India was the world’s richest region for 12 out of the past 20 centuries, and the second richest region after China in the remaining 8 centuries. Only in the 19th and 20th centuries and now, has India not been among the top two nations in the world.
As one of the world’s premier trading nations and industrial manufacturers, India was a capitalist economic powerhouse, with the economies of its various kingdoms based on manufacturing, agriculture, free markets, and free trade. Our kingdoms exported spices, textiles, raw materials, luxury items, agricultural produce, and natural resources such as precious stones and metals, to the rest of the world. There was very little that Indians wanted from outsiders, so foreign traders would mostly pay for their purchases in the form of gold and silver. India thus became the final destination of most of the world’s gold and silver; receiving the nickname “The Golden Bird”. Until the early 19th century, our share of world trade alternated variously between 25% and 30%, compared to 20% for all of Western Europe.
François Bernier, a Frenchman who traveled to India in the 17th century, wrote of the country’s emperor Shah Jahan: “I doubt whether any other monarch possesses more of this species of wealth (i.e, gold, silver, and jewels), and the enormous consumption of fine clothes of gold, and brocades, silks, embroideries, pearls, musk, amber and sweet essences is greater than can be conceived.”
Our exports were not just limited to goods and commodities, but also ideas and religions. Through these very same trading networks, Indian ideas in science, religion, and philosophy made their way to the rest of Asia, Europe, and the Islamic world, and proliferated everywhere; influencing all of the world’s civilizations in one form or the other. India’s philosophical heritage is also rich with the traditions of rationalism and skepticism, such as Buddhism, Charvaka, Ajivika, and Samkhya. Indian rationalist thought even made its way to Greece, and influenced sophist philosophers like Socrates; thus becoming the harbinger of world liberty and creating the foundations of modern Western civilization. In India itself, while some collectivism existed (such as casteism and tribal loyalties); religious and economic freedoms were widely embraced. India’s cultural ethos has always been remarkably tolerant and pluralistic, accepting people of all religions and ethnicities into its societal milieu. As such, Classical liberalism and Capitalism have deep roots in Indian culture.
It is Socialism and Hindutva that are foreign to the Indian ethos. Both are failed 19th century Western ideologies. The former is an unscientific and unnatural economic system that has killed more than a hundred million people, and enslaved and blighted the lives of hundreds of millions more in poverty and enslavement by dictatorships. The latter is a rip-off of the Western concept of ethnocentric nationalism, which has resulted in the destruction of entire countries, led to many great wars, killed tens of millions of people, and produced countless human suffering and misery since then.
For most of our history, India along with China, was the most advanced nation in the fields of science, medicine, and philosophy. This is common knowledge, but it would surprise one to discover that this chronically misgoverned country was historically also the most advanced in economics and public administration. It was therefore inevitably the best-governed.
During the Mauryan era (322–186 BC), India’s political system and public institutions were world-class. They were designed by one of the brightest minds in history, Chanakya, and embedded with the right incentives to ensure honesty and good performance. Chanakya — the chief adviser to the Mauryan emperors Chandragupta Maurya and Bindusara— was a master-strategist who authored the book Arthashastra, which was the world’s first treatise on political science and economics. He is thus the world’s first economist, and the founder of political economy. During his tenure, Chanakya actively promoted free markets, free trade, and incentive-compatible governance within the Mauryan empire. These policies were eventually carried on to successive empires and kingdoms as well.
One should not however get the wrong impression that Indians were the most affluent because of the region’s overall GDP size. The fact that India was the richest region does not automatically mean that the average Indian was richer than his counterparts in the rest of the world. That spot has always historically been held by European nations, at various times by Italy, Germany, Netherlands, and England respectively. India naturally had the world’s largest GDP relative to every other nation, on account of the large size of its population. As a result, they produced more goods than the rest.
Before the Industrial Revolution (1760–1840), there was no such thing as great differences in GDP per-capita. The whole world was poor, and extreme poverty was the norm. Most people everywhere lived at subsistence-level poverty. Everyone, whether they lived in Africa, Europe, or Asia, was at a similar level of productivity since there were no industrial machines to save labor. As a result, the size of a country’s wealth, and therefore “how rich” it was, was purely based on population. For thousands of years, agriculture hardly generated a major surplus. Human population barely grew.
It was the Agricultural Revolution followed by the Industrial Revolution which increased productivity, and hence accounts for the present differences in GDP per-capita around the world. India was the richest country for most of world history, because of the region’s massive population, with China overtaking it somewhere during the Early Modern Period (Circa 1500). India’s share of the world’s GDP declined relative to the Western nations, as it failed to industrialize and improve its agricultural output.
The Industrial Revolution, which began in England in the late eighteenth century, initially produced 3% economic growth rates, and transformed once comparatively static societies into juggernauts of economic growth and scientific innovation, with per-capita standards of living doubling every generation. Thus began a great divide between the industrialized Western nations and backward non-Western nations like India. The West saw per-capita incomes rise from $2 or $3 a day to anything from $90 to $120, and much more if the person is highly skilled. The increase is 3,000 percent in the median or average. And the poorest gained the most. The very rich get another diamond bracelet, but the poor get food, housing, antibiotics, and education which were denied to most people during all of history before the late 19th century.
