The industrial organization of an Indian province

Preface

This book is intended primarily for Indian students. My experience has convinced me that in India the study of economics has a tendency to become undesirably abstract, because the industrial facts which are mentioned in English books to illustrate economic theories are mostly taken from European industry^ and are, therefore, as remote from the experience of Indian students as the theories they are designed to illustrate. My object in this book has been to review the principal economic facts in the society with which Indian students are familiar, and to show the relation of those facts to the abstract economics which they read in their text-books. I have not hesitated to make copious extracts from official publications, because these are not generally accessible to students. Wherever possible, I have quoted the passages which I adduce as evidence textually, because I believe that the actual words of an original authority are more stimulating than any summary. The advantage which a student derives from extracting for himself the economic moral of a record is lost when the original is digested for him by an officious instructor.

I do not pretend to have anything fresh to say to experts upon such technical subjects as settlement, irrigation, famine relief, etc. My wish has been to insist upon these matters only so far as is necessary to show their economic bearing; that which is new in this book is the attempt to consider the economic

VI

PREFACE phenomena of an Indian province as one whole. Many interesting studies of particular industrial problems may be found scattered about the official literature of the Government of India, but these are usually incidental to the consideration of a technical question, and cannot, in the form in which they were published, be placed in the hands of students. As far as I know, no attempt has yet been made to examine Indian industry from the point of view of the economist.

I have thought that this book might prove interesting to some European readers who desire to study the industrial organization of India for the purpose of comparative economics. In view of the possibility of having a few such readers, I have added some explanations which are superfluous to Indian students. European readers, on the other hand, will find some facts regarding European industry set forth with a detail which is unnecessary for them. Thus the book has, I fear, suffered from the attempt to address two different classes of readers at the same time.

It was my wish to have dated this book from the Aligarh College, in the prosperity of which I have been so deeply interested for the last seventeen years ; but the duties of a member of the staff in a residential college left me little time for private work, and therefore, although I continued to collect material as long as I was in India, I was not able to put it together until I reached England.

THEODORE MORISON.

ashleigh, Weybridge.

Contents

CHAPTER

INTRODUCTION I. THE INDUSTRIAL UNIT : THE VILLAGE II. PUBLIC AND PRIVATE OWNERSHIP OF LAND : THE LANDLORD AND THE GOVERNMENT

III. THE COMPETITION FOR LAND : THE LANDLORD AND

Introduction

That part of economic science for which we may claim universal application is confined to a few fundamental conceptions, and a few general principles which appear to hold good in all forms of society. But the great bulk of economic doctrines are not universal laws ; they are only statements of the manner in which general principles operate in special conditions. As the study of economics has hitherto been confined to the inhabitants of Western Europe and North America, it is the operation of general principles in the special conditions of those countries which has principally engaged the attention of economists. It therefore happens that the economic theories which are best known and which have most influenced public opinion represent conclusions which have been reached regarding that particular type of industrial organization which exists in the United States and Western Europe. Modern economists do not claim that these theories are of universal application ; on the contrary, they recognise that different ages and diff"erent phases of human evolution present different types of industrial organization, and that economic theories which are correct statements of

I

2 INTRODUCTION

the manner in which general principles operate in one economic type are not necessarily true of their operation in another.

When, therefore, we approach the study of the economic phenomena of India, we must bear in mind that we are about to deal with a type of industrial organization which is not the type tacitly assumed in most books upon abstract economics. From this it follows that we shall not be at liberty to assume the truth of any economic theory until we have assured ourselves that the premises on which it rests are satisfied by the Indian conditions. Our ultimate goal ought to be the construction of an independent body of economic doctrines which could be logically deduced from the observed facts of Indian society. I do not think that the time has yet come when it is possible to attempt a complete statement of the economics of Indian industry ; the material at our disposal is at present too scanty. Before constructive speculation can be profitably undertaken the economic facts of Indian life need to be collected, sifted, and, if I may use such an expression, cross-examined to find out exactly what interpretation they will bear. This book is intended to be a contribution towards such a collection of evidence. I shall attempt to sketch in very meagre outline the industrial organization of a particular province, and in so doing expose what I believe to be the principal economic facts in a society of this type. If this investigation could be made complete, it should reveal the premises from which the economics of Indian industry could be framed ; it should make clear which of our current economic doctrines are applicable to Indian society and which are not. Strict logic would demand that this investigation should be a plain record of fact, and should be absolutely free from constructive speculation. But unfortunately it is not easy to collect economic facts without some bias of theory; the possibly relevant

INDIAN AND EUROPEAN INDUSTRY 3

facts are so numerous that it is only from a selection of them that any definite meaning can be extracted, and the very act of selection implies a theory. In the succeeding chapters, therefore, I propose to recognise the necessity of employing some theory about which the evidence can be grouped, and for the most part I shall make use of the familiar theories which have been framed for European conditions of industry ; but it must be borne in mind that these theories are for India only tentative and provisional, and that they are to be accepted only if they are found upon examination to be adequate explanations of the Indian facts.

