Notes on Hindu capitalism – continued: #6

As part of my research I’ve come across a recent article which throws light on aspects of Hindu capitalism. Timur Kuran’s work has been cited in this context (recall that Kuran is a major analyst of banking institutions in Islam and of institutions more generally; I was fortunate to be taught by him).

Below are key extracts from this article, by Karen Isaksen Leonard, entitled: Family Firms in Hyderabad: Gujarati, Goswami, and Marwari Patterns of Adoption, Marriage, and Inheritance, (2011).  I’ve significantly truncated the article which focuses on institutional analysis of the impacts of inheritance. I’m more interested in the role of PRIVATE enterprise. There is by sufficient evidence of a robust capitalist system in pre-coloinal India (some aspects that led to innovation were possibly missing).

My next port of call will be Ritu Birla’s work. Birla is a professor at the University of Toronto, and has written Stages of Capital: Law, Culture, and Market Governance in Late Colonial India (Durham, North Carolina: Duke University Press, 2009. I’ve now got to find out more about her thesis.

Scholars are looking again at banking and mercantile families in India’s early modern history, responding to the challenge issued by Claude Markovits in the epilogue of his 2008 volume, Merchants, Traders, Entrepreneurs, to “return the merchant to South Asian history.”[1] Some of the underlying assumptions and questions being asked are old and some are new. My own longstanding assumption, upon which this article relies, has been that bankers and merchants played multiple and important roles with respect to states in South Asia, and that their relations with non-kin officials and other political actors determined their success or failure and sometimes the success or failure of a state, most notably, the Mughal state.[2] 

Consideration of legal norms alerts us to claims being made by Timur Kuran and Anantdeep Singh about the advantages of Hindu law over Islamic law (as written in legal texts) for capital accumulation and the continuity of family firms in the South Asian and Middle Eastern economic worlds. Islamic laws of inheritance, they argue, divide and diminish family resources, partitioning at least two-thirds of an estate among children, spouses, parents, and sometimes more distant relatives. While Muslim women receive only half of what men in each category do, legally they should inherit. Hindu Mitak­shara law, by contrast, helps consolidate and maintain resources within joint families; Hindu women do not inherit and joint-family enterprises pool capital and discourage partitions of an estate.[4]

Other legal questions concern the interactions between customary or per­sonal law and the evolution of British colonial law in much of South Asia. Sumit Guha, for example, discusses precolonial, eighteenth-century con­ceptions of rights and legal practices in the Maratha country, “a region of shift­ing political boundaries, often indefinite jurisdictions, in which several unwritten and written bodies of law and custom could be invoked or set aside as the case might be.”[5]

The present research pertains to Hyderabad, a princely or native state outside British Indian jurisdiction, where the state made no attempt to regulate customary practices with respect to marriage, adoption, and inheritance within each kindred, caste, or community. Legal pluralism prevailed in the native states even as British India codified colonial laws from the 1860s, and, even in British India, attempts to devise laws and impose them on religious and caste communities varied over time and by region.

Lauren Benton suggests that Indian litigants helped move a plural legal order toward a state-centered legal order by seeking to “exploit jurisdictional complexity.” Speculating that colonial conditions “intensified the fluidity of the legal order and enhanced the strategic importance of personal law,”[6] Benton anticipates Rita Birla’s arguments about negotiations between kin-based indigenous commercial networks and market-oriented colonial commercial law from the late nineteenth century; Birla refers to the “extensive negotiability” that characterized vernacular prac­tices governing the symbolic capital of kinship, caste, and lineage, and the capital flows of market exchange and production, a situation that colonial laws sought to restrict.[7]

In Hyderabad by the late nineteenth century, laws evol­ving in surrounding British India and the establishment of a British Residency in Hyderabad began to affect family firms by providing new legal arenas for cases involving transactions and property holding.

To consider these issues, I look closely at three Hindu and Jain banking and mercantile communities, focusing on adoption, marriage, and inheritance prac­tices among Hindu and Jain family firms in Hyderabad, India. These firms came from three major financial communities: the Gujaratis, Goswamis, and Marwaris.

Gujarati merchants and bankers are so named because their homeland is Gujarat, and they have many subdivisions, some of them Hindu (mostly Vaish­navite, worshippers of Vishnu) and some of them Jain.[8]

Marwaris came orig­inally from the Marwar region of Rajasthan.[9] The three major Marwari castes or subcastes are Agarwals, Maheshwaris, and Oswals, the first two predomi­nantly Vaishnavite and the last predominantly Jain.[10]

The Goswamis in Hydera­bad were Shaivite (worshippers of Shiva) sanyasis, celibate mendicants by tradition, whose roots were in northern and central India. Not much has been written about these communities in Hyderabad,[11] although listings of firms by locality and biographies of individuals appear in various sources.[12]

Historical study of Gujarati, Goswami, and Marwari banking firms in Hyder­abad State prior to the state’s 1948 incorporation into India suggests several lines of argument, the first concerning adoption. Before the demographic transition, high infant and child mortality made the survival of sons (the heirs under Hindu law) to adulthood problematic.[13]

With this pattern in mind, I argue that Hindu and Jain encour­agement of adoption, in contrast to Islamic constraints on adoption, gave an obvious advantage to Hindu and Jain family firms when it came to the continuity of their firms and financial networks.[15] Hindu law permits adoption even by widows and of adults as well as children, the purpose being to provide heirs to property and resources rather than to provide for children.[16]  I will present detailed evidence of the prevalence of adoption in Gujarati, Goswami, and Marwari family firms, derived from orally constituted genealogies and also from Hindi family his­tories of Marwari entrepreneurial families in Hyderabad.

