Thoughts on economics and liberty

Category: Books

If you’re in Delhi on 10 December please attend the release of Sagarika Ghose’s book on Indian liberalism

Sharing for the Delhi liberals who may follow this blog. Although I’ve not yet read Sagarika’s book (which I’ll get to read when I reach Delhi in end-January), I think Sagarika has a broadly liberal inclinations including for economic liberty. I will comment further when I read the book and review it. In the meantime, if you are a liberal are are in Delhi on 10 December, please attend this event (and do buy and read the book – that’s crucial to truly understand Sagarika’s views) and let me know what you think.

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A 2007 PhD thesis on Kautilya’s Arthashastra – interesting summary of the ancient Indian state and economy

I’m always interested in analyses of the Arthashastra. Reporting this here for my future reference. The thesis confirms my readings so far from a variety of sources. The ancient Indian state can be best characterised as a pre-liberal capitalist state. The moot question relates to the level of freedom of thought and speech. It appears that there was significant freedom of thought and religion, but there was somewhat limited freedom of speech.

By Sunny Jiten Singh

SOME QUOTES (not necessarily linked to Arthashastra)


The responsibility of the raja in the Vedic sources was primarily that of a leader in battle and the protector of the settlements.

it is also important to note the Aitareya Brahmana literature, which stated that, “state and kingship had emerged from military necessity.”25 In exchange for the protection of people, the king received obedience and their contribution to the maintenance of his reign.


After taking into full consideration the person and the offence, the motive, seriousness or lightness (of the offence), the consequences, the present (effects), and the place and time, the magistrate shall fix the highest, the lowest and the middle in the matter of punishment remaining neutral between the King and the subjects.


the king, at least in theory, was considered subordinate to the popular will of the people, as mentioned in the Kautilya Arthasastra


“Local circuits of trade linked the villages, gramas, with the local market centres, nigamas, and these in turn with the towns, nagaras, the commodities in circulation being largely items of basic consumption.“39 Trade was certainly not limited by India’s natural waterways; in fact, trade flourished along the Ganges and river traffic “provided a wider circuit of exchange.”” While some scholars doubt the extent of trade with neighboring empires, it must be pointed out that, well before the Vedic age, archaeological evidence of clay seals throughout the Indus Valley and the ancient states of Mesopotamia like Ur, Lagash, and others suggests a strong trading environment between the inhabitants of theIndus Valley, specifically Mohenjodaro/Harappa and the Ancient Mesopotamia.


Kautilya advocated separation of church and state


Surprisingly however, Kautilya did not mention much about the importance of education as an important element of statecraft. [Sanjeev; this is important. The king in Arthashastra DOES NOT involve himself in education]


As described in Fragment I, Diodorus II, “among the Indians officers are appointed even for foreigners, whose duty is to see that no foreigner is wronged. Should any of them lose his health, they send physicians to attend him, and take care of him otherwise, and if he dies, they bury him, and deliver over such property as he leaves to his relatives.”103 [Sanjeev: great respect for foreigners]


This is precisely why Kautilya suggested that the monarch set up a recruitment policy to “establish (each) department with many heads and without permanency (of tenure of office).”5


“They dislike a great undisciplined multitude, and consequently they observe good order. Theft is of very rare occurrence. Megasthenes says that those who were in the camp of Sandrokottos, wherein lay 400,000 men, found that the thefts reported on any one day did not exceed the value of two hundred drachmae…”69 

“Their houses and property they generally leave unguarded.”72

[Sanjeev: this reflects the HIGH levels of morality in ancient India- achieved through effective governance systems.]


“…of several remarkable customs existing among the Indians, there is one prescribed by their ancient philosophers which one may regard as truly admirable; for the law ordains that no one among them shall, under any circumstances, be a slave, but that, enjoying freedom, they shall respect the equal right to it which all possess: for those, they thought who have learned neither to domineer over nor to cringe to others will attain the life best adapted for all vicissitudes of lot: for it is but fair and reasonable to institute laws which bind all equally…” 83 [Sanjeev: Ancient India DID NOT authorise slavery]

HOWEVER: “Scholars contend that despite the comprehensive welfare provisions in place under Mauryan rule, slavery was commonplace in ancient India. The issue of slavery in ancient India remains contentious amongst historians.”

it was noted by Megasthenes that the populace in India during his stay seemed generally content. Indeed as noted, one can gather this to be true because stringent control of the state in fact produced a protected society, thus Megasthenes’ further claim that crime was rare. The permanency of the message is striking as five centuries later, Fa-Hsien and his companions would also note that, “the inhabitants are prosperous and happy. [Sanjeev: a well administered country was India]


“…the Administrator should cause to be entered in the Register the number of villages, classifying them as best, middling and lowest…grains, cattle, cash, forest produce, labour and produce in place of tax.”7 Kautilya further detailed what was taxable from the countryside so that his superintendents knew exactly what constituted revenue for the state. He told them, “the aggregate tax, the one-sixth share, provisions for the army, tribute, tax, the ‘lap’, the `side’, compensation for loss, presents, and income from stores constitute revenue from the countryside.”8 The “one-sixth share” in the sentence above refers to bhaga, which is to be understood as a share of produce from private lands, usually one-sixth. The one-sixth share is not fixed, as the tax fluctuated depending on the condition of the countryside. In fact, it went as high as one-fourth or one-third from the most fertile land, “according to yield” on an average land. Not much was expected from un-arable land which, as Kautilya stated, was better suited for infrastructure.

