Colombo Telegraph

Economic Policies Of Parakramabahu, The Great: What Lessons Are There For Today?

By W.A. Wijewardena

Dr W.A. Wijewardena

The Golden Era of Lanka’s history

The reign of King Parakramabahu I, also known as Parakramabahu the Great, is considered the golden era of Lanka, as the country was called at that time, in view of the unparalleled prosperity that he brought to the country during his rule. King Parakramabahu ascended the throne in 1153 ACE after bringing the divided country under a single rule and reigned the whole island from Polonnaruwa as the seat of administration for 33 long years till his death in 1186 at the age of 63. The economic prosperity which the country enjoyed during his rule is an interesting topic which Sri Lanka should investigate today specifically to identify the economic policies he had adopted and ascertain what lessons the country could learn from them.

The use of both primary and secondary sources

The writer is not a historian and therefore has used the primary historical sources and the writings of other historians to speculate on the economic policies adopted by Parakramabahu the Great with a view to identifying their parallels in modern economics. The main primary source is the Culavamsa, Part II of the Chronicle Mahavamsa, translated into Sinhalese by Rev Hikkaduwe Sri Sumangala and Pundit Batuwantudawe at the instance of the British Governor William Henry Gregory and published in 1877. King Parakramabahu the Great has been the hero of Culavamsa and therefore, like the authors of any contemporary Sri Lankan writing, the author of Culavamsa too has over-exaggerated the facts especially with respect to his birth and many of his heroic deeds. However, that part of Culavamsa covering the reign of Parakramabahu the Great is believed to have been written by a Buddhist Monk named Dhammakitti who had come to Lanka from Burma about 50-100 years after the reign of the king. Hence, the facts that have been reported in Culavamsa, though heard from others, would have been current at the time of its writing. The writings of other historians used as secondary sources are those of Professor Senarat Paranawitana and C.W Nicholas in both the History of Ceylon by the University of Ceylon Volume I Part II and the book The Polonnaruwa Period published as a Special Issue of the Ceylon Historical Journal in 1955.

About the taxes, foreign trade activities and coins used in this period, the writer has referred to Ancient Land Tenure and Revenue in Ceylon by H.W. Codrington, A Study of the Economic History of Pre-modern Sri Lanka by W.I Siriweera and Gal Vihara Rock Inscription attributed to Parakramabahu the Great translated to Sinhalese by Nandasena Mudiyanse.

A protégé of Kautilya

According to Culavamsa, King Parakramabahu has been well-versed in many arts, sciences and skills. He has been an eminent physician, out of the box engineer, master horse and elephant rider, knowledgeable of many religions including Buddhism, skilled in warfare with archery and fencing as specialisation, competent in linguistics, dancing, poetry and music and a practitioner of numerous law principles. But the most important skill he had got was his access to the wisdom of Chanakya and Culavamsa has described Chanakya as the Brahmin who was responsible for annihilating the Nanda Dynasty in ancient India. The reference here is to Kautilya, also known as Chanakya, the 4th century BCE Guru on Statesmanship and who wrote the first ever book on economics, The Arthashastra, and another book on ethics, law and morality titled Chanakya Neeti or Ethics of Chanakya. The Arthashastra has been a textbook written for educating would-be kings of economics, politics, international relations, warfare, state administration and management, governance and law. It has been the practice of kings in India to follow Kautilya and according to Culavamsa, even after 1500 years, King Parakramabahu the Great has learnt of the wisdom of Kautilya meaning that he had studied both The Arthashastra and Chanakya Neeti. Much more intriguing is his firm resolution, according to the author of Culavamsa, to be as famous as Kautilya and emulate his wisdom for bringing wellbeing and prosperity to the citizens of his kingdom (Chapter 64: Stanzas 46-51). This is the only reference in the entirety of the Chronicle about a Lankan king following the wisdom of Kautilya and therefore it cannot be a mere creation by the author of Culavamsa.

A speculation on Parakramabahu policies

Hence, it is reasonable to speculate that the economic policies of King Parakramabahu the Great are all based on Kautilyan economic principles. In fact, there are many parallels between his policies and the prescriptions of Kautilya. The taxes he has imposed are same as the taxes prescribed by Kautilya. How the ships which have been stranded in high seas and rescued by the king should be treated is more or less same as what Kautilya has prescribed. Kautilya has recommended that the king should give high priority to the training of kings’ servants and King Parakramabahu too has given such high priority for their training. Kautilya has stressed that the king should be skilled in policy making and according to Culavamsa, King Parakramabahu too has been skilled in policy making. Therefore, Kautilyan economic principles and the rationale of same can be used liberally to speculate on the economic policies pursued by King Parakramabahu whenever the available sources are silent on them.

