Case V: MC∩S∩P = Both in Public and King’s Interests but Immoral. Kautilya invented this possibility and has drawn the maximum criticism for it. He would recommend to the king not to hesitate in the use of immoral methods to eliminate criminals, and in dealing with an aggressor, to enhance safety and security of his public. For example, he (p 269) suggested, ‘A king, who finds himself in great financial difficulty, may collect [additional] revenue [using the methods described below] (5.2.1).’ He (p 272-273) recommended expropriating temple property, exploiting the gullibility of the people and by hook or crook confiscating the properties of traitors and wicked people. Kautilya (p 540) added, ‘Deceptive occult practices shall be used to frighten the enemy. It is also said that these can be used [against one’s own people] in case of a revolt in order to protect the kingdom (14.2.45).’
Numerous writers have incorrectly compared Kautilya’s Arthashastra to Machiavelli’s Prince. However, Ray puts Kautilya’s recommendations in the proper perspective. He (1999, p 81) remarks, ‘The Prince was written with the intention of advising the king how to maintain his rule. The aims of the Arthashastra are yogakshema and raksana of the subjects.’ (Yogakshema=Sanskrit expression signifying welfare—material and spiritual; Rakshana=Sanskrit word for protection and maintenance.)
Case VI: MC∩S∩PC = Morally Wrong, in Public Interest but Against King’s Interest. Kautilya (1.18) considered the possibility that a prince, who was worthy to be a future king, but was treated unjustly and faced the possibility of even getting killed by his own father, might consider killing his father and declare himself the king. Clearly, public interest was more important to Kautilya than the continuation of a king, who was unjust and acted against public interest.3 Sen’s (1997) statements regarding the ethical content in the Arthashastra are unwarranted.
Case VII: MC∩SC∩P =Morally Wrong, Against Public Interest but in Private Interest. According to Kautilya (p 133), ‘A decadent king, on the other hand, oppresses the people by demanding gifts, seizing what he wants and grabbing for himself and his favourites the produce of the country [ie. the king and his coterie consume more than their due share thus considerably impoverishing the treasury and the people] (8.4).’ He added that such a king ‘fails to give what ought to be given and exacts what he cannot rightly take’; ‘indulges in wasteful expenditure and destroys profitable undertakings’; ‘fails to protect the people from thieves and robs them himself ’; ‘does not recompense service done to him’; ‘does not carry out his part of what had been agreed upon’; and ‘by his indolence and negligence destroys the welfare of his people’ (7.5). Kautilya did warn such kings that the public would remove them at the first opportunity to do so.
Case VIII: MC∩SC∩PC = Morally Wrong and Against both Public and Private Interests. According to Kautilya, Case VIII was the worst possible and must be avoided with every possible means. He (p 144) wrote, ‘A king who has no self-control and gives himself to excessive indulgence in pleasures will soon perish, even if he is the ruler of all four corners of the earth (1.6.4).’ According to Kautilya (p 137), ‘Excessive greed and lust bring about humiliation, loss of wealth and association with undesirable persons like thieves, gamblers, hunters, singers and musicians (8.3).’ He (p 140) explained, ‘Excessive desire leads to the cultivation of evil things while anger causes abandonment of good things (8.3.65).’ He (p 141) added, ‘A king who flouts the teachings of the Dharamshastras and the Arthashastra, ruins the kingdom by his own injustice (8.2.12).’
7.2 CHARACTER-BUILDING OF THE FUTURE KING Ethical Education: Kautilya advocated teaching Vedas and philosophy for learning ethical values and self-discipline and economics and political science for acquiring practical skills to lead a good, productive and moral life. He (p 155-156) wrote, ‘There can be no greater crime or sin says Kautilya than making wicked impressions on an innocent mind. Just as a clean object is stained with whatever is smeared on it, so a prince with a fresh mind, understands as the truth whatever is taught to him. Therefore, a prince should be taught what is dharma and artha, not what is unrighteous and materially harmful (1.17).’