Living standards around the world were roughly equal in 1750. Back then, the people in India had a per-capita income slightly lower than the people of England or Italy. Indian agriculture and textile industries were even more sophisticated than that of the West. Even in 1850, living standards were not very different. Today the average person in the developed world is ten to twenty times richer than a person in the developing world. Norway, the world’s richest country, is 496 times richer than Burundi, the world’s poorest country. This wealth disparity has to do with the developed world’s embrace of capitalism, individual freedom, and good governance; which enabled capital accumulation, social mobility, as well as the scientific advances and innovations that improved life for all.
India and the rest of the world failed to create an agricultural revolution and industrial revolution due to various reasons. Scientific innovation in India basically stopped in the 9th century with the deep entrenchment of the caste system after Hinduism’s revival under Adi Shankara. After this period, there were individual isolated efforts to advance scientific research such as the Kerala School, but these were rare solipsistic efforts. The hardening of caste distinctions subsequently destroyed meritocracy, which is vital for good governance and was so fundamental to Indian governance earlier. Rigid social practices grew strong and freedoms declined precipitously. Consequently, India underwent a very long period of socio-economic stagnation and failed to advance in the fields of technology, science, economics, and political philosophy. Indian society became very feudal and closed itself to scientific thinking and new ideas. We even lost Chanakya’s teachings and completely forgot about the Arthashastra until it was rediscovered in 1904. India had to wait until British rule for the fruits of Western civilization (ideas, institutions, scientific and technological advances) to become firmly implanted. All of this made India very vulnerable to invasions by Western imperial powers, and the subcontinent would eventually become colonized by the British, French, and Portuguese. By 1947, India’s share of world trade declined to 2 per cent, and per-capita income barely increased from its 1776 levels. In the meantime, the West had increased its income by at least 10 times.
The very backward Western European kingdoms, in the meanwhile, totally reversed course and became open-minded and curious after the 15th century. They eagerly embraced ideas and sciences from the East, and developed them. They invented new ideas and institutions (for example, democracy, the modern corporation, etc), which the rest of the world back then did not possess, that gave them a military and economic edge. They broke out of feudalism and moved towards property rights, individual liberties, and capitalism. They developed strong institutions and a competitive mindset. The resultant scientific, technological, and institutional advances made them increasingly prosperous and healthier, and eventually culminated in the Agricultural and Industrial Revolutions of the 18th and 19th centuries. It was then that the West began to significantly diverge from the rest in terms of material prosperity, development, and economic productivity.
Western countries became manufacturing powerhouses as well as militarily more advanced and powerful enough to eventually colonize the rest of the world. The Industrial Revolution upended the global balance of power, when traditional societies suddenly felt powerless to defend themselves. By the late 19th century, most of the world had been subjugated by European colonial powers. The Industrial Revolution continues to define the industrial balance of power to this very day, leaving the least industrialized countries to form the ranks of poverty-stricken countries.
East Asia and the Islamic world too were in the same sorry state as India. They had abandoned scientific thinking, stopped innovating, and closed themselves to Western ideas, technology, and scientific advances. They too stagnated, went into decline, and later became victims of Western imperialism. The natives of Africa, Australia, New Guinea, and the Americas were from the start doomed by harsh unfavorable environments and unfavorable geographical locations being very far from Eurasia. As such, they never managed to developed advanced civilizations as was the case in Europe, India, China, and the Islamic world.
Japan — a unique outlier among Eastern nations — learned their lesson during the late 19th century. Eager to avoid being colonized like India and China, it embraced capitalism and began aggressively modeling its institutions and culture after the West. This would lead Japan to eventually become one of the world’s most prosperous nations and leading superpowers by the First World War.
Following the Second World War, the Four Asian Tigers (Hong Kong, Singapore, Taiwan, and South Korea) too followed suit by embracing free-market capitalism and good governance, and are now among the most prosperous countries on Earth. They have even overtaken Japan and most of the West in terms of material prosperity and human development. After being ruined by decades of experimentation with failed socialist policies, China too completely changed course by liberalizing its economy and improving its governance. It is now on the path to becoming a prosperous first world country, and should reach there within another two decades.
India unfortunately has not learnt its lesson even now. After achieving independence, our leaders perverted the democracy and political institutions which the British gave us. Instead of embracing free-market capitalism, rule of law, individual freedom, and meritocracy; we chose the failed ruinous path of Nehruvian socialism, corruption, and caste-based / religion-based identity-politics. The freedoms that we received under our constitution were very limited. Nehruvian socialism led to a growth rate of less than 1 per cent per annum in per-capita incomes. Only after 1991 did growth pick up to the current rates, of around 5-6 per cent per-capita, at which rate real income doubles about every 10 to 12 years.
The results are there for all to see! India is still a filthy poverty-stricken third-world country languishing at the bottom of all development indices, while most of the world is progressing ahead by leaps and bounds. It is still a terrible place to live, despite the proliferation of malls, bars, and high-end restaurants since the country opened up its economy in 1991. The quality of life still remains poor. With the exception of the rich, all Indians are plagued with poor living standards. On EIU’s Where-to Be Born Index, India ranks 66th out of 80 countries surveyed. It is nowhere close to being free. Even worse, Indians lack even basic freedoms such as freedom of speech, freedom to eat what you want, property rights, etc. Our elected representatives and other public servants have become our masters with zero accountability for their actions and overall performance.
However, it’s still not too late! We can change all that. We can catch up with the developed world in over a generation. Not only that, we can also surpass them to become the world’s freest, richest, and most developed nation once again. All that is required is for Indians to insist on freedom and good governance, and rush forward to support and lead India’s only classical liberal party, Swarna Bharat Party. Only the politics of freedom can rescue India from poverty and misgovernance!