Stages of Capital: Law, Culture, and Market Governance in Late Colonial India

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Overview

In Stages of Capital, Ritu Birla brings research on nonwestern capitalisms into conversation with postcolonial studies to illuminate the historical roots of India's market society. Between 1870 and 1930, the British regime in India implemented a barrage of commercial and contract laws directed at the "free" circulation of capital, including measures regulating companies, income tax, charitable gifting, and pension funds, and procedures distinguishing gambling from speculation and futures trading. Birla argues that this legal infrastructure institutionalized a new object of sovereign management, the market, and along with it, a colonial concept of the public. In jurisprudence, case law, and statutes, colonial market governance enforced an abstract vision of modern society as a public of exchanging, contracting actors free from the anachronistic constraints of indigenous culture. Birla reveals how the categories of public and private infiltrated colonial commercial law, establishing distinct worlds for economic and cultural practice. This bifurcation was especially apparent in legal dilemmas concerning indigenous or "vernacular" capitalists, crucial engines of credit and production that operated through networks of extended kinship. Highlighting the cultural politics of market governance, Stages of Capital is an unprecedented history of colonial commercial law, its legal fictions, and the formation of the modern economic subject in India.
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Editorial Reviews

From the Publisher

Stages of Capital is a triumph of learned and nuanced interdisciplinarity. ‘Stage’ as temporal metaphor undoes the great narrative of universal capital. ‘Stage’ as spatial metaphor illuminates the culture of market governance and community in the colonial theater of South Asia. Richly theoretical, provocatively empirical—an indispensable book.”—Gayatri Chakravorty Spivak, University Professor, Columbia University

“Deeply rooted in precolonial pasts and yet somehow fully modern, family firms have remained an important but understudied feature of Indian capitalism. Ritu Birla’s book breaks new ground by analyzing the legal and institutional debates that attended maneuvers by the British to manage and transform this institution into the modern capitalist enterprise. A sophisticated and original study of some critical cultural issues in the history of Indian economy, this book will interest all students of modern India.”—Dipesh Chakrabarty, Lawrence A. Kimpton Distinguished Service Professor of History, South Asian Languages and Civilizations, and the College, University of Chicago

“This remarkable book shows that the history of colonial capitalisms need not, and cannot, be divorced from subtle changes in ideas of legal subjectivity, gender, and corporate risk taking as subjects of archivally based cultural analysis. Ritu Birla’s story of the transformation of the Marwari business clans of northern and eastern India into giants of contemporary capitalism is both impeccably scholarly and resolutely post-Orientalist. This book is a must for all those who sense that the mammoth global meltdown of this decade is powered by myriad regional and cultural capitalist trajectories.”—Arjun Appadurai, Goddard Professor of Media, Culture, and Communication, New York University

<I>Journal of Economic History</I> - Bishnupriya Gupta

“Birla’s book opens to us a fascinating world of the merchant communities of India, who survived and competed effectively with their British counterpart. The book brings together the intricate details of how these privileged communities sought to protect their spheres when challenged by a different cultural context. . . . There is much to learn from this book. The detail opens up further areas of debate and discussion on colonialism, property rights, and economic development.”
Business History Review - B. R. Tomlinson

“In this important study, Ritu Birla unpacks much of the argument and literature on the subject and explains, in this complex, carefully nuanced account, how the Marwaris, a significant community of vernacular capitalists organized in family firms, interacted with various incentives to establish market governance under colonial rule. . . .Readers of the Business History Review will benefit from her thoroughly reasearched, sophisticated account of the kinship capitalism of the Marwaris and its role in developing India’s economy and market structures.”
Law and Society Review - Prabha Kotiswaran

Stages of Capital is a masterfully written book in which Birla brings to bear extensive archival material and insights from social theory, critical legal theory, and postcolonial studies, to offer a sophisticated argument about the workings of colonial law and capitalism in India. . . . This truly interdisciplinary book will no doubt provide a point of engagement for future work in the area. The book is invaluable for legal historians and scholars working on South Asia and likely to be of interest to anyone interested in the study of law, markets, and capitalism.”
Law and History Review - David Washbrook

“[A] fascinating book. . . . Birla provides some important leads, which other scholars will undoubtedly begin to follow, and she deserves great credit for establishing the terrain of a subject likely to attract further research.”
Journal of Interdisciplinary History - Thomas R. Metcalf

“[An] ambitious, excitingly original work. . . . [T]his book brings together economics, law, and history in a powerful vision that shapes afresh our understanding of capitalism and colonialism.”
Journal of Colonialism and Colonial History - Eleanor Newbigin

