7 reasons why businesses fail in Kerala

They are not what you may think — like hartals or labor unions

In 1957, communists in the Indian state of Kerala took a detour from the traditional leninist-marxist revolutionary path to power and formed the first government of the state, after winning a democratic election. Over the next 60 years, they have groomed a generation that is vocal and supportive of consumer rights, and ignorant and unappreciative of producer motivation or provider rights.

Their traditional arch enemy, the Catholic Church, owned a large number of educational institutions, and delivered an education that taught to overvalue compassion and selflessness. Combined, that established a society that accepts altruism as the only morally correct producer motivation, turning Kerala into a socialist haven. Result — a toxic business culture that manifests itself in many subtle ways that even most Keralites don’t realize.

If you ask a Keralite why businesses fail in Kerala, many would be quick to blame government regulations, hartals, labor problems and so on. Few realize that these are just manifestations of underlying structural problems.

Here are some of the cultural attitudes and prevalent beliefs that demotivate successful businesses and entrepreneurs from operating from Kerala:

(1) Give us also some money: Rich are not expected to enjoy (spend) their hard earned riches, but are expected to donate to various social initiatives or to others “in need”. Similarly, large companies are expected to grow no more and exist only as flagbearers of social good.

(2) Idiots wasting their lives: Hard work is not appreciated. In fact someone who has managed to “get through with minimal effort” and to “enjoy life” is perceived relatively “successful” compared to an innovator who has spent all his or her life to build a company and hoard materialistic possessions (aka make money). Often employees may negotiate with employers on the minimum output required to keep the job.

(3) Should have done some smuggling or cheated the Arabi: There is often an ingrained subconscious belief that someone who is rich has somehow gotten rich illicitly. Similar perception exists regarding a company that has successfully grown big, even if the growth has been 100% legit.

(4) You have money; Pay up: Hard work is penalized through significantly higher taxes, commodity prices and utility fees based on income and expenditure. Financially successful farmers may become ineligible for subsidies for several years.

(5) Those greedy, insensitive, bourgeoisie fellows: Profits, especially high marginal profits, are perceived illegal. A pharmaceutical firm with high capex and high gross margin will be labeled evil, so only low capex, low margin businesses are socially acceptable, restricting industrial options

(6) Thou shall not own more than 6 acres: There is a land ceiling act that has outlived its purpose and now hampers innovation. Many unprofitable rice fields and plantations keep burning cash, solely to get around the land ceiling act. Large scale mechanized farming, hydroponics, sophisticated genetic engineering, cost efficiencies from vertical integration, private investment in R&D, are all absent. Even apartment complexes are restricted to under 6 acres to get around land ceiling act, spreading the population, and locking up valuable land that could have been used for industrial or agricultural purpose.

(7) We are #1: Export of talent and the foreign remittances they bring has cultivated a level of complacency by providing a perceived validation of these cultural norms that Kerala can manage to economically “get through” without a business culture. Many resident Keralites find no reason to change or blame fate or unions, while being secretly proud of having a great life.

Entreprenurs are often driven by a larger purpose in life. Compensation issues, regulations and temporary disruptions are routine problems that many of them will love to solve to get to their goals. However, a society that regularly casts their initiative off as evil, and embeds self doubt on their purpose will suck the life out of them, like Dementors that feed on human happiness.

Like this article? Join Medium using my referral link