When India became independent, the main livelihoods in this region, as in the rest of the country, were based on land. But unlike most other regions of India, a significant and relatively more prominent part of the economy (half or more of the domestic product) was urban and non-agricultural. Non-agricultural did not mean industrial. True, the processing of some commercial products involved non-mechanised factories. Alappuzha (Alleppey) had emerged as a hub of coir production and Quilon (Kollam) of cashew. Some isolated large, mechanised factories employed hundreds of people in one place in chemicals, rayon, paper and a few other lines. Thus, Aluva (Alwaye) had textiles, fertilisers, aluminium, glass and rayon industries, and Ernakulam oil and soap industries. There were also tea estates in the hills. A concentration of plantation businesses in rubber and spices occurred to the east of Kottayam. But collectively, these formed a smaller group than trade and the financing of marketing, which dominated the landscape of non-agricultural employment. All major towns lived mainly on trade and informal banking. Trichur and Kottayam were mostly service-based towns, with a concentration of banks, colleges and rich churches.

Over one-third of the workforce was in industry, trade, commerce and finance. In most large states of India, the percentage was 20–35. The exceptions were the industrialised states of West Bengal and Maharashtra, where factory-based large-scale industrial firms concentrated. Again, a contrast emerged with the rest of India. Most local businesses were small-scale, semi-rural and household enterprises, whereas non-agricultural enterprises in the rest of India were mainly urban.

Further, industrialisation almost everywhere else signified a sharp inequality between the countryside and the city. The former was trapped in low-yield farmland producing grains for subsistence or local markets, and the latter experienced growth of high-wage jobs. In the state, that distance was narrower. The presence of tree crops and their industrial processing made for a narrower gap between the rural and the urban. Many of the landholders were also owners of estates growing tree crops. Agriculture was not necessarily low yield nor subsistence oriented. In this way, agriculture and non-agriculture, rural and urban came much closer here compared with India.

Contrary to the claims of Vietnamese historiography, Chinese settlers had arrived in the water world well before the Viet. Their presence owed much to Cambodia’s focus on maritime trade, its encouragement of multiethnic trading communities, and conflict with Siam over the crucial Gulf of Siam passageway. Chinese from Fujian and Guangdong became the largest demographic group in the kingdom, overseeing foreign trade and forming their own mercenary armies. Their numbers and influence grew further as a result of the dynastic transition from Ming to Qing, competition among armed mercantile organizations for control over the East Asian sea-lanes, and the scramble between Cochinchina and Siam for influence over Cambodia. The enterprising Mo Jiu embodied and exploited these trends in forging his own polity at The Port.

In the early nineteenth century, the region was ruled by three main political entities: the British Indian district of Malabar belonging to the Madras Presidency, Cochin state, and Travancore state. This was what the southwestern coast's political map looked like for 150 years before the three units were merged to form Kerala (1956). Despite this difference in political form, the three units experienced rather similar forces of change since the nineteenth century, such as the commercialisation of farming and plantations that expanded into new land frontiers, the influx and mobility of capital, labour migration, social movements targeting harsh inequalities and the decline of landholder power.

This chapter will describe the change and its legacies in the mid-twentieth century. It is helpful to start with the eighteenth century, when the political balance faced new challenges before settling down.

Trade and Politics in the Eighteenth Century

A serious European engagement with the southwestern coast of India began with Portuguese explorations in the late fifteenth century. From much before, Malabar traded with West Asia and Africa. ‘Nowhere in India,’ wrote D. M. Dhanagare, ‘have foreign trading and commercial and religious interests interacted within the indigenous socio-economic and political institutions more intimately than they have in Malabar.’

The chief exports of Malabar in early modern trade were spices and timber. Teak was abundantly available. A large shipbuilding industry developed, dependent on the custom of local ship-owning merchants. Beypur was the principal port in Malabar, where much of the commercial and shipbuilding activity was concentrated. In 1498, the Portuguese mariner Vasco da Gama landed in Malabar. A subsequent Portuguese attempt to impose a licensing system on coastal trade produced intermittent conflicts with the ruler of Calicut (Kozhihode), his allies inland, and a resistance force created by the Muslim merchants operating in the seaboard. The Portuguese attempt failed in the end, and the centre of Portuguese settlement shifted further north.

