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Economic Constraints of the Arthashastra Period

Info: 10455 words (42 pages) Dissertation
Published: 29th Sep 2021

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Tagged: EconomicsMilitary


Arthashastra – Kautilya on War

Kautilya was a proponent of a welfare state but definitely encouraged war for preserving the power of the state. Kautilya’s Arthashastra is a book of ‘pure’ logic, not taking any religious aspect into account. It deals with the various subjects directly and with razor like sharpness. The Arthashastra totally contains 5363 Sutras, 15 books, 150 chapters, and 180 Sections. The 15 Books contained in the Arthashastra can be classified in the following manner: Book 1, as a book on ‘Fundamentals of Management’, Book 2 dealing with ‘Economics’, Books 3, 4 and 5 on ‘Law’, Books 6, 7, 8 describes Foreign Policies. Books 9 to 14 concerns subjects on ‘War’. The 15th book deals with the methodology and devices used in writing the Arthashastra. What is interesting to note is that the topic of war is the last subject in the Arthashastra. War is always the last option. However, a war in certain cases is unavoidable, hence, preparation and maintenance of the army, the right moves in the battle field and warfare strategies all are essential in the defence of a country, subjects which Kautilya tackles with the extra sensory precision.

Economics in Statecraft and War

Kautilya thought that the possession of power and happiness in a state makes a king superior hence a king should always strive to augment his power. Kautilya propounded that war is natural for a state. He said that, “Power is strength and strength changes the minds”[2].Economic power has helped shape statecraft. This element of power is very flexible. Thi s aspect of the power is one which Arthashastra concentrates on and has highlighted ‘Artha’, the economics of the state in the pursuit of power. The quest for power is driven by the satisfaction of the king and his subjects in all the spheres of material well being and social acceptance. This can be achieved by a progressive and robust economy. A corollary to this fact is that the economics of a state can be used to progress the influence of the state over international issues and also used to augment the war waging potential of the state.

Whether a nation has a large or small military, its leadership does understand economics. Economics is a great tool to create conditions for further action or force a nation to change behaviour. There are constraints prevelant in the pursuit of sound economy to further the war waging capability of a state and in turn achieve te power . the resolution of these constraints is the enigma which Kautilya unraveled through Arthashastra.

Kautilya presents that for a King to attain these three goals he must create wealth, have armies and should conquer the kingdoms and enlarge the size of his state. This is quite interesting because he in a way does believe that a state’s superiority is in its military and economic might which is what later philosophers and rulers have followed. In the case of war, Kautilya advocates the King to be closely involved in the science of war.

Classifications of War

Kautilya advocated three types of war: Open war, Concealed war and the Silent War[3]. Open war he describes as the war fought between states, concealed war as one which is similar to guerilla war and Silent war which is fought on a continued basis inside the kingdom so that the power of the King does not get diluted. He believed that there were three types of kings who go into warfare and it is important to understand the distinction between the types of kings and the appropriate warfare strategy to be selected.

Kautilya propounded that state is not considered a massive entity but as one which combines various internal constituents – the king , the fortified city ,the countryside, the treasury and the army. The power with which a state can promote its own interests over other states in the neighbourhood depends on how close to ideal the internal constituents are. The four devices Kautilya used for deriving practical advice were: relative power, deviations from the ideal, classification by the type of motivation and the influence of the unpredictable. This is the core what Arthashastra addresses as the endeavour is to resolve all the constraints that arise in the quest of the state to gain ascendency and enhance its power.

War fighting tactics

Kautilya was also very harsh in narrating the exact methods of fighting a war and use of various tools to reduce the strength of a state. Kautilya wrote in detail explaining the war strategy because he was a strong proponent of social structure. He vehemently defends the state and believes that religion and morals are supposed to serve the state. In Kautilya’s concept of war, chivalry does not have any place and he is a realist. Kautilya in his Arthashastra and believes that war is a means to an end for wealth and stability. He provided the understanding to resolve all the constraints which emerge to achieve the ends. Kautilya has argued that the primary constraint that a state faces is the economic constraints and many a war has been lost for want of resources. The Arthashastra has guided the king in eliminating the constraints, primarily the economic constraints in the furtherance of its interests. The use of economic strength as a means of states’s power has also been highlighted by Kautilya.

Kautilya also took the societal structure and King’s power as given and never challenged it. His focus was not on war per se but on the strategy and tactics of war which elaborates in his work. In describing his opinion on war, he has been very right in saying that a state which seeks power is in war all the time and economy is the most definitive aspect which governs the quest of the state for power.


Statement of the Problem

The aim of this paper is to investigate the modus operandi for the resolution of the economic constraints, imposed in an armed conflict during the Arthashastra period and its concurrence in the present times.

Justification for the Study

Constraints in War

Armed conflict has many facets attached to it and it is not a mere attack and capture as the folklore puts it to be. The constraints as they emerge, from the time of planning of a battle till the time the armies face each other at the outbreak of the hostilities, are what the commander in the battlefield has to counter and work out the resolution of each of the prevalent constraints. The constraints as defined for the evaluation of this research is akin to the risks or uncertainties as they present themselves in the battlefield and which may govern the outcome of the war or the projection of the true power of the nation state. The constraints present as tangible constraints and also intangible blocks which have to be resolved in order to progress the war and ultimately achieve victory. The tangible constraints can be classified as the economic requirements for war effort to sustain and the logistics support required for the armed forces and the intangibles are morale, leadership and the training of the troops.

Evaluating Constraints

The fog of war has prompted strategists throughout history to grapple with the concept of constraints/risk and methodologies for its assessment. There will always be uncertainty. It often will be immeasurable. The very nature of war and conflict and the increasingly complex strategic environment ensures that this is so. Is risk/constraint assessment simply the .comfort level that senior planners experience as they assess key variables? [6] Strategic risks then is the probability of failure in achieving a strategic objective at an acceptable cost. The concept is simple to articulate and easy to understand. But, as in war, the simplest things in strategy are the most difficult.

