 You're watching News Made Easy, I'm Anandya Chakravarty. Capitalism's greatest lie is that the West, the advanced capitalist nations are prosperous because of the Industrial Revolution. Because of the steam engine, because of the spinning Jenny which enabled high productivity, industrialization, jobs and overall prosperity. This is almost entirely a lie. The reason why European industries developed is because colonies were actively suppressed. Take the case of Indian cotton. It was the most famous cotton across the world. It had spread across Europe. It had flooded the European markets but Calico Indian cotton was banned in the UK so that it would act as a protection for the domestic industry. And then another thing happened. When the colonial government actively started controlling India's economy, they put prohibitive taxes, prohibitive excise on Indian products, prohibitive transit duties on Indian products which made imported cotton textiles from Europe cheaper in India compared to what was being produced in our domestic industry. And that is what caused deindustrialization in India. And mind you, initially when Indian cotton was banned and prohibitive taxes were put on domestic cotton in India, the British industry was actually imitating Indian cotton. And it was imitating Indian cotton and this particular design that you see which is famously British now, paisley, is actually nothing but a copy of Indian designs of that time. Even in the 1960s, 70s, you see these photographs of paisley shirts in England and even now it is very popular which is considered to be a British design. It is completely stolen, imitated from Indian designs and Indian designers, Indian manufacturers, weavers were suppressed. And that is how India got deindustrialized and British cotton textiles and from there other industries grew. Two things happened. What did that mean? That meant that there was a protection for British industry to actually adopt new technologies, adapt them to their conditions and use them. That is the number one thing. The second thing that colonization did was that it provided England's poor. The poor of Europe, the reserve army which would have otherwise created political problems for capitalism, it provided them jobs in the colonies, it gave them homes. Between 1870 and 1914, 40 million Europeans settled in colonies across the world including Canada, Australia and New Zealand, 40 million. And they got the biggest jobs. They took away the land from local people in Australia and in New Zealand and in Canada, settled there, took them and became prosperous. We know what happened in India. All the top jobs, highly paid jobs were given to the British. British traders looted India and we know all of this about colonialism. But you will ask that okay, that was true during the colonial period and yes, maybe it gave them some advantage. But what happened after that? What happened after that is colonialism or imperialism without physical colonies. That is what happened and the mechanism through which it happened was the mechanism of international trade. You say that is just ridiculous. Trade is between equals. If there are no tariff barriers, then things, if a country makes something better than another country, it exports. If it can't make something well and cheap, then it imports. It basically leads to equalization of different countries. This is what is in mainstream economics called the theory of comparative advantage. And this is again based on a complete lie. As I told you, the competitive advantage that British cotton, British textiles got over Indian textiles was entirely done by suppressing Indian industry. It was done by suppressing Indian craftsmen and plundering Indian capital and taking it abroad. That was the number one thing that was done. But what happened after that? Once the competitive advantage developed, what was required? And this you will see till the mid-70s, till sometime in the 70s, most developing countries actually adopted these policies. And these policies were to give protection to their own industries, not allow easy imports. Maybe in the short run, this meant that the products that were produced were not of the highest quality. Maybe they were more expensive. But what it did was it created the base for domestic industries in many countries. But from the 80s that changed. And once again, what we saw is that the role of international trade came into play. And there are two mechanisms through which international trade led to the plunder or drain of wealth from the poorer countries to the richer countries. Number one is the idea of competitive or comparative advantage where poorer countries were turned and forced to increasingly become agriculture and mining economies. And you know, these are not high value products. There's a limit beyond which value cannot be created in these products. So they were always at a disadvantage. They had to import manufactured products and they exported primary goods. And they became essentially exporters of low value products and were forced to import high value products. That is the number one way through which this drain took place. The number two and a much bigger way in which drain took place is essentially through the mechanism of exchange rates. Now try to understand this. Let's take the case of India. In India, if you have to buy a dollar today, you want to go abroad and you buy dollars, you'll have to pay 75 rupees. That is the market exchange rate today, 75 rupees to a dollar. But there is something else called purchasing power parity or the PPP