My second argument is that marriage and inheritance practices among these patrilineal mercantile families were actually quite flexible, notably invol­ving affines relatives by marriage as major players. Wives and their kin did play roles in mercantile family histories.[17] Flexible family strategies meant not only continuity for the family firms but also a potentially broad spatial range of financial networks.

Gujarati and Marwari Hindu and Jain bankers and finan­ciers practiced caste endogamy but gotra, or subgroup exogamy, so marriage networks could be and often were wide-ranging. In contrast, Indian Muslims in general encouraged and often practiced cousin marriage. This could result in a more limited range of options for marital networks, possibly leading again to an advantage for the Hindu bankers and merchants in terms of access to capital and other resources. (On the other hand, cousin marriage could offset the dispersion of resources caused by Islamic inheritance law: empirical data is needed here.[18]) 

Finally, I argue that trust is a mischaracterization or overstatement of the values and practices that helped maintain family firms and their financial net­works; at least it seems a less-than-useful concept when analyzing the family firms in Hyderabad. Discussions and debates about trust focus chiefly on long-distance trade diasporas but also raise issues of kinship, caste, and religion that arc relevant here, as well as the issue of the degree of merchant reliance on or autonomy from state power.[20]

Thus entre­preneurial success on the part of Hyderabad’s financial communities was more readily accounted for by close relationships with other political actors in Hyder­abad, as I will show with case studies.

HYDERABAD STATE: REVIEWING THE CRUCIAL ROLE OF BANKERS

Banking firms, particularly what have been termed “great firms,”[28] had been important participants in state-building in precolonial India, serving as state treasurers, minters of money, and revenue-collectors as well as maintain­ing long distance credit and trade networks.[29] The importance of these firms to state-building and maintenance is being increasingly confirmed,[30] and scholars are also looking hard at pre-modern merchant and trading networks in South Asia and beyond, reassessing their relationship to the development of capital­ism.[31]

Yet there is still no definitive history of banking in India that integrates pre-modem and colonial materials across the subcontinent (including the native or princely states). No authoritative, comprehensive history relates the “great firms” and diasporic trading networks to the agency houses and joint-stock banks that emerged under the East India Company, the British Raj, and postco­lonial South Asia.[32]

Bankers and merchants from these last three communities, of Gujaratis, Goswamis, and Marwaris, arrived in Hyderabad at different times, settled in certain localities, and established close relationships with particular officials and nobles at the Nizam’s court. The tumultuous period of the late eighteenth and first half of the nine­teenth century saw bankers becoming crucial players in Hyderabad state poli­tics. The second Nizam, Nizam Ali Khan (1762-1803), moved the capital from Aurangabad to Hyderabad. Nizam Ali Khan’s successors, Sikander Jah (1803-1829) and Nasiruddaula (1829­1857), made agreements with the British resident establishing the Hyderabad Contingent, a military force that was, by 1813-1814, paid by the Nizam but led by British officers. 

The British resident pressed for the back pay due to the Contingent, a debt that grew in the 1830s and 1840s and led to Hyderabad’s financial crisis of the 1840s. Financial arrangements resorted to after the Palmer bankruptcy in 1824 failed to ameliorate the situation, and by 1850 the situation was drastic. Succes­sive Diwans sought funds from bankers and mediated among bankers, revenue contractors, and mercenary troops, all of who became crucial to the state’s finances.

HYDERABAD’S MUSLIM AND HINDU BANKERS

While the absence or near-absence of Muslim bankers is often attributed to the Islamic prohibition on the taking of interest,[42] Muslims were bankers and traders in the subcontinent and in Hyderabad. One explanation offered for Muslim under-representation in the management of large Indian firms stresses not just Islamic inheritance laws but enforcement of them under British rule,[43]but this would not explain the scarcity of Muslim bankers in Hyderabad, a state outside British jurisdiction. Muslim bankers were present and active in Hyder­abad in the late eighteenth and early nineteenth centuries, but they did not establish family firms that lasted.[44] Afghan or Pathan moneylenders were sometimes mentioned as loaning money to state officials and nobles but were not prominent as bankers.[45] Khoja and Bohra Muslims, from formerly Hindu caste communities that continued to follow Hindu law and so were important as merchants and bankers in western India,[46] were not leading bankers in Hyderabad, although there were Bohra families settled in the old city locality of Husaini Alam.

Tantalizingly, it seems that the original “Panch Bhai” (five brothers) bankers of Hyderabad in the late eighteenth century were Muslims, although later these roles were filled by various Hindus.

