Working Paper: CEPR ID: DP15431
Authors: Pilar Nogues-Marco
Abstract: This paper revisits the relationship between capitalism and colonialism by examining the case of British India under East India Company rule (1757-1858). The Marxist-nationalist historiography claims that colonialism generated a steady drain of wealth and that this drain was responsible for Indian famines, poverty, inequality, and economic retardation. I use the East India Company budgets to measure the extent of the wealth that was drained through three direct channels: oppressive land taxes, unproductive expenditures on the imperial army and civil administration, and the unrequited export of commodities from India to Britain. I conclude that available figures lend empirical support to the Marxist interpretation. There was a drain of wealth, and its effect on the underdevelopment of former European colonies deserves further research.
Keywords: India; Colonialism; Drain of Wealth; East India Company; Marxism
JEL Codes: B14; F54; N45
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| oppressive land taxes (R51) | drain of wealth from India (F54) |
| drain of wealth from India (F54) | agricultural productivity (Q11) |
| drain of wealth from India (F54) | widespread poverty and famines (I32) |
| unproductive expenditures on imperial army and civil administration (H56) | diversion of resources from productive investments (H54) |
| diversion of resources from productive investments (H54) | economic stagnation in India (O14) |
| systematic unrequited export of commodities (F10) | wealth extraction from India (F29) |
| wealth extraction from India (F29) | economic retardation of India (O25) |
| oppressive land taxes (R51) | reduced incentives for local farmers to invest in their land (Q15) |