Kautilyanomics: For Modern Times

By Sriram Balasubramanian

India was an economic power to reckon with until its economic decline in the 18th century. What explains this long period of prosperity? The answer might lie in a framework of social and economic thought that lies buried in our ancient heritage, says Sriram Balasubramanian, of which Kautilya's Arthashastra is a major example.

Kautilyanomics for Modern Times seeks to do three things-first, to provide a structure and a context for Kautilya's economic thoughts; second, to examine his work's relevance today; and third, to do it in a way that a lay reader can follow and grasp easily. Kautilya's thought is mainly articulated through the prism of dharmic capitalism and its components-some examples include his views on global economic outlook, state-market dynamics, and sustainable growth through observance of environmental, societal and familial responsibilities.

Fathoming India's rich economic and philosophical heritage and making use of it, Balasubramanian argues, would prove to be a great asset in India's/the country's/the nation's ascent again.

• Language: English
• Publisher: Bloomsbury Publishing
• Release date: Aug 18, 2022
• ISBN: 9789354350528

Book preview

ACKNOWLEDGEMENTS

Grateful acknowledgement is made to the following for permission to reprint copyright material:

Balbir S. Sihag for tables from his book Kautilya: The True Founder of Economics published by Vitasta

L.N. Rangarajan for tables from his book Kautilya: The Arthashastra published by Penguin

Sumedha Verma for a map from ‘Uttarapath and Dakshinapath: The Great Trade Routes of Jambudwipa’ published by Swarajya

Professor Satish Deodhar, Dr Sushrutha S. and Karan Bhasin for co-authoring a section each with the author

1

Introduction

BACKGROUND

Iwas sitting on the veranda of the Madras Sanskrit College (MSC) with three things in front of me—Adam Smith’s Wealth of Nations, a one-page summary of the Arthashastra, and the buzzing Chennai metropolis. Three things that seemed extremely unrelated somehow coalesced to get me thinking: Why is ancient Indian economic thought barely mentioned when talking about the Indian economy?

The Indian growth story after economic liberalisation in the 1990s has been one of the most discussed developmental success stories in the world. Rapid development in infrastructure and technology has powered this growth over the last few decades. Be it the mobile phones that we use, the expansive highways that we drive through or the enormous shopping malls that have engulfed our cities—all of this has transformed the way we live our lives for the better. Yet the emergence of India as a global power isn’t a once-in-a-millennium event. Until its relatively recent decline in the Eighteenth century, it was a global economic powerhouse for several centuries. Angus Maddison, the renowned economist and historian known for his work on the historical gross domestic product (GDP), showcased in his research that India and China were the leading economies (in terms of GDP and GDP per capita) in the world from 0 CE until the 17th century CE (Maddison 2001). Numerous historical accounts such as those by Alexander the Great, ancient Greeks such as Megasthenes, Chinese historian and traveller Fei Xin and the Seleucids (rulers of the erstwhile Hellenistic state from Western Asia) have all reiterated this in their writings. While some have analysed the reasons for India’s economic dominance in this period, my intuitive view is that there had to have been a functioning ecosystem prior to 0 CE for India to have been a superpower back then. There had to be a philosophical and economic framework that provided the springboard for almost a millennium of economic growth. Furthermore, this would also mean that the foundations of modern economic history attributed to Adam Smith’s The Wealth of Nations can be predated by several centuries to individuals in the Indian subcontinent from an earlier era that was equally prosperous. Many other countries, Japan and China to name a few, who have a similar heritage have made efforts to document their past and learn from it. However, these questions were neither answered in history books that I was taught in my school nor the ones that I read later as an adult. It is no wonder then that I wasn’t able to find any mention of ancient thought in our contemporary academic discourse on economics.

As I pondered over this question at the MSC, it dawned on me that I was holding a one-page summary of the Arthashastra. I decided to find an answer to this question. Since there hadn’t been much work on ancient Indian economic history, I was aware of the perseverance and effort that was needed for the task. I knew I might not find the exact answer I was looking for but I was convinced to begin the journey and see how it would unfold. Thus began an endeavour to explore the tenets of the Arthashastra that took over five years. A third-century BCE masterpiece, it details the various theories of statecraft, economics and social norms that were advocated by Kautilya, also known as Chanakya, who was the chief advisor to King Chandragupta Maurya. Containing detailed policy prescriptions, the work is divided into 15 books, over 150 chapters, 180 sections and 6,000 shlokas.