The cosmopolitanism of Malabar strengthened further in the second half of the eighteenth century under two forces, one maritime and another inland. In the seventeenth century, Dutch and English traders arrived to take a share of the lucrative spice trade.

While advances in mass health and schooling made Kerala quite distinct from other states in India in the 1950s, this was not a pathway to economic and social mobility, let alone economic growth. The quality of education, especially higher education, was poor. The persistence of gender norms kept many women out of the labour force, and high unemployment forced most skilled people out of the state. Outside the state, Malayalis found work, but in jobs that did not provide a dramatic change in conditions compared with similar jobs back home.

The Persian Gulf migration broke the stagnation, not just by offering more gainful opportunities but in indirect, if powerful, ways. In the long run, the job market in the Gulf demanded progressively greater skills from the migrants. Two periodic reports – India Migration Reports and Kerala Migration Surveys – reveal a trend towards rising skill levels on average, consistent with the diversification of the Gulf economies from oil-based occupations towards financial and business services. Consequently, more jobs opened up in offices in clerical, accounting, sales and supervisory roles. The migration offered those who stayed back in Kerala the scope to invest in human capital. It stimulated growth by increasing construction activity and the consumption of services. It also possibly encouraged business investment, but this link remains under-researched (Chapter 4). A third factor that deserves mention is women's changing roles and economic conditions, both those who stayed back and those who moved out. In both cases, the nature of the migration and mobility link was different from men’s.

The recent globalisation, or re-integration with the world economy, is, in these ways, a story of labour – and not primarily trade, foreign capital inflow, or investments abroad. It would still be a mistake to overstress international migration or even, more narrowly, emigration to the Persian Gulf. The recent history of labour is also a history of occupational diversification, professionalisation, skill accumulation, shifting gender roles, consumption and saving, and demographic transition.

The present chapter tells that story.

The Miracle

In 1981, the south Indian state of Kerala was among the poorest regions in India. The state's average income was about a third smaller than the national average. In the late 1970s, by average income, Kerala was in the bottom third of India's thirty-odd states. In 2022, per capita income in the state was 50–60 per cent higher than the national average. Among those states large in land size, populous and with a diversified economic base, the state was the fifth richest in terms of average income in 2022. Gujarat, Karnataka, Tamil Nadu and Telangana were the other four. None of the others saw such a sharp change in relative ranking.

Kerala's economy did not grow steadily throughout these forty years. The acceleration, catching up and overtaking were not more than fifteen years old, twenty at the most. Income growth rates were low for much of the 1980s and the 1990s. The numbers changed sharply only in recent decades. The roots of this extraordinary growth performance, however, were much older. This book is a search for these roots.

It is not a common practice among economists to treat a state in India as the subject of long-term economic history. But ‘Kerala is different’ from all other Indian states. A huge scholarship building from the 1970s and drawing in many social scientists insisted it was different. Although poor, the population of the state lived much longer than the average Indian and had a significantly higher literacy rate than in the rest of India. The scholarship trying to explain this anomaly was mindful of history. But the history had a narrow purpose. It was made to work for a specific question: how did an income-poor region make great strides in human development? The discourse that emerged to answer the question had two critical weaknesses. First, it was too state-focused and neglected to analyse enough market-led changes. Second, it took income poverty for granted. Neither the question nor the answers offered are useful to explain the recent acceleration in income. The explanations could not show how the basic premise of a low income might change someday because the research agenda did not consider that prospect very likely.

The British State intervened in the Port of London in 1800. It did so again a hundred years later by appointing a Royal Commission, which provided the basis for eventual reform in 1908. The immediate reason for the Royal Commission was a dock proposal to abolish free entry to docks by river. But the wider context was long-standing, loudly voiced, shipping company grievances about river governance, licensing of lighterage and compulsory pilotage. The Commission’s conclusion that London should have a port authority was generally accepted. However, issues of constitution and compensation bedevilled the Conservative attempt to legislate. In the event, it was a Liberal government, with all-party support, which established the Port of London Authority, effectively nationalising London’s port. In an ironic coda, the port unions soon discovered their new public employer to be a more formidable opponent than their dock company predecessors had ever been.