Constraints Management – Arthashastra

The Arthashastra is essentially a treatise on the art of government and specially focuses on aspects of internal administration and foreign policy. It has been translated as ‘Science of Politics’, ‘Treatise on Polity’ or the ‘Science of Political Economy’. These have been translated over time in the subjects of “Timeless Laws of Politics, Economy, Diplomacy and War”. Kautilya’s treatise encapsulates in many ways, the complexity of the modern times with the constraints faced during war being the same as were relevant in older times. The problems that existed then, persist in a more widespread and magnified manner in the contemporary world. The principles of Constraint resolution in the Military strategy followed by Kautilya are also relevant in the contemporary world. Study of Kautilya’s war strategy will provide an insight into the knowledge of warfare in ancient India and would also throw up important aspects of the constraints to warfare in the modern world, besides enhancing understanding and pride in our country and its thinkers.


The growth of the nation state has been based on the gain of the economic power and the shift in the economic potential. This has resulted in the economics of war emerging as the single most important constraint in the war waging potential of a nation state. The concurrence of the economic power with the military power of a nation state has been the cornerstone of the present day world powers. Kautilya in Arthashastra had realised the prominence of economy in the statecraft and the war strategy. How relevant those postulates are in the modern day strength of a nation state? The ability of the state to exert its influence for the furtherance of the national interests has been defined by the resolution of the economic constraints. The military has become the national instrument that can enforce the economic objective and thus the military power of a nation. Therefore the role of the economic power and the resolution of the economic constraints of a nation are primary for the acceptance of a Nation-State as a world power.


The scope of this paper is restricted to study and analysis of the economics of war. The financial constraints in the war potential of the State and the methods adopted by Kautilya to resolve those constraints. The study will attempt to identify possible constraints in the war potential of the State and present the relevance of Arthashastra in constraint management with the modern day constraint resolution. It will be further endeavoured to understand the lacunae in the present day approach and investigate the Arthashastra for solutions. Thereafter, the paper will focus on assessing the perceived link between economic power of the state and the military power and how one is derived from the other. The resolution of the economic constraints as practiced during Kautilya’s time and in the modern times will also be discussed.

Methods of Data Collection

There are many books written translating the Arthashastra. Modern Warfare strategy has many parallels in the theories as propounded by Kautilya. Research on this topic will be mostly based on the translations of Arthashastra and its relevance with the modern day approach to the resolution of the economic constraints in the war waging potential of the nation state. Sources are likely to include the following:-

(a) Books written by eminent authors and translation of the Arthashastra by various authors.

(b) Articles in periodicals and Journals.

(c) Reports of International strategists and researchers on Arthashastra.

(d) Websites featuring proceedings of various conferences and meetings on the subject.

(f) Papers published or presented by various organisations on the subject.

Organisation of the Dissertation

This study is envisaged to be organised under the following chapters:-

(a) Introduction.

(b) Methodology.

(c) Constraints in warfare -Drawing parallels with Arthashastra.

(d) Arthashastra approach to economics of war.

(e) Derivation of Military power from economic power.

(f) Resolution of economic constraints to war potential.

(g) Conclusion


Interests of the nation state

The behavior of a nation-state is rooted in the pursuit, protection, and promotion of its interests. The interests of the nation state are to be accurately identified to understand much of its behavior vis-a-vis other states and actors in the international system. All states have common interests like its territory, its people, and its sovereignty. While forces outside their own boundaries affect all countries large and powerful, small and weak, a certain level of sovereignty is critical to the notion of national interests. A country that is unable to exercise effective control over its territory and its peoples, relatively free from the intrusion of other nation-states into its internal affairs, is lacking in this critical element of sovereignty. War is an instrument of national policy, albeit a violent one.

Arthashastra view point

Kautilya’s Arthashastra was a science of politics intended to teach a wise king how to govern. In this work, Kautilya offers wide-ranging and truly fascinating discussions on war and diplomacy, including his wish to have his king become a world conqueror, his analysis of which kingdoms are natural allies and which are inevitable enemies, his willingness to make treaties he knew he would break, his doctrine of silent war or a war of assassination against an unsuspecting king, his approval of secret agents who killed enemy leaders and sowed discord among them, his view of women as weapons of war, his use of religion and superstition to bolster his troops and demoralize enemy soldiers, the spread of disinformation, and his humane treatment of conquered soldiers and subjects.

Kautilya thought there was a “science” of warfare, presumably part of a larger science of politics. Kautilya advised the king not to leave military matters entirely to others: “Infantry, cavalry, chariots and elephants should carry out practice in the arts outside (the city) at sun-rise. The king should constantly attend to that, and should frequently inspect their arts.”[9] Open war is obvious, and concealed war is what we call guerrilla warfare, but silent war is a kind of fighting that no other thinker could propound and thus Kautiliya was much ahead of his times and this makes his thinking relevant even today. Silent war is a kind of warfare with another kingdom in which the king and his ministers—and unknowingly, the people—all act publicly as if they were at peace with the opposing kingdom, but all the while secret agents and spies are assassinating important leaders in the other kingdom, creating divisions among key ministers and classes, and spreading propaganda and disinformation.

Kautilya advised the king that “When he is superior in troops, when secret instigations are made (in the enemy’s camp), when precautions are taken about the season, (and) when he is on land suitable to himself, he should engage in an open fight. In the reverse case, (he should resort to) concealed fighting.”[12]

Overriding the constraints

Speaking of justice to an enemy about to conquer is the last tactic of the weak, willing to try all tactics, even desperate ones, Kautilya made up a powerful speech to be given by a weak king to the king about to conquer, a speech offering a mixture of moral exhortation and arguments based on the self-interest of the conqueror. In this speech, Kautilya depicted an envoy saying to the conquering king that he should accept a treaty and “pay regard to [his] spiritual and material well-being”; that conquering a kingdom willing to surrender on reasonable terms is an “impious act”; that battle is not in the conquering king’s self-interest, since “to fight with brave men who have given up all hope of life is a rash deed” and the conqueror will lose troops and “material good”; that such a conquest will only unite his enemies all the more; that the conquering king’s enemies are only waiting for him to be weakened in order to attack; that he himself is risking death; that war itself in which men on each side die is “an impious act”; and that he should not listen to “enemies masquerading as friends” who are giving him false advice as to his real self-interest.[13] Kautilya demonstrated the realities of diplomacy and war as well as the ineffectiveness of moral pleas when confronted by a superior power. Kautilya wanted legions, but he wanted them preceded by elephants, which acted in the ancient world a bit like modern tanks.

