Vishal Thakare

Abstract

Market transactions and outcomes are neither governed by principles in economics nor structured by formal legal institutions. It is integrally associated and controlled by existing social institutions which form social structures as well as economic basis of accumulation. This continues to produce unequal outcomes with respect to different social groups in society. Growing literature in economics on identity and markets establishes the view that identity does play important role in achieving inclusive development which then contributes to equitable income distribution in the economy. Several identities like caste, race, language, religion etc. influence the functioning of market in different degrees.

In the Indian context, caste becomes integral part of the functioning of market and produces highly unequal outcomes leading to imperfections caused by caste identity. This paper attempts to reflect on the impact of deeply rooted informal institutions like caste in India on the functioning of the market institutions. Secondly it critically engages with the debate of ‘Dalit Capitalism’ in relation to social structure based on caste hierarchy in India. Finally it concludes with the remarks on relevance of capitalism in contemporary times for Dalits and suggests possible questions to be addressed if it is to be endorsed by them.

Key words: Market, Dalits, Identity, Institutions, Dalit Capitalism

Acknowledgement: I am grateful to our Prof. Martin for comments.

Introduction

Market transactions and outcomes are neither governed by principles in economics nor structured by formal legal institutions. It is integrally associated and controlled by existing social institutions which form social structures as well as economic basis of accumulation. This continues to produce unequal outcomes with respect to different social groups in society. In fact, economic understanding for investigating the Dalit¹ entrepreneurship gives the suggestion of an historical or cultural conditionedness and variability of the caste (in contemporary market economy) which applies even to the highest form of labor relationship, and theory of production itself.

The emergence of Dalit engagement with the ‘capital’ has gained very much attention over the last few years, especially when capitalism in India is gaining its momentum rapidly with the opening up of various opportunity structures in economic sphere which were historically denied to dalits, both in the public and the private sphere (Guru, 2012). The question of rising dalit entrepreneurs has been largely deliberated, contested in academia, media and several knowledge production spaces. But the question whether the emergence of the dalit millionaire really reflects the current status or conditions of dalits, if it is so, then to what extent it has really transformed the lives of dalits and other underprivileged communities at large remains unexplained.

The national conference of SC/ST entrepreneurs on ‘Dr. Ambedkar’s Thoughts and Ideas on Industrialization and Entrepreneurship’ held in September 2015 raises many questions. The message given in the conference implies many concerns for dalits as to whether they should embrace its version of ‘Dalit capitalism’, what DICCI² calls ‘Be Job Givers’, or continue their struggle for emancipatory ideals as advocated by Babasaheb Ambedkar³ and other organic Bahujan leaders. Does ‘Dalit Capitalism’ really enjoy legitimacy among larger dalit population or is it just an agenda driven by a few elites within dalits who enjoy disproportionate power and interest? This paper attempts to take an inquiry into dalit engagement with capital and assess its possibilities in the context of larger dalit welfare. The paper draws on how the interaction between different economic agents is shaped in imperfect situations constrained by social realities and structure and produces different outcomes leaving the market institution inefficient.

Castes, Dalits and Capital in India

Dalits historically have existed outside the opportunity structure of both institutionalized and community networks as a result of their lower position in the caste ladder. The ladder of caste which is based on hierarchy systematically grants privileges in accordance with the position of social group in the hierarchy. The political gains do not seemed to have substantially translated into economic gains. The existing literature implies the fact that growth of dalit entrepreneurship took off during the 1980s and more rigorously after 1990s. Though reforms of 90s contributed in rising economic inequalities, it provided to be important turning point in many ways and increased the visibility of dalit entrepreneurs significantly both in small and large scale enterprises. Dalit entrepreneurs have increasingly become visible over the last few year and carrying articles in the leading newspapers and media taking a note of the emergence of dalit capital. This movement of dalit capital have also invited attention of the state through institutional measures that facilitates and encourage entrepreneurs from disadvantaged communities with an objective reducing economic inequalities among various social groups.

