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The Economy of Mughal India – with Angus Maddison

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I read a couple of chapters of Angus Maddison who described Indian economy and its pitfalls quite vividly. Angus Maddison is a world-renowned economic historian who is famous for his work on estimating the past GDPs of modern economies by different measures. I won’t go much details into his original work, but the pieces he wrote about Indian subcontinent are worth-reading.

In short, both Mughal and British empire were significantly “elitist” and “extractive“, i.e. from power to money – everything was in the hands of a few. Contrary to the widespread belief in India, the common mass lived a little above the sustainability level and were hit by periodic natural calamity and crop-failures. The system or the economy in general was built to grind the common people into de-facto slavery. In this blog-post, I will focus on the Mughal rule (read the British one also).

The Elitist Mughals

To start with the Mughal system, Maddison notes –

“India had a ruling class whose extravagant life-style surpassed that of the European aristocracy.It had an industrial sector producing luxury goods which Europe could not match, but this was achieved by subjecting the population to a high degree of exploitation. Living standards of ordinary people were lower than those of European peasants and their life expectation was shorter.”

To expose the elitism in Indian society, he notes that the major export items those India had at that time were “salt-peter (for gunpowder), indigo, sugar, opium and ginger” but the import items were nothing but silver, gold and other precious stones. This highlights that on the national level, India exported items produced by ordinary populace where they imported items for elites only. Maddison went on the compare the European standard of living with the Indian ones –

“In spite of India’s reputation as a cloth producer, Abul Fazl, the sixteenth-century chronicler of Akbar, makes reference to the lack of clothing in Bengal, ‘men and women for the  most part go naked wearing only a cloth about the loins’. Their loincloths were often of jute rather than cotton. In Orissa ‘the women cover only the lower part of the body and may make themselves coverings of the leaves of trees’. They also lacked the domestic linen and blankets, which European peasants of that period would have owned.”

So the common people perished where the wealthy had it all. While average Indians didn’t have cloth to wear on, the Indian muslin were famous in Europe and was noted for aristocracy.

The health condition of common people was equally bad. Indian population almost stagnated for about 2000 years –

“Kingsley Davis has suggested that mortality rates in India were high enough to offset the very high fertility rates, so that there was little increase in population in the 2,000 years preceding European rule.”

The System of Exploitation

There lies the hierarchy and Maddison got it correct. The Indian system worked through the caste hierarchy and the agro-income from the lowest strata of the society used to bubble up as taxes to the upper elites.

“The revenue of the Moghul state was derived largely from land tax which was about a third or more of gross crop production, i.e. a quarter or more of total agricultural output including fruits, vegetables and livestock products which were not so heavily taxed … Total revenue of the Moghul state and autonomous prince-lings and chiefs was probably about 15-18 per cent of national income. By European standards of the same period this was a very large tax burden”

Not only the taxes were high, the tax money were used mostly in “consumption expenditure of the ruling class”.  Maddison further notes that the Jagir system in India was not hereditary and the Jagirs were posted from place to place. So, he “had an incentive to squeeze village society close to subsistence”. The village society was very docile and governed by the rules of caste. That was the primary reason why India was smoothly ruled by outsiders for years as Indians were more concerned about their “karma” as per their “caste” and not to sidestep it for a larger or revolutionary role in the society. One notable absence, as per him, was that Indians rarely tried to take up sea-trade as part of their profession since “religious beliefs inhibited foreign travel and commercial development by Hindus”. Furthermore, caste stagnated the society to new ideas and technology unless they are imposed from the rulers –

“In spite of extensive contact with foreigners, India did not copy foreign technology either in shipping or navigation, or in artillery and military organization, and this is one of the reasons it was conquered by Europeans. “

On the other hand the revenues from this exploitation channels were put in to the “hoarding precious metals and jewels and “construction of palaces and tombs”. The total land-irrigation work undertaken was as little as 5% of the total fertile-land.

On the brighter side though, Maddison mentioned that religious institutes in India did not consume as much money as it did in Europe.