About a decade after India began liberalising its economy, arguments over the best pathway to plan for emerged. Kerala acquired a new significance in this discourse. Did the state have lessons for India at large? The most influential commentators on India's record of human development, Jean Drèze and Amartya Sen, cited the strides in human development, implying that India's policymakers needed to learn lessons from what could be done with limited state resources. A competing view, of which Jagdish Bhagwati was a forceful proponent, said that the accent on human development risked devaluing economic growth. Growth needed competitive markets, which would strengthen the state's finances and sustain the ability to fund welfare and public goods. In this second argument, Kerala was cited as a fiscally unsustainable model. ‘The much-advertised model of alternative development, in the Indian state of Kerala,’ Bhagwati said in a 2004 lecture, ‘with its major emphasis on education and health and only minor attention to growth, had … run into difficulties….’

How sound were these authors in reading the state's history? Not very, one would think. Bhagwati expressed his pessimistic views even as economic growth had begun to surge. His intuition that the model was unsustainable was probably correct but not testable. Drèze and Sen, writing in 2013, did casually acknowledge that economic growth revived and then attributed it to ‘Kerala's focus on elementary education and other basic capabilities’, not going into the details of how these two things were related. Their discussion of the state's recent history almost totally overlooked the most significant force of transformation, a market-driven one: the export of labour. In short, the market-versus-state choices in the 2000s debate were obsolete tools for a historical analysis of the state.

When discussing that history, what should we be looking at? Chronologically, the first major transformation that marked the state out in India was the positive achievements in education and healthcare, which began in the nineteenth century. The second major transition was the declining average fertility and population growth rates in the middle decades of the twentieth century. Since these topics are much discussed, we will be brief and build on a few major works on the subjects.

The Port and its Mo leaders have been portrayed within the context of Vietnamese historiography as the facilitators of the final round of Vietnam’s Southern Advance from its homeland in the Red River Valley. However, the Mo had other overlords, such as Cambodia and Siam, and enjoyed close ties to horizontal networks, including the Chinese and Austronesians. The Port’s ultimate incorporation into Vietnam was highly contingent. At the same time, The Port became a mediator and protector of the frontiers of the southern Vietnamese regime of Cochinchina, as well as its main source for the flow of Chinese influence.

The Mo never attempted to forge a state themselves but chose to utilize the territoriality of their realm to expand their economic interests. The Port became a transshipment point for goods and a provider of natural resources. It played a crucial role in the Chinese century in maritime East Asia by facilitating the offshoring of China’s economy. Its example demonstrates the convergence of similar trends and developments across the early modern world and highlights the importance of state-building and institutions in the rise and ultimate triumph of European maritime power.

Under Mo Tianci, The Port continued to thrive as a resource exporter, emporium, and monetary center. In fact, it expanded beyond its immediate surroundings of the water world and Cochinchina, stimulated by commercial growth, social change, and official policies within the regional powers of China, Japan, and the VOC. As a result, The Port played an essential role in the offshoring of the Chinese economy, attracting surplus laborers from China to Southeast Asia and supplying them with goods from Guangzhou. The Port’s expanded jurisdiction after the late 1750s also allowed for a greater specialization of functions. Bassac and other minor ports handled trade with maritime East Asia and received support from the Hong merchants of Guangzhou. The urban center focused more on finance, influencing the money supply of Cochinchina and becoming a center for copper and silver in Southeast Asia. The Port’s fortunes got a further boost when the fall of Ayutthaya to the Myanmar forces removed a major competitor along the Gulf of Siam littoral.

