Thoughts on economics and liberty

Category: Books

Review of Sagarika Ghose’s book, “Why I am a Liberal”

Sagarika has put in her heart and soul into an excellent book that I strongly commend to every Indian. The book is an engaging attempt to educate a country that has understood liberty only imperfectly through sporadic literary flourishes but has never really grown out of its feudal mai-baap mindset towards government. Gurcharan Das’s India Unbound was perhaps the first popular book to promote liberty but in many ways Sagarika’s book is more urgent.

Sagarika doesn’t pull punches. All political parties get their dues. Some people on social media seem to think that Sagarika supports Congress. I couldn’t find any such evidence or any single-minded opposition to BJP. People should read the book before passing judgement on Sagarika’s political preferences.

The book starts with enormous clarity of thought. “The argument of this essay is in favour of social and economic liberalism in the belief that the two cannot be segregated”, she says. This is correct. Freedom is indivisible. We can’t be free in thought without being free in action – in all our actions. The only restriction to action that is acceptable is when someone physically harms another.

Sagarika is widely read. I am almost jealous that she has met and interviewed Isaiah Berlin. (I assume she must have read his Four Essays on Liberty although these are not specifically referenced.) She has also studied Rajaji and Masani and believes that Gandhi is the best example of a liberal leader that India can offer. “For the purpose of this essay I have chosen to emphasize the Gandhian definition of the term ‘liberal’. Mohandas Karamchand Gandhi was, in many ways, the most successful liberal politician of all time”. This view is largely correct and I recognised this in my 2008 book, Breaking Free of Nehru, when I contrasted Gandhi’s small government ideas with Nehru’s grandiose ambitions for the state.

But after scouring Gandhi’s complete works (a million words, now digitally available) I’ve become increasingly clear that Gandhi’s economic ideas were wrong. He tried to invent a “new” economics in ignorance of the marginal revolution or even Kautilya’s Arthashastra. And he badly misrepresented Adam Smith without reading him. He wrote: “What Adam Smith has described as pure economic activity based merely on the calculations of profit and loss is a selfish attitude and it is an obstacle to the development of khadi …the tactics … adopted in a profiteering business have no place in khadi activity. For instance, cheating, fraud, falsehood, adulteration, exploiting people’s addictions or their baser feelings things practised in mill industries and ordinary trade—are to be completely shunned in khadi activity.” This is almost a Marxian diatribe but its origin lies in Gandhi’s ignorance of economics, even though many of his intuitions about individuals were right.

The best and most passionate sections of Sagarika’s book relate to freedom of expression and social liberty. And she has superb sections on the liberation of farmers and women. In these matters her position regarding reforms is almost entirely consistent with our party’s declared positions.

The liberal concept has, however, evolved significantly over the past fifty years into ever more market-friendly directions. When I met her for the first time in October 2018, I suggested that she explore economics in some detail. My book on economics for children from age 10 to 100, Seeing the Invisible, could provide a helpful introduction. I’ve particularly recommended James Tooley’s The Beautiful Tree – a book that develops Gandhi’s insights about school education and opens one’s mind to the brilliant world of accountability that the private sector has built. In this process of future study, I hope Sagarika can accept our party’s position that the government should not only get out of managing education and health but even things like water and roads (wherever that is possible).

On her own volition, Sagarika has recognised the gurukul system and asked in the book: “the liberal must also raise the question: isn’t first nationalizing education and then expecting that the autonomy of those nationalized (or government-controlled) educational institutions will be respected a bit of a pipe dream?” The answer to this question will show her (and India, through her) the way forward if we want to educate our crores of ill-educated youth.

There is one particularly valuable contribution Sagarika has made – through her research on the Indian origins of liberalism. I’ve been trying to jointly write a paper on this topic along with fellow liberal Sanjay Sonawani. Sagarika’s book will add significant value to our research.

Her section on women’s liberty is very powerful. She notes, “Illiberalism towards women … cuts across political parties” and that “[by] imprisoning women in the ladies’ compartment or ‘zenana dabba’ of sarkari feminism, patriarchal tradition is only perpetuated and strengthened”. Therefore, alarmingly, and“[p]erhaps because of the rising tide of conservatism, Indian women are increasingly choosing not to work. Contrary to global trends, women’s participation in the workforce in India has been declining in recent decades, making it more difficult for women to seek independence. Today, India has one of the lowest rates of women’s participation in the workforce in the world.”