The caste system was a systematic stratification based on caste hierarchy together with clear division of labour characterising ascribed profession to each caste. There was very little scope of flexibility in the system (Srinivas, 1962). It is argued that the affirmative provisions in the Indian constitution increased the visibility of Dalits in political affairs but whether it has translated into economic aspirations of majority remains to be explored which would require another paper to reflect on the disparities in assets and resource ownership among lower castes. The model of the state protectionism in the early years of independence managed to retain the structural base of the Caste; as power relations were structured around the caste lines and restricted mobility of dalits in economic life and provided incentives to the social groups situated at the top of hierarchy and left majority of lower castes as wage labourer rather than owners or capitalist. Dalits still shares the large part of work force in India as they were barred from accumulation of wealth in given social structure. Studies on assets ownership (Thorat & Newman, 2007) implies underrepresentation and vulnerable situation of Dalits as opposed to other dominant caste groups and subsequently advances latent view that the market has potential and some limitations to eliminate or blur discrimination as it works on the principles of maximizing individual utility. The emergence of Dalit entrepreneurs, though contested, germed hope for both, an emancipation of Dalits as well as revising empirical economic understanding of contemporary market economy. Additionally, Dalit entrepreneurship opens up possibilities for what Schumpeter (1942) calls “the competition that counts for the new commodities, the new technology and the new source of supply.

The affirmative policies enshrined in the constitution provided access to capital and other support. Though affirmative policies aimed at eradicating poverty and inequalities among Scheduled Caste (Dalit) brought about considerable hope and improved access to capital and other inputs required, it has not been able to eliminate imperfect, segmented and monopolistic divisions in factor market which are general characteristics of institutions that reduces uncertainty. Resultantly, labour and capital suffer from structural asymmetries institutional failure and caste despite higher returns in alternative strategies and spurs malfunctioning of the market [Akerlof 1976; Scoville 1991; Ambedkar 1936 and 1987; Thorat and Newman 2010]. The policies pursued by the government do not seem to function effectively and address the dynamics of social settings and market outcomes. So there is mismatch between the policy and realities, resulting into higher inequalities and wealth concentration among certain social groups.

Attempts to quantify barriers to entrepreneurship (De Soto, 1989) have been made but it does not focus on the larger marginalized groups in society. Besides regulatory framework, the existence of structural social barriers, both pre market and post market, deters the entry of majority of Dalits as wage labourer and producers. Whether eliminating regulatory barriers helps marginalized groups requires separate enquiry. In case of India, social positioning of individuals determines his or her access to the occupational choices and resultantly even in the less regulatory environment certain social groups are left out of from the means of production.

There have been large shifts in the pattern of economic life, both away from and within the villages. There has been a considerable increase in (mostly) circular migration to distant cities to work with nearly half of dalit households in the eastern block having a member in the cities. In the villages, dalits have shifted into professions, as tailors, masons, and drivers, and into businesses, as grocers or paan shop owners. Agricultural relations have changed such that almost no dalits participate in bonded economic ties, such as halwaha, and fewer dalits even perform agricultural labour on lands owned by upper castes. Dalits now are much more likely to contract in factors such as tractors or land from high-caste groups than sell their labour to them.

Dalit Capitalism and Some Questions

Proponents of ‘Dalit Capitalism’ argue that engagement with capital, or what they call ‘Dalit Capitalism’, will make dalits better off and enhance their economic well-being and make them less dependent on upper castes for employment. It aims to emancipate them from the shackles of poverty and as wage labourers of upper castes and intends to prepare them to become potential capitalists who in turn will employ other dalits. And for this, there have been organised attempts by organisation like DICCI, Dalit Indian Chamber of Commerce and Industry on many fronts. This envisioned ‘Dalit Capitalism’ conceptualized by a ‘few’ needs to answer a few questions. First, how this class consciousness of the dalit capitalist will replace ‘caste consciousness’ of the upper caste capitalist? Even if a dalit succeeds in accumulating capital, his relative positioning in the Indian society as ‘Dalit’ doesn’t change and he is still treated as Dalit, the only difference is it makes him a ‘Dalit Millionaire’. Second, would improvement in material assets or wealth of dalits ensure well-being of dalits in public life or society? Third, would it really contribute to larger welfare of entire dalit population or simply of a few people in the dalit community? How does it plan to engage with gender relations within dalit community? To find answers to these questions, it is necessary to understand capital and labour in relation to caste in India.

