Category Archives: South Asia

by Joel | 21 October 2008 · 6:25 am

India’s Vibrant Vernacular Press

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 223-224:

The rise of the vernacular press would have pleased Mahatma Gandhi. He disapproved of advertising and printed no ads in his papers. But perhaps he would have relented if he had realized that advertising revenue is the lifeblood of the vernacular press. When Gandhi reorganized the Provincial Congress Committees along linguistic lines in 1920, he did so because he was convinced that people must conduct their political debates in their mother tongue. The thriving vernacular press proves this point. Gandhi would also have been pleased by the national orientation of the vernacular press: none of the papers mentioned back any kind of secessionism. This is also due to the fact that the ‘print capitalists’ who control the papers are very much aware of the benefits of an integrated national market. Another encouraging feature is that none of these papers are ‘party papers’ to the extent of being owned and operated by a political party. The private owners of the papers may sometimes back a particular party, as Ramoji Rao backed the TDP, but such alliances are temporary with the party depending on the ‘print capitalist’, not the other way round. In earlier times parties controlling the government could exercise considerable influence on newspapers by placing advertisements or withholding them. Nowadays revenue from commercial ads is far more important than that derived from government advertising and this has greatly enhanced the freedom of the press.

India’s lively and free press is of great importance to the country’s democracy. It is significant that the first big spurt in growth of the vernacular press was witnessed after Indira Gandhi’s ‘Emergency’ had been terminated in 1977; her attempt at gagging the press by means of her emergency powers led to a pent-up demand for information. Many people became avid readers when they had access to a free press once more. There is, of course, the more subtle method of influencing the press by co-opting journalists: giving them official importance or letting them know that their careers may depend on adopting certain political views fits in with this method. By now journalists earn good salaries and enjoy many perks, so the threat of forfeiting them might influence their views. But the large number of journalists would make it difficult to co-opt all of them: in 1950 there were only about 2,000 in India but by 1993 there were 13,000 officially registered journalists and there may have been many unregistered ones. At present there are probably more than 26,000. As there are no powerful unions for journalists in India Indian journalism has no collective voice; but the large number and the great variety of journalists are in themselves guarantees of the freedom of the press.

Most Indian journalists are urban people who only occasionally show up in the countryside. But they have rural counterparts who are really behind the newspaper revolution which has swept India in recent years. These rural stringers are often graduates engaged in various activities in their locality. They may own some land or a repair shop and also serve as distributors of newspapers, as advertising agents and as part-time correspondents. They usually are not paid by the editors but send in their news items free of charge. If their contributions are printed, this enhances their reputation in the village and helps to increase the circulation of the paper which they distribute. In their own way, these people support the freedom of the press and it is mainly down to them that huge numbers of newspapers are sold in India every day.

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by Joel | 20 October 2008 · 5:53 pm

India’s Huge Informal Labor Sector

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 211-213:

The poor in India are a vast reserve army of cheap labour. Organized labour in the ‘formal’ sector of the economy is a comparatively small part of the total labour force. In 2003 the public and private sectors together employed 27 million workers. The private sector is the smaller one with 8.4 million but a greater share of the ‘manufacturing’ category with 4.7 million as against only 1.5 million in the public sector. According to the theory of W. Arthur Lewis, in a ‘dual economy’ (traditional and modern) there is a reserve army of labour in the traditional sector which supplies the modem one with a steady flow of new recruits. But the Indian economy is not a dual one: it consists of two parallel economies. Since the reform of 1991, employment in the formal sector has practically stagnated; there has been only a slight shift from the public to the private sector, the first losing and the latter gaining 1 million employees. These figures would confirm the frequent comments on the phenomenon of jobless growth. But, of course, this refers only to the formal sector; the actual growth takes place in the informal sector. In fact, from 1978 to 2000, the share of the informal sector in the total labour force increased slightly from 91.3 to 92.4 million, although one would have expected a decrease of informal labour in a period of steadily increasing economic growth. The wage differential between the two sectors is enormous. For employees in the public sector, official statistics show an average daily per capita rate of Rs 681. According to the National Sample Survey mentioned earlier, the daily wages for male casual labourers in urban areas are Rs 75 and in rural areas Rs 56; the rates for female labourers are Rs 44 and 36 respectively. The figure for the public sector would, of course, include the high salaries of the Class I officials, but they are a small minority when compared to the legions of humble Class IV officials who do manual work or errands for the higher-ups. Nevertheless, even these humble people are head and shoulders above the casual labourers in the informal sector. Moreover, their jobs are secure and permanent, unlike the ‘informal’ jobs, which are subject to the rule of ‘hire and fire’.

Subjection to the rule of ‘hire and fire’ has increased with the growing casualization of informal labour. New forms of contracting labour have developed which permit the employer to shift the onus of hiring and firing casual labour to agents who are told how many workers are needed at any given time. Casualization has particularly affected women workers who were previously not very active in the labour market but have joined it in recent years in increasing numbers. Concerned social scientists have coined the term ‘feminization of poverty’ in order to characterize this phenomenon.

