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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