Xe?or= So. :?l"l05 3eveloosen: 3esear:n >e?ar:=en: Scononiss and 3cse~r:n Scaif ..-orld 3ac1t 7 . e yorld 3ank toes zot ic=e?t rss?ocs;jili::: f 2 t :he .---s -x?resseC ?.er=rj .:-; -- ..-aq- :e 3:--" -&.,,.. are :hose 35 zie atsthot!~) 3C3 s h o u l t n3: ---du:ec :a :he ;or15 .. . . :a-k :r :Q I t s a:::-:a=?= sr~znz:s::~~ns. 2.e flnai-3s. :~ter;r?:a:i;zs, iz;: ~ ~ c c l - l s i o nare :.'.e :esxl:s s 3f r s s e i r = k ix=?o;=C :y :5e 3a-s; :key 20 :or zecessarf ::I ...- -e?r?sezt ? i f i:ial 20i i::r 2f z:e 3-i. 7he :es;5=a;ixs ==ll.yc:=. -ip ?rasenta:ian 2f = a ~ c r i i l . 2-$ 3317 =a?s .:sei, In ~ 5 - s-x.l=er.z ir3 5aL217 f z r :5e convenisnce sf :he reader 3r.a. zo x c . :=?;:: ::.e i x z r e s s l x 3 i . pi-Lon ;-na:scetrer on zke jarz 3f -..e .or-= ' 5z.k >r :zs zffL::z:*s -- :zccer-.:::z " ' -..e -qd i z y ::::I, . :z s 3~:5cr:zi:2s, r* S:Z:.JS 3: :~UZCZ:J, :*r::::yr, arsz, >r :f >r :zzce-r1iz3 ::.e 5eli=:z2:izns 15 ::: > ~ ~ z i d r : ~;:Z s ~ 7 s . . Z : : : : ~ : 3:::-12:;2:. Revised d r a f t June 1981 TEE POLITICAL E m OF 'iEE PREDATORY STATE by Deepak L a l * Paper prepared f o r the Westvn Econcm~icAssociation meeting, Las Vegas, June 24-28. 1984. The author is Professor of P o l i t i c a l Eccnomp a t Vniversity College Tandon (on leave) rcd E c o ~ Advisor to tfie Develovent Research Oeparncent of c the World Bank. ?he Uorld Bank does not accept responsibility for the v i e w expressed herein vhich are those of the autilors and should not be attributed to the World 3ank o r ro i r r a f f i l i a t e d organizations. The findinqs, interpretations, and conclusione a r e the r e s u l t s of research supported by the Bank; they do not necessarily represent o f f i c i a l policy of the Sank. The designations mployed, the presentation of n a t e r i a l , and any aaps used i n this document a r e solely t o r t h e convenience of t h e reader and do not h p l y the ex?ression of any opinion whatsoever on the p a r t of tk World 3ank o r its a f f i l i a t e s concening t h e l e g a l s t a t u s of any country, t e r r i t o r y , c i t y , area, o r ~f its a u t h o r i t i e s , o r concerning the delisitatLon of its boundaries. or national a f f i l i a t i o n . Abstract This paper b u i l d s on the i n s i g h t of Brennan and Buchaaan chat most s t a t e s i n the past and present a r e best viewed a s predatory, seeking to maximisre the p r o f i t s of government, r a t h e r than a s is usually assumed a s being benevolent, seeking t o m ~ x i m i s cthe welfare of t h e i r constituents. Part I explores the positive p o l i t i c a l economy of a predatory s t a t e by examining the macro h i s t o r i c a l record t o answer four broad questions: a r c t h e r e l i k e l y t o be differences among s t a t e s i n the extent of t h e i r predation? Lf so, vhat type of predatory s t a t e is l i k e l y t o emerge and over what t e r r i t o r i a l a r e a under d i f f e r e n t technical, economic and ecological conditious? Uhen is a self-interested predatory s t a t e l i k e l y t o i n s t i t u t e an e f f i c i e n t s e t of property r i g h t s required f o r a market economy? 3 e f i r s t part of the paper provides some speculations on the endogenous determination of the form and extent of predation and the type of economic organisation l i k e l y t o emerge in a p a r t i c u l a r area by a simple application of the recent theory of "contestable markets" and i n d u s t r i a l s t r u c t u r e s . 'Ihe second part attempts a n explanation I of a p a r t i c u l a r form of predatory s t a t e thaz has existed i n my view f o r I millenia i n India, vhils: the f i n a l part of the paper draws some general conc1usior.s on the f e a s i b i l i t y of e s t a b l i s h i n g market economies i n areas uheie the "natural" i n s t i n c t s of the predatory s t a t e are inhibiting. The ?oLiticaL Economy of the Predatory Stace Introduction The econooic advice usually offered to developing countries is based on an implicit model of a state run by Platonic Guardians. Whatever the merits of this view (in a descriptive sense) of the rulers of many Westera duwcracies-md that is questio~ble-it 1: par:icularly inappropriate if ve consider their past or many of the present rulers of the T3ird World. ay contrast, the cmerginp 'aev political economy' has begun to substitute the n o t i m of a 'predatory' state vhich nuximires che profits of government for that of a benevolent state seeking to ~uxini:e the ue?fare-- hovever defined--of its constituea:s. !hny policy recornendations of :he traditional analysis are overtuned. Thus, the so-called b m s e y optisil tax rules for comnodity taxation are no lonqer optimal for tt.e co'nstituents if a revenue mxiaizing Leviathan is stught to be controlled. S r e ~ n a nand auchanan, have devised a public fiaance to csntrol Leviathan through a =onscicuti>n, in vhicb behind d Ravlsian veil of ignorance the constitution makers decide on :he base of taxation Leaving the ?redatory state to decide the rates. R e applicabili~yof cbeir model :o = d e n day bureaucracies in vescern democracies bas been qlrescioned by Usher, as "che cyraany af =he despoc and the tyranny of the mjoricy" are =ot identical. Behind a veil oi ignorance citizens roclld lisit :he powers aŁ a Licq aore than chat of sajoritatian denocracies, "if anl:r because they are Less Li;ceLy co aerge as a king z3aa as senbers 3F the zajotiiy coali~i?n". (p.:022) Ue do not 'mov vhecher a 2reCatory cr contractarcan origin of 5 e I . . Scace is historicaily aore .raiid. i! gut It rs rxteroscir.3 :? decerzine 532 groups "wicb a cnmparati-~eaiva~caqeit coercion 3roduced a s:ats 03 :ke * - - . rhich. , one hand devised a set of pr5percy ri$hts to maximize the recxrrrs ~3 ;Le I rulers and on the other hand, vi:hia char framevsrk, developed a body of Lao and ics enforcement aimed at promoting economic efficiency and hence, cax revenue." (North p.64). Questions of ~ositivepolitical economy then arise: are there differences amongst scaces in che excenc of their predacion? If so, vhrc type of predatory scace is likely co emerge and over rhac cerricorial area in different technical, economic and ecological condicions? As :kese economic condicions are unlikely co be exogenous, che feasible foras of econosic orgaaizacion rill also depend upon the type of propercy rights a ?articular predacorg scace finds it proiicable to establish. Xany ecxionic his:cria>s c , o r , Jones, Baech!er, SrauCe?) emphasize the rise of :he mrkr:. and ics associated property righcs as an essential elenent (hiscoricrlly) for sustained 'modern' economic 3rouctr (in Kur~ec's terns). Yence, when is r self-intcrssced predacory scace Likeiy ta iascicuce an efficien: sec of property rights requir~dfor a market economy? North and asaociat~shave argued for :he i-:orc3cnec:iae beteween z5e form and excenc of predation and tbe type of economic organizarlon likely r a emerge ia a particular territorial area. Par: I ?resents some resulting rpeculacions 21 sn rhe endogo-nous dece-inacion cf these :yo aspects of ecanornic development, by applying c5e recenc t:e?r;r ~f ":onzas:able rmrrkecs" and i:duscrial structure (3aumo1, ?anzer and 3i:tig). 