It is proposed to examine quite briefly how the Great Depression affected the landowning class of Ceylon, whose plantations of coconut trees, rubber, and to a lesser extent of tea, were probably the main source of income, and certainly the preferred investment. This social category does not belong to rural society, because absenteeism is common among plantation owners, but it influences its fate. To do this, we shall compare numerous testimonies generally based on simple impressions, with the numerical results drawn from an analysis of the sales by judicial authority of properties seized during the period 1924 to 1939. Depression, which occurred at the very moment when this emerging indigenous class entered the political arena, also translated into behaviours whose ideological content will catch our attention. The rise of chauvinism, more anti-Indian than anti-British, represents an interesting colonial variant of the xenophobia epidemic that engulfed the countries affected by the depression, of which Germany represented the most pathological case, but of which Asia was far from being exempt.
A pathological indebtedness
“There is hardly a member of the permanent population who has not invested if not the entirety, at least the major part of his savings in [coconut products]. The sudden and sharp decline in their prices has put every domestic budget out of gear (…) It is no exaggeration to say that practically everybody is a borrower today, while lenders are few and far between”[1]. This is the general feeling of contemporaries, who represented Ceylon as a nation in debt at the mercy of foreign plutocrats. The Ceylon Banking Commission, in charge of evaluating the phenomenon in 1934, collected almost unanimous testimonies that underlined its magnitude. But it proved unable to quantify satisfactorily the mass of private debt. Witnesses claimed, based on subjective impressions, that 90% of the population was in debt, or that 75% of the land in coconut producing regions was mortgaged; in rubber areas, 50% of the owners would be in debt. The Commission scaffolded on this fragile basis risky calculations, which gave for the coconut plantations alone a debt of about 110 million rupees (370,000 acres mortgaged at 300 rupees per acre); for indigenous rubber plantations, the total investment was estimated at 50 million rupees but no figures were advanced for the debt, the authors of the report simply pointing out that the high profits of these plantations allowed easier financing than for the coconut owners[2].
A few years later, on a monographic scale, village socio-economic surveys found that the majority of households were in debt: percentages varied by region, from 60% in Matara to 86% in Galle. But it was mostly a debt of a different nature, contracted for food consumption by poor peasants, and amounting to a hundred rupees on average[3]. Village debt was a structural phenomenon, linked to the vagaries of the climate and seasonal variations in employment, and aggravated by monetization. The debt of the planter was a phenomenon in principle momentary, linked to the need to wait for the enterprise to become productive and make profits. But the behaviour of the landowner towards debt remained marked by the peasant model; it appeared irrational in the eyes of external observers who reasoned along a capitalist logic: “One gets the impression, wrote a district administrator, that practically everybody who owned some land which could be offered as security during the years of buoyant prosperity borrowed money for no reason other than extravagant living”. “It is common knowledge that the purchase and development of land in agricultural products is the only major occupation in which in the past Ceylonese engaged themselves or are engaging themselves even now” wrote in 1939 the Minister of Agriculture, D.S. Senanayake, as an introduction to a bill to adjust the debts of plantation owners[4]. Productive debt, or sumptuary debt? The problem in fact did not arise in these terms; according to a witness testifying before the Banking Commission, “Our people pride in possessing of acres of land, although it is 5 out of 100 who improve the value of the lands they come into possession. They go on buying land on the security of the landed wealth they possess. Besides they are fond of investing in lands because it is the easiest way to raise money on emergencies such as weddings, or the purchase of other lands”[5]. An almost caricatural example illustrate the effects of this passion for land. A mudaliyar (low country chief headman) had acquired from the Crown at auction in 1925 a land of 50 acres at the phenomenal price of 520 rupees per acre (it was not even an acquisition in full ownership, but an emphyteutic lease!); one of his ‘enemies’ had raised the stakes and to keep face, the mudaliyar had held on to the end: “I came home victorious, he wrote candidly, receiving congratulations of my headmen and the approbation of the villagers. I realized my folly, but sincerely thought that I would receive the assistance of government in adjusting matters as the bidders against me were worthless fellows”[6]. In fact, the mudaliyar obtained staggered payment facilities, but when the depression arose, he again asked for a gesture in his favour: the case went up to the governor, and London finally agreed in 1936 to remit the remainder of the debt. Land, this fixed idea of the peasant as well as of the large Sinhalese owner, was not considered as a productive asset, but as a sign of social status. Its acquisition responded to considerations of prestige, and in the marriage strategy, an art in which the Sinhalese are masters, a dowry in land was the decisive weapon. Dowries commonly reached in the ruling class several tens of thousands of rupees, and served as a means to seal complex political-financial alliances which forged the ‘clans’ that would dominate the political scene at independence. To capture the best party, it was necessary to exhibit the largest landed area; it did not matter if to build up this parade capital it had to be burdened with double or triple mortgages. Once the dowry was paid, it still remained to organize the most ostentatious wedding. Holding one’s rank was also a sure way to develop one’s capital, by obtaining on the services of one’s debtors and the solidarity of one’s peers[7]. The passion for legal squabble, another source of debt, was another face of the same social reality. Court trials, especially in provincial capitals, dramatically manifested wealth and power. The court was a theater where the tragicomedy of boundary or inheritance quarrels was tirelessly played out, which sometimes turned into drama; attendance at the court sessions was the main distraction of the villagers who came to town; lawyers exercised one of the most prestigious and lucrative professions. In the late 17th century, the debts contracted to pay the costs of the trials were one of the main sources of Kandyan indebtedness: one hundred and fifty years later, nothing had changed, and the procedural debt came in order immediately after the debt for the purchase of land, which it somehow complemented and supported[8]. The lawsuits were themselves multiplied by the inaccuracy of the title deeds in areas that had not been the subject of a settlement. Thus, a vicious circle was formed: the money necessary to support lawsuits intended to defend the value of these same securities was borrowed upon the guarantee of doubtful securities. The behaviour of Sinhalese debtors retained many features that can be described as traditional.
We have analyzed elsewhere the characteristics of debt as it prevailed in the Kandyan kingdom in the pre-colonial period, as well as its subsequent evolution under the impact of monetization[9]. We will retain here the features that survived a century and a half of colonization. Peasant debt was first and foremost a maintenance debt consisting of an addition of small loans contracted when need arose: coconut planters also made a series of loans in a fractional manner during the ten years necessary for their plantation to fully mature. Next to maintenance debt there was a ceremonial debt socially necessary to manifest and maintain membership of the community; it is interpreted by anthropologists such as Firth as an elementary form of investment allowing the borrower to subsequently ensure the counter gift of his guests[10]. In traditional debt, theoretical interest rates were very high: 50% from one harvest to another for grain loan, 100% maximum, regardless of the duration of the loan (dam dupat rule). In practice, the interest actually perceived was a function of circumstances, and could take the form of benefits that were difficult to assess. The Sinhalese debtor was therefore not frightened by having to pay rates of the order of 15% to 30% : he did not calculate what the real profitability of the operation he launched could be and he expected his creditor to adapt his requirements to the circumstances. The creditors, being socially close to the debtors, did not claim any other guarantee than the one given to them by the reputation of the debtor, the credit that he enjoyed in the village society. When a guarantee was necessary, the farmer pledged not ‘his’ land, but his cultivation rights on the land of his lineage (panguwa), and he commonly gave these rights in usufruct (ukas mortgage) as reimbursement; the alienation of land in the hands of creditors was very rare, but the usufructuary mortgage very widespread. The debtor in the 20th century still expected his creditor to trust him on his word, and when he was obliged to grant him a mortgage, he did not envisage that it could eventually result in a definitive land transfer: he considered the operation to be of a revocable nature. He also expected that the creditor would grant him terms of payment: this was the attitude that the community expected of him: thus a lasting relationship of structural debt was established, where the lender found his reward in terms of prestige; it was not in his interest to claim repayment of the initial capital. A final settlement of the debt would have meant a breakdown of social relations. Debt, a social contract par excellence, appears in the Indian context as a link of religious essence[11]. If it is difficult to detect in the type of debt that we consider here survivals of these distant origins, it is certain on the other hand that the debtor did not consider the prolongation of the debt relationship as an intolerable constraint, but on the contrary as a perfectly normal situation. He expected his creditor to renew from time to time the bond between them by demanding the repayment of the principal, and considered it abnormal if he seriously wanted to end their relations. In the past, when a debtor was recalcitrant, the creditor could appeal to the justice of the king or his local representative, without the intervention of which no seizure was possible in principle. But it also had a range of methods of social or moral constraint, ranging from the threat of suicide at the debtor’s door (who might have to answer for the death of a righteous person) to symbolic imprisonment – a circle of chalk drawn on the ground, until a relative or friend came to deliver the debtor by acquitting the debt; at the beginning of the 20th century these practices disappeared, but not the prison for debts, to which the colonizers put very real bars.
