The Drain Of Wealth

The Drain of Wealth

Drain theory was at the heart of nationalist critiques of colonialism, and the acknowledged high priest of this critique was Dadabhai Naoroji, who proposed the idea that Britain was draining and bleeding India for no reason as early as 1867. Part of India's wealth and resources were exported to Britain, for which India received no adequate economic or material return. This so-called "economic drain" was unique to British rule. Even the most repressive Indian governments had spent the money they extorted from the country's citizens. Whether it was spent on irrigation canals and trunk roads, palaces, temples, and mosques, wars and conquests, or even personal luxury, it aided Indian trade and industry or provided jobs for Indians. This was because even conquerors from other countries, such as the Mughals, quickly settled in India and made it their home. The British, on the other hand, were always foreigners.
 
The Drain of Wealth
•    Working and trading in India, Englishmen almost always planned to return to Britain, and the Indian government was controlled by a foreign merchant company and the British government. As a result, the British spent a large portion of the taxes and income they received from the Indian people in Britain, their home country, rather than in India. 
 
•    The wealth drain from Bengal began in 1757, when the Company's servants began to transport vast sums of money extorted from Indian rulers, zamindars, merchants, and common people.
 
•    Between 1758 and 1765, they sent nearly £6 million home. This sum was more than four times the Nawab of Bengal's total land revenue collection in 1765. This figure did not include the Company's trading profits, which were frequently obtained illegally as well. 
 
•    The Company bought the Diwani of Bengal in 1765 and gained control of its revenues. Even more than its servants, the Company quickly organised the drain.
 
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•    It began purchasing Indian goods with Bengal revenue and exporting them. These purchases were referred to as 'Investments.' Bengal's revenue was thus sent to England via 'Investments.' For example, between 1765 and 1770, the Company shipped nearly £4 million worth of goods, accounting for roughly 33% of Bengal's net revenue.
 
•    The drain accounted for nearly 9% of India's national income by the end of the eighteenth century. The actual drain was even greater, as a large portion of English officials' salaries and other incomes, as well as English merchants' trading fortunes, found their way into England. 
 
•    The drain manifested itself as an excess of India's exports over its imports for which India received no compensation. While the exact amount of the annual drain has yet to be calculated, and historians disagree on its magnitude, the fact of the drain was widely accepted by British officials, at least from 1757 to 1857.
 
The Drain of Wealth
•    For example, Lord Ellenborough, Chairman of the House of Lords Select Committee and later Governor-General of India, admitted in 1840 that India was “required to transmit annually to this country (Britain), without any return except in the small value of military stores, a sum amounting to between two and three million sterling, without any return except in the small value of military stores, a sum amounting to between two and three million sterling.”
 
•    And, as John Sullivan, President of the Madras Board of Revenue, put it: “Our system acts very much like a sponge, drawing up all the good things from the banks of the Ganges, and squeezing them down on the banks of the Thames.”
 
•    After 1858, the drain continued to grow, despite the fact that British administrators and imperialist writers began to deny its existence. It accounted for nearly 6% of India's national income and one-third of its national savings by the end of the nineteenth century.
 
•    The wealth drained out of India played a significant role in financing Britain's capitalist development, particularly during the eighteenth and early nineteenth centuries, when the country was just beginning to industrialise. 
 
•    It is estimated that it accounted for nearly 2% of the UK's national income during that time period. When you consider that Britain was investing about 7% of its national income in industry and agriculture at the time, the figure becomes significant.

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