation. It reminded people of smoke stacks, child labor, long working hours and low wages and was never considered a source of prosperity. Initially therefore, the industrial revolution was mentioned as an expression of social ill or social concern and was thought to be the principal reason for the worker poverty particularly in the newly emerging industries like the textiles and steel. There was a stigma attached to the industrial progress and it was viewed more as a social catastrophe rather than a liberator of the impoverished society and the industrial progress brought on by various factors such as the railways and the machine made goods raised the public ire. Only when the proponents of the free market economy like Adam Smith, appeared on the scene, the benefits of industrial revolution started gathering momentum but that happened only in the last two decades of the nineteenth century. The advocates of the free market economy at that time, confused colonial economy with free market economy because the colonial economy had no cope on the beat and the colonizer was the judge and the jury with no regulation to control their predatory behavior. It was however a century earlier that Britain had become a banker to the world and was ruling a unipolar world empire, an empire sustained and supported by the treasures of India and not on account of the industrial activity which was nonexistent at that time.
While England used the term industrial revolution in the context of foreign trade, in France, they were getting amazed at the pace of scientific and industrial progress and they used the term too, more as a simile to compare the industrial advances to their political revolution. Only, early in the twentieth century, the idea of industrial revolution began to gain currency as a technical achievement and shifted the theme from a social ill to something as a forerunner of financial strength.
France was the first to recognize that the scientific progress and the industrial advances were closely linked and the scientific learning was essential for industrial progress. So, as early as 1794, France set up Ecole Polytechnique, where students were required to learn mathematics, science and technologies to provide the backbone for the future growth. They also recognized early that formal process of higher learning was necessary and their road to technical schools required rigorous selection process. That foresight proved correct because those students went on to develop and invent the technologies of the future. So did Germany, where they had trade schools and technical schools of higher learning, the first was set up in Karlsruhe in 1825, and those technical institutes went on to produce the world class scientists and engineers, who were the inventors and leaders of the Germany of tomorrow. Britain had no schools of higher learning nor did they have any formal process for higher learning or the infrastructure for any large-scale industrial production. Britain lagged behind both Germany and France in technological excellence, as it did not have the educational set up of either of those countries, which required years of training, hard work and enterprise and thus Britain could not participate in the industrial revolution.
In the course of the nineteenth century, France also remodeled most of its industry but it never experienced an industrial revolution nor was it accompanied by a sudden burst of wealth accumulation. It is logical to ask why there was no wealth accumulation in spite of the modern industries in France. The simple answer was that the modern industries were nothing more than a process of change, from manual operation to powered operation. It consisted in doing repetitive things mechanically instead of manually. It simplified and smoothened the assembly line work; it produced goods cheaply and it helped people buy things that it could not afford to buy before. It simplified life’s chores; it speeded up the work in progress. It invented the manufacturing system. It brought about economic virtues of machinery so that one could get higher production and productivity. But, one had to find markets where the mass-produced articles could be sold at a cheaper price. The wealth was produced only by increase in the trade and commerce and not by installing some powered equipment. Britain had captive markets for its textiles in India, where the labor costs were negligible and the raw material, cotton, was acquired cheaply under the barrel of the gun.
Britain of those days was singularly focused on wealth accumulation, whether it was through slave trade, piracy or looting the princely treasuries of India or monopolizing its tropical plantations and she neither had the skills or the attitude for scientific and technological work. For Britain, the use of the term, ‘industrial revolution’ became a convenient tool to explain the sudden inflow of wealth and rewrote its economic history and it happily coincided with the proliferation of steam engine and the advent of textile machinery. There are many layers to the colonial history of Britain in the nineteenth century, which the British wrote with little independent review and the use of the term ‘industrial revolution’ was another layer
in that puzzle. The people who worked on the steam engine were ironmongers and blacksmiths with no schooling or any technical background. They learnt by copying others or by tinkering the technologies by hit and miss, more miss than hit. Even when Britain was able to discover something, it was slow to grasp the significance of that discovery.
The Steam Engine evolved over a period of one hundred years beginning with horses and flooded coalmines and finally became a necessity, so that Britain could rule the colonial empire. England had coal deposits in Wales and Northumberland, which provided some basis for any industrial activity. Unfortunately for Britain, those deposits were below the water table and Britain had a problem. People who worked in the coalmines struggled daily to reach the coal seams. That technical challenge was initially met by deploying horses, which scooped water from the mines bucket by bucket, but horses ate barley, oats and hay and they did not work for free. In one colliery in Warwickshire, five hundred horses pulled water out of the mines, So, Britain’s quest for a method to pump water out of the coal mines, took many shapes and forms over the years, and finally morphed into the technology for the steam engine. It was years however, before they had a clear path and it was only through the help from a French mathematician, Sadi Carnot, the inventor of the theoretical heat engine, that they were able to solve the technical challenges with which they had struggled for lack of basic scientific knowledge.
1757- East of the Cape of Good Hope Page 21