3 e secsnd ?arc attempts to provide an explanacisn for :he ?ar=icxlaz f o m oi ?reCatory s:rtr chat has existed for millenia in =he Ceve?opi-q councty 1 X~CV best--:r.Cia. In the finai part of che ?a?er 1 draw s m e genera! c x c l s s i 3 n s 3n c5e feasibility cii establishizq rarke: ec3r.cnies ir? arzas ..ri..erzr%-. '-at-ira:' - instincrs of tht predator7 scare are inni5i:lag. 1. Tbe Stacr as a Violence cum Juscice Producing Yacural Yonopoly There is one essencial as?ecr of a Scace &ich makes it inherently prone co predation. This is ics monopoly of che use of .~iolencevithin ics cerricory. Horeover this violence using and violence controlling "induscry" is a natural monopoly. 21 3ut as vill come as no sur~risein chis city, the resulcing scace cdn range from che 'protection' provided by cbe 3afia "rgains: a violence (it) itself chreacens, and =ho ac:ually supply a sort oE 'black market' pr?c*c:icn in return, suppressislg rival gangsters "(Line, p.403). :O :he aodern day Yes- cern democr~ciesvhic-1 besides maintainiag law and order also provide ocker ?ublic goods co their :icizens. 3u: even :kese ae=ccracirs have evolved frca nation rcares which verz 3iniLar ;o che YaEia in rkeir operarloc. I/ The services of chis cacxtal aonopoiy =ere ?aid far by revenues extrac:cd from the nevly protected ?rey. 3 e nacural inceresc of the monopo';?'~ controllers vould be :a .saxisire cheir nec revenue. 9uc chis need not lead to che escablisbmeac of an eiflcienc set of 7rcpez:y riqbcs. As !ticks as well as Yorcb eapnasizc: "efficiet.~jropert7 rights .zay lead t:, a higher income in =he srace but lover :ax rzvenues for :he r ~ L e rbecause of :he rransac:ion cosrs ( monic?ring, ze-erixq aed c~l?ectingsuch caxes) as . --. . compared :o c3ose of a aore rne=::c:ecc ser of pro?erry r i ~ h c s . X r-l?r therefore frequently cued i: in his inczrescs zo sranc a mon3poLy racker chan ?roper:y tighcs which would lead r3 note cmpe.-i:ive c3r.Cl:i3nsW ( N o r ~ h , p.23). Yost economic historians kave noted the Link Setvsen :>e rise of the market and mercantile economies. Secgraphy vas isportan: for :he rise or' the first mercmiile states ard 'markec' economi~sin Greece. in these cicy states and democracies, rhe state vas under the control of its citizens and enforced the property rights required far :he existence of a narlec economy-- the need for protection of properry and the need for proceccion OF contracts (Hicks, p.33). When later, silitarg technology aade the Creek city State unviable it vas Venice, concrolleS by its merchants, vhich cook up :he torch of the mercaatile and market economy, which then passed subseque~clyto :he iiansa towns of :he Sorch Sea and :kc 3al:ic and then :o Bol?and and Lace= to England. In a!l rhese cases the sgs:am 3f ?=3?a::y rigP.ts ic~rriied :o susEai3 an efficient inarket system required for j r w t h entailed the curbin3 sf tke inherenc predatory power of the scats by its citizens ch=ough virious fomr of taxat ion based on represen:aticn. 3y csnzras:, the 'revenue tconomios' 3: absolutis: Franc? and Spain did not create such rigkcs. Lhy? 3eLaiive barriers to tntry in ~ 5 nacionai '?reda:im' s =rcno~olyis tle ansver usually given. This iiea cag be 3nar3ened by a?plylnq :he aewly formalized theory of "concesttble =rke:3". i5e state at a sininum is a :=o good mltipraduct nacural aonopoip, ?r?vidizq 'protection' and 'justice'. These goods are c~mplernencazy,=i=h su5s:antlal ixcreaslzq r e t s x s =a sca?e iz~ their costs of ?r?duction, and :=el= joint c3s: f-~tc:ion is Likely :o seec BamoL, 3aiLey and Xillig's ( 3 ~ crl:eria ~ 1 f a r a "sus:ainablo, equilibrium for a aulti-produc: soaopolyl'. 3 i s i s deFized as "a s:a:ior.ary quili'crriua ser of product quantities and ?rites =kicb aces zoc ac:rac= . . . -:-~a~a:x:a :he industry" (2.350). 5/ aBW shov chat, f o r a a11=i?roduc: zacaraL ~ocopolis: :>.e sustainaSLe equilibrium ?reventcng entry invol.~es2r::ing i:s ser*,.ices ac :he 3axsey prices i/ associaced vi:h the ~laximunp r o f i r s allowed by b a r r i e r s co +ncry, (see t h e noces t o Fig. I f o r the h e u r i s t i c argrune-c), which a r e "tne annual equivalent of the aiscouated present value 3f :he e n t r y c o s ~ so r b a r r i e r s t o e n t r y facing nev fi-J i n t h e market". 2 . u ~a s they conclude "the same i n v i s i b l e hand chat y a r a n c e e r oelfare-opci=ral pricing under p e r f e c t competition may guide t h e farsighted m o n o p o l i ~ tseeking protection from entry. t o t h e Ramsey v e l f a r e ?pti;rmm" (3.359). 11 The farsightedziess, of t h e incumbent preSacor i s one of t h e determinants of the s t a b i l i t y of m y p a r t i c u l a r f o m of 3redatory s t a t e . j u t vhat a r e cke r e l a t i - ~ eb a r r i e r s t o e n t r y vhictt deternice :he s t a b l e long rxa ' r e n t s ' chat d i f f e r e n t , farsighted predator/ s t a t e s can ax::act? Ue need t o d i s t i n g u i s h between i n t e r n a l and external compecicors Co t h e r ~ l e r sof a S t a t e , chough of c5urse :here a r e =y h i s t c r i c a l examples of c l a i n a n t s of both s o r t s combinieg t o overthrav :5e inccnbent n a t u r a l sonopolisc. t o r p o t e n t i a l external predators :he geogra?hy cf =he p a r c i c - ~ 1 a r region and "azmLgamation costs" (Joces, p.106) a r e relevant i n determining :he b a r r i a r s CD encrg. The e a r l y Europe29 c i r y 5zaces -&ic:l f i r s t e s t a b l i s h e d a s a r k e t system could exis: iade?endeat?p because ?f z k e i r geography. 21 ~ a t ~ e r , v i t a cbanges i x ai1i:ar.l technolsgg rhe f e a s i b l e :erritoriaL s i r e of a stace 3rew. 2.e "core ar~-as"of the ae.4 Sura-,ean o=a:os -;ere alluvial plains an vhich ?lough iusbandrg =:,uld be 2rac:iced zo j i a l d :he :ax base f o r siLi:azy control. ?/ E o u ~ ht h e inter-reai-g areas c:,uld be and vere 3rocgkc ins:, . . p o l i r i e s Lizked co t h e c:,rc-areas a s czmtn:car:=zs and zlLirar:r cechnoL2g~ ispr:,ved, :bere =ere a a a b e r of nacura: 3 a r r i o r r I l i e :ke sea uhich ?r:,tecred &gland, i h e ?grrenes and :he AL?s and t h e norzher?. zsrsnes u5ic3 define:! tke 'natural' defenses of Spain, Prance, che Yetherlands and Icaly. 101 n e s s raised the entry cost for externai 2redacors. Also paradoxically, sodern day countries such as Suiczerland and :he Netherlands (the old United Provincas) vhose inharently poor roils or difficult terrain vas an economic disadvantage, also ?roved to be their political strength as external ?redacorr found it too costly (in terms oE net returns) to concrol them. In addition chero, vere the amalgimetion costs faced by external predators. Given ethnic, Linguistic, and religious differences becueen :he external predator and :he peoplas In dn incunbent'r ~arricory--4iffrrences in Europe "dacing from early faLk .mvu.ents ar.d set:lcxent history" (Jones, p.106)--the incumbent could c3ur.c an a foca of '1oyal:y' vhich the exceraal predator could not. 111 '&at of entry Sarricrs :a :haller.ges from inscrnal ~ompeticors? > i s depended upon milicary techzology and the ?hgsical size af the 'natural!yf defensible territory. C+ceri3 7arIbur a ?iryslcaLly szaller terrirory uoui-e easier ca take ob-r: than a Larger cce, uhilsc :he chacpinq :ethnology oi varfare vhich made large scale an advantage in :he .