In the happiness of his subjects lies the king’s happiness, in their welfare his welfare. He shall not consider as good only that which pleases him but treat as beneficial to him whatever pleases his subjects.
—Arthashastra, I.19.34
Since the Arthashastra is the world’s first manual in political economy, it is appropriate that Tom Trautmann’s radiant study of this text is placed first in our multi-volume series. Our story of Indian business, based on a close examination of texts, is about the great business and economic ideas that have shaped commerce on the Indian subcontinent.
In this series, leading contemporary scholars interpret texts and ideas in a lively, sharp and authoritative manner, for the intelligent reader with no prior background in the field. Each slender volume recounts the romance and adventure of business enterprise in the bazaar or on the high seas along a 5,000-mile coastline. Each author offers an enduring perspective on business and economic enterprise in the past, avoiding the pitfall of simplistically cataloguing a set of lessons for today. The value of the exercise, if we are successful, will be to promote in the reader a longer-term sensibility, which can help understand the material bases for our present human condition and think sensibly about the future. Taken together, the Story of Indian Business series celebrates the ideal captured in the Sanskrit word artha, material well-being, which was one of the aims of the classical Indian life.
The books in this series range over a vast territory—beginning two thousand years ago with this volume on the ancient art of wealth and ending with the Bombay Plan, drawn in 1944–45 by eminent industrialists who wrestled with the proper roles of the public and private sectors—recounted for us vividly by Medha Kudaisiya. In-between is a veritable feast. In addition to the Arthashastra, four sparkling volumes cover the ancient and the early medieval periods—Gregory Schopen presents the Business Model of Early Buddhist Monasticism based on the Mulasarvastivada-vinya; Kanakalatha Mukund, drawing from the epics Silappadikaram and Manimekalai, takes us into the world of the Tamil merchant to the end of the Chola empire; Himanshu Prabha Ray transfers us to the maritime-trading world of the western Indian ocean along the Kanara and Gujarat coasts, using the Sanskrit Lekhapaddhati written in Gujarati; and Arshia Sattar recounts the brilliant adventures told in The Mouse Merchant and in other tales based on the Kathasaritsagara and other sources.
Scott Levi takes off into the early modern period with the saga of Multani traders in caravans through central Asia, rooted in the work of Zia al-Din Barani’s Tarikh-i-Firuz Shahi and Jean-Baptiste Tavernier. The celebrated Sanjay Subrahmanyam and Muzaffar Alam transport us into the world of sultans, shopkeepers and portfolio capitalists in Mughal India. Ishan Chakrabarti traces the ethically individualistic world of Banarsidas, a Jain merchant in Mughal times, via his diary, Ardhakathanak. Tirthankar Roy’s elegant volume on the East India Company is our passage to the modern world, where the distinguished Lakshmi Subramaniam recounts the ups and downs in the adventurous lives of three great merchants of Bombay—Tarwady Arjunjee Nathjee, Jamsetjee Jeejeebhoy and Premchand Raychand.
Anuradha Kumar adds to this a narrative on the building of railways in nineteenth-century India through the eyes of those who built them. Chhaya Goswami dives deep into the Indian Ocean to recount the tale of Kachchhi enterprise in the triangle between Zanzibar, Muscat and Mandvi. Tom Timberg revisits the bold, risk-taking world of the Marwaris and Raman Mahadevan describes Nattukottai Chettiars’ search for fortune. Vikramjit Banerjee rounds up the series with competing visions of prosperity among men who fought for India’s freedom in the early twentieth century via the works of Gandhi, Vivekenanda, Nehru, Ambedkar and others. The privilege of reading these rich and diverse volumes has left me—one reader—with a sense of wonder at the vivid, dynamic and illustrious role played by trade and economic enterprise in advancing Indian civilization.
In this introduction I shall not go over the same ground as Professor Trautmann’s graceful and authoritative work but focus instead on a few themes which provide context for his book and will hopefully enrich the experience of reading it. I shall confine myself to three issues: 1) Given that the notion of property is central to a market economy, it is worth asking the question: what was the status of private property and especially land tenure in the society of the Arthashastra? 2) What are the principles of leadership which emanate from the Arthashastra? Although these were intended as advice to a royal prince, I believe they are applicable to all political and business leaders. 3) Early in his book, Trautmann reminds us that artha, material well-being, is one of the three or four classical goals of life and it is subordinate to dharma, moral well-being. I shall reflect on the significance of the primacy of dharma over artha.