The ‘informal’ proletarians are not protected by any trade unions, which for good reasons concentrate on the organized sector of the economy. Very few of the recognized trade unions can depend on regular fees paid by their members. Accordingly, union leaders must look for other sources of income. They usually squeeze the employers by threatening to stir up trouble. There is no collective bargaining in India: wages are set by officially appointed tribunals and there are also tribunals which try the cases of individual workers who have been made redundant or have not been paid the wages due to them. Therefore most labour leaders are lawyers who spend their time pleading before those tribunals. The informal proletariat has no contact with such tribunals or lawyers.

The usual staff of a workshop in the informal sector consists of the boss and fewer than ten workers. In small firms which operate as subcontractors for manufacturers, the boss may even be an engineering graduate. Capital investment in such workshops is minimal so very often they band together and help each other out. One has a lathe, the other a drilling machine, etc.; if the piece of work requires both, it is carried from one shop to the other. The ignorant observer may think that this cluster of workshops is a slum, but on closer inspection he will be surprised to see the quality and variety of their products. Bigger firms rely on such subcontractors for two reasons: first of all, they can keep the number of workers and the investment in machines limited; and, secondly, if there is a slack in demand they can cut the orders farmed out to the subcontractors. This explains the phenomenon of jobless growth in the organized sector. The huge number of subcontractors who have the reserve army of labour on their doorstep shield the organized sector against risks but can also respond very quickly to increased demand. There is, however, a growing gap between labour productivity in the organized and in the informal sectors. In 1983 labour in the organized sector was about six times more productive than that in the informal one; by 1999 the differential had increased to nine times. This would also account for the wage differentials between the two sectors.

The wages paid by subcontractors, particularly if they work for manufacturers producing cars or machine tools, have to be higher than the wages of casual labourers mentioned above, but they would still be much lower than those in the organized sector. The qualifications of the informal proletariat working for subcontractors range from those of skilled workers to that of untrained people. The skilled workers in workshops would be the ‘creamy layer’ of the informal proletariat and they would be above the poverty line. But the great majority of the reserve army of informal labour are quite poor, something that would be particularly true of the many landless labourers who are at the beck and call of the landowning peasantry. Earlier systems of permanent attachment of such labour to the households of their employers have long since disintegrated because the employer can always find casual labour and does not need to retain labourers in the off-season. Even at times when the harvest or other seasonal operations suddenly require additional labour, there are nowadays migrant labourers who make themselves available for seasonal employment. Workers from Tamil Nadu will show up in the Punjab or elsewhere at a distance of 1,500 kilometres from their home. Here, too, the informal proletariat shows its usefulness as a reserve army of labour. About 43 per cent of India’s rural population are landless. If one deducts from this about 8 per cent for traders, carters, and so on there would still be 35 per cent of labourers who depend on their daily wages.

Of course, ‘casualization’ is hardly limited to India or to informal sectors of large economies. One report last year estimated that 70% of the faculty in American universities now depend on part-time or limited-term contracts. So, to twist the clause that begins this passage: An oversupply of postgraduate degrees provides a vast reserve army of cheap labour for universities.

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by Joel | 7 October 2008 · 8:40 pm

Surprising Correlates of Birth Rates in South India

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), p. 181:

The National Population Policy for the year 2000 had once more set a target for the achievement of the replacement level of the Indian population. The replacement level is defined in terms of the Total Fertility Rate (TFR) of 2.1 births per woman in the course of her life and should be reached by 2010. Demographic projections would prefer to assume 2016 as a more realistic date. The average Indian TFR had come down from 6 in 1951 to 3 in 2001. To the great surprise of planners and demographers, several south Indian states have proved to be way ahead of the National Population Policy. Kerala registered a TFR of 1.71 in 2001, and Tamil Nadu was at almost the same level with 1.76, closely followed by Andhra Pradesh at 1.94. Karnataka was still above the replacement level, at 2.24; it was estimated that it would reach that level within a few years. Andhra Pradesh was the greatest surprise of them all: its TFR had dropped from 2.39 in 1997 to 1.94 in 2001. It has a high rate of female illiteracy and there has been no significant economic progress in this state. The major assumption of demographers that female education and economic progress would lead to a lower TFR was therefore contradicted by the experience of Andhra Pradesh. Moreover, the decline in the TFR usually takes time and does not happen in such a dramatic fashion as it did in Andhra Pradesh. Perhaps it was an awareness of future deprivation rather than of economic progress which prompted even illiterate women to resort to birth control. This goes against all normal demographic assumptions, but there was a striking parallel to this development in Andhra Pradesh in East Germany at the time of German reunification. The number of East German births dropped by 40 per cent at that time, which must have been due to apprehension of an uncertain future on the part of young East German women. This shows that perceptions of the future rather than long-term social and economic trends may influence the decisions of women. This is, of course, only one aspect of the rapid spread of birth control. Knowledge of the methods of contraception and the will to adopt them are also of great importance. Demographers who have studied the spread of adoption of contraceptives have noticed a snowball effect. After an initial phase when only a few women practise birth control, the demonstration effect catches on and others follow their example. In a strange reversal of the assumption that female education leads to birth control, it has been found that birth control may foster female education. Among illiterate women who adopted contraception there were many who would send their girls to school. The correlation seems to be significant, but of course it does not necessarily indicate a causal relation.