~iolenceindustry uould tend :O favor the incumbent. For instance, t5e develo?mear of the cannon la the aid 15th century removed :he security of baronial far:ifiratic?s ia %rope and shifted the balance of advar.:aqes co an iacqmbent centralizing ?redator who could build larger and sore exaensi-~ecastles. (3ean). Thus che resource base fjr exzraccing revenue and z5e geogra?hicaL area 'nacuralLy' defensibis -JI:> a-2ai;able xilirary =echne?agy uould dcc2rxlne :he 'opti.na1' territorial size ~i -he 3:ate I n a ?ar~ic,~iarzcqion as ---ellas :he stable sus~aiaable'na:~ral' rcnc tkac cculd 5e ex=rac=cd :he predator. 3uc, what shapes :he sys:en of ?rD?et:y rights :hey -dill :and :o enforce? Xorch and Thomas argue :hat c h i s .Jill depend u)on :kc r e l a t i v e 'bargaining strengths' of t h e r u l e r s and consticuencs. 121 3ut t h i s 'bargaining s t r e n g t h ' has i n afiec: Seen subsumed i n :he 'encry b a r r i e r s ' vhich determine t h e s u s t a i n a b l e ' a a t u r a l ' renc t h e incumbent predacor can excracc. P.a lover che encry b a r r i e r s t o i n t e r n a l r i v a l s t h e Dore l i k e l y i c i s cha: t h e reduction i n n a t u r a l ' r e n t s ' represencad by :he p r o p e r t y r i g h t s required f o r a n open market -ail1 be iascicuced. Xovevar :he e f f e c t s of e n c r g b a r r i e r s f a c i n g excerna? riqrais m y c e more ambipucus. The h i g h e r t h e s e b a r r i e r s che s m a ~ l e rche iacencive f o r che i n c ~ n b e n t3 r c i a t g r zo i s a e co :e.cUs 4 t h h i 3 prey, soneching he z i g h t 5ave co do co i n c r e a s e :heir '!oyalcy4 and hence :he 'amalga17acion coscs' faced by c x c e n a l cornpe:ic?rs i f e x t e r n a l b a r r i e r s v e r e lower. 3uc e q u a l l y '3 t h e exceac t h e consci:uencs f e a r ama1gaina:ion by an e x c e r a a i predator, :hey a r e less l i k e l y ro 7 r e s s :>air c a s e a g a i n s t a n incumbent p r e d a t o r che l o v e r t h e cncrp b a r r i e r a=d -rice versa. 3 e system o f e f f i c i e n t ?roper::* r i g h t s based on :he relaci-re bargaining screngch of :he prey is aosc l i k e l y t o eaerga ia regions v h e r s georgaphy, and m i l i t a q tecknolopy a l l o w :he ' n a t u r a l ' : e r r i c o r i a l s i z e of cha s t a c c co be such c h a t , j a r r i e r s =3 i n t e r n a l and o,x:e=al encrj a r e h i p 5 anocgn t o prevenc cldemic political instability a s s o c i a r e d vi:S i = c c r z a l b a r o n i a l warfare o r e x t e r n a l invasions, bur zoc s o high a s zo nake :>e inc-sn'cenc s e c x r e - - enough co e x t r a c t :Fie a a x l w i e a s i j l a revesue frm h i s ?rey. I: 1s :ke uniqueness of Europe, a s Jozcs e ~ p h a s i = e s ,:hat ,= 7r3viC2d =ke ecs+lopi=al e n v i r o r ~ e n tf o r ize deveiopzen: ~f a 'scates-s7s:m' ai:er :=e 3enaissacc=, . . vhich bucked t h e h i s r o t i c a l zrczd : w a r d s organizi-q l a r < c rcg,:ocai ?o?ulacions i n t o empires. :a Zura7e no empire uas b-lil: a f t e r :he Eal! of Zorne--their overseas alnpires came Later. n o u g h Zurope :kerzby Los: some eccnomies of rca12, 'he predatory ?over of the individuai states *..as Lovered compared 2ir.h an imperial monopoly over :ne repion. R e cnvironmenca! characteristic was ":he scaccer of regions sf high arable pocsntial sec in a continent of vaster and forests" (;ones, p.105). A second factor, ~ e r h a p saf equal izporcance, is che structure of the economy which deceraines che feasible set of :axes--their relative scruccure, if che'aonopoly is co be sus:ainabie, being determined by che 3arnsey aules a . la 93U. Yere the important disti~ction(as Sicks notes) is :he relatire importance of incemal versus ax:e.qal trade. As in pre-modern economies, chis is likely co de?e-d upon natural resour:+ endomencr, ?arzicularlg tze avai1abiEi:y ~i rich arable !and rela:i.~z :a :te population. ue umld 2x;ec: external trade co be =re important for :he relatively resource ?oar countries. The Creek city rcatrs, :he Yetherlands and England vould succes- sively classify as councries which fall ia t'is caceggry. X-ie self-iacezest of the predarsr Ia expanding :he :ax base of aa econamy dependent C-I external trade should izcuce hia to sec .J? :he property rights for a sercancile economy. 2 1 m e ecanoraic hiscorg of 3ri:ain and :he Yetherland:, vis a vis Prance and S p i a can (as Yorch & somas sitow) be .-rricter. in eeras of che difrercnt system .aF ?rsper=y righ:s that sere establisked after the lenaissance, and cherc =ere 3ood ?c~lcgicaland ecgcoaic reascns vt7 chis should have been so. - - .-.charge L Z-.he inc.jmber.t ?redator is far si~hcec! >e -2:;: .bsssy . 7rices for :he auL=i~rsduc=nar-ural ;~0r;070ivke I 3 ~ ~ 5 , ax:raczing che 'naczrat rent equal ~3 -.he ?ressn: discoua~ed.~alzeof :he Inc2rnal and cx:erzal ezzry .- costs. 3ove7er, even 1: chese costs do 30: zzange 3ver :ize (uhich Is unlikely) :bey cannot 'Je ascertained uich at? exaczicude. Their esciaa:?s will be probabilistic. Depending upon differences in su~jec:ive probabili:lzs and/or diffsrenr degrees si risk aversion on :he part of che incsm3enc +cd k i s rivals, vhac may "objective?yM seem to be a sustaicable equi1ibriu.n nay c r ~ a y not curn ouc t3 be one. >.err a y thus be sustaizable equilibria i n ;rsctice rhich involve extracting sore or 16,s :han the 'natural' rerrt rhan entailed 5y 'objective' enccy Sarrierr. -ere nay then be long run 'predatory' cycles ?/ in vhich tho long run sustainable equilibrium is underained over tiae by predators boqinning to charge sore than the Pansey prices uhich aakcs ertry profitable. >is Leads in the raedium run (uhich of course c?ul?l be nore c5an a century!) to :5r eventual over:hrov of :he incrnbenr azd the .cs:abljs.*se!zt of a fresh sustainable equilibriun by a nro 3rou;, a f ~redac9rs. I. Tie Hindu Equi1ibri.n How do thesz specu1a:ians arlsisg i r 3 ~:5e B C ~ R C C I ~history 3f Europe C relate t o t h ~fcrn of predacor:r state :5ac - a s oscabiisSed in India? I have argued elsewhere (La: (1981) tkat 3n rhe radian subcontizenc, by :he early pears of the Christian era a social, adni?is:rati-re aad economic system had been nstabLis5ed -snic5 has rosined im?er.~ious :a -'-.-*-..-azegcal change for aillenia. I label z5is crrl~urals:aDi',i=: 2r.c ec3nmi; s:agzaitico for about 2000 gears as :3e Si-du Equili5rl.m. ,j!.:: 2as ;raviCfc? a predatory Ira:.= uich a fairly hi3h 'natural' ten:. :: 2x?La=?i:3 =:e determinant of ckis f a x of re6atcr:* scace, 3zc rks- asssciarea ?r:;erz:r ".. rights syscem ze aeod c~ explain 5ocS c5c ~ r i g i z sa x resi:ielce 3 E z ; x u socio-economic sys:a.n, as ax?ress2d r:. i:s Zvin ?il:ars--c?.e casce S j r S E a ! Zasd autarkic vi!lage 'czn.mnicies'. This is :he :ask 3f Eke fa1:~ui:g seczio~s. Z c3ncentraee ,apon the gorrh and ?azti;-~larly :5e 1-do Zangecic ~?aig--:ke crucible of Binduiss and i:s social ex?restion in :he caste sys:e=. 