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In 1800, British India was emphatically a multi-region economy, with political and physical boundaries separating the different parts. The British were on the eve of bringing the whole of India (except Sind and the kingdom of Ranjit Singh in the North-West) under their political control. But political control did not at once bring a real unification of currency or banking that serviced long-distance or external trade, let alone the network of cash or credit transactions that kept the locally centred economic activities going.

Discussions regarding the degree of deindustrialization in 19th century India have usually been based upon "impressionistic observations or aprioristic arguments." The process of deindustrialization is demonstrated through an extension of the arguments of J. Hicks (A THEORY OF ECONOMIC HISTORY, Oxford, England: Clarendon Press, 1969) & D. Ricardo, (THE WORKS AND CORRESPONDENCE OF DAVID RICARDO, P. Sraffa & M. H. Dobb, Ed's, Cambridge, England: Cambridge U Press, 1966) & a comparison of data on employment in secondary industry at the beginning & end of the 19th century in the state of Bihar. The most significant empirical evidence is the decline of traditional cotton weaving & spinning. Contradictions in the ideal & actual models of capitalism in it's international aspect surface in the "backwash effects" of advanced industrialized countries. These effects include industrial employment, investment, & distribution of income, which are correlated with the retardation of underdeveloped countries' industrialization. Development which proceeds by localized economic activities, distributing incomes & opportunities equally & controlling these "backwash" effects on other regions, offers alternatives for the construction of a new paradigm. 2 Tables. Modified HA.