There is nothing more potently destructive than a stupidity whose time has come.

The Americans saw it in

Vietnam when their stupidity backfired and the Soviets saw it in Afghanistan when it almost destroyed
them. Biggest of empires have been brought to dust at the hands of foolest of notions. Even in India we
are no strangers to stupidities at the highest level be it 1948 Nehrus handling of the Kashmir issue or
1950s handling of Chinese.
But perhaps in what he (if he is still interested and can read this small font article from above) can still
console in is the fact that he was not alone in being a victim of stupidity in contemporary India. Even the
mighty British Raj owed its downfall to one of the same kinds The Drain of Wealth. This doctrine
propounded by the early nationalists after careful research pointed fingers at the Englishmen (something
our culture is so adapt in doing even today) that they were draining Indias wealth out to England. Strictly
speaking the drain of wealth refers to the excess of a countrys exports over its imports for which it gets
no corresponding returns. In other words, India exported more to British and imported less and didnt get
anything for the difference. This drain was pegged by some to be as high as 6% of Indian GDP at that
time. But the real beauty of the theory lay in its appeal. It didnt exactly require a rocket scientist in a
peasant to get a feeling of it for he saw after every harvest the white man coming with his goons in
uniform and taking away all his produce. The artisans could see their jobs being taken away by the
Manchester machines. Here was a potent tool in the hands of the frustrated Indian middle class of
educated and the industrialists with which they could mobilize the peasants and the laborers to fight for
their cause. The tigers of emotions had been unleashed.
Well the idea here is not to deny that Britishers exploited India. They may have or may not have, this
article doesnt really want to concern the reader with that. It merely wants to expose a long held myth that
drain of wealth is negative for a nation. I can swear that if those Englishmen of the Raj were to descend
down from heavens (or hell, whatever) and see the curremcy regimes followed by the free governments
of their erstwhile diminions like China, India etc.they would surely beat themselves to death again.
In the name of making exports more competitive countries like India and China have followed a deliberate
policy of keeping their foreign exchange rates artificially low. The rationale is simple. Lets say something
costs Rs. 50 in India. If the Indian Rupee is at 50 to a dollar, that article would be cheaper ($1) in US
compared to say if the Rupee were to be at 25 to a dollar ($2 cost in that case). Cheaper exports mean
more exports mean more industrial production means more jobs mean more prosperity means everyone
is happy. But wait, isnt this a form of Drain of Wealth only more disguised this time? Thats because for
its exports India is now getting lower value than the fair value and for its imports, it has to pay a higher
value. And think about it, where is the compensation for this excess of exports over imports? If this is
not drain of wealth then what on earth could be drain of wealth?

But wait, isnt this a contradiction? I mean drain of wealth was bad! (The gentlemen from the Raj will tell
that now.) But here lies the distinction drain of wealth is not bad in itself.
Drain of wealth can be seen as a sacrifice which the present generation makes in order to bring greater
benefit to the future generations. Its like your parents cutting down their current expenditures to ensure
better education and health for you. And it is exactly the oppposite of running a fiscal deficit economy
where we finance our current expenditures from the earnings of our future generations as eventually a
fiscal deficit has to be met by additional taxes on the future generation.
But does this mean that Englishmen of the Raj were really innocent victims of a stupid and populist
theory? Not quite. It is true that drain of wealth is not bad in itself. The early nationalists also rightly
criticized the English practices of implementing the drain of wealth policy. The drain becomes bad when
the present value of the perceived future benefits becomes less than the value of the present sacrifices
the society is making. This can happen in two ways. First, if the cost of present sacrifices is made so high
that the society simply isnt able to survive to see that prosperous future or second, if the value of the
future benefits is diminished seriously. Though the English failed in both aspects the more visible and
serious failure was in making the current sacrifices unbearable. (And I hope I dont have to give a proof of
that here.) Had it not been for the high sacrifice levels imposed on the contemporary Indians, the rhetoric
of the nationalists would have fallen on deaf ears.
Oh Poor English Not exactly Rather it should be Oh Poor Drain of Wealth Another innocent victim
of social stupidity