Does the UK Owe India $45 Trillion?

Summary

The video transcript critically addresses the claim that the UK owes India $45 trillion in stolen wealth from the colonial period. The author argues that this figure is grossly exaggerated, providing historical GDP estimates and showing that the empire's contribution to UK GDP was much smaller. They also critique the method used to calculate the $45 trillion figure, noting it relies on compound interest and historical exchange rates, which the author dismisses as flawed. The transcript emphasizes that while the British Empire was costly to maintain, claims like these misrepresent historical data.

Takeaways

• 🤔 The article claims that the UK owes India $45 trillion in stolen wealth from the British Empire and the East India Company, but this figure is heavily contested.
• 📉 Even after adjusting for inflation and analyzing historical GDP data, the UK's total GDP from 1840 to 1950 only amounts to £24.45 trillion in 2015 pounds, which makes the $45 trillion figure highly implausible.
• 💼 It is estimated that the British Empire contributed only 1.1% of the UK's GDP in 1870 and 3.3% in 1913, suggesting that the economic impact of the empire on the UK's GDP was minimal.
• 💸 The British government spent heavily on maintaining the empire, with around 37% of tax revenue going to defense and administration of the colonies, including India.
• 📚 Professor Patnaik argues that £9.2 billion was siphoned from India over two centuries and uses a 5% compound interest rate to inflate the number to $45 trillion, but this methodology is criticized as flawed and unrealistic.
• 💡 The speaker argues that using historical exchange rates and compound interest to calculate such a large number over centuries is methodologically unsound and historically inaccurate.
• 📊 Economic studies from 2003 show that prior to independence, 70% of India's economy was homegrown, with only 25% of output owned by foreigners, contradicting the claim that Britain drained India's economy.
• 📈 Industry in India, particularly after the 1900s, grew between 2.7% and 7%, showing that some sectors of the Indian economy were experiencing growth even during British rule.
• ⚖️ The speaker highlights that economic stagnation in India post-independence was due to socialist policies and protectionism, which led to the so-called 'Hindu rate of growth.'
• 🧮 Real wages in India, particularly for laborers and craftsmen, experienced fluctuations during British rule, with significant wage drops in the 1960s and 1970s, only improving after economic liberalization in the 1990s.

Q & A

What is the main argument of the article discussed in the script?

The article argues that the UK owes India $45 trillion for money siphoned during the British Empire's rule, a claim the script criticizes as being based on flawed economic assumptions and calculations.

Who is the economist behind the $45 trillion claim, and what is the basis for this figure?

The economist is Indian Marxist Prabhat Patnaik. She bases the figure on the assertion that the East India Company and British Raj siphoned out £9.2 billion from India over 200 years, applying a 5% compound interest over time to reach the $45 trillion claim.

What major flaw does the script highlight regarding the $45 trillion figure?

The script highlights that even when wildly overestimating the British Empire's contribution to GDP and India's share of that, the total still falls far short of $45 trillion. It critiques the use of compound interest over 200 years and applying historical exchange rates as flawed methods.

What was the approximate total GDP of the UK from 1840 to 1950, according to the script?

The total GDP of the UK from 1840 to 1950 was estimated to be £24.45 trillion in 2015 pounds.

How does the script address the historical contributions of the British Empire to the UK economy?

The script argues that the British Empire was a financial burden on the UK, not a major contributor to its GDP. It claims the empire accounted for only 1.1% of GDP in 1870 and 3.3% in 1913, with significant portions of tax revenue being spent on defense and maintaining the empire.

How does the script describe the economic impact of British rule on India?

The script acknowledges that while India's economy was largely agricultural and stagnated during British rule, the industrial sector (largely Indian-owned) saw healthy growth. It also notes improvements in literacy, mortality rates, and infrastructure.

What does the script say about India’s economic policies after independence in 1947?

The script criticizes India's post-independence socialist policies, stating they led to stagnation, poverty, and what is referred to as the 'Hindu rate of growth.' It compares India unfavorably to China, South Korea, and Taiwan during the same period.

How does the script address wage changes in India during and after British rule?

The script presents data showing gradual wage increases during the 19th century, with significant wage growth for craftsmen before World War I. After independence, wages fell during the period of socialist planning, with laborer wages hitting their lowest point in the 1960s.

How does the script critique Prabhat Patnaik's use of compound interest in calculating the $45 trillion claim?

The script critiques Patnaik's use of a 5% compound interest calculation as overly simplistic and flawed. It points out that applying compound interest over such a long period (over 200 years) and using historical exchange rates leads to an unrealistic figure.

What conclusion does the script draw regarding whether the UK owes India $45 trillion?

The script concludes that the claim that the UK owes India $45 trillion is unfounded and inaccurate, based on poor data, flawed assumptions, and incorrect economic methods.

