The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor

by David S. Landes

  When Clive returned to England, he put his fortune to “creditable” use. He gave large sums to sisters, other relations, impecunious friends; arranged an income of 800 a year for his parents, say $400,000 of today’s money, while insisting that they keep a carriage; and settled 500 a year on his old commanding officer, “whose means were very slender.” After devoting some 50,000 to these generosities, he bought land with a view to securing seats in the Commons for himself and a small coterie of clients. He also bought a substantial packet of shares (100,000) in the East India Company, which he assigned to strawmen so as to make a small voting bloc. In those days, the meetings of the court of proprietors, as it was called, were “large, stormy, even riotous…. Fictitious votes were manufactured on a gigantic scale.” Robert Clive was someone to be reckoned with.

  In the short run, this transfer of wealth and political power from the mysterious East to the country shires and parliamentary halls of England proved unpalatable—too fast, too new. Who were these nabobs (the then current version of the Indian title of nawab), to buy large estates, pretend to social eminence, corrupt English politics? Inevitably, a cry went up for official investigation and parliamentary inquiries. These led to scandalous trials (Warren Hastings) and provoked important changes in the constitution of the East India Company. The new arrangements, which entailed closer state oversight of the governance of Bengal, did make it harder to get “filthy rich” fast; but one could still make more in India in a few years than in a British lifetime.

  In the long run, the British assumption of empire in India posed grave problems of political strategy and ethics. The EIC saw its acquisitions as permanent—“as permanent as human wisdom can make them” (1766). Therefore it had to “protect and cherish the inhabitants…whose interest and welfare are now become our primary care”—for the company’s sake. India was compared to a landed estate where the interests of tenant and landlord were the same.24

  Very wise, and very British; but not simple. Even after reform, the task of development remained, complicated by a prudent reluctance to tamper with Indian social and cultural institutions. The Indian economy changed and grew as new technologies, the railway in particular, came in from abroad. But it was slow to respond to the Industrial Revolution, except as supplier of raw cotton; and the Indian cotton manufacture, once the world’s greatest, shrank almost to vanishing. Indian historians blame this on their colonial oppressor, who not only vetoed protective tariffs (long live free trade!) but taxed the Indian product to equalize access for British yarn and cloth. But that was not the problem. Both Indian and British entrepreneurs were free to undertake modern forms of manufacture in India, as they did beginning in the 1850s. If they refrained earlier, they presumably had good reason.

  How Do We Know? The Nature of the Evidence

  Some of the most important work on Indian history has been done by Indian scholars, yet these, ironically, have had to rely almost exclusively on European records and accounts. Almost no written documentation comes down to us from the Indian side. What we know, for example, of Indian Ocean trade in the sixteenth to eighteenth centuries, and of the textile manufacture in particular, is drawn almost exclusively from the archives of the chartered trading companies and their home governments; also from travel accounts and correspondence to and from Europe.25 These records tell therefore only the outside of the story. They are, however, rich and suggestive—including a certain amount of indigenous material—and have provided evidence for a lot of good history.

  Why this asymmetry is an interesting question in cultural history. The Indians were literate (though they lacked printing), and no empire like the Moghul could operate without records and correspondence. Nor could Indian merchants, active in international trade, have done without similar aids to memory and communication. Was there a problem of preservation? If so, how have East India Company records survived in Madras, Bombay, and Calcutta? Was there a crucial difference in forms of commercial organization? Chartered companies depended on an elaborate bureaucratic apparatus, and bureaucracy means paper. Perhaps the problem is one of continuity and custodianship. The Indian political units were ephemeral, and their papers with them. Perhaps they should have written on clay tablets or stone.

  One thing is clear: the Europeans of that day were already interested in records. Mark here the difference between hieratically literate and generally literate societies. The Europeans, for all the analphabetism of the populace, were of the latter category. From middling on up, they read, but also wrote and published—not only the officials but private citizens. The nearest equivalents in the non-European world would be the Japanese and the Jews. Europeans also were passionately curious about other peoples and societies: the overwhelming majority of travel accounts of that day were written by and for them.

  This curiosity quotient was an important and characteristic aspect of European expansion and dominion. Whether deliberate or unconscious (and it was both), it prepared the way for reconnaissance and exploitation. In recent years, anticolonialist critics have made much of the alleged misdeeds of Western curiosity, putting scholars, spies, and diplomatic agents in the same knaves’ basket. The best known elaboration of these charges is Edward Said’s much-discussed Orientalism (1978). (More on this powerful and influential book in chapter 24, pp. 415-18.) Insofar as the critique holds that only insiders can know the truth about their societies, it is wrong. Insofar as one uses this claim to discredit the work of intellectual adversaries, it is polemical and antiscientifìc. But insofar as it points to the instrumental value and power of information, for good and for bad, it makes an important point.