Practice of state capitalism by Parakramabahu the Great

A Kautilyan economy is an economy characterised by what is known today as ‘state capitalism’ in the sense that there are state enterprises and those state enterprises are run with the objective of generating a surplus to the king. Kautilya has stressed that the king should be watchful of his officers in charge of enterprises making losses because, through losses, such officers are even eating up the labour of the people employed in them. In today’s economic parlance, what it means is that if an enterprise does not earn enough revenue to cover costs, it is tantamount to a waste of the resources used for running that enterprise. Professor Paranawitana quoting the Egyptian geographer Idris has referred to a lucrative and profit making enterprise which King Parakramabahu has been engaged in. Idris has reported that at around 1154 ACE, one year after King Parakramabahu became the supreme overlord of Lanka, shiploads of alcohol have been brought to Lanka and King Parakramabahu had bought all that alcohol and sold it back to citizens at prices fixed by him. Trade in alcohol is an enterprise, among many others, which Kautilya too had recommended to his king because the king can through it not only control drunkenness of people but also he can assure the quality of such alcohol sold. Accordingly, King Parakramabahu too traded in alcohol and ran the business as a state enterprise which makes profits. It can be speculated that he would have been engaged in all other trades such as elephants, ivory, gems, pearls, spices and timber produced in Lanka and many other products imported to the country at that time.

Budgets should be surplus budgets

Kautilyan budgets are surplus budgets since the purpose of budgeting is to augment the king’s Treasury. Without a surplus budget, that objective cannot be achieved. When King Parakramabahu the Great became the ruler of Dakkhina Desha, the country bordered by Kala Oya to the North, Adam’s Peak to the East and Bentota River to the South, Culavamsa says that he summoned his Treasurer, the equivalent of the Minister of Finance today. The young king asked his Treasurer whether he had enough resources to undertake a long war with the other two rulers of the country and unite the island of Lanka under one flag. Culavamsa says that the Treasurer opened the Treasury and showed the King its emptiness. The King having resolved to fill it immediately went on setting up a special economic zone called the Antharanga Dura bordering Kalu River, Sinharaja Forest and Bentota River to process the above mentioned products and export the same to the other countries. His objective was to earn sufficient profits so that he could buy weapons for his military campaigns. Thus, generating a surplus in his budget would have been one of the important objectives of his budgetary policy. Today, this type of policies is especially important when governments have run deep into debt so that through the surplus generated, the governments could repay some of the excessive debts and free a country of debt obligations. This was what was done by the Bill Clinton Administration in 1998 and 1999 when the US Government was deeply debt-ridden. Apart from profits from trading, the King is said to have taxed all economic activities, including agriculture, to build the King’s Treasury. This is in line with Kautilyan recommendation to the king. Accordingly, agricultural produce had been taxed at 17 per cent, water at 1/5of produce if drawn manually, at 1/4 if drawn using bullocks and 1/3 if drawn by means of a machine. Water from natural sources was taxed at the rate of 1/4 of the produce. Thus, tax on agriculture had been between 37 per cent and 50 per cent. In addition, trade, industry and craftsmanship were also taxed according to the rates prescribed in The Arthashastra.

Investment in infrastructure

After becoming the ruler of Dakkhina Desha in 1140 and later as the supreme overlord of the entire country in 1153, King Parakramabahu commenced a massive infrastructure development programme aiming at promoting agriculture, the main livelihood of people in ancient Lanka, and creating townships to facilitate a comfortable life for people. He also invested heavily in building religious institutions to satisfy the craving of ancient Lankans for spiritual development. He is credited to have constructed or renovated many thousands of small tanks, hundreds of large tanks, many irrigation canals and sluices to provide an uninterrupted supply of water for agriculture. R.L. Brohier, writer, surveyor and geographer during the British period, has noted in his Seeing Ceylon that the earth embankment of Parakrama Samudra extending eight and a half miles in length and more than 100 feet in height would have contained four and a half million cubic yards of earthwork. To complete such a massive structure, Brohier speculates that 1000 men would have been engaged day and night for 12 long years. The enormity of management and planning skills needed to bring this project to fruition would be an unimaginable challenge even today. His urban development has aimed at creating comfortable life for citizens and many thousands of traders visiting Lanka. This strategy is equal to modern Singapore’s policy of building ‘Western Oases’ within the country in order to lure developed country citizens, technology and investment. With these massive infrastructure investments, King Parakramabahu has developed domestic agriculture, industry (manufacturing weapons like ‘Sinhala Swords’ and ships) and trade. All these three pillars of the economy would have brought enormous prosperity to Lanka, its citizens and the King himself.