Outlines

00:00

💰 Debunking the $45 Trillion UK Debt to India Claim

The first paragraph addresses a claim that the UK owes India $45 trillion in stolen wealth, citing a flawed argument from an article referencing Indian economist Utsa Patnaik. The speaker criticizes the claim as absurd, explaining that even if UK GDP during the Empire is adjusted for inflation, it doesn't approach this figure. He provides detailed GDP numbers, showing the Empire's contribution was small and defense spending for maintaining the Empire often exceeded its income.

05:02

📈 Flawed Calculation Method of India's Losses

In the second paragraph, the speaker breaks down Utsa Patnaik’s method for calculating India's losses, criticizing her use of a 5% compound interest over 200 years to reach $45 trillion. He argues that using this type of calculation and a historical exchange rate leads to wildly inaccurate results. The speaker also critiques the Marxist economic assumptions used in the calculation, calling them historically baffling and impractical.

10:02

📊 India's Pre-Independence Economy and Stagnation

The third paragraph discusses a report on Indian economic growth, showing that 70% of India's economy was homegrown before independence. It highlights how British rule left behind a fiscal surplus, better property rights, and improvements in literacy and mortality rates. The speaker attributes agricultural stagnation to a lack of modernization by Indian farmers, while industries grew with healthy rates. He contrasts India’s post-independence socialist policies, leading to economic stagnation, with more liberalized economies like China and South Korea, which grew rapidly.

📉 Wage and Price Trends During British and Post-Independence India

In the fourth paragraph, the speaker reviews wage and price data from pre- and post-independence India, showing a gradual rise in wages throughout the 19th century. However, after independence, wages in both labor and craftsmanship sectors plummeted under socialist policies. By the 1960s and 1970s, wages had returned to levels not seen since the early 19th century. Economic improvements only occurred in the 1990s, when India adopted market liberalization reforms, reversing decades of stagnation.

Keywords

💡45 trillion dollars

This figure refers to a claim that the UK owes India $45 trillion in 'stolen' wealth dating back to the British Empire, particularly from the East India Company and the British Raj. The video disputes this claim, arguing that such a number is grossly exaggerated and unrealistic, even with the use of inflation adjustments and economic models. The critique centers around the economic and historical inaccuracies of such a figure.

💡East India Company

The East India Company was a British trading company that gradually expanded into a political and military force, playing a central role in Britain's colonization of India. The video critiques claims that the Company siphoned wealth from India, examining the methods used to calculate such losses and disputing the notion that the total would amount to the exaggerated figures like $45 trillion.

💡British Raj

The British Raj refers to the period of direct British rule in India between 1858 and 1947. The video discusses the financial burden of maintaining the Empire, including defense costs, and critiques the claim that the UK profited immensely from the Raj. It argues that, instead of generating vast wealth, the Empire was a financial cost to Britain.

💡GDP (Gross Domestic Product)

GDP is a measure of the total economic output of a country. The video uses historical GDP data to argue against the idea that the UK extracted wealth from India to the tune of $45 trillion. By comparing Britain's GDP during the Empire years and adjusting for inflation, the presenter demonstrates that the claim is economically implausible.

💡Compound interest

Compound interest refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods. The video critiques Professor Patnaik’s use of compound interest to calculate the amount of wealth siphoned from India. It argues that applying compound interest over centuries inflates the figures in unrealistic ways, contributing to the inflated $45 trillion claim.

💡Public expenditure

Public expenditure refers to government spending. The video highlights Britain's defense and Empire-related costs during the 19th and early 20th centuries, showing that much of the money spent on the Empire went towards maintaining military control and governance, rather than profiting from India's economy. It argues that Britain was losing money on the Empire.

💡Defense spending

Defense spending is the portion of a government's budget allocated to military and defense-related expenses. The video emphasizes that Britain spent heavily on defense to maintain control over its empire, particularly in India, and that this defense spending often outweighed any profits the Empire might have generated. This refutes the idea that the UK was financially benefiting from India.

💡Marxist economics

Marxist economics is a school of thought that critiques capitalist systems, emphasizing the exploitation of labor and the transfer of wealth from colonies to imperial powers. The video references the Indian economist Professor Utsa Patnaik, who uses a Marxist framework to argue that Britain extracted vast wealth from India. However, the presenter disputes her methodology and conclusions, arguing that they are based on flawed assumptions.

💡Post-independence India

Post-independence India refers to the period after 1947, when India gained independence from British rule. The video discusses India's economic performance during this period, particularly under socialist policies, and contrasts it with the growth seen after market liberalization in the 1990s. The presenter uses this to argue that British rule left India with an efficient administrative system, but that India's own economic policies post-independence contributed to stagnation.

