By Anirudh Kanisetti
13th century, an era when the Mongols were considered the Scourge of God, had rulers from Hungary to China quaking in their boots at the mere thought of a Mongol attack. One potentate however was a notable exception: he was, in fact, in the habit of defeating Mongol raids and keeping his dominion, among the world’s most prosperous, conspicuously safe from pony-riding barbarians.
Sultan Alauddin Khilji of the Delhi Sultanate was one of the finest generals in the history of the Indian subcontinent. He came to the throne after a coup against his uncle, and his successful military expeditions against the Mongols required a large and efficient standing army. It would take one of history’s most innovative economic policies to maintain it.
The Sultan’s solution to the problem was as brutally efficient as his military campaigns. The larger the army, the higher its upkeep. However, if prices of essential commodities were lowered, he could assure the same quality of life for his soldiers at a lower cost to the treasury without compromising their fighting calibre.
If the prices of essential commodities were fixed to buy the support of the military, the prices of every other commodity would also have to be controlled to ensure a similar quality of life for cultivators and merchants. The controls, therefore, were extended to every commodity available in Delhi’s markets – ranging from fine cloth to ponies – in an ever-expanding bureaucratic maze.
Fundamental market rules haven’t really changed much from the 13th to the 21st century. Price controls inevitably led to black market trading as a new equilibrium is reached between buyers and sellers. In addition, famines inevitably led to hoarding and shortages.
A policy like this would be impossible to maintain in a state which had to adhere to human rights. Luckily for the Sultan, the Delhi Sultanate was famous for many things, but humanitarianism was not one of them.
Draconian punishments were applied to any merchant who dared to hoard and sell items on the black market. Peasants were forced to come to Delhi and sell only to government-approved merchants at government-approved prices. This is in addition to the land revenue they already paid – which the Sultan paid back to the merchants, allowing for a small profit margin.
An intricate spy network ensured that any violations to the system were reported and dealt with. In times of scarcity, the entire city of Delhi was put on rations and fed only from government granaries, which acquired grain at fixed prices.
Within a few years of Alauddin’s accession, Delhi became unrecognizable. A totalitarian state where the Big Sultan knew all, its markets boasted possibly the most elaborate system of price controls ever conceived, at relatively cheap prices compared to global standards. In times of famine, amazingly, every household in the city had something to eat. Contemporary travellers’ accounts describe the fixed prices, come hell or high water, as a wonder of the world. But the downsides of the policy are not difficult to comprehend.
First, the peasantry had absolutely no incentive to increase production, as they would earn the same regardless. The Sultan refused to lower the taxes they paid. The countryside was essentially bled dry so that Delhi could live as he ordained. Merchants, too, could not pursue profits beyond what the Sultan allowed. This led to the economy stagnating for the duration of Alauddin’s rule: nearly twenty years.
Second, in a stagnating economy, it became more and more difficult for non-military professions to lead a good life. The prices of goods did not change for years, but incomes inevitably rose and fell with the Sultan’s military campaigns. “The price of a camel is two coins,” laments a contemporary, “But where do I get the two coins?”
The policy was clearly meant to benefit the army first, and the average Delhiite second. On the first criterion, it was a success, on the second it was a disaster (except in times of famine). Its implementation required a massive, expanding bureaucracy and spy network to fix everything from trading licences to profit margins and to discover and punish violators. Finally, it led to a miserable existence for the non-military classes, who could only live as well as the Sultan permitted them, and thus had no incentive to increase production, leading to economic stagnation and a long-term weakening of the Sultanate.
Was the policy a success? In terms of Alauddin’s objectives, yes. Was it a success on other counts? The answer is a qualified no – in purely economic terms, it was a disaster. But the positive externalities of keeping the entire Subcontinent safe from the Mongols justified the massive transaction cost to the economy of Delhi: the ends justified the means.
Besides, the citizens of Delhi were still eating Alauddin’s cheap grain in 1334 (he died in 1316), so perhaps they didn’t mind all that much?
Anirudh Kanisetti is an alumnus of the Takshashila GCPP15.
[This blogpost is part of an assignment of the Economic Reasoning coursework. For the assignments, students were asked to submit essays on identifying instances of price controls in the world; who the intended beneficiaries were; and what were the unintended consequences of the price control.]