Conclusion

In summary, in spite of a few glitches (I would discuss those later), Maddison probably got to the closest to the reality. There are very few Indian scholarly articles that could now-a-days confirm that Indians on an average were richer than the Europeans or the Arabs at the same time. The perils of elitist economy would be felt sooner than anyone expected – during Industrial revolution. The major Indian produce – things such as muslin – were dependent on aristocrats to buy. In a world where mass-production was much more important than elite products – Indians were bound to lose the trade war. Moreover, the producer lived in perils and he had little incentive to innovate or take his production scheme to the next level. All things necessary to produce a failed state were gathering mass under the lavish Mughal aristocracy. The myth of rich Mughal India is thus just another myth.

The primary resource – Class Structure and Economic Growth: India & Pakistan since the Moghuls (1971) by Angus Maddison.

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Written by Diganta

February 4, 2013 at 11:57 pm

Colonialism and Economy

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In my earlier post I argued that colonialism has probably no long lasting economic effect on either of the colonizer or the colony. I got a couple of more points to display it. The first is that of Caribbean Island states. They got their independence in different times in the history but that has no effect on their economy. The first one to get independence was Haiti (1804) but they lag behind the all of other neighboring islands by much. The top-of-the-list Bahamas got their independence in 1973 and the second-in-list Puerto Rico is still a US Colony.

Caribbean Economic Performance and Year of Independence

The second set of data is of Turkey and Balkans. Turkey had a lot of area (in Europe) under their occupation for a long time in the history. However, in the long term, there is nothing to suggest that Turkey has economically a better performer than the rest. Rather it is more evident that the other East European colonies are doing far better than Turkey. In fact, until recently (till 1980s), Turkish people were far worse of the entire East Europe they ruled for centuries.

Ottoman Turk Colonies in Europe and Turkey

Ottoman Turk Colonies and Turkey

Both of these also shows that colonialism has limited effect on a economy of a country in the long term. Of course there are some effects in the short-term, such as draining resources or dependency, but in the long economic history drainage of resources has similar effects to that of a war. A war has seldom made a country poorer – especially if we take recent examples of Germany or Japan.

Colonialism, or as of that the whole thing called imperialism has a different root. If I can see through the eyes of Adam Smith, the famous economist and father of modern Economics –

No nation ever voluntarily gave up the dominion of any province, how troublesome soever it might be to govern it, and how small soever the revenue which it afforded might be in proportion to the expense which it occasioned. Such sacrifices, though they might frequently be agreeable to the interest, are always mortifying to the pride of every nation, and what is perhaps of still greater consequence, they are always contrary to the private interest of the governing part of it….”

Well, all that imperialism boils down to the pride of nation. The notion of a colony is a positive pride for the mother country and negative shame for the colony itself. It may be beneficial to the mother country in the economic sense. It may not be as well.

Written by Diganta

November 29, 2012 at 12:50 am

Post-Colonial Disparity

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I have been reading for a while about post-colonial world and how colonies were able to turn things around. The blog post from Jyoti Rahman made me think twice. Was it all correct?

Being Indian, the version I read and heard a hundred times from my childhood, was that Indian subcontinent along with a lot of other former European colonies were hammered quite heavily by colonialist masters. The sole reason of our current state of poverty seems to be related to our history, which has a couple of hundred years of colonial rule in its timeline. During this period, our raw resources were taken away and were used in factories across Europe to produce items for consumption of rest of the world. On the other hand, our local small industries were bulldozed with high restrictions and they soon mired into oblivion – leaving us a nation full of poor people. Little or no investment in Agriculture and food-distribution caused several famines during colonial rule. No effort for public education system left a bunch of illiterate people. To add on top of that, ever since we became independent, we are doing better and better, with more food, some industries and now the services industries to cheer about. There are multiple examples around us to justify this pattern. (Read an article by Amartya Sen on this topic)

To question this understanding, the first graphics I would refer to, is simply of growth of some of the countries post-independence. If I have to assume that it was raw materials from colonies that caused the growth in masters, then there should be an economic effect of increased availability of those resources in colonies post independence. And a scarcity of  the same should be causing growth to limp in the masters.