1. Some %piricaL kfypocheses There are some crucial empirical assunpci~ns-2d :Lying :he foLLoving speculations, one of vhich can be thoroughly docwnancec fzsn Zndia's hiscor.y, but the evidence on the ochers is still largely 3pecaLacive. a) Political !tistability Tha political history of the sub-continent particularly of the Indo- Gagetic plain has been laraely deterained by its zoography. 3te Himalayas to the Yorth have (until recently) provided a nataral barrier against ex:arcaL predation Eron the Yorch. n.e success oi ex:ernal ?redation chrough :he Horc5ern ?assess and aore rcccnciy by sea has :bus depended upon ehan3es in military cecknoLo3y and ?olirical anarchy wi:hin che sun-c=aiiae?c. The large rich alLuvia1 and geogra;?.;:a~Ly homogenous Indo-Cange:i: plain has formed a natural 'core-area' in Jcnes' ceras for an Indian stacz. SUC given its site, its douinacion by a single 3:a:a, 2ith the available military and transport technologies bas been e;risodic. Yor have there been geographical barriers rithin tne area to provida a 'nacxral' s:a:es systzm as ' in Eu-ope. The history of Yorthem India is one of the rise and fall of Indo- Gangetic empires, unich &en they vere end-~riqgalso cxcended ta the South. The resultins endemic political instability a d the 7ericdic breakdo-m af illy centrally imposed Law and order accompanied by culc;lrnl and (more ~3nCentiously)econoni: stability has been reaarke.' upon 3y historians (set! Tkapar, ? . & 6 ) . Since the o_stabiis:menc of Luzer2us fosaing Aryan moaarct:ies I;.z::e Indo-Cangetrc ?laia, :ke lodesi~neof e v e 7 2ec:y Tzdian chiefian has bee3 =ke cs:abiish;oc.~c of a ?an Nor:h iadian ar sub-=jn:inenial zr?;:? based on =kc er?Loitatior. of che iatge revenus base ;rrovided ~y =he relaii.reLy ?roduc:i-re aqrarian sysien vhich was araduaily established in the regicn. 3 i s is . the first ecological-empirical assumption ge b) Stability of Population Siz+ The second, concerns the scze of the population at the cine of:he evolution of the caste system in the sonarchies of the Indo-Cangecir. plain. india today, is considered to be a --wily po?ulaced country. However, till the early part of the 20th century, -oe land-man ratio ia the country ups very favorable. wore surprisingly perhaps, tbere is some uncertain and tantative evidencr (admittedly little better -jmguess estiaaces for antiquity) which suggests that the size of the popu1a:ion and thence :he lrnd-an ratio in times of peace and political stabi?isy (rhich c:rlC be rerxed the 'equilibrium' Lev+?) remined rela:lvely conscan: Eram tke ::me af the Yauryas (c3208C) rill the lacs 18th centcq. It/ Though there were likely to have beet large deviations around this "equilibrium" Level over the centuries, clue to famine, disease and war. C) Unchanging levels of livinq The final empirical a s s q z i o n ve =ice concems levels a( lising. Some quantitive evidence is availab'le for aedeival Iadia (!btb cencurj) 181. Is sugaescs rhat, there !us not b e s zap =larked inprovaenc in levels of Living between 1595 and 1960, cham 2quaLLy i k e has ~ ~ ?robably been no rt.atke6 .mrsening. Xaddison's guess esti=are is chat "India's 3ez capita income 1:: l750 uas probably similar to that in ?960, a= about $150 at 1965 U.S. prices".141 Ye lack even the seagre a& s;leculative e s r h c e s of Levels of :i-rizg durinq Ailoar's reign far =he e a r l i c ?eriods, bur there is some neagrs evidence which suqgesc ckat ;kc Levels of L i - ~ i q;.ere about the sane i:: 320 BC as thcy vere in 1595 AD. Taking cte las: three sf c3e empirical assmprions together 3agge!s:; rhat by about che 3rd century 3C I A i a had evolved an +canomic System which mintaiaed Living scandards (as least ac tixes oi politics? scabilicy) which, though not such above subsistence by modera standards. Vera comparabla to chose ia India in about 1960. 3 e caste system and the -~iLlaqeeconomy as ic had evolved by the 3rd or hth century 3C vere, w e oould hy3ochesise, an esserncial ingredienr in maintaining this *'equiliSriumW, alaeit at a relatively low level, by present, though nor necessarily by the standards of contempor!- neous countries and ci.ri?i:arions in ancienc rimes. 2. The 3oser~p=.tory a.:d the Aryan Sconcmic Troblem The dacper of a shortage of labor was the m j o r ?roblem faced by :+r 2xpandins Aryan rec:leaenrs in the Indo-Cangatic plain. 3 e 3asas. vho vere cle seopl*~'~a3quiSkedby :he Aryans in tkeir march acr3ss :he icco-Caage~i: plains and uho were initially used ca clear the forest. auqnenced :he supply of labor available t o the Aryanr for aqriculcure from their oun tribes. 3 i u 50th enabled and inpelled :ken to move Etcm ckeir :radiclonal fcrn of zonadir. pascoraLisln towards a Eoza of seczlod aqricu1:ure. The zole of increesing population gressure on Land in both induekg and facilira:ing :he adoption of more excensi-re foras of agriculture has beer. persuasively arzued Sp aoserup. 211 Once tke Aryans had estajlished zonarchies based on :he revenue from aqricrrlcural sec:l-alrencs La the Iitdo-.e resul:. 3 . Labor su?ply, Slavery and Caste India has never been economically 2e;endent on sla-rery. hay? The 'shxdra' cxlcivators in Zindu caste society vere che descend en!:^ of the earlier Aryan enemies, the Dasas.Z/ In the a b s a c e of a centralired administrative system co regiscar and enforce ;la-re "concraccs", a necessary condition for slavery :o >erris: is the ease vich whicn slaves can be distinguished E r ~ mfree sen by some attribute suc5 as pigmentation or language--the forset being more inescapable :ban the Laccer. Eae Dasas vere distinct in their appearance from the Aryans, anc spoke a different languaqe. n u s ic .auld have been possible for the Aryans ca have rnf3r:ec their enslavenan: eve3 ui:hout :he centralized poliricsL sys:en =hey Lacked :3 enforce a aore colorblind type of slave system. It is Likely, chat in the original development of :he casce system, the Dasas vere enslaved in some form and put beyond the Aryan social pale. Youe-rer, graduaily, chough not accorded che cvice born scatus of :he Aryaas, they vere incorporz,ted into che 3indu :aste system, as che Shudras who were pemitccd co culcivace Land. Though some slavery conciaued, ic was now more in the nature of debt peonage. It wa3 often contraccual, viih free sen selling themselves and :heir families inc:~ slave- ia cimes of discrtss. 231 Unlike che aomacic 7as:oralisc bq~ans, the 3zsas =ere graba5ly acquainted vich :'. iechnology of secilad agrlculcure, a :echology ;-hi:h frcm cbe remains of :he Uara?;an civi?izacion (see allchin h -Utc:?in) appears =as k a o ~ nin Ildia bei3-e the Xq-an invasions. i z vas chis =achr.o!ogy or various extensions of it, -&ich vas prababiy :ke basis of :he seczied agrical:-re of :fie Ar:~an ~ ~ c z l ~ si;?e:be c Indo-Cagecic ?laia. ~ ~ >is =ligh: ex?iaiz ~ t y :r?e Dasas vho might initially 3ave been enslaved (during t3e periad they sere used to clear che Eorescs) were later incorgorace Hindu soclecy, al5ei: uich a lowly stacus. n e z e could be three reason chis. . , Firsc, :he culcivacloa ski:?