Nations without Balls and Brain
By: Tarique Khan Javed
President, Overseas Pakistani Investors Forum.

The extreme poverty of some 600 million people in India, Pakistan and Bangladesh is a source of embarrassment and shame for the people of world. The area is always in the news because it is the source of lot of trouble in the world.
While the causes of poverty in the Region are many; this paper examines the role of West in its creation and perpetuation.

Background:
The Pope of the time granted all of East to Portugal and all of West to Spain for exploitation and spreading Christianity, in the 16th century. This started the biggest mass murder, loot and plunder on earth.

The Spaniard in the name of Christianity massacred and robbed the Americans at will and decimated local population by introducing fatal new deceases. The effects of these are still present and they remain the most hated rulers of the continent. The memory of these abuses is still fresh in the mind of local population even after the lapse of 500 years. Columbus is a hated figure among Latin American.    
Armed with Papal decree the Portuguese stated to dominate the seas of the eastern world. With the help of their Gun ships, they were the first to disturbed the booming economy of Indo Pak in 17th century. By dint of force and without any moral remorse they blocked the shipping lanes and demanded payments for letting the ships pass to Africa and Asia or else ship goods on their ships.
Vasco de Gamma who opened route of India via the Cape of Good Hope at the turn of 15th century was a villain for the Eastern people as Columbus was for the indigenous Americans.  
 In the absence of naval power to counter; foreign trade suffered causing misery and adding to the poverty.

Indian Economy on the eve of European arrival:
Pgrard observed that” products of Indian looms clothed every man and woman from cape of Good Hope to China”
Moreland remarked that” Indian Cotton weaving industry was by far the most extensive and its aggregate production was one of the great factor of the industrial world of the year 1600”.
Colonel John Briggs noted  in1830 that “ The flourishing condition of the country under the Mogul Emperors is recorded by all European travelers who visited the East within the last three centuries; and the wealth, the population and natural prosperity of India ,far surpassing what they had seen in Europe, filled them with astonishment”.    
In terms of agriculture India was self sufficient and a surplus country. It was source of sugar supply for the Eastern world till Russians developed root sugar.
 India had developed an all India marketing organization by end of 16th century independent of European penetration. This differed little from other parts of the World.
Train of thousands of bullock carts transporting goods from one part to the other was a common sight. Its water transport system was very competitive and well organized.
Excess of exports over imports tilled the balance of foreign trade in India’s favour. Western Europeans could exchange bullions because of American silver. So the Chief feature of India’s foreign trade was the absorption of precious metals. Once it was believed that she was their sink.
Baharji Bohra was richer than British East India Co. The capital of some Indian Cos in the 17th century varied from Rs 50,000 to 750,000.Thanks to fairly advanced monetized economy the capital had great mobility. Fund transfer from one part of the country to another was done with ease by means of merchants transfer notes which were always honoured irrespective of amount.   

The impact of European intervention:
The Portuguese disturbed and curtailed the international trade but they did not effect the inland economy which was much bigger. Thus their impact on poverty was limited.
However, it was the extended Rule of the British from 1750 to 1947 that brought the economy to its knees, caused massive famines and multiplied poverty many-fold. During this period the share of Indo-Pak in world’s GNP reduced from 33% to 3% only. The rule left the biggest mass of poverty in the world. Even after 59 years of independence the total number of poor in the Region is estimated at 600 million.

Company’s business plan:
British East India Co was formed in 1600 with a capital of PS 70,000. Like any other Co its purpose was to make money for its shareholders. As other European Countries were getting rich with international trade, it wanted to get involved in that trade, however with the Papal monopoly granted to Spain and Portugal it found its way blocked.
Gradually the Co, backed by the Crown mustered courage to do some trade illegally, defying the Papal Authority.
In 1630 the Co built Fort St. George in Madras, in 1687 it bought the island of Bombay from King Charles, and moved its factories there. In 1700 it made Calcutta its Head Quarter for Bengal.
 The French had a settlement at Pondicherry south of Madras and another at Chandranagar, north of Calcutta. Between 1744 and 63 the two powers struggled for supremacy in 3 Karnatic wars. Ist was won by French but last two by Clive. By 1763 the British had no European rivals in India.
 In 1757 Clive defeated Seraj-ud-Dowla in the Battle of Plassy, and took Bengal as well as Northern Circars from French and thus made the Co a great territorial power in India by 1760.
In 1765 Clive obtained the Charter from Mugal Ruler in Delhi to Administrator and Dewan of the province and thus legitimizing the Co Rule.