💡Industrial growth in pre-independence India

The video mentions that industrial sectors in pre-independence India were largely Indian-owned and experienced steady growth between 1900 and 1947, despite a lack of protectionist policies. This is used to challenge the narrative that British rule completely stifled Indian economic development, suggesting that industry grew even under a free-trade environment imposed by the British.

Highlights

The claim that the UK owes India $45 trillion from the British Raj is dismissed as egregiously incorrect.

The author argues that even adjusting for inflation, the UK's total GDP during the Empire years doesn't come close to $45 trillion.

A table of total GDP from 1840 to 1950 is used to show that the UK's GDP was only around £24.45 trillion in 2015 money.

Empire-related expenses, including defense, accounted for about 37% of UK tax spending at the time.

The author's analysis shows that the Empire was a financial cost, not a gain, for the UK, with significant defense spending.

Even assuming that India was responsible for all of the UK's empire income, the figure still falls far short of $45 trillion.

The figure of $45 trillion claimed by Professor Patnaik is based on a flawed method using compound interest over centuries.

The use of a historical exchange rate to calculate the $45 trillion figure is criticized as illogical and misleading.

A report from 2003 shows that 70% of the Indian economy was homegrown before independence, with only 25% of total output owned by foreigners.

The British Empire is credited with leaving India with an efficient administrative apparatus, private property rights, and a fiscal surplus.

Pre-independence India saw improvements in literacy rates, declining death rates, and a significant drop in infant mortality.

While agriculture stagnated in India during British rule, other sectors, such as industry, saw healthy growth between 1900 and 1947.

After independence, India's adoption of socialist policies led to economic stagnation, the so-called 'Hindu rate of growth,' and increased poverty.

A comparison of Indian wages over time shows a gradual increase during British rule but significant declines after independence under socialist policies.

The post-independence economic stagnation in India is contrasted with other countries, like China, South Korea, and Taiwan, which saw significant income growth.

