Further observations and thoughts on India, Kolkata

As initially thought, the basic economic unit in Kolkata and West Bengal generally seems to be the family, not the individual. As a result, the family economic unit means that families invest in the education of their children and expect to share in the returns. Also, most businesses here are family businesses and western-style anonymous businesses are basically unheard of: only family loyalty is capable of holding a firm together, which limits the size and spread of most businesses to fairly small shops.

The importance of family also translates to rituals: since marriages are about whole families starting an economic relation, marriages last much longer than their Western equivalent (3 days) and involve time spent at the houses of both the families.

An interesting consequence of the economic importance of family, which has all but disappeared from most regions in the West, is the business of family honour. Families care about their honour and will strongly punish shame brought to them, whereas in the West shame and honour are individual things and hardly carry over between family members.

A good example of how shame and honour works was provided by a local tragedy, well publicised in the local news. At a local wedding, a former lover of the bride came in and shot the groom out of jealousy. Such a tragedy could happen anywhere. What was unusual from a Western perspective though was that the other wedding guests lynched the perpetrator: the guests beat up the perpetrator to such an extent that he died of his wounds. Interestingly, everyone seemed to find this normal and acceptable and it is unlikely that any of those guests will go to jail for doing this, whereas in the West the wedding guests would find themselves in jail for taking the law into their own hands. It is thus a good example of both the phenomenon of enforcement of social norms by means of family honour (the guests were re-establishing the social norms by defending the honour of the family against the assailant), and of the acceptance of violence if it is for the purposes of re-establishing honour and punishing shameful acts. Normally quite docile and passive people are allowed to kill someone if the honour of their family is at stake. You see much the same acceptance of this phenomenon when people punish their sons or daughters for supposedly shameful acts.

A possible historical reason for this honour system could be the uncertain property rights that create a role for family honour as a pre-commitment device to defend the implicit property rights of the whole family. Another possible reason beyond the immediate economic role of family is that family honour acts as an implicit legal system that gives every member an incentive to play by the rules, whereby the payoff to other family members is that they enjoy the joint reputation of the family as a whole and depend on that for their job prospects and marital prospects. All these mechanisms seem important here.

As an update to the previous set of observations, drug use is bigger than it seems at first. Whilst few people here drink and drugs like heroin or cocaine are unheard of, the drug that is used a lot is tobacco, particularly chewed, which translates into copious spitting. The habit of chewing something that looks like prune tobacco and then spitting a mouthful on the pavement is quite universal here, to the extent that you see special signs at the airport and other places forbidding you to do it. The chewing must be the closest to regular drug use they get to here. Whether the spitting spreads disease is dubious: the roads are so dirty that spit wont make much difference.

The issue of nationalism is interesting here: within a country like India, which is basically more diverse than the whole of Europe in every sense of that word (religious, linguistic, ethnic, economic), there is not really a long joint history that is shared by the whole of the country. Hence part of the job of the state and of intellectuals is to make up a shared identity.

You see that Indian nation storytelling in many places: in the Victoria Memorial (basically a palace that functions like a gallery) one gets the story of the English colonial period as a time when Indian consciousness awoke. On the back of cars and trucks one often sees ‘I love India’ painted. Amongst intellectuals you see the preoccupation with stories about ‘Indian history’, where the Indo-European influx of the previously Dravidian population is seen as a pivotal moment in which the mixed population of India was formed. You see the emergence of a national consciousness in terms of Bollywood films that everyone watches, political stories everyone follows, and a certain degree of shared school curriculum wherein English is emerging as the main language that everyone can share in. You see the growth of cricket as the national sport that is talked about and practised everywhere.   In short, you see India being invented.

Something that is really striking to a Dutch boy from a very egalitarian culture is the strong sense of status and hierarchical layers in India. The status-consciousness of Indians is of a different sort to that in the West wherein a basically egalitarian culture witnesses a lot of one-upmanship but where no one is really allowed to boss others around too conspicuously.

Here in India, status is multi-layered and much more absolute. A bit like the English class system gone feral. The lowest downs are afraid to even touch the higher ups. Within the well-to-do groups there are clear delineations of class and seniority. Hence in the civil service people know you partially by your ‘vintage’, ie the year in which you joined. Someone who ‘is an 82’ is of lower innate worth than someone who is a ‘78’.

The consciousness of these status layers goes quite far: people can tell by the surname of someone else what class they come from, whether they are Dravidian (clearly something deemed inferior, if only because it is associated with greater poverty and darker skin colour), and what type of religion they probably adhere to. Hence one can only marry certain family names and reputations are attached to names, accentuating the importance of family honour again.

Whilst legally speaking all these distinctions are frowned upon, the reality of caste and status layer is so pervasive that statistical agencies have no choice but to measure it frequently. Dravidians Some Indo-European groups in the North here are thus called ‘tribal’ or ‘scheduled castes or tribes’. The castes familiar in the west (Brahmins) are apparently ‘unscheduled’.

This layer-consciousness clearly is very strongly internalised by people and permeates the way they see other countries, historical figures, and conflicts. And it goes back a long time, with even the Kama Sutra making frequent mention of people who are ‘lower’ or ‘higher’.