Kautilya considered the treasury most valuable in raising an army, procuring equipment (including elephants), and preparing for war. After the treasury and the army, Kautilya focused on the importance of the fort, on which depends “the treasury, the army, silent war, restraint of one’s own party, use of armed forces, receiving allied troops, and warding off enemy troops and forest tribes. And in the absence of a fort, the treasury will fall into the hands of enemies, those with forts are not exterminated.”[15]

Constraint resolution

Kautilya was consistent in ranking the importance of the treasury, the army, and forts, but it seems that the people, or a popular army, are the most important of all. As he put it, “one should seek a fortress with men.”[19]

Kautilya apparently believed that an army of kshatriyas was best; warriors were supposed to find their “highest duty and pleasure” by dying in battle. Kautilya clearly argued that sections of the army should consist “mostly of persons from the same region, caste or profession.” It was a very clever idea to be mooted as common sense, shows that he is suggesting that men of an army should know one another, that an army of friends fighting side by side is the most difficult to defeat. On the subject of the king’s location during battle, for example, he wrote: “A bare army, without standards, consisting of warriors related as fathers, sons and brothers, should be the place for the king. An elephant or a chariot should be the vehicle for the king, guarded by cavalry.” (Kautilya wanted a man who looked like the king to lead the army into battle.) And thus, a king’s power, for Kautilya, is in the end tied to the power and popular energy of the people, without which a king can be conquered, for “not being rooted among his subjects, a king becomes easy to uproot.”[20] Although Kautilya wrote of using money to raise an army and even of “purchasing heroic men,” he was not advocating mercenaries who fought only for pay, but he was merely outlining the cost of paying, supplying, and feeding soldiers. He believed that “hereditary troops are better than hired troops”; in other words, troops made of men born in the kingdom and thus loyal to the king since birth are better than strangers fighting for money.

Contemporary school of thought

While military power may be the primary tool a nation uses to wage war, it is not the only one available. Military power, together with economic and political power, may be used to impose one’s will upon an opponent. These other elements of national power, such as economic or political, are linked with military action at the national strategic level and passed to the operational and tactical levels of military actions through constraints or limitations on the use of force. Nevertheless, these other elements of power are not fully integrated at the lower levels of war. In the Marxist tradition, Svechin included the possibility of war on economic and social fronts as well as on a military front. [21] The actions along all fronts must be fully integrated and in accord with the political goals of the struggle. The use of diplomatic efforts to preclude and enemy alliance or a second hostile (military) front and economic efforts to insure sufficient financial resources for the conduct of combat operations.

While Kautilya had propounded the postulates for constraint management in warfare in the ancient times but the relevance with the contemporary thought is startling. Military power being only one of the instruments of national power has been highlighted by Kautilya and the same thought is holding today. The resolution of the constraints and overriding of the bottlenecks faced by the commander in the battlefield have their genesis in the employment of all the instruments of national power towards conflict resolution and that is why Arthashastra has been regarded as the epitome of statecraft in all the spheres. If decisive military force is used only as a last resort, after extensive diplomatic, economic, political, and even military power short of actual war have failed to break the will of the enemy, a quick and well placed application of military force would leave little opportunity for the implementation of further nonmilitary initiative. One must never lose sight of the overall objective of warfare which is to get the enemy to do one’s will. This may be best achieved through a thoughtful and complete linkage of all elements of national power. With that linkage brought down to the operational level, chances for a long-lasting victory will increase dramatically. This is where Arthashastra and the present day war strategy are concomitant.


Economics of the nation state

Economic power has become a very powerful tool to enhance the capabilities of a nation and limit those of an adversary. However, as nations become more intertwined through globalisation, they become more vulnerable to disruptions in their economies, manmade or natural, due to reliance on foreign sources of raw materials, components, finished products, or key services. A nation can also use its economy to try to defeat another power. The nation can use its economic power in attempts to destroy a target’s capability to take certain actions or destroy its ability to project power. Although physical defeat of the enemy is more often associated with military operations, economic means are also viable to support the elimination of a nation’s ability to take certain actions.

A nation’s ability to provide resources to research, develop, and further educate their people can lead to new applications of science and knowledge to solve problems in other words, technology. Technological advances can replace existing weapon and support systems to enhance or expand war fighting capability. Acquiring technology through a nations own human resources or with capital resources can allow the nation to make great leaps in economic progress.

Arthashastra view of economy as precursor to military power. Kautilya emphasised that, the three kinds of powers intellectual, compelling, motivating are essentially and unavoidably required to be developed and employed in a manner that they complement each other. None can be used in isolation. According to Kautilya the main aim of any state is to increase one’s power, mainly at the cost of the natural enemy. This increase in power is essentially the first step in the realisation of the ambition to conquer the world. However, Kautilya also specifically mentions that the most important factor that must be weighed before starting is the gain expected from the confrontation and the losses likely to be suffered. Normally, the gain that is to accrue should far outweigh the losses in men, animals and expenses in cash and grains. Thus Kautilya professed a thoughtful approach to the cause of expanding ones kingdom and always kept the focus on resolution of the economic constraints in the war waging capability of the state. He has also stressed that the king is duty bound to ensure, that the people of his kingdom are happy and content, because, a happy kingdom is likely to be prosperous. He further states that a prosperous and wealthy state is unlikely to succumb to another even in case of a conflict.