“This is a groundbreaking book, in terms of its theoretical approach as much as its findings and insights. . . . While scholars of post-colonial studies have been criticised for focusing on text and discourse and the expense of material structures, Birla’s impressive study demonstrates how important capital was to the construction of western hegemonic power and notions of a colonial modernity. . . . As a call to colonial historians to ask new questions of existing archives, Stages of Capital is an exciting and inspiring intervention in the field.”
Enterprise and Society - Priya Satia

“This remarkable and clever book turns capitalism inside out, revealing the little-studied colonial legal structures that shaped both market governance and the commercial tactics in India. By demonstrating how a major merchant community, the Marwaris, adapted to the tide of colonial legislation about business practices in the 1880s to 1920s, Ritu Birla breaks critical new ground for historians in search of a way into the cultural and institutional construct we call the economy.”
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Product Details

  • ISBN-13: 9780822342687
  • Publisher: Duke University Press Books
  • Publication date: 12/24/2008
  • Edition description: New Edition
  • Pages: 360
  • Product dimensions: 6.10 (w) x 9.20 (h) x 1.10 (d)

Meet the Author

Ritu Birla is Associate Professor of History at the University of Toronto.

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Read an Excerpt

STAGES OF CAPITAL

Law, Culture, and Market Governance in Late Colonial India
By RITU BIRLA

Duke University Press

Copyright © 2009 Duke University Press
All right reserved.

ISBN: 978-0-8223-4268-7


Chapter One

The Proper Swindle

Commercial and Financial Legislation of the 1880s

It was not my own fault that, like those who first hatched me, I was conceived in sin and shapen in iniquity, and became almost immediately the means of demoralising every one who came into contact with me, of deceiving those who trusted in me, and of crushing those who opposed me, until my own turn came and I fizzled out in a gutter of fraud.-LAURENCE OLIPHANT, "The Autobiography of a Joint-Stock Company (Limited)," 1876

IN THE LATE NINETEENTH CENTURY, literary texts such as Laurence Oliphant's "The Autobiography of a Joint-Stock Company (Limited)" enacted the new legal world of Victorian England, populated by fictitious persons and societies, and capturing, as Mary Poovey has called it, the "virtual and embodied states" of capital proliferating at this time. Novel legal fictions that coded the limited liability joint-stock company as a public person, for example, accompanied the unprecedented global reach of finance capital in this period. Performing the legal selfhood of this public person, Oliphant's literary confession personifies the spurious origins of modern forms of market association, manifest in their colonial histories. As British territorial colonialism carved out new global markets, new legal instruments enabled capital to move globally, to discover new resources, and to settle and collect in corporate bodies such as the joint-stock company. Legal developments in Britain informed a barrage of commercial, financial, and fiscal legislation that was enacted during the 1880s in India. Marking a new era in India's development regime, these measures conveyed greater concern over the customary commercial and financial practices of "native commerce." This chapter elaborates key debates surrounding the Indian Companies Act of 1882, the Indian Income Tax Act of 1886, and the Negotiable Instruments Act of 1881. These foundational statutes reflected the complicated history of Britain's financial system throughout the nineteenth century, whose contradictions and anxieties were magnified in the Indian colonial context.

Crowning confirmations of the disembedding of the market, these measures introduced almost at once procedures and principles evolved from long legal histories in the British context: the concept of generalized limited liability, the expansion of the fiscal system, and the standardization of currency. Directed at new sites of surveillance, the nonagricultural classes, these statutes represented novel strategies for the regulation and assessment of vernacular merchant capitalists and the promotion of contractual models for trade and association. The fluid relationship between indigenous credit, the export trade of British merchants, and the sovereignty of the East India Company before 1858 was, in the latter half of the nineteenth century, increasingly codified in legal controls that sought to administer the ideals of free trade and allow "capital's ability to generate wealth through circulation." Reflecting concerns about the material profitability of the Indian empire, these regulations emerged in the period after major processes of legal codification and the compilation of Hindu and Muslim personal law, bringing the public/private distinction to questions within commercial civil law and common law, also known as the lex mercatoria, law merchant or mercantile law.