The polity of the Arthashastra is a mixture of private enterprise and state control. What the right mixture ought to be has been the subject of intense debate between the Left and the Right in contemporary politics. No matter where one is situated in the debate, most people believe that a sense of security is not only good in itself but also contributes to prosperity in a free society. Individuals will invest when they feel secure—when they believe that their property will not be taken away arbitrarily. The state is expected to make citizens feel secure, but often it is the principal cause of insecurity, particularly when it does not enforce property rights or when it acquires private land without just cause or adequate compensation. In some societies, the king was believed to own all the land, and this contributed to the insecurity of land tenure. The question is: how secure was property, especially land tenure, in ancient India? Given the scarcity of empirical evidence, one can only speculate on the basis of norms articulated in the dharma texts.
Professor Trautmann offers a sparkling clue from the Arthashastra when he introduces the notion of the king’s bhaga, share, suggesting that the state was only one among many shareholders, and there was a separation of the individual’s from the king’s property. This is quite different from societies where the king owned all property. Bhaga suggests a limitation of state power over the property of others, which is reaffirmed in other dharma texts. Normally the king’s share was one-sixth, shad-bhagin, and this proportion carried into the tax levied by the state on the produce of the land as well as on other economic transactions.
Trautmann rightly calls the concept of bhaga ‘entrepreneurial’. For the focus ‘is not on ownership of a resource but of a share of what is produced . . . [and] at the heart of the idea of the share [is] a certain sense of mutual interest among co-sharers to promote production, as then all shares will be larger’. He adds, ‘it is a language drawn from fathers and sons working on agricultural land or partnership of traders and merchants’. The notion of bhaga has its focal point on possession, not on ownership. Ownership means that one can sell the property; possession does not. Bhaga indicates occupation and use of the property, and to ensure that the householder had a sense of security in possession, the king is told not to interfere in the Naradasmriti: ‘A householder’s house and his field are considered as the two fundamentals of his existence. Therefore let not the king upset either of them.’
How the notion of king’s share and by implication the security of individual property arose in ancient India is hard to say. Professor R.P. Kangle, editor of the critical edition of the Arthashastra, thinks that ‘it may go back to an earlier stage in the development of society when all land was the property of the entire tribe . . . [and] over the generations individual families continued to hold and till the same separate pieces of land, until a vested interest was created, which practically amounted to ownership of the separate pieces of land. Then the rights of alienation came to be recognized.’1 This may be how land became private property to be bought and sold, although there are few references in the dharma literature to the sale of property. We can be sure about the security of possession but not about ownership.
The Arthashastra speaks about four land arrangements: the king’s land, lands of private individuals, common land and unoccupied forest land. We have touched upon the first two; the third refers to the existence of common lands around every village for the enjoyment of everyone;2 the fourth are uninhabited lands, often in the forest. Some of the confusion about the status of private property in ancient India has arisen because the Arthashastra and other texts refer to the grants of these lands. The Arthashastra says the king may grant his subjects vacant land if they are willing to clear it, till it and pay a tax on it. If they fail to develop the land, it would be taken away and given to others.3 The ability to grant land gave rise to the mistaken idea that the king was the owner of all the land in ancient India.
Megasthenes, the Greek ambassador to the Mauryan court, was the first to state that Indian kings owned the whole land of the country. But Megasthenes was not a reliable reporter, and some of what he wrote was fantastic nonsense, including an account of gold-digging ants in India that were the size of foxes. A.L. Basham, the respected English scholar, says: ‘More than one source speaks of the king as the owner of all the land and water in his kingdom’ but he also added that a few texts reject the king’s ownership of all the land. The mistake of the those who believed in royal ownership of all land was apparently based on misreading the dharma texts, which speak of the king as pati, ‘lord’ or swami, ‘master’ of the whole kingdom. Their error was to believe that pati or swami implies an ‘owner’, when it means ‘protector’ of the kingdom.4
Other dharma texts and legal commentators argue eloquently that the king does not own the land of the kingdom. Shabaraswami, an authoritative commentator on the Purva Mimasa, says, ‘The monarch has not property on the earth . . . His kingly power is for government of the realm and extirpation of wrongs; and for that purpose he receives taxes from husbandmen and levies fines from offenders. But the right of property is not thereby vested in him.’ Later commentators express similar views. Nilakantha, a legal scholar in sixteenth century, specifically mentions private property of other landlords: ‘Proprietary right in the whole land with regard to villages, lands, etc., lies in their respective landlords. The King’s right is limited to the collection of tax therefrom.’ Finally, Madhava, the eminent jurist, also refers to limitations in the king’s power over private land. ‘King’s sovereignty is for correcting the wicked and fostering the good. Hence, the land is not king’s wealth . . . [It is] the common wealth of all living beings to enjoy the fruit of their labour.’5
Ancient India, as it emerges from the normative dharma texts, seems thus to present a world quite different world from that of ‘Oriental Despotism’, a term that the ancient Greeks used contemptuously to refer to the states of Asia and the Middle East, and particularly their enemy, the Persian Empire, where ‘the king owned all and everyone was his slave’. By characterizing Asians in this manner, the Greeks were flattering themselves—they were contrasting their own status as free citizens with Asian slavery. Marx took up the idea of Oriental Despotism, calling it the ‘Asiatic mode of production’ to explain why ‘Asia fell asleep in history’. The Asiatic mode referred in particular to the agrarian empires of ancient Egypt and China, where an absolute ruler farmed out the right to collect tribute from peasants to a hierarchy of petty officials, and where extorting tribute from village communities became the mode of enrichment for the ruling nobility.