These are therefore the secret or proclaimed aspirations of potential borrowers. The singular fact is that they found complacent lenders, especially in the person of Nattukottai Chettiar. We have previously described their organization and activities. It is obvious that the Chettiar differed fundamentally from peasant lenders: they were alien to local society, and therefore not bound by social obligations to their debtors. If they agreed to play the game of tradition, it was not out of social obligation, but out of economic calculation. The Chettiar were inserted at the hinge of the capitalist system and the peasant system, connecting their circuits. They chose to finance the development of indigenous plantation agriculture because they saw it as a way within their reach to quickly expand their own capital and the sums they borrowed in the short term from European banks, taking advantage of the significant difference between the interest rates of the capitalist circuit from those of the indigenous circuit. The multiplication of their agencies, each dealing with a limited number of borrowers, gave them the opportunity to personally follow their customers, while the solidarity of their caste organization allowed them to cope with individual accidents. They were therefore able to distribute an easy credit accessible to all, without formalities; they were willing to lend in the long term, to invest. The fact may be surprising if we consider that they refused to settle permanently on the island. It can be partly explained by the permanence of the firms despite the regular renewal of agents, and by the high rate of interest claimed that allowed them to recover the equivalent of the capital after four or five years. It is also explained by their feeling that the economic system put in place by the British was solid, and that they occupied a strategic position by financing the production of Burmese rice and the products of Malaysian and Ceylon indigenous plantations of coconut and rubber. But the major fact seems to me to be the conviction they had that they were covered by the colonial political-legal apparatus. The Chettiar did not execute financial acrobatics without a net; they knew that as a last resort they would be able to stop playing the game and have their debtors’ mortgaged properties put up for sale. But the weaknesses of the system were soon to reveal themselves: classic weakness, so to speak, arising from the contradiction between short-term resources and long-term investments; political weakness resulting from the gradual takeover of the State apparatus by representatives of the Sinhalese majority identifying their interests with those of the debtors, or debtors themselves.
Judicial sales.
In 1931, the colonial government, alerted by the moratorium plans of some politicians, conducted a summary and confidential inquiry with district administrators and judges to find out the extent of judicial sales[12]. It was found that the phenomenon was not serious enough to require public intervention, and the case was closed without further action. Three years later, the Banking Commission of inquiry set up at the request of the same pressure groups concluded that it was necessary to find a solution to a problem considered very serious. Finally, between 1936 and 1939, the village surveys all underlined the extension taken by the property of non-villagers, and implicitly considered that the depression was responsible for it. Difference in appreciation of a political nature, or worsening of the phenomenon over the years? A careful examination of the results of the 1931 investigation leads to doubt the seriousness of the answers, very brief and treated as a routine affair by officials who were overwhelmed with paperwork tasks. Reports from the coconut and rubber areas were much more alarmist: in the Kalutara, Awissawella and Kägalla courts, there was a 20% to 32% increase in the number of lawsuits. In Kalutara, Chilaw and especially Kurunägala, the collapse of land prices was such that the amount of sales did not even cover that of receivables. In the administrative reports of the early 1930s, indications of the same order can be gleaned, but formulated in vague terms[13]. The considerable number of coconut estates sold and become the property of Chettiar, the visible impoverishment of the wealthy peasantry, and in particular of the indigenous chiefs, were highlighted as a recent phenomenon.
The Ceylon Banking Commission said in its report: “Banking institutions, Chettiar and others have admitted that before the depression, it is hardly if they had the opportunity to drag their debtors to court for the recovery of their debts”[14]. The Chettiar themselves, in a memorandum addressed to the same commission, recognized the existence of these transfers, but added that that “most of the acquisitions [of land properties] were forced upon by their debtors who preferred to transfer their properties to the Chettiar rather than face worse difficulties”[15]. The administrator of Puttalam district confirmed that “it is a mistake to think of these moneylenders as rapacious land grabbers. They are no more anxious to buy the lands than the owners to sell them” but added “The general depression is still felt acutely, more coconut estates have been taken over by Chettiar and other creditors in liquidation of their debts”[16]. The tea-producing districts of the upper country were affected, where the network of Chettiar agencies was also dense. The Chettiar were accused of having systematically foreclosed in the province of Uva, and two recently established institutions, the Chettinad Corporation and the Bank of Chettinad, were in the process of building up an extensive land capital by getting their hands on the best tea lands in the vicinity of Bandarawela. “We think, said witnesses, that most of the past indebtedness of the medium size holders and the big private holders has been liquidated by sales (…) Now all the most fertile land in the district is in the hands of this Chetty firm”[17]. The socio-economic surveys of the years 1936-1939 noted similar phenomena in particular villages of the coconut districts. “The expropriation of smallholders by small Ceylon capitalists, Indian Muslim merchants, local shopkeepers and lenders has probably continued at an accelerated pace (…) It is significant that mortgages of coconut land cluster round the depression period. Even the largest areas are not exempt and titles of many of them have passed to the Chettiar and other financiers”[18].
During and after the depression, many small landowners had to sell their lands that were absorbed into larger estates belonging in many cases to non-residents. Thus, in four villages in the district of Kurunägala (Tittawela, Rangama, Hiripitiya and Wilagedara) 30% of the coconut plantations were owned by villagers and 70% by absentees, while 59% of the paddy fields were owned by the villagers and 41% by absentees. The conclusion that emerges from these testimonies and investigations is that it is the depression in general, the action of moneylenders in particular, especially Chettiar, which was responsible for peasant landlessness. Without excluding this hypothesis for some villages, I consider on the contrary that this very real situation was the result of an evolution started long before the depression by speculators grabbing peasant lands with borrowed money to build up extensive land properties for the benefit of the Colombo Ceylonese bourgeoisie.
The statistical review of sales by judicial authority from 1925 to 1939 confirms this general impression. While the number of sales had increased in significant proportions, the share of foreign creditors, and especially the value of the debts claimed by non-Ceylonese, did not increase significantly. On the other hand, the few indications available regarding the ethnic distribution of land ownership in 1939 confirm and clarify the general indications provided by the Chettiar regarding their real estate property. I summarily analyzed the 12,433 judicial sales announced between 1924 and 1939 in the weekly official journal of the colony (Ceylon Government Gazette); and in more detail the announcements every other year, from 1925 to 1939, numbering 6,393, just over half of the total. This particularly tedious work consisted of noting for all sales their number, their location and the percentage of Chettiar creditors in the total, and for sales every other year, the value of the receivables, the ethnicity of the creditor and that of the debtor when they could be ascertained, and incidentally the existence of mortgages and the nature of the properties offered for sale: but these last two pieces of information were neither complete nor really safe, and were excluded from the final operation. The identification of the ethnicity of the parties present was made on the basis of an onomastic tracking whose principles are described in the annex.
Let’s first consider the overall evolution of the number of sales. It remained until the end of 1930 perfectly in line with the overall economic evolution. Of 400 sales per semester in 1924, it dropped to less than 300 in 1927 and bounced to more than 700 sales in the second half of 1930; then it decreased very regularly, regaining its total of 1929 in 1936, and fell to 230 in the first half of 1939. This movement is confirmed by the statistics of seizures published by the Land registrar services: their number capped from 1931 and decreased from 1933; it is singular that sales had fallen earlier than seizures; one would expect the opposite but increasingly many seizures were not followed with sales (in 1930, 1300 sales for 1800 seizures). The fall in the number of sales after 1930 is surprising in view of the statements of contemporaries who argued in 1931 that alienations were not alarming, but were moved from 1934 by the situation: is it the effect of the chronological shift specific to any awareness, always late after the event? This undeniable decrease can be explained by a series of factors. The first is a change in attitude on the part of the courts: taking into account the depression, they granted creditors the benefit of seizures less easily than in the past, and above all left debtors longer grace periods[19]. According to the representative of one of the major business law firms of Colombo (Julius and Creasy), the average time lag between the beginning of an action and the judicial sale was of the order of two years in 1938. Creditors, discouraged from going to court, especially since lawsuits were expensive in times of crisis, therefore preferred to recover amicably what they could. In addition, the judges enforced an order issued in 1927 on the recommendations of the Land Commission, which prohibited the alienation by any means of land mortgaged after that date when it had not been the subject of a settlement. Another element of explanation lies in the fact that the Chettiar had reduced the volume of their loans as early as 1925 and that the volume of their current claims therefore tended to decrease. The statistics of the Registration show that the depression led to a sudden drop in the number of mortgages from 80,000 in 1929 to 40,000 in 1934. Releases collapsed even more, from 18,000 to 8,600 ; the difference does not correspond to judicial recovery: many amicably releases were not recorded. A last hypothesis is not to be ruled out, although it is contrary to the impression that generally prevails : the improvement in the financial situation of the owners from 1931-33; the increase in the number of releases from 1933, followed a year later by that of mortgages, tends to confirm that the land market was experiencing a recovery probably resulting from the coupon system.