In the British-Indian imperial social formation of the 1880s and 1890s, the burgeoning of new financial instruments enabled the free spirit of capital and sought to capture it through the disciplines of law. In Britain, the eighteenth and nineteenth centuries had marked a shift away from land as the primary register of personal wealth; by the late nineteenth century, the growing dominance of finance capital in Britain's economy had produced new social imaginaries. As Poovey explains, "Even as they occupied an everyday world increasingly filled with objects from all over the globe, more Britons measured their worth not simply by the acres (or square feet) that surrounded them, but by immaterial [representations] ... of value that [were] always deferred." The virtuality of capital, manifest in the stories of the new financial press as well as in the intricate plots of Victorian novels, had been enabled by the theoretical fictions of the law. Legal developments that spanned the nineteenth century reflected scandals concerning financial and commercial practice and the stabilization of new forms of capitalist value. Certainly, important components of modern business-such as the joint-stock association, the idea of the national debt, and share trading-had histories reaching back to the early seventeenth century. But legal historians acknowledge that the pace of legal change after the 1840s was much accelerated. They highlight a general discrepancy between the innovations of eighteenth- and early nineteenth-century commercial and financial practice and the "stagnant legal framework" of the same period. Early twentieth-century jurists such as F. W. Maitland, for example, bemoaned measures such as the "Bubble Act" of 1720, repealed only in 1824, which had managed speculation mania through excessive restrictions on pioneering commercial practice, strictly enforcing the express authority of Parliament and royal charters to incorporate joint-stock companies. In Britain, the shift from law as an arm of sovereignty to a tactic of laissez-faire built momentum in the nineteenth century and was evinced in legal innovations that enabled new vehicles of investment, savings, debt remittance, and credit, as well as the standardization of tax law. Significant markers included the formal establishment of the London Stock Exchange in 1801; the repeal of the "Bubble Act" in 1824; the recasting of companies law beginning in 1844; the introduction of bankruptcy legislation in 1831 (revised in 1869 and 1883); the revision and expansion of the tax law, which had been primarily directed at land, in order to thoroughly cover trade, business, investment, and salaried income; the revision of trust law starting in the 1830s and its standardization beginning in the 1890s; and the amalgamation of the English banking system in the 1880s and 1890s.

In India, the pace of such developments was even more accelerated, and their impact more jolting, as the statutory changes and jurisprudential debates of much of the nineteenth century in Britain were concentrated in India in the period after 1875, following the passage of the Indian Evidence Act and Indian Contract Act, both in 1872. These measures standardized rules of evidence and defined the rules of contract as well as the competency to contract, establishing the figure of the rational contracting subject as legal subject. In the Contract Act especially, the interested subject, the template for the market agent, was consolidated as a subject of law. Elaborating the incarnations of this generalized legal subject, the foundational statutes of the 1880s (which coincided with concerns about declining agricultural productivity) confirmed a century-long shift from a physiocratic model of political economy focused on land as a source of revenue and wealth, to the taxation of income and investments. Here, the order of Adam Smith's market offered a model for sovereignty itself-as governing justly by managing, arranging, distributing. Two general trends in economic policy in the 1870s exemplify the affirmation of free trade alongside the development of technologies of extraction that characterized colonial liberalism in this period: the lowering and abolition of customs duties and the expansion of the fiscal system. Beginning in 1870s, the high import duties (as much as 20 percent) established by the Government of India immediately after the rebellions of 1857 were reduced substantially. In 1875, they were taken down to 5 percent, and in 1882, the year of the Indian Companies Act, import duties were eliminated entirely except for those on special articles (opium, salt, ammunition, and liquor). Export duties were also largely done away with (except for on rice), and in a perfect enactment of the move from landed wealth to finance capital and its virtuality, the Inland Customs hedge-an actual organic hedge that was carefully patrolled and that stretched from the Indus River to the Bay of Bengal -was, according to the Imperial Gazetteer of India, "practically abandoned" in 1879. At the same time, negotiations were conducted with princely states to abolish their customs duties. Fiscally, 1873 began a twenty-year period in the decline of the value of silver, the standard currency of India, with respect to gold; this substantially increased the burden that the Government of India faced in paying Home Charges and interest on its debt to Britain. In particular, the year 1885 saw an extreme and sudden decline in the exchange rate, and for the next decade, the Government of India sought out new sources of extraction. Most notably, it identified the urban population as a source of tax revenues, as manifest in the 1886 Indian Income Tax Act.

