HOW “GERS” WORKED IN INDIA

Jason Hickel

Jason Hickel

Dr Jason Hickel is an academic at the University of London and a Fellow of the Royal Society of Arts. His most recent book is “The Divide:

Iain Lawson writes “As the UK Government spell out the latest GERS estimates about how England subsidises Scotland it is carrying on a long established tradition of using mythical calculations to convince the colony they are dependent of on the largesse of London. Below is the example of India but it is a common theme amongst all of Britain’s colonies. It was originally written by Jason Hickel”

Jason Hickel writes. There is a story that is commonly told in Britain that the colonisation of India – as horrible as it may have been – was not of any major economic benefit to Britain itself. If anything, the administration of India was a cost to Britain. So the fact that the empire was sustained for so long – the story goes – was a gesture of Britain’s benevolence.

New research by the renowned economist Utsa Patnaik – just published by Columbia University Press – deals a crushing blow to this narrative. Drawing on nearly two centuries of detailed data on tax and trade, Patnaik calculated that Britain drained a total of nearly $45 trillion from India during the period 1765 to 1938.

It’s a staggering sum. For perspective, $45 trillion is 17 times more than the total annual gross domestic product of the United Kingdom today.

How did this come about? 

It happened through the trade system. Prior to the colonial period, Britain bought goods like textiles and rice from Indian producers and paid for them in the normal way – mostly with silver – as they did with any other country. But something changed in 1765, shortly after the East India Company took control of the subcontinent and established a monopoly over Indian trade.

Here’s how it worked. The East India Company began collecting taxes in India, and then cleverly used a portion of those revenues (about a third) to fund the purchase of Indian goods for British use. In other words, instead of paying for Indian goods out of their own pocket, British traders acquired them for free, “buying” from peasants and weavers using money that had just been taken from them.

It was a scam – theft on a grand scale. Yet most Indians were unaware of what was going on because the agent who collected the taxes was not the same as the one who showed up to buy their goods. Had it been the same person, they surely would have smelled a rat.

Some of the stolen goods were consumed in Britain, and the rest were re-exported elsewhere. The re-export system allowed Britain to finance a flow of imports from Europe, including strategic materials like iron, tar and timber, which were essential to Britain’s industrialisation. Indeed, the Industrial Revolution depended in large part on this systematic theft from India.

On top of this, the British were able to sell the stolen goods to other countries for much more than they “bought” them for in the first place, pocketing not only 100 percent of the original value of the goods but also the markup. 

After the British Raj took over in 1858, colonisers added a special new twist to the tax-and-buy system. As the East India Company’s monopoly broke down, Indian producers were allowed to export their goods directly to other countries. But Britain made sure that the payments for those goods nonetheless ended up in London. 

How did this work? Basically, anyone who wanted to buy goods from India would do so using special Council Bills – a unique paper currency issued only by the British Crown. And the only way to get those bills was to buy them from London with gold or silver. So traders would pay London in gold to get the bills, and then use the bills to pay Indian producers. When Indians cashed the bills in at the local colonial office, they were “paid” in rupees out of tax revenues – money that had just been collected from them. So, once again, they were not in fact paid at all; they were defrauded.

Meanwhile, London ended up with all of the gold and silver that should have gone directly to the Indians in exchange for their exports. 

This corrupt system meant that even while India was running an impressive trade surplus with the rest of the world – a surplus that lasted for three decades in the early 20th century – it showed up as a deficit in the national accounts because the real income from India’s exports was appropriated in its entirety by Britain. 

Some point to this fictional “deficit” as evidence that India was a liability to Britain. But exactly the opposite is true. Britain intercepted enormous quantities of income that rightly belonged to Indian producers. India was the goose that laid the golden egg. Meanwhile, the “deficit” meant that India had no option but to borrow from Britain to finance its imports. So the entire Indian population was forced into completely unnecessary debt to their colonial overlords, further cementing British control. 

Britain used the windfall from this fraudulent system to fuel the engines of imperial violence – funding the invasion of China in the 1840s and the suppression of the Indian Rebellion in 1857. And this was on top of what the Crown took directly from Indian taxpayers to pay for its wars. As Patnaik points out, “the cost of all Britain’s wars of conquest outside Indian borders were charged always wholly or mainly to Indian revenues.” 

