DP15431 Measuring Colonial Extraction: The East India Company's Rule and the Drain of Wealth (1757-1858)

Author(s): Pilar Nogues-Marco
Publication Date: November 2020
Keyword(s): Colonialism, drain of wealth, East India Company, India, Marxism
JEL(s): B14, F54, N45
Programme Areas: Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15431

This paper revisits the relationship between capitalism and colonialism by examining the case of British India under East India Company rule (1757-1858). The Marxist-nationalist historiography claims that colonialism generated a steady drain of wealth and that this drain was responsible for Indian famines, poverty, inequality, and economic retardation. I use the East India Company budgets to measure the extent of the wealth that was drained through three direct channels: oppressive land taxes, unproductive expenditures on the imperial army and civil administration, and the unrequited export of commodities from India to Britain. I conclude that available figures lend empirical support to the Marxist interpretation. There was a drain of wealth, and its effect on the underdevelopment of former European colonies deserves further research.