Potentiality of emergence of capitalism in Mughal India

It has often been asked why India failed to industrialise and evolve a capitalistic economy before the British conquest. In other words, was there any potentiality of emergence of capitalism in Mughal India along the lines of what happened in Europe? This query was casually probed by W.H. Moreland (India at the Death of Akbar, London, 1920; From Akbar to Aurangzeb, London, 1923) and Brij Narain (Indian Economic Lib, Past and Present, Lahore, 1929). However, since 1960s, there has been a regular debate on this question beginning with Moms D. Morris (1963) and Toru Matsui and followed by Bipin Chandra and Tapan Raychaudhuri (1968). But their views largely dwell on the 19th century India. It will, however, be more fruitful to us if we focus attention on the status of the Mughal economy. A pioneering enquiry on these lines was conducted by Irfan Habib in ‘Potentialities of Capitalistic development in the Economy of Mughal India’.

In fact what we are concerned not about why a capitalist structure did not emerge during the Mughal period; our query is whether we can see signals of capitalist development within the Mughal economy. Significantly Europe did not possess capitalist economy in the 17th century. Capitalism started emerging, for example in England, from the second half of the 18th century only. It was, by and large, merchant capitalism that prevailed in England at this time, not industrial capitalism.

To begin with, we must be clear about what do we understand by the term capitalism. Thereafter we may begin to investigate the presence or absence of its features in Mughal economy. Let us list the most important features of early capitalism:

  1. Control of capital over production-processes;
  2. Money or market relations;
  3. “Immense accumulation of commodities” (Karl Marx); and
  4. Breakthrough in production-technology.

That the merchants of Medieval India possessed considerable capital cannot be questioned. Estimates of their wealth come from European records. We are told that in 1663 some merchants of Surat owned more than 5 or 6 million rupees. Mulls Abdul Ghafur of Surat had assets worth 8 million rupees. He also owned twenty ships (between 300 and 800 tons each). The English factors testify that the volume of his trading transactions was no less than that of their company. Another Surat merchant Virji Vora is reported to have held an “estate” of the value of 8 million rupees. Manrique (1630) was amazed by the immense wealth of the merchants of Agra; he saw money piled up in some merchants’ houses that “looked like grain heaps”.

Besides, the merchants put their money into commercial circulation. The wealth of the non-mercantile groups too was invested in trading ventures. This included the Mughal Emperors, royal ladies, princes and nobles-many of whom had their own ships. True, their investment was less than that of the merchants; but the important point here is that their involvement increased the size of “money-market” in its own way.

The system of credit and banking in Mughal India was well developed. The sarraf who acted as a banker remitting money and issuing bills of exchange called hundi. The sarraf also discounted the hundi of merchants thus enlarging the volume of money for commerce. Another well-developed financial practice related to the insurance of goods in transit (both inland and marine). Moreover, institutions of money lending (and interest), for commercial purposes including bottomry and respondentia, were also prevalent. Clearly then the basic financial and economic institutions were in operation in good measure during the 17th and 18th centuries. This may have put the Medieval economy on to the road to capitalism.

Again, commodity production was taking place on a vast scale, especially of textiles, saltpetre, indigo, etc. Procurement of these commodities was made easier both for the Indian and foreign merchants by the institution of brokery. Means of transport, too were fairly well-established keeping in view the constraints of Medieval times.

True capitalist relations may develop only when capital would dominate and control large areas of production process. This is the principal difference between industrial and merchant capital. The latter is not directly involved with manufacture. In other words, production was not controlled by merchants: it was carried out by independent artisans who owned the tools, invested their money in buying raw material, worked at their respective homes (Domestic Craft System), owned the finished goods and sold the latter at the market. Capitalism destroys all these features, turning the independent artisans into wage-workers. As an upshot, industrial capital takes over gradually the means of production and controls the entire system.

But the changeover from merchant to industrial capitalism was not abrupt or sudden. There was a transitory stage that arose within merchant capitalism itself. It is called putting-out system. Therefore, it is pertinent to examine the nature and extent of this transitory phase in Medieval India, that is, the progressive control of labour and production by capital.

The penetration of merchant capital into the existing artisan-level mode of production could occur through the putting-out system (dadni) which seek to have been quite an established practice, though on a small scale, even prior to the 17th century. The brokers come into the picture because the advances to the primary producers by the merchants were made through them: Let us first set out the economic structure of the putting-out system. The Indian economy during the 17th century was a sellers’ (i.e., producers’) market. There was tremendous demand and the large number of competitive buyers flooding the market. Thus, from the merchants’ point of view, especially of those engaged in foreign trade, the putting-out system excluded his rivals and secured him timely delivery of stipulated quantity of commodity in accordance with his specifications at previously agreed rates. On the other hand, the primary producer accepted advances since he had to cope with extensive orders for which he may not have adequate money to buy raw materials. (The next stage was the supply of raw materials, too). Thus, the putting-out system rendered economic services to both the merchant and the artisan. In this context, the degree of penetration of merchant capital into the production-process through the putting-out system could be assessed by examining whether the merchant advanced cash or raw materials (or both) and the tools of production to the artisan. Taking the textile industry, we have adequate evidence for advance being given in cash to infer that it was an established practice. But evidence for raw material is quite insufficient to show its wide use, while that for instruments of production is almost negligible.

Here it must be pointed out that the need for giving raw material (yarn) to the weavers arose from the consideration that the yarn obtained by weavers themselves was often of inferior quality, even when granted cash advance. It appears that some profit accrued to the weaver when he himself purchased yarn or raw silk of a quality questionable from the merchants’ point of view. Thus it may be reasonably assumed that the weaver did not always welcome the supply of raw material from the merchant as this possibly wiped off the little “cut” they could otherwise get. This partly explains the scarcity of data on this particular practice, that is, the advance being made in raw material. Hence the predominant form of the putting-out system was cash-advance.