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by Joel | 4 October 2008 · 12:25 pm

Affirmative Action Dilemmas in India

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 168-170:

Before [V. P.] Singh was toppled, his government had introduced the 27 per cent reservations for the backward castes in August 1990. The Congress government under Prime Minister Narasimha Rao had to live with this new rule and made no attempt to reverse it. It was soon faced with a landmark judgment of the Supreme Court in November 1992, which forced the government to establish a National Backward Classes Commission with quasi-judicial powers to determine the claims of castes for the recognition of their ‘backwardness’. The judgment of the Supreme Court was due to a lawsuit initiated by some members of backward castes. The judges feared that they would be inundated with such suits and realized that they had no criteria by which to determine such cases. Moreover, they felt that litigants who were not at all backward as far as their economic situation was concerned would nevertheless try to obtain the benefits of affirmative action. The judgment of 1992 therefore included an injunction which obliged the government to define the criteria by which the ‘creamy layer’ of the backward castes would be excluded from such benefits.

The debate concerning the ‘creamy layer’ highlighted the problem created by the synonymous use of the terms ‘caste’ and ‘class’. All official statements referred to ‘backward classes’ when they really meant backward castes, the term ‘caste’ being deliberately avoided as it referred to an undesirable aspect of Indian social life. However, caste and class are not at all identical. Many members of the high castes are poor labourers, whereas there are many rich people of low caste origin. Since speaking of a rich class among the members of the backward classes seemed to be incongruous, the term ‘creamy layer’ had to be used.

The National Backward Classes Commission was established by an act of Parliament (Lok Sabha) in 1993. Even before it was constituted, a special commission had reported on the problem of the ‘creamy layer’. It was decided that the children of high government officials or of persons with an annual income above Rs 100,000 would not be entitled to the benefits of affirmative action. In 2004 this limit was raised to Rs 250,000 (approximately US$ 5,000). But whereas the ‘creamy layer’ could be defined in this way, it was much more difficult to fix the basic criteria for defining ‘backwardness’. Of altogether 1,133 applications received from various communities during the period from 1993 to 2003, the commission accepted 682 for inclusion in the list of backward classes and rejected 451. In its report submitted in 2004, the commission admitted that it had to base its decisions on inadequate data and often had to fall back on the census of 1931 as it was the last one which contained information on castes. The commission therefore recommended that future census operations should once more provide data on caste affiliations as it would otherwise be impossible to base affirmative action on reliable social data. It is doubtful whether the Indian government will follow this recommendation concerning census operations in view of the political trouble it might cause. Moreover, once it is known why such questions about caste are asked, interested parties would see to it that the respondents answered them in a suitable manner.

The problem of defining the criteria of ‘backwardness’ came up once more in 2006 when the Congress-led coalition government decided to extend the reservation for OBCs to educational institutions. The reservation of government jobs was controversial enough, but educational reservations cut even deeper as far as the career prospects of students from higher castes were concerned. Due to India’s rapid economic growth, many students look for jobs in the private sector rather than for government posts. But whatever job one wants to get, access to higher education is the necessary precondition. Once more the Supreme Court played a decisive role. It asked the government to specify the criteria for OBC reservations. In addition, doctors launched a nationwide strike against this new policy since they are the only group of educated people whose strike really matters. The government stuck to its policy. The political equation is obvious: there are probably about 400 million OBCs in India and their vote will decide the outcome of the national elections which are due in 2009.

In the absence of census data, the National Sample Survey Organization finally supplied some relevant data in 2006 which were based on a sample survey of 125,000 households. According to this, the proportion of OBCs in the Indian population amounts to 41 per cent whereas the Scheduled Castes account for 20 per cent and the Scheduled Tribes for 8 per cent. As far as household expenditure was concerned, the survey showed that in the rural areas the OBCs attained about the same level as the ‘forward communities’ in this respect, whereas in the urban areas these communities were far ahead of the OBCs. Of the members of urban ‘forward communities’ 52 per cent spent Rs 1,100 per month whereas among the OBCs only 28 per cent reached that level.

