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Caste Identity and Economics

The Grammar of Caste: Economic Discrimination in Contemporary India by Ashwini Deshpande (New Delhi: Oxford University Press), 2011; pp xxi + 295, Rs 695

Caste Identity and Economics

Sukhadeo Thorat

o deal with the complexity of economic behaviour with greater ease, theories have developed behind the protected walls of “other things being given” to isolate the infl uence of other factors in economic decisions. However these protected walls have been dismantled in stages, and have eventually led to the development of various branches of economics. The relaxation of the assumption of institutional neutrality led to the rise of the branch of institutional economics, which now recognises that institutions (rules, norms, and ideologies) matter in economic outcomes. Similarly, the rules and norms that govern exchange in various markets also matter. Ashwini Despande’s The Grammar of Caste: Economic Discrimination in Contemporary India deals with this neglected theme of “identity and the economics” in the Indian context and discusses how economic outcomes are shaped by caste identity.

The book discusses the theories and empirical evidence on economic discrimination, its outcomes and policies. In this sense, it is an all-inclusive volume covering the relevant aspects on the subject. Needless to say, this book is an i mportant contribution to the theme.

Theories of Economic Discrimination

The book begins with a discussion of the theories with a focus on the neoclassical which shows how social identities of economic agents can be central to the determination of economic outcomes. Two main theories, namely, the “Taste for Discrimination” and “Statistical Discrimination” are discussed in detail. A ccording to the “Taste” theory, an individual will discriminate simply because she has a taste for it. This is due to prejudice stemming from a set of beliefs or values that are formed without any objective consideration of fact. The statistical

book review

The Grammar of Caste: Economic Discrimination in Contemporary India by Ashwini Deshpande (New Delhi: Oxford University Press), 2011; pp xxi + 295, Rs 695.

discrimination model, on the other hand, locates the source of discrimination in imperfect information that employers have about various groups. The judgment about productivity is then determined by received social convention and uses these beliefs (stereotypes) in hiring and setting wages of the persons with a certain social identity such as race, gender or caste. The hiring, allocation of jobs and wages often get shaped by the perceived notion of productivity of a group of workers rather than actual productivity. It is possible for the employer to discriminate without necessarily having a taste for discrimination.

Application to Caste

The author then switches over to the application of what she calls “Western imagination” to the institution of caste and discovers only a handful of theoretical works that have especially focused on the economics of caste (unfortunately none by Indian academics), revealing a disturbing silence or caste blindness in the modern Indian theoretical writing in economics, which is otherwise extremely rich. Among the few attempts, the one by George Akerlof appears to be seminal on caste identity and economic outcomes, because most of the later theoretical attempts have been based on Akerlof’s work on caste. All of them recognise a few economic features of the caste system with respect to property rights and occupations – fixed, compulsory, hereditary, and hierarchical. Akerlof explained caste discrimination within the statistical discrimination framework, in which “the caste identity of the agent perceived by other agents is seen as an indicator of

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merit or worth which, in turn, determines their labour market outcomes” in terms of hiring and wage. Thus, caste identity is seen to flow from a set of features attributed to individuals from

the low castes which decide how others will behave with them and they in society in economic dealing. These attributes are seen as indicators of merits or worth. Scoville looks at castes as a “system of human resource allocation and a system of ‘production and distribution’”, with reciprocal obligations and mutually beneficial division of labour – reciprocity determined by some assumption of fairness or fair exchange. Ashwini Deshpande rightly points out the limitation of Scoville’s approach insofar as “by highlighting interdependence, it takes away the hierarchical and exploitative nature of the caste system and presents a benign picture that emphasises the role of the caste system as a facilitator of mutually beneficial division of labour”. The Deepak Lal explanation of caste system is essentially a variant of the Akerlof model; it argues that the caste economy was developed to deal with the set of problems that ancient Indians were facing, the need for secure labour supply for agriculture and to overcome uncertainty concerning outputs.

Unlike others, Deshpande does not undermine the theoretical contributions by Indian writers. In fact she brings out a good deal of insight from the writings of three writers, namely, Phule, Periyar and Ambedkar. The Indian theorists of caste brought a new dimension to the interpretation of the caste system. Phule and Periyar shared a more or less common approach towards caste. Both recognised inequality as a governing principle of the caste system in economic, educational and social relations. Both also recognised the role of ideology (religious and social), which includes the shastras, smritis and the Gita as a body of Hindu religious literature that forms the ideological base for the caste system. Both also recognised brahminism as an ideology of oppression and dominance rationalised by customary laws and religion, and the brahmin as the leading defender

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of the caste system. Both used the framework of the caste conflict, while Phule articulated the caste confl ict between brahmins and the low/lowest caste (the shudras and ati-shudras). Periyar viewed it as a conflict between the brahmin and the non-brahmin. Thus, both in Phule and Periyar, the brahmin/non-brahmin or shudra/ati-shudra confl ict constitutes the central element that shapes Indian society. However, both refrained from defining the essential features of “brahminism”. Also, although both refer to the nature of oppression and dominance involved in the caste system in a general way, their analysis is devoid of analytical discussion of its dimensions.