Colonies vs Masters in last 50 years

Colonies vs Masters in last 50 years

But the graph above shows absolutely the opposite. In last 50 years, colonies might have got little improvement of per-capita growth, but the gap between colonies and their  former masters has expanded at a rapid pace. This makes me comment that rather than we demanding our independence, the masters should have voluntarily freed our nations.

But then comes the next question, why is this disparity, even after the decolonization? There are two answers – one in the side of the masters, the other was from the colonies. After world-wars, the European nations were better of without colonies because they avoided one of the core reasons of their disputes – ownership of colonies. Post-world-war, Germany developed rapidly and this time they didn’t have a problem with other European countries, as they didn’t vie for colonies. There are no intra-state war (not even a proxy one) among Western European colonialists after the colonialism ended. Rather the cold-war kept them united.

The second reason would probably be attributed to a successful shift of their economy to tertiary one, which these countries already doing good at. With higher level of average education and skills in Science, they were bound to lead the world in services and innovation driven economies.

On the other hand, most of the colonies inherited better institutions than their previous native rulers have built (Indian institutions were far better in 1947 than what was left by Mughals in 1757). However, for most of these countries, strong nationalist sentiments drove them to success in the form of independence.  These sentiments, coupled with fear from recent-past experiences, made these countries extremely business-unfriendly. They became inward looking, anti-foreign-investment and invested most of the resources into less-productive sectors such as Agriculture and  small-scale industries. However, standard of living were improved in these countries in the form of health, education and social indices went up and towards the end of the graph, those start to yield some good results for them.

Now going back to where I started, were these colonies better off being never fallen into the grips of masters? I see point for and against it clearly. The points in favor of this view are discussed in the beginning. The points against it are also becoming clear. For example, between 1750 and 1947, the growth in the World economics were mostly fueled by manufacturing. There were new innovations all along the Europe and an active patent system to protect interest of investment on innovation. Indian rulers before the British did never thought of value of innovation, nor did they encourage it with more business. The culmination of pre-Raj Indian empires were said to be Akbar’s rule that created space for peaceful existence, but not even an iota of industrialization and literacy drive that one would expect in contemporary Europe. If you look at Akbar’s EU contemporaries, you’ll find Elizabeth of England and she appears to be much more farsighted than Akbar. Long later in 1857, Indians started their first war of independence with an objective of getting their old Mughal-Maratha rulers back but not for democracy, literacy, separation of church and state or modernization of infrastructure and institutions. India didn’t yet have enough decision-makers to think in those terms.

In summary, I feel we got what we deserved. Even if there were no such thing named colonization (which again was inevitable) or we were never colonized, we were having roughly the same standard of living that we have today. Whether we named our country as India, or were we have 20 different countries instead of three – are different questions and I can not address them. Guided by democracy with no political setup or autocracy with an extension of Mughal-Maratha-like empires would not have taken us far beyond where we are today.

Update –

Bangla Version with a lot of discussion.

Written by Diganta

June 3, 2012 at 1:42 pm

Facts and Myths around US Oil Import

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I read hundreds of articles about US presence in Iraq and most of them argues with oil as a primary driver of US Economy. Moreover, they also highlight the importance of Persian Gulf as a primary source of US oil and energy resources. These notion is extremely popular in Indian subcontinent and Middle-East, where people love to discuss sans any facts. However, digging deeper in facts quickly dismisses that big a role of oil in modern day United States.

If we briefly look at oil import trends of United States, we can definitely observe a downward trend in oil import for last six years. In year 2010, US imported almost same amount of oil as they did in 2001. From the peaks of 2005, its down by about 12%. US oil imports are actually going down. (source)

Let’s go over the other myths –

1. US imports most of its oil from Persian Gulf and US imports more from OPEC countries.

Clearly wrong. US imports around 15% of oil from Persian Gulf and about 40% from OPEC.