There is one difference with her approach to women that I must note. She believes that “allowing … women into Sabarimala by the Supreme Court is an important reaffirmation of Hinduism’s inherent spiritual democracy”. Our party believes that it is not the job of a court to reaffirm any spiritual matter. The government and courts must stay strictly out of all religious matters unless physical harm is involved.

The book’s sub-title claims it is “A Manifesto for Indians Who Believe in Individual Freedom”. Perhaps I have a different notion about this and consider that a manifesto should involve a structured set of ideas for reform. I have been a liberal manifesto writer for over twenty years now. I began in February 1998 when I determined to build a liberal political party for India. This led to the 1999 People’s Manifesto, in consultation with around 500 people (this document is available on the India Policy Institute’s website). In 2008 I wrote Breaking Free of Nehru which provided a clear action plan for India. In 2013 I used all this knowledge as well as Sharad Joshi’s work to write the Sone Ki Chidiya reform agenda. All this work then fed into the Swarna Bharat Party’s manifesto. I suggest that the book is a great essay but is probably not a manifesto. Or maybe it is a different type of manifesto.

I have another comment to make. The book educates and exhorts but stops short of proposing a vehicle to take this forward.

In 2004 I wrote that a liberal is one who politically fights all his life for liberty. No great liberal merely wrote books. Therefore, exhorting corrupt socialist parties to adopt liberalism is not the way out. And it is not as if people haven’t tried to guide them. I personally explained these matters and handed over the Sone Ki Chidiya agenda in July 2014 at Delhi’s Ashoka Hotel to Jitendra Singh, Minister of State for Prime Minister’s Office. I also corresponded and spoke with Vinay Sahasrabuddhe who held the pen on BJP’s 2014 manifesto. But the BJP is not interested in reforms. It is a political beast for self-aggrandisement of its leaders, with absolutely no concern for the people. The same goes with Arvind Kejriwal whom I met in 2012, with similar results. The socialists will not change their spots.

India wont’s become free unless a national liberal party comes to power. It is time for action. I hope Sagarika will join politics and directly take India forward in the direction she has outlined.

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Quotes and extracts from Sagarika Ghose’s “Why I Am a Liberal: A Manifesto for Indians Who Believe in Individual Freedom”

I’m making notes here, which will inform my book review:


“The argument of this essay is in favour of social and economic liberalism in the belief that the two cannot be segregated”

“The liberal, as we have been emphasizing, argues for a limited government—a limited role for the state—for the primacy of individual freedom and individual enterprise to create welfare, uphold justice and to awaken society’s moral sense.”

“The market works precisely because no economic actor can claim omniscience or claim to know exactly what all consumers want. Therefore, the entrepreneur seeks to find incremental improvements to a product here or a service there.” [She is willing to have both the government and private sector compete in education and health. She does not agree to the state setting the school or university curriculum. However, she is not for full privatisation of these sectors.]

She rejects all identity politics and collectivism. “In the end, justice and liberty for all is the only possible sustainable politics that provides a permanent dividend.” One can agree with her fully on this.

“Youth today are hungry for inspiring idealism. If liberals can’t provide it, power-brokers will fill young minds and use them as cannon fodder for their own narrow political games.”  This is where liberalism should come in.

“If the government and politicians remain determinants of our cultural and moral values, individual morality will disappear down the drain,” One can fully agree with this

Following the tradition of Gandhianism and Trusteeship

“For the purpose of this essay I have chosen to emphasize the Gandhian definition of the term ‘liberal’. Mohandas Karamchand Gandhi was, in many ways, the most successful liberal politician of all time”. [Sanjeev: I have shown how Gandhi, in his deep disregard and ignorance for economics – he refused to read Adam Smith but criticised his work vehemently. He wanted to impose his personal opposition to technology on others. He wanted business to do things that may not be in its interest, such as “trusteeship]

“Not only the growth of the cake but also the equitable distribution of the cake is also what Rajaji meant when he spoke of the ‘trusteeship of the rich”

“The Big State, always in the hands of some political party or another with its own motives and ideologies, should not run all activities that are needed for peoples’ welfare as amonopolistic charity paid for by taxes. This is where Rajagopalachari’s notion of trusteeship of the rich [Sanjeev: this is originally Gandhi’s notion, not Rajaji’s] comes in which means the wealthy must set up institutions out of a sense of social conscience.”


