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Development in Tabanan, Bali

In our last post, we discussed how Clifford Geertz used the idea of the Bazaar economy to characterize the economic problems of Modjokuto Java.

Geertz noted that the erosion of traditional society had created a “Catch-22” type of situation where it allowed for the emergence of “economic man and woman” but simultaneously eroded the basis for generalized trust. Thus, though it facilitated some types of economic relationships, these were intrinsically limited in scale.

But things were different in Tabanan.

In Geertz’s words:

Tabanan’s aristocratic-entrepreneur faces nothing resembling the entrenched, resourceful, and bitterly antagonistic Chinese Business community with which Modjokutu’s former peddlers must contend.

In fact:

Tabanan’s traditional ruling family – about 6 percent of its population – overwhelmingly dominates the nascent modern economy of the town.

And Geertz noted that the aristocracy of Tabanan consciously saw themselves as

shifting the material basis of [their families] eminence from land ownership and political power to commerce and industry, as maintaining an old ascendancy in a new society. (p. 119)

Their strategy to do this was explicitly to exploit the traditional social structures over which they had a lot of control:

it is on the basis of this type of pluralistic collectivism – in such marked contrast to the hyper-individuated, person-to-person bazaar pattern with which Modjokuto’s would-be firm builders must cope – that the aristocratic entrepreneurs of Tabanan must base their efforts after innovation, reforms and economic growth. (p. 99)

In Tabanan, the aristocracy used the traditional social structure to their economic advantage. In one firm (a tire capping factory) all “fourteen men, all traditional commoner descendants of the lord, work in the factory” (p. 111). In another (a bus line) “this enterprise obviously rests on concepts of group loyalty and traditional leadership which grow directly out of rural social organization and which are wholly lacking in the bazaar economy” (p. 116).

But just as the bazaar economy was limited, so was that of Tabanan.

Geertz state that this is:

Tabanan’s firms can become easily politicized in modern terms and this is – at least in a democratic state – extremely dysfunctional to further growth.

This was because they 

had a tendency to behave uneconomically because of the “social welfare” pressures of its members who, for the most part, are not basically growth minded. (p. 123)

So although the use of traditional social structures allowed Tabanan princes to build firms that the peddlers of Modjokuto could not, at the same time these social structures were in many ways inimical to profit maximization because they built in social norms of redistribution which impeded the incentives of the princes to build such organizations.


Development in Modjokuto, Java

In Geertz’s view the social structure of the towns is key to understanding their development potential and in particular, as we emphasized in our last post, whether modern firms could emerge.

Geertz traces the different social structures in Modjokuto (Java) and Tabanan (Bali) to the very different colonial experiences they faced.

The Dutch East Indies Company founded the city of Batavia in Java in 1619 (present day Jakarta) and they quite quickly became heavily involved in the politics of Javanese states. Until 1901 when the rest of the archipelago was formally annexed, direct Dutch control was limited to Java and key economic places in the outer islands (particularly the spice islands of Banda, Ambon, and Ternate).

In Modjokuto, there was long history of Dutch rule and in the nineteenth century, the presence of large sugar cane plantations undermined traditional political elites. Traditionally Javanese society was also perturbed by powerful outside influences, for example, the islamization of the Javanese coast and the spread of Muslim merchants into the interior, as well as the presence of a strong Chinese business community.

In Tabanan, in contradistinction, the traditional political elite, which traced its roots and legitimacy back to the great Hindu Java kingdom of Majapahit, ruled until 1901, and so was much stronger politically and socially. Islamic merchants were absent in Bali and the Chinese were much less present, and to the extent that they were, they were more ‘indigenized.’

These histories might be thought to have created an advantage for Modjokuto that appeared in the 1950s, when Geertz studied it, to have most of the trappings of a modern society. There was a very dynamic and capitalistic Javanese Muslim trading community based around the market and the Mosque. But these traders, rather than developing modern firms, remained small peddlers.

Geertz described this as (pp. 31-33)

on the other side of the jump from peddling to merchandising, the Chinese storekeepers, truckers, and warehouse owners have  … complete control.

[For a peddler] skill in bargaining … is his primary professional qualification.

The fixed price system, along with brand names, advertising, and the other economic customs which accompany it, relieves the buyer-seller relation of competitive pressure and places it on the relation between sellers.

In other words, Geertz characterizes the economy of the Muslim traders of Modjokuto using the concept of the “Bazaar economy,” which we introduced in our post on the economy of the Congolese city of Kananga.

But those working in the Bazaar economy find it hard to grow and create firms.