When the evidence has been collected and examined, it will be possible to point out the exact difference between the Indian and European type of industrial organization. I do not think that this can be done with profit now, but even in the present state of our knowledge it is possible to point to certain broad resemblances and contrasts between the two types. I do not think it can be maintained that there are economic forces at work in the one which are inoperative in the other. Thus, to take a specific example, I do not think that competition is a force of less importance in Indian than in European industry. I cannot find any support for the opinion that competition is in India neutralized by custom. Undoubtedly there is in India a great deal of what is known as ' economic friction,' impeding the operation of general laws ; but in no country is economic friction absolutely negligible, and when we compare the agricultural classes of Europe with those of India, the diflference between them in this respect is not very remarkable. At most, there is a difference in degree, and not in kind.

But if the economic forces are much the same in India and Europe, there is the greatest difference between the distribution of economic functions among the various classes in one society and the other. To

4 INTRODUCTION

my mind the most important difference between the two types of industrial organization is this : in India the labourer usually works on his own account ; in Europe he is usually a hired man, working for an employer. There are, of course, in each society some workmen of the type which is characteristic of the other. Thus, although in England the labourer usually works for an employer, and receives wages irrespective of the price at which his employer sells the product of his industry, yet there are a few examples of the labourer working on his own account, such, for instance, as the tinker and the cobbler, who are survivors from an earlier industrial organization. And in India there are some labourers who occupy the same position as wage-earners in Europe. In all Indian towns there is a considerable number of men engaged in manual labour who receive daily or monthly wages, but as the urban population is only a small fraction of the total population, they are relatively of small importance. In the villages also there are almost always a few persons serving for wages. But the great bulk of the labouring class of India are men who work on their own account, and not for an employer. In addition to supplying the labour necessary for the production of wealth, they direct industry and undertake the risks of production — that is to say, they discharge the functions of the entrepreneur or business manager in Europe.

Many important consequences follow from this distribution of economic functions, and they are those which most clearly differentiate the Indian from the European organization of industry. To the student this particular distribution of functions is important, because it invalidates the application to India of most of the current economic doctrines about the working classes. Thus the rate of wages, which appears to an American writer ' the paramount question to the vast majority of the people of civilized lands,' is a

THE INDIAN LABOURER AND WAGES s

matter of very slight concern to the working class of India.*

Dear bread, too, the apprehension of which causes so much anxiety to a working man in Europe, is to the small farmers who form the majority of the Indian population welcome evidence that their produce will fetch a good price. And to take a historical case : the inflation of the currency, which inflicted a great injury on the English working classes in the reign of Henry VIII., was in the last century a positive boon to the Indian working man, for it gave him a small but much-needed advantage over his creditor the village money-lender.

But it is not in its relation to economic theories, but in its bearing upon the production of wealth, that the distribution of functions most deserves attention. The part of the entrepreneur may be played by either the landlord, the capitalist, or the labourer, or, as is often the case in Europe, by a fourth person who is only an entrepreneur — one, that is, who leases his land, borrows his capital, and pays wages for labour, and whose only function is to initiate industrial operations. But the efficiency of industry will differ very much according to the class of man upon whom the responsibility of directing it happens to be thrown. The production of wealth is most likely to be large in countries in which, as in Europe, the direction of industry is in the hands of a man who by education and natural ability is specially fitted for the task. In Europe and America the ideal entrepreneur is a man fully conversant with all the processes of production, and always on the alert to discover more efficient or more economical industrial methods ; he grades his workmen to their work according to their individual capacities, and he studies the demand of his market in

* ' The paramount question — the one which is of prime importance to the vast majority of the people of civilized lands — is, What makes the rate of wages ?' — ' The Distribution of Products,' by Ed. Atkinson.

