Was India impoverished by industry or by imperial rule?

The short answer

• Steam and cable shrank distance. Distance had once shielded local producers from some competition because moving goods and news was expensive. Steam and cable reduced that protection. Compound engines used steam twice and saved coal; iron and later steel hulls made ships larger, while stations from Gibraltar to Singapore supplied fuel. Undersea telegraph cables were insulated with gutta-percha, latex from Malayan trees. Grain and cotton could now be traded profitably across oceans, extending worldwide a change railways had brought to Britain.
• Industry demanded raw materials. Factories needed supplies beyond those available locally. Cotton, jute, wool, rubber, copper, tin, palm oil and grain came from distant regions. West African palm oil supplied lubricants and soap for industrial Europe, Bengal jute made sacks for the world’s grain, and Congo and Amazon rubber went into tyres. Demand drew these regions into the industrial economy as suppliers, often with little power over the terms.
• Free trade backed by force. Free trade meant commerce with few barriers, but markets could be opened by force. Britain fought the Opium War after China tried to stop British opium sales, opening China in 1842. Treaties imposed low import taxes on the Ottoman Empire, Egypt, Persia, Siam (now Thailand) and Japan; India’s colonial government kept taxes on British imports low. Gallagher and Robinson called the combination of trade and treaties, backed where necessary by conquest, the imperialism of free trade.
• Capital from London. British investors held about £4 billion in overseas assets by 1914. Much went into railways, ports, mines and government bonds, or loans to governments. In India the colonial government guaranteed railway companies a return of about five per cent, paid from Indian taxes, so British investors bore little risk. Capital followed profit and political security into routes for exporting raw materials; relatively few factories were built that might compete with Britain’s.

What it changed

Nationalism grows from economic grievance. The loss of Indian wealth became an argument for political change. Dadabhai Naoroji charged that British rule drained the country, and the Indian National Congress, founded in 1885 as a party of educated Indians and later a leader of the independence movement, took up the claim. In 1905 Bengal’s swadeshi movement—“of one’s own country”—urged Indians to buy Indian goods and boycott British cloth. A product associated with economic loss became a means of resistance.

A world of migrants. Steam shortened a voyage that had taken six weeks under sail to about ten days, making passage cheaper. Tens of millions of Europeans crossed the Atlantic; Indian and Chinese workers traveled to plantations and mines across the tropics, many under indenture, contracts binding them to employers for years. The epilogue’s arrows trace these journeys and ask who gained and who left home under pressure from debt and coercion. Labor moved where capital sought it, changing the populations of whole continents.

The Great Divergence hardens. By 1900 Europe and the United States made about 85 per cent of manufactured goods, and the income gap between the industrial core and much of Asia and Africa had grown enormously. This Great Divergence became embedded in the world economy. Historians dispute how much industrial competition and empire each contributed. A difference that had been modest in 1750 now separated manufacturing countries from many suppliers; it would take a century to begin closing.