WHEN CAPITALISM REDUCES INEQUALITY

August 3, 2014

The last few years have not been good for the cause of capitalism as a range of evils from rising inequality to environmental destruction have been laid at its door — often for good reason. Capitalism has been a wrenching force in human history – but for this very reason it has also been a revolutionary social force, weakening deeply entrenched social hierarchies. It is not simply coincidence that the capitalist era has also witnessed the gradual erosion of entrenched and grossly unequal social hierarchies, ranging from slavery to serfdom, feudalism to patriarchy.

The iron grip of the old social order was pried open by a range of forces – civil wars, revolutions, legal and constitutional changes, the rise of democracy and universal franchise. But it was also reshaped by technological and economic forces, in particular the industrial revolution and capitalism.

The corrosive effect of capitalism on social hierarchies has been unfolding in recent decades in India, one of the most hierarchical societies in the world. The deep social hierarchies of caste have been one of India’s most pernicious historical legacies which continue to hobble the country. And no group has borne the deadening burden of this history as much as Dalits – formerly known as “untouchables”. 

Over the last century, Dalits have sought to escape their predicament through multiple ways, ranging from religious conversion, linking themselves to anti-upper caste social movements, leveraging the promise of universal franchise in the Indian Constitution, supporting political parties professing an egalitarian ethos and even creating their own political parties. And they have sought mobility through the state itself, through affirmative action in education and public employment.

These combined efforts have surely made a difference and the relative position of Dalits in Indian society is a far cry from what it was at the time of Independence. Nonetheless, while a long road has been traveled, the journey is far from complete. Social hierarchies are extremely resilient and weakening them either requires bloody revolutions as in Russia and China, or within a democratic framework, a wrenching economic force as capitalism. 

Within India there has been deep skepticism whether markets – and in particular, entrepreneurship – can be an instrument of social empowerment. In part this was because power and privilege was vested in state organs which made accessing organs of the state so critical. In addition, a broad intellectual ethos in India viewed markets and entrepreneurship with suspicion, seeing it as an instrument of oppression rather than empowerment. And historically many Dalits were landless laborers, penurious and perennially indebted to money lenders and landlords, this deep rooted skepticism was hardly unsurprising. Business meant traders and money lenders, occupations with ingrained notions of caste. 

But India has been changing and with it the well being of Dalits. This has resulted in part because of legal and constitutional protections, in part the cumulative consequences of millions of daily struggles as well as the creation of an emerging, albeit small, middle class as a consequence of affirmative action. But it has also been changing as a result of the complex amalgam of forces unleashed by the growth of the Indian economy, the greater role of markets and integration with the global system. New pressures and stress points have erupted along with new fissures and opportunities.

Amidst these unprecedented changes, there has been a remarkable growth of Dalit entrepreneurs, which we chronicle in a new book, Defying the Odds: The Rise of Dalit Entrepreneurs
https://casi.sas.upenn.edu/defying-the-odds  

Several factors explain this change. One, Dalit entrepreneurship has grown because entrepreneurship has grown in India, both because the intellectual climate has changed but also because formal sector employment, be it in the private or the public sectors, has stagnated over the past two decades even as the economy and the population have witnessed massive growth. With nearly two million Dalits entering the labour force annually, and public sector employment stagnant, the need for a new paradigm of social justice is manifest. 

These entrepreneurs are in a wide variety of sectors, from manufacturing to construction to newly emerging services like health care and education. They have succeeded through a combination of grit, ambition, drive and hustle – and some luck. They are not “representative” in any formal statistical sense either of the Dalit community or even of Dalit entrepreneurs and there is no guarantee that these entrepreneurs will continue to grow let alone become business tycoons. And for every successful entrepreneur there are countless others who have failed, beaten down by life’s impossible odds. 

Nonetheless they are a microcosm of large historical changes that are underfoot in India where a dehumanizing social system is slowly but surely giving way. These changes might appear glacial on a day-to-day basis, but they are epochal. Historians are likely to look back and compare the sheer magnitude of these changes as comparable to the decline of century plus struggles of racial equality in the United States, the decline of serfdom and feudalism in Europe and Latin America and the ongoing struggles of gender equality. 

For many of these entrepreneurs the path to social mobility offered by entrepreneurship began with spatial mobility, most of all escaping rural India. Seemingly placid from the outside, its rigid hierarchies can suffocate those at its receiving end. The chaos and squalor of urban India provides at least a cloak of anonymity that keeps the possibility of individual initiative alive. Anonymity increases risk taking since failure has less social costs. 

India has until now eschewed the transformational possibilities of entrepreneurship as a tool of social empowerment. This needs to change – soon – not just for the Dalit community but for India itself. Although it is certainly the case that in today’s world the socioeconomic advantages of birth continue to matter hugely for life chances, for Dalits the odds have shifted from the impossible to the improbable. Capitalism has countless flaws – but it does a glimmer of hope to those hitherto condemned by their ascriptive identities at birth.