Caste isn't efficient or capable

Aakar Patel explains why Brahmins and Vaishyas dominate India's corporate boardrooms:

My view has long been that these are our only two capable castes. It is largely from merit that they dominate. 

Pitted against such sheer unabashed racism, the arguments of the Sangh Parivar ideologue Gurumurthy, who has long been an advocate of caste as a 'development vehicle', seem like refreshing, unbiased wisdom. In fact, Gurumurthy's oft repeated paeans to caste based enterprises offer the most efficient refutation of Patel's Two Supercastes theory.

Gurumurthy has been studying industrial clusters in India for over a decade and one conclusion that can definitely be drawn from his observations is that individuals from castes across the varna divides are capable of becoming 'capable' entrepreneurs, not just those from an elite group or two. He says, in this article from The Hindu:

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.

Jatavs, Nadars, Naidus, Gounders, Ramgadiyas, Patels: Dalits, backward and intermediate shudra castes. Who isn't capable? 

Patel should read Gurumurthy a little. And Gurumurthy should also read a little about research that doesn't agree with his views. For instance, Abhijeet Banerjee and Kaivan Munshi, in their paper 'How Efficiently is Capital Allocated? Evidence from the Knitted Garment Industry in Tirupur', presenting some of the evidence (page 20) from a study of Gounder and non-Gounder (or 'Outsiders', as the study calls them) garment manufacturers in Tirupur, say:

 (1) The average Gounder firm that was set up during our sample period (1991–1994) started with almost three times as much fixed capital as a comparable Outsider firm.
 (2) At all levels of experience (by which we mean the number of years since the firm went into business as an exporter), the average Gounder firm owns more fixed capital than the average Outsider firm that was started in the same year, though the difference is small for firms that have been exporting for more than 6 years.
 (3) At all levels of experience, the capital intensity of production in an average Gounder firm (measured both by the ratio of fixed capital to exports and the ratio of fixed capital to total production) is between 1·5 and 2·5 times that of an average Outsider firm that was started in the same year.
 (4) Output (measured both by exports and by total production) is initially lower in firms owned by Outsiders compared with firms owned by Gounders that were started in the same year, but grows faster with experience and crosses that of the Gounders after about 5 years.
 (5) In contrast with the cross-community comparison, within each community, firms that invest more maintain higher levels of output at every level of experience. 

To sum up, roughly, the Gounders employ more capital than the Outsiders but dont get better results than them. Caste isn't efficient.

But the Gounders can start garment units more easily, get easier access to capital and labour, rely on better co-operation from local authorities, and can stick around longer (even if they are not as efficient as the Outsiders) because of what the researchers call the 'community effect' (or plain old caste loyalty, in other words). But despite all those advantages:

 In our data the Outsiders seem to outperform the Gounders. This is easiest to see by comparing the Gounders and Outsiders who have more than 5 years of experience. The Outsiders in this category own less capital stock than the corresponding Gounders. Yet they produce significantly more. Moreover, the growth rate of output is higher for the Outsiders with more than 5 years of experience compared with the corresponding Gounders, which rules out the possibility that the Gounders are trading off current productivity for future growth. Finally, these Gounders use more capital per unit of output and own more capital stock at every level of experience: everything else being the same, this should give them a higher growth rate. The slower growth of the Gounders is therefore in spite of this additional advantage. 

And so on. How truly capable is the corporate Brahmin or Bania? India's share in world trade now hovers at less than 2%. Despite all their advantages, built over a two millennia old foundation of education, land, wealth and power, the very 'capable' Brahmins and Baniyas leading all the organized capital of India don't seem to be so very capable, after all.

The Gounders ('80 per cent of whom are not even matriculates', as Gurumurthy says, but 'compete at the global level, exporting knitwear garments valued at over $2 billion'), representing less organized capital, seem more efficient than the Brahmins; and the Outsiders in Tirupur seem more productive than the Gounders. India's economy definitely needs more and more doses of Outsiders, in boardrooms and classrooms, to make it truly efficient or capable.

 Cartoon by Unnamati Syama Sundar.

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Also published on Round Table India.