WRITTEN BY R. NANJAPPA                        

Post No. 8268

Date uploaded in London – – – 1 July 2020   

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R. Nanjappa

But by the time Smith was writing, things had turned bad- in fact dismal. Smith does not mince words either about the then prevailing state or about the causes. 

He writes:

“…… a country where the funds destined for the maintenance of labour were sensibly decaying,….Many would not be able to find employment even upon these hard terms, but would either starve, or be driven to seek a subsistence either by begging, or by the perpetration perhaps of the greatest enormities. Want, famine, and mortality would immediately prevail in that class, and from thence extend themselves to all the superior classes, till the number of inhabitants in the country was reduced…..

This perhaps is nearly the present state of Bengal… we may be assured

that the funds destined for the maintenance of the labouring poor are fast decaying. 

The difference between the genius of the British constitution which protects and governs North America, and that of the mercantile company which oppresses and domineers in the East Indies cannot perhaps be better illustrated than by the different state of those countries.

 Book I, chap.vii

Smith also remarked on how the interest rates were driven high by the company policies and practices.

The diminution of the capital stock of the society, or of the funds destined for the  maintenance of industry, however, as it lowers the wages of labour, so it raises the profits of stock, and consequently the interest of money…..The great fortunes so suddenly and so easily acquired in Bengal and the  other British settlements in the East Indies may satisfy us that, as the wages of labour are very low, so the profits of stock are very high in those ruined countries. The interest of money is proportionately so.

In Bengal, money is frequently lent to the farmers at forty, fifty and sixty percent and the succeeding crop is mortgaged for the payment. As the profits which can afford such an interest must eat up almost the the whole rent of the landlord, so such enormous usury must in its turn eat up the greater part of those profits.

(Part I, chap. viii Penguin Edition, vol.i, p.197)

This explains how Bengal was gradually ruined, both its agriculture and industry declining, and the wealth thus obtained went to enrich England and fuel its Industrial revolution. 

How the company destroyed our economy

What exactly had happened? By 1757, the East India Company had established its supremacy in India and it soon acquired the rights to collect the land revenue (Diwani, in 1765) and proceeded to do so with thorough ruthlessness and without regard to local conditions, by appointing intermediaries. Thus from a trading post, Bengal became an imperial possession! The funds so collected were not spent on the people, but became the earnings of the company. And the company officials also syphoned off large sums for themselves, leading to a great epidemic of corruption.

Even Governor Clive was part of it, and impeachment charges were levelled against him later.. This led eventually to a great famine in 1770-  The first ever famine experienced in India, and that within 15 years of the British conquest. This famine killed one third of the population of Bengal. (Remember, Bengal was then much larger than the present puny West Bengal). Smith first briefly refers to this.

In rice countries, where the crop not only requires a very moist soil, but where in certain periods of its growing it must be laid under water, the effects of a drought are much more dismal. Even in such countries, however, the drought is perhaps, scarce ever so universal as necessarily to occasion a famine, if the government would allow a free trade. The drought in Bengal, a few years ago, might probably occasioned a very great dearth. Some improper regulations, some injudicious restrictions imposed by the servants of the East India Company upon the rice trade, contributed, perhaps, to turn that dearth into a famine.

Book IV, chap v


tags — India, Not poor-2

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