The evolution of the value of the claims is not the same as that of their number. The statistics collected are less accurate, the enormity of the task having forced me to carry out counts only for every other year. But the overall movement is clear enough: the decline in the value of receivables is faster than that of their number from 1925 to 1927: each debt is of lesser importance; the increase from 1927 is also slower, but it continues until 1933: after claiming small claims, the lenders attack the largest. This fact is perhaps not unrelated to the late but intense awareness of alienations by the ruling classes; if they initially felt little concerned, it is because they were not yet threatened. Among the ‘heads’ that fell from 1932, there were a number of parliamentarians. Subsequently, the average value of receivables decreased again, the rise of 1939 being mainly explained by the presence of a few very large recoveries. The location of the sales provides an indirect indication of the nature of the property affected: in the North Western Province, the coconut tree predominates, in Sabaragamuwa, it is rubber, and in the Central province, tea and commercial interests are important. Sales in the coconut land area followed an evolution in line with that of all sales, but tended to fall more quickly from 1931, probably due to the attitude of the courts and the impossibility for the creditor of making any profit from the sales. The unexpected maintenance at a high level of sales in the tea area suggests that despite the establishment of the coupon system, small tea producers, among which there are many kangani, were experiencing persistent difficulties. It is also likely that creditors would press their debtors more because of the maintenance of the profitability of tea plantations, thanks to the restriction, at a suitable level. The sawtooth evolution of Sabaragamuwa’s sales is difficult to explain (perhaps it results from the annual periodicity of the distribution
of rubber coupons?), but the overall movement is quite similar to that of the North-western province. It was not possible for me to carry out a rigorous analysis of the nature of the lands sold, because of the often imprecise nature of the description given in the advertisements. The toponymy itself does not make it possible to distinguish simple gardens from modest plantations (both are called watte in Sinhala); in addition, most sales combine houses and gardens, or gardens and paddy fields. A summary survey for the first quarters of 1925, 1931 and 1937 gives the following approximate results (in the count, sales affecting two types of property are counted twice): houses alone and houses and gardens represented 23.5% 20.3%; 23.5% of sales. Houses and gardens, small plantations and gardens and paddy fields represented 51.3%; 67% and 56% of sales. Paddy fields, and paddy fields and gardens 14.4%, 14% and 16.5% of sales. The proportions were therefore stable overall with a slight increase in the place of paddy fields. The extension taken by the sale of paddy fields was the subject of contradictory testimonies. A delegation of indigenous leaders of Kurunägala said that the ukas system remained the rule: “At least 75% of coconut owners have lost their land. – Is this also the case for rice field owners? – No, when they borrow, it is usually from another villager, on a usufructuary mortgage.” But the village surveys present a different picture. In Battulu Oya, 75% of the paddy fields were in the hands of non-residents: “They originally belonged to the villagers but passed out of their hands for failure to redeem mortgage debts”. The Kurunägala survey offered similar cases: “Alienation of paddy lands into the hands of non-residents has been on the increase for some time. In Wedanda, over 25% of the paddy lands are under mortgage to a copra merchant; in Tittawela, about 63% are held by non-residents; in Pannala and Hiripitiya, an increasing proportion has gone to Indian Muslim traders”[20]. I have myself encountered similar examples in the village of Haloluwa (district of Kägalla): the local dominant family, which had invested in a few acres of rubber, had to sell its micro-plantation during the 1930s, then all its paddy fields, which covered almost half of the terroir; the plantation was acquired by a shopkeeper and by a peasant from a neighboring locality, the paddy by the dominant family of another village; the descendants of the former lords of the village after 1940 obtained a lot as landless farmers in a settlement of the dry zone. The growth in paddy field sales only apparently contradicts the hypothesis of an improvement in the situation of the owner classes after 1931-1933, formulated previously: indeed, who owned rice fields in sufficient quantity so that they could be used to pledge a loan? The wealthy peasantry, and the class of indigenous leaders that emerged from it. And who bought them? Other peasants, and also traders, small civil servants, and bourgeois of Colombo or southern cities… in short, the category of plantation owners. This remark leads us to once again emphasize an essential distinction when we talk about the possessing classes: this means the class of the new rich living in the cities and seeking to place their fortune in the acquisition of land ownership, and not that of traditional rural dominants. In short, the bourgeoisie, but a bourgeoisie that remained influenced by the traditional value system.
The last factor analyzed, less in detail than I would have liked, is the community belonging of creditors and debtors. The question is essential, given the controversies raised at the time by the economic role played by the Indians in Ceylon. Let’s examine first the evolution of the share taken by the Chettiar in land sales. At the beginning of the crisis, their proportion in all creditors increased significantly, from 27.5% in the first half of 1924 to 38.7% in the first half of 1930. Then, contrary to the general feeling of contemporaries, their place regularly decreased, to stabilize at around 22% from 1935. If we consider the value of the debt, the evolution was even faster: in 1925, the Chettiar claimed 1,157,380 rupees (33.6% of the total) in 1929, 1,226,639 rupees (43.6%); in 1933, 1,081,319 rupees (31.4%) and in 1937, 868,329 rupees (29%). Such a decrease means that the place was taken by other creditors, mainly the Sinhalese. A comparison of the sales of 1925 and 1933, taking into account only the Sinhalese and the Chettiar, is instructive. In 1925, the debts claimed by Chettiar from the Sinhalese represented 16.5% of the number and 12.2% of the value of the debts; in 1933, they amounted to 16.8% of the number and 12.4% of the value. On the other hand, the loans between Sinhalese, which represented in 1925 25.4% of the number and 10.1% of the value of receivables, amounted in 1933 to 29.5% of their number and 15% of their value.
The structure of Chettiar firms and their operations have already been described in the first part of this study. But it is interesting, to understand the reality of their operations during the depression, to consider the number of cases where each of them was a creditor. From the sales announcements in the Ceylon Government Gazette from 1925 to 1939 (every other year) I drew up a list of 620 firm names. Not all firms on the island were represented on this list, but probably the vast majority of them. Some were subsidiaries of agencies based in Colombo and the same firms appeared under different vilasam in different years. In 1934, the Chettiar Association declared that it had 556 members, a hundred of which were only pawnbrokers; it added that before the crisis, their number was 50% higher, which would give about 675 ordinary lenders in 1925. The most striking feature is the very large dispersion of operations: only 27 firms appeared more than ten times in eight years, including 7 firms twenty to thirty times. A second significant characteristic is that there were two types of behaviour: some well-established lenders had one or two judicial recoveries per year from one end of the period to the other; others appeared only in an ephemeral way, either that the volume of their cases was not sufficient to lead them to go to court on a regular basis, or that their presence in Ceylon had been momentary. It appears in particular that 315 of the 620 firms ceased to appear after 1931. The ‘Chettiar crisis’ led to the departure from the island after 1925 of a third of the Chettiar, according to their association. A phenomenon of concentration occurred, the most visible manifestation of which was the creation of two organizations, Bank of Chettinad and Chettinad Corporation, both controlled by one of the largest firms in Madras, belonging to Sir Annamalai Chettiar[21]. The evolution of the average value of Chettiar debts reflects these transformations: it decreased until 1931 (1925: 4,704 rupees; 1927: 4,542 rupees; 1929: 3,833 rupees; 1931: 2,820 rupees) which means that small lenders sought to recover their funds. Then it increased (4,142 rupees in 1933, 3,991 in 1935, 5,947 in 1937 and 4,531 in 1939), only the largest lenders remaining active. Among other lenders from the Indian continent, it is worth mentioning in passing the presence of shark usurers, the so-called Afghans, who demanded exorbitant interest and multiplied fraudulent practices against their victims. But the volume of their operations was tiny: they constitute a category that was quite widely represented in Kandy district but the amount of their loans was rarely more than 100 rupees, and the repeated frequency of sale of the same property tends to prove that they rarely achieved their ends by legal processes.
Enriched kangani, especially those who had established themselves as shopkeepers or small plantation owners, were conspicuous among moneylenders in the up-country localities. Unfortunately, onomastics do not make it always possible to distinguish them from the agents of certain Chettiar firms, nor from the indigenous Tamils from Jaffna, so that it is impossible to assess their real role. Kandyan headmen were prominent among their debtors, especially in the province of Uva and the district of Nuwara Eliya; one of them, indebted for the considerable sum of 28,000 rupees with a kangani of Koslanda, was compelled to sell 52 plots, highlands as well as paddy fields[22]. On a smaller scale, the detailed list of claims of a plantation shopkeeper, Muttupalani Pillai, shows that this category advanced money indifferently to Sinhalese, Tamils, or even Chettiar with whom they placed their profits[23]. Nevertheless, the kangani, in this period of immigration crisis, were certainly better represented in the category of debtors than in that of creditors. Most of them had gone into debt to Chettiar to build up their small tea plantations, and the depression led to a fall in profits they derived from their activities as overseers and planters; their debts were often very high: several tens of thousands of rupees[24].
Another notable element is the place held by Europeans as creditors vis-à-vis Ceylonese debtors. This little-known fact deserves to be highlighted, because it runs counter the thesis that European and indigenous credit circuits were watertight[25]. In 1925, Europeans (and perhaps some Burghers, whose names are sometimes difficult to distinguish from those of Europeans), demanded 26.7% of the total value of debts, in 1931, 25%, in 1937, 27.4%. What is the origin of this phenomenon? Possibly the absence of income taxes in Ceylon before 1932, which made profits domiciled on the island more attractive for local Europeans than those that could be derived from dividends domiciled in London. The importance of these small but valuable mortgage claims explains the concerns of European pressure groups regarding moratorium projects and their insistence on limiting to 25,000 rupees the maximum amount of debts for which a conciliation procedure would be possible.
