‘Scam 1992’: A Story Of Feudalism And Capitalism In India

I have not read the book from which the series was adapted. This is only a comment on the SonyLIV series.

To analyse Scam 1992 from a Marxian perspective, it is important to first understand a philosophical contribution of Marx and Engels — historical materialism. It posits that changes in our social and political lives are driven by the material conditions and relations, i.e. socio-economic relationships between components of a society and the available pool of resources.

Understanding Historical Materialism

Early human societies practised primitive communism, where tribes owned and managed resources in a collective manner. The tribes had very limited access to tools, were nomadic, banded together in primitive communes and hunting-gathering was the mode of production of goods that were necessary for sustenance.

Since the tribe was nomadic, there was no concept of private property in the form of land or any other resource. When the skills to make tools developed, and as farming became a possibility with the use of tools, primitive communism started to decline. Tribes ceased to be nomadic and could settle in a single region. Thus, ideas of ownership of property came about.

To gain some context, let us do a thought experiment: Sentinel island in Andaman and Nicobar is populated by a small tribe that has had no meaningful contact with the outside world for ages. What if you were to go to this island and read out Article 19 of the Indian constitution and tell them that they have property rights?

They will not have a clue about what you are saying since their mode of production is hunting and gathering. They simply could not care less about property rights because property does not mean anything to them. This is the point of Marx and Engels. Social relations, rules, customs or ideals are heavily interdependent on the economics of a society.

Rules about private property make sense to us only because we practise an economic system that involves private ownership. If someday we abolished private property, these rules would simply be obsolete.

Marx and Engels say that such is the case with any other stage of human development — each stage of society ceases to exist as the material conditions change. The idea that material and economic conditions can explain the changes in our society (and may even predict to a limited extent) is the core of historical materialism.

Perhaps the most astonishing use of this framework was by Vladimir Lenin in his pamphlet, “Imperialism: the highest stage of capitalism.” He argued that since the colonial and imperial powers of the world (European nations, Japan) had become dependent upon their colonies, further colonisation was the only way for them to maintain their legitimacy with their respective populations.

Thus, they will soon compete over the control of colonies and this would lead to a war between imperial nations. This war turned out to be World War 1. It has become a factoid that WWI was caused by the assassination of Archduke Ferdinand of the Austro-Hungarian empire. But this event was a mere trigger point as the economic conditions were ripe for the war.

Transition From A Feudal To Capitalist Society

The original analysis of Marx and Engels was based on their experiences in Europe. More precisely, a capitalist Europe. Before the French Revolution, Europe was a feudal society ruled by monarchs and a very strict division of aristocracy, clergy, peasantry and so on.

The transition of Europe to capitalist society was a violent and bloody process since those who benefited from existing economic relations (feudal lords under feudalism) would do anything in their power to stop it from changing.

Marx and Engels held that as Europe transitioned to capitalism and democracy from feudalism, the rest of the world would also transition to some form of capitalism as they reached the required level of development.

In India, our feudalism was certainly not identical to that of Europe, but there were some key similarities, such as ownership of land being restricted to the powerful classes (upper castes) in the society. In some sense, I believe that this progression of feudalism to another economic system was hampered in India and possibly the rest of the third world.

Imagine, if the Europeans never came to India, the kingdoms of the subcontinent would have become a force to reckon with (they controlled a large chunk of the world economy) and would have had their own respective revolutions to overcome feudalism and transitioned to some other form of production and governance.

India’s Transition To Nehruvian Socialism

Now, as capitalism made its way to India from the west, two of its tendencies would shape our feudal system. One, it destroys the existing hierarchies of the system. For instance, it could challenge the feudal system by extending property rights to serfs, peasants, etc.

Two, it can reinforce existing hierarchies if feudal power structures can accommodate themselves in the new economic system. A great example is that equal (legal) rights for women were not granted even after many years of the capitalist and democratic revolution in western states, as capitalism benefited/s from the exploited and unpaid labour of women in the household.

India’s feudalism was the caste system that gave the privilege of wealth and land ownership only to certain upper castes. Broadly speaking, capitalism destroyed the feudal classes in Europe and liberated the masses from feudal oppression.

But in India, we never had our capitalist revolution — the British literally handed over a liberal-democratic and semi-capitalist system of governance to the feudal (caste) society of India whose governance was naturally dominated by the upper castes of the country — Jawaharlal Nehru and the Nehru-Gandhi family being the prime example.

Nehru’s policies, or Nehruvian socialism, as we call it, was a utopian socialist ideology, i.e. it did not subscribe to Marxism and can be described roughly as a social democracy.

It did not allow market forces to shape a newly independent nation, for justifiable reasons. But the lack of a transition from feudalism meant that this utopian socialism would reinforce the existing feudal hierarchies of caste, gender and other cultural phenomena. Thus, this economic system became a playground for feudal lords to exercise their power in new ways.

