Chapter 4 The Market As A Social Institution

Sociological Perspectives On Markets And The Economy

Commonly, a 'market' is understood as a physical location for buying and selling, a gathering of buyers and sellers, or a category of trade (like the car market) or demand (like the market for software professionals). However, the term 'the market' in a general sense encompasses the entire spectrum of economic activities and institutions, essentially being synonymous with 'the economy'.

While economics primarily studies how markets function in capitalist economies (e.g., price determination, investment impact, saving/spending factors), sociology offers a different perspective. Sociologists view markets not just as economic mechanisms but as social institutions deeply embedded within specific cultural and social contexts. Markets are often structured and influenced by social groups, classes, and interconnected with other social institutions and processes. This concept is referred to as economies being socially embedded.

Caste-Based Markets And Trading Networks In Precolonial And Colonial India

Contrary to older views that saw pre-colonial India as having largely self-sufficient villages based on non-market exchange (like the Jajmani system), recent historical research indicates that the Indian economy was significantly monetised (used money for trade) even before British rule. Villages were linked into wider exchange networks for agricultural products and other goods.

Pre-colonial India possessed well-developed manufacturing centers (known for textiles, spices, etc.) and sophisticated indigenous merchant communities, trading networks, and banking systems. These systems, often operating within caste and kinship structures, facilitated trade both within India and internationally.

An important instrument of trade and credit was the hundi, a bill of exchange. These could be honoured by merchants in different parts of the country, enabling long-distance trade based on trust within community networks.

Social Organisation Of Markets – ‘Traditional Business Communities’

Sociological studies highlight the significant role of 'traditional merchant communities' or castes in organizing markets in India. The historical importance of trade is reflected in the Vaisya varna. While Vaisya is sometimes an aspirational status, specific caste groups like Banias have traditionally been involved in commerce. Other communities with distinct religious or group identities such as Parsis, Sindhis, Bohras, and Jains are also prominent in business.

The specific nature of a community's institutions and culture often influences its business practices and organisation. A key reason for the concentration of certain businesses within particular communities is the reliance on caste and kinship networks. Trust is often stronger within one's own community or family group, leading businessmen to prefer trading within these networks. This can result in a degree of caste monopoly in specific sectors of business.

Colonialism And The Emergence Of New Markets

The arrival of colonialism brought profound disruptions and transformations to the Indian economy, impacting production, trade, and agriculture. A classic example is the decline of India's handloom industry due to competition from cheaper, machine-made textiles imported from England.

While pre-colonial India had a monetised economy, the colonial period is seen as crucial in integrating India more fully into the world capitalist economy. India shifted from being a major exporter of manufactured goods to a supplier of raw materials and agricultural products for British industry and a market for its finished goods.

New groups, particularly Europeans, entered trade, sometimes collaborating with existing merchant communities and sometimes displacing them. However, colonialism didn't completely dismantle existing economic structures. Instead, the expansion of the market economy created new opportunities for some traditional merchant communities, allowing them to adapt and even enhance their position.

The Marwaris are a prime example. They rose to prominence during the colonial era by leveraging new opportunities in cities like Calcutta and establishing extensive trade and moneylending networks across the country. Their success was built on strong social networks that fostered trust and facilitated their banking system. Some Marwari families transitioned into modern industrialists, and the community remains highly influential in Indian industry today. This trajectory demonstrates how social context is vital to understanding economic processes like the emergence and transformation of business communities.

Understanding Capitalism As A Social System

Sociologist Karl Marx viewed modern capitalism not just as an economic system but fundamentally as a social system. He defined it as a system focused on commodity production (producing goods for sale in the market) through the use of wage labour.

According to Marx, every economic system, or 'mode of production', is characterised by specific 'relations of production' which determine the social structure, particularly the class structure. He stressed that the economy isn't just about goods, but about the relationships between people involved in production.

Under capitalism, labour itself becomes a commodity. Workers, who do not own the 'means of production' (like factories, land, machinery), must sell their ability to work ('labour power') to capitalists in exchange for a wage. This creates two primary classes:

• Capitalists: Own the means of production.
• Workers: Sell their labour power.

Capitalists profit by paying workers less than the economic value their labour actually creates, extracting 'surplus value'. Marx's analysis profoundly influenced subsequent theories and debates about capitalism.