US Oil import from OPEC and Persian Gulf

US Oil import from OPEC and Persian Gulf

2. US imports a lot of oil from Saudi because of the kingdom’s closeness with USA.

Wrong again.

US Oil Imports from Saudi and Canada

US Oil Imports from Saudi and Canada

US is steadily increasing imports from Canada over Saudi and in 2010, US imported 2.5 times of that it imported from Saudi. The tar-sands oil in Canada made them the owner of second largest oil reserve after Saudi and United States is making full use of it.

This is the detailed break up of US oil sources –

US Oil Import sources

US Oil Import sources

US Oil - Imports vs Domestic Production

US Oil - Imports vs Domestic Production

The last but not the least – it’s always assumed that US will remain the largest net oil importer of the World. However, Shale Gas is turning that tide. A very optimistic article  (and another one)on Shale Gas discovery and its impacts terms this as “energy revolution”. The days might not be far ahead, when US might not import from outside of the continent at all.

A good read – Swami Aiyar’s blog

Written by Diganta

February 20, 2012 at 10:50 am

Posted in Economy, Myth, Technology, US

Tagged with , , , , , ,

Govt sizing – too little or too large?

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I came across the quantitative measurement of a country’s economic freedom in a report presented by Economic Freedom of the World. The report concludes that “Countries with more economic freedom have substantially higher per-capita incomes”, with their chart at page 17.

This shows that the least free countries also lags in per capita income and the most free ones have high income.

To derive to a Economic Freedom index, the Journal of Economic Survey assigned numerical marks to each country in each of the categories. There are four basic categories they classify their numbering into – Size of Govt, Legal Structures, Access to money, Freedom to trade, Regulations (Credit, Labor and Business). The one I am going to discuss now, is basically the first one, i.e. Size of Government: Expenditures, Taxes, and Enterprises.

As per their description, this category has four further sub-categories –

  • General government consumption spending as a percentage of total consumption
  • Transfers and subsidies as a percentage of GDP
  • Government enterprises and investment
  • Top marginal tax rate

Their basic argument goes like this (quoted from the report) –

“When government spending increases relative to spending by individuals, households and businesses, government decision-making is substituted for personal choice and economic freedom is reduced. … When government consumption is a larger share of the total, political choice is substituted for personal choice. Similarly, when governments tax some people in order to provide transfers to others, they reduce the freedom of individuals to keep what they earn. … They (Govt Capital) often operate in protected markets. Thus, economic freedom is reduced as government enterprises produce a larger share of total output. … Such rates (High income tax rates) deny individuals the fruits of their labor. Thus, countries with high marginal tax rates and low income thresholds are rated lower. …  countries with low levels of government spending as a share of the total, a smaller government enterprise sector, and lower marginal tax rates earn the highest ratings in this area.”

But does it translate to prosperity? Does it at all contribute towards higher per capita income? Surprisingly, the statistics shows a negative correlation between Govt size and Per capita income. I tried to come up with a chart where I list out 20 countries with highest rating in Govt. size and their rank in World Bank per capita income list.

Per Capita GNI rank vs Govt Size rank Graph

Per Capita GNI rank vs Govt Size rank

So, we’ve got an interesting list. Most of these countries are poor, except for tax havens and Singapore. Besides, the top ranked Hong Kong’s Military and Foreign relations are managed by Mainland China that scores poorly in the Govt size index.

Now let’s see how it looks like for the countries who are rated poorly. The bottom 20 of Govt size countries are –

Per Capita GNI rank vs Govt Size rank graph

Per Capita GNI rank vs Govt Size rank

So that becomes interesting, the list includes countries such as Scandinavian ones, Benelux members – countries those offer highest freedom to their population. And more interestingly, on an average, the average rank of these 20 countries is 99.5 in the per capita GNI compared to that of 123.85 for top 20 countries.

So, the end chart of top-10 vs bottom-10 looks like this –

Top 10 vs Bottom 10

Top 10 vs Bottom 10

FYI, the Top 10 avg drops to 12,502 if we keep Hong Kong out of the list.