The finding drawn from the analysis of judicial sales that is most contrary to the preconceived ideas of contemporaries is the growing place of indigenous lenders in the mechanisms of alienation. These lenders were less visible than the Chettiar, they handled much smaller sums, and, with few exceptions, did not make a profession of their activities[26]. Three categories stand out in these operations. The landowners have always practiced the loan of seeds to their sharecroppers and neighbors; some seem to have converted to the loan of money on a local basis, which the headmen already did at a time when the conversion of the grain tax into money forced the peasants to borrow to pay the tax. Unlike the Chettiar, their main objective was to get their hands on the land of their debtors. For example, in the district of Kandy, they foreclosed whenever possible. But it is doubtful that the depression had significantly changed the volume of their activities, if not by pushing them to press their claims even faster, to the extent that they were themselves pressed by other creditors, or affected by the collapse of rice prices. A second category was made up of Sinhalese, Muslim, or Ceylonese Tamil shopkeepers. They sold food products and fabrics on credit, and took high margins from the transaction – actually disguised interests; many Muslims, whose religion prohibits interest loans, did so. In times of depression, shop credit tended to be all the more expensive as suppliers, often linked themselves to Chettiar, restricted their facilities. Traders who practiced the loan on upcoming harvest could always make seizures: the traditional practice consisted of presenting themselves on the threshing floor, a bag in hand, solidly framed by acolytes, and to seize on the spot what was due. But they increasingly demanded mortgages, and the transaction frequently led to judicial sales[27]. A third category was made up of government employees, especially rural teachers. Having a regular income, however modest, they were in an advantageous position in times of crisis, and many engaged in lending as a subsidiary activity, constituting a land capital that contributed to raising their prestige, to giving them a social base that they often lacked. Education was booming during the 1930s: all the testimonies suggest that this boom was accompanied by the development of a new type of lender[28]. But our statistics are unfortunately silent with regard to the profession of ‘amateur’ creditors. It was not possible to analyze these categories of creditors from a quantitative point of view, but a number of salient features appeared during the count. In some areas, lenders were almost entirely indigenous: this was the case in Jaffna, where loans were made between Tamils, in Kalutara, and to a lesser extent Galle and Matara, where Sinhalese lenders dominated. Among the latter, the number of members of the Karava caste (originally fishermen) seems particularly high, but the activity was in no way confined to a particular professional caste as in the case of the Chettiar. The absence of a caste of lenders in the traditional social structure of the Sinhalese regions is an important phenomenon, which would deserve an in-depth study: it contrasts with the fairly general presence of such social groups in India: the Chettiar, without integrating into the Sinhalese social fabric, filled this void. A last notable feature is the place of Muslims among the debtors of Sinhalese creditors: it seems that a number of Sinhalese had invested money in commercial activities through this way.
The depression had therefore resulted in a spectacular and early swelling of the mass and value of judicial sales but in this phenomenon, the share taken by foreigners, Indians or Europeans, had not increased exceptionally. Already high in 1925 (60.3% of the value of debts), it remained at a comparable level in 1931 (59.7%) and in 1937 at a slightly lower percentage (54.4%). It is therefore wrong to claim, as the Ceylon Banking Commission did in 1934, that judicial recoveries by foreigners were a novelty linked to the crisis.
The reality of land transfers
Do the statistics of judicial sales faithfully reflect the reality of land transfers? There are two objections. The first is that these are announcements: they do not reveal what finally happened to the land. The second is that they do not represent, far from it, all sales. It would have taken to reach certainties on these points to explore the archives of the provincial courts; an attempt to do so has remained unsuccessful, given the mass and disorder of the documents, and the almost impossibility of making the necessary in-checks with the indications of the Ceylon Government Gazette. The following remarks do not therefore claim to exhaust the question. What happened to the properties put up for sale? And first, how were the sales going? It was not uncommon for properties to be put up for sale two or three times, either that no bidder had appeared, or that the debtor had obtained a last-minute respite; the case seems common when the creditor was a Chettiar and the debtor was an influential person, a Kandyan headman for example; sometimes sales were shunned by potential buyers who feared that their acquisition would cause them more trouble than profits. Sometimes villagers obstructed the effective possession by the buyer. This kind of boycott was, it seems, limited to the Tamil areas of the north and east of the country: the strength of solidarity was much greater in the Tamil society than among the Sinhalese[29]. David Washbrook has shown that at the end of the colonial period, in India, between half and two-thirds of appeals for the execution of judicial sale orders were classified as not executed: their execution did not depend on legal coercion alone, it was mediated by extra-legal institutions that were able to adapt judgments to social realities[30]. The institutions in question are the family solidarity and caste networks. As they were notoriously less solid in Sinhalese society, it is likely that sales were more effective in the south of the island. The absence of bidders frequently resulted in the creditor’s control over the land. According to the main auctioneer at Kurunägala, “ordinarily, the mortgagee takes the land: nobody bids at the sale”. Of the 37 sales analyzed by the administrator of the same district in 1931, 19 resulted in the acquisition of the land by the creditor, at extremely low prices: the average amount of debts reached 4,200 rupees; the average value of the properties was estimated at 16,644 rupees but the sums obtained during sales reached on average only 609 rupees! In Kalutara the collapse was a little less marked. On a limited sample of 21 cases the amount of debt was 1,909 rupees on average, the valuation 1,529 rupees, the value of sales 1,264 rupees. Extreme cases were mentioned during the debate on the draft moratorium: a 40-acre coconut estate estimated at 30,000 rupees, sold 60 rupees for the satisfaction of a debt of 15,000 rupees; a small 9-acre rubber plantation worth 6,000 rupees, sold 60 rupees for a debt of 406 rupees, and whose owner was sentenced to prison for debts for the rest of his due[31]. Unfortunately, we do not have general data on the movement of land prices. However, scattered testimonies collected by the Banking Commission gave orders of magnitude lower than those just mentioned; the experience of the main auctioneer of the coconut land areas and an expert in evaluation operating in the Kandy regions are particularly valuable. According to them, a coconut plantation in the North Western province, which was worth between 500 and 1000 rupees per acre before the depression, came down to 250 to 400 rupees; a rubber plantation in the district of Kandy worth 500 to 1000 rupees per acre could be sold only between 250 to 600 rupees if it found a buyer; a paddy field went down from 300 to 100 rupees per acre[32].
What happened to the victims of judicial sales? The testimonies diverge considerably[33]. While some claim that creditors returned the land purchased to their former owners as a sharecroppers (this was at least the rule in the case of paddy fields), others argue that they systematically expelled the occupants “to avoid the possibility of trouble; the displaced cultivator had to move out to some other place and work as a labourer; there are owners who advance on mortgages with the main purpose of getting their debtors’ land.” This type of case was frequently encountered when a big owner wanted to round his estate to the detriment of smallholder neighbours, and seemed quite common in the ‘coconut triangle’. Analyzing the distribution of land ownership in the district of Chilaw, (53.4% of families without land, 26.1% having less than 1 acre, 15.3% from 1 to 5 acres, 5.3% more than 5 acres) the authors of a survey commented in 1937: “These figures are hardly believable for an agricultural community. They reveal the extent to which big owners with their estates have consolidated their position and the other villagers were squeezed out or left with holdings of uneconomic size (…) During and after the depression many of the small owners had to sell their lands which were absorbed into the larger units belonging in many cases to non-residents” . According to the testimony of the agrarian services official of the North Western and North Central Provinces, it is not so much the Chettiar than the Ceylonese themselves who were responsible for the evictions: “The number of Chettiar in the district is now greatly reduced, as several had to leave it being bankrupt. The securities they held were sold, and the land was bought by Ceylonese who ousted the original owners from their land”[34].
