Is caste an economic development vehicle?

S. Gurumurthy

Traditional caste, by reorienting itself, seems to be handling modernity well. It is modernity that appears clueless as to how to handle caste.

In his two articles in The Hindu (Jan. 8 and 9, 2009), Justice Markandey Katju has brilliantly articulated what was once the colonial — now, the modern — view on ‘caste.’ He asserts, like most do, that caste is a “social evil,” “divisive,” and “a curse” that must be ‘eradicated’ if India is “to prosper.” Yet he concedes that, despite its suspected racial origin, caste had done good to India by helping in work specialisation, which had made India an economic super power till CE 1700. But, he says, it is an old story, and the British advent has changed all that. Asking “could India have developed like North America and Europe had the British not come?” he answers: “there is no use crying over spilt milk.” He is now relieved that the evil of caste is being destroyed by technology, people’s struggles, and inter-caste marriages.

In sum, Justice Katju accepts the western anthropological view of Indian society. But setting out to validate the western view, the Dravidian and Dalit movements actually ended up repudiating it. For it is the very caste that such movements fought to snuff out that finally became the vehicle for their assertion, surprisingly proving the old saying, “vishasya visham oushadam,” that is, if caste were poison, it is its cure too. Justice Katju, like most scholars — social, economic and political — seems confused about how to handle the ’traditional’ caste in ’modern’ times. While they see it as an evil in politics, here is a different view of caste that brings out its positive role in market economics, that is, caste as ’modern’ development — yes, modern economic development — vehicle.

Popular Indian socio-economic discourse today seems to be not fully familiar with the emerging phenomenon of ‘social capital’ — an area of study where culture and economics confluence. Francis Fukuyama, who authored the first bible of globalisation (The End of History and the Last Man) and made individualism, the free market, and liberal democracy demigods, wrote his next book Trust in which, on rethinking, he captured culture as the “20 per cent missing element” of economics. As contrasted with individualism-dominated societies, he says, relation-based societies generate culturally defined social capital. Social capital is non-formal networking based on kinship within societies. The emerging view is that social capital expedites the socio-economic development process.

Fukuyama had missed out India, therefore caste, as India was not worth noticing when he wrote the book Trust. But contemporary writers and modern minds like Gurcharan Das and Swaminathan Ankilesaria Aiyar in India did not miss that out what Fukuyama had. They perceive caste as a potential engine of growth and development. Swaminathan Aiyar saw it as the social capital of India. That Justice Katju seems to be unaware of the empirical evidence of caste as a development vehicle in economics is evident from his remark that “a scientific study’ on caste ’is yet to be done.”

Caste is a very strong bond. While individuals are related by families, castes link the families. Castes transcended the local limits and networked the people across. This has prevented the disturbance that industrialism caused to neighbourhood societies in the West, resulting in unbridled individualism and acute atomisation. In independent India, a contradiction has developed between the individualism-centric Constitution and caste collectives. Caste-based politics has actually helped to harmonise this contradiction between the formal Constitution and the non-formal social architecture. In a sense, caste-based politics mediates between traditional society and the modern state in India. Yet it can still be argued that the caste element in politics is not desirable. But caste in economics is a positive drive of development. Read on.

The caste system, which was admittedly savvy with economics over millennia, has in modern times engaged the market in economics and democracy in politics to reinvent itself. It has become a great source of entrepreneurship. Studies show that the castes-based industrial clusters lead the nation’s industrial development. A UNIDO study (1997) shows that out of the 370 small scale industrial clusters and 2600 artisan-based clusters, which generated 70 per cent of India’s industrial output, 66 per cent of exports, and 40 per cent of employment, only 13 were government-sponsored. The rest had evolved out of the caste/community-based network.

Take the case of backward castes. The entrepreneurship generated by the Patel caste today dominates two-thirds of the global diamond trade. The Nadar caste runs over three-fourths of the retail trade, match works, and fireworks in Tamil Nadu. In Tirupur, Goundar caste entrepreneurs, 80 per cent of whom are not even matriculates, compete at the global level, exporting knitwear garments valued at over $2 billion. The World Development Report 2001 found that the social networking within the Goundar caste and the circulation of capital by trust had enabled Tirupur’s rise as a global knitwear hub. In Sankagiri and Namakkal in Tamil Nadu, Goundar caste entrepreneurs own the largest fleet of lorry, tanker, and tipper transport vehicles in the whole of India. Ninety per cent of them were farmers earlier and 20 per cent were just rearing cattle. The list is too long to be captured here.

An empirical study was conducted in some 25 caste-based industrial clusters in different places in India by a team of academics and professionals trained in modern business under the aegis of the Tamil Nadu Swadeshi Academic Council. It showed that whether it is the Jatavs of Agra and Kanpur, or the Nadars, Naidus, or Goundars of Tamil Nadu, or the Patels of Gujarat, or the artisan Ramgadiyas of Punjab, they have risen as competent entrepreneurs – many at the global level – mostly by leveraging on their kinship-based social capital. Most of them have had very little education. It is the community that has acted as the knowledge provider thorough kinship and social network.

More information on the caste-based growth model is available in the book Indian Models of Economy, Business and Management [Prentice-Hall of India 2008] by P. Kanagasabapathi who was part of the Swadeshi Academic Council team. A recent book by Harish Damodaran, India’s New Capitalists: Caste, Business, and Industry in a Modern Nation (Palmgrave Macmillan) also points to the evolution of caste as a development vehicle. A study of unregistered small and tiny enterprises by the National Sample Survey Organisation (NSSO) in 2005 showed that there were over 42 million such units, out of which 45 per cent were owned by backward castes, scheduled castes, and scheduled tribes. These 42 million units provided the largest employment outside agriculture, engaging 90 million hands, and growing at an annual rate 2.6 per cent during 1990-98. So caste is turning into social capital in the market economy, and emerging as an open air university for entrepreneurship.

To conclude, traditional caste, by reorienting itself, seems to be handling modernity well. It is modernity that appears clueless as to how to handle caste. The modern elites see caste as a political nuisance. But they seem to be unaware that its perceived nuisance in politics can be mitigated by promoting the economic potential of caste. Elite India’s dilemma about caste seems to be outdated.

(The writer is a political and economic commentator and a corporate consultant. His email id is >guru@gurumurthy.net )

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