6 INTRODUCTION

order to dispose of the product to the best advantage. When industry is so directed, it is likely to terminate in the production of a greater volume of wealth than when it is controlled by an uneducated labourer who has to combine these delicate tasks with exhausting manual toil. In India the direction of industry is in the hands of men who have no chance of learning about new methods of production, new mechanical appliances, or of studying the condition of the market. The peasant who cultivates a small holding, for instance, is not in a position to learn of the existence of unfamiliar varieties of grain or cotton ; he has no opportunity of finding out what devices for lifting water or crushing sugar-cane have been invented, or what degree of success they have achieved. His acquaintance with the market is confined to knowing of a demand which has clearly manifested itself; he has no means of ascertaining what the future movements of the market are likely to be. The hand -weaver is in the same position: he has no opportunities of learning of the mechanical improvements by which the efficiency of his loom could be enormously increased, and he continues to ply his craft in the fatiguing and ineffective fashion which his predecessors followed a thousand years ago. In these circumstances the total output of wealth cannot be as great as in a society in which industry is directed by men possessing technical skill, commercial knowledge, and administrative ability. Between one society and the other there is the same diiference as there is between a mob and a highly-disciplined army led by competent officers.

The wealth produced in a country is the national dividend from which all the factors of production receive their reward. Where the national dividend is small, the share which falls to the labourer's lot is small also, and it is a natural result of his methods of production that the Indian labourer gets a scanty

THE INDIAN LABOURER'S INDEPENDENCE 7

reward for his toil. Theory and evidence alike confirm the paradox that where the labourer works on his own account, as in India, the reward of his toil is much smaller than where, as in England, he works for an employer.*

In some respects, however, the Indian industrial organization is more favourable to the labourer than the European. In Europe the labourer cannot begin to work without the permission of the employer; the land, the implements of production, and the raw material are all under lock and key, and the labourer can only get access to them if he complies with the terms which an employer offers him. The European workman who is thrown out of work not only sees his children ill fed and ill clothed through no fault of his own, but has to bear the added bitterness of the injustice of his misfortunes. Among the lower orders of labour there is the further danger that the workman will be degraded by the irregularity of employment. The man who has to get his living out of a little plot of land is at least free to work when and for as long as he likes, and has the strongest inducements to industry. To the Indian cultivator, ground down

• Those who amuse themselves by the manipulation of conjectural statistics may be interested in the result obtained by comparing Mr. F. J. Atkinson's estimate of the annual income of British India with Mr. Chiozza Money's estimate of the annual income of the United Kingdom. Such a comparison yields this result : Wages of 3Ss. a week in England represent the same proportion of the national dividend as Rs. 7 a month in India. I am inclined to think from personal observation that this is not very far from the truth : the man who earns Rs. 7 a month in India probably does occupy about the same position in the social scale as the artisan who earns 35s. a week in England. The figures for wages in ' Prices and Wages ' are so untrustworthy that no statistical comparison can be made. The figures upon which the above calculation is based are :

Population Income

in Millions. in Millions.

8 INTRODUCTION

between a rack-renting landlord and a usurious moneylender, it may be but small consolation to learn that the armchair philosopher thinks he is in a position which favours the growth of the economic virtues, but it remains true that he enjoys some advantages for which the English workman sighs in vain.

There is one other general observation to be made regarding the Indian organization of labour — namely, that it is one in which it is not possible that the division of labour should be carried very far. Owing to the necessities of agriculture, the people are scattered over the face of the country in small villages, and, owing probably to the defectiveness of communication in the past, these villages constitute self-sufficing industrial units ; as the division of labour is limited by the possibilities of exchange, there is no opening in such villages for specialized skill. In agriculture, which is the main occupation of the rural population, this is not a great evil, because it has not in any country been found possible to carry the division of labour very far in agriculture ; but the subsidiary industries would be made much more efficient if labour could be further divided. As however, the object of this book is to record the phenomena of Indian industry, and not to speculate upon the data we already possess, I will proceed at once to an examination of the facts. My survey will be confined to that portion of India which has been known at different times as the Ceded and Conquered Territories, the North-Western Provinces and Oudh, and the United Provinces of Agra and Oudh. My reason for confining attention to one particular province is to bring out distinctly the essential features of a particular type of industrial organization. Were I to attempt to embrace all India in a single survey, I should be compelled to subject every general statement to some qualification, and thus the distinctive features of the Indian organization of industry would

A TYPE OF INDUSTRIAL ORGANIZATION 9

be blurred and confused ; but in a particular province the economic conditions are sufficiently uniform to permit of general statements which present clear-cut and intelligible outlines. If the industrial organization which prevails in the United Provinces is found upon examination to be typical of the whole of India, then the examination of the type in one province is sufficient for the understanding of the whole country ; if, on the other hand, it is found that in Madras and Bombay other economic conditions prevail, then there would be loss instead of gain in attempting to make general statements about two dissimilar economic types.

Chapter I The Industrial Unit: The Village

In 1 901 the population of the United Provinces was 47,691,782. This population was distributed among the following occupations, each occupation being understood to support not only the workers but also their dependents— ?.e., women and children, etc.