The second objection is more serious: sales by judicial authority obviously do not represent all land transactions. Two other types of transfers took place: sales made by agreement of the parties by a private auctioneer, and amicable transactions. Let’s start with the latter: they were undoubtedly frequent and have always been, especially among the poorest villagers unable to resist the pressures of the notables and finance the cost of a trial. Can we assume that they multiplied during the depression? The general deterioration in the standard of living may have made debtors retreat from court costs that they would have undertaken in times of prosperity; indeed, several testimonies suggest that the courts exerted less attraction than usual on a people of litigants renowned for their love of chicane. In addition, the more favorable attitude to the debtors of the courts pushed creditors to seek to recover their money by other means. This could explain that despite the decrease in the number of sales after 1931, the value of debts collected did not decrease so quickly. Nevertheless, there is no evidence that debtors in debt with the Chettiar feared the courts more than those who were in debt with their compatriots. In addition, the passionate attachment to the land of the Ceylonese in general, and of the Sinhalese in particular, makes it unlikely that they voluntarily stripped themselves of their property for the benefit of their foreign creditors without resorting to all the means at their disposal. Private auctions, on the other hand, had a considerable extension at the other end of the social scale. Creditors as well as debtors, when it came to high-value domains, often felt that it was worth paying for auctioneer services to get a better price, with a better advertising than that of the administration[35]. It was excluded, given the enormity of the task, to scan the entire press of the years 1925-1939 in search of these announcements. However, I made an effort to carry out surveys, for a few months taken at random. For the second quarter of 1929, the total number of auction sales amounted to 153. The value of debts, in the 64 cases where the sum was mentioned, amounted to 46,6064 rupees, or an average of 7,282 rupees per sale; if we assume, which is not proven, that this average also applies to other sales, we would obtain a total of about 1,114,000 rupees. During the same period, the total amount of judicial sales amounted to 700,833 rupees for 298 sales, or an average of 2,349 rupees per sale. For the month of March 1931, there were 90 auctions; the amount of 39 auctions amounted to 602,106 rupees, or 15,438 rupees per sale, but this figure was inflated by the presence of two very large operations. If we exclude them, we get a sum of 327,065 rupees for 37 sales or 8,839 rupees per sale. The average of judicial sales for the corresponding year is 4,070 rupees, and their number for the month of March 1931, is 114 sales. It can therefore be reasonably assumed that private auctions represent between a third and half of the total number of sales, but that each of these operations amounts to double or triple those carried out by the administration: in value, auction sales would be about 50% higher than judicial sales. If we consider the location of the sales, no well-defined characteristics emerge, if not a slight predominance of auction sales in the coconut districts (Kurunägala, Chilaw, Galle). Finally, the comparative analysis of the debtors’ identity gives exactly the same figure for 1929 (78% of Sinhalese for judicial and auction sales), the value being a little lower in 1931 (62%, but the sample is less large). With regard to creditors, the Chettiar are a little more represented in the auction sales of 1929 (45% of the sample) than in the annual average of judicial sales (43.5%) in 1931, they form only 35% of the creditors in the sample, almost exactly as much as the annual average of the judicial sales (34.7%). I will therefore cautiously put forward the hypothesis that the absence of the statistics for auction sales does not distort the conclusions relating to the community of belonging of the parties involved; on the other hand, it would be necessary to multiply by 2.5 the total value of the claims recovered by judicial means to obtain an order of magnitude of all the sums collected from 1924 to 1939: which would represent 110 million rupees, including 37 million rupees for the Chettiar. This result is perfectly compatible with the estimates provided by the Chettiar in 1934: the value of the land purchased was estimated by them at 30 million rupees, and that of current mortgage loans at 20 million rupees.
There is another way to verify the reality and extent of transfers: the yearly Ferguson directories contain plantation lists mentioning the name of the owner, location, area and nature of the crops. These lists are in principle updated annually, but they cannot be assured of absolute accuracy. Only the plantations whose owners have communicated the data to the publishers are included; however, over the years there is a trend towards swelling in the number of domains recorded: the phenomenon results from the emergence of a Ceylonese bourgeoisie proud to exhibit its fortune in a directory originally restricted to European planters, which became a kind of Who’s Who, an essential reference in terms of social status and marriage strategy. An apparent increase in the number of Ceylonese owners may therefore conceal a stagnation or decline. It was therefore resolved to examine only the situation of the properties belonging in 1939 to Chettiar, Tamils of other castes, and Muslims, excluding the mass of major European estates, which had not progressed since the 1920s, and that of the properties of the Sinhalese. When comparing this list to that of 1925, only the domains whose owner had changed between these two dates were retained, and whose data were clear enough to allow a secure identification. Out of a total of 386 estates, 29% belonged to Chettiar in 1939, 50% to other Tamils, 21% to Muslims. What is the origin of these 112 Chettiar domains? 10% belonged to Chettiar in 1925 (2,304 acres, 85% planted in tea); 14% had been acquired before 1931 (1,865 acres, 45% in tea and 49% in coconut); 26% had been acquired after (1,696 acres including 30% tea, 20% rubber, 50% coconut). Among the properties belonging in 1925 or 1931 to members of other communities, four (3.5% of the total, 587 acres) were previously owned by Muslims; seven (1,888 acres) by Tamils of other castes; sixteen (6,455) by Europeans or Burghers; twenty-seven (25% of the total) belonged to Sinhalese, for a total of 4,966 acres composed of 46% tea, 35% of rubber and 19% of coconut. With regard to the 192 properties belonging in 1939 to Tamils of other castes, 56% were owned by Tamils since 1925, 27% do not appear in the lists prior to 1939, 11% were owned by Europeans or Burghers, and 5% to Sinhalese (2,030 acres). Finally, the 82 properties belonging to Muslims were at 26% the property of other Muslims, 11% of Burghers or Europeans, 14% of Sinhalese (1,724 acres) and 47% do not appear in previous directories. According to these figures, no large-scale expropriation of the Sinhalese would have occurred: the total number of Sinhalese ‘loss’ amounts to 48 estates representing 8,720 acres; even if we add to them the 138 estates of which it was not possible to identify the origin (13,863 acres), we only reach a total of 22,583 acres and 186 estates, or 1.37% of the area and 4.2% of the estate number. However small estates do not appear in the directory.
We will therefore, by taking a closer look at the Chettiar property in 1939, try to assess its importance. In 1939, the Chettiar owned about 10,750 acres of tea; this figure is slightly higher than what they declared in 1934 (7,500 acres) but there is a margin of error from the possible confusion between the names of Chettiar and those of members of other Tamil castes, and on the other hand the alienations continued between 1934 and 1939. These properties represented 1.9% of the area of tea plantations. For rubber, the Ferguson yearbook mentions 6,381 acres, a figure close to the 1934 estimate (7,500 acres), which represented 1.4% of the total rubber area given in the directory. On the other hand, the data on coconut is obviously very incomplete: in 1939, the Chettiar declared in the directory only 6,593 acres; while they evaluated their properties in 1934 to about 35,000 acres. According to the official estimates, the small and large coconut estates covered a little more than one million acres in Ceylon, while the directory mentions only 227,846 acres i.e. 4.5 times less. By assigning the same coefficient to the area declared by the Chettiar in 1939, we obtain about 30,000 acres, a value close to the estimate of 1934. The coconut properties of the Chettiar therefore represented between 2.9% and 3.5% of the total area of these plantations in 1939. We are far from the alarmist figures put forward by the Ceylon Banking Commission, which said that 60% of the coconut estates were mortgaged to Chettiar and that the latter had appropriated a third of these properties, about 20% of the coconut area[36]. Even if Indian bankers resold as many domains as quickly as possible, it is difficult to argue that they were the instruments of a large-scale alienation.
Pauperization and chauvinism.
The impoverishment of the possessing classes, especially from 1933, is open to doubt. It is unlikely that land transfers had such a magnitude; they did not have a comparable severity to those that traumatized Lower Burma at the same time. But if the Ceylonese owners proved to be able to keep most of their assets, didn’t they had to make heavy sacrifices that compromised their standard of living? Was the intense thirst for credit, which the Chettiar were no longer willing to quench, a sign of an impoverishment of the bourgeoisie? There are many examples of individual destinies compromised by the effects of the depression. We will mention only one, which concerned one of the main promoters of the policy of assistance to debtors in difficulty, and is known on the basis of private documents. The member of the State Council for Kägalla, E.A.P. Wijeyeratne, a provincial lawyer who was not known for his excessive lifestyle, and whose modest fortune was not based on the possession of vast plantations or on land speculation activities, was forced by the state of his finances not to run in the 1936 elections; he was compelled in 1935 to solicit a short-term loan of 1,500 rupees from the big Indian Muslim trader Adamalee on the guarantee of his lands[37]. What should not be the situation of more adventurous or more prodigal than him. But despite multiple individual examples, as eminent as they are, it is the overall trends that count. The thirst for credit is not necessarily a symptom of impoverishment; on the contrary, it can be a sign of a resumption of business. We have already noted several indications of such a reversal of trends, in particular that the number and value of mortgages, after a sudden fall from 1929 to 1931-33, started to increase again. The evolution of savings deposited at the Post Office and Savings Banks is also instructive. Until 1932, the impact of the crisis was indisputable; postal savings, whose mass was the most considerable, were decreasing, withdrawals since 1930 exceeding deposits: the petty bourgeoisie, the main user, ate its capital; in the same way, the savings of the Savings Banks, of a more recent creation and of a lower amount, progressed only very little. But from 1933-34, savings increased until 1938-39. This evolution, which went unnoticed at the time, can be explained by the institution of the coupon system that preserved the income of owners at the expense of employment; by the increase in the income of State agents given the decrease in the cost of living; and possibly by a temporary change in attitude towards land investment: the depression made the placement unattractive, especially since the restriction schemes excluded, in the case of tea and rubber, the cultivation of new lands. The total amount of this type of savings was, in 1937, of the order of 4 million rupees: a significant sum compared to that which was collected during the same year by judicial sales: 2,987,000 rupees (1,680,000 rupees if we exclude the 8 largest sales out of a total of 643). If the land market remained depressed, and if on the other hand savings were beginning to increase, how is it that the thirst for credit was still felt so acutely in 1934? The main reason lies in the almost total cessation of Chettiar operations. Since 1929-1930, according to their own testimony, there had been virtually no new transactions[38]. Willy-nilly, from lenders, the Chettiar tended to become rentiers; they deposited in European banks the sums provided by amicable sales and recoveries (about 5 million rupees) and increasingly repatriated their capital to India since the institution of income tax in Ceylon exposed them to being double taxed. The other sources of credit were not of much help: the State Mortgage Bank created in 1931 limited its activities to a tiny minority of very large owners; and, at the other end of the scale, rural cooperative credit companies born during the 1920s were forced into bankruptcy one after the other, and the property of their members put up for judicial sale, especially in the Batticaloa rice producing region[39].
