Prof Raman Mahadevan has a superb piece on Indian business history. It is really rare to read about Indian business history in regular media.
Prof Mahadevan says there is lot of discussion and criticism on rising corruption and greed in corporate India. But this is hardly anything new and the seeds were sown much earlier:
The growing clamour recently in favour of corporate ethics and against blatant corporate greed and malfeasance, both from outside and within the corporate sector, is of a piece with the push for transparency and against corruption. The angst is best exemplified in Gopalkrishna Gandhi’s recent outpouring that “corporate greed has crossed all bounds as has corporate tastelessness”. The Satyam scam, followed by the 2G spectrum scam and the Coalgate scam, have blown the lid off the rot within the system. Much of the recent writing on this theme seems to attribute the roots of this malaise to the regulatory system of the licence-permit raj, which was put in place post-Independence. But this misses the wood for the trees: the roots of unethical business practices well predate 1947.
The institutionalisation of corruption in business can be traced to the Raj, and beyond that, to the very nature of colonial mercantile trade under the aegis of the East India Company. It is best exemplified in the involvement of company officials in private trade in violation of the company charter and the enormous pecuniary benefits derived by them through graft as revealed in the cases involving Robert Clive and Warren Hastings.
I am inclined to attribute the strengthening and embedding of these unethical business practices in imperial India, with implications for developments in post-independence India, to two main factors: a) the absence of level playing field as between European capital and fractions of Indian merchant capital over access to emerging investment opportunities, and b) to the uniquely Indian experience of the rise of an Indian entrepreneurial class, in those times, from business communities with pronounced commercial moorings. As a consequence, the commercial instinct of the traditional family firms—such as pedhis and sarafis—assumed overriding importance in their overall scheme of business and many of these business traits were carried over to the management of modern enterprises that came under their control. It was also reflected in the compelling need in a highly competitive and imperfect market, characterised by uncertainties and risk, for quick turnover, irrespective of the means used for doing so. Satta, or speculative bids and deals, was integral to the opium and cotton trade, the initial source of wealth generation of many of the traditional Indian firms. This situation, as it were, created the basis for the growth of what came to be perceived as unhealthy business practices. Legendary is the case of Premchand Roychand. His rise to riches and decline through speculative dealings in cotton trade and the Backbay Reclamation project during the 1860s was probably the first major scam in the financial history of India.
…..That the problem still dogs us clearly suggests that sections of corporate India have drawn the wrong lessons from its history.
There are many insights in the essay that would be unknown to students of Indian economy (and finance). So there is a tendency to describe any current event as never before/unprecedented and so on. Reading history tells you how historical all these ideas are and continue to be important and relavant even today.