Tolerance by Accident, Trust by Design

In the latest installment of our partnership with the Center for Advanced Study in the Behavioral Sciences, Saumitra Jha writes about the “ghost” in his study: 1987–88 CASBS fellow Douglass North.
Today, trade and globalization often reinforce the incentives for coercion and violence. But what might the history of India reveal about the economic conditions of toleration?
Photograph of shoreline, beached boats, in Porbandar, India

“They have torn down the Babri Masjid in Ayodhya. We must leave tonight.”

On December 6, 1992, many towns across India erupted into flames as activists destroyed a 16th-century mosque. The Babri Masjid was commissioned by a Muslim ruler (the first Mughal emperor Babur) but had been built on a site many believed to be the birthplace of the Hindu deity, Rama.

Riots sparked among Hindu and Muslim communities that had lived side by side for centuries. Even the religiously integrated crime families of Bombay, many of their fortunes seeded with smuggling from the Middle East, saw brother turn against brother in the name of religion. Indian politics and its occasional cousin, Indian organized crime, would not be the same. The ethnic bloodlettings of India’s past were not the ancient history that I had thought.

At that time, I was in high school in the Himalayas. The morning after the mosque was destroyed, we were scheduled to take an eight-hour bus ride south to Delhi. The old heartland of the Mughal empire, the region we were to travel through had some of the most religiously mixed cities in the country. Stories spread that, that night, groups searching for members of the ‘other side’ were pulling people off buses. We left in darkness, our bus winding through rural backroads to avoid the main highways. Though we ultimately arrived safely, I remained deeply troubled.

Religious hatred and violence seemed so medieval. Yet, it had revealed itself even in some of the richest, most modern parts of the country. Why—I wondered—wasn’t India’s economic growth and development solving these problems?

I found a path to begin understanding why, during my junior year of college, when I first encountered the work of economist Douglass North. North once worked in the study where I do now, in a COVID-friendly corner of the Center for Advanced Study in the Behavioral Sciences (CASBS) that overlooks the Stanford campus.

Prior to North—and the “New Institutional Economics” that he helped establish—many benchmark economic models simplified the world by assuming that individuals were perfectly rational: capable of flawlessly solving even the most complex of math problems. Further, these rational actors often enjoyed similar information and well-defined property rights. In this highly abstract world, the invisible hand of the market could lead to efficient (though, even then, far from equitable) outcomes.

New Institutional Economics (NIE) adopted a more rounded, if disturbing view. People are only rational at times, argued the NIE: they use rules of thumb, often conceal information, cheat, and even employ violence. Societies develop institutions—informal and formal rules—that shape how individuals navigate the complexity of the world. However, looking at history, North noted that if such institutions are ever optimal, it is “usually by accident.”

Religious hatred and violence seemed so medieval. Why—I wondered—wasn’t India’s economic growth and development solving these problems?

This view gave me a lens to understand the puzzle that troubled me since I was as a boy. As societies got wealthier, one might hope that people would have better opportunities, which would make violence and hatred simply not worth it. But the NIE suggested that even with prosperity, sometimes even terrible social norms and formal rules could often persist and shape our thinking and behaviors. And, too often, trade and globalization even reinforce the incentives for coercion and violence instead.

To be honest, I found this view both accurate and pretty depressing. As a PhD student, I set out to try to understand what, if anything, we could do about it. Again, I was inspired by India’s example.

India does have a history of tragic waves of religious violence. But it also possesses centuries-old traditions of tolerance as well; its communities provide a haven for many groups fleeing religious persecution elsewhere, including Jewish, Parsi, and Muslim communities. Even within a single state, like the rich coastal state of Gujarat, this contradiction was apparent. Despite witnessing appalling religious violence in 2002, Gujarat was also the homeland of Gandhi and was a region with storied traditions of “ahimsa,” or nonviolence.

I wanted to understand when and why some Indian communities developed “good” rules—institutions that support long histories of tolerance—and why others remained powder kegs for violence. My PhD co-advisor, Avner Greif, had emphasized that to understand such institutions, however, you need to understand not just the rules that people adopt but the nature of the beliefs and organizations that sustain these rules. And that required diving deep into the historical and social context.

To do this, I began by looking into the very first encounters of Hindus and Muslims in Gujarat and the rest of India, going back to the seventh century, studying contemporary travelers’ narratives and accounts. I traveled to Gujarat in 2006, visiting and talking to members of communities around the state that had been affected by the riots and those that had remained peaceful. And I gathered a lot of data.


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So, where do institutions of tolerance emerge? Combining the historical accounts, the fieldwork, and the data, it became clear that such institutions develop in very specific places, where two conditions were satisfied. First, Hindus and Muslims needed to have incentives to work together: for example, engaging in business relationships that complemented each other, rather than competed against one another. Second, this complementarity had to be robust: it had to be difficult for one group to replicate or simply steal the source of the others’ complementarity.

One important set of examples of these were ports—like Mahatma Gandhi’s own hometown, Porbandar—that had traded to the distant Middle East during the medieval period. For one month a year, for close to a thousand years, Mecca had been one of the largest markets in the world during the Hajj—and one had to be Muslim to go to Mecca. This gave Muslims in ports—in India, but also on the African coasts, the Malay peninsula, and beyond—a strong advantage in overseas trade and shipping. And, yet, this advantage nonetheless benefited the communities they connected by sail.