And that’s not all. Britain used this flow of tribute from India to finance the expansion of capitalism in Europe and regions of European settlement, like Canada and Australia. So not only the industrialisation of Britain but also the industrialisation of much of the Western world was facilitated by extraction from the colonies.

Patnaik identifies four distinct economic periods in colonial India from 1765 to 1938, calculates the extraction for each, and then compounds at a modest rate of interest (about 5 percent, which is lower than the market rate) from the middle of each period to the present. Adding it all up, she finds that the total drain amounts to $44.6 trillion. This figure is conservative, she says, and does not include the debts that Britain imposed on India during the Raj.

These are eye-watering sums. But the true costs of this drain cannot be calculated. If India had been able to invest its own tax revenues and foreign exchange earnings in development – as Japan did – there’s no telling how history might have turned out differently. India could very well have become an economic powerhouse. Centuries of poverty and suffering could have been prevented.

Jason Hickel

Jason Hickel

Dr Jason Hickel is an academic at the University of London and a Fellow of the Royal Society of Arts. His most recent book is “The Divide:

33 thoughts on “HOW “GERS” WORKED IN INDIA

  1. I’m very pleased that this research from Utsa Patnaik has been published, and equally horrified at the scale of Brutish exploitation. The Brutish Empire and continuing state is, truly, the most corrupt and corrupting entity ever to have existed. Ozymandias would blush at such oppression.

    I look forward to India suing for reparation.

    Liked by 17 people

  2. Nothing to worry about. The Scottish Government will delay GERS publication indefinitely. All they have to do is treat GERS like a FOI request which means they will never see the light of day for ages and ages or someone can lose them on a cancelled ferry.. At the same time there will be a co-ordinated announcement from ministers, MSP’s and MP’s that GERS is nothing but a pile of mince and Westminster can go and take a running jump.

    Easy – isn’t it.

    Liked by 7 people

  3. I just read this the other day on Aljazeera, though the original date is from 2018 on Aljazeera for Mr Hickel’s report.

    Nevertheless the impact is shattering the British empire has it down to a tee I think, in instilling in the minds that they the empirical colonisers, are actually doing the colonists a favour when they are really robbing their countries blind, and oppressing them, sometimes subtly, sometimes openly, and when the colonists finally realise what’s going on, the imperial colonisers, try to divide the country, politically and often physically as well, resulting in a new imperial colonist friendly state being formed.

    Liked by 12 people

  4. I have seen papers written before that describe this figure of 45Trillion but the explanation on how it was arrived at was quite technical and detailed. However with the simplification offered by this article it now makes perfect sense.

    “The Sun never set and the blood never dried” that is the true story of the Empire. Those who study history are far less inclined to wave the Butcher’s Apron.

    The flow of revenue from Scottish Assets has always been “…in support of the Empire”. It was recorded as such until 1946. Strangely the same year the first SNP MP was elected.

    The Empire was a business unit operated by a very, very small elite. The Empress of India and the Royal household certainly gained greatly ( She also exempted herself from taxation to increase the fortune faster). As for all those trinkets she received as….”gifts” from India’s loyal “regional rulers”

    The real question is…why does the Scottish Government stay silent on GERs and allow the charade to continue?

    Liked by 17 people

    1. “The real question is…why does the Scottish Government stay silent on GERs and allow the charade to continue?”

      Clootie.

      Sturgeon has given credence to the GERS figures this very day by saying that a deficit, is no barrier to independence. She knows fine well the GERS figures are a mixture of guessimates, Professor Richard Murphy and Business for Scotland exposed this, and in anycase these unrealistic figures only apply as part of this union, which if true (they aren’t) would say that being part of this union is economically very bad for Scotland.

      Iain previous excellent post, exposes why Sturgeon is reluctant to come clean on the GERS figures, and why the SNP are tacit on pushing on for independence. I used to wonder, and even shout at the tv screen when PMQ’s was on as to why SNP guests did let loose and say what had to be said, Iain’s previous post explains that for us all to see.

      Liked by 5 people

  5. Without the active connivance of what might be termed the indigenous Indian establishment, the fraud could never have been successfully perpetrated. Given that indigenous establishments have never been known to prosecute themselves for their criminality, it seems very unlikely that the Scots, along with the Indians, will ever build their respective decolonized nations with the assistance of reparation monies, legally extracted from the pockets of their indigenous caste-based establishments.