“Parties see the state or the government as a source of power, and seek to bribe or coerce citizens as a way only to retain power. When vote banks are the only prisms, individual citizens disappear from view. Only vote banks are visible, individual citizens are invisible.” [She has a good grasp on the idea of collectivism vs. individualism]

“The High Command structure of parties is reflexively resistant to talent because talent is a disruptive force and implies a threat to the illiberal Supreme Leader.”

Where I don’t agree with her

“The ‘sab neta chor hai’ is a highly anti-democratic sentiment.”  [I can understand where she is coming from, that everyone in government must be assumed to be innocent till proven guilty but Sagarika is wrong on this in the case of socialist India. I was within the IAS and I KNOW that all political leaders are crooks, even though some may not directly take bribes. The system MAKES THEM crooks (see Chapter 5 of my book, BFN). It is not anti-democratic to speak the truth]


She definitely does not take the side of any party. She has criticised all parties without pulling punches. Whether it is Indira Gandhi, Mamata Bannerjee, Dev Kant Barooah, Jayalalitha, Kejriwal – no one is spared.

Obviously, and for good reason, she focuses on the enormous failures and aggressions against liberty of the Modi government. One agrees with her on her entire political approach.

On the role of government

“the benefits of yoga are undeniable, but should the taxpayer’s money be spent on yoga events on a national scale?” [One can fully agree on such matters with her]

She hits out very vigorously against Big Government, e.g. “The drive across the world is how to make governments more transparent and accountable to citizens. In sharp contrast today the reverse is true in India. It is citizens who are forced to be more and more transparent and accountable to government.” [This is really good]

On the defence of property rights

“Think of the hundreds and millions of cattle in India, including cows and buffaloes. Should farmers not be free to sell them once they have reached the end of their productive period?Are these rules not an assault on the property rights of farmers?”

On governance

She has only a limited discussion on governance. Nothing on electoral reforms, nothing on administrative system reforms. But there is a discussion on shutting down some Ministries.

  • She argues for shutting down HRD and I&B Ministries [But she seems to support making AIR/Doordarshan independent like BBC but that’s a really bad idea. They should be shut down. Period.]


“A free mind is a necessary precondition for a free market.”  “Respect for dissent is the hallmark of the liberal.” “The crackdown on humour and satire has taken place across political lines, and ‘secular’ governments have been as repressive as ‘nationalist’ ones.”  She laments India’s extremely low levels of press freedom. The book has an extensive discussion regarding censorship/ banks and such restrictions on individual choice (except in schools and health). She is obviously against any internet shut downs. (“In 2017, the Internet was shut down sixty-nine times, the maximum number of shutdowns taking place in Jammu and Kashmir”).

“the question arises of whether governments exist to ‘protect sentiments’. If the state can ban goat slaughter for mutton, is this one step away from hypothetically banning the azaan inmosques because ‘sentiments of Hindus’ are being hurt, or hypothetically banning Durga Puja celebrations because ‘sentiments of iconoclasts’ are being hurt, or banning the sale ofalcohol because ‘sentiments of teetotallers’ are being hurt? Is the Big State, a guardian of sentiments?”

I also agree with her view that: “The anti-defection law is another instance of ‘illiberal secularism’—how secular governments have often taken illiberal actions.”


Where I agree with her

“The Modi years have seen the growth of a massive government whose every new initiative is bringing ever more layers of officialdom, inspectors, permits and rules. It has been called ‘saffron socialism’ in full bloom, a Big State unwilling to let go of, say, the banking sector or even properly set Air India free from control even as it offers it for sale.”

“Modi promised ‘minimum government, maximum governance’ but suddenly the Hindutva nationalist state seems to be a monster state, its finger in every pie from education to culture to yoga to food choices. This is an even larger government structure than the one created by Indira Gandhi.”

She is strongly critical of the slow disinvestment process.

Where I differ with her

“The journey to prosperity through the market may need to be balanced with government responsibilities in education and public health, in the form of the democratic welfare state.The liberal is open-minded on the need for the government to shoulder its responsibilities. Pure market economics, as pragmatic liberals understand, could in some instances drastically widen inequality without, as Amartya Sen points out, accompanying public investment in health and education.”… “the struggle against injustice has to be connected with constructive demands for basic entitlements.’ The delivery of these basic entitlements do need to be addressed by governments.”

