The Bleak Reality of India’s Capitalist Development

Review of Elisabetta Basile's important monograph: "Capitalist development in India's informal economy" (London and New York: Routledge, 2013)

One of the features characterising the massive reshaping of the world which is presently taking places under our eyes is India’s impressive economic ascent. Supposedly due to the launch of the new neoliberal economic policy in the summer of 1991, by the beginning of the new century it had become so impressive that forecasts that projected the Indian economy as poised to conquer one of the first positions worldwide by 2050 became fashionable. However, these enthusiastic appraisals could not conceal – at least, not completely – that the conspicuous fruits of this impressively rapid growth were largely being garnered by the crorepatis, namely the very rich, and the middle class (that is, a small minority of the population).

What was happening has been decried by an unrepentant Marxist, Professor Prabhat Patnaik, as the coming into being of “two nations”. Of course not the two nations – the Hindu and the Muslim – of which Mohammed Ali Jinnah spoke in the 1940s, but the nation of the rich and the nation of the poor. The former thinks of itself as part of the First World, nay, as an extension of the United States; the latter seems to be forever mired in the unchanging ‘Third World’ of old.

However polemically brilliant, Patnaik’s characterisation can lead to a misleading vision of what is happening in India. In fact, it strengthens the idea that a part of the Indian economy is quickly progressing because (neoliberal) capitalism has taken hold of it, whereas the remainder – where neoliberalism has not struck roots – is stuck in an unchanging, pre-capitalist mode of production, still dominated by non-market features. Reality, however, seems to be different: in India the two nations – the rich and the poor – are the twin products of the peculiar form of capitalism which has flourished in the post-independence years. Accordingly, any idea that capitalist development will result in the progressive universalisation of wealth – or, to make use of Indian political jargon, any idea that the present type of growth might be inclusive – is improbable and far-fetched.

Certainly the closely argued, methodologically innovative, and excellently researched monograph under review is a clear-cut and exhaustive demonstration of what has just been stated. The author does not face the problem of what Patnaik calls the two nations directly, nor does she focus her attention on the neoliberal reforms in the early 1990s. Rather she centres her analysis on a slice – admittedly a big one – of the Indian economy, namely “Provincial India”, which is made up of “small towns and villages”, and starts her examination from the “deep impact on economy and society” (1) caused by the Green Revolution (launched in the mid-1960s). Provincial India, after all, is where the vast majority of India’s population lives and works: realising what is happening there is crucial to a proper understanding of Indian reality.

In Basile’s analysis, this reality is characterised by the fact that India’s provincial economy and society, far from being static, are flexible and dynamic, and dominated by the unmistakable presence of capitalism. However, it is a form of capitalism of which social regulations and non-market features, supposedly bound to be dissolved by capitalism, are a permanent and integral part. Consequently, flexibility and a high rate of production entail heavy social costs, represented by the proliferation of “multiple modes of inequality – class, gender, religion and ethnicity – which add to economic inequality” (2). In fact, the Indian way to capitalism is “markedly biased against labour” and imprisons the rural worker in a precarious life, marked by “indecent working conditions” (196).

In Basile’s analysis, this situation is the direct product of two main characteristics: the first is informality; the second is the crucial role of the caste system as social regulator.

The categorisation of informality has changed in time, but is nowadays defined as including “all employment arrangements in which workers live and work in conditions of unregistered subordination, even when the employment relationships are ambiguous, disguised and not clearly defined” (56). Accordingly, whereas the bulk of the informal workforce takes the form of self-employed workers, an integral part of it is made up of petty producers, who employ a low skilled labour force, mainly unpaid family labour, and make use of primitive technologies. Indeed, as pointed out by Basile, these petty producers are “pseudo-entrepreneurs” (189), with a contradictory class location and largely devoid of control over their own production.

Informal labour varies in the different rural and urban economic activities, but, as a rule, represents the huge majority of the workforce (tables at 59-65). Equally important, it is crucial to the success of the Indian brand of capitalism, contributing nearly 50 percent of India’s GDP.

If informal labour contributes decisively to making Indian capitalism a success story, the fact remains that, as hinted above, its lot is indecent working conditions, which cause “a high rate of occupational diseases and accidents”. Moreover “precarious living standards are often associated with precarious conditions at work”, and both working and living standards “can deteriorate further owing to long working hours and the lack of weekly holidays” (69). As remarked by Basile: “Far from improving living and working standards, capitalist development in Provincial India is leading to a widespread downgrading of the rural labour force” (196).

The fact that this is happening without any widespread and sustained forms of opposition is made possible by the second main characteristic of the Indian brand of capitalism, namely the crucial role of the caste system as social regulator. In Basile’s analysis, caste is both an institution and an ideology: as an ideology, it is a system of values and beliefs espousing a non-egalitarian vision of the world and influencing human intercourse accordingly; as an institution, “when it transforms from ideas into social norms” (100), caste ensures that “the intellectual and moral leadership of the elites is ‘spontaneously’ accepted through shared values and ideas, supporting the hegemony of the dominant classes over the subaltern ones with the use of caste idioms and symbols” (100-1). In practice, this happens through the creation of a dense social web of caste-based civil associations (and sometimes political parties), where the joining of the subordinate classes/castes, apparently on a voluntary basis, is in reality quasi-compulsory. Thus caste becomes the instrument by which “subaltern workers are led to accept the moral and intellectual leadership of capitalists, overlooking their [the subaltern workers’] class interests and in spite of their poor living and working conditions and their high levels of exploitation and self-exploitation” (101-2).

As in the case of informality, caste is not bound to wither away under the burning rays of modernity; rather, it is a permanent feature of the Indian brand of capitalism. In Basile’s words, it is “a necessary ‘impurity’ that supports a historically specific ‘variety’ of capitalism in which class and non-class relations intertwine” (195).

The above, briefly put, is the substance of Basile’s theses. These are expounded through an analysis organised in two parts: the first is the closely knit in-depth review of the relevant literature on the India made up of small towns and villages; the second is the testing of the main conclusions drawn from it and their refinement against the empirical study of the market city of Arni in Tamil Nadu. Both the review of the relevant literature – which is an authentic tour de force – and the results of the empirical study of Arni (to which, in the past, Basile has made her own contribution) are analysed in the light of an innovative and powerful ‘eclectic’ Marxist/Institutionalist analytical framework elaborated by the author. This makes the monograph under review not only a must for whoever is interested in the (bleak) reality of Indian development, but a crucially important addition to the panoply of methodological tools at the disposal of social scientists working on India.

The International Spectator: Italian Journal of International Affairs, Volume 49, Issue 2, 2014


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