When the British came to India they continued with the historical mistake of believing that India too was under ‘Oriental Despotism’, and this guided their thinking about land tenure. The recent work of historians suggests, however, that property rights to land were generally more secure in India and the major Eurasian agrarian societies—China, Japan, the Ottoman Empire and Europe—than was once believed. It is in the context of this debate that we should note the statement of the Arthashastra, an avowedly royalist text, that the king’s land is separate from common lands and individual holdings.
How much land an individual should own is a different question, and did not concern the ancients in India or elsewhere. Perhaps, this was because land was plentiful. But with the passing of time and a growth in population, this question began to occupy the minds of men. In seventeenth-century England, John Locke, the political philosopher who is regarded as the father of modern liberalism, offered an elegant answer. He said that private property is derived from human labour. In his Second Treatise, Locke stated: ‘As much land as a man tills . . . and can use the product of, so much is his property. He by his labour does, as it were, enclose it from the common.’ This came to be known as the ‘labour theory of value’, about which Karl Marx had much to say later. Locke believed, however, that property precedes government and government cannot ‘dispose of the estates of the subjects arbitrarily’. Thus, property is a natural right, he believed, and this right is now enshrined in the Constitutions of all modern states. The main justification of this right is based on the ethical development of the individual or the creation of a social environment in which people can prosper as free and responsible agents.
Leadership is crucial in both business and politics, and the Arthashastra obliges by offering a fairly detailed account of the qualities of a good leader. Towards the end of chapter one, Trautmann describes the ideal king, or rajarshi, as ‘a king who is a rishi or sage’. In reading over the king’s rigorous daily routine, what stands out is the high energy expected of the ruler. The night and the day are divided into eight parts by the sundial in a packed schedule, with constant attention to the business of the day. The ruler is expected to sleep for only four and a half hours. The day’s routine includes time for study and recreation, and the text does make a major concession—it allows the king to adjust his pace according to his capacity.6
A high energy level seems to be consistent with the exhausting pace maintained by successful business and political leaders throughout history. It is also required of senior managers in modern-day corporations today. What is remarkable about the king’s demanding pace in the Arthashastra is a commitment to ‘secular asceticism’, a term that Max Weber, the German sociologist, used to characterize Protestant entrepreneurs. The striking feature of the king’s ethic of ceaseless work is that it is accompanied by a ceaseless renunciation of the life of luxury that surrounds him. It is not unlike the renunciation commended by Krishna to Arjuna in the discipline of nishkama karma, non-attached action, in the Bhagavad Gita. In my long experience in business, I have found many secular ascetics among the entrepreneurs and senior managers I have known. Aditya Birla, Ratan Tata, Azim Premji and Narayana Murthy are a few examples from the contemporary Indian corporate world—the more successful they became, the more they tended to live frugally. I sometimes feel that the world is divided into producers and consumers—high-performing leaders have little time for consumption.
To achieve this ascetic ideal the king is expected to control his senses, says the Arthashastra. He is supposed to lead a life of self-control and keep a check over the human passions of lust, anger, greed, pride and arrogance. In particular, he should avoid associating with another’s wife; not covet another’s property; practise ahimsa, non-violence, towards all living things; and avoid the company of harmful persons. He should especially avoid the four vices which lead to a loss of self-control: gambling, drinking, womanizing and hunting. On the positive side, he should cultivate a life of intellect by a disciplined study of different fields of human knowledge; cultivate the company of wise men; be righteous and honest; and finally, he should be resolute and determined, not dilatory and fickle. If he follows this prescription, he will acquire self-discipline, from which will follow self-possession, a vital quality of leadership.
