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Spirits of Capitalism: Explaining Industrial Variation in South Asia

  • Author(s): Naseemullah, Adnan
  • Advisor(s): Chhibber, Pradeep
  • et al.

Over fourteen months of field research studying manufacturing firms in South Asia - spread across three industries in fifteen cities in India and Pakistan - uncovered a remarkably consistent pattern of diversity in firm-level industrial strategy. Such a pattern cut across states and provinces, industries and national boundaries, thus presenting a challenge to state-centric explanations of firm behavior. Through interviews with more than two hundred firms, two categories of strategy emerged in every research site and in every sector. Some firms exhibited paternalistic relationships with their workers, conservative modes of financing and tended to see the state as a protector of indigenously developed norms. Other firms deployed professional institutions for the management of workers, liberal modes of financing including high levels of leverage, and tended to see that state as a promoter of international norms.

I argue that instead of strategies being derived as responses to government policy or market conditions, manufacturers in South Asia formulate relationships with other actors in the economy based on their perspective on the character of the economy and the means and ends of industrial production. Those who perceive the economy through technocratic perspectives tend to see the economy as a space ruled by universal norms and practices, and thus establish more systematic relationships with workers, finance and the state. Those who maintain embedded perspectives tend to see the economy as constituted by dense networks of individual relationships, and thus establish more personalistic relationships with workers and the state while building up finance internally. These perspectives often endure within firms over time, as second- and third-generation manufacturers follow the guidelines of the firm's founder. They do not correlate with a particular size of firm, industry or location, but do however correlate with the education and work experience of manufacturers and the strength of institutions within the firm over time.

Such cleavages in industrial strategy and manufacturers' perspectives reflect a broader division within South Asian society of the means and ends of economic development, one that was distilled and legitimated during national resistance against imperial rule. Some among the nationalist movement, who forwarded a vision of development based on socialistic economic planning, saw development as a rationalistic process of industrial catch-up, with the state as the central actor in disciplining and transforming society. Others held that development lay in the rejection of western norms and values, and a return to a mythical pre-colonial society of traditional hierarchies and economic relations submerged in moral frameworks, where the state would serve as a protector of this organic society. These positions in the nationalist movement both reflected and consolidated divisions among indigenous society, divisions that are operative more than six decades later in the technocratic and embedded perspectives among manufacturers in contemporary South Asia. The continued existence of such dual modes of capitalist strategy and practice also represents a portrait of the South Asian state that - far from disciplining society into a unitary institutional framework or being prevented from doing so by capture - actively maintains and supports multiple modes of doing business. Based on the study of Indian regulatory documents, I suggest that this is because the state tries to forward several different developmental interests, from increasing exports to creating employment, simultaneously, rather than maintaining a singular focus on maximizing economic growth.

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