Extracts from Sriram Balasubramanian’s book Kautilyanomics: For Modern Times

Modern economic thinkers provide a binary distinction between economic paradigms—either the laissez-faire approach or the Keynesian interventionist approach to policymaking. Laissez-faire is broadly defined as ‘a doctrine opposing governmental interference in economic affairs beyond the minimum necessary for the maintenance of peace and property rights’.

Its proponents believe that government intervention should be at a bare minimum and that the markets should determine the functioning of the economy. The Keynesian approach on the other hand is broadly defined as one where ‘optimal economic performance could be achieved—and economic slumps prevented—by influencing aggregate demand through activist stabilisation and economic intervention policies by the government’.

In simpler terms, they advocate that the state should intervene when the market is not functioning properly and that this intervention is necessary for the economy to do well.

In my view, Kautilyan thinking is somewhere in between these two economic paradigms with the distinction of being underpinned by the foundation of dharma. Some researchers argue that Kautilyan thinking is akin to a state-controlled economy, something similar to the erstwhile Soviet Union-style planning commissions. As we will see later in this chapter and the rest of the book, this is far from the case.

I tend to agree, to a large extent, with other scholars, who have defined Kautilya’s governance through four main components: varta (economic policy), dandaneeti (law and enforcement), anvikshiki (philosophical and ethical framework) and trayi (cultural context). These are well-thought-out and valid interpretations of the Kautilyan approach and provide other researchers with a foundation to explore further.

Having said that, I tend to disagree on a few counts from this approach. First, I find trayi to be a common feature across the various pillars rather than a separate pillar by itself. I try to highlight these cultural elements in the various pillars of dharmic capitalism later in the chapter. Second, and most importantly, the idea of dharma as a foundational principle was essential to his economic worldview. Without the philosophy of dharma, Kautilya’s economic principles are a skyscraper without a foundation. This must be the most important component of any Kautilyan economic framework. I define this detailed framework as dharmic capitalism.

Dharmic Capitalism

There are three pillars to Kautilyan dharmic capitalism: A rule-based yet non-intrusive state, wealth creation through a global outlook and the need for sustainable growth and welfare.

Rule-based Yet Non-intrusive State

The role of the state, as conceptualised by Kautilya, is one that is firm and rule-based yet not intrusive in its implementation. The plethora of rules and regulations for various industries indicates a rule-based framework for governance as opposed to an excessively planned economy. For example, let’s take trade policy for instance. As we detail later in the book, Kautilya wanted fixed duties and tariffs for products and exempted some of these for imports to boost trade between the borders of different kingdoms. While the basic tenets are strictly followed, there is no ‘executive planning’ of sorts in its execution.

There seems to be no limit on the productive capacities of firms pertaining to what they produce and how they produce. The focus seems to be mainly on having a robust regulatory and legal framework that is strictly implemented. Otherwise, the nitty-gritty of the processes is flexible enough to ensure that they function properly and as per consumer interests. The focus of all of Kautilya’s thinking on implementation is on the consumer’s best interests, which is contrarian to the role of what is called a ‘planned economy’ in modern parlance.

Does this mean that the state is not interventionist at all? Not really. Kautilya seems to feel the need to intervene when the market is not able to sort out certain things. For example, as we detail in the ‘Sustainable Growth and Welfare’ chapter, Kautilya feels strongly about the need for matsya nyaya, which means ensuring that small firms do not get overwhelmed by bigger or dominant firms. In this particular case, he feels the need to intervene so that the richer firms/people pay their fair share of income so that inequalities are not exacerbated. This is an instance where he feels the state needs to ‘nudge’ the policy in a way that ensures parity to the people in the kingdom.

Wealth Creation Through a Global Outlook

At a macro level, Kautilya seems to be inclined towards a global view of the economy. This has three components: a vibrant international trade environment through ease of doing business, utilising natural resources and traits of the populace, and enabling investment from savings to drive growth in a variety of areas, including infrastructure.

International trade was integral to the functioning of the Mauryan dynasty and the free exchange of knowledge and trade seems to be ingrained in his approach. While he is cognisant of the need to protect domestic interests as well, his policies seem to indicate an expansionist view of the economy. For example, his exemptions and incentives for imports and the efforts taken to make ‘ease of doing business’ a reality in the kingdom indicate his worldview on this topic.

Furthermore, the emphasis on creating a friendly business environment is self-evident with his focus on streamlining tax measures for all the products being traded.

Infrastructure development through highways, roadways and maritime routes further reiterates that he viewed trade as more of a boon to his kingdom than anything else. It is important to note that the key highways such as the Uttarapath and Dakshnipath (discussed later in the ‘Wealth Creation’ chapter) were improved and strengthened significantly during the Mauryan rule. Kautilya felt the need to enhance the trade infrastructure to enable better commerce among trading partners. In summary, he felt the need to create wealth through an internationalist mindset and approach.

About the book
Title: Kautilyanomics: For Modern Times
Author: Sriram Balasubramanian
Published: Bloomsbury Publishing
Pages: 292
Price: ₹599

The author is an economist based at a leading international monetary institution. Extract published with permission from the publisher, Bloomsbury

Check it out on Amazon.

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