February 27, 2020
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Whole Lot Of Business Sense

A major step forward in the scholarship on capitalist development in India

Whole Lot Of Business Sense
India's New Capitalists: Caste, Business And Industry In A Modern Nation
By Harish Damodaran
Permanent Black Pages: 362; Rs. 695
The "Protestant ethic", claimed Max Weber, promoted the "spirit of capitalism" and wrought change in feudal Europe. It is "animal spirits" that induce "a spontaneous urge to action rather than inaction" and thereby fuel enterprise, said John Maynard Keynes. For 200 years, social scientists have tried hard to explain why and how agrarian societies transform into industrial nations. When, how and why do merchants, traders, moneylenders and landlords become industrial capitalists?

There has been much theorising and even more empirical recording. The study of capitalist industrialisation in India is, however, still in its infancy. You get hagiographical accounts of the "captains" of business, you get dull historical detailing or sociological hypothesising, but very little hard facts about the social origins of business enterprise in India.

So, full marks to Harish Damodaran for a book that those interested in the dynamics of capitalist development in India must read. It’s not just good journalism but the work of a profoundly talented observer of social change in India.

Everyone complains about Indian politics getting stuck in the caste groove. Indian business was there before. Caste networks helped create trust, an essential lubricant of business. Damodaran doesn’t discuss the whys and wherefores of caste in business. He has stuck to digging out facts and showing us how different castes across the country made the transition from traditional economic activity to trade and industry.

Interestingly, vegetarian Indians—the Jains, Marwaris and Brahmins—exhibited "animal spirits" before the other castes caught up. They and the Parsis dominated pre-Independence business enterprise. After Independence came the Chettiars, Khatris, Kammas, Reddys, Rajus, Jats and Marathas, to name some of the other entrepreneurial castes.

Damodaran doesn’t waste time trying to justify the caste lens. Nor does he get diverted by the question "Is caste class?" He believes capitalism in India has developed through what he calls "business communities" in which ethnic and other networks facilitate commercial activity. In elaborating the caste dynamics of capitalist development, Damodaran’s taken scholarship in the area several steps forward. It would have been fascinating to see how Damodaran’s grandfather, the Communist leader and Marxist theoretician E.M.S. Namboodiripad, would have viewed young Harish’s work!

Damodaran identifies three sources of industrial capitalism in India—mercantile capital ("bazaar-to-factory"); professionals ("office-to-factory") and agrarian capital ("farm-to-factory"). My own work on the development of capitalism in Andhra Pradesh, dating back to the early ’80s, showed a fourth route—public works-to-factory, the so-called "contractor class" who accumulate capital from public works. There are many prominent examples of businessmen who have milked the public exchequer, with help from politicians in office, to become "dynamic entrepreneurs".

Damodaran’s book corrects one imbalance in existing literature on business enterprise in India—the regional one. Most of existing work focuses mainly on Marwari, Jain, Parsi and Punjabi enterprise. There is very little published work on South Indian business, apart from the work of economic historians. Damodaran’s chapters on South Indian castes in business, and his brief ‘Note on Minorities’ fill this gap.

The most important challenge Damodaran poses to his distinguished grandfather’s intellectual and political legacy is not his focus on caste as a factor in the growth of new enterprise. Rather, it is his unequivocal demonstration that so many of the first-generation business groups across the country find their origin in the post-Green Revolution agrarian transformation of rural India.

The old theoretical formulations regarding India’s inability to make the transition from feudalism to capitalism because of the semi-feudal nature of agrarian relations and the constraints imposed by backwardness fly out of the window. That may be true for parts of eastern and northern India, but, as Damodaran shows, in much of southern, western and northwestern India, farmers have become industrialists. The dynamics of Indian agriculture facilitated that transition, with help from the government.

I am particularly delighted to see Damodaran’s rich detailing of this process because some of us had in fact argued even in the ’80s that a new dynamism was visible in the countryside in places like coastal Andhra, southern Tamil Nadu, western Maharashtra and so on, where a new business class was in the making. It is not often that one reads a book you wish you had written. I certainly wish I had Damodaran’s skill, energy and intellect to produce such a well-researched and readable book.

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