Caste Institution and Labour Market

Some institutions are contradictory to the goals of other institutions with which it is integrated; an institutional logic in each society leads institutions to coalesce into a complex social configuration. This occurs because the institutions are embedded in a culture in which their logics are symbolically grounded, organisationally structured, technically and materially constrained, and politically defended. The institutional configuration usually exhibits some degree of adaptability to new challenges, but continues to evolve within an existing style. But under new circumstances, these institutional configurations might be exposed to sharp historical limits as to what they may or may not do (Friedland and Alford, 1991). Some regards this coalescing of institutions as social system of production while some label it reproduction of social relations.

As North suggests, “Institutions reduce uncertainties by not only providing a structure to everyday life but also guide to human interaction in specific way. It involves the constraints that human beings devise to shape human interaction both formal and informal ways. Both of these evolve over a period of time and plays crucial role in determining the performance of economy in general”. Similarly, caste as a social institution has evolved dramatically over a period of time and closely linked to social and economic relations between the castes resulting into unequal distribution of resources and incentives.

Labour is integral to the capitalist economy which cannot be imagined without it. Caste system is closely integrated with the division of labour and consequently division of labourer poses many constraints to the organisation of labour both in organized and unorganised forms of production. Labour in the modern economy requires a specific set of skills and capacities to claim well paid white collar jobs and other skilled jobs in organised form of production. Individuals with high skills produce high value added commodities and services while individuals with fewer amounts of skills are most likely to be engaged in low value added production and services. The white collar sector seems to be highly dominated and regulated by the so-called dominant castes in the social hierarchy of India. This embeddedness of social identities to economic structures and institutions results in unequal and highly unjust outcomes and deprives opportunities and benefits to disadvantaged groups’ viz. dalits in the hierarchy. It is clearly visible among dalits because of denial of their entry in key opportunity structures and institutions aimed towards developing various capacities and highly skilled human capital producing higher productive outcomes, in the past. The present situation of Dalits in Indian economic scenario is a reflection of unevenness and highly skewed distribution of assets and means of production as a result of the caste system (Thorat, S & Neuman, K.S, 2012).

It is important to understand the dynamics of human capital formation process in India. This process is very closely integrated into social structure based on institution of caste. This institution of castes continue to be dominant determinant in deciding the fate of persons born into lower castes, who were historically known as untouchables and was outside the fold of Hindu Verna System. Their social positioning in the society was extremely low and any individual or group breaching the rules of castes were to be punished with the strong sanction mechanism established by the system. Ambedkar (1936) points out in Annihilation of Caste, “A man’s power is dependent upon 1) physical heredity 2) social inheritance or endowment in the form of parental care, education, accumulation of scientific knowledge, which enables individual to be more efficient than the savage, and finally 3) on his own efforts”.

It is important to note here that individual efforts come third and the first two factors become more important in order to be able to compete in the market. The fundamental principles of demand and supply of the market is violated in Indian labour market as the very process of human capital formation, through imparting necessary skills through education and providing access to spaces where the individual can enhance their skills, gets fractured in the Indian experience as a result of caste. In the socially rigid hierarchical system based on caste in India, the functioning of the labour market is remarkably influenced by informal ascribed characteristics like caste, ethnicity, sex which play a critical role for acquiring essential skills like education, occupation or behaviour patterns; this produces unequal market outcomes and undermines the role of formal institutions that exists to eliminate all the imperfections in the market caused by tastes and social identities. Consequently, the assumption that market undermines identities is proven wrong in the Indian reality and caste becomes crucial informal institution that determines the functioning of market institution.

