Baniyas & Brahmins: How culture shapes Indian biz success

Does culture make all the difference between an economy that works andone that fails?America’s Republican presidential nominee Mitt Romney says it does. Hemade the remarks while comparing the prosperity of Jewish Israel tothat of the Muslim Palestinian territories next to it.

But the writer that Romney quoted to support this view, Jared Diamond,disagrees with Romney and says culture doesn’t explain why somecountries are rich and others poor. Diamond wrote a response to

Romney, saying he doubted Romney read his book, which is called Guns,Germs and Steel. The book says geographical and botanical features ofa territory and the biological features of its inhabitants explain thedifference between rich and poor states, not culture.

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Washington Post columnist Fareed Zakaria also disagrees with Romney.Zakaria says this theory of a cultural explanation for economicsuccess originally came from the sociologist Max Weber. The reason whythe economies of Britain, Germany and America were so healthy, Webersaid, was because of culture. The success of these states came becausethey had something called a Protestant ethic, which made them see workas worship.

[caption id=“attachment_405282” align=“alignright” width=“380”]  In India at least, it’s not genes, not magic, but culture that produces business champions. Reuters[/caption]

But Weber, who was writing a century ago, also said twocultures that had no hope of progressing were Japan and China, and weknow how wrong he was about them.

Zakaria says it is capitalism that drives economics, and by this hemeans liberalised laws. He points to the low growth in India (which hereminds us was called “Hindu rate of growth”) before 1991, when the

economy began to open up and rates became healthy.

Romney and Zakaria both talk of such things as “Israeli” culture and"Indian" culture with specific reference to economic success. Romneybelieves the first is what brings Israel success; Zakaria says thesecond doesn’t play any part in India’s success since 1991.

Zakaria says culture is important but always changing and so notsignificant. Zakaria believes the success of Asians in America comesfrom immigrant drive, not culture.

I think Zakaria is wrong about this. If we examine this success, wecan ascribe it to culture fairly quickly.This can be demonstrated.

What is common to these Fortune 500 leaders: Vikram S Pandit(Citibank), Indra Nooyi (Pepsi), Sanjay Jha (Motorola), Sundar Pichai(Google) and Surya Mohapatra (Quest)?

All are Brahmins.

Two Indians are deans of world-class management institutions, NitinNohria of Harvard Business School and Dipak Jain of Insead. Both areBaniyas.

Warren Buffett’s blue-eyed boy (Ajit Jain) and DeutscheBank’s CEO (Anshu Jain) are Baniyas too.

Any scan of Indian successabroad past or present will continually throw up mercantilecommunities, whether Arun Sarin at Vodafone, Harish Manwani atUnilever or the Bohra Hatim Tyabji at Best Buy.

What Zakaria sees as “Indian” success is that of a couple of communities.

This isn’t just about the success of Indians abroad. The richest 10people in India are Lakshmi Mittal (Baniya), Mukesh Ambani (Baniya),Azim Premji (Lohana/Khoja), Ruia brothers (Baniya), Savitri Jindal(Baniya), Gautam Adani (Baniya), KM Birla (Baniya), Anil Ambani(Baniya), Sunil Mittal (Baniya), Adi Godrej (Parsi). Nine of the tenare from mercantile castes, including the only Muslim.

The thing to know is that these communities are absolutely tiny, butare still able to produce most of our business champions. Why? Notgenes, not magic, but culture. We can dismiss the data as arising fromhistorical advantage of a few families, or a statistical error, orsomething else. But I don’t think that will bring much clarity.

Eventually, we will have to settle on the difference in culture as thekey element that explains this data.

Capitalism and its laws help, but they can only help where the cultureis receptive. Pakistan has laws more liberal than those of India, andit opened up its economy much before India did. But still it doesn’thave growth. Why is this so?

I believe it is because the culture ofthe majority of Pakistanis orients them towards a national securitystate rather than an economically prosperous one. I have written aboutthis earlier ( here ).

I would say Romney is right, at least about us.