Commoditisation And Consumption

A key process associated with the global expansion of capitalism is commodification (or commoditisation). This refers to the transformation of things, services, or even relationships that were previously outside the market system into commodities that can be bought and sold.

Examples of commodification include:

• Labour: Workers selling their labour power for a wage.
• Human Organs: The controversial practice of selling kidneys, raising ethical questions about what should or should not be treated as a commodity. Historically, even human beings were commodified as slaves, a practice now considered immoral, yet selling one's labour or skills is widely accepted in capitalist societies.
• Social Services: In contemporary India, examples include:
  • Professional marriage bureaus and websites charging fees for matchmaking services, traditionally done by families.
  • Private institutes offering paid courses in 'personality development' or communication skills, traditionally taught within the family or social circles.
  • The growth of private schools, colleges, and coaching classes, representing the commodification of education.
• Natural Resources: The commodification of drinking water into bottled water is a recent example, shifting it from a freely available resource to a purchasable commodity.

Another significant aspect of capitalist society is the increasing importance of consumption, which carries significant social and symbolic meaning beyond mere economic necessity. In modern consumer societies, the goods people buy and display are used to communicate social distinctions, socio-economic status, or cultural preferences. Max Weber termed goods used in this way as status symbols (e.g., brand of phone, model of car). Consumption patterns and lifestyles become ways in which social classes and status groups differentiate themselves.

Globalisation – Interlinking Of Local, Regional, National And International Markets

Since the late 1980s, India has experienced significant economic changes driven by liberalisation policies, leading to an era of globalisation. Globalisation refers to the increasing interconnectedness of the world in economic, cultural, and political spheres.

Key trends of globalisation include:

• Increased international movement of goods, money, information, and people.
• Advancements in technology (computing, telecommunications, transport) that facilitate this movement.

A central feature is the growing extension and integration of markets worldwide. This means events in one global market can have significant consequences far away, such as the impact of the US economy on India's software and BPO industries.

Globalisation facilitates the rapid circulation of not just money and goods, but also people, cultural products, and ideas, drawing them into new circuits of exchange and creating new markets. This includes commodifying cultural elements, knowledge systems, or traditional practices (e.g., marketing Indian spirituality, yoga, or ayurveda in the West).

The growth of international tourism is another example of culture becoming a commodity. Traditional events like the annual Pushkar fair in Rajasthan, originally a livestock market for local communities, are now marketed globally as tourist attractions. This event demonstrates the intermingling of diverse groups (camel traders, Hindu pilgrims, foreign tourists) and the exchange of not only goods and money but also cultural and religious symbols.

Debate on Liberalisation – Market Versus State

The globalisation of the Indian economy is closely tied to the policy of liberalisation, initiated in the late 1980s. Liberalisation involves reducing state control and increasing the role of the market. Key policies include:

• Privatisation: Selling government-owned enterprises to private companies.
• Deregulation: Relaxing or removing government rules on capital, labour, and trade.
• Reducing tariffs and import duties to ease the import of foreign goods.
• Making it easier for foreign companies to invest and establish industries in India.

These changes are also referred to as marketisation – using market-based mechanisms instead of government intervention to address economic or social issues. Proponents argue that this promotes efficiency, growth, and prosperity by favouring private enterprise over state control.

Liberalisation has stimulated economic growth and opened Indian markets to international players, leading to the availability of many foreign goods and attracting foreign investment. Privatization is intended to improve efficiency and reduce the government's financial burden.

However, the impact of liberalisation has been mixed and debated. Critics argue that the costs and disadvantages outweigh the benefits for India. While some sectors (like IT, certain agricultural exports) have benefited from access to global markets, others (like certain manufacturing sectors, oilseeds) struggle to compete with foreign producers.

Indian farmers, for example, now face global competition due to reduced protection. Policies like support prices (government guarantee to buy produce at a minimum price) and subsidies (government payment towards input costs) were previously used to protect farmers but are reduced or withdrawn under liberalisation, making farming less viable for many. Similarly, small manufacturers face increased competition from foreign goods. The privatization or closure of public sector units has led to job losses in some areas and a growth in less secure, poorly paid employment in the unorganized sector compared to the more stable organized sector jobs.

Understanding markets as social institutions, their connection to social structures like caste and class, and their rapid transformation under liberalisation and globalisation is crucial for grasping contemporary Indian society and the broader consequences of these economic changes.