The politics of affirmative action has certainly strengthened the solidarity of the Other Backward Castes…. The ‘social federalism’ of a caste-based society is also reflected in the pattern of regional parties whose rise was discussed in an earlier chapter. The notions of hierarchy associated with a caste system have vanished from political life where the manifold patchwork of regionally dominant peasant castes is much more important than notions of hierarchy and hegemony. But one particular element of stratification has survived in spite of all affirmative action: the stigma of ‘untouchability’.

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by Joel | 28 September 2008 · 11:53 am

India’s Infrastructure: Bad News, Good News

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 157-160:

Next to airports, India’s seaports require thoroughgoing modernization. The biggest and most famous of them all, Mumbai, has a notorious reputation for terrible delays and incompetent handling of goods. A few years ago, turnaround time was about eight days, regardless of the size of the vessel; this has improved somewhat but even now about four days are required to load or unload a ship. This is due to deliberate negligence as the port earns more by collecting demurrage charges than by any other means. The trick of this trade is the stranglehold which Port Authority labour has on the loading and unloading of goods. In most other ports around the world, the port authority is merely a landlord, providing berths and cranes, etc. but no labour, with loading and unloading done by labour hired by the shipowner or his agent. The port authority with ‘dedicated’ labour is a British legacy. In British ports it may have made sense to retain a labour force specialized in loading and unloading ships, particularly in the past when most of this work was not mechanized. Nobody would have thought that delay rather than speed would be the result of retaining specialized labour. Making money on demurrage charges is, of course, a flagrant example of being penny-wise and pound-foolish. No shipowner in his right mind would enter a port such as Mumbai unless he absolutely has to because it is his destination. Bulk breaking is taking place elsewhere in efficient ports like Singapore or Colombo. Many a ship with only part of its load to be delivered to India would rather call at those ports than enter an Indian port. Jawaharlal Nehru Port across the bay from the old port of Mumbai is supposed to be somewhat more efficient than the old one, but it is first and foremost a container port under the management of the Indian railways and is thus not a direct competitor of the old port. Although Jawaharlal Nehru Port is India’s largest container port, it handles only about 10 per cent of the freight handled by Hong Kong, the world’s largest port of this kind. The inefficiency of Indian ports is not only delaying imports, it is also harming the export trade. In the old days of ‘export pessimism’ this was ignored, but now when producers in India wish to export some of their production to achieve economies of scale, they may give up such plans as their goods get stuck in the port….

The story of Sunil Bharti Mittal, who is now the biggest private operator in this field, is a good example of the rise of the new type of Indian telecom entrepreneur. He is not related to the famous steel tycoon Lakshmi Niwas Mittal, and his rather unusual family name Bharti is made up. His father, who belonged to a caste of traders, married a woman of a higher caste. This inter-caste marriage was frowned upon at that time and the couple adopted the name Bharti. Sunil started making cycle parts in Ludhiana. In 1983 when many imports were still banned, he hit upon the idea of manufacturing push-button telephones and then launched his Airtel brand of mobile phones in 1995. From making phones it was only one further step to acquiring two mobile phone licences and one fixed net licence. Subsequently Mittal expanded his operations and now provides his services in all 23 mobile telephone circles of India in which field he has overtaken the public sector firm BSNL. In order to raise the capital for this relentless expansion he linked up with foreign investors. In 2001 the American firm Warburg Pincus acquired about 6 per cent of Bharti Televentures; later the Singapore firm SingTel and the British firm Vodafone also acquired shares in Mittal’s company, but they are all minority shareholders. Meanwhile Sunil Mittal dominates the Indian telecom scene and continues to win prizes both in his personal capacity as an exemplary entrepreneur and for his company as the best in its field. He has also pioneered broadband connectivity in various fields and is always a step ahead in adopting new technologies. Mittal had started from scratch as an innovative entrepreneur. As he has stated, he was inspired by Mahatma Gandhi’s words: ‘First they ignore you, then they laugh at you, then they fight you, and then they lose.’

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by Joel | 27 September 2008 · 9:58 am

Policing the Pirates of Puntland

The India-oriented blog, The Acorn, recently noted that the Indian navy is proposing to join the multinational effort to police the pirate-infested waters off the Horn of Africa, many of them operating out of Somalia’s “self-governing” region known as Puntland.

Among the tasks assigned to the Combined Task Force 150 (CTF-150)—an international naval task force comprising, among others, of US, British, French, Pakistani and Bahraini ships—are maritime security operations in the Gulf of Aden, Gulf of Oman, the Arabian Sea, Red Sea and the Indian Ocean. While its purpose is to deny the use of the seas to smugglers and terrorists the main problem in the area under its watch is piracy.

CTF-150 doesn’t have enough ships to secure one of the world’s busiest shipping lanes. So it advises large, slower vessels to travel in convoys so that it can better watch over them. But since this is not always possible, around one in 500 ships fall victim to pirates. Since the monthly traffic is around 1500, pirates succeed in raiding three or four ships each month.