These are pretty loose statements. There are no entitlements. There can be a social insurance program. Further, I object to citing socialist Amartya Sen on matters (such as education) where his ignorance is colossal. She needs to read James Tooley at the minimum, if not Friedman and my work.

“what is needed is to dismantle the entire system of controls which is creating and sustaining these disastrous shortages in the supply of quality higher education. When the supply of higher education is left entirely to the government, how can there be equality of opportunity given that demand far outstrips supply?” This is good.

But she is happy for AIIMS type institutes to be set up by government: “education is a sector from which the government cannot and should not escape responsibility.” “Both the UPA and NDA governments committed to creating more AIIMS-like institutions, but the promises have not been met.” ][This is entirely wrong. The government should not be involved in setting up or managing any educational institution.]

But I do note that she’s at least asking the question: “Yet the liberal must also raise the question: isn’t first nationalizing education and then expecting that the autonomy of those nationalized (or government-controlled) educational institutions will be respected a bit of a pipe dream?”

She then identifies the gurukul system of India: “Premodern India didn’t really have any institutions of higher learning beyond the gurukul,”


Sagarika cites Yascha Mounk and in fact recommended (when I met her in October 2018) that I read him. I have commented briefly here on Mounk.



Taken from here.

Throughout India’s post-Independence history, the Big State or Big Government has constantly sought to increase and centralize its powers at the expense of citizens’ individual freedoms. Jawaharlal Nehru, even though he was an idealistic constitutional democrat, created the policy and intellectual space for the Big State because of his belief in a socialistic centrally planned economy. Indira Gandhi used agencies of state power, such as ministries and parliamentary institutions to push her ‘Indira revolution’. The Narendra Modi-led BJP has taken state power to new maximalist heights to create a government that pushes its own socioeconomic ideological priorities, through many government agencies. The administrative prowess of the Big State inevitably tends to weaken due to gross government overreach.

As Mahatma Gandhi warned, the danger with the expansion of the powers of the state is that it comes with the expansion of the government’s capacity to use coercion. Coercion takes various forms such as denial of various permissions and harassment of citizens by officials. The government is the only entity in a democracy that is legally empowered to use force and carry weapons. Thus, when the power of this legally armed entity increases exponentially, citizens have reasons to worry. Those of us enamoured of the ‘danda’ to rule India only need to wait until the blow of the danda falls on our own heads to really understand what it feels like. The Big State’s capacity for violence needs to be powerfully checked by the rule of law and solid constitutional safeguards on the limits of power. If it is not, then violence tends to become normalized, even legitimized, with the continuous expansion of the state because the state or government begins to coerce citizens to impose its own priorities.

Also, once it has expanded, since the state still can’t satisfy everybody, some groups are inevitably left out, leading to disaffection – as we have seen in the Jat, Patidar and Maratha protests. This sense of injustice and frustration begins to grow when some groups get state benefits and some don’t.

The Big State is invariably in the grip of the ruling party, and when the government or state becomes too powerful, politicians who control this Big State gain enormous powers over citizens’ lives. As Gandhi believed, the more power is centralized in the government, the more is the government’s potential for unleashing violence and coercion on its own citizens.

Government powers can be used to arrest cartoonists, imprison dissenters, harass citizens through government agencies, deny the cause of justice when ruling party politicians are involved in illegalities (as we have seen in riot cases), give government agencies the power to stage armed ‘encounter’ killings or killings outside the judicial process, deny passports, cancel FCRA licences for NGOs, slap sedition charges on students, writers and intellectuals and come up with policies that take a severe toll on citizens’ well- being.

Censorship can be imposed, hate-speak can be deployed from the bully pulpit and public places can be summarily shut down. Amartya Sen has called the demonetization drive of the Modi government a ‘despotic act…an act that undermines notes, undermines bank accounts, undermines the entire economy of trust.’

Why does a big government tend to cause alienation? This is because a Big Government creates a feeling of loss of individual agency and that one is being controlled by vested interests, elites, power brokers, et al. Citizens feel powerless. Citizens also experience a growing sense of frustration that even though theoretically in a democracy they are told they are the masters of the government, yet in reality, they are not able to get the government to deliver for them or meet their expectations or make politicians fulfil their promises.

