The virtuous spiral of Smithian growth: colonialism as a contradiction

As the world experiences a fourth industrial revolution - in Information Technology - we look back at how things turned out in the first Industrial Revolution, which began when Adam Smith was writing The Wealth of Nations. For the historical record, we draw on the recent study of Power and Progress by Daron Acemoglu and Simon Johnson, who describe how the benefits of innovation were – or were not - spread across society in Britain at that time. This paper focuses on the case of India under colonial rule, however, where two themes emerge. First, how the transfer of technology under the control of a private company – based in London and granted monopoly powers by the British government - was enough to stymie the ‘virtuous spiral of Smithian growth’ for a century or more. Second, how two centuries of colonial control also deprived the indigenous population of what Amartya Sen has claimed is the key insurance against famine - namely democratic accountability. The paper end with brief remarks on how industrial policy in India of today could help spread the benefits of the current IT revolution.