In Geertz’s words (p. 126):

Modjokuto enterprises seem to grow so large and then no larger, because the next step means widening the social base of the enterprise beyond the immediate family connections to which, given the lack of trust which is the inverse of individualism, they are limited.

Or (p. 47):

Whatever is obstructing the development of a modern economy out of the general bazaar economy, it is not a lack of “business-like” orientation … what [it] lacks is not elbow room but organization, not freedom but form.

So Geertz portrays Modjokuto as inhabited by economically rational peddlers, but who are caught in the Bazaar economy because, to grow in scale and form modern firms, they would need to be able to write contracts and enter into long-run deals. But they cannot do this because of a general lack of trust. They trust members of their family and this supports the Bazaar economy, but trust goes no further.

Ironically, therefore, the same factors that eroded traditional economic elites along with their social ties and extra-market relations and thus freed the field for capitalistic individuals simultaneously creates an environment with a severe dearth of trust, which turns out to be a major impediment to the development of more modern economic organizations.

Why can’t the Chinese businessmen of Modjokuto take up the slack and create firms?

To some extent they do, but Geertz argues that they are blocked by social barriers, particularly a general resentment, and the fact that they are outsiders.


Peddlers and Princes

Clifford Geertz wasn’t just interested in the nature of the Balinese state, he was also interested in central problems of economic development.

In his book Peddlers and Princes, he examined the comparative development of two towns, Tabanan in Bali, the capital of a pre-colonial state with the same name, and Modjokuto in Eastern Java.

The overarching agenda of the book is to show how social structure influences the possibilities for creating economic development and Geertz shows historically how and why these two towns ended up with very different social structures. By this, Geertz means that even if the basic economic challenge was the same the problems that stopped it being solved were very different.

But what was this economic challenge?

Geertz explains:

Sociologically speaking, perhaps the major difference between a modern economy and a traditional one is that the former is marked by a very large number of social structures, institutions and roles specifically adapted to fulfill economic functions as opposed to others, while for the most part the later is not: … The firm is an excellent sociological benchmark of development … precisely because it is such a specifically economic institution, a miniature social system specialized to perform economic functions and integrated in terms of economic values. And it is such firms that the entrepreneurs of both Modjokuto and Tabanan are trying to create. (p. 137).

So Geertz focuses on the problem of creating firms. 

This is of course well-trodden territory within economics. There are many interesting and empirically relevant theories of how efficient firms may emerge to solve problems that markets cannot, or why such efficient organizations may not emerge because of credit market imperfections, holdup problems or incomplete contracts.

But Geertz has in mind more sociological constraints on the formation of firms. He argues that

the construction of a viable firm … requires two very difficult and somewhat contradictory achievements: a sufficient degree of independence of the – from an economic point of view – non-rational pressures of institutional custom, and the establishment of an accepted normative code in terms of which completely economic activities can be regulated. Without the first, business firms sink into the inefficiency with which those of Tababan are usually threatened; without the second they flounder on the shoals of mistrust, as Modjokuto’s tend to do. (p. 138)

In the next two posts, we will see how budding entrepreneurs in Tabanan and Modjokuto were trapped between the Scylla of non-rational pressures of institutional custom and the Charybdis of lack of an accepted normative code.


The 1906 Badung Puputan

The world of the theatre state that we described in our last post came to a brutal end with the final annexation of Bali by the Dutch in 1908. The ritual suicides (Puputan, from the Balinese word puput meaning ‘finishing’ or ‘ending’) that took place as a consequence of the Dutch annexation of Bali are one of the less well known atrocities induced by European colonialism.

According to Robert Pringle’s A Short History of Bali, they led to 1,100 deaths (p. 106). The most notorious of these took place as the invading Dutch approached Denpasar, the capital of the pre-colonial state of Badung.

Pringle quotes a contemporary account of the carnage that this created (p. 104)

As they drew closer, they observed a strange, silent procession emerging from the main gate of the puri. It was led by the Radja himself, seated in his state palanquin carried by four bearers, dressed in white cremation garments but splendidly bejeweled and armed with a magnificent kris. The Radja was followed by the officials of his court, the armed guards, the priests, his wives, his children and his retainers, likewise dressed in white, flowers in their hair….One hundred paces from the startled Dutch, the Rajda halted his bearers, stepped from his palanquin, gave the signal, and the ghastly ceremony began. A priest plunger his dagger into the Radja’s breast, and others in the company began turning their daggers upon themselves or upon one another. The Dutch troops, startled into action by a stray gunshot and reacting to attack by lance and spear, directed rifle and even artillery fire into the surging crowd. Some of the women mockingly threw jewels and gold coins to the soldiers, and as more and more people kept emerging from the palace gate, the mounds of corpses rose higher and higher. Soon to the scene of the carnage was added the spectacle of looting as the soldiers stripped the valuables from the corpses and then set themselves to sacking the palace ruins.

