Caste and the world of business

Review article
Harish Damodaran, India’s New Capitalists: Caste, Business and Industry in a Modern Nation, Permanent Black in association with the New India Foundation, 2008, Delhi, pp xxiii + 341, Rs 695.

To call this work a fascinating collage of business biographies would best describe the experience of reading it, though perhaps at the risk of undermining the rigour with which its material has been assembled. Quite in contrast to the unfettered subjectivity of a collage, Harish Damodaran has written this book with rigorous attention to the dimension of caste (or more precisely, jati) as a central determinant of entrepreneurial behaviour and business success in India.

Entrepreneurs have been viewed as the dynamic element in economic processes, as the rebels against conformity, who (as Joseph Schumpeter puts it) break the dull rhythms of the “circular flow” of the economy – or the reproduction from day-to-day of stagnant human horizons – and open up limitlessly expanding possibilities. Missing perhaps in this view of the entrepreneur as an epic hero, is a vision of the individual innovator within a larger network of social and cultural ties.

Caste in India, though often considered a residue of the pre-modern economy, has proved an inescapable part of all business histories, indeed, even perhaps a decisive element in modern entrepreneurial success. Social networks are key, simply because business is all about building and sustaining commodity exchange networks and industry is all about establishing productivity enhancing techniques at vital nodes in these networks. To put it in terms of the basic vocabulary of the economist, caste networks aid entrepreneurship by reducing “transaction costs”.

Yet approaches to business history have suffered from certain serious deficiencies, which Damodaran cites as the principal motivation for his work. There has been for one thing, a tendency to remain confined to “traditional” business communities without an understanding of how these traditions are continually being invented and reinvented. This in turn leads to a lack of contemporary focus. Several traditional merchant families, having made the transition to industry and riches beyond imagination, have since fallen away into obscurity. And despite all the continuing prominence of older trading communities in the Indian entrepreneurial landscape, there are new entrants of no recognisable business pedigree who are leading the charge into new frontiers. In terms of geographical focus, the south of the country again, has tended to fall outside the gaze of the conventional business historian.

For these reasons, Damodaran does not dwell at length on the so-called “old merchant communities”, which he identifies as the Banias and Jains of Gujarat and north India, the Marwaris, Parsis, Nattukottai Chettiars, and the Lohanas and Bhatias of the Kutch-Kathiawar-Sindh belt. After a quick consideration of the “general trajectories” of entrepreneurial growth within these communities, which brings the narrative right up to contemporary times, Damodaran turns his attention to the communities less studied: Brahmins and Khatris, Kammas and Reddys, Naidus and Gounders, Nadars and Ezhavas, Patidars and Marathas. He documents the presence of entrepreneurial energy in all these quarters and then turns his attention to explaining an absence. The northern farming communities – in particular, the Jats – he points out, have yet to manifest any tendency to make the transition from agrarian dynamism to industry. Damodaran concludes, a little implausibly since his entire treatment has dealt with “minorities”, with a “note on the minorities”, unable to resist the temptation of using a politicised euphemism in referring to the Muslims. Here again, he is dealing with an absence – or rather, a marginal presence that was splintered and scattered with the partition of 1947.

Damodaran shows how extended kinship networks have concretely worked in ensuring business success. The Nadars of southern Tamilnadu promoted a bank entirely through small capital subscriptions from their caste folk, providing their business ventures with an effective bulwark against fthe uncertainties of finance; a Gounder family of Coimbatore, newly arrived in the sugar industry, overcame a stiff working capital bottleneck by effecitvely persuading clansmen to part with sugarcane on an extended line of credit, a business deal that would have been unthinkable outside of strong and deep community bonds. Then again, Damodaran also demonstrates with a number of illustrations, how globalisation and the stockmarket, which have given a fresh impetus to the mobility of capital and loosened its anchorage in specific social and cultural milieus, has led to a weakening of these kinship ties in business.

Summing up the experiences of these diverse social aggregates, Damodaran identifies three kinds of trajectories of business success. “Bazaar to factory” sums up the path taken by the traditional merchant communities, which are really not the primary focus of this book. Rather, what this book is more concerned with, are the “office to factory” route, which brought the service-oriented and “scribal” castes – Brahmins, Khatris, Kayasths, the Bengali Bhadralok -- into the portals of industry; and the “farm to factory” trajectory represented by the Naidus, Gounders, Patidars, Marathas and Nadars.

Considering the mutability of tradition, it could also be argued that these perhaps are not three distinct trajectories, but three variants of the same trajectory, though displaced in time. That argument perhaps is especially apt when it comes to the “office to factory” trajectory, since many of the traditional merchant communities identified by Damodaran, began their industrial empires as minor functionaries in the early colonial trade in opium, raw cotton and indigo. As these networks of commodity exchange spread out through the south Asian landmass and gradually acquired diversity and depth, greater numbers were drawn into it, both as movers and shakers, and as hapless victims. New identities were forged, such as capitalist and worker, even as several old identities, such as craftsman and subsistence peasant, were undone.

India’s industrial growth was derivative of the dynamics of colonialism, rather than autonomous. The national bourgeoisie that grew out of the process remained segmented, divided into numerous endogamous groups. This book ends with an affirmation of the value of diversity. When democratic political contestation and spontaneous economic change, contribute towards a socially diverse middle class, the likely further outcome is a socially diverse entrepreneurial class. Diversity in turn, becomes an assurance of solidarity. Though the country has in its southern and western regions, achieved a semblance of social diversity, large sections still remain excluded. And in the vast Hindi heartland and the east, even the semblance has not been achieved.

The last two decades of economic liberalisation have seemingly created conditions for those lower in the hierarchy of business and industry to migrate upwards into the interstices of the capitalist system and acquire leadership positions. Yet there has also been in this time, a vast increase of inequalities of income and wealth.

There is currently underway, an impassioned debate among the Dalits – a heterogeneous social group that shares the common attribute of exclusion under the ritual order – on globalisation as a possible antidote to all their inherited debilities. That argument remains inconclusive. And while the jury remains out, material realities are ensuring that the answer is not left to spontaneous forces of entrepreneurship and economic change. Politics, it is increasingly recognised, will now drive the agenda.