Kosa or the Treasury

The fifth most important element of the state is the treasury according to Kautilya. All activities of the state depend on finance and therefore sufficient attention needs to be given to the treasury. Kautilya considered the treasury most valuable in raising an army, procuring equipment (including elephants), and preparing for war. After the treasury and the army, Kautilya focused on the importance of the fort, on which depends “the treasury, the army, silent war, restraint of one’s own party, use of armed forces, receiving allied troops, and warding off enemy troops and forest tribes. Kautilya lays down various causes that may contribute to the growth or reduction of the treasury. Kautilya says “The wealth of the state shall be one acquired lawfully either by inheritance or by the king’s own efforts.” He further adds that the treasury should be rich enough to withstand any calamity especially when the state has no income for a long time.

Managing the economy for power – Arthashastra approach

Management of the state necessitated realism, not idealism. It required the prudence and precise calculation of measures undertaken alongside their short and long-term consequences, which formulated the theoretical beginnings of economics:

“Wealth will slip away from that childish man who constantly consults the stars: the only guiding star of wealth is itself; what can the stars of the sky do? Man, without wealth, does not get it even after a hundred attempts. Just as elephants are needed to catch elephants, so does wealth capture more wealth.”[22]

Public welfare was contingent upon the strength of the state. The latter was achieved by internal development or territorial expansion, both of which were realized through power.[24] Hence, the prime motive of the state was the never-ending pursuit of artha. It is only after dedicating its energies to this end, can the state or king then move on to fulfilling dharma and kama. As such, the Arthashastra provides extensive coverage on the overall economy, which includes: infrastructure (roadwork, irrigation, forestry, and fortification), weights and measurements, labor and employment, commerce and trade, commodities and agriculture, land use and property laws, money and coinage, interest rates and loan markets, tariffs and taxes, and government expenditures and the treasury. The high level of detail dedicated to these areas demonstrates the remarkable organisation and centralisation of the state idealised in the Arthashastra, and it also supports the view that the information contained in the text is a compilation of works that have endured over long periods of trial and error.

The Arthashastra is surprisingly calculated on every minute detail and economic function – the exact number of panas[25] is provided for every salaried position, legal ramification, commodity, and livestock. Economics was regulated through such central planning and the highly detailed attempts at identifying the optimal amount for every economic function stresses this constant strive towards efficiently improving the overall utility and welfare of society. Along with prudence and careful calculation, the state is advised to be extremely active or energetic in managing the economy, as the Arthashastra states that, “The root of material well-being is activity, of material disaster its reverse. In the absence of activity, there is certain destruction of what is obtained and of what is not yet received. By activity reward is obtained, and one also secures abundance of riches.”Similarly, a different verse in the same chapter advocates the direction of such activity towards improving public welfare. Though seemingly liberal and humanitarian, this too had a very important economic basis. Hence, dedicating resources to the lower rungs of society also strengthened the peripheries of the state, which in turn actuated territorial expansion. Furthermore, providing amenities for the poor masses indirectly stimulated population growth, and thus, the overall growth of the state and economy in the long run. Hence, there is a lot of truth in the verses in which the Arthashastra states that “it is the people who constitute a kingdom; like a barren cow, a kingdom without people yields nothing.” The emphasis on population growth for indirectly achieving economic prosperity is also hinted elsewhere in the text, in which the Arthashastra strongly prohibits premarital sex and adultery and instead encourages fertility via rewards and punishments framed within the legal system. Central planning was directed towards maintaining stability, order, and efficiency in the economy.

Kautilya’s Principle and Aim of Economy ‘Artha’ can therefore be summed up as ‘Peace can be maintained by making war difficult and costly for the enemy through the balance of power achieved through alliances’.

Contemporary perspective

Whilst the basis of exerting power of any country has been that of expansion in the last twenty odd years the focus has shifted from territorial expansion to one of economic expansion. There are a number of examples of countries or coalitions trying to exert pressure on other countries to ensure the protection of their own economic interests. The engagements between all the countries of the world bear testimony to the fact that almost all parties have been trying to protect their own interests in dealing with others. The principles enumerated by Kautilya in his policy of Samdhi or Treaty have almost universal application today. Countries today are indulging in more and more treaties or accords than ever before to safeguard their own interests.

Kautilya also mentions that war should be declared as a last resort and that all other means like sama, dana, and bheda (conciliation, gifts/bribes, dissension) should be implemented towards averting war. In other words Kautilya prefers putting pressure on the enemy without breaking the peace. These very principles have been laid down in Chapter I of the United Nations Charter, where article I states “To maintain international peace and security, and to that end: to take effective collective measures for the prevention and removal of threats to the peace, and for the suppression of acts of aggression or other breaches of the peace, and to bring about by peaceful means, and in conformity with the principles of justice and international law, adjustment or settlement of international disputes or situations which might lead to a breach of the peace.”

This brings forth the justification of the well being of the society as the predominant factor since the ancient times till date. Also, the diversion of the resources meant for the well being of the society towards the war waging potential without the exploitation of all the options towards resolution is being despised upon. This was relevant during Kautilya’s times and is as relevant today. Though economy is a major constraint in the war waging potential of a nation state, and all efforts are made by the state to strengthen this instrument of national power prior to gaining the military ascendency, it is also proving to be a major restraint in controllong the expansionist attitude of states since ancient times.


Economic power

Economic power can be defined broadly as the capacity to influence other states through economic means. It is composed of a country’s industrial base, natural resources, capital, technology, geographic position, health system and education system.

Military power

Military power is the capacity to use force or the threat of force to influence other states. Components of military power include number of divisions, armaments, organisation, training, equipment, readiness, deployment and morale.

Power is an elusive concept

In the historical perspective, military power has been paramount and economic power a luxury. This has slowly changed to the point that the two roles have become interchangeable. A country's military capability is derived from its economic capacity. A country's economic capacity also determines it capability to exert and maintain its political, social and economic independence in the world and hence a force. Economic power does not translate directly into military power but the material basis of military strength has traditionally been a starting point for assessments of military potential, and economic capacity has been treated as a necessary condition for the ability to inflict significant harm since the advent of the industrial age.

