1. In many cultures, especially in the Indian case, it is important to understand that stories are not explanations. They are neither true nor false because they do not describe ‘factual’ events; they do not claim that they do either. Unlike the Bible, the Puranas do not have to be true or known to be true for them to play the role they do in the Indian culture. The Indian myths neither allegorize virtues nor are they ‘disguised’ histories. In other words, the presuppositions of your question (common ones in the western scholarship since the Enlightenment) are false and based on ignorance about the genre of the myth and the roles they play. (I can only assert these claims having argued them elsewhere.)
2. As an example, consider a group performing a ‘rain dance’. When you ask them why, in all probability you will get to hear a story. The most frequent explication (whether given by anthropologists or from philosophers or whoever) that one gets to hear is this: this group is providing an explanation about the performance of their rain dance. Assume for a moment that this is indeed the case and see what happens as a result: you are transforming the members of that group into a bunch of idiots. Is one to really think that they believe that their jumping up and down in some specific manner is the cause of the rains? Do you really think that if they were such fools, their culture could have survived at all? Ludwig Wittgenstein, in his reflections on Sir James Frazer’s ‘The Golden Bough’, posed the same issue in the following way: why then is the rain dance performed only during the rainy season? Perhaps, you would do well to think Wittgenstein’s question through. [For more, check this and this. ]
3. Let me sketch you a context where the story about Shiva and his Linga would be told. Imagine, just to anticipate a point I will shortly make, a family gathering in India, and a child asks this question: “Amma (mother), why is it that Shiva is ‘worshipped’ (done puja to) only in the form of Lingam, Brahma not at all, whereas Vishnu has so many different temples with so many avataara’s?” The mother, assuming she was at home with her traditions, would tell her the exact same story you cite. She would perhaps use formulations like “Shiva ‘mixed’ with the wives of the sages” or some such thing. If the child wants to know what this ‘mixing’ entails, the mother would continue without embarrassment or without being perturbed: “you will know about it, when you grown up.” If the child did not know what ‘lingam’ meant, the mother would say “what your brother has between his legs”. No one in the audience would either feel shame or embarrassment with this story, my friend. I have been both the listener and the ‘bard’ in my own family on many such occasions that I am pretty sure that any number of others would resonate with this sketch. In other words, there is no cultural forgetfulness involved, any more than not knowing that ‘linga’ also means penis.
4. It is important to keep in mind the question to which this story is an answer: why is Shiva worshipped in the form of Lingam, unlike Vishnu? It tells us how something came to pass, provides intelligibility to doing the puja of lingam. The most important point here is this: this story is not censored in the Indian traditions. This dovetails with an extremely important question: “If indeed there exists a paradox between the Bengali texts and the translation, how do you explain it? Why are the “unspeakable” secrets acceptable in Bengali but not in English translation? Why censorship only in English?” I leave it to you to ponder on these questions. I cannot hope to provide you an answer in the confines of this post.
5. In other words, there is no ‘cultural forgetfulness’ involved here. If the mother tells this story without ‘shame’ or embarrassment, the ‘Victorian’ values are not involved in this situation. What are involved are questions like: what are stories in the Indian culture? How are they told? What do they do? Etc. To do ‘cultural hermeneutics’, one needs to do this kind of research before writing books.
6. This story is known to many, but it does not embarrass them. My embarrassment with the explanations that Jeffrey Kripals of this world sell tells something about my culture (i.e. what stories are, etc), something about the inability to answer the trivialization, and so on.
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