Thinking about whether this is going to change, the analogy with class consciousness in the west comes to mind, in particular the 19th century where you had the ‘franchised’ (the rich who could vote), the aristocracy, the royals, and the rest. Then too, royal persons were sacred and untouchable and this really only got purged from the culture when economic and military realities moved in favour of more equal outcomes across people. Nowadays even a billionaire in the West could not hope to be treated with the deference you see here between the various layers, and the basic working relationship in a hierarchy in the West is far less openly a matter of command than it is here. A nice example of this is policemen carrying sticks around with which to beat beggars off the pavement. Can you imagine such a thing as a routine event in any mayor Western city?

What also strikes one is how one-dimensional work relations are: roles and hierarchies are set in stone, whilst in the West roles and groups are far more fluid. Westerners get trained from an early age to move between groups and to assume both leadership and subservient positions depending on the task at hand or just the whims of the teacher. This is not the case here where people stick to their groups and play quite specific roles. A driver is a driver and not an emergency medic, a leader on the soccer field, a follower on the cricket field and an administrator-in-need: in the world of work the driver has one role and very fixed types of relationships with the people above, below, or alongside him. These roles do not get reversed anywhere for people from different layers do not mix socially, nor do they intermarry.

What was not immediately clear in the first few days of my visit to Kolkata was how the politics of this place work. Seeing the political gangs in particular neighbourhoods at work who go around as if they own the place, intimidating the local shops and local women, things have become clearer: politics here is of the almost directly parasitical variety, subject only at the top end to limited legal scrutiny and the competition of other political parties. At the level of businesses and neighbourhoods, any source of income is taxed by the political parties and only well-connected families can maintain a thriving business. As a result, the number of sectors in which one can make it are very limited and are dominated by a few families. The big money spinner is property development, in the hands of a few well-known families, but things like television, movies, mobile phones, etc., are also quite concentrated in the hands of well-connected families.

For the vast majority of the population, who are not well connected, this means there is only one realistic way to escape from poverty, which is education. Hence many kids quite fanatically study as hard as they can, stimulated by parents who know the system, with the bright kids learning good English and being absorbed mainly in the civil service which is highly legalistic and thus also meritocratic in terms of entry. The emerging IT sector further absorbs the smart ones who can speak English (and prefers girls to boys), whilst a further sizeable fraction migrates to other states in India or abroad, sending remittances home (a large source of income in Kolkata).

The issue of economic development in West Bengal is therefore to a large extent one of politics, where the danger is that if a particularly fierce parasitical group gets into power, all the sources of growth will be taxed to oblivion again, repeating the experience here of the 1970s when the heavy industries all moved to other states as a result of punitive state taxation and regulations (courtesy of the communist government). The task for the ones who want West Bengal to escape this cycle is to either co-opt all the major political parties into an economic consensus or else to push for rapid development such that the independent power of commerce is large enough to withstand an unfavourable political regime.

Answering the earlier question how one can invest here, one either needs to invest together with a local partner or else invest in the few national firms doing business here. The bottom line is that one cannot avoid investing in political contacts here, either directly or indirectly. So merely buying property is useless as one need contacts to protect that property. Since most firms are family firms, even the bigger ones, buying shares in local firms is not an option either. Hence, realistically speaking, the best way for outsiders to invest here is to buy into international firms who have invested in local contacts and joint ventures.

If I reflect on how fast India can become as rich and as well-organised as Australia or other Western countries simply from the perspective of education and role-playing,I will say it will take at least a couple of generations. The beggars on the side of the street who are barely holding onto a meager existence have no chance to see their children get a good education, and neither does it seem realistic that their grandchildren will experience a level playing field given that their parents will have virtually no chance to work themselves up to a position where they can give their children the advantages taken for granted by the well-to-do here. And that is really the overwhelming impression I get here: in-your-face poverty and inequality.

Author: paulfrijters

Professor of Wellbeing and Economics at the London School of Economics, Centre for Economic Performance

5 thoughts on “Further observations and thoughts on India, Kolkata”

  1. So, potentially the best way to invest (if you had the money to do so) would be to find some kind of equivalent to an “old money” family that was down on its luck – one that has plenty of contacts and residual prestige, but not the capital or internal skill set to run a successful business in modern India – and partner with them?


  2. Thanks Paul, this is really interesting.

    Though i’ve never visited India, this seems to jibe with the impressions i had earlier this year reading ‘Behind the Beautiful Forevers’. It is a very deeply reported book about life in a particular Indian slum. The author was there every day for three years. Very much worth reading. What particularly came through is the parasitical nature of the police and political parties.

    It will be interesting to see how the major chain stores, like Walmart, go now they are allowed to open in parts of India. This could do a hell of a lot of good by lowering food prices for the urban poor, which is probably heading towards half of their consumption basket. But they say they will take it slow and i certainly can’t blame them for that. The barriers are huge.


  3. Chris,

    yep, that is exactly what you should do. You will not be surprised to know that lots of investment there goes via remittances: money sent to family members by people who migrated and thus have someone local to do their bidding. I was told there are now agencies but property rights really are fluid (and you cannot get rid of renters) so that is a dicey road.


    yep. My wife read Shataran by Gregory Roberts and keeps telling me I am basically just repeating what he said about Bombay in the 1980s!
    I must say though that I agree with you about the potential for foreign companies to do some good there, though when it comes to food dont hold your breath: food at the lower end is dirt-cheap because it is very dirty. No way that a Western company like Wallmart can compete with that simply because there quality standards would have to be much higher. I am thinking more of introducing and spreading complex human organisations and thus leading to a proliferation of homegrown multinationals.


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