Now the Russian navy is sending a warship to the area after one group of the pirates may have bitten off more than they can chew.

SOMALI PIRATES who seized a Ukrainian ship carrying 33 T72 battle tanks – apparently bound for the autonomous government of South Sudan – yesterday warned against any attempt by Western navies to rescue the vessel’s weapons cargo or its crew.

Januna Ali Jama, a spokesman for the pirates in the breakaway north statelet of Puntland said the pirates would soon begin the routine Somali pirate tactic of negotiating the return of the cargo ship Faina to its Ukraine state owners in exchange for a ransom.

Jama told the BBC Somali Service that the pirates demand is £18 million from the Kiev government because apart from the Russian made tanks the Faina is carrying “weapons of all kinds”, including rocket-propelled grenades, anti-aircraft guns and many hundreds of thousands of ammunition….

The pirate syndicates – of which there at least five, each about 1000-strong – operate out of Puntland, far to the north, wrapped around the Horn of Africa where the Gulf of Aden meets the Indian Ocean, which declared itself separate from the Republic of Somalia 10 years ago. Puntland is to Mogadishu what Kurdistan, semi-autonomous and far off in the northern mountains of Iraq, is to Baghdad.

Unrecognised internationally – although the British Embassy in neighbouring Ethiopia maintains close contact with the Puntland government, which is allowing oil exploration by three Western companies – little diplomatic pressure can be put on Puntland, which says piracy grew after international “sea robber” fishing fleets plundered and wrecked its rich fishing grounds. The United Nations estimates that fish worth at least £50 million a year are plundered illegally from Somali waters by Spanish and other foreign boats.

The pirates are unlikely to be unable to unload the tanks because of a lack of specialist heavy-lifting gear in the tiny ports and innumerable coves of Puntland, a barren land three times the area of Scotland which historically depended on fishing and camel and goat-herding.

But that will hardly discourage the pirates. What they want is booty, in the form of on-board cash, cargo and, most importantly, ransom money, which owners are increasingly willing to pay, given the huge values of ships and their cargoes and the daily costs of maintaining them at sea. On the same day as the Faina was captured, another Puntland pirate syndicate released a Japanese ship and its 21-member crew after a £1 million ransom was paid. The 53,000-tonne bulk carrier Stella Maris had a valuable cargo of zinc and lead ingots. And as the Stella Maris was being freed, Somali pirates were hijacking a Greek chemical tanker with 19 crew on board as it sailed through the Gulf of Aden from Europe to the Middle East.

The Faina is believed to be heading to the pirate port of Eyl, the main destination of hijacked ships where Puntland entrepreneurs run special restaurants for the hundreds of seized crewmen and where the pirates’ accountants make calculations on laptops and drive state-of-the-art land cruisers….

Worldwide, pirates attacked a known 263 large vessels in 2007, up from a reported 239 in 2006, according to Choong’s piracy reporting centre. Southeast Asia, especially the shipping lanes of the Malacca Straits between Malaysia and the huge Indonesian Island of Sumatra, used to be the world’s busiest place for pirate attacks. Better co-operation between southeast Asian nations and the consequences of the 2004 tsunami have greatly reduced the number of attacks. Many pirates operated out of Aceh, the northern province of Sumatra, but the tsunami destroyed their ports, wrecked their boats and killed many of the pirates.

Somali piracy easily tops the world table, both in terms of the number of attacks and the money made. It is the Somali financiers sitting mainly in Dubai, Britain, Canada, Denmark and Kenya who make the big money by keeping the bulk of the ransom payments. Pirates based in Nigeria and Peru are also climbing the league table.

France is now circulating a draft resolution in the UN Security Council urging nations to contribute more warships and aircraft to the fight against piracy off Somalia. While the Foreign office has ordered the Royal Navy, to the incredulity of the nation’s maritime industry, not to detain Somali pirates from fear of human rights complications, the French are being pro-active.

UPDATE: On The Atlantic magazine’s blog The Current, Robert Kaplan describes a bit of the lifestyle of these pirates.

I spoke recently with several U.S. Navy officers who had been involved in anti-piracy operations off Somalia, and who had interviewed captured pirates. The officers told me that Somali pirate confederations consist of cells of ten men, with each cell distributed among three skiffs. The skiffs are usually old, ratty, and roach-infested, and made of unpainted, decaying wood or fiberglass. A typical pirate cell goes into the open ocean for three weeks at a time, navigating by the stars. The pirates come equipped with drinking water, gasoline for their single-engine outboards, grappling hooks, short ladders, knives, AK-47 assault rifles, and rocket-propelled grenades. They bring millet and qat (the local narcotic of choice), and they use lines and nets to catch fish, which they eat raw. One captured pirate skiff held a hunk of shark meat so tough it had teeth marks all over it. With no shade and only a limited amount of water, their existence on the high seas is painfully rugged.