It was Ambedkar who dealt with these issues with more clarity and richness. In fact, Ambedkar gave an overall theory of the caste system (and not just its economic theory), and dealt with its origin and growth, linkages with Hindu religious ideology, its features and the consequences. Ashwini Deshpande discusses the contribution of Ambedkar but begins with an apologetic note. She observes, “while we cannot reproduce the richness either of Ambedkar’s thoughts, it is only appropriate for us to take a glimpse of his economic critiques of the caste system”. Indeed Deshpande gives only a glimpse of Ambedkar’s views, limiting herself to the consequences of the caste system and, in the process, leaves out his theoretical contribution to the theory of the origin and growth of caste and untouchability, and its features. She does refer to Ambedkar’s 1916 paper “Castes in India: Their Mechanism, Genesis and Development” and the book Annihilation of Caste (1936), but does not discuss the element of theory and its comparison with neoclassical writers, or with Phule and Periyar. There is also no discussion of the views of Ambedkar on the dynamics of caste, which is the subject matter of Annihilation of Caste. Beside the three essays, namely “Essential Features of the Caste System”, “Unique Features of the Caste System” and the “Philosophy of Hinduism” which examined features of the caste system fi nd no place in Deshpande’s discussion. The third e ssay examined the religious (ideology) foundation of the caste system. By not covering the views of Ambedkar, the a uthor has deprived herself of his rich contribution to the theoretical aspects of caste system.

Dynamic of Caste System

The caste system as an institution has also undergone a signifi cant change. Deshpande deals with this issue, drawing mainly from the current theories. Akerlof believed the mechanism of social ostracism (with social and economic p enalties) to be the main deterrent to change from the customary norms of caste relations both by the high and low castes. The greatest rewards go to those who do not break social customs. Therefore, the high castes who enjoy privileges have their prejudices and desire to perpetuate domination, and prevent collective action for change in the caste system. For the lower castes, fear of social ostracism by the high castes discourages a move for change. The author rightly points out the limitations of the “cost and gains hypotheses” and urges an i ncorporation of the role of collective a ction for social reforms undertaken by discriminated groups, legal reform, and the economic empowerment of dalits in the theory of change. Scoville pointed out three barriers that ensure that institutional change in the caste labour market will be minimal or nil. Deshpande argues that in the modern occupational structure, heredity plays a much smaller role and labour market barriers work differently. This needs to be explained. For the right reason she argues that while these theories try to explain the changes in the caste system as a whole, it is equally relevant to explain changes that take place in degrees and parts, which, in fact, is the situation.

Discrimination and Inequalities

After covering the ground in theory, Ashwini Deshpande analyses the economic outcome of the caste system in terms of caste and gender disparities in human development. Using the large data sets that are available on a variety of indicators of material well-being, she aggregates them into what she calls the “Caste Development Index”. She comes out with strong evidence of a persistence of caste disparity. And also indicates that the scheduled castes (SCs) continue to belong to the lowest rung of the economic ladder, calling into question any notion of substantial upward mobility. She then goes on to explain the inequalities in human development between the SCs and the rest. The book provides considerable evidence that while part of the present inequalities are a result of past discrimination, part of them are also due to continuing discrimination in employment and wage earning in the formal private sector in rural and urban areas in the “present”. In the end, the author observes that “(the) evidence indicates that lip service to merit notwithstanding, the working of the markets shows a deep awareness of caste and r eligion cleavages and indeed perpetuates caste discrimination in the present”.

Affirmative Action Policies

The last chapter, “What Is To Be Done?”, deals with the intensely debated issue of policies. It begins with the question: “Do we need special policies to tackle discrimination and disparities or are universal anti-poverty or redistributive policies enough to close the caste gaps?” All possible issues relating to policies are raised and discussed. The discussion is focused on the working of reservation policies in public employment and higher education and its effectiveness in reducing disparities, and the major controversies surrounding these policies. Popular themes such as the issue of the creamy layer, reservation and effi ciency, perception of non-dalits and dalits about the e ffectiveness of policies are dealt with a lot of frankness. The discussion provides a good deal of insight into these popular controversies. After taking stock of the alternative views, in the end Ashwini Deshpande concludes with three observations. First, labour markets do not function on the basis of first best, perfectly competitive principles, but are in fact discriminatory. Second, the Indian affirmative action programme is only partially successful and flawed in several ways, but in the absence of an alternative – a comprehensive and clearly articulated alternative – it should continue. Third, there is no evidence in support of

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the claim that an affirmative action policy lowers productivity or efficiency. In the end, to realise caste equality she suggests dual policies – general and restructured affirmative action policies.