The dry-up of credit sources therefore contributed to prolonging the depression, at a time when the owners were beginning to look to the future with less pessimism. To quench their thirst for credit, they resorted to expedients. The success of the cheetu circles represented an original, but dangerous, response to this need[40]. The principle was as follows: a cheetu was a temporary mutual credit association bringing together a specific number of contributors who paid a fixed sum at regular intervals into the hands of a director. After appropriating the first payment, this director launched auctions for each payment, and the member who offered the highest discount won the total capital paid, less the discount that was redistributed to those who had not yet benefited from an auction; the director was personally responsible for the payment of the remaining payments by those who had already benefited from an auction and required a mortgage or security deposit to do so. When everyone had obtained their cheetu, the circle dissolved. There were many variants of this basic principle, described in the report of the Banking Commission, but we do not need to detail them. More interesting from our point of view are the origins and actual functions of the cheetu. The existence of mutual credit circles is attested in many peasant societies. These institutions represent an extension of the forms of collective solidarity and exchange of work; they are also similar to funeral brotherhoods, and like them, their functioning is accompanied by a ritual of which the banquet organized during each payment is the major element. In modern Europe, tontines offer a variant of the same theme. Closer to the cheetu are the practices of the esusu of which Bascom studied the functioning among the Yorubas, in West Africa, and those of the ho, circles of female mutual credit generalized in Vietnam and widespread in China. The cheetu themselves exist in Malaysia under the name of kutu. Their origin is from Southwest India, from where they reached Southeast Asia[41]. To return to the case of Ceylon, it is important to point out that they represented an innovation there. Their sudden and ephemeral success was directly linked to the effects of the depression, and it is again Indians, this time from Kerala, who imported the system, momentarily taking the place of the Chettiar. In a few years, the cheetu circles they led multiplied in the cities, where they attracted shopkeepers and petty officials, and even in the countryside. In 1934 there were 86 cheetus with official status, but probably many more that operated illegally. Many adventurers took advantage of the thirst for credit to grab small naive savers. Indeed, the effective functioning of the cheetu circles left room for easy embezzlement. A cheetu director could slip away after taking the initial payment; he could also use the services of accomplice members to push the auction when a certain member of the circle had obviously an urgent need for money, so that the discount redistributed to other members, of which he himself was a part, could reach high rates. But even assuming that the circle operated on a perfectly regular basis, his members benefitted from it very unevenly; there were actually two categories of members of a circle: those who joined it as investors, and those who had recourse as borrowers. The former left their money there for as long as possible: they thus benefitted from the largest number of discounts offered by their co-partners and did not have to pay any discounts themselves, competition diminishing as the cheetu approached its end. The latter, pressed by the need, competed with each other from the creation of the circle, so that they eventually paid a very high interest; some estimates show rates of 20% to 35% on average, while investors earned 10% to 15%. This fundamental characteristic of cheetu tends to confirm our hypothesis that there is a category of owners whose savings had not been seriously affected by depression and who took advantage of the situation to become amateur lenders, but a number of them were victims of the actions of Indian adventurers whom they had trusted. The unpopularity of the Chettiar, which probably came more from the cessation of their credit operations than from their land acquisitions, was coupled with hostility towards the Keralite entrepreneurs of cheetu.
Ceylonese or more precisely Sinhalese nationalism, antedates the great depression, but was stirred up by it. After the fall of the Kandyan kingdom in 1815, the monarchical idea coupled with a spirit of independence survived for several decades; the animosity of a fraction of the Kandyan aristocracy towards the foreign presence was not directed exclusively against the British, but also against Indians, who were there prior to colonization: in the entourage of the last kings of Kandy, themselves of South Indian origin, there were many moneylenders, most likely from the Chettiar caste. The figure of the expropriating foreigner became prominent in the political discourse, when Low-country Sinhalese attempted to rally the Kandyans for electoral purposes, whitewashing their own responsibility in the land grabbing process. As early as 1925, D.S. Senanayake, as member of a committee of enquiry on landless villagers, had a suggestive exchange with a Kandyan headman, L. Nugawela who was giving evidence:
- Senanayake: “About fifty years ago, the villagers owned a lot of land, but now much less. The chief offenders have been the Coast Moors of the coast, Chetties and so on. Did you know that they tried to get undivided shares of property and harass the villagers and put them into court etc., and so a man loses all his lands?
- Nugawela: Yes, that is the chief cause of losing land”[42].
An extreme expression of xenophobia is found in a long memorandum addressed under a pseudonym to the Banking Commission by a representative of the Sinhalese business community[43]. Its author began with a piece of self-criticism, which took up all the commonplaces conveyed by colonialist circles; these worn themes took under his pen a striking relief, in the context of the crisis and land alienation: “The Ceylonese are not industrious and all their time, all their energy, all their earnings are invested in imitating, ruining their physique, their tradition and love of the country (…) They are bankrupt in all, except verbosity (…) Ceylonese have been borrowers in every respect for the past three or four hundred years. Language is borrowed, literature is borrowed, ideas are borrowed, modes and means of life are borrowed. Money is also borrowed. Foreigners encourage borrowing. A foreign government supports the foreign lenders.” To this cultural and economic alienation, it is necessary to find a responsible person; the Chettiar provides a convenient scapegoat: “They are the canker eating into the vitals of the Ceylonese nationality aided and abetted by all other foreigners. The Chetty’s methods are assured and peculiar, and no ordinary power can cope with him. Physically, he is a mass of cowardice. Morals he has none. Spiritually, he is a mass of superstition, weak, fearing God but not loving, hating humanity, a veritable Jew, ready to tear and destroy. In cunning and treachery he has no equals. Laws are circumvented by him. He spreads dishonesty, bribery, corruption, immorality, and destruction wherever he goes. He is everywhere and in everything. He bribes from the legislators to the fiscal peons. The Chetty along with usury should be exterminated and exorcised to restore our island’s financial balance.” Another ideological loan… this time from Nazism. We should not imagine that such arguments were common; but they were a symptom of a deep malaise of the possessing classes. The foundation by Bandaranaike of an organization called the Sinhala Maha Sabha (Great Sinhalese Association) in 1937, which represented a turning point in the career of the future leader of the national movement, must be interpreted in the light of these xenophobic feelings, although he was not himself a jingoist[44]. Reading through the minutes of the State Council sessions leaves the impression that anti-Indian feelings represented one of the major themes of political discourse and took the place of nationalism. It would be excessive to represent the Ceylonese in general and the Sinhalese in particular as a nation seized by the mania of persecution, and the Chettiar of Ceylon were spared the violence that accompanied the advent of Burmese nationalism. The peasants knew very well that British and Ceylonese speculators were more responsible than the Indians for their condition; as for the bourgeoisie, it expected the State to come to its rescue to redeem its debts.
State assistance.
The gap created in the credit system by the withdrawal of the Chettiar was finally filled by the establishment of a State bank. The story of the birth of a modern banking system in Ceylon has already been written in a valuable book, which exempts us from returning to it in detail[45]. On the other hand, we will focus on successive projects to put an end to land alienations or even to return their alienated properties to unfortunate debtors. During the years of prosperity, a few lucid minds, fearing the fickleness of the Chettiar credit system, called for the creation of a State credit institution[46]. These requests led to the birth of a mortgage bank (State Mortgage Bank) which began its activities in 1931 under the presidency of Sir Marcus Fernando, one of the largest owners of coconut estates. Its purpose was long term lending for all, but having few funds, it restricted its operations to a narrow fringe of rich planters, and generally required mortgages on urban buildings that hardly depreciated during the depression: only the bourgeoisie of Colombo (the absentee owners of the coconut plantations) was able to provide these guarantees[47]. This is one of the many examples of diversion by the bourgeoisie of institutions originally intended for the peasantry, or at least for its wealthy fringe.
