Trade, Institutions and Ethnic Tolerance: Evidence from South Asia Saumitra Jha∗ Stanford Graduate School of Business Sept 30, 2012 Abstract I provide evidence that the degree to which medieval Hindus and Muslims could provide complementary, non-replicable services and a mechanism to share the gains from exchange has resulted in a sustained legacy of ethnic tolerance in South Asian towns. Due to Muslim- specific advantages in Indian Ocean shipping, inter-ethnic complementarities were strongest in medieval trading ports, leading to the development of institutional mechanisms that further supported inter-ethnic exchange. Using novel town-level data spanning South Asia’s medieval and colonial history, I find that medieval trading ports, despite being more ethnically mixed, were five times less prone to Hindu-Muslim riots between 1850-1950, two centuries after Europeans disrupted Muslim overseas trade dominance. I provide case and representative household survey evidence that these differences were transmitted via the persistence of institutions that emerged to support inter-ethnic medieval trade and continue to influence contemporary occupational choices, trust and organizations. Keywords: Trade, Institutions, Culture, Religion, Cities, Ethnic Conflict, Social Norms, Peace 1 Introduction On February 27th, 2002, a carriage of the Sabarmati Express carrying Hindu activists caught fire at Godhra railway station in the western Indian state of Gujarat. At least 58 people were burnt alive. ∗I owe particular thanks to Susan Athey and Avner Greif, as well as Aprajit Mahajan, Kenneth Arrow and David Laitin. I am grateful for the suggestions of Ran Abramitsky, Amrita Ahuja, Roger Bolton, Feysal Devji, Claudia Goldin, Emeric Henry, Asim Khwaja, Michael Kremer, Prakash Kannan, Kimuli Kasara, Anjini Kochar, Timur Kuran, Jenny Kuan, Jessica Leino, Pedro Miranda, Monika Nalepa, Rohini Pande, Matthias Schuendeln, TN Srinivasan, Ashutosh Varshney, Nico Voigtlander, Steven Wilkinson, Gavin Wright, Joanne Yoong and seminar participants at AALIMS, Berkeley, Chicago, Clio, Davis, Harvard, Northwestern, Stanford, LiCEP, LSE, MIT, Princeton, NEUDC, NYU, UBC, UWO, the all-UC economic history group and the World Bank. Sangick Jeon and Astasia Myers provided much valued research assistance. 1 Electronic copy available at: http://ssrn.com/abstract=2155918 In the weeks that followed, towns throughout Gujarat succumbed to ethnic violence that claimed at least a thousand lives and forced 98,000 people into refugee camps. The city of Ahmadabad, particularly in its medieval precincts, experienced 24 days of rioting that took the lives of more than 324 people. Once Mahatma Gandhi’s headquarters for non-violent teaching, Ahmadabad has since become notorious for the frequency and intensity of its ethnic conflict. The patterns of violence in Ahmadabad stand in sharp contrast to those that prevailed in Surat, a historic port city just 140 miles south. Surat too, is divided into an old medieval city and newer settlements. Surat’s proportion of Muslim residents, at 12.3 percent, mirrored Ahmadabad’s 13.0 percent (Census of India, 2001). Yet, over the course of the 20th century, Surat witnessed virtually no religious violence. Even in 1969, when most other large Gujarati cities, particularly Ahmad- abad, succumbed to religious rioting, Surat was unaffected (Engineer, 1995, Varshney, 2002).1 It took the destruction of the Babri Mosque in Ayodhya in December 1992 to end Surat’s unusual record of religious peace, when six days of rioting left 175 dead. Following the Godhra incident ten years later, Surat also experienced six days of violence that led to at least nine deaths. Yet, unlike in Ahmadabad, where riots were concentrated in the old city, Surat’s riots were largely focused in newer migrant settlements (Varshney, 2002). Despite possessing many attributes that commonly correlate with religious violence, Surat’s reputation as an “oasis of peace” persists.2 The medieval-era precincts of India’s cities, which are often relatively poor and house Hindus and Muslims in close and crowded proximity, are often cited in the popular press and by academics as natural repositories for religious tensions that routinely explode into violence (Engineer, 1988, Brass, 2003). Indeed, the potent relationship between poverty, ease of insurgency and ethnic vio- lence found in studies at the cross-country level (eg Fearon and Laitin, 2003, Miguel, Satyanath and Sergenti, 2004) seem to find ample validation in the crowded precincts of India’s towns. Hindu- Muslim violence has resulted in more than 40,000 deaths or injuries since 1947, the overwhelming 1Between 1885 and 1985 Surat experienced two incidences of Hindu-Muslim violence, with one death in each case. In 1985-1986, when another wave of violence combining religious and inter-caste tension hit Gujarat, Surat’s riots were between castes rather than religions (Varshney, 2002)[p228]. 