The Coal Mine Mafia of India: A Mirror of Corporate Power

• DOI: http://doi.org/10.1111/ajes.12208
• Date: 01 March 2018
• Author: Yugank Goyal
• Published date: 01 March 2018

The Coal Mine Mafia of India: A Mirror of

Corporate Power

By YUGANK GOYAL*

ABSTRACT. An investigation of the source of power of mafia-type

organizations may reveal how other non-state actors can operate as if

they are independent of the state. This study of the coal mafia in

Dhanbad, India shows that power often derives from socially

hierarchical relationships involving debt and/or caste. It also

demonstrates how state policies that are thoughtlessly implemented

may solidify existing hierarchies. By analogy, modern corporations gain

some of their power by behaving as if they were semi-sovereign

institutions that draw their strength informally from social networks and

other extralegal relationships.

The mafia in the Dhanbad coalfields emerged through a series of

institutional changes. Labor shortages were initially resolved by labor

intermediaries, who eventually controlled the labor through linkages

associated with debt, caste, and social obligations. These intermediaries

eventually assumed official positions in labor unions, which gave them

a platform for electoral politics. When the coal industry was

nationalized, the union leaders further solidified their position in the

nationalized corporation. In this way, private labor intermediaries

became local political leaders who controlled the state apparatus to

some extent.

Corporations follow similar patterns. Both mafias and corporations

exploit weak governments, collude with them, and often operate with

a high degree of independence. Like mafias, corporations often derive

their power from socially embedded networks that they craft in local

communities and populations. Because the roots of their influence are

embedded in social networks, simple legal and regulatory changes are

often insufficient to limit their power. Transnational corporations

engaged in extraction of natural resources share with mafias the ability

*Associate Professor of Economics, O.P. Jindal Global University. Email: yugank-

goyal@gmail.com.

American Journal of Economics and Sociology, Vol. 77, No. 2 (March, 2018).

DOI: 10.1111/ajes.12208

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C2018 American Journal of Economics and Sociology, Inc.

to leverage monopoly power in one domain into control of other

domains. As a result, this case study of the coal mafia in India offers a

unique entry point to understand corporate sovereignty.

I. Introduction

Modern corporations do not simply buy and sell goods and services.

They have enormous power to shape the behavior of the markets in

which they operate as well as the governments that regulate those mar-

kets. Although all business corporations are nominally dependent for

their power on the governments that grant them charters, they often

operate in ways that create the impression that they are independent of

any governmental authority. If that were the case, they would be func-

tioning as sovereign powers, at least to some extent.

Complex criminal enterprises, sometimes referred to as “mafias,” also

have institutional characteristicsthat enable them to operate outside the

restrictions of government control for extended periods (Gambetta

1993 on the Sicilian mafia; Chu 2000 on Hong Kong triads; Varese 2001

on the Russian mafia; Hill 2003 on the Japanese mafia). They do so by

providing a service that substitutes for the state or defies the state: 1)

dispute settlement in areas without courts, 2) extortion, which is similar

to taxation withoutproviding equivalent services, 3) protection of prop-

erty rights, such as by the Sicilian mafia in the 1950s or the Russian

mafia in the 1990s, or 4) trade in prohibited or heavily taxed commodi-

ties, such as alcoholic beverages during Prohibition in the United States.

Mafias also operate in legitimate industries,primarily as cartel enforcers,

and trading legal commodities illegally (Gambetta and Reuter 1995;

Reuter 1987). They may also serve as intimidators of customers, work-

ers, and trade unionists in favor of employers (Bell [1953] 1988: 131;

Block 1983: 43; Gambetta 1993: 93–94, 197; Varese 2001: 71; Chu 2000:

71–72, 153–154). Mafias function as shadow governments that have

some level of sovereignty or operational independence. A mafia may

also seek to project a public image of a normal business operation in

order to hide the ways inwhich it functions outside the law. As a result,

some mafias have diversified by developing formal modes of gover-

nance (Caanzaro1985; Saviano 2006; Dickie 2004).

The American Journal of Economics and Sociology542

In this article, I first investigate ways in which mafias are often analyt-

ically similar to modern corporations. By examining how mafia opera-

tions are carried out, we may gain an understanding of how

corporations exercise a degree of sovereignty, which is to say a degree

of autonomy from government control.

Second, I will show how mafia-type organizations often derive their

power through embedded social inequities. Any theory of how power-

ful non-state actors function must recognize the importance of

non-economic structures of society. This will be particularly true in

developing nations, which are characterized by huge social inequities

that form the initial conditions in which power relations are con-

structed. The power of a mafia or a corporation can be traced to the

design of the social structure, which has been institutionalized in

collusion with the state. Thus, the power of non-state actors is both

independent of the state and a product of stateactions.

In this study of non-state actors, I look at the case of coal mines in

western India (located in Jharia, in the Dhanbad district). One of the

richest coal deposits in the country, these mines remain largely under

the unofficial control of criminal syndicates that are popularly called

“mafias” in India. I outline the operations of mafia in the collieries and

examine the historical processes that characterized their emergence in

the region. Central to the argument is the idea that characteristic social

and labor relations developed in the mines early on, which became the

source of power relations that developed in time and helped sustain

mafia organizations. In this study, I also explore what went wrong in

the processes of union building (1930s–1940s) and nationalization

(1970s) that createdconditions for the mafia to flourish.

II. Background

In order to explore the analytical similarity between mafias and corpo-

rations, Gerber (2000) argues that there is no fundamental difference

between organized crime and business organizations that act in ways

that border on criminal behavior. The moral pathologies of manage-

ment behavior of large business corporations are sometimes captured

by the metaphor of the mafia (Ferraro, Pfeffer, and Sutton 2005;

Ghoshal 2005). When a corporation engages in illegal and unethical

The Coal Mine Mafia of India 543