  Food, Income, and Standard of Living

  What was the condition of the “mass” in pre-British India? European travelers and visitors reported general poverty, even misery, and Indian interlocutors agreed. Why so many temples in South India? “…the soil is immensely productive while the subsistence needs of the inhabitants are so few.” An English traveler visits a local king who speaks of his peasants as “Naked, Starved Rascals.” Their needs? “Money is inconvenient for them: give them Victuals and an Arse-Clout, it is enough.”26

  Some historians would argue that these strangers saw and understood less than they thought, or that they blackened the Indian picture by way of brightening the European. A few have even asserted—on the strength of estimates of food intake—that the Indian ryot lived better than the English farm laborer.27

  Such calorimetric cliometrics seem to me implausible in the light of the gulf between European and Asian techniques. Nor am I persuaded by efforts to project twentieth-century comparative income estimates back to the eighteenth century.28 The opportunities to distort the result are endless, and the leverage of even a small mistake extended over two hundred years is enormous.

  In these speculative exercises, the numbers deserve credence only if they accord with the historical context. That context, for India, was one of limited property rights and technological backwardness. Western Europe, well on its way to the Industrial Revolution, was inventing and improving ingenious, labor-saving devices, in particular, both hand-and power-driven machines. It had long since passed Asia by. It’s as simple as that: more productive techniques translate into higher incomes.

  And What Happened to Omichund?

  The negotiations between the British and Mir Jafar were carried out by two agents, one of them Omichund, a merchant of Bengal who had taken up residence in Calcutta to benefit from the company’s protection and had suffered heavy losses in the course of the nawab’s seizure and occupation of the city. This Omichund, the historian Macaulay tells us with the candor of an age that did not know political correctness, was well equipped by his business experience to mediate between the English and the nawab’s court. “He possessed great influence with his own race, and had in large measure the Hindoo talents, quick observation, tact, dexterity, perseverance, and the Hindoo vices, servility, greediness, and treachery.”

  It was Omichund’s task to lu
ll and gull the nawab. This he did. Thanks to his inventions and fictions, the planning proceeded apace; but the more it advanced, the more everything depended on the discretion of Omichund. A word from him could destroy the conspiracy. And just at this point Clive began to hear disquieting news, that Omichund was hinting at betrayal unless he got a huge compensation. Huge? He asked for 300,000 pounds sterling (say 150 million of today’s dollars), and what’s more, he wanted this commitment written into the treaty that would seal the installation of Mir Jafar on the throne of Bengal.

  Clive was outraged. This was blatant dishonesty. It was also greedy. He decided to repay cross with double cross and had two treaties drawn up—one real, on white paper, making no mention of Omichund; the other false, on red paper, with a clause in the merchant’s favor. Not all Englishmen were ready to connive at this fraud: Admiral Watson refused to sign the red version, an omission that would surely arouse Omichund’s suspicions. So Clive—as much be hanged for a cow as a sheep—forged the admiral’s signature.

  Now it was time for action. The confident nawab took up arms. Clive and his English troops—the kind of men, as he put it, who had never turned their back—routed him at Plassey (1757). The nawab fled the field and then his throne. The winners met to divide the spoils. Omichund came to the conference full of expectation, for Clive had treated him up to the last minute with unfailing consideration. The white treaty was then read. No mention of Omichund. Turning to Clive, he had his answer: “The red treaty is a trick. You are to receive nothing.” The poor man swooned, was revived, but never regained his senses. Gradually he sank into lethargy and bewilderment. Once a man of sharp reasoning and simple dress, he now walked pointlessly about in lavish, bejeweled accouterments. Within a few months he was dead.

  Macaulay, normally sympathetic to Clive, draws the line at this deceit: “…this man, in the other parts of his life an honourable English gentleman and soldier, was no sooner matched against an Indian intriguer, than he became himself an Indian intriguer, and descended, without scruple, to hypocritical caresses, to the substitution of documents, and to the counterfeiting of hands.”29 But this was not the gravamen of Macaulay’s condemnation. While pointing to Clive’s moral shortcomings, Macaulay prefers to argue his case on grounds of expediency “such as Machiavelli might have employed.”

  The point was that Clive had committed “not merely a crime, but a blunder.” Individuals, Macaulay points out, may get rich by perfidy, but not states. In the public domain, a reputation for veracity is worth more than valor and intelligence, and this especially in a world of ubiquitous guile and duplicity. Nothing other than a reputation for unconditional honesty could have enabled Britain to maintain its empire in India at so little expense; nothing else could have brought out the wealth of the nation from its hiding and hoarding places. The mightiest princes of the East, he notes, cannot persuade their subjects to part with their wealth for usurious returns; the British can bring forth tens of millions of rupees at 4 percent.

  This is Macaulay’s judgment. He has a point. But were Clive’s successors more scrupulous than he? Or have imperialists and statesmen simply learned to lie better? Or to lie in some things and not in others? Pursue honesty in money matters, and Devil take the rest? That would be an irony. The fact is that even in Macaulay’s righteous time, veracity was a function of raison d’état. Even in money matters—especially in money matters. It is true that investors trusted the word of Britain and bought consols at 4 percent, and Britain never let them down…until the twentieth century, when war and deficits undermined the purchasing power of the pound and killed the gold standard. Is inflation a kind of impersonal lie?

