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Notes on Hindu capitalism – continued: #7
I'll need to borrow Ritu Birla's book from the library, but in the meanwhile I've come across one of her articles, Law as Economy: Convention, Corporation, Currency.The article, presented at Harvard in April last year, raises some remarkable points regarding the conflict between Indian and British capitalism.
It is becoming increasingly clear to me that there was a distinct form of capitalism that can be legitimately called Hindu capitalism. It performed most functions that British capitalism did, but in different ways.
Colonial legislation and jurisprudence installed “the market” as abstract model for all social relations and as terrain for the making of modern subjects. A torrent of new measures directed at the free circulation of capital emerged in the period immediately after formal legal codification, especially from about 1880 to 1930, measures that ranged from law on companies, to negotiable instruments, to income tax, trusts, and charitable endowments, as well as futures trading and government securities, among others.
A key story in the broader global standardization of contract law in the nineteenth century, this accelerated colonial process installed new forms of group association grounded in contractual relations of individual subjects.
Vernacular practitioners of capitalism, who operated through norms of kinship, and were universally acknowledged engines of credit, production, and consumption, confronted the establishment of contract as universal instrument for market exchange. The confrontation exposes the difficulties in translating the spatial and temporal habitus of market conventions, the ways of organizing exchange, production, kinship, and trust that sustained the hegemony of vernacular capitalists, and that British authorities sought to appropriate in the name of a civilizing mission of “moral and material improvement.”
It is important to remember here that in 1858, after being shaken by the rebellions of 1857, the British Crown officially replaced the East India Company, pronouncing a policy of noninterference with indigenous culture, a project enforced through an investment in legal pluralism with the codification and strict application of the regime of personal law.
IV. COMPANIES AND THE MONOPOLIZATION OF CORPORATE LIFEInfluenced by Maine, colonial jurists understood joint family organization in nineteenth-century India as an ancient form of corporation. The difficulty with the joint family, as with other such ancient forms in medieval Europe, was that, in Maine’s words, “corporations never die”: they have a perpetual life, an extensive symbolic value of kinship, caste and lineage, and the arrangements and capital flows of commerce and finance.
The majority of vernacular firms were regulated by the Hindu Law of Mitakshara, the personal law system which gave sons rights in the family property, including the capital of the firm, at birth. Moreover, credit and what economic historians have called “commercial trust” could be extended to kinship relations that could be linked back through a common male ancestor as many as seven generations.
Connections across time were complemented by connections across space: the vernacular notion of “family” extended beyond just the household and encompassed a variety of patriarchal relations. The commercial joint family household—father, wife, sons and their wives, and unmarried daughters—existed within a much broader context, the nexus of extended relations harnessed by the firm. These networks were constituted spatially, across villages, bazaars, and even global regions. Lines of descent called gotres arranged exogamous clans within a particular endogamous caste, and constituted yet another barometer for degrees of affinity.
The story of the establishment of The Indian Companies Act of 1882: Establishing the limited liability joint-stock as the model for commercial organization, the act was a fine-tuning of an earlier statute of 1866 and was instituted after the boom and bust of the cotton market in western India in the 1870s, following the U.S. Civil War. In this volatile market climate, British merchants launched new companies at an accelerated rate, drew investments from native shareholders, and then defrauded them, absconding with their investments. The hundreds of pages of debates surrounding the act evince a public discrediting of British-run joint-stocks, and an extensive public discussion of corruption. As one officially solicited “native” opinion asserted, these newly hatched joint-stocks were “huge superstructures of fraud, erected to inveigle the unwary and imprudent.”
And despite this exposé of limited liability as a masquerade for corrupt practices, the debate resulted in new legislation, offering a pumped-up version of limited liability, with strict codes for memoranda of association, official registration, and the regulation of bankruptcy. It replicated earlier British statutes and enforced the corporation as a public legal person, a contractual model for what was called the “the healthy and useful employment of capital” and equally as significantly, for civic association.