London’s seasonal foreign trade reflected its access to northern and continental Europe and the City’s association with the East and West Indies, but coal and other coastal trades dominated daily port activity. London was a tidal river port centred below London Bridge, with waterfront industry spread more widely. Organisationally, it was complex, with many different interests. As foreign trade increased, legal restrictions on landing places for foreign produce were blamed by merchants for congestion. A campaign by mercantile interests for the introduction of docks followed. The author examines the motives here. For leading West India merchants, specialised dock facilities would enable them to control and discipline a directly employed labour force, reducing theft. The eventual outcome, the construction of docks by joint-stock companies, owed much to State support. Its involvement went beyond the introduction of docks. For the government, this was an element of a warehousing scheme designed to develop London as an entrepôt. General port efficiency would be promoted by appointing the Corporation of London as harbour authority.

Although Mo Tianci maintained the ties of vassalage that his father had forged with the Nguyễn, Cochinchina only constituted one important foundation of his rule. He continued The Port’s traditional subordination to Cambodia and actually increased his involvement in the kingdom. He backed a ruler that leaned toward Cochinchina’s rival, Siam. After a succession struggle during the mid-1750s, Tianci emerged as the real power behind the throne. He forged a partnership with Batavia, presenting himself as an Austronesian principality within the sphere of influence of the Dutch East India Company (VOC). He also integrated The Port with the Chinese community of Batavia. The grandson of the city’s Chinese kapitan took charge of the Qing merchants at The Port, and a translocal justice system ensured the smooth conduct of trade across maritime East Asia The secret to Tianci’s ability to juggle simultaneous identities and allegiances lay in his understanding and manipulation of the conventions of the Sinosphere and the Southeast Asia mandala system. As a result, he achieved outside recognition of the autonomous status of his realm without the need to declare a formally independent state.

For years now, Kerala has had the distinction of being ruled by a communist-partyled coalition. The communist alliance won the first state assembly elections in 1957, lost in 1960, returned to power, and ruled the state in 1967–70 (first under E.M.S. Namboothiripad till 1969 and then under C. Achuthamenon), 1970–77, 1978–79 1980–81, 1987–91, 1996–2001, 2006– 11 and since 2016. In between, there were years when the state was under President's Rule, that is, the federal government governed it. The composition of the left coalition changed. It was never a body consisting of only the ideologically left parties: the Muslim League and some Christian factions allied with the communists. However, the main constituents of the coalition were the Communist Party of India (CPI) until 1964 and the CPI (Marxist), or CPI(M), after the CPI split into two parties.

In no other state of India, except West Bengal (and later Tripura), did the CPI or CPI(M) command a popular support base large enough to win elections. In common with West Bengal, tenants and agricultural labourers in these acutely land-scarce regions formed the main support base for the party. The communists won elections on the promise of land reforms. There was another historic factor behind their popularity. Caste equality movements coalesced around the leftist movement. Because of their commitment to the rural and land-dependent poor, the left delivered land reforms in Kerala and West Bengal in the 1970s. And in both states, ruling left parties indirectly drove private capital out of trade and industry. Ideological differences within the Communist Party of India led to a split in 1964. A faction led by S.A. Dange tended to have cooperation with the Indian National Congress, which then had a good relationship with the Soviet Union. That and the debates on National Bourgeoisie led to the split.

This is not a paradox. The paradox was that from the 1990s, if not earlier, the left quietly turned friendly towards private capital. By then, agriculture was in retreat, the old base of the left was not significant anymore, and the state was rapidly falling behind India in economic growth (and investment rates).

Besides mercantile, shipping, legal, insurance and financial services, the capital’s maritime connections extended to large-scale manufacturing like shipbuilding, ship repairing, marine engineering, sail-making and sugar baking. Shipping investors, almost exclusively involved in some aspect of sea trade, varied from those holding a few shares to the relative few reliant on ship owning for their income. The wealthiest shipowners and merchants, as well as the Royal Navy, were among the customers of London’s shipyards, clustered along the waterfront. Subject to severed cyclical swings, shipbuilding was a highly skilled, unionised occupation. Many of those employed in port industries lived in London’s then quite socially mixed waterfront parishes of East London. Seamen ashore in colonial and foreign trades also gathered here in response to a sailor economy serving their need for credit, lodging and entertainment.