The first moratorium projects date back to the beginning of 1931. “If [the debtors] are not saved, said their promoter, the nation is bound to perish”[48]. After the elections, the case was relaunched at the initiative of the representative for Kägalla, E.A.P. Wijeyeratne: “The mortgage debt of this country is gigantic (…) A great authority on finance stated only a year ago that it was over 500 million rupees (…) No agricultural country in this world of the size of Ceylon has yet been known that can bear a debt of that magnitude.”[49]. Wijeratne urged for the State control over the banking sector, which had always refused to invest directly in the development of the country, preferring to place on the London market or with the Chettiar; meanwhile, he considered that a moratorium was necessary. The result of this approach was the formation of a parliamentary commission of inquiry whose report was tabled a year later. This document reflects without detour the class interests of its authors: “While in the case of small debtors the land lost by one villager generally passed into possession of another villager either directly or through the hands of a purchasing creditor, this was not the case with large debtors, as the ability of the Ceylonese to purchase large estates sold under decree sale was indeed small at the present time. Consequently, in the case of the large creditors where the property would ordinarily be purchased by judgement creditors or their nominees, the loss is not merely personal to them but more far reaching, as the majority of large creditors are admittedly foreign capitalists”[50]. The project (Judgment Debtor’s Bill) was unanimously opposed by European business circles, which had heavily invested in mortgage loans; in his memoirs, a former planter, T. Y. Wright, defined the project as “a way to buy back with taxpayers’ money land that was wasted by pierced baskets of which some were once millionaires”. Europeans were soon joined by representatives of the Indian community who expressed the concerns of the Chettiar, and by the most moderate Ceylonese leaders whose fortune was solidly established. Adopted by the State Council with a narrow majority, the project was vetoed by the governor, and by the London authorities, who were convinced by an avalanche of motions and petitions. That of the Ceylon Chamber of Commerce explained that by virtue of the economic integration of the island, the measure was likely to have far-reaching repercussions: “The commercial and agricultural activities of the island depend largely, if not entirely, on the credit facilities that emanate either directly or indirectly from the banks.”[51]. After this first setback, Sinhalese politicians did not abandon their project. They obtained the creation of the Ceylon Banking Commission, whose composition reveals the evolution of the colonial government: it did not include any European in its ranks, but was presided by an Indian Parsi banker, Sir Pochkanawala, and not by a Ceylonese. Shortly before, similar commissions had investigated the banking system of India and Burma. Following the nuanced recommendations of the commission, which exempted the Chettiar from the sin of usury but accused them of irresponsibility, the attention of the political class was focused on the project to create a State bank aimed at filling the void left by the Chettiar withdrawal, and which the European pressure groups did not want. The moratorium projects were abandoned, possibly because forced sales were not so dramatic, but the relapse of 1938 revived the debate. The new projects first aimed to institute a conciliation procedure between creditors and debtors (Debt Conciliation Bill)[52]. The Chettiar, who had given up recovering all their debts, did not oppose it; on the other hand, the Europeans were fighting a rear-guard fight. The governor planned to oppose his veto and referred it to London. Among the senior officials of the Secretariat of the Colonies was a former director of the agricultural services of Ceylon, F.A. Stockdale, who harshly criticized the project, which he said was intended to benefit only the large absentee owners who led an extravagant lifestyle in Colombo. But the war pushed the authorities to spare the local political class, and London agreed in December 1939, on the basis of a report written in energetic terms by the Minister of Agriculture and future Prime Minister, D.S. Senanayake. Encouraged by this success, politicians reintroduced in 1940 an annually renewable moratorium project, which was opposed by European insurance companies that had invested heavily in mortgages and already felt that they were wronged by the delays of the courts[53]. London finally accepted the project in 1941, because its scope was restricted to small properties.
The last project was by far the most interesting and significant. Its aim was to have the mortgaged properties sold between January 1st, 1929 and December 31st, 1940, bought back by the State, so that they could be returned to their former owners for a repayment spread over 25 years[54]. The governor renounced to veto a measure that he considered anti-Indian and anti-European, doubting the real effects of its application: “The proof of this legislative pudding will lie in its eating.” It does not seem indeed that this law (Land Redemption Ordinance) had spectacular effects: between 1945 and 1947, 5,519 applications were registered and 2,850 rejected, but the examination procedures were especially long and those of acquisition even more. What must hold us back is more the intention than the act. The authors of these laws defended actual interests. But their behavior, consciously or not, was in line with a monarchical tradition that a century and a half of colonization could not erase. “In the time of kings” according to the consecrated expression that always comes to the lips of the Kandyans, land sales were always redeemable during the lifetime of the parties, and when an aristocrat was threatened with seizure, the king intervened to finance the redemption of his debt; it also happened that the monarch obliged the powerful to return to simple villagers the land they had snatched from them by forcing them to go into debt, but there only one attested case in the time of the last king of Kandy, whose anti-nobility positions were to cause the loss[55]. Recourse to the State, a substitute for monarchical authority, in times of crisis, is certainly not a characteristic of Ceylon, as shown by the entire political history of the interwar period in the West. The xenophobia epidemics that accompanied it was also universal. But it is rather in the Indian cultural area that the Ceylon case must be appreciated. There is a significant contrast between a structured Hindu society, where intermediate forms of organization, such as the caste, took precedence over the individual and the State, and more flexible societies – those of the Buddhist countries on the Indian periphery – where the individual did not benefit from the same solidarity or suffer from the same constraints. It is the weakness of social ties in a Buddhist context that the recourse to the State found its justification.
*
To sum up our findings and enlarge the scope of the study, it can be asserted that the depression of the 1930s, in Ceylon as in other areas producing raw materials, was above all the crisis of the small and medium-sized indigenous production, which had developed during the previous two decades. This expansion had been favored by the availability of land (the chenas), of credits (provided especially by the Chettiar) and by the presence of a market where the demand, especially for rubber, grew faster than the production of the large European owned plantation companies. However, during the 1920s, expansion met its internal and external limits. Land was becoming scarce; credit was drying up; the market was getting cluttered. Even before 1929, overproduction was present; it resulted in part from this indigenous growth itself, and large producers were quickly determined to eliminate these undesirable competitors from the market. They exported their crisis, getting rid of their surplus immigrant labor by sending it back to India, and stopped hiring villagers as occasional workers. Finally, the restriction plans adopted in 1933 and 1934 met the expectations of large planters, while ensuring, thanks to the sale of their coupons, a modest rent to small producers. The weight of the crisis was ultimately borne by the most marginal social categories, new Tamil immigrants still poorly integrated into the structure of the plantations, and moreover occasional Sinhalese workers who lost the resources they could derive from hiring on large plantations, from work to task on small plantations and in public works sites. This category survived thanks to family solidarity or the patronage of the notables, and by finding imperfect substitute resources such as home garden cultivation. It exposed itself to climatic fluctuations, to the ‘old regime crises’ from which the peasantry had freed itself thanks to the multiplication of external jobs. When the drought occurred, the malaria epidemic catastrophe, a crisis in the crisis, was triggered, eliminating a hundred thousand victims predestined by malnutrition. The possessing classes of Ceylon became aware of the peasant condition and the duties of the State in this regard, but were quick to defend their own interests. With new political responsibilities, but burdened with their endemic debt, they demanded that the State replace their departing creditors. The colonial government remained reluctant until the war revealed that the advent of the Welfare State was the best way to ensure a quiet transition to independence. This process, of which all the nuances expressed in the previous pages have been erased, translated politically into the appearance of a series of myths. The general spread of the depression, through the credit system woven by the Chettiar, the public finance crisis, and the narrow links of the peasantry with the plantation economy revealed that the entire island economy was integrated into the world market. However, it was at this precise moment that colonial circles developed the thesis that the peasant economy would be immune from fluctuations in the economy. A colonial version of the myth of the return to earth, the dualist theory had the function of concealing the bankruptcy of a dependent but real indigenous development, and of removing the spectrum of a rapid growth in social spending. Let everyone return to his place, the peasant to his fields, the immigrant in excess to his homeland. Under the opposite appearance, the Ceylon political class cultivated the same myth. Discovering the deterioration of the peasant condition, it celebrated the pre-colonial golden age and the virtues of self-sufficiency, rejecting on the colonizer the responsibility for a supposed long-term decline of the peasantry, and a very real spoliation of its lands, and ignoring its own role in the process. At the same time, it accused the Indian financiers, who abandoned it after having largely financed it, of reducing Ceylon to a ‘proletarian nation’, while the Indian immigrant workers of the plantations began to be designated to the peasant vindication as those responsible for unemployment. These facts and myths were far from being limited to the only case that concerns us. We find the equivalent in Malaysia where the ‘sons of the soil’ were beginning to claim the exclusivity of the profits provided by the plantation economy; and in paddy producing Burma where agricultural development that was reaching its before the crisis, was definitively compromised by the great depression. In the latter case, this led to a wide scale peasant rebellion, while no such revolt occurred in Ceylon. Among the reasons explaining the difference between Burma and Ceylon, one should point out the absence of a land tax and the beginnings of a representative political system in Ceylon, but also the fact that expropriation by the Chettiar was limited and affected absentee landowners more than actual peasants.