We find only one reference in the English factory records to advance of raw material, but that is in connection with raw silk. The reason assigned was that the weavers, out of poverty, could not buy raw silk of the requisite quality. The same could be said about Gujarat with the difference that probably this practice was adopted on a comparatively large scale tban in Bengal. But there is no evidence to convince us that it ever acquired a very dominant form of the putting-out system there.

Even Chicherov, despite his strong advocacy of the development of capitalistic relations, is struck by the scarcity of data on the advancing of raw material, that is, yarn, to the weavers. He himself explains that “the supply of raw material’s never posed a problem” in tbe rural areas because “cotton-growing, which was extraordinarily extensive and in some areas almost universal, was a typical economic-geographical feature of India; cotton could be grown on every farm or bought on the nearest market”. He adds, “spinning, widespread not only in the weavers’ home but also in ordinary peasant families, created a constant and vast source of raw materials for the weaving trade”. Thus, it may safely be concluded that the most distinguishing feature of the putting-out system during the 17th century was the practice of cash-advance.

From this point we can pass on to the part played by the practice of cash-advance in transforming the relation of production. Considering the prime motive of giving cash-advances to the artisan, we do not notice any distinct tendency on the part of the merchant to intervene deliberately in the production process in such a manner as to bring about a radical change in the relations of production. True, the producer was “tied” to the merchant in the sense that now he was under an obligation to fulfil his commitment, that is, to provide the merchant with the commodity produced by him in accordance with the merchant’s specifications within a limited time and at an agreed price. But the artisan still retained the ownership of the tools of production and in this case raw materials, too. What really happened was that he had merely sold off his produce in return for advance payment out of his free will. There does not appear to exist any extraordinary economic compulsion (except poverty) for him to accept such orders from the merchant; nor does the latter appears to have employed non-economic coercion to compel him to enter into such a deal. Instead, the merchant had to induce the producer to accept the advance payment in his own interest.  But even this “tie-up” was very slender. The artisan had merely turned into a “contract-producer” from an “independent” one. True he was no longer the owner of his produce, but he was not yet alienated from the ownership or raw material and tools of production.

As long as the artisan worked within the domestic system of craft-production, real capitalistic relations of production could not be generated. That the putting-out system did not deprive the producer of his tools and often raw material clearly indicates that the control of labour by merchant capital was indeed very weak. Until this alienation took place, commodity-production manufactory or, in other words, assemblage of large number of workers at one place at the same time for the production of the same commodity under a superior capitalist direction could not emerge. But at this stage the putting-out system itself, along with the brokers, would ultimately disappear, yielding place to new relations of production.

Nor do we find any evidence for the creation of surplus value, say, through “depression of wages”, during the 17th century so that a part of the labour time could remain unpaid for. Quite obviously in the absence of the exercise of non-economic coercion by the merchants, this was not possible so long as the tools of production were retained by the artisan, working within the domestic system. Since the tools were simple and cheap to be made or purchased and no technological breakthrough was achieved rendering them costlier, beyond the means of an average artisan, the latter was not alienated from them. Here we may recall the observation of Marx:

The process, therefore, that clears the way for the capitalist system, can be none other than the process which takes away from the labourer the possession of his means of production; a process that transforms, on the one hand, the social means of subsistence and of production into capital; on the other, the immediate producers into wage-labourers.

However, we do not propose to hold that merchant capital did not exercise any influence on the organization of production. The putting-out system through which it operated did encroach on the “independent” status of the primary producer, transforming him into a “contract-worker”. It also cut him off from the market–a process which was inherent in the system itself. Again, the sporadic examples of karkhanas maintained and the dyeing and refining “houses” erected by the foreign merchants in Gujarat and Bengal do indicate the direction of change during the latter half of the 17th century. Yet these changes were not fundamental nor so widespread as to compel us to discover in them elements which could promote real capitalistic relations. After all these were changes within the existing mode of production, wherein merchant capital had a very feeble hold over the production process. Therefore, it will be incorrect to say that merchant capital “broke through the traditional bonds of production” in 17th century India: it had only nibbled a small part of it, of not much consequence.

It is pertinent to ask why did merchant capital, operating through the putting-out system, fail to exercise any worthwhile control over labour? That the failure did not spring from a lack of its development has been examined by Irfan Habib. The enlargement of demand and the flooding of the market with a large number of competitive buyers had put the primary producer in a favourable situation; the absence of any extraordinary economic compulsion or non-economic coercion left the artisan free to strike a deal with whomsoever he considered best. Another important reason was the coexistence of the independent artisan-level production with the putting-out system (which turned the artisan into a contract labourer) probably on a scale larger than the latter or at least on equal footing. Besides, territorial and occupational mobility of the artisan was yet another factor which often may have rescued him from falling into “economic bondage” or “dependence” as a result of his poverty.

Finally, the interests of the broker and merchant did not always coincide. The former tried to seize upon and opportunity to get some irregular income through underhand mechanism: his victims were both the producer and the merchant. Thus he did not always act in a manner which could promote the interest of merchant capital; rather he worked sometimes in collusion with the artisan.

Perhaps it would not have been difficult for some merchants, especially for “broker-contractors” (middlemen merchants) who were in close proximity with the production-process, to evolve into manufacturing entrepreneurs: the examples of karkhanas maintained by the Mughal emperors, nobles and occasionally by the foreign companies should have served as models. But a mere change in the organization of production unaccompanied by basic changes in technology could not cut much ice.

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