Not quite the ‘civilizing mission’.

Geertz commented on this as follows

the king and court again paraded, half entranced, half dazed with opium, out of the palace into the reluctant fire of the by now thoroughly bewildered Dutch troops. It was quite literally the death of the old order. It expired as it had lived: absorbed in a pageant.


The Theatre State

In earlier blog posts, we have taken issue with the dominant ideas about the state in the social science literature. For instance, we looked at Berber society through the lens of Ernest Gellner’s book Saints of the Atlas and showed that contrary to what Max Weber had suggested, it was not the state that had the legitimate monopoly of violence,” but society.

A different powerful critique of central notions of how states work is due to another social anthropologist, Clifford Geertz, and in the next several posts we will discuss Geertz’s ideas and use them as a steppingstone for thinking about state-society relations.

Geertz’s seminal studies of Indonesian society and politics are rich in insights about the types of problems we examine in Why Nations Fail.

In his book Negara: The Theater State in Nineteenth Century Bali, Geertz provided a characterization of how the state (called the Negara) was organized and worked in 19th century Bali and he used this to make generalizations about how many pre-colonial states functioned in 19th century Southeast Asia.

Today Bali is part of Indonesia, but in the 19th century it was independent and made up of a number of separate polities. In 1800 there were probably 11.

The Dutch began their colonization by capturing part of the north coast of the Island in the late 1840s taking over the state of Buleleng. The Dutch, via the Dutch East Indian Company, had been colonizing in the region since the early 17th century but they had taken over little territory outside Java until the 19th century. Though the north coast of Bali was strategic for the Dutch, and integrated into their trading networks, it was marginal to Bali itself, the heartland of which was the southern piedmont dominated by irrigation fed rice agriculture.

The economic base of the states that dominated this piedmont, such as Tabanan, Karangasem, Klungkung, Gianyar, Mengwi and Badung, was trade in rice and other agricultural commodities such as coffee (previously slaving had been important as well).

According to most theories of the state, these states should have been heavily involved in the control of agriculture. Indeed, a famous hypothesis due to Karl Wittfogel in his book Oriental Despotism is that it was precisely societies that heavily used irrigation for agriculture that ended up with centralized despotic states. According to Wittfogel, this was because building irrigation systems required huge amounts of coordinated labor and this created a big incentive for a state to emerge to mobilize and control it all. (See this paper for a recent empirical analysis of Wittfogel’s thesis).

But Geertz pointed out that, paradoxically, the states of Bali controlled neither trade, which was mostly in the hands of Chinese merchants, nor irrigation systems and land, which were organized collectively by subaks (irrigation societies).

In fact Geertz argued that the Balinese states hardly governed anything at all and were remarkably un-bureaucratic. He painted a picture of a self-governing and self-organized society and instead characterized the state as being a “Theater State” which was mostly involved in pageants and religious rituals to justify itself and the social order unpinning it, but which did little else that was real.

Yes, the states collected tribute and taxes, but this was primarily to fund the theatrics. Geertz’s uses these cases to attack many ideas in the theory of the state, not just Wittfogel’s “hydraulic hypothesis”.

He is particularly keen to criticize the idea that the symbolism and pageantry of states are just a masquerade that tries to hide the reality of domination from people, noting (pp. 121-122)

Each of the leading notions of what the “state” is that have developed in the west since the sixteenth century — monopolist of violence within a given territory, executive committee of the ruling class, delegated agent of popular will, pragmatic device for conciliating interests — has had its own sort of difficulty assimilating the fact that this force [of display, regard and drama] exists. None has produced a workable account of its nature. Those dimensions of authority not easily reducible to a command-and-obedience conception of political life have been left to drift in an indefinite world of excrescences, mysteries, fictions, and decorations. And the connection between what Bagehot called the dignified parts of government and the efficient ones has been systematically misconceived.

This misconception, most simply put, is that the office of the dignified parts is to serve the efficient, that they are artifices, more or less cunning, more or less illusional, designed to facilitate the prosier aims of rule.

The last sentence of the book sums up his thesis:

The dramas of the theater state … were, in the end, neither illusions nor lies, neither sleight of hand nor make-believe. They were what there was.

So was Geertz right in his criticism of the social science literature on the state? How can we understand the different types of states that have emerged throughout history and in different parts of the world?

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