Business and Polity: Dynamics of a Changing Relationship By D.N. Ghosh, Sage, Rs 795

Pretty soon after man emerged from the jungle to pursue agriculture, he had to form communities to protect himself from hostile humans and animals. So collective organization, nowadays known as government, is as old as human settlements. And just about when men discovered fighting, they also found it advantageous to trade. So business is nearly as old as government. This book is a history of the way the two have lived together, worked together, and fought together.

It begins with Greece, which built one of the earliest empires over the 8th to 4th centuries BC. It captured slaves from the lands it conquered, received tribute from its colonies, developed trade across the Mediterranean and the Middle East, made coins out of silver from its Laurian mines, and developed credit networks connecting its business centres.

The Romans professionalized the system the Greeks had created. They made good use of slavery; they created an oligarchy that became rich out of large agricultural estates worked by slaves. They built up a professional army whose massed formations and heavy arms gave it an edge over all competitors, and a class of traders who brought the treasures of the empire to Rome for its elite to buy and enjoy.

Skipping then over Indians, Chinese, Byzantines and Persians, Ghosh goes on to the Muslims, who took over pre-existing empires in Egypt, the Levant, Asia Minor and Persia. They made little change in the administration they inherited from the pre-Islamic kingdoms, but by converting people irrespective of economic status and treating them as equals at least before god, they reduced social schisms and invigorated the economies of the areas they conquered. They also invented light cavalry which overcame the Roman-style armies of Persia — a point Ghosh omits.

After hovering briefly over the maritime trade of Indians and Chinese in the first millennium, Ghosh turns to Europe in the Middle Ages. It saw some important commercial innovations such as single-entry bookkeeping, bills of exchange and joint stock companies (limited liability came much later, in Britain in the 15th century). But what distinguished Europe from other regions was the breakaway of cities. The movement began with guilds, which were craftsmen’s cooperatives. It had its greatest success in the ports of the Baltic and the English Channel; maritime traders combined to wrest local government from the continental kingdoms. Starting from Lübeck in north Germany in 1356, traders in the ports of northwest Europe formed a loose confederation called the Hanseatic League. Its growth contributed to the prosperity of the big four Italian city-states — Genoa, Milan, Venice and Florence — which lay between Europe and the old treasure trove of India and the Middle East. The businessmen who climbed the pyramid of wealth became financiers of warring kings. As kings became hopelessly indebted, they handed over control of taxes to businessmen, and tax farming developed into a new business.

This European money game, stretching from the Baltic to the Mediterranean, was transformed after the almost simultaneous discovery of America and the sea route to the Indian Ocean past the Cape of Good Hope at the end of the 16th century. The monarchs of Spain received 181 tons of gold and 1600 tons of silver from their American possessions between 1500 and 1650; in the three centuries after 1500, the Americas sent to Europe 70 per cent of the gold and 85 per cent of the silver output of the world. These riches went first to finance imports from India and China but, eventually, they financed powerful navies which set up outposts and colonies across America, Africa and Asia. The colonization of the world was initiated by the bullion of the New World.

Holland was the pioneer of this phase. In 1581 it rebelled against and broke away from Spain. Thenceforward it was a republic dominated by traders; it was like a Hanse port that had taken over an entire country. Its ships spread across the Atlantic. There it confronted the British, who began as pirates preying upon Spanish and Dutch ships plying the Atlantic, but came to dominate the Atlantic in the 18th century after they had colonized North America and the West Indies and developed plantations to produce tobacco, sugar and coffee using slave labour from Africa.

Whereas medieval kings had privatized tax collection, the British monarchs, starting from Elizabeth I, privatized colonization by chartering companies to develop trade with particular parts of the world. The empires in India and China failed to notice or develop the partnership between State and business that emerged in Europe between the 16th and the 18th centuries. The partnerships defeated Asian empires, colonized the Indian Ocean area and made China a captive market. Imperialism was the pinnacle of achievement of the European partnership between business and government.

And its greatest failure was in the two world wars, which crippled Europe as the world’s manufacturing hub. They also gave a considerable stimulus to the United States of America, which became the dominant power after World War II. But according to Ghosh, its days are numbered. It does not save enough to be able to finance world domination; it will fade away by the middle of this century. His idea of the future is inclusive growth.

This is an inadequate summary of the book under review. Over 400 pages and 1,20,000 words in length, this book may appear long, but its canvas is so vast that it races through centuries and continents at breakneck speed. The reader will learn many obscure and interesting things from it, but he will often wish that the author had spent some more time on a topic, or given an argument a more rigorous shape. In case he wants to quench his thirst for more knowledge, he has a bibliography of 600 works to help him. Working through it may require a lifetime of devotion to rulers and businessmen, and sojourns in the great libraries of the West; for anyone who cannot afford them, this book is the best introduction to a fascinating subject.