How Trade Leads to Tolerance

As the spread of Islam in much of South India shows, trade can often bring communities together.

In the 7th century CE, as Islam spread like wildfire across Arabia and then across the world, one would be forgiven for assuming that it happened purely thanks to sword. After all, that is the easy narrative that seems to be broadly accepted as gospel today. Indeed, the 8th-century CE conquests of Muhammad bin Qasim, the Ummayyad general, are popularly believed to be the foundation of modern-day Pakistan – as if the country was uninhabited before then.

However, in the Indian subcontinent (and particularly in South India) the spread of Islam was never that simple. Within the lifetime of the Prophet Muhammad, Arabs who had recently converted to the new religion had built mosques in what is now Kerala, continuing a long-established tradition of foreign traders settling down on India’s Western coast. Within the space of a few decades, Muslim trading communities had put down roots across the Konkan, and especially across the coast of modern-day Karnataka.

Over the course of centuries, descendants of these traders would bring gunpowder, horses and fine textiles to a succession of Indian states (from the Rashtrakutas to Vijayanagara and the Deccan Sultanates), battle the Portuguese for control of the Arabian Sea trade, and eventually participate in India’s freedom struggle. And yet, in Karnataka’s 2018 Assembly election, the coastal belt that had been their home for centuries delivered an overwhelming verdict in favour of reactionary outfits that portrayed Muslims as posing an existential threat to the Hindus that they had lived in harmony with for centuries.

The question of how these once well-integrated minorities lost much of their economic and social influence is interesting. Though it might well be political dynamite at this time, the answer contains fascinating insights not only into human nature but also into India’s economic and political history.

Trade and Peace

In his 2013 paper, Trade, Institutions, and Ethnic Tolerance, Saumitra Jha of the Stanford Business School attempted to explain why South Asia’s medieval trading communities developed long-lasting local institutions that supported peace with other religious and ethnic groups. This question is particularly interesting given what we know about contemporaneous trading communities, such as Jews in Europe, who often faced religious and economic violence.

Jha argues that in medieval South Asian trading ports, Muslim traders had a competitive edge in terms of their access to Indian Ocean trade. The reasons for this are simple. As traders practising the new faith spread across the world, they formed a new international trading network. Connected to the wealthy new political centres like Damascus (and later Baghdad), and kept consistent through annual pilgrimages through the Haj, the network grew exponentially wealthier and more influential. The network was easy to enter if one was a Muslim trader (providing capital, ports of call, and so on) and difficult to compete with if one was not.

There was, therefore, a clear economic incentive for specialisation and cooperation. For example, Muslim overseas traders could provide Hindu artisans with easy access to a large, stable global trade network with a massive demand for their goods, a function which Hindu traders could not perform as easily. They, in turn, would begin to specialise in inland trade to get goods from the hinterland to coastal urban centres. Furthermore, competition between Muslim trading groups provided additional economic benefits to producers – it is important to keep in mind that none of the groups here were homogenous and came to the table with an array of interests.

In general, then, different ethnic groups could specialise in different, complementary economic activities. Cooperation made more economic sense than competition, and interests cut across religious lines. This led to the emergence of institutions to redistribute the benefits of trade, possibly through the provision of local public goods, and a gradual tradition of tolerance being established.

Such institutions were more likely to emerge in places where the Muslim minority was less likely to have political patronage from rulers, giving them more incentive to cooperate with their economic partners in order to protect their interests. This is particularly true in the case of South India, where the first Muslim-ruled polities emerged only in the 13th and 14th centuries – allowing for a period of nearly 600 years of institution-building, from the 7th century onwards.

Jha describes this process as, “complementary, nonreplicable services and a mechanism to share the gains from exchange (resulting) in a sustained legacy of ethnic tolerance in South Asian towns.”

What Changed?

Simply put, the breakdown of complementarity, non-replicability, and sharing mechanisms removed the economic incentives to cooperate, given broader political change in South Asia. Karnataka’s coastal belt provides a particularly interesting case study.

Muslim influence over global trade network waned from the 16th century onwards, when European traders made concerted efforts to take over. However, local institutions of tolerance were already well-established by then, and led to ethnic groups re-specialising into new, still complementary occupations. Jha’s study points out that places with such institutions were 25% less likely to have any religious riots at all in the period between 1850 and 1950.

These institutions, however, suffered two major blows in the colonial and post-colonial period. The first was the Western imposition of new, unstable polities in the Middle East after the First World War. “Saudi” Arabia, particularly, began to derive its legitimacy and authority from the House of Saud’s domestic and international patronage of hardline interpretations of Islam.

The second blow was the emergence of the “two-nation theory” and the Partition of the Indian Subcontinent. The emergence of religious nationalist identities, shaped of course by colonial history discourses, provided a political incentive for competition and conflict. The result was that one of the Islamic world’s major population and intellectual centres was unmoored, and the political incentives for ethnic tolerance were undermined and shifted. These changes were coupled with new industries, economic structures, and global trade networks in which being Muslim conferred no special advantage – their role was no longer non-replicable, which meant that their economic and thus social influence plummeted.

In coastal Karnataka, towards the late 20th century, demographic change – involving large numbers of Indian Muslims emigrating to the Gulf or being able to access remittances without a mechanism to redistribute the surplus among local groups – would have further damaged institutions and traditions of tolerance. The emergence of even more virulent forms of religious nationalism and later, social media-enabled fake news factories (I write on how they influence group behaviour here) were the coup de grace. Competition replaced cooperation, resentment replaced tolerance, and hardline organisations were swept to power.

This long and turbulent narrative proves one thing beyond a doubt: if modern India is to become a more equitable and tolerant country for minorities who have lived here for centuries, we would do well to learn from history, and attempt to create economic and political incentives that will allow for the strengthening of local institutions of inter-group tolerance.


Editor’s note: This piece originally appeared with the headline, ‘The Peaceful Spread of Islam in India.’ As that could have been misconstrued, and the spread of Islam was mentioned in the piece as illustrative of the broader argument about trade, we decided to change the headline. 

About the author

Anirudh Kanisetti

Anirudh Kanisetti is a Research Associate at the Takshashila Institution. A graduate of BITS Pilani Goa, his research interests range from systems modelling to geostrategy, economics, history and culture.