Dispatch #87: Tocquevillean framework to understand caste & entrepreneurship in Tamil Nadu
In this dispatch, we will parse through the academic literature on the relationship between caste and ownership of enterprises in TN and explore how it is different from North India
In this post, I continue my enquiry into the economic transformation of Tamil Nadu with social transformation as a lens. A long-term economic transformation of any country, state or region depends upon several factors - superior infrastructure, government policies, increase in investment, laws that increase the ease of doing business, better health & education indicators etc. In Tamil Nadu, however, social transformation due to changes in caste structure has also played a dominant role. Ashutosh Varshney in his brilliant essay ‘Two banks of the same river? Social orders and entrepreneurialism in India’ explains:
One of the greatest differences between India’s North and South is that lower caste movements opposed to the Hindu caste hierarchy erupted in Southern India as early as the 1910s, and democratic politics - both movement and election-based - eroded the vertically organised caste system by the late 1960s. The erosion was not deep enough to liberate the Dalits. Still, it did lift the middle-ranking other backward castes (OBCs), thereby bringing down the political dominance of the upper castes. In contrast, caste hierarchies have come under intense pressure in parts of the North relatively recently.
Varshney explains this distinction from a Tocquevillean lens.
In 1831, political scientist Alexis de Tocqueville observed distinct levels of prosperity along the banks of the river Ohio. On his left, he saw Kentucky where the economic dynamism was lacklustre, while Ohio on his right was relatively more prosperous. He attributed the lack of economic activity in Kentucky to slavery which vertically segregated the society and prevented all forms of human ingenuity, creativity and independent spiritedness which are essentially for commerce and enterprise. Similarly, Varshney argues that rigid caste structures in the North and undermining a vertical social order in the South (especially in TN) due to social movements have ‘unleashed entrepreneurial energies’ which resulted in the region’s economic transformation. Within the Indian caste system, the occupation and the caste of an individual have always been closely interlinked, therefore entrepreneurship was confined to a few castes. In Tamil Nadu, the loosening of caste shackles due to social movements that mobilised castes, broke down the relationship between caste and business, thus bringing lower castes into entrepreneurship. In North India, such transformative movements have been rare, new and mostly coming from the political arena through electoral politics.
Satish Deshpande explains this ‘Dravidian’ model:
The central idea is that the anti-Brahmin movement – which developed into the Self-Respect Movement – became the site for the construction of an inclusive Dravidian identity that could build a “chain of equivalences” across various caste groups. This is what prevented the swift splintering of lower-caste alliances after initial successes in challenging upper-caste political power, as seen in states like Bihar. By articulating its demands in the language of dignity and self-respect, the Dravidian movement constructed a historic bloc: a broad coalition of disparate class-caste groups and communities. This enabled the movement to become hegemonic by fashioning a “Dravidian common sense,” a popular ideology that secured not just the consent but the active participation of the people. By avoiding the language of class and identifying the “Aryan-brahmin” as the enemy, the Dravidian movement created the space for a political formation that could simultaneously pursue capitalist growth and social-democratic welfare. The result is that today Tamil Nadu is a state that has the highest rate of urbanisation, one-fourth of all Dalit enterprises in the nation, the highest gross enrolment ratio in higher education (both overall and for Scheduled Castes), one of the highest rates for both poverty reduction and economic growth, and the highest share of renewable energy.
But why would a social order, determined by hierarchies, impede productivity and entrepreneurialism?
This can be answered in two ways.
In their 2021 paper ‘Culture, institutions and social equilibria: A framework’, Acemoglu and Robinson explain how culture impacts political institutions and economic outcomes. According to them, culture consists of several interconnected attributes like social hierarchy, identity, honour, customs and traditions, segregation and mixing between different groups etc. These attributes typically form combinations to form cultural configurations. These cultural configurations provide meaning to culture. For example, a culture based on attributes of social hierarchy based on the notions of purity and status in society based on occupation generates a caste-based society as in the case of India and the political institutions are also designed to reinforce this hierarchy and make access to public goods difficult for the individuals from lower castes.