Wealth may result from military power or from influence over opinion, just as either of these may result from wealth. In former times, military power was isolated; with the consequence that victory or defeat appeared to depend upon the leadership qualities of commanders. In the present times, it is common to treat economic power as the source. To revert to the analogy of physics: power, like energy, must be regarded as continually passing from any one of its forms into any other. The attempt to isolate any one form of power, more especially, in our day, the economic form, has been, and still is, a source of errors of great practical importance. While it is possible to convert military power back into economic power peacefully, the cost is largely prohibitive. Forceful use of military power to build economic power is extremely risky and can have counterproductive side effects in the form of economic sanctions. Military power is also extremely difficult to sustain without corresponding levels of economic power. For it is economic power that allows military power to be built up in the first place.

The traditional distinction between hard power and soft power is not entirely persuasive. Traditionally the test of a great power was 'strength for war'. Over the centuries, as technologies evolved, the sources of power have shifted. Today, the foundations of power have been moving away from the emphasis on military force and moving towards the economic potency of a state. In the industrial age, a positive relationship has commonly been assumed to exist between the ability to sustain military force and the economic foundations of power. This is evident from a brief examination of the evolution of industrial-age operational theory regarding the targeting of the economic base of an enemy. Attacking the state's economic base is a viable means of disabling an opponent.

The hard-soft distinction, though, is deceptive on several grounds. The words tend to imply that "hard is good" and "soft is bad."[26] Yet in practice, policymakers believe the reverse: if they can prevail through the exercise of soft power, that is much better than having to apply, for instance, military muscle. Economic power is the foundation of military power. It is just as important to set the agenda in world affairs and attract others as it is to force them to change through the threat or use of military weapons. This aspect of power is "soft power" - getting people to want what you want.

Economics is a vital element as a part of security discussions. A government can use an instrument or combination of instruments of power to persuade, coerce, or defeat an adversary.[27] A nation could try to persuade or use influence to change what a power might believe or value. Similarly, a country might want to change certain of its adversary's behaviors. A state could then use coercion to force modifications of selected behaviors. Finally, the nation's government might try to eliminate another power's ability to take certain actions or capabilities through defeating them in some endeavor. Economics can be used in all three cases independently or along with political, military, and informational elements of power.

Arthashastra view of economy

The Arthashastra is a book based on pure logic, Anveshiki. Kautilya has considered both the differing viewpoints of the extremes before reaching any decision. Edward de-Bono, the world-renowned thinker of 'Lateral Thinking' said, "The most intelligent man is the one who can look at two different contradictory viewpoints at the same time and arrive at his own decision." This is the quality that a leader has to develop when there are people coming to him with contradictory viewpoints. The book is based on logical discussions taking into consideration all kinds of ideas of various Acharyas.

A king prevents deterioration in his position and secures an improvement (a desire for which is a built-in feature of the system) in two ways: by attention to the elements of his power, and by built-in feature of the system) in two ways: by attention to the elements of his power, and by external action. Kautilya enjoins the ruler to attention to the elements of his power, investment: a wise king adopts policies that add to the resources of his country and enable him "to build forts, to construct buildings and commercial roads, to open new plantations and villages, to exploit mines and timber and elephant forests, and at the same time to harass similar works of the enemy."

Kautilya describes gift as the planned redistribution of incomes and resources in relation to domestic politics; and in relation to international politics, foreign aid. In the entire treatise about Gift as an instrument of policy of a traditional agrarian society he remarks; Gifts are a means of (favorably) influencing the disaffected[32] . Gifts and conciliation should be used to subdue weak kings, and dissension and threats against strong kings. Such gifts might include grants of land and girls in marriage, and the creation of a climate of security and freedom from fear .

Kautilya considered the treasury as the most valuable element of state for preparation of war. All activities of the state depend on finance and therefore sufficient attention needs to be given to the treasury. The Arthashastra regards economics as zero-sum game: the state would need to prosper economically lest it be overtaken by wealthier imperialist neighbors or suffer from internal rebellion by discontented government officials and military leaders.


Military power, together with economic and political power, may be used to impose one's will upon an opponent. Other elements of national power, such as economic or political, are linked with military action at the national strategic level and passed to the operational and tactical levels of military actions through constraints or limitations on the use of force. The armed forces responsible for conducting portions of the campaign must be adequately resourced. Unfortunately, future wars will most likely be fought under substantial resource constraints. Many of these resources are used by more than one element of national power. The national policy should encompass that this potentially divisive issue of resource sharing is addressed early on. Thus the transformation of the economic strength of a nation state to military power is a solution which needs to be developed in a cooperative atmosphere and thus support the overall national power strategy. Arthashastra provided the 'laws of the land' required to achieve unity of effort in the economic progress of the state by the resolution of the economic constraints and thus augment the military strength.

In practice, implementing engagement relies heavily on the manipulation on the economic elements of national power, primarily in the areas of trade and finance, to influence the behavior of other states. Engagement uses economic interdependence, or mutual dependence, to create ties that, in theory, should bind states together. Robert Keohane and Joseph Nye, the analysts of Soft Power,suggest that economic interdependence should be understood in terms of the power to influence, or the effects on each state of their trade linkages. Indeed, as many scholars have indicated, states have long recognized the truth that power generally flows from asymmetrical (or imbalanced) interdependence.[34] At its core, economic statecraft is founded on the principle of asymmetrical power.

The Arthasastra gives an important place to economic statecraft and coercion for purposes of maintaining order. It says that the means of ensuring the pursuit of philosophy, the three Vedas and economics (arth) is the rod; the administration of the rod constitutes the discipline of politics, (dandaniti), having for its purpose the acquisition, preservation, augmentation and bestowal of things. On it is dependent the orderly maintenance of worldly life. Kautilya adds that, if the rod is not utilised, it gives rise to the law of fishes; for, the stronger swallows the weak.

