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August 2015

Markets Destroy Traditionalist Oppression

The market process makes entrepreneurs. Entrepreneurs don’t only come from the elite.

So far this year, my favorite Cato Institute paper is one that fairly few have probably read. It’s not about Obamacare or climate change. It’s not even about the United States. Still, it tells a remarkable story about the market order and its enemies. The paper is called “Capitalism’s Assault on the Indian Caste System: How Economic Liberalization Spawned Low-caste Dalit Millionaires.” It’s by Cato Research Fellow Swaminathan S. Anklesaria Aiyar.

For decades following independence, India had a socialist economic system, one in which businesses were minutely regulated, heavy industry was nationalized, production quantities were officially set, and barriers to market entry were high. This ostensibly modern state of affairs sat side by side with certain traditional social features, including rigid stratification under the caste system. Predictably, upper-caste individuals overwhelmingly captured the special favors that socialism dispenses. The upper castes dominated Indian industry, not by merit, but by political pull.

These two systems, the caste system and socialism, were supposed to be enemies. Indian socialists claimed that they wanted to eliminate the inequalities of the caste system. Embarrassingly, however, the socialists’ favored methods didn’t work at all. Political set-asides and official bans on caste discrimination only created a thin upper crust of politically connected dalits. Yet extreme poverty, lack of mobility, and severe social discrimination remained for nearly all the rest.

Subaltern studies is a field from which we libertarians could maybe learn a thing or two. Its key lesson for the moment is simple: Rarely do designated subaltern elites bring genuine improvement to the vast majority of the oppressed. More often, they perpetuate oppression by putting a nice, familiar face on it. Designated elites can channel and often dissipate legitimate subaltern anger. To simplify a bit: “How bad can things be when we have dalits in parliament?”

This was also how socialism managed to sit so well with India’s social stratification. At root, the two are surprisingly close: A socialist society cannot help but be stratified, because it entrusts to a well-connected few the direction of the country’s economic activity. The well-connected few can also set the rules for entering the club. And for this purpose, traditional stratification patterns will do very well indeed. Meet the new boss, same as the old boss.

Socialist societies can thus end up resembling – or just sitting comfortably atop – traditional, hierarchical societies much more than either socialists or traditionalists would like to admit. “Strange to say,” wrote Alexis de Tocqueville, but “[socialism] seems to have been the offspring of royal despotism.” But it wears the mask of the people.

One of the great things about the market order is that it dispenses with the pretty facade. Capitalism puts no one on the elite board tasked with ending elitism. Capitalism reserves no special seats in parliament. The market order arrives unwanted and mistrusted. Its first point of entry is, more often than not, by way of the black market.

And yet capitalism makes brick houses. It makes televisions. It makes food that is abundant and cheap. It makes electric fans and bicycles and motorcycles. And since India’s leadership began economic liberalization in the 1980s, the dalits – the lowest stratum of the caste system – have seen substantial increases in all of these welcome consumer amenities.

The market process also makes entrepreneurs – people from all walks of life who have some idea of what customers might want, and who have the discipline to act on their vision. Entrepreneurs don’t only come from the elite. They are dispersed throughout society, seemingly at random. They aren’t made by government quota, and a license to do business does not an entrepreneur make. Where India’s economy was formerly dominated by high-caste networks and families, now what matters most is “the price – and not the caste – of the supplier,” writes Aiyar. Dalit millionaires have begun to proliferate.

Unlike under socialism, the rest are doing better as well. As Aiyar notes, in a poll of dalits, “61 percent in the east and 38 percent in the west said their food and clothing situation was ‘much better.’ Only 2 percent said their condition was stagnant or worse.” And the old, oppressive social order is finally crumbling:

Traditionally, dalits were seated separately (sometimes in a remote courtyard) at social occasions such as weddings to avoid “polluting” upper-caste guests. The practice of separate seating at upper-caste weddings is down from 77.3 percent to 8.9 percent in eastern Uttar Pradesh, and from 73.1 percent to 17.9 percent in western Uttar Pradesh.

It’s one practice out of many, but it’s indicative of a trend – a familiar trend to countries that have already liberalized. In the West, women, Jews, other religious minorities, gays and lesbians, and others who have traditionally been marginalized all have the market process to thank for the general overthrow of the bad old days. Markets give economic independence, and economic independence means that we don’t have to put up with traditionalist nonsense if we don’t want to. If you don’t treat us well, we can and will make our way without you. 

The improvement is far from total, and liberalization itself could stand to go a lot further, both in India and elsewhere. But the lesson is clear: If we want to destroy an old, oppressive order, the market process is the best tool for the job.

Markets tend to be excellent at giving people individualized goods and services. All that matters is that they’re willing to work, and the market will do all it can to keep prices as low as possible. Markets, though, tend to be lousy at instantiating static visions of what a society ought to look like. As Robert Nozick put it, liberty upsets patterns. The market replaces static patterns with a flexible order, one that answers to absolutely nobody’s comprehensive social vision, while giving just about everybody an improving standard of living. As Aiyar writes, “Karl Marx was wrong about many things, but was right about one thing—the revolutionary nature of capitalism in destroying feudal values and institutions, and allowing new entrepreneurial classes to arise.”