• Originalreference(2.1.16)fromSpengler(p73):‘Akingwitha small treasury swallows up the citizens and the country people themselves (2.1.16).’
Rangarajan (p 253): ‘A king with a depleted Treasury eats into the very vitality of the citizens and the country.’
• Originalreference(2.21.13)fromSpengler(p75-76):‘If,through fear of a rival purchaser, a [trader] increases the price beyond the [due] price of a commodity, the king shall receive the increase in price, or make the amount of duty double.’
Rangarajan (p 342): ‘Calling out too high a price at the gate [anticipating competitive bidding] penalty shall be [the] “differences between actual sale and the price originally called or double the duty.”’
• Originalreference(9.4.26-27)fromDasgupta(p40):‘Theobject slips away from the foolish person who continuously consults the stars; for an object is the [auspicious] constellation for [achieving] an object; what will the stars do? Men without wealth do not attain their objects even with hundreds of efforts.’
Rangarajan (p 637): ‘Wealth will slip away from that childish man who constantly consults the stars. The only [guiding] star of wealth is wealth itself; what can the stars of the sky do? Man without wealth does not get it even after a hundred attempts. Just as elephants are needed to catch elephants, so does one need wealth to capture more wealth.’
2
Society, Polity and Economy
The main objective of this chapter is to highlight the gap between the actual economy at the time of Kautilya (4th century BCE) that was stagnant and segmented, and the ideal economy envisaged by him—dynamic, open and efficient. The Arthashastra is an exhaustive treatise on anticipating and resolving possible problems, which might arise in bridging such a wide gap. The level of abstraction it achieves is the source of its timeless utility. Consequently, despite the absence of modern problems of pollution, population pressure and industrialization at that time, Kautilya’s Arthashastra still provides useful insights into the challenges of today’s world.
According to Knight (1947), differences in social, political or economic conditions may not matter much if the goal is simply to explain the most fundamental concepts in economics. He (p xlviii) observes: ‘The more general principles of analytic economics are simply the principles of economic behavior, of the effective achievement of ends by use of means, by individuals and groups, irrespective of social or political forms. Even under a “pharaoh”, combining absolute sovereignty with outright ownership of men themselves as well as the land and goods, much the same choices and decisions would have to be made to make activity effective rather than wasteful and futile.’ Notwithstanding Knight’s assertions, it is believed that a historical perspective is absolutely essential for understanding and appreciating the true contributions of ancient writings.
Over time, the writing style changes and even a great contribution made in not too distant a past may appear prototypical today and that should be kept in mind in evaluating the significance of the contributions of earlier writers. Additionally, over time, even important historical facts fade away from peoples’ memory and tend to acquire the status of fiction. For example, John Craig (1699) attempted to model this phenomenon and apply it to the second coming of Christ. This issue is discussed in Section 2.1. The socio-religious-political conditions prevailing at the time are presented in Section 2.2. Section 2.3 offers some limited background of economic conditions at the time.
2.1 CHANGES IN WRITING STYLES OVER TIME The fact that the Arthashastra is an ancient classic should be borne in mind. A truly historical perspective on the Arthashastra may be gleaned from the fact that it was written more than a thousand years before the Magna Carta, and almost two thousand years before the Scientific Revolution and the Industrial Revolution. The passage of time is likely to have, at least, two effects:
• achangeinthewritingstyleand
• thecreationofskepticismregardingcertainhistoricalfacts.
Writing Style: Writing style, at least in ancient India, was quite different from the one prevailing today. For example, Surendra Mital (2000, p 22-23) points out, ‘On the basis of the opinions of Kautilya expressed in the third person, the view as put forward by Hillebrandt that it is not the work of Kautilya but of a school, and this is also the opinion of Keith and Winternitz. But Kane says: “In order to avoid looking too egotistical ancient writers generally put their views in the third person.”’
Similarly, as time passes, language and style change and works, which may not be even hundred years old, may appear strange. Weintraub (1992, p 3) remarks, ‘If one looks back to the 1930s from the present and reads in the major economic journals and examines the major treatises, one is struck by a sense of “the foreign.”’ Additionally, some of the theories, which were developed during the recent past, may appear prototypical or obsolete today. As Zingales (2000) observes, ‘While the existing theories have delivered very important and useful insights, they seem to be ineffective in helping us cope with the new type of firms that are emerging.’