Service pf native and foreign States ... 7'^^

Provision and care of animals ... ... 522,683

Personal, household, and sanitary services 2,676,334

Food, drink, and stimulants ... ... 2,650,282

Light, fire, and forage ... ... ... 96,284

Buildings 123,499

Vehicles and vessels ... ... •■• 6,170

Supplementary requirements ... ... 233,239

Textile fabrics and dress .'.. ... 1,890,129

Metals and precious stones ... ... 660,856

Glass, earthen, and stone ware ... ... 433,235

19. Transport and storage ... ... ... 545,807

20. Learned and artistic professions ... ... 622,184

22. Earthwork and general labour ... ... 3,134,231

23. Indefinite and disreputable occupations ... 132,055

It is not possible to institute an exact comparison between the distribution of the population in India and

3- 4- 5- 6.

7- 8.

13- 14.

THE OCCUPATIONS OF THE PEOPLE

II

England according to occupation, because the Census of the United Kingdom is prepared upon another principle. But the next table, which has been compiled from the Census of 1901 for England and Wales, is sufficient to give an idea of the profound difference between the industrial conditions of the two countries.

Males.

Females.

Total of Males and Females.

Engaged in national or local government

171,687

26,500

198,187

Defence of the country

168,238

168,238

Professions and their subordinate occupations

311,618

294,642

606,260

Domestic services

304.195

1,690,722

1,994,917

Commercial

530.685

59,944

590,629

Conveyance of men, goods, and messages

1,249,000

18,825

1,267,825

Agriculture

1,071,040

57.564

1,128,604

Fishing

23,725

23,891

Mines and quarries

800,179

5,006

805,185

Metals, machines, implements, and conveyances

1,174,180

63,016

1,237,196

130.731

18,707

149.438

Building and works of construction

1,042,864

1,043,566

233,000

24.592

257.592

142,365

33,^48

175.513

Chemicals, oil, soap, etc.

101,938

26,702

128,640

80,071

25,270

105,341

Paper, prints, books, and stationery

188,057

90,900

278.957

Textile fabrics

492,175

663,222

1. 155.397

Dress

414.637

710,961

1.125,598

Food, tobacco, drink, and lodging

774.291

299,518

1,073,809

Gas, water, and electricity supply and sanitary service

71,284

71,425

Other, general, and undefined workers and dealers Total engaged in occupations...

61,503

742,519

10,156,976

4.171.751

14,328,727

Without specified occupation or unoccupied

Population over ten years

1.977,283

9,017.834

10,995,117

12,134,259

13,189,585

25,323,844

12 THE INDUSTRIAL UNIT: THE VILLAGE

On comparing these two tables one fact immediately arrests attention, and that is the difference in the importance of agriculture in England and India. Of all the males occupied in England only io"5 per cent, are engaged in agriculture, and there are no less than four other industrial groups in which the number of workers is greater than in agriculture. In India, on the other hand, agriculture is of such overwhelming importance that all other industries are reduced to insignificance in comparison. Out of a total population of 47,691,782 over 66 per cent., or 31,703,343, were returned in the Census as workers at, or dependents on, pasture and agriculture of all kinds. In addition to these, out of 7i8S2,SS3 other workers who declared their principal occupations to be unconnected with land directly, 666,692 recorded agriculture as a subsidiary occupation. The industry next in importance to agriculture. Order 22, 'Earthwork and general labour,' supports 3,134,231, and in the words of the Census Report (Part I., p. 262), ' It is almost certain that a very large number of them work principally on land.'

As two-thirds of the population of these provinces are supported by agriculture — and there is no single occupation which supports one-tenth of this number of people — all other callings may be classed as subsidiary industries, which subsist principally by assisting agriculture indirectly, or by supplying the wants of the agricultural population. The survey of the industrial organization of these provinces is therefore reduced to a description of the economic conditions governing agriculture.

The agricultural population is distributed as follows:

2. Tenants with some rights of occupancy ... 10,613,639

3. Tenants with no rights of occupancy ... 10,245,927

5. Agricultural labourers 4,362,774

6. Growers of special products ... ... 124,474

7. Agents, rent-collectors, forest rangers, etc. ... 253,973

THE AGRICULTURAL POPULATION 13

Among the agricultural population ought also to be classed the majority of the 522,683 persons occupied in the care of animals.

