Could Britain Continue with the Gold Standard in Absence of Colonial India?

Abstract

ABSTRACT This paper dwells on the account, provided by de Cecco, of the functioning of the international gold standard, as steered by Great Britain. The arrangement relied on a few institutional aspects dealing with the acquisition and disposal of gold by Britain, not only as units of transactions but also to facilitate profitable investments overseas. India had a major role in providing gold flows, as political tributes, to meet the ‘Home Charges’ in the ruling country. Nationalist arguments in India on the ‘drain’ were centred on the legitimacy of using taxes in India to meet the overseas expenditure in Sterling. Further sources of financial transfers, were not recognised by the nationalists. This paper provides an outline of the multiple channels of transfers used to expropriate gold from India. Those routes include India's trade surpluses; ‘expenditure abroad’ as earmarked in the domestic budget; currency reserves; and the camouflaging of unproductive debts by Britain to justify the interest payments under Home Charges. This is a new interpretation of the mode and the magnitude of financial expropriations by Britain, supplementing the ‘Drain of Wealth’ narrative. The paper ends comparing the colonial expropriations from India and the subordinate finance in the neo-colonies under contemporary capitalism.