The intensity of the discussion over principles of corporate association reflects the extent to which forms of capitalist economic organization informed visions of modern social association in this period. The Acting Registrar of Joint-Stock Companies at Bombay, the eye of the storm, for example, insisted that:
[T]he evils incidental to limited liability have been exaggerated in Bombay
by peculiarities in Native character. . . . The mass of Native shareholders,
profoundly ignorant, and placing blind confidence in the new discovery
in “finance” placed no watch on their Directors and Managers. The latter
only wanted to profit from the sale of shares, and cared nothing for the
regular transaction of business. The shareholders have now changed the
blindness of confidence for the blindness of terror, and it appears that
they are generally quite ready to get out of the concern at any cost
without calling the responsible parties to account.Reiterating long-held tropes about the submissive nature of the native population, the Registrar’s opinion posed habits of public civic association—the responsibility of exercising rights, rather than obeying a despot or director—as necessary conventions for the “healthy and useful employment of capital.” An economic organization of the social, in other words, was to convey modern habits of rights, part of a civilizing mission’s mantra of “moral and material progress.”
At the same time, the affirmation of limited liability threw the organization and practices of kinship-based commerce into question. The figure of the indigenous merchant loomed large in the debates, strangely not as facilitator of capital, but as a serious problem, a problem of personalized exchange antithetical to new legal procedures.
The major issue was whether the standardized procedures of the Act applied at all to indigenous kinship-based firms: could these even be conceived as public corporations, or at the very least as contractual partnerships? If so, it was argued, the firm should come under the purview of the Act. Or was the firm first and foremost a family? In this case, it would have to be regulated by the Hindu or Muslim personal law that governed the so-called private realm of indigenous “culture”—matters of caste, inheritance, and religion. Again, it is important to remember here that by this time, the project of “cultural preservation” was official policy, enforced through the codification and application of the personal law.
The Companies Act did not, as might be expected in an easy reading of colonial disciplinary practices, make indigenous firms directly subject to its regulations. Rather, it demanded that they be regulated by the Hindu or Muslim personal law governing families and religio-cultural practice.
In short, vernacular capitalism was governed first and foremost as cultural, rather than as economic mechanism. That is, despite the universally acknowledged role of vernacular capitalists as key economic middlemen, colonial law institutionalized a disjuncture between economy, a public and ethical project, and culture, a private one. The Companies Act thus exposes a key technique of colonial liberal governmentality— the production of economy and culture as distinct and separate spheres—one I argue ultimately espoused by indigenous capitalists themselves.
V. CONVENTION, NEGOTIABLE INSTRUMENTS, AND THE LEX MERCATORIA
Almost contemporaneous with the Indian Companies Act, the Negotiable Instruments Act of 1881 grappled with what colonial jurists had begun to call the “native” lex mercatoria. I would like to foreground a key feature of the debates around the Indian Negotiable Instruments Act, once again, the problem of the joint family firm, and discourses on the temporality of vernacular conventions.
Indigenous or vernacular systems of credit in particular drew legislators’ attention as British joint-stock banks flourished beginning in the mid-nineteenth century, marking the institutionalization of the British banking sector in the subcontinent. British banks depended on vernacular merchants and their vast access to credit in the bazaars across India, and vernacular capitalism’s investment in the financing of colonial commodity production tied them to sources of British financing. The indigenous “unorganized” banking sector had varied “personalized” and multiregional conventions for borrowing, lending, and investing, secured by extended ties of kinship, in which negotiable instruments could be endorsed and reendorsed many times; they sustained a very extensive negotiability.
These conventions, and their variability, posed problems for legislation aimed at rationalizing and facilitating flows of credit and forms of paper currency. As early as 1866, the first Indian Law Commission, guided by Henry Sumner Maine and James Fitzjames Stephen, had introduced the question of standardized rules for negotiable instruments. Intended to be one of the chapters of the Indian Civil Code, an inaugural bill on the subject was introduced in 1867, and referred to a Select Committee.