  12

  Winners and Losers: The Balance Sheet of Empire

  The discovery of America, the rounding of the Cape, opened up fresh ground for the rising bourgeoisie. The East-Indian and Chinese markets, the colonisation of America, trade with the colonies, the increase in the means of exchange and in commodities generally, gave to commerce, to navigation, to industry, an impulse never before known, and thereby, to the revolutionary element in the tottering feudal society, a rapid development.

  —MARX and ENGELS, Manifesto of the Communist Party

  The turn of the eighteenth century was both end and beginning. It saw the liquidation of the Dutch East India Company; the prohibition of the British Atlantic slave trade (but not the end of slavery);* the peak and decline of the sugar bonanza (including revolution and the fall of planters and plantations in Saint-Domingue [now Haiti]); an end to the Old Regime in France; an end to the period of Old Empire. The new era would see Europe lose formal control of territory overseas (Spain would be the big loser) but gain wider economic dominance. Europe would also force its way into territories previously seen as inaccessible and untouchable (China, Japan), while creating in others (India, Indonesia) a new kind of imperium in its own image.

  The hinge of this metamorphosis was the Industrial Revolution, begun in Britain in the eighteenth century and emulated around the world. The Industrial Revolution made some countries richer and others (relatively) poorer; or more accurately, some countries made an industrial revolution and became rich; and others did not and stayed poor. This process of selection actually began much earlier, during the age of discovery.

  For some nations, Spain for example, the Opening of the World was an invitation to wealth, pomp, and pretension—an older way of doing things, but on a bigger scale. For others, Holland and England, it was a chance to do new things in new ways, to catch the wave of technological progress. And for still others, such as the Amerindians or Tasmanians, it was apocalypse, a terrible fate imposed from without.

  The Opening brought first an exchange—the so-called Columbian exchange—of the life forms of two biospheres. The Europeans found in the New World new peoples and animals, but above all, new plants—some nutritive (maize [Indian corn], cocoa [cacao], potato, sweet potato), some addictive and harmful (tobacco, coca), some industrially useful (new hardwoods, rubber). These products were adapted diversely into Old World contexts, some early, some late (rubber does not become important until the nineteenth century).

  The new foods altered diets around the world. Corn, for example, became a staple of Italian (polenta) and Balkan (mamaliga) cuisines; while potatoes became the main starch of Europe north of the Alps and Pyrenees, even replacing bread in some places (Ireland, Flanders). So important was the potato that some historians have seen it as the source and secret of the European population “explosion” of the nineteenth century.1 But not only in Europe. Grown on poor, hilly soils, the potato, along with peanuts, sweet potatoes, and yams, provided a valuable dietary supplement for a Chinese population that in the eighteenth century began to outstrip the nourishment provided by rice.

  In return, Europe brought to the New World new plants—sugar, cereals; and new fauna—the horse, horned cattle, sheep, and new breeds of dog. Some of these served as weapons of conquest; or like the cattle and sheep, took over much of the land from its inhabitants. Worse yet by far, the Europeans and the black slaves they brought with them from Africa carried nasty, microscopic baggage: the viruses of smallpox, measles, and yellow fever; the protozoan parasite of malaria; the bacillus of diphtheria; the rickettsia of typhus; the spirochete of yaws; the bacterium of tuberculosis. To these pathogens, the residents of the Old World had grown diversely resistant. Centuries of exposure within Eurasia had selected human strains that stood up to such maladies. The Amerindians, on the other hand, died in huge numbers, in some places all of them, to the point where only the sparsity of survivors and some happy strains of resistance enabled a few to pull through.

  Why the Eurasian biosphere was so much more virulent than the American is hard to say. Greater population densities and frequency of contagion? The chance distribution of pathogens? Where were the Amerindian diseases? Only one has come down to us—syphilis, which the French called the Italian disease, the Germans the French disease, and so on as it made its way from seaports
to the rest of Europe.*

  Yet the invaders had their own weaknesses. American visitors to Mexico call travelers’ diarrhea “Montezuma’s revenge” those to India speak of “Delhi belly.” Such tags are supposed to be funny, but in fact, Europeans migrating to these strange lands in the early centuries fell easy victim to local pathogens and infections and died “like flies.”2 Depending on place. Climate and hygiene—modes of evacuation and waste disposal, water supply and run-off, personal habits, social customs—could make all the difference. Thus the Indian Ocean area was three to four times more virulent than the temperate zones; the West Indies and American tropics up to ten times more; and West Africa was a one-way door to death. Mortality rates there ran fifty times higher.3 Within these larger regions, higher densities made for festering pestholes: Bombay in India, Batavia in Indonesia. A jacket illustration of Fernand Braudel’s trilogy (Civilisation matérielle, etc.) shows a well-to-do Portuguese family in Goa dining in a water-covered room: the table stands in water; their feet rest in water. This no doubt kept crawlers from joining the repast, but it was an invitation to enemy swimmers. Forget about flyers.

  Oceanic migrations, then, voluntary and involuntary (slaves), brought much death into the world and much woe. But also riches and opportunity for the Europeans, whether leavers or stayers. That is the law of migration in market societies: people go to improve their situation, and so doing, enhance the bargaining power of those left behind; while in their new home they create or seize wealth (food, timber, minerals, or manufactures) to ship or take back to the old country.