Dalits occupy a different place in production chain and are found to be at the bottom of the ladder characterizing low productivity, survival activities etc. As a result, entrepreneurship for social mobility remains an unattained dream in India. Majority of dalits today continue to live on subsistence wages and are found working in informal labour market arrangements, both in the rural and urban areas (Deshpande A, Sharma S :2013). Skill difference between SC/ST employees leads them to doing unskilled jobs in construction and other high labour intensive industries as opposed to the higher castes who occupy skilled jobs at production sites. Their dependency for survival on upper castes is more visible in rural area and invisible in urban regions. Due to discrimination faced in labour markets despite presence of preventive institutional arrangements and lack of necessary skills to enter into so-called white collar employment, dalits secure self-employment as a route to escape from poverty and see it as an alternative to wage employment. This leads them into setting up of small ventures such as street vendors; tea stalls etc. petty enterprises or any self-employed activity which is unsustainable and risky in terms of job security. Even the sectorial pattern of businesses that dalits are involved in remains considerably unchanged with some exceptions and continues to be driven by caste-gender configurations. Their association with traditional stigmatizing occupations which were predominantly caste based (leather work) continue to exist, though it has declined, it exists in different forms. In this way, caste institution reinvents itself into different form and agents involved in the process ensures it as they have high possibility to benefit from it.

The surplus produced with the help of labourers, a significant section of whom are dalits, accrues to the owners, mainly upper castes. Similarly, dalits who become capitalists by exploiting the labour power of their own caste mates, allowing their entry into a wealthier class, leaving their own people in the same labouring caste/class. Dalit entrepreneurs who advocate capitalism find it difficult to get business opportunities with non-dalit business counterparts and they tend to depend on their networks that are engaged in low value added production. Knowledge intensive production systems are dominated by upper castes and dalits serve only as wage labourers as a result of their entry into institutions of higher education, in these production structures.

Market and Dalits

The functioning of market varies considerably with the society characterized by different institutions. In the societies where informal social structure is dominant, the institutional arrangement that attempts to enforce enabling conditions for the operation of market remains ineffective and perpetuate the dominant older forms of production and accumulation. Many of the writings suggests that arrival of competitive market and its inherent feature of creative destruction enabled entry of disadvantaged social groups like lower castes into various occupations that go beyond their traditional caste occupations and provided them chances to exploit their skills in the competitive market.

Modern societies are characterized by social distinction based on accumulation and consumption of resources. This belief system is firmly rooted in society when actions that confirm one’s status in society is repeated over a period of time eventually transforming social relations by replacing the new symbolic norms that determine one’s status in the society. The ‘ascribed’ status provides many privileges to the social groups situated in the advantaged positions and chances of upward mobility to the groups at disadvantaged positions.

Market gives rise to spontaneous identities. Group identity matters in determining the nature of market outcomes (Akerlof, 2000). Market processes presupposes the existence of caste and produces outcomes that are economically unjust. Growing literature on market and discrimination imply that certain individuals or groups having particular characteristics based on race, caste, gender and sexual orientation are treated differently and are denied opportunities to contribute efficiently to production (Basu, 2015). The neo-classical school of economics views caste as a pre-modern social identity that discourages competition and believes the markets will undermine these stagnant identities which in turn will ensure equilibrium in the market. New institutional economics though does recognize the role of informal institutions – religion, norms, customs, traditions etc. historical evidence seems to suggest the imperative of impersonal/formal institutions for lowering transaction costs and hence promoting competition, which in turn can lead to growth.

The fundamental assumption that the market relies on is that every individual is ‘rational’ i.e. unbiased and without any prejudice while interacting or transacting with others and this enables equilibrium and ‘efficiency’ output of highest level. To apply this logic market in India, where every individual carries his social identity such as caste first, and then identifies his counterparts consciously, based on ‘caste consciousness’, to transact business, in most cases. So the principle of rationality which forms the basis of market interactions is violated when it comes to productivity which does not reach its equilibrium, considered the marker of ideal functioning of any market. Resultantly transaction costs for lower caste individuals become more as opposed to the upper castes and acts as a detrimental factor in the functioning of market. For example, there is high prevalence of rent seeking in the administration which results in corruptive practices. In order to avail opportunities, upper caste pays relatively less as bribe while lower caste pays more to avail the same opportunity. This micro perspective implies dysfunctioning of market with regard to various social identities though it seems to be functioning in relation to different identities.

Capital, Caste and Accumulation:

Capital does not discriminate individuals along their identities; it is the individuals who (mostly from dominant groups in society), having accumulated capital over generations by exploiting labour and other means of production, that appropriate and acquire the dominant role in societies. Similar is the case with India, the Varna system enabled Vaishya⁴ community, commonly known as Baniya, with trading as their primary occupation, to govern the process of accumulation. While dalits were far away from this process of accumulation and were enslaved by these dominant castes for a long period of time.