Further this complementarity in overseas trade came from a trading network that was intangible, and so impossible to seize, and the scale of the Hajj was so large it was impossible for a Hindu to replicate. Not surprisingly, then—before being disrupted by European colonial interventions beginning in the 16th century—Muslims had dominated overseas trade across the Indian Ocean, from the coasts of Zanzibar to India, Malaysia and beyond, as far as China.

Ports emerged at natural harbors along India’s medieval coasts to accommodate these trading relationships. These ports also witnessed not just the emergence of rules but also beliefs and organizations that supported trade, inter-group trust, and religious tolerance. So much so, that even three centuries later—after Muslim trade advantages had ended due to European colonial interventions, and many of the ports themselves had silted up and become inaccessible to trade—this legacy of beliefs, norms, and organizations continued to shape the way people interacted with one another. The institutions of peace and tolerance outlived the economic incentives that had once sustained them.

India has a tragic history of religious violence. But it also possesses centuries-old traditions of tolerance.

An example of these tolerant, local, institutional beliefs can be found in Gandhi’s own life. Growing up in the erstwhile medieval port of Porbandar in the late 19th century, he would later reminisce about the syncretic nature of his mother’s temple, with a Koran kept inside the temple itself, and the active discussions that took place emphasizing the commonalities of both religions. This he credited as an important influence on his own beliefs and approach to nonviolence.

Norms also emerged that reinforced inter-religious trade. As Europeans increasingly threatened Muslim advantages in overseas trade, Hindus in medieval ports began to adopt a custom called “Kaala-pani” (black water)—that any Hindu who ventured overseas (i.e., in competition with Muslims) would lose their caste, and be subject to ostracism by other Hindus. Even in 1891, Gandhi would have to engage in a purification ritual after returning from law school in London in order to be readmitted to his community.

Organizations also emerged to support tolerance. Members of Muslim trading communities engaged in local philanthropic endeavors, including dispensaries and providing relief in response to cyclones. In some places, they even endowed Hindu temples. In Porbandar, the institutional continuity over time can be seen in the buildings themselves (Figure 1).

Figure 1: The Bohra Muslim community building (jamaatkhana) on the seafront of Porbandar.

Yet, while Porbandar had a strong tradition of religious tolerance between Hindus and Muslims, it was not naturally a peaceful place in general. The strength of organized crime was such that a 1999 Bollywood movie, Godmother, had been inspired by Santokben Jadeja, a mafia don turned politician. But, unlike in the modern city of Bombay, the Porbandaris did not turn on one another. Instead, later, when asked why Porbandar remained peaceful during the pogroms of 2002, a Hindu respondent mentioned that there had, indeed, been attempts to incite violence. Community members were sent bangles to signify their lack of virility in not attacking their Muslim neighbors. However, no one in the community, including the local politicians, wanted violence. And, so, it did not happen.

These patterns were reflected in the data. Despite being, on average, somewhat poorer and more religiously mixed, I found that erstwhile medieval ports had five times fewer religious riots than otherwise similar towns through the colonial era, and were “oases of peace,” even during the widespread rioting in Gujarat in 2002.

Further, even into the 21st century, the Hindu-Muslim wealth gap was smaller in these port towns than elsewhere. And, even though they were more religiously engaged, Muslims in these towns were also more likely to vaccinate their sons against polio. This was an important measure of societal trust, since then, like now, vaccination was viewed with fear by many.

In contrast, in other medieval towns, like Ahmadabad, where Hindus and Muslims competed, or on inland trade routes where it was easy to replicate the other’s trade network, there were much weaker incentives to build institutions to support peace. The historic lack of mutual trust that resulted can still be seen in the shape of the cities themselves. In old Ahmadabad, each ethnic neighborhood had gates (“pol”) that were closed at night, and sentries posted above the walls to ward off potential attacks (Figure 2). These old medieval precincts continued to experience extensive religious violence throughout their history.

Figure 2: A gate protecting a fortified neighborhood (pol) of medieval Ahmadabad.

Working to understand institutional change in the spirit of North and Greif, I began to realize that a lot of the problems we face today of hatred, polarization, and conflict are also very old problems. Despite the grave challenges we face in changing such deeply embedded processes, some societies have nonetheless addressed these issues, with some success, time and again, throughout history. I discovered examples where technocratic political problem-solvers had created inter-group complementarities and used new organizational, economic, and financial ideas to bring people together and to expose them to the benefits of the common good.

I now convene the Stanford Conflict and Polarization Lab, where we are conducting modern randomized control trials, inspired by some of these successful historical natural experiments. We are finding that, in contemporary field experiments, too, these ideas can build support for peace.

This research has also left me with some hope that we are not condemned to repeat the past, or be stuck in a morass of poor rules. Instead, such historical institutions can provide valuable clues for informing contemporary policies. Poor rules can be—and, perhaps, are made to be—broken.


This article was commissioned by Caitlin Zaloomicon

Featured image: Porbandar, India. Photograph by Jonathan E. Shaw / Flickr (CC BY-NC 2.0)