WRITTEN BY R. NANJAPPA                        

Post No. 8529

Date uploaded in London – – – 18 August 2020   

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Chapter 7 – Part II

                           COLLECTED WRITINGS OF DHARAMPAL- 2

R. Nanjappa

Book I, Chapter IX

III. Mercantile companies destroy:

Adam Smith tells us in some detail how a mercantile company, given monopoly, would act against the interests of all concerned, in pursuit of immediate profit. He describes how the Dutch and Portuguese companies have ruined the areas under them and says:

“The English company have not yet had time to establish in Bengal so perfectly destructive a system. The plan of their government, however, has had exactly the same tendency. 

“Had they been allowed to go on, it is impossible that they should not at some time or another have attempted to restrain the production of the particular articles of which they had thus usurped the monopoly,…. In the course of a century or two, the policy of the English company would in this manner have probably proved as completely destructive as that of the Dutch”.

Smith distinguishes a true sovereign from a mere merchant. He says that a sovereign derives his revenue from that of his people; so, his natural interest should be to allow the people to increase their revenue! But this is not the case of the merchant with monopoly, where he could maximise his profit by curtailing production. He makes some great observations:

But a company of merchants are, it seems, incapable of considering themselves as sovereigns, even after they have become such.

As sovereigns, their interest is exactly the same with that of the country which they govern. As merchants, their interest is directly opposite to that interest.

But if the genius of such a government….is in this manner essentially and perhaps  incurably faulty, that of its administration in India is still more so. That administration is necessarily composed of a council of merchants… which in no country in the world carries along with it that sort of authority which naturally overawes the people, and without force commands their willing obedience. Such a council can command obedience only by the military force with which they are accompanied, and their government is necessarily military and despotical.

They will employ the whole authority of government, and pervert the administration of justice, in order to harass and ruin those who interfere with them….

Such exclusive companies are nuisances in every respect; more or less inconvenient to the countries in which they are established, and destructive to those which have the misfortune to fall under their government.

Book IV, Chapter VII


We can thus see that Adam Smith anticipated, as a mere economist, the likely economic and social outcome when a merchant company plays sovereign. The moral tone of this Professor of Moral Philosophy is also unmistakable. His prescience is stunning in its accuracy. The English in India had two centuries, as Adam Smith assumed, and brought about the ruin and destruction of a prosperous country as he predicted.

There is only one slip on his part. He distinguished between a true sovereign, who has the interests of his subjects at heart, and the mercantile masters who merely run for profit. Here, Dharampal’s records show that in the case of India, the company was merely the executing arm and the real master of destruction was the British sovereign and government. The company had always had the backing of the British army and navy. The company contributed large sums to the British treasury, and advanced money.

It is to this dispensation that we have to trace the origin of India’s economic decline, poverty and distress. Our agriculture was destroyed by company interference, high taxes, shortage of capital, high interest. People left agriculture and sought other occupations. But industries (manufactures) were also declining and could not support the increasing numbers. Famines struck, and people had no means to sustain themselves. Hereditary occupations declined. Our educational systems, science and technology, institutions of governance declined and disappeared. The financial arrangements which had sustained them through centuries collapsed. The whole of Indian society was subjected to great distress.

The writings of Dharampal trace how this happened, on the basis of original documents which he has provided in all the volumes.
Dharampal as historian confirms what Adam Smith as economist stated would happen!


It may appear to some that Adam Smith is quoted repeatedly. This is deliberate and necessary. Adam Smith is considered the father of modern economics and he wrote that the East India company would ruin India. He explained how this would happen. Unfortunately, neither Indian historians, nor Indian economists seem to have read Adam Smith and neither quote him in this context. The Indian government establishment, even after Independence, is continuing the colonial lies and distortions as Indian history, and perpetuating the lies through the education system. When the government is repeating the lies of the colonial government, it is necessary for us to repeat the correct position in different contexts. Hence Adam Smith has to be quoted repeatedly. 

Dharampal has shown how Adam Smith’s views proved correct- India was ruined. But Dharampal shows, on the basis of colonial records, how the British government itself was responsible for and beneficiary of this loot.

2.It used to be said in some circles that the British happened to rule India “in a fit of absentmindedness”. Among the historians of an earlier generation, Prof. Sripad Ram Sharma (S.R.Sharma) (Fergusson College, Pune) had countered this argument brilliantly and showed how the British government was actively involved in creating the colony here. This was in his book “The Making of Modern India”.  It was published by Orient Longmans more than 60 years ago. Unfortunately it is out of print. It may only be available in some libraries. [I still have my old notebook, where I have extracts from this book] Dharampal actually shows that the British government was behind the East India Company  at every stage. India’s ruin was the work of both the Company and the British government.

TAGS – books to read, -19


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