This leads to even greater support for populist leaders to rise, on the plank of the disaffection created by the Big Government, which in the end only benefits those in power. Populists seize on the inability of the state to deliver, but when they come to power they put in place their own set of controls. The end result is that the scope and arbitrariness of state power or government power only keeps expanding.

What’s the answer? What’s the right combination in the role of the government? The liberal, like the thinkers in Hindu traditions, believes it is the quest for answers which is more important than the answer itself. When we seek answers, we don’t deny that knowledge is not possible but that it is contextual, so even if we hold strongly to our beliefs, we cannot become blind or dogmatic; we should be willing to test our ideas, respect the right to dissent and not forcibly impose ideas. This is why liberals, as a first principle, seek a limited government, not a Big Government which curtails individual freedoms in personal, social, economic and political choices. Often, absolute certainty among central planners or despots inevitably leads to disruption of individual freedom and economic markets. Choice becomes redundant and citizens are deemed nothing more than sheep to be guided and deployed for whatever reason the planner or supreme leader thinks appropriate.

The answer is not in Big Government or statist solutions or in asking for government protection but in ourselves and the power of what we can do together. This means realizing the importance of liberal, democratic citizenship. The idea of India as we have seen is neither nationalist nor political, instead it is civilizational. It’s an idea that harks to the pluralist ancient genius of a subcontinent where freedom, iconoclasm and rebellion have always been celebrated, an idea that tries to be a beacon in the world. The subcontinent’s long tryst with individual liberty and autonomy was a tradition that Gandhi and our liberal ancestors reignited for the modern era.

Brilliant minds down the years – scientists, doctors, engineers, social scientists-have often believed they had the ultimate answers and should refashion society according to their ideas. A belief in certainty led to many ways of ordering society – along communist or fascist lines. Yet, in subcontinental Hindu, Bhakti and Sufi thought, it has always been the search that was primary, the quest for knowledge; the humility that we do not have knowledge and must constantly seek it was the core belief. Hinduism doesn’t provide answers, it provides only ways to seek answers; the quest for answers prevents us from being trapped in blind certainty. Similarly, liberal democracy is a way of dialogue and argument and counter-argument to create possible answers.

The expansion of the Big State triggers authoritarian impulses among people and a political player soon turns up, willing to ride that authoritarian horse and gallop to power. In many ways, Congress-led dispensations have been ‘soft’ Big States that failed to adequately devolve power. These ‘soft’ Big States laid the ground for the rise of an even greater statist force like the Modi-led BJP or the Hindutva-led ‘hard’ Big State.



Are we aware of who some of the most liberal sections of Indian society are? Those who have been campaigning long and hard for their individual freedom? No, these are not feminists or JNU students, writers, journalists or activists, The are instead certain

communities of fanners, the humble kisana. In March 2018, the Kisan Coordination Committee released in eight-point charter of demands calling for open markers and just prices.

The charter was released by followers of the late farm sector leader and liberal Sharad Anantrao Joshi. Joshi spent most of his lift exposing the injustices heaped on farmers by caging them in all manner of laws and restrictions. The charter calls for the liberalization of agriculture, the end of government intervention in the farm economy, scrapping of the National Food Security Act, direct benefit transfers to the poor, free trade in farm products and the removal of restrictions in creating rural land markets.

Joshi was one of India’s pioneering liberals. He was an urbane, brilliant Syndenham College and Switzerland-educated United Nations diplomat, returned to India to become the most vocal economic liberal of the farm sector. He founded the farmers’ union, the Shetkari Sangathana, in 1979. Joshi had always advocated free enterprise in the rural economy and while in Parliament famously tabled a private member legislation demanding that the ideology [SOME TYPO HERE] Don’t the people of India have a right to choose whether they want to be ruled by a socialist party, capitalist party or liberal party? Joshi believed this clause effectively bars liberal parties from contesting elections. Interestingly, the Janata Party was Indira Gandhi’s sworn enemy but was ideologically almost exactly on the same page as her uber-socialism. While Indira’s Congress had moved to dilute property rights to actively intervene in the private sector. the Janata Party in 1976 deleted the fundamental right to property altogether. The socialism clause in the Representation of the People Act is yet another illiberal aberration inserted by the Rajiv Gandhi government and needs to be debated. It effectively bars all those who do not want to swear allegiance to socialism, from contesting elections.