Loss of Government jobs and narrowing trading opportunity:
Unlike other Ruler and occupiers in history British decided not to take and trust any local in their administration. They brought in large number of British to take control of all important jobs. 
This deprived a large number of locals of their government jobs and closed one source of income.
 In order to make a profit out of the Rule the Co decided to have monopoly on trade of all profitable items like opium, salt, alcohol etc and impose as much tax as possible on other items, without worrying about its long term ill effects on the people. Its sole objective of the rule was to earn money for the Co and provide jobs to the British citizen.
 Co officials were also allowed to trade on personal account, using Co’s flag  and exception from taxes, to  maximize income, at the cost of local traders who had to pay taxes. The Co did not even object to taking bribes and Clive himself admitted taking a large bribe from Mir Jafer.

Imposition of heavy tax on land and denying any savings:
Co imposed upto 90% tax on Economic rent (Gross revenue less costs) in Bengal on Land- lords and introduced the direct taxation system on cultivators, known as Rioyatwari system, in Madras and Bombay. When other territories were annexed a mixture of the two systems was introduced.  
 The purpose of Rioyatwari system was to get rid of the middle man and maximize revenue. However this added to the misery of people of Madras and Bombay as the individual peasant was not able to resist the demand of the Co no matter how excessive it was. The choice was to accept what ever the Co demand or leave the land.  
Co’s demand on the land of taxes upto 80% of the economic rent was not different from what the Mugals demanded. However the Moguls use to share the crops while the Co demanded tax in money. Under Mogul rule, the tax collection system was lax and lenient and the actual collection was always much less.
Besides on the first sign of a crop failure or distress the Rulers granted remissions and opened up their granaries, this was not the case under the Co rule. The Co officials were aloof and un-sympathetic towards the locals and ruthlessly demand the full rent irrespective of the circumstances.
Even when some kind hearted officials wanted to give concessions and from time to time and made a case for it; all  such proposals were always rejected by the Co’s Board.

Co’s method of funds transfer:
As if a treasure chest was found by the Co.  Co wasted no time in making huge some of money and transferring it to home country.
 When it was given opportunity to manage and tax the land their aim was to gain a substantial surplus over the cost so that they could take a part of the fund to UK in the form of goods needed by UK, but for which it did not have the money. The surplus was converted to so called Investment which were exports paid by the Co and its officials.
 Co created a Home Office in UK, expenses of which were to be paid by the Indian Treasurer. The Home Office was to look after the affairs of India. The charges of Home Office increased as the resources of Indian Treasury expanded.
The Co took away all well paying jobs from the locals and gave it to British Officer. The Officers use to remit a substantial portion of the salary back to UK.
The Home Office charges and remittance resulted in regular out flow of almost half of the Indian Taxes to UK. In return of which nothing was coming expect the Co rule.
Co monopolized production and sale of Salt, Opium, Alcohol and Indigo. Its Officers took away bulk of the lucrative in land trade thus depriving locals from this means of lively hood. When trains were introduced it took away the transport business from the locals and gave it to Rail Cos owned by European capital.
“ Place any other country under the same condition with crippled industries and agriculture subject to heavy and uncertain Land Tax and financial arrangements requiring one half of its revenue to be annually remitted out of the country and the most prosperous nation on earth will soon know the horrors of famine” wrote Ramesh Dutt in 1906.