Skepticism: According to Stephen Stigler (1999), Craig (1699) pointed out that the passage of time might create doubts about the occurrence of past events, such as, the story of Christ. Or more recently, Einstein, in paying tributes to M K Gandhi at his death in 1948, stated, ‘The world will scarcely believe that such a man as this ever, in flesh and blood, walked upon this earth’. It is incorrect, although understandable, that many historians of economics may find it hard to imagine that a seminal thinker like Kautilya ever lived and, that too in a now developing country like India. It is truly astonishing that even many well-read individuals are not aware of the fact that both China and India experienced innovative periods very early on, very similar to the Italian Renaissance. Alternatively, imagine what would be the status of the Wealth of Nations in the year 4076 (ie. 2300 years after its publication).
Date and Authorship of the Arthashastra: Quite unexpectedly, someone in 1904 handed over a manuscript to Dr R Shamasastry, who was then the Librarian at the Mysore Government Oriental Library. He published the first English translation of Kautilya’s Arthashastra in 1915. Since then there have been controversies about the date and authorship of the Arthashastra. Many Western writers have advanced the hypothesis that it was not written during the 4th century BCE and that it was written not by one, but by many scholars. Recently, Mital (2000) meticulously examined the methods and evidence used, particularly by Trautmann (1971), to test such hypotheses. Mital concluded that the methods used by Trautmann are arbitrary and often contradictory and, therefore, insufficient to prove his claims.
So far, absolutely no direct evidence has been found against Kautilya being the sole author of the Arthashastra. And there is no evidence that it was not written during the 4th century BCE. And the indirect evidence such as the writing style of various segments of the Arthashastra is inadequate to disprove the date of its writing or Kautilya being the sole author. In other words, at present, these are merely doubts just like the doubts that someone else might have written at least some of the plays attributed to Shakespeare.
Additionally, there is no contradiction or inconsistency regarding the use of any concept in the Arthashastra1. For example, whether discussing the economic policies or the foreign policy, the use of the opportunity cost is consistent throughout the Arthashastra. In general, the probability that a book would be internally consistent with multiple authors is very low. In fact, it is a challenge even for any writer to be internally consistent2. In the absence of any other evidence, Trautmann’s hypothesis of multiple authors seems to be unjustifiable, given the impeccable internal consistency of the various concepts used in the Arthashastra.
The period from 7th century BCE to 4th century BCE may be described as India’s dynamic period, as Drekmeier (1962) has asserted. He (p 35) observes: ‘From roughly the 7th to the 4th century BC, India was the scene of the formulation and spread of a remarkable number of doctrines, pantheist and mat
erialist, atheist and rationalist. Many asserted the complete freedom of the human mind from religious doctrine and were outspoken in their criticism of the Vedas and the Brahmanical system, going so far as to call the Vedic teachers imposters.’ There were many other developments as mentioned below.
A Paradigm Shift in Attitude Towards Health Care Sage Punarvasu Atreya initiated a well-organized study of medicine in India called Ayurveda (science of life) during the 7th century BCE. This may be considered a paradigm shift in medicine since it was realized that good health and longevity depended on human efforts, and diseases were not caused by any supernatural powers and their appeasement through prayers was unnecessary. One of sage Atreya’s students, Agnivesha, wrote a Samhita (compendium) on medicine. Sometimes later, the precise date is unknown, Charaka revised Agnivesha’s Samhita (compendium), and now it is known as Charaka Samhita.
Sushruta also wrote a book called Samhita during the 6th century BCE. It contains 300 surgical procedures and 120 instruments. Sushruta is known as the ‘father of surgery’ and also as the ‘father of plastic surgery’ in India. Tiwari and Shukla (2005) state: ‘Sushruta is the pioneer of reconstructive rhinoplasty. Cutting off the nose was a common punishment in ancient India and more than 15 methods of repairing such damage are mentioned by Sushruta, akin to most modern plastic surgery techniques.’ Similarly, Kautilya realized the need to have tort laws related to malpractices. Kautilya also suggested replacing many physical punishments by monetary penalties.