The term zamindar covers all persons who have proprietary rights in the soil, and includes both landlords in the English sense and peasant proprietors. The Census of 1901 makes no distinction between these two, but in the Census of 1891 the zamindars were classified as follows :

Landed proprietors, not cultivating ... ... 545,728

Landed proprietors, cultivating ... ... 3,251,084

As there is no reason to suppose that the proportion between these two classes has been materially disturbed, we may assume that the number of peasant proprietors is about 3,000,000 ; if to these we add the tenants and sub-tenants, we get a total of approximately 26,000,000 persons supported by the cultivation of small holdings. Thus, more than half the population of the provinces are petty farmers (including in this term the farmer's family) who raise food primarily for their own consumption, and who obtain the money which they need for rent, interest on debt, or the purchase of minor luxuries by the sale of their surplus produce.

This agricultural population is scattered over the level plains of the United Provinces in small villages, each village constituting an industrial unit which contains in itself all the labour, capital, and skill which are in India considered necessary for the cultivation of the soil. In almost every village there will be found representatives of three distinct industrial classes. The first of these are the landlords. The land upon which the industry of the village is expended belongs either to an individual landlord or landlords, or to a group of relations who constitute a body of joint proprietors ; these landlords usually

14 THE INDUSTRIAL UNIT: THE VILLAGE

belong to a socially higher rank than the majority of the rural population, and are thus in a position to command the respect of their fellow-villagers independently of the power which is conferred upon them by the monopoly of the land. Next to them are the petty farmers or cultivators, who constitute the largest of the three classes ; these men rent from the landlord small parcels of land which they usually hold on a yearly tenure, and, were it not for the associations now inseparable from the term, they might be described simply as cottiers. The last class is made up of such artisans as the carpenter, the blacksmith, and the potter, who assist agriculture by making or repairing agricultural tools, or supplying the domestic wants of the agricultural population. To this class also belong the village servants, who perform the menial offices of the village, and who are the common drudges of the little community. Although the persons in this last category follow a variety of occupations, the whole class is relatively small, because there are few villages so large as to demand the services of more than one carpenter or potter.

These different classes are bound together by the solidarity of their interests. All the persons who are maintained, in whatever capacity, by one industry, have a common interest in its prosperity. When the raw material is imported from a great distance, or the methods of manufacture are complex, or the sale of the finished product is effected far from the factory, this solidarity of interest is apt to be obscured. But in a small community depending entirely upon agriculture, the sense of solidarity is strong ; it is patent that all classes in an Indian village must suffer from a drought which suspends husbandry altogether, or from a frost, which kills the ripening grain in the ear. When the cultivator cannot sow his seed, the landlord has no difficulty in realizing that he can get no rent nor the artisans in anticipating similar misfortunes for

COMPETITION IN AN INDIAN VILLAGE 15

themselves. To this consciousness of interdependence must be added a sense of unity which springs from the comparative isolation of the village. Taken together, the two form powerful bonds which knit the inhabitants of the village into a very compact industrial unit. But solidarity of interest is not incompatible with competition, nor does familiarity necessarily beget friendliness;* and in a Indian village there are the same motives which prompt men to pursue their economic interest as in all industrial communities.f

The landlord desires, as a rule, to let his land to the best advantage ; the tenant is anxious to pay as low a rent as possible, and to sell his produce for the highest price it will fetch. When he finds that he can make a larger profit by raising wheat than by growing sugar-cane or cotton, he does not hesitate to pursue the course which he thinks most advantageous. The artisans realize when there is a demand for their services and transfer themselves to places (outside the village) where they are most highly rewarded. Even the lowly menials whose part in the social system has for generations been degrading drudgery, struggle to improve their lot, and when an opportunity presents itself engage in the cultivation of land like their betters. The readiness with which they have in modern times turned their freedom from caste restrictions to account is in itself a proof that they have a quick eye to their economic advantage. Inside the narrow circle of the Indian village competition is the rule, as it is in the wide sphere of international commerce. But it is competition among persons who are for the most part

* As a matter of fact, the country-folk, both in India and in England, seem more pertinacious in their quarrels than the inhabitants of the towns.

t Since the publication of Mr. B. H. Baden- Powell's book on 'The Origin and Growth of Village Communities in India,' it is hardly necessary to show that there is no community of property in an Indian village in the sense understood by Sir H. Maine.

i6 THE INDUSTRIAL UNIT: THE VILLAGE

illiterate, who know nothing of the world beyond the village, and who are for practical purposes imprisoned in the narrow circle of familiar fields. Such men have not the facilities to improve their position which are accessible to every boy in London and in New York. In respect of the most important factors governing their material life they are helpless, and competition is more often a name for the action of inimical forces against which they are powerless to contend than of their own endeavours to ameliorate their lot.