The mercantile members of the Legislative Council, all representatives of British trading interests, had unanimously objected to the bill because of its numerous deviations from English law. On the other hand, other members had strongly criticized it for not including a clause saving the customs of native merchants. From the bill’s inception, then, the question of preserving indigenous customs, and so sustaining the official policy of “noninterference” in native culture, conflicted with arguments for their assimilation into British legal models.
The debate, which continued for over a decade, was driven by the ambiguous place within the Anglo-Indian legal system of what jurists called the “native law merchant,” for this legal arena did not fall under the purview of personal law. The final act of 1881 did include a “local usages” exception, but one that ingeniously opened a space for their assimilation to models of contract already codified by the Indian Contract Act of 1872. It stated that in order to “facilitate the assimilation of the practice of Native shroffs [bankers] to that of European merchants,” the act would extend:
[T]o the whole of British India; but nothing herein . . . affects any local
usage relating to any instrument in an oriental language: Provided that
such usage may be excluded by any words in the body of the instrument
which indicate an intention that the legal relations of the parties thereto
shall be governed by this Act.Local usages could thus be overruled if vernacular negotiable instruments were written to accommodate the practices of British bankers and merchants.
While in theory not directly affecting relations among indigenous merchants, this provision reflected the de facto governmental installation of a new market terrain, the concomitant delegitimizing of bazaar practices and the accelerated and more extensive transactions between British and indigenous commerce conducted through joint-stock banks.
The Select Committee on the bill in 1879 defended the new provision as one which would not “stereotype and perpetuate these [indigenous] usages,” but rather “induce the Native mercantile community gradually to discard them for the corresponding rules contained in the Bill.” Seeking to transform mercantile convention while dissimulating laissez-faire, the Committee argued that “the desirable uniformity of mercantile usage will thus be brought about without any risk of causing hardship to Native bankers and merchants.” It delivered evidence offered by the British joint-stock Bank of Bengal, “that the native usages as to negotiable paper have of recent years been greatly changing, and that the tendency is to assimilate them more and more to the European custom.”
The standardization represented by the Negotiable Instruments Act presented itself as the logical extension of indigenous mercantile conventions, even as it reflected the very institutionalization of a new terrain—the public space of economy, inscribed by the new and restricted spatial and temporal negotiability of contract law.
Social institutions
One key example is nineteenth-century colonial jurisprudence on indigenous endowments gifted for social welfare. Vernacular capitalists would establish institutions for social welfare such as temples, schools, rest houses for travelers, all of which were consecrated to deities. These were organizations that produced social capital and affirmed the respectability, and so the credit, of kinship-based firms.
The difficulty for jurists was that in vernacular conventions, income derived from such properties could revert back to the firm, to defray debt, or to provide for the welfare of aging family members for example. Income regained in time would then be redirected to the endowment. Such oscillations performed the extensive negotiability across social capital and the material flows of credit, as well as across time itself, and across the colonial categories of public and private, that characterized vernacular commercial practices.
Anglo-Indian jurisprudence on trusts sought to restrict this negotiability, and sought to establish an a priori intentionality for the purpose of such endowments, one that would regulate the endowment as a contract made in perpetuity, and so confirm the principle of mortmain as grounding legal category for charitable trusts. These concerns were manifest in a series of late nineteenth-century Bombay and Calcutta High Court cases on religious endowments, in which judges interpreted case law on temple management to argue that the deity was a legal subject. Extending this logic to case law on endowments for social welfare that were consecrated to deities, new precedents established that these were gifts given to the deity as legal beneficiary, so that no income could revert back to families, as the rights of the beneficiary confirmed that the purpose of the endowment was to exist in perpetuity. This fantastic turn of legal idolatry, which ushered in the sovereign translation of customary endowment as legal trust, exposes modern law’s investment in an autonomous subject: the legal rights of the deity overrode the situated contexts of gift giving,
2012-08-18 05:40:45
Source: http://sabhlokcity.com/2012/08/notes-on-hindu-capitalism-continued-7/
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