British India: Railways and Democracy
Many say the railways were a positive product of British rule of India. Shashi Tharoor’s An Era of Darkness looks into this. In 1843, Governor General Lord Hardinge was at least honest when he said that the railways would be beneficial for the “commerce, government and military control of the country”. Look at how it was constructed. (1) The British government guaranteed 5% return on bonds (very high for that time) used to raise money to build the railways. And why not? After all, it was taxes on India that would be used to pay the interest, not British taxpayer money. (2) This created a perverse incentive for British companies laying the tracks in India. That 5% interest was on the principal, so the more money the company claimed it needed, the higher the interest payment. Thus, there was no incentive to optimize or reduce costs. The opposite was the case. Each mile in India thus cost £ 18,000. For comparison, a mile at the same time was costing just £ 2,000 in the US. ...