After the famine of 1876-1878, a new department of Land Revenue and Agriculture was distinguished from the Finance Department, and between 1875 and 1905, when the Department of Commerce and Industry was established, the government directed itself consciously at the collection and standardization of commercial information, a trend evinced by the debates surrounding the Negotiable Instruments Act of 1881. Indeed the statutory changes of the 1880s evinced the opening of new channels of information after 1870-the modern postal system, newspapers, printed books and pamphlets, and the electric telegraph -information that in its circulation carved out a civic public and produced knowledges of public import. Indian historiography has documented well the expanding civic arena of the late nineteenth century, an arena buzzing with political publicists and early nationalist associations, and facilitated by the Indian Councils Acts of 1861 and 1892 as well as measures for municipal government. Alongside the production of a new political public by corporate bodies like the Indian National Congress (established 1885), the law formalized models of public association and exchange that institutionalized another version of the public which was the corollary of the emergent nation: the market.

Before turning to the statutes themselves, it is important to note that our approach to the law, as outlined in the introduction, addresses contradictions presented in the social and economic history of Indian capitalism. Broadly speaking, these arguments have posed colonial law on economy as undermining itself and therefore ineffective. Perhaps the most well known example is David Washbrook's argument on law and agrarian society in this period, which asserts that "if the rule of law were meant to provide the social and political force driving the market economy, the raj was doing its best to see that it had little power." Here, free market liberalism, as manifested in the rule of law, confronted the Raj as a colonial power, with its interest in propping up conservative forces for social stability; this confrontation ultimately limited capitalist transformation. As an empirical statement about the mechanics of colonial governmentality, the assessment is sound, but as a reading of law, it is too literal. Washbrook reads the rule of law as a failure, as not able to accomplish its liberal vision; he thus assesses the law on the basis of its own criteria of success and its own modernizing propositions, a perspective that presupposes and reiterates a universal narrative of capitalist development.

This casting of the law as ineffective is echoed more broadly in histories of Indian merchant-capitalists that argue that while commercial and financial law called for the regulation of market exchange, the peculiarities of indigenous market practice were protected under the personal law. As such, the public/private distinction is understood from within its own logic, as ensuring an arena of autonomy for indigenous practices. David Rudner's study of the Nattukottai Chettiars, for example, emphasizes that while banking legislation sought to control customary exchange through restrictions on indigenous negotiable instruments, the vast material accumulations of this caste of merchant-bankers evinces the failure of colonial law in regulating this group. This argument tells us quite a bit about the material agency of indigenous capitalists and the continuity of Chettiar banking and trading activity, but less about the ways in which law produced boundaries for the operation of that activity. More broadly, studies often rightly emphasize the concomitant operation and porous boundaries between the informal bazaar economy and the official sector, but say little about the law. While it is important to remember that British and Indian systems worked side by side and, indeed, were intimately connected to one another in a "mutually recognized division of spheres," as Amiya Kumar Bagchi has put it, our attention to law allows us to investigate the politics of the reproduction of these spheres.

Whether presented as a failure, or as a benign distinction between public/private, formal/informal, law is under-researched in the history of Indian capitalism. Rather than assessing the rule of law based on the criteria it sets up for itself, or reproducing its claims, this analysis investigates the operation, rather than just intention, of colonial law: its production of subjects and parameters of legality and legitimacy. As such, it considers processes by which the law, as a language of sovereignty, suppresses and transforms local knowledges and conventions, even in benign or benevolent performance. As critical legal theorists have asserted, legal systems exploit the difference between "legitimacy and illegitimacies," a central concern of this analysis, manifest especially in our attention to the deployment of the public/private distinction. If we assess the law from within its own logic and claims, then the private arena will be understood as space of indigenous autonomy; informed by feminist approaches, we investigate the distinction as one between legitimate and illegitimate arenas for economy and modernity.

(Continues...)



Excerpted from STAGES OF CAPITAL by RITU BIRLA Copyright © 2009 by Duke University Press. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Acknowledgments ix

Introduction 1

Part 1 A Non-Negotiable Sovereignty?

1 The Proper Swindle: Commercial and Financial Legislation of the 1880s 33

2 Capitalism's Idolatry: The Law of Charitable Trusts, Mortmain, and the Firm as Family, c. 1870-1920 67

3 For General Public Utility: Sovereignty, Philanthropy, and Market Governance, 1890-1920 103

Part 2 Negotiating Subjects

4 Hedging Bets: Speculation, Gambling, and Market Ethics, 1890-1930 143

5 Economic Agents, Cultural Subjects: Gender, the Joint Family, and the Making of Capitalist Subjects, 1900-1940 199

Conclusion: Colonial Modernity and the Social Worlds of Capital 232

Notes 239

References 307

Index 329

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