The classic tactic of Somali pirates is to take over a slightly larger dhow, often a fishing boat manned by Indians, Taiwanese, or South Koreans, and then live on it, with the skiff attached. Once in possession of a dhow, they can seize an even bigger ship. As they leapfrog to yet bigger ships, they let the smaller ships go free. Because the sea is vast, only when a large ship issues a distress call do foreign navies even know where to look for pirates. If Somali pirates hunted only small boats, no warship in the international coalition would know about the piracy.

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by Joel | 20 September 2008 · 12:31 pm

India’s Sweatshop Diamonds

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 96-97:

When India had shielded its economy behind tariff walls, its share in world trade had dwindled into insignificance. As mentioned earlier, ‘export pessimism’ was the prevailing mood at that time. It was not easy to change this mood so only new branches of export production could escape it. Nowadays three new types of commodity account for more than half of India’s total exports. Diamond processing was the first and the most unexpected success story of them all. Of course, India had been known as a source of beautiful diamonds in ancient times, but in modern times South Africa has been the leading producer of raw diamonds and the processing is done in Western Europe in places such as Antwerp. Only a few decades ago Jewish merchants controlled almost the entire diamond trade and Jewish artisans participated in the processing of these precious stones. Suddenly a community of Gujarati merchants from Palanpur cut into this trade and made use of cheap and skilled labour available to them in places such as Surat and other towns of Gujarat as well as on the outskirts of Mumbai.

India has to import the raw diamonds; the contribution of its export industry is the value added by expert processing. A breakthrough was provided to this new industry by the creative use of industrial diamonds. Only about a quarter of all diamonds mined are normally fit for jewellery; the rest are passed on to the makers of machine tools for cutting and grinding. Most industrial diamonds are small. Gujarati entrepreneurs knew how to get these tiny stones processed and adopted novel designs of jewellery which sparkled due to the collective effect of many small stones rather than the individual radiance of larger and very expensive diamonds. This created a new market of middle-class consumers who could not afford expensive jewellery. But the Gujarati entrepreneurs also ventured into the market for very precious stones. They even created new brands such as the Nakshatra diamonds endorsed by the Indian actress Aishwarya Rai, a former Miss World.

The buying of diamonds in places like Antwerp is done by the so-called ‘sightholders’, experts entitled to inspect raw diamonds and select them for their respective companies. Earlier these sightholders were a charmed circle of insiders, but the Gujarati merchants gained access to the circle and now almost dominate it. Eleven of twelve diamonds processed in the world are now processed in India. This, of course, means that the fast growth which this Indian industry registered in recent years is bound to level off. The value of Indian exports of precious stones – mostly processed diamonds – has expanded by leaps and bounds. In 1966 the value of these exports was a mere US$ 25 million; by 2004 it amounted to US$ 14 billion.

India’s greatest advantage is the low wage paid for the rather demanding job of diamond processing. The fixture in which the diamond is held during processing is called a dop. With a semi-automatic dop a worker can polish 800 to 1,000 diamonds per day. The wages of Indian workers in this line are about 10 per cent of those earned by their colleagues in Antwerp. This is why more than 800,000 workers are employed in the various workshops in Surat whereas in Antwerp there are only about 30,000 still active in this field. Surat is just one of the Indian centres of diamond processing, though perhaps the largest. The conditions of the workers are generally quite miserable and children are also recruited for this work. Large profits are reaped only by the entrepreneurs, who have now extended the scope of their work to other Asian countries and even to Russia.

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by Joel | 20 September 2008 · 7:05 am

India’s ‘Fraternal Capital’ and Contractor Networks

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 100-101:

Tiruppur, a town near Coimbatore in Tamil Nadu, has emerged as a major centre of knitwear production and Sharad Chari has made a fascinating study of the mode of production in this town. He has described the emergence of ‘fraternal capital’ as a typical form of cooperation among small-scale entrepreneurs in this field. Most of the owners of the small workshops and even a large number of their employees belong to the Gounder caste of peasants who have made a successful transition to industrial production. The Gounder peasants are used to hard work in intensive agriculture where the landholder and his labourers are working together and this style of operations has been transferred to the shop floor where the owner is always present, usually controlling the stitching table where the cloth is converted into garments. Gounders who want to emphasise the special features of their work often make it appear as a kind of ‘work ethic’. Actually it helps them to justify the control of labour in their small-scale industry. They do not strive for economies of scale as these would be diseconomies under the official rules favouring small-scale enterprises. Accordingly, successful entrepreneurs do not invest their capital in expanding their production, but in setting up ‘fraternal’ enterprises run by other members of the Gounder caste, albeit these people are not necessarily related to them in terms of family ties. Total production has thus grown very quickly and whereas earlier only men worked in this industry, more and more women have been recruited in recent years. Most workers are paid by piece rate or they work under various types of contracts rather than receiving regular wages.