The State of the Arthashastra is unique among those of antiquity for engaging in commodity production on a large scale. There are separate agencies for looking after production in mines factories, forests and fields. There is a money economy, mainly in the towns. The high degree of division of labour is indicated by the existence of separate agencies for the maintenance of order; collection of taxes; supervision of production; regulation of trade, weights and measures; maintenance of foreign relations; management of armed forces consisting of infantry, cavalry, chariots and elephants; and administration of justice. In addition, there are agencies for managing the total revenue and expenditure, storage and censuses. Hierarchy is clearly indicated bv the mention of several levels of work.

The Arthashastra defines its subject as being "the attainment and protection of the earth", the earth in turn being defined as "the source of the livelihood of men"[35] . This fusion of economic and political aspects is a highly significant characteristic of the State of the Arthashastra. It performs the political functions of holding in balance two exploiting classes, enforcing discipline on the labour class, and maintaining, relations with other kings. Economically, it is the main land clearing agency, by far the greatest land- owner, and the principal owner of organised industry and the greatest producer of commodities.

Kautilya provided the much wider significance of 'artha' than merely wealth. The state or government has a crucial role to play in maintaining the material well being of the nation and its people. Therefore an important part of Arthashastra is the 'Science of economics'. The aim of the pursuing successful economic policies particularly through productive enterprises is also to increase revenue of the state and appropriate surplus for the state treasure[36]. This 'surpluses' were the means of ensuring the war potential of the state, be it through the economic strength of the state or by the conversion of the economic well being of the state into the military might through the resolution of the economic constraints.

Kautilya did not distinguish between the wealth of the sovereign and that of his subjects. IN his proposals of the rules and practices by which a king will rule successfully Kautilya explicitly recognises the engagement of the states through international trade (trade amongst kingdoms). The trade in goods and services apart from being the major vehicle for increasing wealth of the state also is a means of engagement which prove to be a deterrent or a means of coercion through the economic channel of diplomacy.

Arthashastra enunciated his views in gaining economic superiority through international trade, principles of taxation and the labour theory of value. All these theories postulated by Kautilya were with the aim of economic property of the state thus resolving the economic constraints to war waging potential and concurrently gain ascendancy to further the interests of the state. In proposing the economic policies Kautilya was very careful in so as not to burden the state itself. He anticipated the importance of conducting trade in accordance with the principles of comparative advantage and that imports are as important as exports in promoting the nation's economic development and growth. He proposed an ideal system of taxation whose burden will be borne fairly and which distorts the economic decision making as little as possible, thus ensuring smooth flow of economic resources to the power potential of the state and in turn enhancing the war waging potential.

Kautilya was far ahead of his time in developing the labour theory of value to determine the just wage for the workers and ensuring that this is revised with the economic well being of the state. He explicitly recognised that the value of labour depends on the skills employed, time spent on the job and the amount of the output produced. This was very crucial in motivating the subjects to contribute maximum to the well being of the state and in turn the state ensuring the material well being of the subjects.

It is clear that a state's engagement policies are built on the basic theoretical assumption that economic sensitivity and vulnerability in the target state will ensue from any asymmetrical trade linkages that favor the state. This assumption may be theoretically true in purely economic terms, but it is less relevant (if not erroneous) in terms of practical statecraft, the arena where economics and politics are inextricably linked. In other words, when engaging a state, during the critical risk assessment phase, the question should be asked: What impact will policy changes have inside the own state itself?

Arthashastra addressed both these presumptions by the way of ensuring the tangible economic growth in the state to further its military assets and motivation amongst the subjects of the state to resolve the economic constraints within which might affect the power augmentation of the state. In rethinking engagement, a keener understanding of, and greater respect for, any given opponent state's ends, ways, and means for influencing the own state policy must be considered seriously by own decision makers, the guidance to which was amply provided by Kautilya.


The very nature of war and conflict ensures that a degree of ambiguity, uncertainty, and, yes, risk will exist in any developed strategy. Clausewitz devotes the central theme of On War to this very premise; Clausewitz was not the only one to recognize the subjective nature of war, but he was the first to mark that characteristic as preeminent. Throughout his work, there are allusions to chance, luck, guesswork, uncertainty, probabilities, and so on.

Despite this uncertainty, there is comfort in the knowledge that others have navigated these waters before. The challenge is to somehow structure or frame the strategic problem to minimize the unknown or more importantly, to account for it. The effective strategist strives for the .closest approximation of the truth, knowing that full knowledge is impossibility.

An education in strategic subjects, followed by continuous historical study to maintain mental suppleness, combined with vicarious experience through exercise, and actual experience, all contribute to acquiring the skills necessary for finding the .closest approximation of the truth. Acknowledging the theoretical uncertainties inherent in war, conflict, and policy and strategy development is an important, if unsatisfying, step in understanding constraint assessment. It allows a better framing of the strategic puzzle. It is simply a matter of knowing what is not known in order to make better use of what is known

The simple definition of constraint as an imbalance in ends, ways, and/or means is straightforward but clearly incomplete. How does one measure the degree of constraint in any particular strategic endeavor? This is the heart of the dilemma.

The economic element of national power has two faces: one as a dominant element of power and the other as a source of potential susceptibility to the nation. Economic activity provides a potent source of power that includes the ability to produce goods and services, influence, a tool to weaken a possible foe, and an objective to protect in terms of a national asset. Conversely, economics is also a source of vulnerability or weakness for a nation. The nation can exist without international trade; however, the standard of living for its citizens and its wealth would certainly suffer. Economics, thus plays a predominant role in determining the power equation of the nation states in the world and as a corollary the economics of the war waging potential or the ability of the nation to influence the proceedings is largely dependent on the economic strength. This can also be viewed in the light of the ability of the state to overcome or resolve the economic constraints in the war waging potential.Economics is simply the study of the use of constrained resources. One of national leadership's main concerns involves the acquisition of additional resources or trying to maximize the use of the nation's resources. In this respect, the nation state tries to expand its ability, within these constrained resources, to make goods and services and extend its access around the world to get more. A basic understanding of the scope of the nation's economic power will help the reader think about how the country can use it along with other elements of power, political, military, and informational. The research addresses what makes an economy strong and how the nation can use its economic power to overcome the economic constraints to the war waging potential as illustrated in the Arthashastra by Kautilya to further its national interests.

