Open and Closed India

In an interview the LSE’s distinguished economic historian Tirthankar Roy was asked how his work on colonial India informs our understanding of contemporary India.

What was similar between the colonial times and the post-reform years? The answer is openness. The parallel tells us that openness to trade and investment is good for capitalism, whether we consider the colonial times or the postcolonial. The open economy did not deliver capitalistic growth in the same fashion in both eras. But there were similarities. In both the periods, not only commodities but also capital and labour were mobile, which encouraged freer flow of knowledge, skills, and technology, and created incentives for domestic producers to become better at what they were doing.

…It is necessary to stress the lesson that open markets and cosmopolitanism were good for the Indian economy, because the political rhetoric in India remains trapped in nationalism, which tends to blame global trade and global capital for poverty and underdevelopment. That sentiment started as a criticism of the British Raj, nurtured by the left, and the negativity persists. The pessimistic view of openness is based on a misreading of economic history. There were many things seriously wrong with the British Raj, but market-integration was not one of these. Influenced by a wrong reading of history, India’s politics remains unnecessarily suspicious of globalisation and cosmopolitanism.

For evidence of rhetoric trapped in nationalism look no further than the Indian government’s refusal to allow Apple to sell used iPhones in India.

Hat tip: Pseudoerasmus on twitter.


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