Plunder and fund transfer from 1757 onwards:
During the first 8 years of direct rule by British East India Co, after Battle of Plassy in 1757, the Co and its officials took away Pound Sterling (PS) 3.7 million, as per British parliament records. Clive personally took PS 59,000 which made him so rich that he offered to work for free in future.
In 1765 Clive estimated Co’s income from Bengal, Bihar and Orissa at Rs 23 million. After paying for Military expenses of Rs 6 m, Nawab’s allowance of Rs 4.2m and King’s payment of Rs 2.6m; the surplus was calculated at Rs 12.2 m or Pound Sterling (PS) 1.65m per year for remittance to UK.
The last local ruler of Bengal (1764) realized land revenue of PS 817,553, within 30 years the British rulers realized PS 2,680,000, in the same Province
In 1817 when British took control of Bombay from Marhattas the land revenue was PS 800,000 within few years it was raised to PS 1,500,000.
“No Native Prince demands the rent that we do” wrote Bishop Heber in 1826 after traveling all through India and visiting British and Native States.
“A land Tax like that which exist in India” wrote Colonel Briggs in1830,” professing to absorb the whole of land lord’s rent was never known under any Government in Europe and Asia” 
With the passage of time and expansion of the Empire the revenues grew. By 1830 the total income reached Rs 66 million out which 22m was sent as Home Office expenses and about 10 m as salary income of British Officers. Thus 32 out of 66m was remitted every year to the richest country in the World. By 1900 India become the poorest country in the world. A result of 150 years of ruthless exploitation and loot by force of arm.  
To collect such large tax and generate surplus for transfer to UK, the Co demanded upto 90% of rental income compared to 5-20% collected in Ireland and England. The Co devised a very efficient and cruel tax collection system. The result was that no surplus was left with the peasant and land lords and every crop failure led to famine.

Destruction of Indian industry:
As the Empire grew the British were not content at income from land and started to curb all industrial activity to give way to manufactured goods from UK. The aim was to make India only producers of raw material like raw cotton, while all value adding is done in UK.
The policy was persuaded with unwavering resolution with fatal success ; orders were sent out to force Indian artesian to work for Co factories ; Commercial residents were legally vested with extensive power over village and communities of Indian weavers.
Prohibitive tariffs upto 40% excluded Indian Silk and Cotton goods from England. English goods were admitted into India free of duty or on payment of 2.5% duty.
 In 1813 Calcutta exported to London PS two million of Cotton goods by1830 Calcutta imported PS 2 m worth of Cotton manufactures from London. 
The British manufacturers, in the words of the historian H.H. Wilson “employed the arm of political injustice to keep down and ultimately strangle a competitor with whom it could not have contended on equal terms”
Gradually the very large cotton spinning and weaving, and other industries of India died down by 1830s.
Millions of Indian artisans lost their earning. Millions of Indian women in villages who earned decent amounts spinning and weaving the cotton lost the source of income which was so vital for their family’s survival. The population of India lost one great source of their wealth.  
It is a painful episode in the history of British rule of India; but it is a story which must be told to explain the economic condition of Indian people.
As most of the Government jobs were retained for the British; people had no other source of income other than agriculture and had no savings to rely on during crop failure.

Resultant Great famines:
 By a moderate calculation the famine of 1770, 1799-1801,1806-7,1812-13,1824-5,1832-3,1837-8,1853-5,1860-1,1866-7,1868-70,1873-4,1876-8,  1877- 78,1888-9,1896-7, 1899-1900,1905-6, 1906-7, 1907-8 and 1943 killed  some 30,000,000. This was  the  size of a faired sized European country..   
The famine after famine happened not because there was overall shortage of food in the country. There were food surpluses in the neighboring States while people died on the streets simply because people did not have money to buy food. Even if traders transported the food from outside there was no purchasing power. The price system and market use to collapse. While the Rulers were least concerned.
 This is worst recoded human suffering in history.

What if Europeans had not occupied Asia?
The debate whether Columbus was a blessing for America or a curse may go on for ever. However form purely economic point of view it can be said that Asia would have been better off if Vasco de Gamma had not arrived in Calicut at close of 15th century.
The reason is that Asia as a whole particularly India, China and Indonesia were flourishing civilization and bulk of the economic activity of the world was concentrated in this part of the world. Agriculture, industry and trade were booming and the Rulers and bulk of the subject were very well off.