A state can use an instrument or combination of instruments of power to persuade, coerce, or defeat an adversary. A nation could try to persuade or use influence to change what a power might believe or value. Similarly, a country might want to change certain of its adversary's behaviors. A state could then use coercion to force modifications of selected behaviors. Finally, the nation's government might try to eliminate another power's ability to take certain actions or capabilities through defeating them in some endeavor. Economics can be used in all three cases independently or along with political, military, and informational elements of power. Kautilya in Arthashastra has provided for all the economic means to cater for these cases.

Arthashastra by Prof L N Rangarajan explicitly deals with all the aspects of statecraft as linked to the economic activities of the state. The principles of Economic administration[40] have been explained to the minutest of details by Kautilya .The importance renderd to Artha over Dharma and Kama being the three pillars of statecraft is evidence enough of the part that economics plays in the state.

The economic well being of the state intrusively is the bedrock of the military might of the nation. The examples of Japan and more recently China have reestablished the postulates as enunciated by Kautilya. This is the stepping stone towards resolution of all the economic constraints which a state might encounter in its quest for power. Economics is an instrument of power but also the source of the other instruments of power like the military and diplomacy. Kautilya's 'Principle and Aim of economics' can therefore be summed up as 'Peace can be maintained by making war difficult and costly for the enemy through the balance of power achieved through alliances'.

Kautilya also mentions that war should be declared as a last resort and that all other means like sama, dana, and bheda (conciliation, gifts/bribes, dissension) should be implemented towards averting war. In other words Kautilya prefers putting pressure on the enemy without breaking the peace and this can be successful only be resolution of all the constraints primarily the economic constraints to the war waging potential of a state.

It is interesting to note that in the 4th century BC, Kautilya had realised that prosperity and safety were completely interlinked. He therefore advised the King to look after his subjects and states that in their happiness lies the King's happiness. He opines that a state with a contended and satisfied population is more likely to be a strong and powerful state capable of maintaining its sovereignty rather than a state wherein the people are unhappy. Kautilya classified the work force into three broad categories: Knowledge workers (including advisers), production workers (farmers and others) and the soldiers. He implicitly proposed a virtuous model of economic growth in which, income, governance, knowledge and ethical conduct were determined endogenously which contributed to the realization of power of a state and thus further its interests.

Kautilya believed that national sovereignty was a prerequisite for economic prosperity. So he gave the highest priority to national security since only freedom from foreign rule gave the freedom to pursue economic and spiritual goals. Therefore, he asserted, "An enemy's destruction shall be brought about even at the cost of great losses in men, material and wealth (7.13)."[43] This model of constraint management is followed till date and has been the initiation of determining the potential of states in the power quest.

There are two critical roles played by foresightedness: (i) to foresee and devise preventive and remedial measures in advance of the possible occurrences of constraints or adversities, and (ii) to recognize the interaction between self-protection and self insurance measures, that is, adjusting remedial measures in the light of the preventive measures. Kautilya emphasized the first role of foresightedness but it is doubtful that he understood the second role. Kautilya recommended that the king should be tireless in his efforts to see beforehand the occurrence of a constraint or disaster. Note ,foresightedness and forecasting are complementary, since foresightedness helps in finding long-term and reliable solutions whereas forecasting helps in devising immediate remedial measures. Kautilya stated, "All state activities depend first on the Treasury. Therefore, a King shall devote his best attention to it. A King with a depleted Treasury eats into the very vitality of the citizens and the country."[44]

It is interesting to note that Kautilya has spelt out a large number of rules and procedures for his King so as to be successful and be able to expand his kingdom. If one considers the 4th century BC King to be a elected Head of State in the 21st century and then draws parallels whilst considering the impact of technology, especially that in the information age, it is evident that the dictums of Kautilya are as valid today as they were in his times. Kautilya has essentially laid down the ground rules for humanity as a whole to be prosperous and satisfied, till such time that the basic nature of human being changes the dictums of Kautilya are unlikely to be irrelevant even in the days to follow.


1. Rangarajan L N "Kautilya Arthashastra" Penguin Books, 1992

2. Kangle R. P. "Kautilya - The Arthasastra Part II ", 2d ed., translation., Delhi: Motilal Banardisass, 1992.

3. Kangle.R P "Kautilya- The Arthasastra" Part III, A Study. Bombay: Registrar, University of Bombay,1965

4. Banarsidas Motilal, Chandragupta Mauraya and his times, Delhi,1988.

5. Parmar, Aradhana, "Techniques of statecraft: A study of Kautilaya's Arthashastra", Atmaram and Sons , Delhi ,1987.

6. Boesche Roger Kautilya's "Arthaśāstra on War and Diplomacy in Ancient India" The Journal of Military History, Vol. 67, No. 1 (Jan., 2003), pp. 9-37 http://www.jstor.org/stable/3093167 , 03 Nov 09.

7. Modelski George "Kautilya: Foreign Policy and International System in the Ancient Hindu World" The American Political Science Review, Vol. 58, No. 3 Sep., 1964, pp. 549-560, American Political Science Association Stable http://www.jstor.org/stable/1953131,15 Dec 2009

8. Brown D. Mackenzie "The Premises of Indian Political Thought", The Western Political Quarterly, Vol. 6, No. 2 Jun., 1953, pp. 243-249 University of Utah on behalf of the Western Political Science Association,http://www.jstor.org/stable/442160, 18 Dec 09

9. Waldauer Charles, Zahka William J and Pal Surendra , 'Kautilya's Arthashastra – A neglected precursor to classical economics" ,Indian Economic review Vol XXXI No. 1 1996 pp 101-108

10. Islam Sayem , The Arthashastra-Insights on Statecraft and Reflections of Ancient Indian Society

11. Deva Satya, State and Bureaucracy in Kautilya's "Arthasastra" ,Economic and Political Weekly, Vol. 19, No. 19 May 12, 1984, pp. 811-815 http://www.jstor.org/stable/4373251, 21Dec 09.