When production for export increased, a new elite of export merchants arose from the ranks of these small entrepreneurs. Smart young men in business suits, wearing sunglasses, can be seen chatting with their relatives on the shop floor who provide them with the material which they market in New York or elsewhere. Many of these exporters are assemblers rather than producers. The links of fraternal capital connect all these people and make it difficult for outsiders to penetrate this business. In this way fraternal capital provides horizontal and vertical linkages which are otherwise only found in big corporations. Decentralized supervision – and exploitation – of labour is an asset in this type of business organization. Contracting in and out enables the small entrepreneurs to respond to changing demand. Such an organization helps to defend the class of entrepreneurs against labour unions, which have a strong tradition in this area.

Another interesting example of the control of labour in this region is the putting-out system practised by a producer of rag carpets in the adjacent Erode District. He uses rags from the hosiery industry and gets carpets woven for the big Swedish firm IKEA. Initially it was traditional weavers who got involved in this business, but soon the putting-out system was extended to villages whose supply of labour was of a very different kind. In a Gounder village affected by water scarcity, the peasants took up carpet weaving in order to survive. In another village inhabited by migrant construction workers, the women who had also participated in this work shifted to carpet weaving, which they could do at home. Tapping labour resources of different kinds for export production is a characteristic feature of the informal sector of India’s economy.

Similar features of decentralized production and exploitation of labour can be observed in the garment industry of Ahmadabad, a city once famous for its large composite textile mills, most of which have long since closed down or are ‘sick‘. But in the 1990s hundreds of small workshops producing ready-made garments sprang up. Their production is supplemented by home-based women who stitch garments for entrepreneurs who operate a putting-out system. These women had been used to stitching petticoats and children’s wear; they own very simple sewing machines. When they were required to stitch more complicated garments for export their skills and their machines often proved insufficient for the new tasks. They usually earn piece rates which amount to about 2 to 5 per cent of the value of the articles they produce. With such low wages they can hardly afford to invest in add-ons to their sewing machine for new lines of production. Nevertheless, they somehow managed to get on with their work. This area of Gujarat is also famous for its embroidery, which has been successfully adapted to the requirements of export production, a line of production in which India is ahead of China.

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by Joel | 6 September 2008 · 1:59 pm

What China Taught India, 1962

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 46-48:

The big blow to [Afro-Asian] solidarity came in 1962 when China invaded India in order to settle a border dispute. Nehru had assumed that China was an anti-imperialist power just like India and that such powers would live in peace with each other. Moreover, he had supported China’s control over Tibet, which was supposed to be an autonomous region. Unfortunately, he had failed to get from China a definitive statement concerning the India-China border in return for this support. The treaty which Nehru concluded with China in 1954 only mentioned some passes through which the trade between the two countries might flow. It also contained the five principles (panchshila) relating to mutual benefit and non-interference in each other’s internal affairs which Nehru henceforth regarded as the cornerstone of his foreign policy. However, none of this could prevent a clash with China. In 1959, the Dalai Lama, Tibet’s priestly ruler, fled to India and Nehru granted asylum to him but did not permit him to establish a Tibetan government in exile. In the following months border clashes increased and notes were exchanged which Nehru did not publish until he was forced to do so by the Indian parliament. In 1961, the Chinese Prime Minister Chou En-lai visited India for border negotiations. Nehru had collected all relevant maps and was surprised that Chou En-lai did not wish to look at them but immediately proposed a deal: China would recognize India’s eastern border as delineated by the McMahon Line of 1914 if India would leave the Karakoram Pass and Aksai Chin (northeast Kashmir) to China. China had secretly occupied most of Aksai Chin in the 1950s, so India would simply have to acquiesce in this loss. The access to the Karakoram highway was of great strategic importance to China for the control of its western provinces. However, Nehru as head of a democratic government could not deal with national territory as easily as Chou En-lai had expected. The deal was not accepted and border clashes continued. Finally, China forced the deal on an unwilling India by means of a well-planned military offensive. When the USA and the Soviet Union were busy with the Cuban Missile Crisis in October 1962, a division of Chinese troops crossed the McMahon Line in the east and soon reached the Assamese plains. But this was a diversionary move. These troops withdrew before their supply lines could be cut. In the meantime the Chinese also launched a massive offensive in the west to capture the Karakorum highway – and they did not withdraw as this was the area which really interested them. Subsequently, there was a conspiracy of silence between India and China as to what had happened there. India was not willing to admit its losses and China would not reveal its illegitimate gains. China has adopted an attitude of superiority ever since and sometimes this has even been expressed quite openly. When China invaded Vietnam in 1979, Deng Xiao-ping compared this to what China had done to India in 1962. Atal Bihari Vajpayee, who visited China at that time as India’s Minister of External Affairs in order to ‘normalize’ relations with China, got this message and immediately returned home. ‘Normalization’ had to wait for a long time.