It is the promulgation of the constitution and provision for elimination of untouchability enabled the entry of Dalits into various opportunity structures particularly in political and administration and provided access to key areas denied to them in past. This exposure to power structures and opportunity to experience it closely generated hope for capital accumulation which would never be imagined by leaders like Babasaheb Ambedkar⁵. He strongly believed in acquiring and consolidating political power which he considered first key to emancipate dalits from all forms of social odds. Dalits failed to consolidate political power after his death leading to split into many groups which reduced their political significance at the national level and provided opportunity for other national political parties to appropriate Ambedkar and to assimilate dalits for narrow political gains.

The access to capital for dalits is multi-layered and exclusionary in its nature. Dalits are largely dependent on various social assistance programmes of the government. For this assistance they are required to open accounts in banks now, and this is being portrayed as improved ‘access to capital. The additional layer of exclusion becomes evident when the dalit formally approaches these financial institutions to set up a business or an industrial venture and expresses his/ her wish to start production with a view to generate surplus. These institutions are dominated by upper castes and perceive dalits as incapable of doing business. They even go to the extent of demoralizing the budding entrepreneur and create multiple constraints for the dalit person to access credit. In contrast, upper castes enjoy privileged social or business networks which are established over a long period of time and thus easily access the capital required in pursuit of surplus (Prakash , 2014).

These institutions contribute in spreading ‘learned helplessness’ which potentially decreases the learning ability of an individual in the event of discrimination by his or her peers (Elmslie and Sedo, 1996). As a result of this, dalits tend to remain behind, both at the group level and the individual level, which in turn constrain human capital formation. This cumulative disadvantage produced through several processes of exclusion force dalits into further marginalisation and discourages their desire to become a part of the system.

Market as a Alternative for Dalits?

The defence of dalit capitalism rests on viewing dalits as employers not employees – this is based on the assumption that it will provide equal opportunities and space for prosperity. Caste institution is socializing agency that instils a particular set of norms or attitudes in various informal ways. A person belonging to the upper caste in the hierarchy is more likely to trade with identical social group by virtue of their close association with the caste group. Capitalism by its nature tends to undermine efforts to address the larger social question of equal access to market and non-market systems. It systematically sets the rules of social relations between different groups in society and reproduces hierarchy based on material wealth. This system primarily focuses on individual gains and privileges the notion of ‘private’ at the cost of larger social gains.

As Gopal Guru rightly puts it, “Prescription of capitalism as the ideal social order seriously and continuously misleads people into ignoring the inconsistency between the new truth (Dalit millionaires) and the ontological truth that reflects perpetuation and deepening of wretchedness among dalits”

Caste is a important element that conditions the functioning of Indian market outcomes. Caste relations are not exogenously given but they have evolved over a period of time and imposed multiple constraints on individuals located at the lower end of hierarchy. The gravity of these constraints varies with the rank of social groups in the caste hierarchy. The one situated at lowest end viz. mostly Dalits or Scheduled Castes officially, are less likely to benefit from market institutions. These imperfections arise due to the social rigidities that constrain their ability to participate in the market to achieve equilibrium. Therefore, to understand the functioning of market institutions in India requires consideration of social relations which emanates from historical legacy and dominant institution of caste. There is an ample amount of research that has shown underperformance of lower caste group in market, particularly with regard to assets ownership, labour market participation and imperfect competition as a result of caste.

Conclusion

Markets existence requires specific conditions to achieve its efficient outcomes. A society deeply engrained with informal institutions such as caste in India not only affect market outcomes but perpetuate existing structural inequalities and to some extent even make it worse. Thus endorsement to the capitalist system can prove as major risk for a majority of dalits and it has bigger costs than benefits for the larger dalit community. Imperfections caused by rigid social structure will benefit only certain segment of lower castes and larger question of redistribution be undermined in the process. Social democracy must be a precondition for capitalism to exist. In the absence of social democracy, imagining ‘Dalit capitalism’ would mean subscribing to the market economy that tends to undermine larger questions of redistribution and believes in self-regulated mechanism which most of the time in the hands of elite in highly segregated societies.

End Notes

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