Despite comprehensive taxation, “taxes were intended to be light and equitable. The King is advised not to put too great a burden on the people, nor to resort to unrighteous and covetous methods.22 This sentiment was affirmed by Kautilya, who wrote that, “the King should exempt from taxes a region laid waste by the army of the enemy or by foresters, or afflicted by disease or famine.”23 Furthermore, Kautilya reached out directly to farmers when he said, “And he [referring to the King] should favor them with grains cattle and money. These they should pay back afterwards at their convenience.”24

[Sanjeev: this was a sophisticated tax system, underpinned by the ability to pay but never excessive, with one-third being the max. Sunny further details how taxation worked. Worth a read.]

…he should ask money of the rich according to their wealth, or according to benefits (conferred on them), or whatever they may offer of their own will [Sanjeev: this was for an emergency]

As Kautilya noted, “even actors, singers and prostitutes are to pay half their income.” [Sanjeev: Not quite sure about this – but appears that some categories of labour were at least partly supported by state regulation – so presumably they had a greater obligation to pay tax – need to check this when I find time]


The merchants dealing in gold, silver diamonds, precious stones, pearls, coral, horses, and elephants were to pay fifty karas. Those that trade in cotton threads, cloths, copper, brass, bronze, sandal, medicins, and liquor had to pay fourty karas. The trader in grains, liquids, metals and he who deal with cart were to pay thirty karas. Those that carried on their trade in glass (kaca) and also the artisans of fine workmanship, as well as those who kept prostitutes were to pay ten karas. Those that traded in fire wood, bamboos, stones, earthen pots, cooked rice, and vegetables had to pay five karas. Dramatist and prostitutes were to pay half their wages [Source]


The Kautilyan police state was almost total. There was no room for anything resembling the modern Bill of Rights because individual liberties like freedom of speech and privacy were absent in the Kautilyan State. [Sanjeev: this is natural, given the constant fear of enemy attack in his times. The idea of liberty requires a strong state that is fully capable of performing its security functions. When security is compromised, freedom generally suffers.]


…in all cases, he should favor the stricken (subjects) like a father.102

And the king should maintain children, aged persons and persons in distress when these are helpless, as also the woman who has borne no child and the sons of one who has (when these are helpless).’°3

And those women who do not stir out — those living separately, widows,
crippled women or maidens, – who wish to earn their living, should be given
work by sending his own female slaves to them with (a view to) support them.

Section officers inquired about each family’s income and expenditure to determine each family’s living conditions. Furthermore, the use of local and state officers provided
for an extremely structured welfare state.


Kautilya gave due attention to the physical attributes of cities and towns. In other words, the dwellings in cities and towns had to not only adhere to certain criteria for maximum benefit of the people but at the very least had to provide resources within their reach.


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The capitalist economy of Ram Rajya as detailed in Valmiki’s Ramayana

I’m starting to study the Ramayana economy. Here are preliminary notes from this version of Ramayana. There is not the slightest hint of socialism in Ram Rajya.

Ramayana versions

Griffith version.

A modern translation.


The city had beautiful and massive gates and charming markets;

Innumerable ambassadors and merchants dwelt there and people from many lands traded peacefully within its walls.

Let beautiful and eloquent women and merchants follow in his train, together with rich traders who can set up stores stocked with those things necessary for the army of Shri Rama. [Sanjeev: The army did not produce its own stocks – these were purchased from traders]

Of a celestial aspect, it was filled with different kinds of merchandise, and traders from every country came there. [Sanjeev: Ram Rajya was a FREE MARKET]

In the market, in the houses, at home and abroad, all spoke only of the coming proclamation of Shri Rama as ruler.

Those cities with their innumerable parks, filled with vehicles and well-stocked markets,


0 Foremost of Men, I give  thee gold and silver coins; take with thee a quantity of gold and  set out, having furnished thyself with supplies of weapons, food and conveyances. [Sanjeev: the idea here is to go and BUY these things from the market, INCLUDING WEAPONS]


The city was enclosed by strong fortifications and a deep moat which no enemy, by any expedient whatsoever, could penetrate.