The Gulzar-i Asafia, a Persian history, describes Hyderabad’s evolving banking communities and their localities in the early nineteenth century and highlights non-Muslims. It lists ten bankers, five in Karwan (all Gujaratis), four in Begum Bazar (three Goswamis and a Marwari), and one in Chaderghat, or Residency Bazar (a Parsi): “Side by side in Begum Bazar are the houses of the Marwaris, Gosains, Komatis, Afghans, and other financiers and traders … and in Karwan Sahu, the Gujaratis reside…. The bankers are millionaires, lending millions of rupees to the state and financing the land revenue contrac­tors…. [One of them, a Gosain] associates with the Afghan military leaders and is fond of fighting…. The bankers also loan to the nobles and to the Nizam himself; they have access to the Court.”[52]

Given the provisions of Hindu Mitakshara law, Claude Markovits, for example, found a surprising incidence of women recognized as heirs in 118 succession cases among Shikarpuri Sindhi merchant court cases in the 1890s.[53]

The leading Hindu bankers in Hyderabad State were initially Gujaratis settled in Aurangabad and in Karwan (just outside Golconda Fort).[55] Karwan was dominated by Gujaratis, although others were also settled there.[59]

This Gujarati family firm all by itself illustrates many issues of interest here: adoption, flexible use of kinship ties, mistrust or rivalry among relatives, and, in oral accounts of the firm’s affairs, leading roles for women. These genealogies show the family firms responding to mortality and age structure, passing leadership to sons, cousins, nephews, or relatives through affines to carry on entrepreneurial activities. Whether or not actual adoptions were involved is not always known (only one was explicitly mentioned in inter­views), but the flexible family strategies are very clear.[66] Many of the men had more than one wife, sometimes at the same time, suggesting that multiple wives as well as adoptions served the strategic end of securing living sons.

The British Residency, or Sultan Bazar locality, attracted increasing numbers of bankers from Karwan and Begum Bazar and the old city from the 1820s since the British Residency area offered them protection from the Nizam’s desperate requests for more money.[72] A competing British Indian legal system was developing there, one that enjoyed substantial military backing from nearby Secunderabad and in British India. The Benkati Das cluster of closely related Gujaratis in the banking business shifted residences and temples (their Gokulnath temple and the private Bhagwan Das family Giriraj temple) from Karwan to Sultan Bazar in about 1900.

WHAT HYDERABAD’S MARWARI FAMILY HISTORIES TELL US

No matter how brief the histories, again and again only one son of two or three survived, and many fathers died leaving a very young son or sons. Adop­tions were plentiful,[87] usually of relatives but not always. Of the sixteen Oswal Jain family histories, ranging in generations from one to eIeven,[88] eight mention no adoptions, and the other eight record sixteen. Of the forty-two Maheshwari family histories, of from one to eleven generations, twenty mention no adoptions, and twenty-two mention a total of thirty-five. Of the thirty-two Agarwal family histories (including a few Digamber Jains), ranging from two to nine generations, there were thirty-seven adoptions in nineteen families. In sum, forty-nine of these ninety Marwari families migrating to the Nizam’s state give histories that include adoptions, eighty-nine in all. In some families there were as many as four or five adoptions, most of them being a second or younger son of a younger brother given to an older brother or cousin brother.

CONCLUSION

Patterns of adoption, marriage, and inheritance among the predominantly Hindu and Jain banking communities in Hyderabad State show family histories interacting with changing political and legal regimes. Recent work by Kuran and Singh relates normative Islamic and Hindu inheritance laws[94] to the rela­tive continuity of Muslim and Hindu family firms. While the possibilities of such links are promising (particularly with respect to adoption, not considered by Kuran and Singh), much more study is needed. Their work rests on several assumptions: first, that both Hindu and Muslim financial firms actually fol­lowed Hindu and Islamic inheritance law when it came to succession; second, that the common Muslim practice of cousin marriages did not effec­tively counteract the divisive effects of Islamic inheritance law; and third, that the striking success of the Khoja and Bohra Muslim communities was due chiefly to the continued adherence of these endogamous communities (once Hindu castes) to Hindu law with respect to inheritance.[95] Further, while the Hyderabad evidence testifies to the frequency of adoption in Hindu and Jain financial communities, it also shows that multiple wives and the flex­ible incorporation of at least some affines into family businesses helped supply male heirs to the family firms.

Claude Markovits argues that Asian merchants were “some kind of capitalists” and writes that the South Asian merchants were able “to maintain significant areas of independent inter­national operations throughout the period of European economic and political domination in Asia.”[97] Jack Goody contends that in both South Asia and Europe kinship groups and extended domestic units often played critical roles in commercial and industrial activities both before and after the develop­ment of capitalism.[98]

As scholars look again at South Asian banking and mercantile families and firms, the material presented here highlights the significance of marriage, adoption, and inheritance practices within communities, and whether or not such practices were regulated by the state in any way.

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I’ve removed all footnotes. Please check original PDF.