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BW Businessworld

Lessons In History

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History is more or less bunk, quipped Henry Ford. But The Story Of Indian Business trilogy, authored by three academics and edited by business and management thinker Gurcharan Das, humbly corrects the US business icon. In fact, where several historians have failed, the troika of authors succeeds. They unlock the DNA of what exactly constitutes ‘Indianness' in business. While Arthashastra: The Science Of Wealth by Thomas R.Trautmann takes us to curious takes on the epic treatise, Merchants Of Tamilakam: Pioneers Of International Trade by Kanakalatha Mukund is an exploration of a region that offers certain key examples to India today. The East India Company The World's Most Powerful Corporation by Tirthankar Roy is an interesting inspection of how a colonial company defined the way we do business even today.

Trautmann is the author of Kautilya And The Arthashastra (1971) and other tomes on ancient India. Nilgiris-based Mukund is an economist who has written extensively on India's textile industry. She is also the author of The Trading World Of The Tamil Merchant (2010). Roy teaches at the London School Economics and is the author of, most recently, The Economic History of India 1857–1947 (2011).

The series offers deeper insights than many history books. Often, run-of-the-mill historians writing about India's business and economic past get bogged down by their school of thought and seldom provide balanced assessments. For instance, imperialist historians were, obviously, pro-imperialist, while the nationalist herd was too anti-foreign. Marxist historians, being projectors of class struggle, wrongly interpreted events. But in this series, authors operate as issue-based archaeological detectives unlike school-of-thought historians.

Arthashastra, a 2,500-year-old text devoted to statecraft and wealth creation, was written by Chanakya aka Kautilya. Trautmann's analysis is simple and to the point. The ancient text, incidentally, helps us understand many current economic maladies plaguing India — from landgrabbing to Maoist insurgencies. For instance, the Arthashstra says the king is only the taxer of the land, not the owner. Right to property always intended that government levies land tax at one-sixth of the market value and fertility of land. It is not supposed to own or confiscate property belonging to private individuals. Historically, protection of forest resources and integrating tribals into the mainstream of society, while maintaining their cultures and systems, was never effective. Accelerated deforestation and antagonism of tribals gave rise to a rash of insurgencies. China managed such uprisings both by its firmness and land reforms. India did not.
Reading Trautmann's interpretations gives rise to myriad thoughts. India, like most nations, preferred to evolve into a republic rather than remain a kingdom or an empire of vassal kingdoms. While kingdoms are economically more nimble and have lower administrative costs, nations preferred republics for their collective military strength, among other key factors. That said, today, republic has lost its meaning of yore. For instance, even though India and China are republics, ours is a highly federal system, while China is heavily centralised.

Mukund shows that India's balance sheet has invariably been stronger than its income statement. The country's ability and proneness to treasure-trove and hide wealth is better developed than its ability to earn from it. Skewed wealth ownership continues. India's billionaires reportedly own 20 per cent of its overall wealth. Mukund digs out interesting models. In Tamilakam, south of Deccan, wealth was often donated or kept in trusteeship in temples to legitimise it, socially sanctify its owners, and used in development. This is quite contrary to the situation today, where wealth is squirreled offshore to tax havens in Europe and South America.

India's black wealth exceeds the combined offshore black wealth of the US and China. If 50 per cent of our wealth was black money two decades ago, today it is a staggering 84 per cent, as per some estimates. In one way, federalism in India has abetted such practices. Tamilakam rulers tended to treat bureaucracy as a variable cost — increasing its size during economic boom times and reducing it during times of slump. While fiscally profitable, this approach tended to make bureaucracy "patronage-dependent", with loyalties towards vested interests. India has always been a weak state with a strong society while China has been a strong state with a weak society. Social change in India is brought about more by the society, and by the government in China.

The Agent Raj
Roy's interestingly researched book says colonial exploitation of India had been hugely overstated. For instance, colonial export of cloth to England did not account for more than 0.01 per cent of our GDP in the 18th century. The East India Company expanded our trade potential by legal enforcement of law of contract and by the use of a network of agents. Commerce grew from being only intra-family and intra-community to inter-family and inter-community. A typical Indian company is a crossbreed of widely-held shareholding and a proprietorship concern wherein the owner family looms large despite professionalism. Why is our work culture so muddied? Indian companies get a large part of their sales from agents, and these agents are closer to business owners than employees. Agents are lower in cost, savvy in selling; devious in accounts; cunning in office politics; useful conduits in influence-mongering and collusive in money laundering. Many sectors fall prey to them. Insurance, finance, housing and even consumer products are examples.

The rich content makes this great trilogy a must read for business students, executives, historians and, above all, policymakers.
Kumar is a retail consultant based in Chennai

(This story was published in Businessworld Issue Dated 14-05-2012)