The Way Forward

In the end Ashwini Deshpande summarises the central messages from the book in three insightful statements. First, caste identity matters for economic outcomes. Second, markets have their limitations in overcoming the consequences of caste identity which operates through the market and pre-market discrimination. Third, interventions in the market and non-market institutions by the State in the form of well-articulated affi rmative action policies are necessary to combat discrimination and reduce caste disparities.

However, the book also makes appeals for advances in research on theoretical, empirical and policy fronts to improve our understanding and to bridge the gaps. The most important issue relates to the dynamics of the caste system. While neoclassical theories o ffer a good deal of insights, Deshpande also points out their limitations in explaining change and continuity in the caste economy. While these theories say that “prejudices/stereotypes/beliefs” shape discriminatory behaviour, they do not inform us how “prejudices/stereotypes/beliefs” are formed in the fi rst place.

The statistical discrimination theory which suggests imperfect information as a source of discrimination is wanting in explaining the behaviour of the higher castes in the village market setting where employers or buyers have full information about the untouchable workers (and their own caste workers) through a longtime association and yet selectively indulge in discrimination in hiring of untouchable workers in some farm operations such as harvesting of fruit or vegetable and household work. Or even if the untouchable business p erson sells milk/ vegetables at a price lower than the high caste seller, the higher caste buyer may not buy from the untouchable seller. Or the high castes may refuse to rent a house or buy a new one or land for residence in an untouchable locality, even if the rent/price of house/land price is lower compared with their own caste locality. The (economic) gains hypothesis has to grapple with these situations. The reason may be the social cost in the form of social ostracism by persons of her own caste for violating the caste norms discourages them to go against customary norms. In an urban setting, however, some of this economic behaviour will disappear, while some would still remain.

Caste does not come into operation in buying or selling of goods in the urban market, but discrimination may persist in urban housing. In either case the neoclassical theories have to address these issues in the Indian context. It is here that Ambedkar’s (and Phule’s and Periyar’s) contributions bring some insights into understanding the formation of attitude/ prejudice/stereo types and the resultant behaviour of the higher castes. Ambedkar attributed the discriminatory behaviour to the ideology – religious and social – which determined the rules and norms of discriminatory behaviour of the higher castes towards the lower castes. It is this philosophical support, that gives solidity to the caste system.

To what extent the ideologically governed norms and codes are infl uenced by the complex set of forces such as the “economic gains” offered by the market economy, the economic, social and enforcement costs, economic mobility among the dalits, legal safeguards (against discrimination) is an area which needs research about which Deshpande shows concern and urges the theorist to incorporate them into the theory of change. This also calls for empirical research on factors governing change in the caste system so that policies are based on the evidence.

The lack of clarity on the forces infl uencing change also brings in an ambivalence on the policy front, about which the author expresses concerns – the ambivalence relates to the nature and priority about the policies needed to reduce caste disparities and discrimination. Drawing from the theoretical and empirical insights she does propose dual policies, namely, economic and education policies for all (including towards discriminated groups of dalits) and affirmative action policy for discriminated

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groups. However, it seems that throughout the discussion she perceives affi rmative action policy as a substitute to general policy and not necessarily as a complement to the general policy to address the group-specific problem of discriminated groups. It is necessary to recognise that general policies of economic and education empowerment are required both for dalits and non-dalits. But the dalits, besides general policies, also need additional policies to overcome discrimination. For instance, development of education and skill will enhance the employability of both dalits and non-dalits, but the dalit with equal education may still face discrimination in hiring (which high caste may not). So for a dalit, whether or not one likes the general policy it will have to be supplemented by affirmative action to provide safeguards against discrimination in hiring. Much of the confusion that we see on this issue is due to the failure to draw a distinction between the problems of the non-dalit poor and dalit poor. It is these genuine concerns that Deshpande expresses in a section on policy.

In the view of the fact that there is growing demand for group-specifi c policies based on caste, ethnic and religious belonging, the book is timely insofar as it dwells on the issue of group inequalities and offer a good deal of insights. It is going to be of immense utility to researchers on the economics of discrimination, policymaking, and, above all, in teaching in higher educational institutions, which Ashwini Deshpande began several years earlier.

Sukhadeo Thorat (thoratsukhadeo@yahoo. teaches economics at the Centre for Regional Development, Jawaharlal Nehru University, Delhi and is chairman, Indian Council of Social Science Research.

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