2.2 SOCIO-RELIGIOUS-POLITICAL CONDITIONS IN THE 4TH CENTURY BCE There is hardly any ancient work in India on political thought, sociology or economics, which does not use the two words: Dharma and Shastra. The word dharma in general means duty, and righteousness in personal and social conduct. Ray (1999, p 10) defines dharma as, ‘It comes from the Sanskrit etymology dhr, meaning to hold. Dharma is that which holds a society together.’ He (p 12) adds, ‘It alone holds society together; violation of it shakes the society to its foundations and constitutes a mortal threat to its existence.’
Again, according to Ray (p 10), ‘The term shastra means a systematic study of the general principles and detailed organization of a specific form of human activity. Thus dharmashastra refers to a systematic treatise on the general principles and detailed content of righteous conduct. Sometimes, the term shastra is interpreted as an authoritative text, and the principles and the rules laid down in a treatise are given the status of injunctions. Thus the principles and rules of dharmashastra are not merely analytical and explanatory but also authoritative and binding in nature. This additional connotation, however, is absent in other usages of the term. Thus the principles laid down in Bharat’s Natyashastra and Kautilya’s Arthashastra are largely elucidatory and, at best, advisory.’
According to the Vedas (Brahminism), the life span of an individual was divided into four stages, namely, Brahmacharya— the stage of learning and celibacy; Grihastha—the stage of family life; Vanaprastha—the stage of penance and looking inward, and Sanyaasa—renunciation of all worldly things and detachment. Each individual following the prescribed role at each stage of his or her life implied adherence to dharma. At that time, under the influence of Buddhism and Jainism, individuals were giving up their vocations. Kautilya was particularly concerned with the ramifications of this phenomenon. He (p 405) asserted, ‘No man shall renounce his marital life [to become an ascetic] without providing for his wife and sons (2.1)’. In fact, he (p 411) prescribed a fine for such an act (definitely no tolerance for deadbeat fathers) (2.1).
The canons of Brahminism were challenged from two fronts which, according to Karwal (1966), had diagonally opposite views. Buddhism rebelled against the caste system and recommended a radical social reform: a casteless society. However, its economic vision was not conducive to economic progress since it recommended renunciation of all worldly things. Similarly, Jainism also recommended asceticism. The other challenge to Brahminism came from the school of Brihaspati, sometimes referred to as founder of the Charvaka philosophy, whose thrust is typically summed up in the maxim: ‘eat, drink and be merry so long as life is there even if one has to borrow to consume ghee, because once this body is consigned to ashes (after death), there won’t be any re-birth.’ Further, there was no heaven and no God. The followers of Brihaspati thus advocated stark materialism. Apparently, there was a considerable amount of social disorder and confusion at the time of Kautilya.
Karwal (1966) notes that during the 4th century BCE, India was divided into petty kingdoms fraught with internal unrest and mutual distrust among the neighbourly rulers. He summarizes the preKautilyan conditions as: ‘Thus, there were chaos and confusion in every sphere. The need of the time was in the political sphere, integration and consolidation, in the socio-religious sphere, reconciliation of the sectarian and caste conflicts, and, in the economic sphere, the control of economic aggressivism. Kautilya voiced this need and Kautilyanism was intended to meet it.’3
It seems that at the time of Kautilya, the caste system was not that rigid. For instance, the Sudras had a wide variety of choices regarding their economic activities. Kautilya (p 577) stated, ‘Envoys, therefore, speak as they are instructed to, even if weapons are raised against them. The shastras say that even if an envoy is an outcast, he shall not be killed (1.16).’ Similarly, he (p 421) wrote, ‘In case a Brahmin has only one son by a Sudra wife, that son shall have only one-third of the property (3.6).’ It seems that inter-caste marriages were not completely prohibited, particularly, if the upper castes were involved and a capable individual even if an outcast, could become an envoy (honorable position). However, in later years, it again became rigid and varnas degenerated into different jatis or castes and sub-castes (for details see Deshpande, 2000). Adherence to one’s assigned caste and performing the assigned role implied following his or her dharma.