Transcripts

a couple of days back someone sent me

this article which argued that the UK

owes India 45 trillion dollars in stolen

money dating back to the East India

Company and the British Raj this is one

of the most egregiously incorrect pieces

I've ever seen published anywhere the

link was to Al Jazeera but their source

was an article in this book published by

Columbia University Press by the Indian

Marxist economist Putin er Patnaik now

the trouble with these claims is that

they make no sense whatsoever because

even if you adjust for inflation the UK

was not making 45 trillion dollars

during the empire years if you look at

this table you can see total GDP in 2015

pounds sterling if you add up all the

GDP numbers from 1840 to 1950 it still

only comes to about twenty four point

four five trillion pounds all in I've

got that figure by multiplying these

decade averages by ten and then adding

them all up now consider that it has

been estimated that the entire empire

accounted for just 1.1 percent of the

gross national product in 1870 and three

point three percent in 1913 and with

these figures in mind you can see how

ridiculous the forty five trillion

dollar number is incidentally around 37

percent of the UK's tax spend at this

time went on at the Empire and it went

on defense spending that's defense in

India Africa and wherever else the

Empire spread now I guess so happens

that I have the gross public expenditure

numbers for the 19th century right here

seems that in most years the UK

government spent between 50 million

pounds and a hundred million pounds

going over the

Komi at the height of the Napoleonic

Wars taking 1870 as our benchmark year

public expenditure was 67 point 1

million pounds which is around 2.7

billion pounds in 2015 money of which

around 2.6 billion pounds was spent on

defense and running the empire if the

Empire was bringing in 1.1 percent of

GDP at that time it was making only

around 1.3 billion pounds in 2015 money

which is basically half of the defense

spend we could say then but for every 1

pound the UK taxpayer was spending on

the Empire it was losing 50 pence the

Empire was a demonstrable cost and this

has been known by economists of all

stripes from Keynes Ian's to the

Austrian school for decades but anyway

let's indulge professor panic here a

little bit shall we and assume that

India was solely responsible for all

empire income and to assume that it

accounted for 4% of the UK's GDP which

we know overestimates it greatly let's

be fair here her time range is 1765 to

1938 and my estimate of twenty four

point four five trillion in two thousand

fifteen pounds total GDP for the UK is

from 1840 to 1950 so the GDP from 1765

to 1840 is of course much smaller than

what went later but let's be completely

reckless here and simply double the

number that I've given already that is

let us assume that the UK's GDP was

twenty four point four five trillion

from 1765 to 1840 which it obviously

wasn't four percent of that number is

still only one point nine five trillion

so even with wildly overestimating the

Empire's contribution to GDP assuming

that India is responsible for all of it

ignoring UK tax spend on the empire and

wildly overestimating the UK's total GDP

in this way the number is still a long

long way from the 45 trillion dollars

that Professor pet snake is claiming so

how does she get to this absurd number

professor Patnaik claims that the East

India Company and the Raj siphoned out

that's her term nine point two billion

pounds from India over this 2000 year

period

she gets to this number by using a five

percent compound interest accumulator

that looks something like this anyway

one thousand dollars in 1800 accumulates

around two million dollars of interest

over two hundred and nineteen years and

so if you add it all up the balance

comes to something like forty six point

six million dollars from an initial one

thousand dollars back in 1800 and this

is the method that she uses to reach

this number of nine point two billion

pounds and then she uses the historical

exchange rate of you know back in 1800

of four point eight dollars to the pound

to get to this number of forty five

trillion dollars now this as far as I

can tell it's total insanity based on a

wild set of assumptions and also

historically bafflingly moving forward

two hundred and nineteen years and then

using a historical exchange rate to

convert it again don't ask me this is

Marxist economics but it seems like

complete rubbish now I am not wishing to

defend the British Empire in this video

but rather correcting bad data this

comprehensive report on Indian economic

growth compiled by proper economists in

2003 show

that do Jess prior to independence over

70% of the Indian economy was homegrown

with foreigners owning only 25% of total

output and I quote one of the legacies

of the British rule was an efficient

civil service and administrative

structure this administrative apparatus

stood free India in good stead they left

the country with a fiscal surplus and

well-established private property rights

the literacy rate and improved by 10

percent since 1901 the death rate had

almost half and the infant mortality

rate declined by 42 percent now the

Indian economy is widely perceived to

have stagnated during this period but

that is because it has primarily an

agricultural base and Indian farmers for

whatever reason hadn't invested in

modern methods I know for example that

after the 1870s Britain was importing

most of its wheat from the USA which was

already using tractors and combine

harvesters and more efficient modern

methods it's not exactly the UK

government's fault that Indian

entrepreneurs in the rural sector didn't

modern modernize in other sectors

industry for example which was almost

exclusively Indian owned and operated

you can see pretty healthy growth in the

pre-independence years of between 2.7

and 7% from 1900 to 1947 this was with

zero protections or tariffs there's a

completely free trade policy I mean

agriculture was in decline everywhere

while industry was in the ascendancy

I mean join the club India this was

happening all over the world and it is

entirely to be expected of course after

1947 India embarked on a socialist style

government based on import controls

preserving traditional methods of

production direct state intervention

into markets presumably something more

like what Professor Patnaik once and

this famously resulted and what is

called the Hindu

rate of growth which resulted in

stagnation starvation and more people

living under the poverty line than

previously you can see there compared

with China South Korea and Taiwan the

increase in the average Indian income

between 1947 and 1999 was tiny

incidentally I was interested in what

the situation was before 1947 I found

here a study on average Indian wages in

constant rupees the column on the left

is labourers real wages in 1913 rupees

the one in the middle is the wages of

craftsmen and the one on the right is

the nominal consumer price index which

means how much your typical basic goods

are generally as if as this goes up

there is inflation so just looking on

this first page for example you can see

that between eighteen hundred and

eighteen and four there was for some

reason and ninety percent increase in

prices at the time when wages were

falling without even looking it up this

looks like a severe economic crisis for

India during the dying years of the old

Mughal Empire with a severe price shock

the East India Company had already taken

control of big doll by this time but you

would have to look up exactly what was

causing this price shock anyway

what these data show is a gradual

increase in laborer wages over the 19th

century which seemed to stabilize around

0.3 of the 1913 rupee mark and a

significant increase in craftsmen wages

which hit 8 1913 rupee per day in 1841

at a time the prices were falling second

half of the 19th century the Raj took

over in 1858 by the way looked a little

bit rougher prices go up and down wages

seemed fairly stable around that point 3

mark for the labourer around point 8

before the craftsman there's also some

general improvement after World War 1

with the labor up wages hitting the

naught 0.56 in nineteen

32 and craftsman wages hitting a

staggering 1.78 in 1935 they seemed to

drop again during World War two

but one year before independence in 1946

they were back up to point 43 for the

laborer on point 78 respectively for the

craftsman then Gandhi comes in and does

his thing you know the first government

nuru and all out wages fall back down to

nineteenth-century levels by the mid

1960s in fact craftsman wages had more

than halved from 1935 to 1960 for labor

wages more than half from 1955 to 1964

so this was a pretty bad decade under

socialist planning look at what happens

in the 1960s now in 1977 laborer wages

dropped to a miserable naught point 1 7

1913 rupees the lowest they had been

since 1804 and the craftsmen not faring

much better the real wages in the 1980s

in India were no better than they were

for most of the 19th century and for

many years they were actually worse it's

only in the 1990s when some market

liberalization and a new way of economic

thinking finally came in that those wage

rates start climbing back up if you're

wondering about the soaring CPI numbers

on the right-hand column well it seems

that that massive increase is down to

this increase in the money supply by the

looks of things all right that'll do

does the UK Oh India 45 trillion dollars

of course not

get out