    Liked by 7 people

  6. Well well. Quelle surprise. Aye, they have form right enough. Not for nothing are they known as perfidious Albion.

    There was a time when I used to get annoyed and angry about stuff like this. Not any more. A waste of time and energy, and besides, noo that I’m getting on, I hae the auld blood pressure tae tak care o. What an absolute shower of rogues.

    Liked by 11 people

  7. A ‘conservative’ £45 trillion figure for India alone is staggeringly high but imagine what it must be if all other sources of foreign wealth was included.

    ‘The history of Iran’s oil industry began in 1901, when British speculator William D’Arcy received a concession from Iran to explore and develop southern Iran’s oil resources. The exploration in Iran was led by George Reynolds. The discovery of oil on May 26, 1908 led to the formation in 1909 of the London-based Anglo-Persian Oil Company (APOC). By purchasing a majority of the company’s shares in 1914, the British government gained direct control of the Iranian oil industry, which it would not relinquish for 37 years. After 1935 the APOC was called the Anglo-Iranian Oil Company (AIOC). A 60-year agreement signed in 1933 established a flat payment to Iran of four British pounds for every ton of crude oil exported and denied Iran any right to control oil exports’.

    https://en.wikipedia.org/wiki/Petroleum_industry_in_Iran

    Liked by 5 people

    1. There is a school of thought that, in the early preliminary talks, D’Arcy presented the discovery of oil as a pestilence that if not properly controlled could cause serious environmental issues for Iran but because of the goodness and kindness that sets the Great British people apart from the rest of the world,”if you just sign here on the dotted line we’ll solve these problems for you”.

      Liked by 2 people

  8. No surprise that BBC Scotland has opened HYS on the GERS figures. THis allows a large attack from the whole of the UK about Scotland being subsidy junkies.

    I look in vain for SNP rebuttals.

    Liked by 6 people

    1. We’ll wait a long time for their rebuttals. It suits the SNP to allow GERS figures to go unchallenged. I used to fume at the spineless attitude of the SNP to GERS being used to bludgeon the case for independence despite the fact that proper investigation of the deliberate obfuscation of allocation of liabilities and income has been questioned outwith their ranks. Their weak-kneed silence is taken to be acceptance by Unionists who every ‘GERS Day’ look forward to their annual baiting of indy supporters with crowing triumphalism. Their clinching argument is, ‘ Even the SNP accepts GERS figures.’

      The impression is inevitably given to the general public that the SNP – and therefore supporters of independence – have had to concede that Scotland would be unable to manage as an independent country. It was this duplicitous copout which began to convince me that their lack of fight concealed something more sinister and that was that they had no intention of defending the independence case. It is, of course, known to most to us who read this blog now, that that suspicion has been fully vindicated, that the SNP has no interest in independence and in fact, is brazenly undermining it.

      Liked by 9 people

  9. ““As the UK Government spell out the latest GERS estimates….”

    GERS is written and published by the Scottish government, so that’s a basic error. I don’t think the UK government has even commented on the subject.

    Saying it’s all rubbish, means the Scottish government hasn’t got a clue what it’s own income and expenditure is. That would make them incapable of government.

    Implying that has to do with the East India Company taking over the Indian subcontinent is silly. Like really silly.

    Liked by 1 person

    1. Nnels – your words demonstrate that you do not have a clue what GERS is. Perhaps by the time the next version of GERS is publshed you will have educated yourself.

      Liked by 4 people

      1. As you will see, GERS is published by the Scottish government by the Cabinet Secretary for Finance and the Economy:

        https://www.gov.scot/publications/government-expenditure-revenue-scotland-gers-2019-20/

        It’s also peer reviewed by people who peer-review that kind of stuff on a professional basis.

        Telling people you don’t think they haven’t a clue isn’t a debate – it’s an argument, and no-one wins an argument. I would advise you to change your tone.

        Like

      2. I can easily. Let me give you the opportunity to outline why you think the costs of H2 Should be allocated to Scotland or the host of other infrastructure improvements in the South of England should be allocated to Scotland? I have literally hundreds more I think it is you that needs to change your tune.