rate of dollar and that is just 22 rupees. What does that mean? That means that if you had to buy something in the US for one dollar, it will on an average cost you just 22 rupees today in India. Not 75 rupees. Mind you, technically exchange rates should translate into the buying power of two currencies. But that's not what happens because of the strength of the dollar, because of international financial institutions, because of different inflation rates which are all because of the global economy, the dollar actually is much more expensive in value compared to the rupee than it ought to be. That is the crucial question and now understand one thing. If the dollar was exchanged at the PPP rate, purchasing power parity for every 22 rupees of goods exported, we should have got one dollar in exchange. But what happens now for every 22 rupees of goods exported, we just get 30 cents. That is what we get. In effect, 70% of the value of products that we're exporting is being looted from us, plundered through this unequal exchange rate. This unequal exchange rate creates unequal exchange and effectively value of goods that is being taken away from the third world, from poorer countries turns out to be two to three times more than what they have paid back. Let me tell you how much has been taken away. These are calculations done by three economists, Hickel, Sullivan and Zomkawala. It is available on the internet. You might be able to find it. This is a recent paper which has estimated the kind of drain that has taken place between 1960 to 2017. And they say in all from the poorer countries or developing countries, which is called the Global South to the Global North, which is the developed world, a total of $62 trillion has been taken away. And these are $20-11. If you calculate that in today's $20-22 value, that is more than $77 trillion worth of value which has been transferred to the developed world from the developing world through these unequal exchange systems of international capital. The biggest loser here and mind you, China has actually gained as well at the cost of other developing countries from this international exchange and also it has had huge tariff barriers. It has a controlled economy despite that the maximum amount of money that has gone out, value that has gone out back is $19 trillion has gone from China alone. In today's prices that is $23 trillion. What about India? From India, the value of drain is about $3.4 trillion more than our current GDP. This is in $20-11 and in $20-22 that is $4.2 trillion, nearly 80% more than our GDP and mind you, this is GDP calculated in market exchange rate dollars. If you calculated in PPP dollars as Hinkle and others have done, you will see that it is nearly 40% of the potential GDP that India produced, 40% of losses. Just imagine what that means in terms of lost savings, lost prosperity, lost per capita income. If that had come with us, it had stayed in India, then you would have seen a much stronger economy, much more stronger economy, much lower levels of poverty, much higher levels of industrialization in a country like India because of the lost capital and savings that has gone to the west. And mind you, this has not been a constant and steady process. As I told you, there were tariff barriers till sometime in the late 70s in many developing countries which were there and India of course was one of them as well, which protected domestic industry and made it difficult for global capital to take over these markets. What happened is that in the 1980s, finance capital brought in neoliberal economics which was brought in by Ronald Reagan in the US and Margaret Thatcher in the UK which is why they are called Thatcherism, Reaganomics, that's what we know them as. The current state, the current dominating economic policies across the world actually originate in these two leaders who implemented in their own countries but broadly, these are known as neoliberal policies which involve opening up each domestic economy, bringing down tariff barriers and opening up to international trade and to private capital because where the government controls, it's actually a little difficult to extract a plunder and drain wealth from poorer countries. From within two years in 1982, Indira Gandhi brought in the first level of liberalization, opening up and privatization through operation forward and then we know in 1991 the Rahman Mohan reforms or the Big Bang reforms technically which brought about massive opening up and gradually India essentially globalized, brought down tariffs and allowed foreign goods and foreign capital to flow in much more than it ever did and in that process what happened is that the drain increased and look at this graph that I'm putting out on the screen right now, this particular graph shows you how the drain has increased throughout the years and look at that particular point, from 1980 onwards it actually shoots up clearly neoliberal economics or globalization effectively created this condition through which it shot up, the drain actually shot up. Despite that, we're still told that liberalization, globalization, economic reforms these are great things for poor countries, this will make them rich. You see the data that it does not, it's the exact opposite. We know world inequality data also tells us the same thing. These are the great big lies of capitalism that we've been told and this is why we ourselves, our politicians, our bureaucrats, our thought leaders we ourselves are forcing upon ourselves a return to colonialism, imperialism without colonies.