Education as a Method for Becoming Wise: Kautilya discussed four functions of education: learning some relevant historical facts (ie. imbibing information), mastering useful skills (knowledge), increasing cognitive abilities, and improving self-control over destructive emotions such as ‘anger, lust, greed, conceit, arrogance and foolhardiness’ (ie. wisdom). That is, he included not only the three roles of schooling discussed by Conlisk (1996) but also added a fourth one that helped in developing the ability to control emotions, ie. he emphasized that schooling developed the ability to draw inferences and promoted self-discipline.4 He (p 144) observed, ‘The sole aim of all branches of knowledge is to inculcate restraint over senses (1.6)’.
Kautilya also described the process of learning. He (p 142) stated, ‘Learning imparts discipline only to those who have the following mental faculties—obedience to a teacher, desire and ability to learn, capacity to retain what is learnt, understanding what is learnt, reflecting on it, and [finally] ability to make inferences by deliberating on the knowledge acquired. Those who are devoid of such mental faculties are not benefited [by any amount of training] (1.5).’ He (p 143) added, ‘For, [trained] intellect is the result of learning [by hearing]; from intellect ensues yoga [successful application]; from yoga comes self-possession. This is what is meant by efficiency in acquiring knowledge (1.5).’ It may be noted that Kautilya believed that a person’s innate abilities and his desire to learn were complementary, implying that education could serve as a ‘signal’ too.
Education, Superstition and Emotions: Kautilya assigned negative roles both to superstition and emotions. He (p 637) observed, ‘Wealth will slip away from that childish man who constantly consults the stars (9.4).’ It is obvious that he strongly believed that there was a negative relationship or a trade-off between wealth and superstition (irrationality). He (p 636) labelled some emotions as ‘obstacles’ to achieving the gains from campaigns. He provided a comprehensive list of such emotions. These included: ‘Passion, anger, timidity, compassion leading to aversion to fighting, recoiling from awarding deserved punishment, baseness, haughtiness, a forgiving nature, thinking of the next world, being too pious, meanness, abjectness, jealousy, contempt for what one has, wickedness, distrust, fear, negligence, inability to withstand harsh climate and faith in the auspiciousness of stars and days (9.4).’
Kautilya believed that education made a person rational by developing self-control over emotions, that is, in today’s terminology an educated person’s indifference curves became almost vertical. Caplan (2000) provides a common framework to analyze the controversy between the neoclassical and behavioral approaches. Figure (3) in Caplan’s analysis may be used to represent Kautilya’s views on the role of education and the trade-off between wealth and irrationality caused by emotions and superstition.
Obviously, one does not need to have vertical indifference curves for a corner solution like point B in the Figure 7.1. But more fundamentally, it implies that preferences are endogenous, that is, the slopeoftheindifferencecurveofachildmaybeinfluencedbyhis/ her education. It also means that according to Kautilya, rationality, to some extent, is an acquired trait. He stated, ‘Discipline is of two kinds—inborn and acquired (1.5).’ He believed that one could
Figure 7.1: Line AB indicates a negative relationship between irrationality and acquisition of wealth. Education reduces irrationality and changes the slope of the indifference curve.
acquire wisdom by imitating wise people. Keeping that in view, he instructed a prince thus: ‘With a view to improving his self-discipline, he should always associate with learned elders, for in them alone has discipline its firm roots (1.5).’ According to Kautilya, education (along with its other roles) helped in developing discipline, which removed irrationality. However, Elster (1998) concludes his survey, observing: ‘The more urgent task is to understand how emotions interact with other mo
tivations to produce behavior.’
SUMMARY Kautilya believed that an individual’s well-being depended on good governance and one’s own efforts. He understood the importance of freedom from foreign rule, internal chaos, hunger, disease and ignorance so that individuals had the freedom to pursue their own spiritual and material interests. Although he was unaware of any such distinctions, he did not see welfarism, contractarianism and building of capabilities of individuals (see Sugden (1993)) as mutually exclusive approaches and would have considered them as complementary in promoting the well-being of individuals.