Joshi set up the Shetkari Sangathana to oppose farm subsidies, demand remunerative prices for farm produce and gain access to markets and technology. Why is it, Joshi asked, that while finance and industry were deemed worthy of liberalization, agriculture was not? Agriculture is the largest private sector in India. Yet, it is completely ignored when it comes to economic liberalization and ease of doing business!

For too long, the kisan has been trapped in a time warp of the statist politicians’ imagination, He is seen as a figure seated calmly and wisely next to fields of waving paddy, wearing colourful clothes and uttering profound and simple phrases—the constant ‘Other’ of city folk. The ‘kisan’ is seen as a representative of an unchanging rural idyll which must be cossetted and protected by successive governments, preserved in a glass case like a museum piece. The ideal underlying ‘Jai jawan, jai kisan’ has degenerated in the hands of successive generations of politicians who pay lip-service to both groups, only to keep them dependent on state handouts, robbing them of their basic dignity.

Liberals, on the other Hand, argue that the farmer must be set free. The farmer must be freed from land ceiling laws and land conversion laws. The absence of clear titles and deeds means that there can be no free buying and selling of land and there is still no proper market for land. Thus, a farmer cannot maximise his holdings or farm his fields productively as he cannot freely buy and sell. If he builds his own ponds and check dams he could violate drainage laws as per the Northern India Canal and Drainage Art of 1873. If he takes his produce across state boundaries he could be in violation of the Agriculture Produce Marketing Committee Act (APMC) or Mandl Act enacted almost fifty years ago, which states the requirement of separate trading licences for every mandi. Farmers can therefore sell to traders only with a licence for a particular market.

While the fruits of liberalizing industry are clear, no thought is given to liberalizing agriculture. An arsenal or legislation prevents farmers from realizing their productive potential because statist policymakers cannot set them free and instead only make them the target of populist hand-outs.

Why is it crucial to recognize farmers’ individual rights? Joshi campaigned for politicians to respect the farmers’ right to trade, sell and make a profit. Joshi wanted FTI in the farm sector, along with the latest seeds and technology. He also wanted to give farmers the option of exiting the farm sector if they want to. Joshi’s key realization was that the woes of fanners were the result of a gross misperception that farming was an ancient lifestyle rather than a

serious modern profession. This mindset has led to the desire on the park of the Big State to ‘protect’ farmers. Endless red tape has been offered as a lifeline, but it has only bound their hands and legs.

Instead of individual freedom, farmers have been trapped in government policy and are always subservient to the government. The Modi government promised to double farm income in five years by 2022. Yet there have been a spate of farmer suicicles. In April 2017, fanners from Tamil Nadu stripped naked in front of Prime Minister Modi’s office and even consumed their own faeces. A mammoth protest march poured into Mumbai in March 2018, in which 35,000 farmers across Maharashtra covered 180 kin on foot over five days.

A range of controls bears down on the Indian farmer. Not only is he unable to freely buy and sell land, but the prices of his crops are fixed by the government. His wherewithal to farm (such as water, fertilizers and seeds) is either unavailable or of poor quality, and he is thus perpetually tethered to poverty. Writes columnist Swaminathan Aiyar, ‘Farmers should be treated as producers with internationally competitive potential, not as objects of charity… a national strategy on agriculture should include, creating good land records, financial infrastructure and moves to give cash grants per acre per year”

Joshi’s cry was always to set the farmer free from all the controls he labours under, as if to argue, don’t keep us trapped in a home like a bride. Let us come into the world and see what we can do. He said: ‘We don’t want alms, we want the price of our sweat and toil.’ To reiterate a quote from a policy paper written for a Round Table Conference held by a group of Indian liberals in Deolali in lune 2018:

“The economic reforms. which began in the 1990s focused only on non-farm sectors. Indian agriculture was overlooked once more. Indian agriculture is the largest private sector in the country. Yet nearly three decades after the initiation of economic reforms, almost every aspect of agriculture, from land, to crops, inputs, credit, prices, access to market, logistics, value addition, to domestic and international trade, remain captive in a regulatory maze. Consequently, the largest sections of people have experienced little benefit from so-called reform policies, and not surprisingly there is little popular appreciation or support for economic liberalization. Therefore, each small step can only be taken stealthily or surreptitiously, often by sugar coating through subsidies and handouts, which ends up opening new doors for corruption and cronyism, deepening the popular disenchantment with the political process. The farmer is.chained to poverty and then offered charity from the government.”

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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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