2This term was used to describe Surat during the Gujarat riots of 2002 by the Times of India editorial page, February 1st, 2007. 2 Electronic copy available at: http://ssrn.com/abstract=2155918 majority in towns and cities. However, the aggregate statistics of religious violence in India mask a great diversity in Hindu- Muslim relations. Even within Gujarat, one of India’s wealthiest states, the contrast between the relatively peaceful old city of Surat and its newer settlements and the violence throughout Ahmad- abad city suggests that old towns in India exhibit patterns of religious conflict that are not com- pletely explained by factors commonly associated with ethnic violence: the incidence of poverty, ethnic composition, state or town-level electoral incentives or even rioters’ ability to avoid the police. Understanding how communities that have all the ingredients for conflict still succeed in maintaining tolerance may provide insight into how other communities may do the same. In this paper, I provide evidence that the degree to which Hindus and Muslims could provide one another with complementary, non-replicable services prior to European colonization has gen- erated a legacy of reduced ethnic conflict even in towns that might otherwise seem likely locations for violence.3 I use the fact that due to the coordination of overseas markets through Muslim pilgrimages such as the Hajj, Muslims enjoyed exogenous complementary and non-replicable ad- vantages in accessing Indian Ocean trade routes in the medieval era. I find that medieval overseas trading ports, which served as the geographical focuses of Hindu-Muslim complementarities in trade, were five times less prone to Hindu-Muslim riots and around twenty-five percentage points less likely than otherwise similar towns to experience a religious riot between 1850 and 1950, two centuries after Europeans disrupted Muslim advantages in overseas trade. Between 1850 and 1950, medieval port towns were around ten times less likely to experience their first outbreak of Hindu-Muslim rioting in any given year. These differences in patterns of conflict between medieval ports and other towns persist but diminish following the Partition of South Asia, in part reflecting the extensive ethnic cleansing of minority populations in previously riot-prone non-medieval port towns. These differences diminish still further with a series of economic and political shocks near the end of the 1970s. However, Gujarati medieval trading ports continued to experience fewer riots and exhibited less widespread religious rioting in the aftermath of the burning of the Sabarmati 3Technically, two actions are complements if 1) adopting one does not preclude adopting the other, and 2) whenever it is possible to implement them separately, the sum of each return cannot be greater than doing them together. 3 Express in 2002, and households in medieval ports still show patterns of lowered perceived com- munity conflict, reduced inter-ethnic inequality, complementary occupational specialization and more wide-spread inter-ethnic organizational membership in 2005. The paper draws upon a broad range of sources, including a novel town-level dataset that combines hand-collected information from medieval traveller’s narratives, a 16th century Mughal census– the Ain-i-Akbari, colonial-era indicators of demography and development, qualitative fieldwork conducted in Ahmadabad and the port towns of Surat, Somnath-Veraval and Porbandar in 2006-07, and a 2005 urban sample of household level data on trust, conflict and local organiza- tion (the Indian Human Development Survey 2009). I use these sources to rule out a number of key alternative explanations and to interpret the results as providing evidence for the long-term persis- tence of “institutions”– which, adapting the definition used by Greif (2005) to draw upon robust comparative statics (eg Milgrom and Roberts, 1990), I define to be ‘systems of complementary norms, beliefs and organizations that together induce regularities of behavior’. I first provide evidence that the differences between erstwhile ports and other towns are not the result of factors, such as a more mixed ethnic composition or poverty, that are often suggested to explain ethnic violence. Instead, I show that medieval ports are more ethnically mixed and poorer than similar towns, both factors that are commonly associated with greater violence. In fact a medieval trade legacy appears to reduce violence the most in larger towns that are more ethnically mixed. Further, the results do not appear to be driven by the selection of medieval ports by Muslim