The combinations of attributes are either dynamic or static. The static combinations are rigid and lead to a hardwired culture. In a hardwired culture, there is only one cultural configuration. This cultural configuration may lead to institutions that are extractive and restrictive. These institutions further impact (limit) the economic and social outcomes of individuals. Take a culture that gives primacy to notions of purity, hierarchy and subjugation of people doing menial jobs. This cultural configuration results in legitimising extractive institutions like caste. Belonging to a lower caste impedes economic outcomes since those individuals would never get opportunities. This cultural configuration (caste) may lead to a very different kind of politics, say politics of affirmative action, which could then lead to a whole range of different institutions and economic and social outcomes.
The second explanation comes from Charles Taylor who argued that social hierarchies that inhibit productivity and free thinking often come from a sense of honour rather than dignity. According to Taylor, the politics of dignity is based on the idea that all humans are equally worthy of respect. Perpetuating hierarchies and reserving honour for those sitting at higher pecking order, impedes all forms of political and economic expression.
These social hierarchies led to the differences in economic dynamism on both sides of the river Ohio. In the case of India, the 675-mile-long mountain range that divides north and south of India can be seen as our proverbial Ohio.
According to this article in Hindu, TN ranks one when it comes to OBC ownership of MSMEs. The article states:
As of March 31, 2022, the number of MSMEs owned by OBCs was 23.31 lakh units, out of a total of about 80.16 lakh units in the country. Of the OBC-owned units, around 41% are located in three States — Tamil Nadu (14.5%), Maharashtra (14.4%) and Rajasthan (12.4%), according to a perusal of the data furnished by the Office of the MSME Development Commissioner exclusively to The Hindu. The data was compiled on the basis of the units that have registered themselves with the authorities through the Udyam portal.
The state has the highest number of MSMEs that are owned by OBCs - 3,37,016. This translates to 39.4% of all 8.56 business units in the state. This percentage share is 10% points more than the national average.
The case of Nadars
The story of businesses in Tamil Nadu is the story of communities. The social transformation that led the Nadar community to move from the traditional occupation of toddy-tappers to dominate the business of chemicals, firecrackers and then information technology is ‘one of the most remarkable transformations in India’s caste history over the last 150 years’, argues Varshney. The social upward mobility movement of the community from the bottom of the pyramid to the upper echelons of businesses is a potent example of social transformation in Tamil Nadu.
Nadar community was essentially involved in collecting toddy by climbing the Palmyra trees. The sap from the tree was fermented to make an alcoholic beverage.
Varshney in the essay explains:
Some Nadars embraced Christianity in the middle of the twentieth century, responding - with hope and relief - to the attempts of Christian missionaries doing their religious work under British rule. By the end of the nineteenth century, through local trade and commerce, the Nadars developed a small middle class. In 1899, in Sivakasi - where the economic rise of Nadars was the highest - four years of violent confrontations between the Nadars and the higher castes began. Quite in contrast to such conditions a century and a half ago, the Nadars by now have expanded their commercial interests over a variety of sectors, including high-technology products. The greatest success story is that of Shiv Nadar, a billionaire and the founder and chairman of HCL, one of India’s most successful computer hardware companies.
Of several factors responsible for the economic transformation of the state, the flattening of caste hierarchies played a significant role.
Why didn't states like UP and Bihar witness similar social transformations?
The answer lies in the sequencing of the social and electoral mobilization and the churn that followed in North and South India.
Varshney concludes:
In the South, lower caste social organizations have historically been very significant. These organizations have emphasized not only affirmative action but also education and commercial activities. They did not rely entirely on the government to uplift their communities. For example, the apex social organization of the Nadars - Nadar Mahajan Sangam - is also among the largest educational organizations in Tamil Nadu, running schools, colleges, and institutes of engineering and medicine. Lower caste politics in Southern India moved from movement politics to electoral politics, in the North, lower caste politics has been almost entirely electoral. The Dalits of UP have no significant commercial or educational organizations.