^ xnish :he 3asas needed :o pass 7n =o the Aryans to make settled aqriculture -riabla, could presumably only be demonstrated by doing, xnich of course isplies the uil?inqness of :he Dasas k 3 I demonstrate these skills. Secondlyt if the Dasas had practised these skills in the past, chey were Likely :o have had a comparacive advanrage in rhe ~ exercise of there skills (at Leas: initially) as compared with t.?e Aryans. Thirdly, as is well ' m o m frsm the experience of various foras or' collec- I I tivised aqriculcure, as agricui~ura! technology (even of ~ h esubsistence cy$e) cannot be described in :ems of any ~ r e c i s eset of inpuc-output co-rfficien$r, l it is very difficul: :a nonicsr =he effgrc of peasan:s, and :a coerce :hem ~z I perfors accsrdi3q to an afficieacy zorx. as :here are 20 uza~ai3zous indicatsrs oi this no=. n u s , ic would ha.~ebeta sore efficient for :he above incentive and inforarcioaal reasons to have eaancipated the 3rsan sla~ves and give3 them autscony in Cecisim naking and control over agri:ul:ural ~ operations. V a r i ~ u sother zeans of 3aintainiag chr r ~ r a llabor suppiy i.? che Cndo-Cangetic p:ains besides slavery, such as pollcaxacion, E/ :imi:ationi 3n nipration, and varisus faras af izdenture, vould also have Seen Infeasible a s I I they all require the ?over of a cen~ralized state and its atcendaac bureaucracy for :hair csfarc-c. Z o ~ e - ~ e r3i.~en :he ezaeaic ?olicicaL , inscsbiLicy iuring :his 7ericC (our firs= stylized fact), acy such alcernaki.te I vould have been buil: on sand. 2i:h ? l ~ n c i f * ~iazc. and =>e =axin3 and =api-q l . of pokicica? a11tkorI:y over a ;arzic.~iar reqi:n =%ere vould alV-ra:rs5ae:e ieFr. I I che danger chat direc:?y c3er:ec ?easac:s zou?e %as:e f?ed cte se:=lsren:s ( a s they zever:t..e!ess JTd acC ~r., E3r ins:mco i n lacor %p%ul cimes) vi.ede;rer the political au:korl=y -:as -sea~snec!from ince-zecixe csnflic: accnqst rk4 , monarchies. I I The caste syucen provided a more subcle and andurinq answer :a :he Aryan problem of mintaining their rural Labor supply. It took account of :he - need for a decencralired system which did not require any overall (and iarger) political c o m m n i c ~to exisc for its survival, and ensured that, any attempt to start new settlements outside the framevork of Sindu society vould be difficult if not itnpossiblr. the diqrision of labor by caste, and its enfotcement by local social o r t r a c i ~ mvas central :o the s c k e m . n e r e sere tuo aspects of the caste syrcem vhich are relevant. The first is the endogamous specialization of the comp1emen:ery I sez-rices reqsired as inputs lnto :he func:ioning 3f a .riabia setcLenenc. X?yf 1 siagle cppressel group ?Lancing t2 lea*.-ea particsiar village to sac up an i:j own, would find that, if the group vas coniined co one caste group, they vouXd lack the necessary complementary skills :onfined to other castes, to scar: a new sattlezent. a e y -auld therefore have -.a recruit rrembers cf other casce!~ to join them in fleeing :he Aryan setclemeat. m e likelihood of chat would 'be remote, as some of chese ~ t h e rcomplzner.tary castes vould have a high rizua: and economic status, and uould not have an incentive to move to che mors uncertaia enviroraent of the new: settlement. Tine caste-~ise diVrision of Labor could also be maintained purely through che inscruaent of social os::acism uichouc a central church, or eolitical coercion. The oscraciss i5v0la~edin breaking tke caste code, either as a consumer or prodocer is can be shown sore rigorously, in terms of a 3oCeL of a caste society developed by AkerLor'. As :he casteist seqmescacion of labor inhi3i:ed Labor zobiiity berveen occupations, but did not completely prevent ic, overpopulaccd cas:es who vould suffer a cut in sarninqs if all their neabers crovded :he o c c u ~ a c l ~ h could and did, (both in cfieory and practice), take up other occupations. g/ m e r e vas thus both occupational acd scatus (social) 3 9 mobilicy vicbin :hle caste system. L . Village Autarky The endemic polieical instability -auld also explain che reia:iveiy autarkic nature of che Aryan .ri!Laqe ccmmunicies. A viaale socio-ocorionic syscea vouLd have bad co overcome :be 3eriodic interrs3tisn of !n:er-resi;na; . . trade and com.erce. Even af:st =akin% accounc of eke ?r:xirtis:e syscrns sf trans3or: and c o m u n i c a t ~ o n sin ancient India, vhich by isposinq high cranspo-c costs could have m d e a n y goods in the repionaL or sub-regional economies non-tradeables, :hc uncertainty itdcced by :he coctinual ?o!i:icai instability nust nave nade a furr5er sove t?vards sub-reqiaeal 3r village autarky sc~nornicalLy rational. 2 1 IS. The 'Yindu' levenue State The centripetal tendencies cowards an Indian =spire have been counterbalanced by :he endemic cen:rifugal forces flovi3g from geography, aad the assaciaced difficulties of coaaun:cations in holdizg the sub-continen: cogether. Thouqh :he nos: prosperous and glorious 2eriods of Indian histor:# hays beer. :he 7eriods of staoi1i:y under dynasclc I=l?erial ~ ~ l :he, e difficulty of naincainicg the iqerial .airy of india, bas in its locq .-.rst~r:~ . . inside such periods relati-zely infrequect. The groat s i r e ~ g t hof :he s o c ~ a lI?C economic s:Js:cm set u p by :he ancient 3izdus. cberzforn, -;as i:; k i j k ! : ~ decentralized aacsrc xnich proviCed specific incenti-zes :a -darri3g chief:aizs I co d i s ; . ~ r b che ongoing l i f e sf :he relacive!y aucarkhic vil!aq+ c a m n i : i c s a; little as possible. l?iis *ras June i n ? a r t by m k i n g -Jar =he crade of p r o l e s s i o n a ! ~ :nd thus saving :he =st 3 i :he populace from beinq icducced i n t o cbe deadly d i s p u t e s of I a d i a ' s c d c g i c g r u l e r s . Squally imporcane, however, u a s che c r e a c i o n of r ;ocaL a b i n i s c r a c i - r e and revecue stzuccure, iarrd a t r a d i t i o n of paying a c e r t a i n customary s h a r e of t h e v i l l a q e oucpuc a s revenue co t h e c u r r e n t overlord, uhich 3eanc chat any new policica! vi:cor(bad a ready and w i l l i n g source of ~ r i b u c eIn place. i t wou?d be a Eoolhariy aonarch who vould seek t a :haage t h e s e l g c a l arranqenencs uhich greacLy reduced t h e effor: required oa 5 i r par: t o f i n a n c e h i s a = i e s and courz. p e v i i l a g e c o r n u n i t i d s i n c,ura bousht r e l a t i v e peace and quid: azd couid c a r r t cn :heir d a i l y business r e l a c i v e ' y undiscarbed beneath t h e h u r l y b u r l y of ~ c o n t i l u i n q aristocratic c o n f i i c s over eke t a x base. This ex?lains both thb concizz;tic;r of t h e v i l l a g e coarrunitio-S, and t h e ~ r i wf a c i e s u r 7 r i s i n g supineness Indians haoe s h o w i n quickly buckliog under t h e k e e l of any zek 111. The O r i s i n s of Indian 3egrenue ;r.&irriscration 3 e beginnings of .a r C a i n i s i r a c i - ~ escrdccure a r c d i s c z = i b l c ;niche a n c i r n t Yindu 3onarchi.s~ fr?a :he 4c3 cer;tr;ry 3C bur t h e a n c i e l t Zndian a t h i n i b c r a c i v e s y s t e n v a s only f u l l y Ceveloped rrrrder t h e I q e r i a l Y a u q a s i n I :he t h i r d century SC. 1 ~ bs a s i s , as Z ~ P K of 'he a n p i r e , .+as Land ravenuel O f f i c i a l s v e r e appo:a:ad ~3 =easi;ze :>e Lana ul-der =,~iii.racLonabd z> e-raL-ate :he cr3p. 3egu!ar rr,esszet.:s s e r e =de c 3 :r;crease :ke zeves.aeb . . - . f r o 3 an expandin3 econcmy. Srcn vil:age =as s ~ C e r:he ~uz:sd:ei:on of a ' headran vho vas responsible f a r coiiec:lzq :axes, 2 7 1 and t h e s e % e r e sci?