Colossus (37 page)

IMPERIAL SINS OF OMISSION

The results of imperial globalization were in many ways astounding. The combination of free trade, mass migration and low-cost British capital propelled large parts of the empire to the forefront of world economic development. In terms of the production of manufactured goods per head of population, Canada, Australia and New Zealand ranked higher than Germany
in 1913. Indeed,
per capita
GDP grew more rapidly in Canada than in the United States in the ninety years before World War I.
⁸⁸

But there is a problem. The performance of the Dominions was not matched in the rest of the empire, and least of all in Asia, where the jewel in the imperial crown was supposedly situated. This raises a crucial question. Why was Indian economic performance so much worse than that of the dominions? India attracted £286 million of all the capital raised in London between 1865 and 1914—18 percent of the total placed in the empire, second only to Canada. Yet Indian
per capita
GDP grew at a miserably slow rate. Between 1857 and 1947—between the mutiny and independence, in other words—it rose by just 19 percent, compared with an increase in Britain of 134 percent.
⁸⁹
Between 1820 and 1950 it grew at a mere 0.12 percent per annum—barely at all by the standards of the “white” empire and slow even by comparison with British Africa.

Here is one of the central conundrums of modern economic history. India, more than any other major economy, had free trade and Western commercial norms imposed upon it. Yet the result was deindustrialization and economic stagnation. The United States, by contrast, had thrown off British rule and adopted the kind of protectionist tariff rates—averaging 44 percent on imported manufactures—that we would now condemn in a developing economy. The result? By the end of the nineteenth century the United States had overtaken the United Kingdom by most measures of economic performance. If India’s relative economic decline can be blamed on the British, the case against liberal empire begins to look dauntingly strong.

The nationalist explanation for Indian “underdevelopment” under British rule has four essential components. First, the British deindustrialized India by opening it to factory-produced textiles from Lancashire, whose manufacturers were initially protected from Indian competition until they had established a technological lead.
⁹⁰
Secondly, they imposed excessive and regressive taxation. Thirdly, they “drained” capital from India, even manipulating the rupee-sterling exchange rate to their own advantage. Finally, they did next to nothing to alleviate the famines that these policies caused. One recent historian has gone so far as to speak of “Late Victorian Holocausts” in the 1870s and 1890s.
⁹¹
This negative view of the British role in India, which can be traced back as far as Naoroji Dadabhai’s
Poverty
and Un-British Rule in India
(1901), continues to enjoy wide currency.
⁹²
It is perhaps the single most powerful piece of evidence in the case against liberal empire.

No doubt it benefited the Indian economy little to maintain one of the world’s largest standing armies as, in effect, a mercenary force at Britain’s disposal.
⁹³
Yet recent research casts doubt on other aspects of the nationalist critique. The Indian historian Tirthankar Roy has shown that the destruction of jobs in the Indian textile industry was probably inevitable, regardless of who ruled India, and that an equal, if not greater, number of new jobs were created in new economic sectors built up by the British.
⁹⁴
Even in the case of textiles, by the 1920s the government of India was clearly giving preference to Indian manufacturers over Lancashire’s mills. It is also far from clear that taxation under the British was excessive, since the land tax burden fell from around 10 percent of net output in the 1850s to 5 percent by the 1930s.
⁹⁵
The supposed “drain” of capital from India to Britain turns out to have been comparatively modest: only around 1 percent of Indian national income between the 1860s and the 1930s, according to one estimate of the export surplus (which was what nationalists usually had in mind).
⁹⁶
In any case, a large proportion of the notorious Home Charges remitted to Britain were paying for services that India needed but could not have provided for itself.
⁹⁷
Finally, the famines that beset the Indian economy were far more environmental than political in origin, and after 1900 the problem was in fact alleviated by the greater integration of the Indian market for foodstuffs. The Bengal famine of 1943 arose precisely because improvements introduced under British rule collapsed under the strain of the war.
⁹⁸

British rule had some distinctly positive effects in India. It greatly increased the importance of trade, from between 1 and 2 percent of national income to over 20 percent by 1913.
⁹⁹
The British created an integrated Indian market: they unified weights, measures and the currency, abolished transit duties and introduced a “legal framework [that] promoted private property rights and contract law more explicitly.” They invested substantially in repairing and enlarging the country’s ancient irrigation system; between 1891 and 1938 the acreage under irrigation more than doubled.
¹⁰⁰
They transformed the Indian system of communications, introducing a postal and telegraph system, deploying steamships on internal waterways
and building more than forty thousand miles of railway track (roughly five times the amount constructed in China in the same period). This railway network alone employed more than a million people by the last decade of British rule. Finally, there was a significant increase in financial intermediation.
¹⁰¹
As Roy concludes: “The railways, the ports, major irrigation systems, the telegraph, sanitation and medical care, the universities, the postal system, the courts of law, were assets India could not believably have acquired in such extent and quality had it not developed close political links with Britain…. British rule appears to have done far more than what its predecessor regimes and contemporary Indian regimes were able to do.”
¹⁰²
It is also possible (and the British no doubt believed) that their rule in India tended to reduce social inequality.
¹⁰³
Certainly, by comparison with their counterparts in the other big Asian economy, which remained under Asian political control throughout the period, Indians fared quite well. Chinese
per capita
GDP actually shrank by around 17 percent between 1870 and 1950, roughly the amount by which Indian incomes rose. Though China’s troubles were in large measure due to the disruptive effects of informal European imperialism and then Japanese colonization, it is at least arguable that the country would have fared better economically if formal British rule had been extended beyond the outposts of the so-called treaty ports like Hong Kong.