8
Ethics and Economic Growth
One should not stay where the five do not exist: means of livelihood, security, sense of shame, courtesy, and philanthropy.
—Kautilya’s Sutras
In recent years, a considerable amount of intellectual effort has been devoted to studying the influence of institutions and good governance on economic growth. In fact, the very origin of economics as a separate discipline during the 4th century BCE may be attributed to the imperative of economic growth and to the studying of its relationship to institutions, good governance and ethics. Kautilya believed that quality of institutions and good governance depended on ethical environment and ethical conduct of the decision-makers. Kautilya emphasized establishment of quality institutions, such as, a rule of law, protection of private property rights and the provision of good governance. He offered a comprehensive definition of good governance, which included efficient and effective economic policies and caring and clean administration. He recommended removal of ‘obstructions to economic growth’ and suggested tax incentives to promote economic growth through encouraging capital formation. Section 8.1 contains this discussion.
The discussion in Section 8.2 is focused on considering Kautilya’s ideas related to the identification of land, labour, and both human and physical capital as sources of economic growth. According to him, anyone who consulted his stars or depended on gods for a favourable outcome was courting disaster. Kautilya’s Arthashastra may be considered as the best expression of Indian thought on economic progress and its relationship to social order. He argued that economic growth improved the standard of living and made a nation stronger and more secure. He believed power and prosperity were interdependent (see also Chapters 13 and 18).1 Kautilya believed that the establishment of rule of law and private property rights were essential to the achievement of prosperity since they created conditions conducive to the full exploitation of opportunities. But good governance was required to create the opportunities. He argued that good institutions reduced the risk and good governance increased the rate of return on private investment. This unique insight is presented in Section 8.3. It has been argued that the decisions to invest and work are dependent on the existence of good institutions and these have been termed as the ‘deep determinants’ of economic growth. However, according to Kautilya, dharma was the ‘deep determinant’ since the quality of both institutions and governance was dependent on it. Two types of models of growth are discernible from the Arthashastra: one guided by enlightened self-interest and the other based on ethical conduct. These are presented in Section 8.4.
8.1 CREATION OF GOOD INSTITUTIONS AND PROVISION OF GOOD GOVERNANCE According to North (1990), institutions include formal rules and regulations and social norms, which constrain the behavior of individuals. However, Kautilya made a distinction between internal restraints which were due to self-discipline and internalizing of ethical values and external constraints imposed by the society. He considered them qualitatively different, since internal restraints were more reliable than the external constraints in creating trust and preventing systemic risk. Accuracy of prediction is a desirable disciplinary value to have and the behavior of an ethical individual could be predicted more accurately than that of a ‘rational fool’. The challenge is: how to make people ethical in a godless world.
Law and Order and Economic Development: Kautilya emphasized the importance of rule of law and protection of private property rights. He (p 108) observed, ‘By maintaining order, the king can preserve what he already has, acquire new possessions, augment his wealth and power, and share the benefits of improvement with those worthy of such gifts. The progress of this world depends on the maintenance of order and the [proper functioning of ] government (1.4).’
Protection of Private Property Rights: Kautilya (p 121) wrote, ‘The wealth of the state shall be one acquired lawfully either by inheritance or by the king’s efforts (6.10).’ He (p 231) added, ‘Water works such as reservoirs, embankments and tanks can be privately owned and the owner shall be free to sell or mortgage them (3.9).’ He condemned an immoral and shortsighted king, who did not protect private property rights. According to him (p 133), ‘A decadent king, on the other hand, fails to protect the people from thieves and robs them himself; does not recompense service done to him.’
Kautilya used moral incentive to motivate the king to be fair in protecting his subjects. He (p 377) wrote, ‘A king who observes his duty of protecting his people justly and according to law will go to heaven, whereas one who does not protect them or inflicts unjust punishment will not. It is the power of punishment alone, when exercised impartially in proportion to the guilt, and irrespective of whether the person punished is the king’s son or an enemy, that protects this world and the next. (3.1).’ Administration of justice is discussed in Chapter 15.
