Caste, Village Solidarity, and Economic Development in India

One reason the Indian economy has not grown as fast as China's is that fewer rural Indians have moved to cities. This also explains why population growth in India remains higher than in East Asia, since peasants have more kids than urban factory dwellers. But why? Wages in Indian cities are much higher than in villages, and in East Asia that caused a massive migration to cities and factory districts.

Evidently, Indian peasants either like their villages more, or like urban life less, than their Chinese, Thai, Korean and now Vietnamese counterparts. Why?

A new paper by two economists argues that this is because in India the support that they generalize as "insurance" (e.g., support for children when a parent cannot work, help in paying medical bills when someone is injured) is almost all informal rather than provided by the government or corporations. Rural people are supported by strong neighborhood or village associations; urban support groups are weaker and where they exist have taken decades to develop. These associations are organized by caste:

The explanation that we propose for India’s low mobility is based on a combination of well-functioning rural insurance networks and the absence of formal insurance, which includes government safety nets and private credit.

…In rural India, informal insurance networks are organized along caste lines. The basic marriage rule in India (which recent genetic evidence indicates has been binding for nearly two thousand years) is that no individual is permitted to marry outside the sub-caste or jati (for expositional convenience, we use the term caste interchangeably with sub-caste). Frequent social interactions and close ties within the caste, which consists of thousands of households clustered in widely dispersed villages, support very connected and exceptionally extensive insurance networks.

Households with members who have migrated to the city will have reduced access to rural caste network.

I find this fascinating because of what it says about freedom, oppression, and solidarity. In old rural India, peasants were pretty thoroughly oppressed, as the ideology of caste was added to the brute fact of aristocratic dominance. Caste decreased contact and mobility between classes, creating more rigid rural hierarchies than anything seen in Europe. Violations of caste rules were brutally enforced, for example by gang rape.

And yet poor peasants turned this oppression into a source of strength, organizing self-help networks based on the very rules aristocrats used to exclude and oppress them. Those networks work so well that people are reluctant to leave them for the city, even when the real wage for urban workers is nearly 50% higher.

Libertarian-leaning conservatives in the west sometimes argue that we should eliminate government insurance schemes (in this broad sense) because then people would take care of each other. What they are missing is that such self-help networks do not arise from a state of freedom, but from oppression and exclusion. Furthermore, they almost always bring with them rigid social norms. Village networks that provide help to those in need also punish deviants, sometimes with the same brutality their masters use against uppity peasants, other times just by exclusion or shunning.

The modern world of big cities, high mobility, and great personal freedom cannot be organized along the lines of a supportive but intolerant village. It simply won't work. I for one, wouldn't want it to; I much prefer impersonal mechanisms of support like Social Security and health insurance to living in the sort of community where everyone would know the details of my life and have lots of opinions about how I should live. These are not just different economic arrangements, but different worlds.

Via Marginal Revolution.