~ped - 18 - --. to the royal treasury by yet other a::lcials. >.e gc-~ornnrntuas also responsibie for :he ccnstraction and naintenance oi .~ariousirri3acion facilitieo and. i: seems, a vacer :ax uas levied on :hose using Ehese facilities. The Yauryas established :he firs: centralized bureaucracy in India. ~shoka's empire vas divided inco four provinces, under vice-regs1 royal princes. Iach ?rovince ras subdivided inco distric:s. vhich, in curn, vere divided into groups of villages. 3 e .rillage *ass :he Lowest uni: of adminiscracion. 231 >is is J pa::ern far adainisterinq :he Indian s p i r e vhich has rerai3od .rirt.;alLy unc5azqod aver =he intcr.rer.iz~ centuries. Yilicary technology has obviously been irnpor:anc in deccraining :be Ceqree to vhich :he natural sonopoly chat has been periodica!ly established :a :he Indo-Cangecic plain is contescabla by i c t e m a l riBrais. O ~ c ea 2e.a enirant I established his dominance, Eke suscainabilicy on a C-ynastic basis oi chc r.ev!p established nonopoly depended upon his heirs beiag farsighted anougn not :o excract more than :he nacural rent. : 5 chey did rben :here vould be an incentive for i n t = m a l corncecitors ~3 ;rise and acrsapc :o provide a comper-itive suppiy. =e rebeilions ar =he ec'ges of :he %?ire (ukere 5ecausel of costs or' cranspor: and c o m n i c a t l m :;-:a1 encry vould be easier) vhich kave (as chey scill do) 291 plagced Tzcla'j :mperial ' rtllers, rould :hen beccrnk period of chaos .aciL one or Dct..er ~f zne fauding chiafs ;uccecCecl :a sonopoly he had acquired. If :he -cti?rLyizg ecolsqicai, lemsgra?hic ar.c economic conditions did not a!=rr xtl-~edly--as:hey did noc (till oery recently)--chere would be cycles oi 3rouch and decay of empires ?inkea co cycles in 'rrqtr' :hat che predarory-s:aCe sausn: :o exact, vi:h :he 'scab1:e' equilibrium corresponding to the sus:ainab!e 'narural' rents ex:rac:able under the C U L ~ SOE aBw! We have litrle to go on in cocumencing che changing fiscal exaccidn of India's predators till about 10001\3. 3ut che simple theory outlined in Part I does seem c3 fit :he case oi a: leas: :uo of the major India3 empirqs that have risen ana fallen siace the=--che aedieral Yoghul empire, and :he, British aaj of :ha 13th co 20th cent.zries. The theory su3gests chat given cbe large alluvial "core area" of the Indo-Cangecic ?loin and the consider~bleentry barriers facing exrenal rivals, the 'natural' rent chat a stable predatory state could excrac: gourd be re!atively high. Secondly, give3 the isporfance of incerr.aL relarive c t ~ external trade, there vould be iicclc incentive for c5.e predatory scare to1 creace the property rishts requite& :o establish a aercancile and thereby a .mrket economy. These predictions ate borne out by che relatively detailed account nov available of rhe '3evecue Economy' (Jicks) established by Eirsc the Suicanace and :hen che !!og%uls 13 :be hdo-Cangecic plan (see Xay "aere ~ O Vseeas :o be a c3asensus char :he 3oghui Scare ciaimed ac Leas; one :bird t3 half or norc oi zie aqricu!:urai 7roduce 13 cash" (2ha:cacharya. 2.1708). !!addison krr escisated :'at "the c3caL ro-vez~e(of which ?and revenue uas tho- slajor tar:) of :ke .Y.cg=xI Stafe acd au:Cnomous princelieqs and c5iefs a s ?robably a b u c 15-13: ? E na~ior.aLisczae" (7.22). This can be compared rrith the es:i=u:e of 3eane 5 Cole :ha: in :5a8, :ax reven.;e mounted co 6.3% of naciaea! incone ia Eng1ar.d (a couccry ..rnich -~cuLd have a Lower thrashold of inczeal 'encry-' coscs and hence lover 'naturai' rents). This tax burden %as iscreased under Aurangzeb ar.d his successors and^ I contributed to the decline of c3e Xophuls (in line ~ i t hthe cyclical model of^ I fiscal excess). The Internal c h o s and breakdovn only came to an end with the I gradual escablishmenc and extension of British power over che subcontinent. The British Xaj, vas relatively benign in its fiscal exactions. I Yaddison estimates that, by tke end of :he colonial period "the :atal car b u r d e ~gas only 62" of national income (Xaddison ?.AS). 3ut as a resu!c, chel 3aj's iiaances vere a?vays prccaricus. Yorer~cr,xnlike its predecessors ch4 I 3aj csuld ZOi excrac: the 'aar~ral' rent =hat ?as: ?redatory s:azcs Sad I axcractcd for tsro inporcant reasons. Firs:, znliie SKISCof ;aaia's other ~ I invaders, the Jritish, after a 5riei iaitia? ?e:iod (vhich ended with the 1357 I ~ I .mtiny) in vhich they atzzmpced :3 5econe a traditianal iadian povet, szt thenselves apart and above their s~bjccts. S i s meant that, ZnLike any of 1 India's previous ruLers :here xas a possibi:i:y 25 a catiocaLisr revolt of i$e I I ?opulace as a vhole agaiast its r~lcrs. %is aeant rhat the entry Cosis for1 I incemaf rivals had been consiterably reduced, and the British 5our.d rhat, tAe I "secret of successful Indian 3o-reraez: was L3v =axation", (Tomliason (1975 ) I p.338) vhilst providing lav orfar =ore c=ea?lp =tan had historically bee-b possible. I I On the other Sand, the -1aLl;e 35 Zzdia t3 t=e pire re =as ia ?roviii.lIp a !ar+,e reservoir of arr~ed-ar.F;.er for use ix ~ s i aa i d ~ f z i c a?aid ouc 3f ~ . . I Indian revenues (Tomiisson, p. 339). ?,e co3s:::ac:mal hiscary I 3i :he I 3ri:i:h Xaj nas been recen::? reoorker! as a 3is:3r- 2f .rariccs ~x?e"-~.-?.lzi :a squeeze nor? revenues for Inperial 7urposes (see Seal). Co-??clzp I-diar , I I I I coLlabora:?rs by granting them sysceas of represancacion, -cminacion and ele=cion became an essential expeaienc in squeezing more revenues uithout incurring :he accompanying ?oLi:icaL and adminiscracive costs. The syscen cf represencaci-~egovernment :Sac energed vas hovever :o be used in :be 30s: i9k7 period by people Less moved by che spirit of John Stuart Yill :ban che ancient Indian political cradicion of feuding faction leaders fishting for a share 3f che regional or national spoils of a potentially Izoerial Revenue economy. X I 1 nev inscicucioual scruccure :adni:cedly less bloody :han in tte ?asel for 1 arnbicious ?oLicicians to fight for and vield !aperial auchori:y had Seen created Su; :kc ancienr Indian aocion :ha: :te scate is =he personal (~oss:bLg heridicary) jagir (fief) af :hose 2ho concrol i:s cencral levers had 20: 5een eradicated fro= che ainds af eicher :he rulers or che ruled. Uorse, vi:h che ending of alien rule and the accompanying reduc:ion of the dangzr oi an incarnal carionalist re-~olc,CSe 'natural' rDnt t? be exrr+cc+d kad cnce ajain risen :o its historica? Levels. India's rulers hid noc niss chis cpporcunity, and che econcmic h i s ~ o r yof India since Independence can be Looked upon as a saSK extension of India's kiscorical Sevenue Economy chat chese changed circ~nscanceshave pe-micted. 3 e ovezc revenues exzracced by :he State in the lace 1970s vers r ~ n n i n qar over 202 35 national incme, buc =his Goes noc Seqin co cake aczounr of :5e rents :Sac various ?ublic aiEiciaLs were exzractizq from :he zier=anciLisc syscec of trade. industrial anti ?rice conerols t3at :te ?os: izde?endeece frctiatsry stacc kas e s c a o l i ~ l ein Izcia. ~ '1. 