If one leaves aside their fundamentally different resource endowments, the explanation for India’s underperformance compared with, say, Canada lies not in British exploitation but rather in the insufficient scale of British interference in the Indian economy. The British expanded Indian education—but not enough to make a real impact on the quality of human capital. The number of Indians in education may have risen sevenfold between 1881 and 1941, but the proportion of the population in primary and secondary education was far below European rates (2 percent in India in 1913, compared with 16 percent in Britain). The British invested in India—but not enough to pull most Indian farmers up off the base line of subsistence and certainly not enough to compensate for the pitifully low level of indigenous capital formation, worsened by the custom of hoarding gold.
¹⁰⁴
The British built hospitals and banks—but not enough of them to make significant improvements in public health and credit networks.
¹⁰⁵
These were sins of omission more than commission. Unfortunately for Indians, the na
tionalists who came to power in 1947 drew almost completely the wrong conclusions about what had gone wrong under British rule, embarking instead on a program of sub-Soviet state-led autarky, the achievement of which was to widen still further the gap between Indian and British incomes. This reached its widest historic extent in 1979.
¹⁰⁶

LESSONS OF LIBERAL EMPIRE

Economic historians will doubtless continue to debate the causes of the “great divergence” of economic fortunes that has characterized the last half millennium. If environmental factors provide a sufficient explanation for the widening of global inequalities, then the policies and institutions exported by British imperialism were of marginal importance; the agricultural, commercial and industrial technologies developed in Europe from 1700 onward were bound to work better in temperate regions with good access to sea routes. However, if—as seems more likely—the key to economic success lies in the adoption of the right legal, financial and political institutions, then it matters a great deal that by the end of the nineteenth century a quarter of the world was under British rule. Even in the tropics, the British endeavored to introduce the institutions that they regarded as essential to prosperity: free trade, free migration, infrastructural investment, balanced budgets, sound money, the rule of law and incorrupt administration. If the results were much less impressive in Africa and India than they were in the colonies of British settlement, that was because even the best institutions work less well in excessively hot, disease-ridden, or landlocked places. There the investments that were needed to overcome geography, climate and its attendant deleterious effects on human capital were beyond the imaginings of colonial rulers schooled in the Victorian fiscal tradition of balanced budgets with low taxes. Certainly, the very different policies adopted by postinde-pendence governments have been more successful in only a tiny minority of cases.

In November 2002 the British foreign secretary, Jack Straw, told the
New Statesman
magazine: “I’m not a liberal imperialist. There’s a lot wrong with
liberalism, with a capital L, although I am a liberal with a small L. And there’s a lot wrong with imperialism. A lot of the problems we are having to deal with now are a consequence of our colonial past.” Central to my argument is that there was such a thing as liberal imperialism and that on balance it was a good thing. From the 1850s until the 1930s the British approach to governing their sprawling global
imperium
was fundamentally liberal both in theory and in practice. Free trade, free capital movements and free migration were fostered. Colonial governments balanced their budgets, kept tariffs low and maintained stable currencies. The rule of law was institutionalized. Administration was relatively free of corruption, especially at the top. Power was granted to representative assemblies only gradually, once economic and social development had reached a level judged to be propitious. This policy “mix” encouraged British investors to put a substantial portion of their capital in poor countries and to demand relatively low-risk premiums in return. New technologies like railways and steam power were introduced to poor countries sooner and at a lower cost than if these countries had been politically independent. The results of liberal imperialism were mixed, no doubt. Not everywhere grew as rapidly as the colonies of white settlement. But even those countries (like India) that achieved only very slow increases in
per capita
income almost certainly fared better than they would have under alternative regimes.

Two conclusions follow from all this. The first is simply that in many cases of economic “backwardness,” a liberal empire can do better than a nation-state. The second, however, is that even a very capable liberal empire may not succeed in conferring prosperity evenly on all the territories it administers. With that
caveat
, we may therefore make what might be called an altruistic argument for the United States to engage in something resembling liberal imperialism in our time. A country like—to take just one example—Liberia would benefit immeasurably from something like an American colonial administration.
¹⁰⁷
Liberia is one of those countries listed in table 7 where nearly everything has gone wrong. Misgovernment and civil war have reduced it to the very bottom of the international rankings for human development. In 2003, as the country plunged still deeper into anarchy following the flight of its dictator Charles Taylor, the United States came under pressure to send troops to Monrovia to impose order there. From one point of view, of course, this was precisely the kind of
humanitarian intervention Republicans had previously criticized the Clinton administration for undertaking; what was manifestly needed here was nation building rather than mere regime change. Yet if there is one country in Africa for which the United States has a historic responsibility, it is Liberia, the only African country to have been colonized by Americans in the nineteenth century (so that former slaves could return “home” after their emancipation). If liberal empire is a serious possibility in the twenty-first century, where better for it to begin its work than in wretched Liberia, a place where political independence has been a curse, not a blessing, and self-determination has turned out in practice to mean self-destruction?