Now let’s revisit the facts and hypothesis. Fact one – more Govt intervention/size is correlated to higher per capita GNI. Fact two – more economic freedom is correlated to higher per capita income. However, the hypothesis, as per the report, is that less govt intervention/size should contribute towards higher economic freedom!! How good is the hypothesis then? Doesn’t it falsify the conventional wisdom of higher Govt intervention implies less prosperity? In other words, doesn’t it falsify the neo-liberal economists and World Bank/IMF dogmas?

GNI Per Capita incomes are collected from World Bank Website.

The data about Economic Freedom Index are collected from Free the World website.

Written by Diganta

April 25, 2011 at 7:02 am

Articles on Science and Religion by Einstein

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Any Scientific minded person who considers himself as a religious or an atheist, should read thses wonderful articles of Albert Einstein. These are, in a sense, an eye-opener to me, that how beautifully one could express the ways to reconcile religion and science. There are four master-pieces, all of them are worth reading at a stretch. I know there will be many religious people claiming that Einstein was a ‘deeply religious’, but what I found here, that he defined the religion in totally a different way to build himself as ‘deeply religious’. Let’s go through a few excellent quotes.

On how the religion has come :

“With primitive man it is above all fear that evokes religious notions – fear of hunger, wild beasts, sickness, death. Since at this stage of existence understanding of causal connections is usually poorly developed, the human mind creates illusory beings more or less analogous to itself on whose wills and actions these fearful happenings depend. Thus one tries to secure the favor of these beings by carrying out actions and offering sacrifices which, according to the tradition handed down from generation to generation … This, though not created, is in an important degree stabilized by the formation of a special priestly caste which sets itself up as a mediator between the people and the beings they fear …”

Problems in the above definition of religion and his own view :

“Common to all these types is the anthropomorphic character of their conception of God. … I shall call it cosmic religious feeling. It is very difficult to elucidate this feeling to anyone who is entirely without it, especially as there is no anthropomorphic conception of God corresponding to it.  … The individual feels the futility of human desires and aims and the sublimity and marvelous order which reveal themselves both in nature and in the world of thought. Individual existence impresses him as a sort of prison and he wants to experience the universe as a single significant whole. Buddhism, as we have learned especially from the wonderful writings of Schopenhauer, contains a much stronger element of this.

On morality :

“A man’s ethical behavior should be based effectually on sympathy, education, and social ties and needs; no religious basis is necessary. Man would indeed be in a poor way if he had to be restrained by fear of punishment and hopes of reward after death.”

In praise of religion (article 1 and 2):

“The highest principles for our aspirations and judgments are given to us in the Jewish-Christian religious tradition. If one were to take that goal out of its religious form and look merely at its purely human side, one might state it perhaps thus: free and responsible development of the individual, so that he may place his powers freely and gladly in the service of all mankind.”

Defining a religious person and religion (Article 3) :

“a person who is religiously enlightened appears to me to be one who has, to the best of his ability, liberated himself from the fetters of his selfish desires and is preoccupied with thoughts, feelings, and aspirations to which he clings because of their superpersonalvalue. … Religion, on the other hand, deals only with evaluations of human thought and action: it cannot justifiably speak of facts and relationships between facts.”

In support of Science :

“For example, a conflict arises when a religious community insists on the absolute truthfulness of all statements recorded in the Bible. This means an intervention on the part of religion into the sphere of science; this is where the struggle of the Church against the doctrines of Galileo and Darwin belongs.”