The clash between India and China had sounded the death knell of Afro-Asian Solidarity even before 1962, but anti-colonial solidarity still motivated Nehru, who was sensitive to appeals from leaders of countries which were involved in their freedom struggle. In September 1961, Kenneth Kaunda, the future President of Zambia who had attended the Belgrade Conference of the Nonaligned Nations, visited New Delhi and gave a lecture in which he blamed Nehru for tolerating Portuguese colonial rule in Goa. He argued that rather than setting an encouraging example which the Africans could follow Nehru obviously wanted to wait until the Africans had overcome Portuguese colonial rule, whereupon Goa would then fall into his lap like a ripe fruit. Kaunda was clearly quite right in assessing Nehru’s motives and his speech stung him into action. Goa was liberated by the Indian army in December 1961; it proved to be a walkover but this could not have been predicted. As a member of NATO, Portugal was well armed and had a strong garrison in Goa. It could also rely on support from Pakistan. If the Portuguese Governor-General had decided to defend Goa seriously, the liberation could have ended in a bloodbath. Fortunately, he only blew up a few bridges and surrendered gracefully as he was aware of the far superior power of the Indian army. This was Nehru’s last great triumph, but he experienced it with mixed feelings. He lost his reputation as an apostle of peace and was berated by every Western power. This he could live with, but the humiliating defeat he suffered at the hands of the Chinese in 1962 broke his heart. He must have felt very deeply that he had failed as architect of India’s foreign policy.

Nehru’s successors adopted a more realistic approach: India’s regional position was more important to them than its role in world affairs. The twin challenges of China and Pakistan converted India with a vengeance into a self-conscious territorial state concerned with its defence. A retired Indian general had once said that the colonial legacy of a huge army embarrassed India’s political leaders as much as inheriting a brewery would embarrass a teetotaller. Nehru did not invest much money in armaments; however, this changed after India’s defeat by the Chinese in 1962. Defence expenditure was stepped up, which alarmed Pakistan. The Chinese had shown that India could be beaten and had thus set Pakistan an example, but due to India’s rapid armament, the window of opportunity for Pakistan seemed to be closing fast. Pakistan’s military dictator Ayub Khan was pushed by his young Foreign Minister, Zulfiqar Ali Bhutto, to attack India in Kashmir. Bhutto had forged a military alliance with China in 1963 and Pakistan had yielded a large part of territory to the west of the Karakoram Pass to China at that time. Nehru’s successor, Lal Bahadur Shastri, was considered weak and inexperienced. Pakistan tested his reaction to a border intrusion in the Rann of Katch in the summer of 1965. Shastri requested the then British Prime Minister Harold Wilson to arbitrate in this matter, which only served to encourage Ayub Khan to launch his Operation Grand Slam in September 1965 and he sent his tanks to cut the only connection between India and Kashmir. If Shastri had again called for arbitration, Ayub Khan could have finished his business in Kashmir and then negotiated from a position of strength. But this time Shastri ordered his troops to launch a counter-attack on Lahore. He also refused to listen to a Chinese ultimatum which referred to their threat to cross the border of Sikkim. Pakistan had hoped that China would open a second front in the east, but the Chinese did not follow up their ultimatum and bitterly disappointed their Pakistani allies. China had encouraged Pakistan in the hope that it would do some damage to India, but it was not interested in investing anything in this war as it had reached its aims in 1962. The same Chinese stratagem was repeated in 1971 when Pakistan lost its eastern half and the Chinese supported Pakistan, but did not give the Pakistanis help when they needed it.

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by Joel | 31 August 2008 · 10:40 am

Wordcatcher Tales: girmitya, kala pani

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), p. 1:

India is a state encompassing a civilization. It includes a multitude of ethnic and linguistic groups which share a common cultural background. Its historical continuity is amazing…. In the recent past India has also become a territorial nation state with defined borders and institutions guarding its territorial integrity. The idea of a clearly delineated territoriality was not prevalent in India in earlier times. The Himalayas in the north and the ocean encircling the country appeared to those living inside it as ‘natural’ boundaries. In fact the mountain people never conceived of the Himalayas as a boundary and they ‘transgressed’ it in many ways. Many of the coastal people, on the other hand, participated throughout the ages in maritime trade. The orthodox prejudice against crossing the kala pani (black water) was not shared by them. This aversion to seafaring was a relatively late phenomenon in an era when people in India became more introverted and defensive.

The awareness of the ‘natural’ boundaries of India did not imply a feeling of national identity in territorial terms. Nationalism first found expression among educated people and did not affect the common people for along time. The poor people from northern India who were transported to Fiji as indentured servants to work on the sugar plantations did not refer to themselves as ‘Indians’ but as girmityas. The word girmit was a Hindi neologism derived from ‘agreement’, the document which bound them to their servitude. Their identity was derived from this common fate. It was only later when emissaries of Mahatma Gandhi reached Fiji that these girmityas became Indians.

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