This journey has been exhilarating, to say the least. The numerous translations of Kautilya’s Arthashastra were useful for understanding the geostrategic elements of the text, yet very little of it had explored the nuances of economic policymaking in a structured manner. ‘Structure’ is perhaps the biggest challenge in deciphering the Arthashastra and I realised that if one were to do that successfully, one needed to have understood modern economics and economic history, and also have cultural and linguistic knowledge of the subject. Moreover, I firmly believed that if one were to critique or analyse such a masterpiece, it was necessary to develop expertise in these areas to do justice to the text.

Given my background in economics, I was confident of the first criteria. I had always been fascinated by economic history because economics is a by-product of human interactions which is to an extent rooted in civilisational ethos. The modern economic thought is often so quantitatively driven that it is hard to get people to look beyond regressions and economic models. Many people tend to forget that no matter what the models say, it is the output of individual human interactions that eventually aggregates to form the macro-economy. I had been thinking along these lines since the global financial crisis of 2007-2009, which highlighted the fallibility of one-size-fits-all solutions. More fellow economists have acknowledged the need for more customised solutions to socio-economic problems. My research on the economics of happiness, well-being and inequality is an extension of this thinking.

On the second criteria, I was well versed in the cultural context. On the linguistic side, I was convinced that one had to have a reasonable knowledge of Samskritam¹ (संस्कृतं)—and read the text in the original Devanagari script. The poetic form of the text makes it impossible for the true nature of the text to be understood through a translation(s). This led me to the realisation that I had to refine my knowledge of Samskritam (I had done a part-time diploma from Madras Sanskrit College many years ago) to have a more comprehensive grasp of the subject. Besides taking additional courses, this pursuit led to interactions and discussions with a variety of Samskritam scholars, economists, historians, translators and even Indologists, all of whom brought various new perspectives on how to approach the subject. These experiences include driving almost three hours from Washington DC to New Jersey to participate in one of the annual Samskrita Bharati² events where individuals read, communicate and write Samskritam, and interacting with linguistic experts from across the globe. Though I have miles to go before mastering Samskritam, improvement in the language has been a great asset in my pursuit of understanding the Arthashastra.

Enhancing my expertise in these criteria is the primary reason why it has taken such a long time to write this book. I could have easily written a few Google-searched op-eds in news publications and compiled them into a book, pretending I knew everything but my conscience wouldn’t have permitted me to do so. I have lived, breathed and experienced the text over the last five years, and such a beautiful journey is priceless in its purity. Much remains unexplored in the Arthashastra but using these skill sets, I have made a humble attempt to dive into Kautilya’s brain to extract his ideas and highlight them in a structured manner.

BOOK OVERVIEW

The book aims to address three key things. First, it attempts to provide a structured interpretation of Kautilya’s economic thought. Second, it seeks to contextualise it within the realm of contemporary economic trends and thought in India. Third, it tries to provide the common reader with insight into Kautilya’s thinking in an easy-to-read yet comprehensive manner. This book attempts to look at Kautilya’s thinking and its relevance today from a holistic perspective.

The first few chapters outline the big-picture ideas presented in the book followed by a perspective on ideas from the pre-Kautilyan era, an introduction to the Arthashastra (for the uninitiated) and a glimpse into the challenges in interpreting the text. The next chapters offer an overview of the philosophical frameworks that form the foundation of Kautilya’s dharmic capitalism. The subsequent chapters deal with the three key elements of dharmic capitalism: wealth creation, sustainable growth and welfare, and a rule-based non-interventionist state. In wealth creation, some of the principles of trade that Kautilya used and their relevance today are discussed. Following this, the importance of gold in today’s India and how Kautilya’s ideas could be used to leverage this asset are elaborated upon. The next chapter deals with Kautilya’s views on savings as an instrument of growth—something that is very relevant to the Indian economic story. Subsequently, Kautilya’s views on sustainable growth and welfare through environmental, societal and familial responsibilities are explored. Furthermore, the concept of redistribution of wealth (as a consequence of inequality) in contemporary India is analysed and how Kautilya’s ideas can be used to address it. The role of the rule-based yet non-intrusive state via the rule of law and enforcement of contracts in Kautilyan times and its relevance to today’s times is looked into. Towards the end of the book, some areas of research that could be pursued to expand the scope of Kautilya’s economic thinking are explored. The hope is that this book will provide a structure to understanding how Kautilya might have viewed today’s challenges and addressed them.

RELEVANCE

One of the key explorations of this book is the Arthashastra’s relevance to today’s economy. This is tricky to assess since it is highly subjective, depending on one’s perspective and expertise. Furthermore, the large contextual differences between ancient times and today’s world necessitate the need to extrapolate to bring the pieces together. Yet I think that these extrapolations are worth the stretch because they help to understand what Kautilya would have thought in today’s times. This is similar to how economists try to interpret Adam Smith’s views in the current context. In this backdrop, there are three broad questions that I have used to gauge this