3 e Faiiure eo 2evelop a Uarkec Ecansrnr >ere 3as See3 a :hri-~izs 3er:kan: ciass in I z d ~ asizcc 2: : e ~ s : :ze j ~ cencxry 3.C. h uhich has aeneiiczed frzm :he development sf z r x n cericres from abou: rhe same dace. Yowel~er,the flovering of a f ~ r nof zercancilc capitalism has been repeacsdly ?revenced by various constraints on corrmetce irnp,jei by -.Eficialdom as re?! as :he social res:ric:ions sf :he casce sysccm. Tt-are vas a period in ancirn: Indian niscory vhe5 :be Ce-~elopmescoi a mercantile economy in che subconcinenc was ac leasc a possibiLicp. I C was novever decisively (and in our view inevitably) settled by the conflict bet- ween 3rahmi~isn--~hich upheld :he casce sysccm--and che non-casceist religious seccs--9uddhism and Jainistu--which had gtovn in che 6ch century 3C. 301 2.e nercan:ile classes had pros7ered vie5 :ke 3rovch of crade and coEerce in :h;e bck - 6ch centuries BC, buc cheir ecsnomic ?over uas 3oc 3acched by policicel ?over vnich vas held by cke :.do spper :as:es. T3e Zercancile cjsccs su?por:rd :he new non-casceist sects and :he succ3me of cheir conflict -die3 cha 3ra?aias can be traced in the relacive grouch and decline in 3uddhiss--unose declice in :urn was asssciaced with :he decli~eiz :he political iortuces or' che netcantile class. laccet decline sas in 3ar: caused 5y :he izcreasing intornecine ariar re in Northern India af:er :he Cupca 2ezicd ($:h-Sch centuries 0)and the beginning of a series of invasions from the norchvesc vhich must haare disrupted the inlaad and overseas crade .-%ich -das :be source of the metcancile class' ecorromic ?suer. 3y the time of :he a07ezif 3f :ke Cresenc in India (c 1000 XC3) 3rahiminiss had tricmphed. Though under :he Yoghul~and :ke restoration sf lav and srder f3r subscancia1 ?eriods over a latze ?at,= of :he subcontinent, :ie serchar.ts 2rosjered. cke-ir econcmic jovet -Jas xoc imccked by :heir ?oiiticaL ;over (Spear, ?.h7). Nor did :he 3ricish sac:eed ia cscablishing a =erranti!= e~ocos~y. even chouqh che lace 19th cen:crj xi:3 ics c3mitsene co Llberai economic policies did see iSe rise of various indigenous indusirial groups E:o~m r5.e merchant Castes. ne traditional Literary castes--;arcic~lar!y :he 3raSmir.s-- vere the firsc (diven ckeir historical ?enchant for ;arasiticsi govet--est service) to convert tc che nev Western vays and take the opportunitiqs fa; legal and c1eri:aL job3 rhe nev systzm offered. ?hey were che firstl:o penetrate tte higher reaches of the bureaucratic 'steel frame'. the Xndian Civi! Service. As the =jot historian of the Indian siddle classes niotcs: "Since India's tradition of caste authoritariarisa fitted in sell uith the Imperial s c h a m of things. Indian Sureaucrclcs, rho us:aally belonged to 3igher castes, vere quick i3 scab into the shods of the 3rit;st. who !'eF: India 'n 1947. J~eeaucracythus continued :o recain its hoid over business in India and is increasiap its hold ui:h the extension of :he state's ecozomic . function. >is nay be Seneficiai :o the educated middle classe:. since as officers of Govenaenc :hey step in as controllers of nazionalize:! ilndustries uithout any 2ersonaL stake in then. 3ut it is no gain =o the csun:ay as a uhole. The syscen or' state controt in facr stifles &roc-th of rntrepreneurial elemencs vhicb India has in tha past badly nceded :Q .pe:ed r ? production. Traditi;sally recruited from the Lrcerary ~lasses,uich ?c business acumen, civil servants are mos: unsuited to acceleraza ';rodcctioc in I hope this is enough to suggest how :here have been long ra propensities vhici have shaged a ?arzicular f o m 9f pr2daror.j state i-. India, uhich though recencly garbed ic representacive clothes has not =hangad iis nature or essential ?ur?ose. In facc :he advances i= vhac Yicks :e8=s =3e 'administrative revolu:ionS of :he ?csi LOO years, have Led :3 a huge expansion of the traditicnal Icdian E o r ~of a Revenue Lconomy viih i i r e consequences Eor its zconomic development. Precomnicmen~and Efficiency I Can chese natural proclivities of large 'nacurai' rent rich s aces to I I ercrbliuh an inefficient sec of 2ropercy rigtc~be seamed? There is bne I I imporcane historical case ohere chis has happened-che United Scaces. IC 'has I been done by a form of precoumicmenc =/--a conscitucion--which tied the I Scace, Ulysses like to the masc, so char ic vas not ensnared by the Si&ens of ics 'natural' rent seeking proc1ivi:ies. This was 2ossible because as(Nor:h ~ notes: "The American colonies vere ;a the ex:raordinary position of taLizq over from England noc only che body or' propercy rights (and common l a u ) :hcc had been evolving there, buc also che deep discrusc of A powerful scacle chat I emerged from the L7,qlish 2evolucioc**. (North p.187). 3cc as he goes oln :c~ .how, under populisc pressure che controls cbac the f r a r r s 05 che I I c o n s c i ~ u t i ohad insti:uted ~ t. cxa:rol the Scare brzke do-. The r.ajons ---ere i concerns about the discribucional justice of an unregulated m r k e c an d e n a ~ d s for fundaaental political and economic structural &ange to alter cDe I dirtribuii~nof income (Sorth 2.192). The resuitinp ;cliciciracion a/ IYS econosic life and ici consequences for che atcenuation of the aarkot t a is anocher scary. ~ Out for ay pur?ose ic is iaporrmr to note -.he hold of a rimliar public ideology--Fabian socialisre-in moden: India. >us when Izdia T/Jot a consticution at Indepetdence ic legitimized =ke contC=uarion of a 3'3 expanded version of the 3evenr;e economy in the name of "sccial justic I". 321' I Thus precomnitment in the form of a conscitrrtion is not enough i:f the ideology of the constitution makers is not conducive to chaining ~eviathJn. Yost inefficient predatory states need to be saved from themselves by sove I form of precommicnent, but in devising and recornending the form of that) I pracommitment we must be clearheaded. The optimal Ramsay tax rules chat I economists are taught to recoamand are also the appropriate ones for Leviathan. As the BBU theory suldests. advising a predatory state to leyy I I theie would be redundant if the state was incertern+orally rational I I (farsighted). Given the relf-interest predatory states have in their riet revenues as well as survival, if the optimal tax experts' advice is not keedled l it will usually mean that heishe has not recognized some of che politica~ I constraints which determine which set of cornodities can be taxed. and oker I I which the '.ax structure should be Ramsey optimal. I I I But even though the L e q i c g of hrnsey taxes is compatible with a ~ whole host of alternative property rights systems and the associated 'odtural* I I I rents extracted by the predatory state, there m y b e a secondbest argumerjc from I I the vierpoint of its constituents for s- form of precamitment by the stare I I -to not levy the Sansey optiaul taxes in a territory .&ere its natural I I I proclivity is towards the assignment of inefficient propercy rights. 