On a kingdom destitute of a  ruler, clouds charged with lightning and thunder pour down  rain and hail! In a rulerless land, the peasants sow no grain ;  fathers and sons oppose each other and wives no longer remain  subject to their husbands. In a rulerless land, there is no  peace, thieves and brigands exercise their power; women,  unfaithful to their consorts, leave their homes! Where women  lose their virtue, trust is also lost. In a rulerless land, there  are no assemblies, nor do the people visit pleasant parks and  gardens or build temples and homes of rest. [Sanjeev: People build their own temples – at least for the most part, not the king]

In such a land, the self-controlled brahmins offer no sacrifice nor do those of pious vows, assist them in the sacred rite. In a rulerless land, the brahmins do not receive their due share of the sacrificial fees ; neither do actors nor leaders of song or dance find joy in such a land. The holy festivals promoting the land’s prosperity are no longer held, nor do those reciting the holy tradition give satisfaction to their hearers.

In a rulerless land, virgins adorned with golden ornaments, do not frequent the flower gardens at close of day, nor do the devotees of pleasure, riding swift chariots in company with charming damsels, repair to the forest.

In such a land, the wealthy are not protected, nor does the husbandman, the cowherd and the shepherd sleep at ease with open doors.

In a rulerless land, great elephants of sixty years of age do not wander on the royal highways adorned with tinkling bells. The twanging of the archer’s bow is no longer heard, nor do the merchants travelling the roads in security bring their goods to sell from distant lands. [Sanjeev: Ram NEVER trades or produces anything: he provides security to traders]

In a rulerless land, the self-controlled sage, fixing his mind, in contemplation, on his identity with the all-pervading spirit, receives no hospitality when night falls.

Wealth is not unassailable, nor are man’s needs supplied, the armies have no leaders, nor can they match the enemy in war.

In a rulerless country, no man, gorgeously apparelled, riding in an excellent chariot, drawn by swift steeds, can go forth without fear; [Sanjeev: CLEARLY, THE KING’S MAIN FUNCTION IS OF SECURITY] nor can the learned disputant propound his doctrines in the city or forest.[Sanjeev: the king is not busy running schools or colleges]

In such a land, garlands and sweetmeats, alms or other gifts, are not offered by worshippers as a sacrifice, nor in the springtime, do the princes, like blossoming trees, adorned with sandalwood and ambergris, walk abroad.

A kingdom without a sovereign is like a river without water, a forest without vegetation, or a cow without a keeper. As a chariot is known by its standard, as a fire is indicated by smoke, so the king, a light representing the kingdom, has been extinguished.

No man loves his own kind in a rulerless land, but each slays and devours the other. [Sanjeev: this is the basic theory of Hobbesian social contract, repeatedly in various Indian scriptures]

Atheists and materialists, exceeding the limits of their caste, assume dominion over others, there being no king to exercise control over them. [Sanjeev: this sounds like a bit of a problem – but note the king ONLY intervenes when they assume “dominion” over others. There is no prohibition in being an atheist]


“”A wise and learned king, having obtained and ruled the entire earth, properly by righteousness and by administering justice to the people, indeed ascends to heaven when detached from the mortal body.” [Source]

“The king will have great renown for he is the ruler of the righteousness of these people, a protector, a respectable and adorable one, and as he wields the sceptre of justice,” [source]

As the eyes continuously point out what is dangerous to the body, promoting its welfare, so the king ever regards the advantage of his people, promoting truth and ethical conduct. [Sanjeev: the king’s ONLY role is to promote good conduct]

The king leads his people in the path of righteousness and guides them in integrity, he is the parent of his subjects and the greatest of benefactors. [Sanjeev: This is where we can differ radically from Ram Rajya, since the king is a servant of the people, not master]

In the path of duty he excels even Yama, Kuvera, Indra and Varuna. The king, discerning good and evil, protects his kingdom [Sanjeev: the defence function, again]; bereft of him, the country is enveloped in darkness. 0 Holy Vasishtha, while the king lived, we obeyed thy! mandates as the sea keeps within its boundaries. 0 Great Brahmin, consider our words and the danger threatening this, our kingdom, and appoint someone as king if he be of the house of Ikshwaku.



“‘The king, O Bharata, should always act in such a way towards the vaishyas [merchants, commoners] so that their productive powers may be enhanced. Vaishyas increase the strength of a kingdom, improve its agriculture, and develop its trade. A wise king levies mild taxes upon them” (Mahabharata,XII.87).

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Have finished initial work on book for children + training manual. Have put DOF on hold once again.

A couple of months ago I had set myself the goal to finish up a first draft of the book on economics for children and the SBP training manual. I also wanted to get on to a further revision of DOF since I’ve made extensive notes over the past few years which I’d like to include in that book.

I’ve finished the first drafts of the first two (here and here). Happy to receive comments on both. I’d like to acknowledge the excellent materials and additional questions from Joyson Fernandes for inclusion in the SBP training manual.

But it is now already September and I should now focus my spare time on writing for newspapers about SBP, instead of taking up the revision of DOF which I now believe I should resume after the 2019 parliamentary elections.

So DOF is on hold once again.

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