European advantage and reason of their success:
What Nobel Asian civilization lacked was aggressiveness. The societies were governed by ideals of great religions like Islam, Hinduism and Buddhism which preached co existence and control of desire for worldly things, beyond certain limits. The high, sophisticated, advanced value system did not allow the societies to be aggressive and conquerors, using their vast financial resources. India built a small shipping fleet but did not build a Navy. China did build a Navy capable of dominating seas upto Africa, but on realizing the mistake that this may lead to a desire for foreign occupation, the Rulers ordered its destruction.
 The Nobel Rulers of the Region thought that the rest of the world was thinking in the same manner and that no body would use force in trade and life will go as before.
However the greed of Europeans changed all that. They very unashamedly used their superior Gun boots to first disturb the commercial shipping of the Region and eventually conquer and subjugate its people and steal their wealth.
The vast difference in the moral standing of the Asians and Europeans was the key to the success of the West and humiliation of the East.
While Asians were bound by their religious principles and high moral codes, Europeans while paying lip service to Christianity, decided to free themselves of all rules and become rich at any cost. 
    It was not the superior arm or military tactics which explains European success fully. Because except for Naval power the arms and tactics were same. It was their freedom from all moral rules which gave them their edge. The manner of  Annexation of Sindh in 1843, is a good example in this regard.
 With their hold on power the Europeans became richer by the day at the cost of Asians. In the case of Indo Pak the British took away some PS 4 billion between 1750 and 1947 in the name of Home Office charges and Officers remittances (in today term this was equal to PS 4,000 billion or about USD 7,000 billion). They also shifted the trading and consumption pattern so that even today all value adding trade pass through West.
While they control most of the shipping, insurance and banking related to international trade thus assuring that they take the cream out of the trade fueled by cheap and hard work of the Third World.

Asian share in World GNP:
As a result of changes brought by the Western occupation of great nations of Asia. Their share in World GNP was reduced as follows between 1750 and 1950:

-Indo Pak from 33% to 3%
- China from 28% to 2%
-Indonesia from 14% to 1%.

The poverty in these countries knew no bound at the time of their independence. China followed a revolutionary communist path to correct the situation and isolated itself. India also followed an isolationist policy and followed a socialist path to improve the condition of its people. Pakistan followed a capitalist development strategy to quickly alleviate poverty. Pakistan’s model proved to be the most effective.
Both China and India later realized that by following and isolationist policies they can not freed and employ their teeming millions. By 1990s they started to open up their economies like Pakistan and allowed large scale western investment and technology.
Gradually Asian countries are retaking their rightful place in the World economy and their share in world GNP is rising fast.
However the back log of poverty created due to 200 years of exploitation is still large. Some 600 million people in India, Pakistan and Bangladesh are still under poverty line.

Pakistan’s smart policy:
Pakistan was able to alleviate poverty at the fastest rate among these counties from 1947 to 1972 by following capitalist policy linked closely with the West.  It created small scale industry with latest western technology and adopted latest agriculture practices and was soon able to clothed and feeds its growing population better than Indians and Chinese.
However the Socialist and Islamic experiments since then retarded its economic march forward.
Thankfully,  since 2001 we are once again marching fast to alleviate poverty and it is hoped that in the next 40 years poverty rate will drop from 25% now to 3-4%. By that time Pakistan is expected to become the 7 to 10th biggest economy of the world to match is military power.  
 
Conclusion:
British rule was beneficial in many aspects especially for Muslim Punjab and Sindh. Baluchistan and NWFP as we see it today was their creation in the last quarter of 19th century. Thus present day Pakistan probably gained a lot from their rule.   However for India, Pakistan and Bangladesh as a whole, economic consequence was not positive. There was a massive drain of resources from our land which added to the poverty of our people.
 If we had remained independent and gradually obtained and learned the science and technology which developed in European we would have been better off. There are reasons to believe that a prosperous country like India would have attracted the best brains of the world as USA does today and would have the latest ideas, science and technology.
In such a scenario we would have also absorbed new rational thinking of renaissance movements or French revolution ideals of liberty and equality of mankind. This would have been followed by assimilation of ideals of American democracy and Soviet Socialism and humanism.
However we may not have English language. Instead Urdu or Chinese could have become the international business and science language, given the economic importance of India (33%) and China (28%) in the world GNP in 1750.