Joining the ‘early’ with the ‘modern’

Economic History reasons, as Ghosh does, that the eighteenth century should be studied on its own terms. In the book, there are two specific targets of this indirect criticism. The first target is an approach that transplants the concept of the early modern from world history to India. The second target is an approach that looks at early modern India expecting to find out why modern India turned out to be a poor country. Both of these approaches can be subjected to the same criticism. Any generalization on the trajectory of economic change in the eighteenth century needs to be consistent with an acceptable interpretation of later developments in India. No account of a time can convince if it is incompatible with that of another time. The narrative in Economic History is sensitive to this need to achieve consistency between the ‘early’ and the ‘modern’.

Ghosh criticizes me for reading eighteenth-century history from a modern or nineteenth-century perspective. At times, he sounds as if reading the past in the light of the present is a wrong way to ‘do’ history. If indeed someone, somewhere has shown that history should not be done in this way, the news has not reached economic history, a great part of which is an attempt to explain both the origins of modern economic growth, and the origins of underdevelopment and poverty in the modern world. Many new discourses and innovations owe directly to the wish to discover the roots of changes that are occurring in the present. That drive accounts for a resurgence of history within theoretical economics. It is difficult to imagine that the return of China in global economic history could be quite as emphatic as it has been without the rapid transformation that China has gone through since the 1980s.

I see nothing wrong with reading the past with reference to the present, and will indulge in it in a moment. It carries a risk, however: the risk of underestimating the complexity of both the past and the present. The risk is bigger when the present consists, not of facts, but of a constructed idea, a theory about the modern world. Too often, analytical economic history uses the Indian example to show why the West grew rich, while the Indians, among others, stayed poor, and answers the question with reference to colonial exploitation, cultural and institutional failing, drain, deindustrialization or, more recently, state failure to supply public goods. These theories of the economic history of modern India define the modern as the industrializing West and define India as a region that failed to become like the West. Irrespective of the different variants, they make the same fundamental error, as I have argued on other occasions. They diminish India into a single, simplified trajectory—becoming poorer and falling behind—whose only virtue is that it can be used to prove theories about the rise of the West.

What would be a more acceptable version of the trajectory? We can disagree on the answer. But any general account of economic change in the nineteenth century must accommodate two contradictory facts about the region. First, India was one of the few countries in the tropics that industrialized. The rate of growth in manufacturing employment was above the world average between 1860 and 1940, comparable with those of the other emerging economies of the time, Japan and imperial Russia, and without a distant comparison in the contemporary tropics. Industry, in turn, was embedded in a cosmopolitan, commercial sphere located in the port cities of Bombay, Calcutta, and Madras. These cities were not just trading hubs. Around 1900, they supplied some of the best education and financial services available outside the Western world; a great deal of that infrastructure had been created by the Indian capitalists in collaboration with skilled immigrants. If we call this business world ‘industrial capitalism’, it occurred in a region where every textbook prerequisite for the emergence of industrial capitalism had been missing in 1800. Favourable factor prices, an activist state, high rate of savings, and prior agricultural revolution are the usual prerequisites for industrialization discussed in popular textbooks. Not one of these factors favoured India in the nineteenth century. Why did the tropics’ most impressive capitalist transformation happen in the most unlikely of places? Does the eighteenth-century transition suggest an answer? I believe it does, by showing how the cosmopolitan commercial hubs like Bombay, Calcutta, and Madras emerged.

A second stylized fact has to do with the famously low, stagnant, sometimes falling, agricultural productivity which persists in many regions of South Asia into the present, despite vast changes in technology. In the past, low land yield left states, including the British Indian state, in possession of small fiscal resources, exposed the population to consumption and famine risk, and led to growing poverty as the land-dependent population began to grow. Does the eighteenth-century scholarship suggest that the living conditions of the agriculturally dependent population were significantly different in the past? I believe it suggests instead deep, long-term continuity in these conditions, or at least no compelling evidence of a secular tendency.

What is the evidence on the eighteenth-century trajectory? What matters to sustainable economic change are conditions of production and investment. Did these conditions change? Ghosh comments on my discussion of agricultural productivity in a rather misleading fashion. The point of that discussion is not to show how large or how small yields were, but to show that almost all empirical investigation into agricultural yields in the years before large-scale surveys began suffer from observation biases, a cavalier treatment of units of measurement, and that a careful probe of the data suggests that no story of a definite rise or a definite fall in yield in the 1700s can be easily sustained in the present state of knowledge. If changes in rural institutions such as property rights made any difference to production conditions and investment, there is little evidence to show how they did and how much they did.

On the other hand, investment incentives outside agriculture did change, quite dramatically. As the Mughal empire collapsed, and the successor states fought among themselves, in the process all growing poorer than before, the axis of Indian capitalism shifted from overland trade in the Indo-Gangetic plains towards the East India Company ports, involving a migration and relocation of private enterprise from the interior. The evidence for this migration is rich and incontrovertible. It appears in regional histories and in studies of business communities. All the prominent business communities of the nineteenth century changed the nature of their business during the eighteenth-century political shift. Among those Indians who dominated long-distance trade, informal banking, overseas trade, and industrial investment around 1900, one segment had always been based in the coasts, like the Parsis, and the other segment, like the Marwaris, had migrated from northern and western India towards the coast from the late-1700s. The inland was not exactly drained of capital. Big banking firms continued in Mathura, Benares, Multan, and Ahmedabad. Marwari bankers went deep into the countryside. But many of them reinvested money in businesses directly or indirectly connected with the trading world of the ports. Further evidence of this many-sided relocation of capital comes from trends in urbanization, which form the subject of a chapter in the book.

To conclude this discussion, Economic History proceeds on the belief that the story of the eighteenth century must be consistent with an acceptable story of the nineteenth century. Consistency is achieved by suggesting that economic transitions in both the eighteenth and the nineteenth centuries contained a deep and growing disparity at their core, a disparity between a dynamic, globalizing business world and a stagnant agricultural one. It might be useful to remind ourselves that such a disparity is a part of the ongoing transformation in India.

This account seemingly underplays the importance of the state, which brings me to a second area of disputation.

Rethinking state formation and colonialism

The historiography of economic change in the eighteenth century concentrates on state formation and the transition to colonialism. From an economic history standpoint, the relevance of these processes is not obvious. In a condition of repeated conflict, all states, and especially the successor states, struggled to achieve fiscal stability and administrative control. Public goods that might matter to trade and agriculture, such as roads, security, embankments, tanks, and canals, were neglected. But how that factor directly affected production and investment we will never know. If traders left home, were they driven out by higher risks at home or attracted by higher returns elsewhere? We do not know. The East India Company met the challenges of fiscal instability and military threat with different means from those used by the other successor states. These innovations were new ones and helped the Company beat its rivals. But it is not clear how that fact matters to economic history.

As a state, the British Indian one, under the Company or the Crown, mattered to economic history in a specific way. It created a new framework of civil law, though little of that apparatus had come into existence in the eighteenth century. It grew to be a huge military force. Beyond these two areas—law and defence—the state made little intervention. It was just too poor to make large welfare and infrastructural commitments and sustain these. Its tax–GDP ratio was among the smallest in the world in the nineteenth century. That poverty derived from its reliance, like the inland empires of the past, upon land taxes. Still, it was different from the inland empires in that it had firmer control over the sea and in its commitment to protect overseas trade, increasingly driven by a belief that India and the Indian Ocean were crucial to securing Britain's own future.

Ghosh criticizes my view that British colonialism is not an important explanatory variable in economic history. No doubt this claim is fit for debate. My argument is that the transition to colonialism in itself does not imply a distinct trajectory of economic change. The relevance of the transition to colonialism must be shown, not assumed. In the book, the relevance consists in the process of relocation and concentration of capital in the Company ports. Despite some regulation of capital and labour migration, after 1770 Bombay, Calcutta, and Madras functioned more or less as free and open business towns. All three towns saw an efflorescence of organized trading, often under Indian and European collaboration. Of course, the regime mattered to that efflorescence, but not as an interventionist state. It had little money to spend and little interest in regulating or discriminating between forms of capital. It is not altogether clear that the British Indian administration or the Board of Control were aware of the scale and implications of the migration of Indian capitalists into Calcutta and Bombay. The regime mattered in an indirect way as a military power keen to protect trading hubs and maritime routes. The attraction of that support drew capitalists from the landlocked interior to these cities, a process that had begun in the eighteenth century. Without that process, the offbeat revolution that took shape in Bombay, Madras, and Calcutta cannot be imagined.

New proposals

Ghosh makes a case for a different way of approaching eighteenth-century economic history. Whether my narrative is right or wrong, these proposals have value and merit a discussion. There are two substantial proposals and a number of subsidiary suggestions. I will overlook the subsidiary points, because these do not touch the core of the discourse. For example, the term ‘capitalism’ is criticized. A broad notion of capitalism as a market economy with private investment has done quite well in economic history. Scholars who use the term do not feel obliged to define it every time they use it. Of course, that does not invalidate a contextual definition such as that which Ghosh thinks would be more useful.

The first of the two bigger proposals is to take a ‘regionally focused’ approach. What this project should mean is set out clearly towards the end of the article. There were inland zones of commercialization that were not dependent on the protection or sponsorship of the Company. It follows that an alternative and, presumably, better way of writing eighteenth-century history would be to write a series of region-specific narratives, and identify the distinct trajectory of change that prevailed in each one of these regions. Ghosh makes a case for writing Indian history by treating regions as ‘discrete entities’.

The region-focused approach is a great idea. But it cannot be put into practice. There are two reasons why it is not implementable. First, there is just not enough data to settle even the basic pattern of economic change in many large regions during any period of the eighteenth century. Source-based research is usually region-bound, but usually does not concern itself with broad patterns. Historians who join big debates sometimes make themselves believe that they know the broad patterns. But they do not. That false confidence shows up in a liberal use of adjectives in otherwise balanced survey pieces. Ghosh writes that in many inland regions there were ‘dense’ networks of trade, ‘high’ (even ‘very high’) levels of commercialization, and a ‘great deal’ of production for the market. How much is high? What is dense? What is a great deal? Have we not heard this discourse before? One of the best-known surveys of the field tells us that there were ‘huge’ trade, ‘much’ production, merchants operating ‘on a large scale’, ‘much’ industry, ‘masses’ of labourers and artisans, ‘great’ cities, and ‘prosperous’ market towns in eighteenth-century India.Footnote ¹ These labels hide a devastating and elemental gap in our knowledge – there are no numbers to back up quantitative descriptors. The gap is wider and variable at the regional level.

Instead of saying, let us do region-focused history, would it not be better to say that, since we do not have the minimum tools to do region-focused history, let us look at another method? My answer to the question is to read the basic pattern of change in the 1700s in terms of the changing relationship between regions. The balance of urban enterprise and town population, the shifting axis of trade, migration of capital, and labour are foregrounded in that narrative. I agree with the criticism that this is not the best way of doing the economic history of the eighteenth century—but is there a better way that works in practice?

The second reason region-focused history would not work is that historians underestimate the geographical complexity of India. Where does a core come to an end and the hinterland begin? Take Bengal, a so-called core region. As the colonial geographers showed, Bengal was composed of several geographical zones that were not at all well integrated in the 1700s. Intra-regional links depended on transport and insurance costs, which would reach astronomical levels by twentieth-century standards. In 1830 it took 20 changes of ferry, 20 ‘stages’, and many days to traverse the distance of 200 miles from Calcutta to Dhaka—and this was safe to do, or possible at all, for just six months in a year.Footnote ² Why should Calcutta and Dhaka both form parts of the same region? Ghosh cites a recent work on Gujarat, another so-called core region.Footnote ³ This excellent new work is not about North Gujarat, nor about the forests, the arid frontiers, the peasants, and the uplands of Gujarat. And if Bengal and Gujarat can be deconstructed, what about the regions that are rarely mentioned in debates conducted at the broadest level? What are Malwa, Bundelkhand, Chhattisgarh, Mewat, Berar, Chotanagpur, or Rayalaseema—core, periphery, or hinterland? I agree that an attempt to define regions is a good idea. The task requires engaging with geography; with costs of transit in terms of time, money, and safety; and with the manner in which physical and political spaces interacted, far more seriously and with more novel kinds of data than historians realize.

The second proposal advanced by Ghosh is to adopt a ‘comparative approach’. In part, the proposal follows his dissatisfaction with a trade-bound definition of capitalism. Instead, it is suggested, the concept of an early modern capitalist transformation should include the industrious revolution, moral economy, consumption, and proletarianization. The problem begins when we step back into Indian history, and try to meet the call to explore ‘local patterns of consumption, production, and exchange, and how these relate to . . . political, cultural, social, and ideological [factors]’. It would be fascinating to do this for every region in 1750, but I do not think anybody can.

In part, the comparative approach joins Kenneth Pomeranz's reciprocal comparison method with Ghosh's own proposal that the core regions of India should be treated as discrete entities. That is, we should define and compare the core regions of India with core regions elsewhere. This project will first need to address the problem of defining regions in a geographically sensible way, which I discussed above. Secondly, the project will need to meet the consistency check, that is, the early modern in every region will need be shown to be compatible with the modern history of the region. Quite apart from these two issues, I do not believe that comparative history is an area we should be jumping into. Which conceptual tool is portable cannot be settled either easily or quickly. Let me illustrate. Ghosh suggests that my treatment of urban history would gain from reading a recent publication comparing Europe with China.Footnote ⁴ The book in question is a bold and innovative work. But before experimenting in eighteenth-century Indian history in the same way as a book on China and Europe, I would wait and see that the work survives reviews by China experts and Europe experts.Footnote ⁵ That takes time.