Tuesday, June 26, 2012

Globalisation and traditional hierarchies - Some thoughts

The Becker-Posner Blog has a brilliant piece on capitalism, globalisation and its impact on social structures like class, gender and race. Titled "Profits, Competition, and Social Welfare" it argues that capitalism does help in reducing the the barriers of social inequality.
"My second example deals with the interaction between capitalism and discrimination against groups based on their race, gender, religion, or other characteristics. Capitalism and the profit motive help to erode discrimination because companies in their quest for greater profits try to hire minority group members who are getting paid less than their productivity. In addition, the successful growth in incomes and productivity induced by private enterprise raises the standard of living of minorities even when they continue to suffer from substantial discrimination.

A prime example is South Africa under apartheid that was maintained by government laws but was opposed by many private companies. South African blacks suffered immensely under apartheid, and its overthrow is one of the great events of the past several decades. Nevertheless, one main problem during the apartheid period was not to prevent many blacks from leaving South Africa, but rather to control the in migration of blacks from other parts of Africa. The explanation is obviously not that the incoming blacks liked apartheid, but rather that the private enterprise system in South Africa had raised substantially the incomes of blacks there -despite the widespread government-orchestrated discrimination against them-and blacks from other countries in Africa wanted to benefit from the higher incomes available to them in South Africa.

Something similar happened in the United States. African-Americans suffered greatly from discrimination until recent decades. Nevertheless, black incomes continued to grow along with white incomes as the US experienced sizeable and continuing economic growth after the end of the Civil War in 1865 (see my book The Economics of Discrimination, 1971)."
Does globalisation and capitalism have an impact on eroding traditional structures of inequality? Does it help in reducing gender, race and caste discrimination? Is the market "neutral" to these prejudices? Are traditional hierarchies severely challenged by the "efficiency" driven, anonymous market? I have often thought about this issue in the context of caste hierarchy in India. Is globalisation and open market more beneficial to the marginalised communities in terms of anonymizing their identity? Does it give them more opportunity to participate and rise the social and economic ladder than in a State led model of development? Will international trade provide more opportunities to members of these communities to participate and have a stake in development? Will it help reduce barriers, not of trade and tariff, but of social stigma and intolerance? Does it offer more opportunities for participation in an unhierarchical relationship thus acting as a leveller?

Chandra Bhan Prasad suggests that capitalism is more favourable to the eradication of social inequality. In his paper titled "Markets and Manu : Economic Reforms and its impact on Caste in India" he argues that capitalism does help in being emancipatory but it needs to be more egalitarian and participatory.

Can the rules of a market economy of efficiency, competition, entrepreneurship and innovation combat traditional hierarchies of caste inequality? Is it easier for people from the disadvantaged communities to rise up the social ladder in a capitalist led model as compared to a state led model? This report titled "The rise of Dalit Entrepreneurship" explains how Dalit entrepreneurs have risen in a market led economy.
"Explaining that economic standing is the only way Dalits can redefine themselves, RGICS’ Babu likens the trend to the wave of Black Capitalism in the US in the 1970s and 1980s. “There are strong similarities. Like the black capitalists of America, most of the Dalit entrepreneurs are first-generation entrepreneurs, people who were never into businesses but mostly relying on agricultural labour. To get into serious business from agriculture is a paradigm shift. And, in both cases, here as in the United States, even though there have been state interventions to promote entrepreneurship, individual motivation and community help have come first,” Babu says."
study titled 'Caste and Entrepreneurship in India" by Harvard Business School, to the contrary, posits that representation of dalits in capitalist led entrepreneurship is still low. Explaining that the lack of  "network effects" could be one of the reasons, it concludes:
"The evidence we have presented shows that the OBCs have made progress in entrepreneurship , but SCs and STs are considerably under-represented in the entrepreneurial sphere.  That is, for SCs and STs, political gains have not manifested themselves in greater entrepreneurial prowess.   The rise of Dalit millionaires, driven in part by newer economic freedoms, does not appear representative of the broader swathes of the SC/ST population, at least until 2005.  Such under-representation appears to persist even in states with very progressive policies towards SCs and STs, in states where OBCs have made considerable progress in enterprise ownership, and in urban areas where outright discrimination is lower than in rural India."
Thus, questions remain as to to what extent globalisation and capitalism help addressing traditional hierarchies. Are these forms of development also appropriated by powerful communities? Also, is representational participation  good enough? For example, if a few entrepreneurs from a particular community do well and integrate, does it signify that the whole community has benefitted? Will small entrepreneurs and business men have more likelihood of upward mobility in a globalised world? Are markets, globalisation and international trade immune from traditional prejudices of gender, caste and race or  will it be subsumed in these traditional structures? This is an area that definitely requires more research since as developing countries integrate and questions are raised about the benefit it would have on large populations comprising of hitherto disadvantaged sections, the answers to the question of the relationship between traditional discrimination and new markets will have to be addressed.

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