This is exactly where he sounds like an absolute Atheist :

“Nobody, certainly, will deny that the idea of the existence of an omnipotent, just, and omnibeneficent personal God is able to accord man solace, help, and guidance; also, by virtue of its simplicity it is accessible to the most undeveloped mind. But, on the other hand, there are decisive weaknesses attached to this idea in itself, which have been painfully felt since the beginning of history. That is, if this being is omnipotent, then every occurrence, including every human action, every human thought, and every human feeling and aspiration is also His work; how is it possible to think of holding men responsible for their deeds and thoughts before such an almighty Being? In giving out punishment and rewards He would to a certain extent be passing judgment on Himself. How can this be combined with the goodness and righteousness ascribed to Him?  … The main source of the present-day conflicts between the spheres of religion and of science lies in this concept of a personal God. “

How religions with ‘personal God’ will play around Science :

“To be sure, the doctrine of a personal God interfering with natural events could never be refuted, in the real sense, by science, for this doctrine can always take refuge in those domains in which scientific knowledge has not yet been able to set foot. “

A request to religious leaders to modify their approach to religion :

“In their struggle for the ethical good, teachers of religion must have the stature to give up the doctrine of a personal God, that is, give up that source of fear and hope which in the past placed such vast power in the hands of priests.”

Again restricting religion in the domain of idealism and attitude :

“As regards religion, on the other hand, one is generally agreed that it deals with goals and evaluations and, in general, with the emotional foundation of human thinking and acting, as far as these are not predetermined by the inalterable hereditary disposition of the human species. Religion is concerned with man’s attitude toward nature at large, with the establishing of ideals for the individual and communal life, and with mutual human relationship.”

On in-community brotherly love :

“For while religion prescribes brotherly love in the relations among the individuals and groups, the actual spectacle more resembles a battlefield than an orchestra. “

Overall, I feel the articles are really great. The gist is – Science and Religion are friends is they stay in their own ground. Science should not try to guide what is worthy and what is worthless, what we should do and what we should not. At the same time, Religion should not try to describe how the nature works, neither should it insist anything to be ‘created’ by God as a person. He condemned the idea of ‘religion of fear’, that is, the idea to tell people to be good only because some Omnipotent God will punish them otherwise after death. Overall, these come under one of the best read articles of my life time – they sound very strong.

Links once more.

Written by Diganta

July 31, 2007 at 8:52 am

The Myths Against Atheism

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The 10 top myths against Atheism are :

1. Atheists believe that life is meaningless.
2. Atheism is responsible for the greatest crimes in human history.
3. Atheism is dogmatic.
4. Atheists think everything in the universe arose by chance.
5. Atheism has no connection to science.
6. Atheists are arrogant.
7. Atheists are closed to spiritual experience.
8. Atheists believe that there is nothing beyond human life and human understanding.
9. Atheists ignore the fact that religion is extremely beneficial to society.
10. Atheism provides no basis for morality.

Sam Harris, the author of “The End of Faith” and “Letter to a Christian Nation“, bursts these 10 myths against Atheism. He tried to prove atheists are normal people and only notion they have is to reject anything that is not yet proved. According to his theory, atheism does not mean that one has to grab some other dogma (like Marxism) and behave according to that. Atheism is restricted to rejection of religious dogma. The source of morality for Atheists changes to some modern books, laws and behavioural science rather than ancient holy texts, and by no matter they are immoral.

The most interesting was the myth 9, which says that “Atheists ignore the fact that religion is extremely beneficial to society.” It seems from his writing that Atheists are ready to accept the historical importance of religion but not as a source of morality. He says that if human beings are able to “choose” from good and bad texts of the Holy Books and also provide “better” interpretations for those “bad” texts, then why shouldn’t we directly bypass those holy texts and use our own choice.

However, the problem that I often see scientists and historians quoting against Atheism is the lack of alternative guideline. Human beings are still too weak to live without any guideline, specifically laid out to them by some supreme being. Rod Liddle suggests that we should leave God as he is since the drastic absence of God could create instable society since human beings will grab some other dogma. Sam Harris is yet to answer this “Moral Vacuum Dilemma” against Atheism.

Reference :
1) The Trouble with Atheism – part 1. (Youtube video – 24mins)
2) The Trouble with Atheism – part 2. (Youtube video – 25mins)

Atheism, Sam Harris, Myth.

Written by Diganta

February 19, 2007 at 9:01 am

Posted in Atheism, Myth

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