Good Governance: Kautilya believed that prosperity, national security, good governance, and knowledge were interdependent. According to him, good governance consisted of three basic elements: (i) provision of national security and public infrastructure, such as roads, to facilitate and promote commerce, (ii) formulation of efficient (farsighted and well thought-out) policies and their effective implementation, removal of all obstructions to economic growth and tax incentives to encourage capital formation, and (iii) ensuring a caring and clean administration. These are presented in turn.
Provision of Infrastructure: Kautilya (p 181) suggested, ‘Not only shall the king keep in good repair productive forests, elephant forests, reservoirs and mines created in the past, but also set up new mines, factories, forests [for timber and other produce], elephant forests and cattle herds [shall promote trade and commerce by setting up] market towns, ports and trade routes, both by land and water. He shall build storage reservoirs, [filling them] either from natural springs or water brought from elsewhere; or, he may provide help to those who build reservoirs by giving them land, building roads and channels or giving grants of timber and implements (2.1).’ He (p 553) added, ‘A king makes progress by building forts, irrigation works or trade routes, creating new settlements, elephant forests or productive forests, or opening new mines (7.1).’
Efficient Formulation and Effective Implementation of Policies: Kautilya recommended that the king promote capital formation, remove all impediments to economic activities, and pursue productive activities. He suggested considering all aspects of a policy: its proper formulation and effective implementation. He (p 116) wrote, ‘In the interests of the prosperity of the country, a king should be diligent in foreseeing the possibility of calamities, try to avert them before they arise, overcome those which happen, remove all obstructions to economic activity and prevent loss of revenue to the state (8.4).’
Incentives to Encourage Capital Formation: He suggested many measures to encourage capital formation. He (p 231) recommended • Tax Holidays: ‘Anyone who brings new land under cultivation shall be granted exemption from payment of agricultural taxes for a period of two years. Similarly, ‘for building or improving irrigation facilities’ exemption from water rates shall be granted (3.9).’
• Concessionary Loans (p 179): ‘[On new settlements] the cultivators shall be granted grains, cattle and money which they can repay at their convenience (2.1).’
• Duty Free Imports (p 238): ‘Any items that, at his discretion, the Chief Controller of Customs, may consider to be highly beneficial to th
e country [such as rare seeds]’ (2.21) are to be exempt from import duties. He was against putting any excessive tax burden on the people (see Chapter 12).
Effective Implementation of Policies: Kautilya assigned the role of executing the king’s orders to the ministers. He (p 200) stated, ‘The ministers shall [constantly] think of all that concerns the king as well as those of the enemy. They shall start doing all that has not [yet] been done, continue implementing that which has been started, improve on works completed and, in general, ensure strict compliance with orders. The king shall personally supervise the work of those ministers near him. With those farther away, he shall communicate by sending letters (1.15).’ He (p 123) listed the responsibilities of a minister as follows: ‘All state activities have their origin in the minister, whether these be the successful execution of works for [the benefit of ] the territory and the population, maintenance of law and order, protection from enemies, tackling [natural] calamities, settlement of virgin lands, recruiting the army, revenue collection or rewarding the worthy (8.1).’
Recommended an Ethical, Clean and Caring Administration Clean Administration: Drekmeier (p 256) points out, ‘Restraints on the king were not formal; they were restrictions imposed by the obligation to uphold custom and sacred law and to fulfill the requirements of rajadharma.’
Caring: Kautilya believed that a king should take care of his subjects like a father takes care of his children. He (p 128) wrote, ‘Whenever danger threatens, the king shall protect all those afflicted like a father [protects his children] (4.3).’ He (p 180) added, ‘He shall, however, treat leniently, like a father [would treat his son], those whose exemptions have ceased to be effective (2.1).’
Kautilya- the True Founder of Economics Page 14