We see how the lack of a “free market” prevented any possibility of challenging the monopoly of wealthy families like Tata or Birla by smaller businesses. Starting in the late 1980s, India started its neo-liberal reforms and transitioned to a market economy.

Thus, it was only natural that some old hierarchies would be destroyed (as feudalism was destroyed in Europe) and some old ones would retain their position to rise up in the pecking order.

It is quite unusual for a communist to speak of the liberalisation in a positive light, but it cannot be denied that full-fledged capitalism brings our society one step closer to socialism and that this process of liberalisation should have been done in a manner that the communist party governed states like Vietnam and China have attempted.

Note that Marx himself supported a capitalist revolution in Germany to overthrow the feudal monarchy.

Where Do Harshad Mehta And His Story Fit In This Mess?

Harshad Mehta’s story is something that we call rags to riches story or a self-made man. But as with most self-made men, this framing ignores the reality of caste and gender in India. A lot can be and has been said about such stories, but here I will attempt not to judge Mehta but take the point that the series tries to establish one step further.

Mehta obviously comes from an upper caste family but is not well off in terms of wealth. He is charismatic, smart and ambitious, and starts off as a jobber in the stock market of Mumbai. He takes umpteen risks and spends his entire family savings (even losing his father in the process) in off-setting that risk. He faces many obstacles but eventually rises up in the hierarchy as the Big Bull.

In the series, we see established, traditional and stereotypical businessmen like Manu Mundra or western dressed elites like Kedia and Tyagi who look down upon Mehta.

While the series does not spell it out for us, I believe it is a reasonable claim that these folks were much more privileged compared to Mehta, i.e. they were the remnants of a feudal system that tried to fit in and flourished in the age of Nehruvian socialism.

As the market is becoming freer, the old feudal lords are running for their money as new capitalists like Mehta are coming for their heads.

Mehta obviously used shady or illegal methods to make his fortune, while the more seasoned investors like Mundra, Kedia and Tyagi were making use of their influence and using the same methods but in moderation. They do whatever they can to put down Mehta, such as planting a (true) story with Sucheta Dalal.

People like Tyagi and Kedia are feudal lords who retained their positions in the newly emerging capitalist order and were not letting a monopoly breaker in the market. As Sucheta Dalal uncovers through her investigation, the scam was not just Mehta but the whole system itself.

We see instances where Dalal and others try to guilt Mehta into admitting that his actions led to the downfall and deaths of many, but the arch of the story gives us the message that systemic legal reforms were needed to prevent the loopholes and that Mehta as an individual himself, was not unique. He was simply a scapegoat for the system during the investigation.

What Mehta did was illegal, maybe much more so than his feudal associates, but that does not mean that their wealth was any less illegitimate than his. Like most bourgeois media, the series implies that it was illegitimate because their methods were illegal, or because RBI did not act on them, etc.

But there is more fundamental illegitimacy in the system — that of the discrepancy between value and labour.

The basic idea of the theory of value used by Marx and even early capitalist philosophers such as Adam Smith says that value can only be produced by labour. And that property, solely by virtue of its existence, cannot have a value.

Simply put, the labour theory of value says: “What you sow, is what you reap.” If you put more effort into building your house on a piece of land, it will have a larger value. If you put more effort into farming a piece of land, it will produce grain of a higher value.

So how does this relate to stocks, securities and other kinds of financial investments? First, the amount of labour that can go into researching and analysing a particular investment opportunity is finite and, hence, the value one gains from that labour should be worth that labour.

But with finance capital, the value generated by investing your assets is proportional to the principal amount one has invested and not to the labour that went into research and analysis.

Imagine you, a recent college graduate, have analysed a particular stock in the market and invested a small amount of money that you have saved. Rakesh Jhunjhunwala (one of the former members of the Bear cartel in the series) also did the same analysis and reached the same conclusion, i.e. he has put in the same amount of labour as you did.

However, simply because Mr Jhunjhunwala has so much more capital than you, to begin with, the value he derives from that labour is humongous compared to the value you derive from that investment. In capitalism, you can obtain wealth which largely depends on the amount invested but depends the least on your labour.

The diatribes we see from everyone in the series when Mehta artificially inflates the prices of stocks is very much a feature of finance capital — bringing about a change in value without any labour. Thus, Mehta was not doing something antithetical to the system but was simply taking it to its limits.

Even today, we see this happen when revered figures like Elon Musk tweet about some cryptocurrency to inflate its value or say stupid shit to inflate his own corporation’s stock.

The above paragraph is a more concrete analysis and critique of financial capitalism, something that the series only hints at. But the series nonetheless shows the interesting dynamic between utopian Nehruvian socialism, emerging capitalism and feudalism.