14 such I I l a precomnitment can be obtained ic could lead cowards a welfare cptimall I dynamic adjustment to a more deve10pren:ally and market oriented set ail 1 I property rights. This brings us straight back ro 3renann and Suchanan* fiscal conscitucionalism--uhCh is ;mere ;.e came in. 30w we zec a relu ran: Ullysses to tie him (or her) self c 9 :he m s t , then becomes the really ( imporcant question for political economy--on xhich of course I have (as(yet) I nothing to say! FOOTNOTES 1. As Yorch notes: "vhecher che scace originaced as 1 3 predatory group attacking and exploiting a peasant village (a predatory ~ r i s i nof the^ I scare) or developef out of che commur.al necds for organisat ion of :he peasaln: village (a contrrcc origin of che scate) cannoc be resolved." 2. These speculations are 'macro-historical' in chat they 1 concenrrace on very broad general trends rather :ban the ietrils of hiscord. They are akin to chose of YcJeilL, Jones and 3arri.gt.n-'loore for iascancei 3. "There have been ciaes ohen violence-using entar?ri ses comFedcd in denandins 7ayments for ?rotcccion in a!aost the sace :et:icory, for example, Curiep the Thirty Years' n r in Ce-ny. 3u: such A si:uacion ~ even sore uneconomic than .auld be competition in che saqa territories bec-heen rival telephone systeas. Competing police forces oere even more inefficiek: than competing Eire csm7anies. A nonopoly of the use of fcrce sichin a 1 1 I contiguous cerri:ory enabLtC a ?rateccion-?roduc:n3 e3:erprtse co izprove z s product sad reduce its costs." (Lase, p.AO2). i b . .Yor:h & Thomas (9.87) 2ote of tbe &ergo-sce of 3uropean 3a:ibn states in the LSch and 16th co,ncuziss: " 3 o n in ox2anding xarfarc, crcacl-6)j y intrigue and treachery, che crsmed heads appeared :D kave aore :ke characteristics of Xafia bosses :ha :ke ckaracceriscics of ki-8s cavisio c5 a1! cencury Later by John Lacire". 1 i 5. These are :ha: (a) i5e ~ o t a lcosi f ~ ~ c z i oi?r :le n i40 )rodfCz~ ?rlCuced joincly by the fi= =avo- "s=ric:ly decr~ssitgray averags cls-,, 42s: I is, iE a orouorcionace increase ir, all, of rhe ,Zir;n9sD U ~ J U C Sproduces . . than ?roporcionace izcraasz :a :ci :otal cost," (2.356) azd (ii) :he 4 f~?ccion is cracs ray convex, uhich "requires, in essence chat comple.?..et.trr- ties in production out weigh scnle rffsccr aiong the rclevanc cross se-c:-n".- ---1 (p.356). The coca1 cost furrcrion =herefare looks as i n Fig. 1, iC 5. If the vector of aptimal outputs is deaoi2d by y , C(y) is I Z e cost of producing eke ouc?uts (excludinq entry costs) and Ygi and ?' :he mar~inalrevenue and price respectively of the ich pro&~ct, :he 3ansey I I conditions zequire for the 2 good case 1 I I 7. It should be noted hovever that: "Bansey 2ricing is suffic enc I buc not necessary for subsrainabilicg. Consequer.tly, C I ~ P C zay exist D 1 suscainabie ?rice vec:ors, ?er=apo even many of then chat 23 not satisfy)the I 1I Bamsey conditions" [3amol, Panrer, Uillig, p.21. 3. See 'icks, p. 39. I I 9. See Jones, p.105-6. LO. Jones, ibiC. 11. Yowever. as YcNei!l emphasizes, in the OLC Yorld (from abdu; I I tOtBC r o 14th cegcxry rU)), ihere was a cbrcnic conflicc Setveen tLe n o j d s of the steppes and settled aqriclucuraliscs. The aomadic ?asc2ralis~s' "r of aoveaenc and su?erior die:. zave c h a a cleir militaq ahvantage ova sessile and (often) ?.roteia-det'icienc cultivators" (Xc.UeilL (338L3 3.21 F r m I. che tLae %hen ?asc2ral n o m d s first learned CIO shoot arrows from horse5 ck :ill =he YughaL and Yanchs cotg-~escsor' India and n i n a in :he l5:h rnd 1715 I centuries, ":he p01iric.l histmy of civilized Zurasia azd Africa cocsiiscr largely of iace-nit:?nt conques: fy invaders from :;le grasslands, 2ur.c-satsd i by recsrrenc rebellions of aqricxltural 7opuiations agaizsi su~j:~ati$d =tc I heirs of such conquerors". (XcXeili (1983) p.12). 12. See Yorch atd Thomas, p.98. 13. A fact which maybe of in?or:ance in explaiaing cSe developme of the nercancile economies amongst :he contemporary South East Asia HICs- the 'Cang of Pour'--Korea, Taiwan. Yar.fX~ngand Singapore. 14. The grovch cycle model of Goodvin vhich is expLicitly based the biological predator-prey node1 of Volcerra would ssem r3 be a?plicablr 15. The term Hindu is used in its ancient geo&tapi..icaL sense as refering to :he inhabitants in the land of the Indus. Various ocher at:ea vnich are meagre and in my .riaw unsuccessful in explaining :he origins oi caste system are revieved in Lal. 16. "Yegaschenes in the 4th century 3.C. heard of 113 ki~gdoms, the actual number m y well have been =lore. From time to time a strong paramount power has arisen and succeeded for a feu years in introducing a certain amount of political unity, Sue such occassions were rare. bXen nc such power existed, the s:ates, huadrzCs ia number, might be Likened to a svarm of powerful, sutually repellant =ie:uLes in a state of incessant movement. now flying apart, and aqair: coalescing" (Smith (L9al), p.5). 17. See hychaudrii Raychaudri S Uabib; Dacca; Durand; 3ashan: mapar; Davis; ?!addison. 18. See hychaudri & 'Jabis cf?. 'ii',; Bhatcachar-/a, for a raviev the evidence. 19. Yaddiscn, p.:a. 20. See La1 for a revieu af :=is aspect. 21. .Also s+e Clark and :ias=eLL chapter 3. Dairty 2ravides a f o m l i r a t i o n of the 3 o s e r ~ p'grout:? ztodel'. 22. b p a r , pp.3&, 38. 23. aasham 3.153. 2 0 . A s i n Kayna, :o ;rovlde a cheap Labor supply :a che -,nice 1 s e c t l e r farms. See C o l l i e r P C ~ Lai. 25. Sea 3asham; Srizivas. 26. ~ Thus i n La1 we es:inate tS;t v i t h the beset'ic of hindsight I between t h e 4th century aC and i 9 t h cencury .U) assuailrg tbac each @aeracLon's r time horizon i s roughly a century, t h e probability t h a t :here oould be 1 k p o l i t i c a l s t a b i l i t y and pan Sorth Indian Law and order uas 0.19. Assumin t h a t the e1astici:y of nargieal u t i l i t y i s 2, and :hat che zradinq a l c e r n ( a t i s ~ e I doublsd per capica ilrcmes above che a u t a r k i c levels Curing periods 3f t i n e s of t r a d e disruption, inccmes d i d not f a l l :o l e s s :kan 30-90: of :de I 4 a u c a r ~ i clevels. t o r oore r e r ? i s c i c gains Erorn trade, the Levels 3i inc me ale cines of disrupri=n 4nd.r t r a d e snould not f a l l below 951 o i rhe r u t a r k i d I ?eweLs 15 che :raCiz3 slco-r,ari-~e.;ere r o be cx;ec:cd r;ci;i:y a a x k i - : - -L--gi I 29. Csr.siC~rtec*nr c.rer.tr in Assam and ?.~?:ab Eor ixls:anco,, =:= Long-standing seperatis: =oi.=c 1.7 faei? Xadu. I I i 30. inevi:aoLy, 5eca:se as =e Save a q u e C above cke c a s t = syszlp3 as 5ot dysfur.c:ianal azd prcviieC :Ze asi is for r ;riabLc ar.d r e l a t i - ~ e l y ~ I I I prosperous econcmic and sociaL order. 3 o -cocflic: =as aisa 5ez-dean :54 I republicrn f o o c k i l l s aad c f e =caarc5icaL ?Lai.ls. 2 e :act=: - J ~ : ? Ickeir1:i?rzsz :ax base ver? 5ound :a .,in ou: i:: ::e ian3 ?A: a s :key tit. 5ea -41 a I EuLLer deue-lopne~ca5 rhe arr.er.:. l i 31. 3 iaporcanco 15 "~recomirse~:"a5 ar. esssztlaL =laze:: i:: buman racicnality 3ocs back :a Eke di5c.~ssion9f ' a ~ r s s i a ' by Ariszaia. (Sen), inconsistent time preferences (Stroc:), an= endogenous changes In I caster (von Uerszacker). Elscer provider 3 splendid discussi~nacd eludicacion of this isportant facet of 'iqerfac: r3ciocalicy'. Sc.".e!:i-3': is a recent economist's view of the subjec:. 32. 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