2.3 ECONOMIC CONDITIONS, MARKETS AND INSTITUTIONS IN 4TH CENTURY BCE Karwal (1966) remarks: ‘Economically also, there were factors making for disintegration, partly due to the politico-socio-religious disorder and partly because the individualistic enterprise of the pre-Kautilyan period was giving way to capitalism. The free bargaining of that period was being replaced by bargaining through guilds. It was the age of guilds—guilds of artisans, of craftsmen, of labourers, of merchants and of even priests. They arbitrarily raised prices, wages, profit and interest, the merchants in particular resorting to cornering and profiteering.’4
Agriculture was the most important economic activity. Basham (1959, p 194) writes, ‘The Greek travelers were most impressed by the fertility of India’s soil and the energy and ability of her cultivators.’ Mining was particularly important for making weapons and coins for the state. The metals mined were gold, copper, lead, tin and iron. Metallurgy and manufacturing industries were getting established. Making weapons and salt, brewing liquor, weaving textiles and manufacturing jewellery were the main industries. Gambling and betting were the main service industries.
Product Markets: Merchants from foreign countries brought goods to the cities where the bidding took place. However, Kautilya was aware of the potential problems of monopoly and monopsony. He had no idea about the deadweight loss but equity considerations were emphasized.
Factor Markets: Wages, profit, interest and rent were recognized as distinct factor payments. Some individuals did work for the government in public enterprises and civil services. But a majority of the individuals were self-employed. However, Basham (1959, p 216) notes, ‘Though the basis of ancient Indian industry was at all times the individual craftsman, aided chiefly by members of his own family, larger manufactories, worked chiefly by hired labour, were by no means unknown.’ Further, ‘We read here and there of private producers who had far transcended the status of the small home craftsman, and who manufactured on a large scale for a wide market. Thus, an early Jain text tells of a wealthy potter named Saddalaputta who owned 500 potters’ workshops, and a fleet of boats which distrib
uted his wares throughout the Ganges valley; there are a few other references, which confirm that large scale production for a wide market was not unknown in ancient India.’ Basham points out that the existence of cooperatives of workmen were also common. He asserts, ‘Their existence tended to encourage division of labour; thus one man would fashion the shaft of an arrow, a second would fix the flights, and a third would make and fix the point.’
Currency: There was no inside money. The king issued silver and copper coins. The highest value coin, called pana, was rectangularshaped and was the medium of exchange and also the unit of account. According to Kautilya (p 327), ‘The Chief Master of the Mint shall be responsible for the minting of silver coins, made up of [an alloy consisting of ] 11/16th part silver, 1/4th part copper and 1/16th part hardening metal (such as iron, tin, lead or antimony) in the following denominations—one pana, ½ pana, ¼ pana and 1/8 pana [the weight of each coin being proportional to its value] (2.12).’ The king charged 8% fee for issuing currency and it appears that seigniorage was an important source of government revenue even at that time.
There was some borrowing and lending of money between individuals. Parmar (1987, p 131) states, ‘No doubt, banking facilities in the modern sense were not available in Kautilya’s time, but the use of credit and promissory notes was not unknown. Loans and credits were frequently given and a reasonable amount of interest was charged on them. The big merchants in the few large towns gave letters of credit to one another.’
Urbanization: Most of the population lived in the countryside. But there were a few fortified cities with modern amenities as well as incidence of crimes. Pataliputra was the capital of Chandragupta Maurya’s kingdom. Seleucus Nikator (successor to Alexander) appointed Megasthenes as his ambassador to the court of Chandragupta Maurya and he remained there for some time. Basham (1959, p 198-199) states, ‘Pataliputra in the time of Mauryas, according to Megasthenes, was a long narrow city, stretching nine miles along the bank of the Ganges, and reaching only one and a half miles inland.’ According to Chandler (1987), it was the largest city in the world with a population of roughly over 200,000 in 300 BCE. Book II of Kautilya’s Arthashastra has two chapters detailing the constructiondesign of a fortified city (some writers claim that this is the first datable book on civil architecture). According to Majumdar (1980, p 77), ‘Kautilya divides the city into sixteen sectors with twelve gates by means of three royal highways running east to west and three running north to south. The city was to be well provided with water, drainage, and underground passages.’ Kautilya recommended building codes to protect privacy, civic codes to maintain hygiene and cleanliness and setting up industrial zones to minimize fire hazards by limiting craftsmen to specified industrial areas.
Kautilya- the True Founder of Economics Page 4