12. Lemire Major Judith K. "Towards an Integrated Campaign Plan: The Use of Political, Economic, and Military Elements of National Power at the Operational Level of War",1993, School of Advanced Military Studies, United States Army Command and General Staff College, Fort Leavenworth, Kansas.

13. Kamath M.V," Kautilya for the 21st Century ",Book review Dr Narayanacharya K.S.'and. 'Relevance of Kautilya for Today, 24 Dec 09

14. Summary on Kautilya's Arthashastra: Its Contemporary Relevance Publshied by Indian Merchants' Chamber, 2004. 24 Dec 09.

15. Boone Bartholomees J., jr., "Guide to national security policy and strategy", U.S. Army War College, July 2004, 30 Dec 09

16. Message from: akmal00, "The teachings of Kautilya's Arthashastra", Post Date: 18/05/2008 , nitish.bhushan76@gmail.com,ajay.aurora@rediffmail.com, 30 Dec 09.

17. Nye Joseph S., Jr."The Changing Nature of World Power",Political Science Quarterly, Vol. 105, No. 2 (Summer, 1990), pp. 177-192 The Academy of Political Science http://www.jstor.org/stable/2151022, 30 Dec 09

[1] Roger Boesche, "Kautilya's Arthashastra on War and Diplomacy in Ancient India", 2003, p15.Roger Boesche is Professor of Politics and Arthur G. Coons Professor of the History of Ideas at Occidental College in Los Angeles. His most recent book is The First Great Political Realist: Kautilya and His Arthashastra.

[2] Max Weber "Politics as a vocation "in Weber, Cambridge: Cambridge University Press, 1978, p 212-25. Ethics of Responsibility was a type advocated by in his lecture.

[3] Boesche. Op cit. , pp 22.


Henry C. Bartlett, G. Paul Holman, Jr., and Timothy E. Somes, .The Art of Strategy and Force Planning,. in Strategy and Force Planning : RI: Naval War College Press,1995), p. 20.

[5] John M. Collins, Grand Strategy: Principles and Practices Annapolis MD: Naval Institute Press, 1973, p. 5.

[6] B. H. Liddell Hart, Strategy, 2nd ed. (New York: Meridian, 1991), p. 322-323.

[7] Kautilya, The Arthasastra, 2d ed., and trans. R. P. Kangle, Part II of The Kautiliya Arthasastra (Delhi: Motilal Banardisass, 1992), book 5, chapter 3, line 35-36, page 304 Kautilya Arthashastra, 5.3.35–36: pp. 304

[8] Ibid. 5.3.47: pp305

[9] Ibid. 7.6.17: pp339.

[10] Ibid. 10.3.1–2: pp 438

[11] Ibid. 12.1.32: pp 462.

[12] Ibid. 12.17–32: pp 461–62; 12.2.8–33: pp 462–64

[13] Ibid. 12.2.1–7: pp462.

[14] Ibid. 8.1.38–40: pp388

[15] Ibid. 7.10.33: pp355.

[16] Ibid. 7.15.11: pp370

[17] Ibid. 7.14.18–19: pp368

[18] Ibid. 9.2.21–24: pp412

[19] Ibid. 7.11.23–25: pp357

[20] Ibid. 8.2.18: pp392

[21] Aleksandr A. Svechin, Strategy, (Minneapolis: East View Publications, 1992), p. 84.

[22] L N Rangarajan, Kautilya: The Arthashastra, 1992, Penguin Books, p 637.

[23] Ibid. pp 559. "Strength is power; happiness is the objective of using power. Power and success are interrelated. Power is of three kinds; so is the success resulting from its use... a prosperous treasury and a strong army provide physical power..."

[24] L N Rangarajan, Kautilya: The Arthashastra, 1992, Penguin Books, p 117.

[25] Ibid. pp 109-110.The coin most often mentioned in the Arthashastra is the pana. Rangarajan states that "the value of a pana in relation to the cost of living is in (5.3.34); an annual salary of 60 panas could be substituted by an adhaka of grain per day, enough for four meals for one Arya male (2.15.43)... given the fact of a cash wage of 5 panas a month for the lowest paid, the pana was, indeed, a valuable coin...".

[26] Joseph S. Nye, Jr "The Changing Nature of World Power" Political Science Quarterly, Vol. 105, No. 2 (Summer, 1990), pp. 177-192

[27] David E. Johnson, Karl P. Mueller, and William H. Taft, V. "Conventional Coercion Across the Spectrum of Operations" RND Corporation, 2002.

[28] R. Shamasastry,Translation of Kautilya's Arthasastra, 4th edition Book I Chap 13 Mysore, 1951.

[29] Ibid. Book II Chap 10

[30] Ibid Book IX Chap 5

[31] Ibid Book IX Chap 6

[32] Ibid Book IX Chap 6

[33] Albert Hirschman, National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1945).

[34] Robert O. Keohane and Joseph S. Nye, Power and Interdependence (3d. ed.; New York: Addison-Wesley Publishing, 2000),pp. 10-11.

[35] R P Kangle translation of Kautilya Arthashastra Arthashastra Book XV Chapter I

[36] LN Rangarajan Kautilaya The Arthashastra 1992 Penguin Books p 13

[37] L N Rangarajan Kautilya Arthashastra Penguin books 1992 p. 56-57

[38] Ibid. pp 2

[39] Ibid. pp 125

[40] Ibid. pp 200-211

[41] Ibid. pp 541

[42] Ibid. pp 149

[43] Ibid pp 116

[44] Ibid pp 253

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