Leadership is about influencing and motivating people and the Arthashastra offers a number of ways that are familiar to both corporate and political leaders. A leader can motivate people through fear and punishment (danda) or reward and trust (dana). Every leader has faced this dilemma: what is the right balance between the ‘carrot’ and the ‘stick’? The Arthashastra, ever suspicious of human nature, mostly veers to the latter end and offers rich discussion about dandaniti, retributive justice. It is at pains to point out, however, that punishment should be proportionate to the wrongdoing and be perceived as deserved and just by the public—otherwise, the leader will lose the respect of his people.7 Consistent with its sceptical nature, it suggests other disagreeable strategies for influencing and controlling people by dividing them (bheda), or using deceit and illusion (maya). Dictators and leaders of totalitarian regimes are familiar with these strategies.
Professor Trautmann introduces us at the beginning of his book to the classical doctrine of the four aims of life. Many of the ancient texts, including the Arthashastra, discuss the proper place of each of these aims. In particular, they raise the question of whether the pursuit of artha or profit should be governed by dharma or righteousness. I shall briefly examine the significance of the priority given to the ethical dimension in market transactions.
Dharma is a frustrating and untranslatable word. Duty, goodness, justice, law and religion all have something to do with it, but they fall short. I think of it chiefly as a concern for doing the right thing, both in our private and our public lives. Towards the end of chapter five, Trautman discusses dharma in the context of law, in particular, commercial law (vyavahara). Disputes are natural in economic transactions and private commercial contracts, and need to be resolved. The Arthashastra suggests a panel of three judges called dharmasthas, ‘upholders of dharma’, to resolve disputes. Trautmann wisely reminds us about the crucial role of law and justice in a market economy, something that economists and business people sometimes forget. He says, ‘Market exchanges need a framework of law to operate effectively, the law providing a peaceful way of resolving disputes among parties to a transaction, on the one hand, and, on the other, providing for the punishment of bad behaviour in the market.’ Most multinational companies today are very strict in expecting their employees to unequivocally obey the law. Yet despite fairly stringent punishment laid out in, for example, the Foreign Corrupt Practices Act of the US government, dharma failures are common in the business world.
Aside from dharma and artha, kama, or desire, is a third aim of life. Kama teaches that it is in human nature to want more. Dharma seeks to give coherence to those desires by containing them within an ordered existence. Since no amount of regulation will catch all the crooks who transgress dharma, what is needed in the end is self-restraint on the part of each actor in the marketplace, and this leads to the building of trust. When there is trust in society dharma prevails. Thus, self-restraint on the part of individuals and trust within society are aspects of dharma. At the heart of the market system, Tom Trautmann tells us, is the idea of exchange between ordinary, self-interested human beings, who advance their interests peacefully in the marketplace. In fact, transactions in billions of dollars take place daily in the modern global economy on the basis of trust.
Dharma is the invisible glue of norms and values between transacting persons, which allows them to trust each other and transact with a sense of safety. The best enterprises in the marketplace are aware of this. They tend to build a reputation for dharma-like behaviour, and they are generally rewarded for this. The market system, thus, depends not only on laws but on the self-restraint of individuals, which allows them to cooperate and trust each other in the marketplace. This is how dharma is related to artha. However, there are limits to restraint and trust. This is why the Arthashastra instructs the ruler about the importance of danda, the ‘rod of the state’, to punish those who fail dharma.
A concern with dharma is ultimately a concern for duties rather than rights. Unfortunately, today’s political discourse in modern democracies is focused mainly on rights, and it seems to me that we have gone too far. The notion of dharma is a good antidote, reminding us that duties underlie rights. Just as one cannot understand America without the idea of liberty, so one cannot understand India without the idea of dharma. The great Sanskrit scholar, P.V. Kane called modern India’s Constitution a dharma text, but he too was unhappy with its excessive focus on rights rather than obligations (which underlie those rights). The founding fathers of the Indian republic were so deeply concerned with dharma that they insisted on placing the symbolic wheel of dharma in the Indian flag. This has not, alas, curtailed the pervasive corruption in Indian public life.
Gurcharan Das
1 November 2011
New Delhi