It is perhaps too easy to assert a link between the global depression and the crisis of the colonial system. The Indian example, which is decisive, shows that the birth of an authentic national movement is significantly earlier, and has nothing to do with the economic situation, which was generally favorable for this country at the end of the 1930s. What the depression calls into question, at least in the colonies most integrated into the British imperial system, is the inchoative development of a small production on the margins of the system, which in a way ensured the collaboration of an important fraction of the peasantry and the entire land-owner bourgeoisie for the purposes of colonization. If the development of this small production was a world-wide phenomenon, which remains to be proven, and that it played a decisive role in the origins of overproduction and the crisis, one is entitled to say that colonization was a victim of its own contradictions.
[1] Sessional paper 23 of 1934: Ceylon Banking Commission, volume II, (CBC II) p. 331 (E. de S. Wijeyaratne, notary, Galle); Administration Report (AR) Puttalam 1932, p. F21
[2] CBC II p. 187 (Madawela), p. 27 (Abeysekera), p. 21 (deputation Ratnapura) ; Sessional Paper (SP) 22 of 1934: CBC volume I p. 161, 170-171 ; Evidence of the Committee on Landless villagers, Land commissioner records file 907, 20.10.1925 (L. Nugawela)
[3] Bulletins of the Ministry of Labour, Industry and Commerce n° 5 to 12: Reports of the Economic Surveys of Villages (SV) Kurunägala n°10 (70%), Kalutara n° 6 (80%), Chilaw n° 7 (75%), Puttalam n°8 (74%), Galle n° 11 (86%), Matale n° 9 (84%), Matara n° 12 (60%)
[4] Administration Report (AR) Puttalam 1932, p. F21, CBC II p. 44-45 (Bostock), CO54/970 (Memorandum by D.S. Senanayake on the Debt Conciliation Bill, 1939), CBC II p. 86-87 (Awissawella), p. 351 (H.W. Dias), p. 496 (Government Agent Southern province)
[5] CBC II p. 178 (R.C. Kannangara, planter, Deniyaya)
[6] CO54/55801/1936
[7] OBEYESEKERE (G.), Land Tenure in Village Ceylon, Cambridge, 1967, JIGGINS (J.), Caste and Family in the Politics of the Sinhalese, Cambridge, 1979, FRYKENBERG (R.E.) ed., Land Control and Social Structure in Indian History, Madison, 1969, POUCHEPADASS (J.), Land, Power and Market. A Bihar District Under Colonial Rule, 1860-1947, New Delhi, Sage 2000.
[8] CBC II, p. 27-28 (Abeysekera), D’OYLY (J.), A Sketch of the Constitution of the Kandyan Kingdom, Colombo, 1929; KANE (P.V.), History of the Dharmashastra, Poona,1946
[9] MEYER (E.): “From Internal to External Debt. Observations on Changes in Credit Practices in Sri Lanka in Colonial Times” in MALAMOUD (Ch.) ed., Debts and Debtors. New Delhi, Vikas, 1983, pp. 161-177.
[10] FIRTH (.), Capital, Saving and Credit in Peasant Societies. London, 1964
[11] MALAMOUD (Ch.) ed., Debts and Debtors. New Delhi, Vikas, 1983.
[12] SLNA 65 Confidential file (CF) 969/1931
[13] AR North Western Province 1930 p. F4, 1931 p. F34; AR Puttalam 1931 p. F22
[14] CBC I p. 21
[15] CBC II p. 67; in the Burmese rice producing areas, the Chettiars were similarly forced into foreclosing: see BROWN (I.), A Colonial Economy in Crisis, Burma’s Rice cultivators and the world depression of the 1930s, London, Routledge, 2005, p. 77
[16] AR Puttalam 1932 p. F21 and 1934 p. F33
[17] CBC II p. 39 (Bassett), p. 406-409 (Badulla session)
[18] SV Kurunägala p. 7-10, SV Chilaw p. 10 sq.
[19] Judicial commission, Sessional Paper SP 6 of 1936; CO54/970, notes of a meeting held in the chambers of the Legal Secretary, 6.04.1938: evidence of Mr. Rowan (Julius and Creasy); CBC II p. 2 (Abeysekera)
[20] CBC II p. 518 (Kurunägala); SV Kurunägala p. 11; SV Chilaw p. 7.
[21] CBC II p. 66-67 (Memorandum of the Nattukottai Chettiar Association)
[22] Ceylon Government Gazette (CGG) 1937, p. 905; see also SP 18 of 1951 (Kandyan Peasantry Commission), p. 275
[23] CGG 1927 II, p. 1063
[24] For example, CGG 1929, p. 912 (Punahela); CGG 1937, p. 891 (19,000 Rupees, Atabage)
[25] CBC I p. 35; CBC II p. 403 (Luddington)
[26] CBC II p. 375 (Negombo), p. 493 (Kalutara), p. 473-481 (Cooperative Mortgage Bank secretary, Kandy); SV Kurunägala p. 33.
[27] CBC II p. 403, 461, 38, 429, 143-145; SV Kurunägala p. 20.
[28] AR Registrar of cooperative societies 1935 p. E4; CBC I p. 52; TAMBIAH (S.J.) “Ceylon” in LAMBERT and HOSELITZ, The Role of savings and wealth in southern Asia and the West, Paris, UNESCO, 1963; YALMAN (N.), Under the Bo Tree, Berkeley, 1967.
[29] CBC II p. 47 (B.P. Nicholas, banker, Jaffna); AR Registrar of cooperative societies 1934 p. E20; CBC II p. 277 (Campbell)
[30] WASHBROOK (D.A.), “Law, State and Agrarian Society in Colonial India”. Modern Asian Studies 15 (3) 1981 BAKER (C.), “Debt and the Depression in Madras” in DEWEY and HOPKINS, The Imperial Impact, Studies in the Economic History of Africa and India, London, 1978.
[31] CBC II p. 516-520 (M. Fernando, auctioneer, Kurunägala); SLNA 65/CF969/1930.
[32] CBC II p. 457 (Puttalam), p. 519 (M. Fernando), p. 402 (Government Agent Ratnapura), p. 477 (Walbeoff, valuer); SV Kurunägala p. 32-33.
[33] CBC II p. 375 (Negombo), SV Chilaw, p. 30.
[34] CBC II p. 460; Reports of the Divisional Agricultural Officers for the North Western and North Central provinces; Evidence of the Committee on Landless Villagers (D.J. Jayawardene, notary, Negombo); Hansard 1931 (2) p. 231 and 319 (Freeman, Corea)
[35] Sessional Paper 6 of 1936 (Judicial Commission) p. 66-75
[36] CBC I p. 35 and 70, CBC II p. 403 (Codrington)
[37] SLNA 25/20/20 Wijeyeratne to Will, 29.10.1935; Wijeyeratne to Adamalee, 2.11.1935
[38] CBC II p. 487-488 (testimony of the deputation of the Nattukottai Chettiar Association)
[39] AR Registrar of cooperative societies 1934 p. E20; CBC II p. 277 (Campbell), p. 200 (Kalutara), p. 27-28 (Chilaw)
[40] CBC I p. 55-60, CBC II p. 233, p. 351, p. 500; CO54/55782 (Cheetu Ordinance file, Attorney General report)
[41] FIRTH (R.), op. cit. 1964 ; SWIFT (M.G.), “Capital, Saving and Credit in a Malay Peasant Economy” in FIRTH op. cit. 1964 ; NGUYEN VAN VINH, Coutumes et institutions annamites: les sociétés d’épargne et de prêts mutuels, Hanoi, 1931.
[42] Evidence of the Committee on Landless Villagers, 20.10.1925 (L. Nugawela); CBC II, p. 245.
[43] CBC II p. 105-108
[44] MANOR (J.) The Expedient Utopian, Bandaranaike and Ceylon. Cambridge, University Press, 1989
[45] GUNASEKARA (H.A. de S.), From Dependent Currency to Central Banking in Ceylon, London, 1962
[46] PERERA (G.K.W.), Economic Development, an Appeal, Colombo 1925
[47] Sessional Paper 21 of 1929; Sessional Paper 24 of 1936
[48] Hansard 1931 p. 341-346 (6.03.1931, C.W.W. Kannangara)
[49] Hansard 1931 (2) p. 279-294 (10.09.1931)
[50] Sessional Paper 3 of 1932 CO54/909/92953/2 (Memorial of the Ceylon Chamber of Commerce, 29.03.1932); 8
[51] CO54/909/92953/2 (Memorial of the Ceylon Chamber of Commerce, 29.03.1932); WRIGHT (T.Y.), Ceylon in my Time, 1889-1949, Colombo1951, p. 177-178
[52] CO54/970/56080 (Debt Conciliation Bill)
[53] CO54/984/56152 and 56161 (Suspension of Mortgages bill and Rates of Interest bill, 1941)
[54] CO54/985/56284 Confidential dispatch, 19.01.1943; see also AR Land Commissioner 1940-1947; CGG 1942 p. 471-477 (29.06.1942)
[55] D’OYLY op. cit., p. 96; PIERIS (P.E.), Tri Sinhala, Colombo 1939, p. 77 note 1