        Liked by 5 people

      3. You could also explain how Scotland which has very limited borrowing powers can amass any substantial deficit all the time you are arguing that Scotland is doing so badly as part of the Union, in comparison with a range of fully independent countries while still arguing we should stay doing the same thing as part of the Union. You promote this as the Union doing a good job whereas I see it as a complete failure and wasted opportunity. Uk dodgy statistics do not in anyway reflect the position of an Independent Scotland. We return to the ultimate question..if we are such a basket case why oh why are you so desperate to hold onto us?

        Liked by 3 people

      4. Nnels- not interested in debating with people like you – been there done it – a waste of time.

        The fact that the UK can allocate ANY expenditure it wants for ANY purpose in ANY physical location to Scotland through its own dictat means it can manipulate the figures to show any level of deficit it wants.

        GERS is nothing but a Mickey Mouse propaganda tool – but I suspect you know that already Nnels.

        Liked by 4 people

      1. Wings at its best.

        The years go by and still the Scottish government produce the GERS nonsense. I used to think it was laziness or incompetence that they had not refused to get involved in the GERS production I now think it is deliberate that Sturgeon wants to get GERS out there as an anti independence propaganda tool.

        Any decent Independence Party leader would tell them to stuff their GERS figures.

        Liked by 2 people

  10. If there’s is on thing I learned about colonialism while studying under the Royal Town Planning Institute’s guidance, is that colonialism was all pervasive, and that it’s effects continue to shape the modern world. OK, two things. So from my perspective, it’s hard not to consider GERS as anything other than an example of the scientific racism that was central to colonialism, as it undermines the rights of the cultural “other” through the manipulation of science and empirical reality.

    UNDERSTANDING RESTORATIVE
    JUSTICE THROUGH THE LENS OF
    CRITICAL CRIMINOLOGY
    http://www.antoniocasella.eu/restorative/Cunneen_2007(dot)pdf

    Liked by 3 people

  11. Iain, both you and the boy from Barrhead are publishing great blogs. Hard to say which is best. Grumpyscottishman is also excellent.

    I know which is the worst – WGD.

    Liked by 6 people

  12. nnels….the “basic error” is that the SNP government accepts the data provided to them by Westminster, and indolently allows the Scottish government’s civil service – loyalty pledged to….the Crown?… to do the sums on the data provided to them from their employers in Westminster.

    Liked by 3 people

    1. Every single MSP has pledged allegiance to the Crown. I don’t think it is a requirement for unelected civil servants.

      Anyway, the repetitive, boring indyref blog cant on GERS is entirely predictable. But you are right: It is also completely at odds with the SNP, the Greens, or pretty much anyone else that is elected. Many people are intellectually lax enough to believe whatever they want to believe, even when obtained from sources of dubious provenance. Anti-Vax?

      Like

      1. Please rebut the six points made in the WOS summary. I also would like to know what benefit the High Speed Rail link is to Scotland. We are paying our whack of the cost. What are we getting in return?
        It is a project which has got out of hand and is now admitted that it will not be finished. It has become another vanity project, like the painted aeroplane and the proposed new Royal Yacht.
        I don’t believe I am ranting here or asking you to do anything unreasonable.

        Liked by 5 people

  13. Tonight I have watched The National Roadshow with Michael Russell (can be viewed on YouTube). It is as clear as day the SNP are completely unprepared for independence and have chosen to waste the years since 2014 on things much more important to them.

    Scunnered is the word and I am contemplating resignation after over 50 years of membership.

    Liked by 7 people

  14. Scots law and legal practice has been groomed for over three centuries, so as to accommodate the political demands of English legal culture. Which is institutionally hostile towards natural rights and the justice of the Natural law tradition. So it’s no wonder Scots law has been unable to defend itself from English nationalism self-identifying as British nationalism (Brexit), nor from gender ideology.

    Postcolonial Studies After Foucault:
    Discourse, Discipline, Biopower, and Governmentality as Travelling Concepts
    https://d-nb.info/1064990231/34

    Liked by 3 people

  15. We Scots must be the most ungracious ungrateful people in the world. Poor England doesn’t have enough to feed her own starving school kids ( I suspect they are genuinely going hungry and Rashford isnt making it up ) but subsidises every man woman and child in Scotland to the tune of £2200.

    I was going to celebrate this piece of unheard of uniquely placed Scotophile Tory munificence with a bottle of prosecco but the supermarket was dry thanks to Tory induced brexit.

    Liked by 7 people

Comments are closed.

%d bloggers like this: