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Reversals of Fortune: Why the Hierarchy of Nations So Often Turns Topsy-Turvy

Author(s):Guha, Ashok Sanjay
Reviewer(s):Roy, Tirthankar

Published by EH.Net (September 2022).

Ashok Sanjay Guha. Reversals of Fortune: Why the Hierarchy of Nations So Often Turns Topsy-Turvy, New Delhi: Routledge, 2020, 109 pp. £42.99 (paperback), ISBN 978-0367466046.

 

Reviewed for EH.Net by Tirthankar Roy, London School of Economics and Political Science.

A central question in economic history is how regions and countries in the world became unequal in recent centuries through the operation of such modern forces as globalization, industrialization, colonialism, the emergence of powerful states, and technological and institutional changes. Many economic historians think that there was something modern and unprecedented about the pattern of international inequality that took shape in the nineteenth century; some would call it a ‘reversal’ of earlier forms of inequality, but they disagree on what had changed and why. This short and readable book by an economist who has taught the subject in India over a long and distinguished career revisits this question.

The origin of the inequality question is too big for one single work to handle. Evidence-based scholarship divides into two overlapping subfields, one asking what was distinct about the West or Britain that these regions saw an acceleration in income and productivity before other areas did, and the other asking what made achieving a similar transition in the third world a hard struggle. Despite the claim of the book to offer a single narrative on inequality covering the whole world, it is more persuasive as a critique of the rise-of-the-West stories than as a historiography of the third world.

The target of the criticism is the position that the rise of the West owed to ground-breaking institutional changes and technological innovations. These things travelled quickly and found their best uses elsewhere, sometimes far away from where the original innovation had happened. The book argues that no matter where technologies were invented and depending on a matching between local resource conditions and market size, technologies could bring substantial gains to other regions, hence a tendency of the growth impulse to spread from origins outward.

The narrative part of the book consists of five chapters, three of which have the word ‘reversal’ in the titles. Chapter 2 illustrates the core argument about the mobility of ideas. For example, ‘The revolution in textile technology . . . totally transformed parts of the world best suited for cotton plantations’ (p. 20), an account of Anglo-American convergence. Chapter 3 asks why regions in Asia (like India) that once exported high-quality handicrafts fell behind in modern times and answers that Western European powers had more at stake in sponsoring transoceanic navigation than did the Asian empires, which earned enough money from land. Chapter 4 discusses the New World to suggest that during its economic emergence, regions of the New World ‘acquired institutions that inhibited industrialization’ (p. 54, emphasis in original). Chapter 5 is about Britain’s emergence and falling behind, showing how the mobility of ideas and market size could combine to favour other regions. The book ends by taking the narrative to the present, arguing that the ‘technological transformation of the late twentieth century integrated for the first time the labour surpluses of Asia into world trade’ (p. 94), hence a further reversal.

The book is persuasive in showing how the market size and mobility of ideas could transmit the growth impulse. It is less persuasive on why the growth impulse was weak in the third world until the late twentieth century. As I said before, many explanations of divergence start by identifying a critical factor that made the West forge ahead and then look for reasons why that factor was absent in the third world. The method usually leads to speculative claims about the economic history of the third world. The book follows this approach and falls into that trap.

The best the book can do is insist that European colonial rule underdeveloped the third world. The evidence comes from India, where ‘rapacious plunder’ unleashed by the East India Company and ‘the corrosive effects of colonial subjugation’ (pp. 42-44) during imperial rule made the Indians poor, and their economy stunted. This mode of argumentation on the economic history of colonial rule took shape in the 1960s and the 1970s. This discussion is seriously outdated by the oversight of subsequent critiques and debates.

These debates suggest two general points relevant to the interpretations of colonialism. First, European rule in Asia or Africa (roughly 1800-1960) did not start a series of top-down interventions and revolutionary changes. These states did not share a single plan, origin, and ideology, and while militarily successful, they had too little tax revenues to do anything other than defend themselves. Their power relied heavily on support from indigenous society, from chieftains to the business elite. That diversity does not make a general reading of colonialism across countries impossible but makes it a challenging task for interpretive history. (For more on this discussion, see Gardener and Roy (2021, cited in author bio)).

Second, seeing colonial rule as a state form created by the Europeans is an error. As a state form, colonial rule sometimes entailed using military power for land grab and labour coercion. It almost universally neglected non-defence public goods. But as a state form, it also sometimes entailed the protection of property. For example, European military and naval power over a vast expanse of the world enabled Chinese and Indian merchants to earn profits and cross borders, even continents. In other words, it was also an agent of market integration.

The role of empires in fostering market exchange renders the view of colonialism as nothing more than an exploitative state untenable. For example, Indian nationalists claimed that India made too many payments to Britain owing to its political status and called these payments a ‘drain’ of savings. The book cites drain as if it is an accomplished and accepted fact. It is not. It is just bad economics. Most of these payments were market-mediated, meaning that these either saved costs (like service of loans raised in London, where interest rates were lower than in India) or came from income generated within India (like repatriated profits of trading and manufacturing firms). The railway guarantees were cited as a drain; current research shows that the railways generated enormous positive externalities in the Indian economy.

Among indigenous businesses that made money using these newly formed global connections were the owners of the world’s fourth largest cotton mill complex in western India. This industrial complex employing half a million or more people emerged without protection, competing with the first industrial nation in a free trading system, and had all but driven out Manchester from the Indian market by the 1920s. Ironically, the cotton mills of India confirm Guha’s claim that technologies travelled to and succeeded in locations with favourable resource and market conditions. To the extent that the imperial contacts facilitated such mobility, this example challenges the argument that the imperial impact was mainly ‘corrosive.’

 

Tirthankar Roy is a professor of economic history at the London School of Economics and Political Science. He is the co-author, with Leigh Gardener, of The Economic History of Colonialism (Bristol University Press, 2021).

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Subject(s):Economic Development, Growth, and Aggregate Productivity
International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative