Economic Nationalism And The Welfare State Idea


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The 19th century Liberals had also developed a powerful critique of British economic policy and drew up plans for economic reconstruction based on state intervention.

Critics like Romesh Dutt clearly perceived how the British policy of developing Indian markets for the advancement of her own industries was proving disastrous for the country. The British policy resulted not only in destroying Indian urban handicrafts but also forced the urban unemployed artisans to go back to villages, which, in turn, increased the pressure on Indian agriculture, resulting in further subdivision of land, growth of unproductive debt (due to improvident borrowing and unscrupulous lending), often leading to the transfer of land to the non-agriculturists.

Dadabhai Naoroji, the Grand Old Man of India, propounded his famous “Drain theory” to indicate how the British were draining away the wealth of India. Comparing British rule with the earlier regimes, Dadabhai admits that the Mughals and the Marathas may have plundered and looted but their wealth remained within India. Individual subjects may have suffered but not the country as a whole. Again Dadabhai admits that under native rulers, the taxes may have been heavy but the proceeds stayed within the country. With the British, not only was the tax burden high, but the proceeds two were sent out of the country. Dadabhai accused the British of perpetually draining away India’s wealth in the form of a variety of payments viz. interest, pensions, furlough allowances of the British army, Home charges, etc. This “drain” prevented India, Dadabhai argued, from accumulating capital with which Indians could start industries or trade.

Gokhale studied the causes of rural indebtedness and opined that the remedy to reduce indebtedness lay in providing credit to agriculturists by starting Agricultural Banks and Credit Co-operative Societies.

Ranade wanted state farms to be set up as model farms and to develop undeveloped land.

In short, the Indian liberals stood (unlike the laissez-faire Liberals of the West) for a welfare state. They evolved the concept of a welfare state, if not in terms of theoretical constructs, at least empirically in terms of the needs of a backward economy. The welfare schemes they proposed related mainly to three areas –

  • agriculture and industrial development;
  • public health and sanitation;
  • public education.

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Bibliography : IGNOU – Modern Indian Political Thought

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