Entrepot trading to create wealth

King Parakramabahu the Great had trade relations with almost all the countries in the world. Coins issued by monarchs in China, Cambodia, Bengal, Persia, Middle East, Egypt and Greece had been found almost throughout the country relating to his period signifying the trade relations he would have had at that time. Ships had come from all these countries to Lanka and brought numerous products of these countries. Lanka had stockpiled them and resold to traders who had visited from all over the world. This type of trading is called today ‘entrepot trading’ and it can be speculated that Lanka was an important entrepot trading centre at that time. In that manner, Lanka would have performed the role which Singapore had been performing in early stage of its economic development. In fact, one of the reasons for King Parakramabahu the Great to invade Burma was to protect his trade rights. According to Culavamsa, Lanka had been buying Burmese elephants at 30 silver coins per elephant and the King of Burma had, without pre-announcement, stopped selling elephants to Lankan shippers. When he finally permitted the sale of elephants to Lanka, the prices had been raised to 1000 to 3000 silver coins making it a completely prohibitive trade. Annoyed by these unilateral restrictions to trade, king Parakramabahu had invaded Burma and re-established the trade links with that country.

Several firsts by Parakramabahu the Great

King Parakramabahu could claim credit for several firsts he would have introduced to Lanka as economic policies. The establishment of the Antharanga Dura Zone by him as mentioned above would have been the first and the only export processing zone a Lankan king would have ever established. According to Professor Paranawitana, Antharanga Dura is the title of a special officer who had access to the king day and night and appointing such a powerful officer to run the special zone shows the importance he had attached to this zone. Culavamsa also says that he had set up a special training school to train his public servants and the college had been located within his palace itself. The subjects taught to these would-be public servants had covered many diverse fields: Sciences dealing with horses and elephants, warfare with specialisation in archery and fencing, arts such as music, singing, dancing and poetry and many foreign languages. The teaching of foreign languages would have been to facilitate public servants to communicate with many traders who would have visited Lanka at that time. On the basis of the trade relationships which King Parakramabahu had with other countries, the foreign languages so taught would have been Chinese, Siamese, Burmese, Indian languages, Persian, Greek and Egyptian Language. He is also credited to have offered the first ever voluntary retirement scheme in history. According to Culavamsa, Buddhist priests had been divided into different sects and there had been open rivalry among them. Some of them were even defiled because as Culavamsa says they were interested only in their ‘families and children’, a type of behaviour not expected of a Buddhist priest. King Parakramabahu had offered them a monthly pension if they left the order voluntarily. Culavamsa says that all those defiled Buddhist priests had taken the offer of a monthly pension and left the order voluntarily. Thereafter, for the remaining priests, the King had introduced a code of conduct known as Parakramabahu Kathikawatha or Code as presented in his Gal Vihara Rock Inscription.

Every instance of prosperity is followed by adversity

Toward the end of his rule, the kingdom would have got into serious economic difficulties. The unpaid wars he had been engaged in, the decline in agricultural productivity due to over-tapping of the agricultural land and the outflow of gold through wars and payment to foreign artisans and workers would have contributed to this decline. Accordingly, there had been a debasing of the coins issued by the King from gold to cheap metal. By today’s practices, it is equal to printing of paper money in excessive volumes where the production costs of money are much lower than the face value of same. It has thus facilitated the king to earn a huge profit which economists call ‘seigniorage’. However, it is a sign of economic weakness and in the eyes of the foreigners, an appreciation of the local currency since they are now paid by overvalued cheap metal coins for the goods they sell to Lanka. That would have compelled the traders to raise their prices so that the imports coming to the country would have lost their competitiveness. For a trading economy, to have an overvalued currency is an economic curse since it shrinks, in this case, first imports and then exports. It also causes for trade to have relocated in some other trading centres. The gradual decline in the domestic economy in this manner normally leads a country to raise taxes, take away citizens’ property by force and when there are public dissents, to condemn people to arbitrary imprisonments. This is exactly what happened toward the last lap of Parakramabahu rule. Thus, Culavamsa which had earlier praised King Parakramabahu the Great as a ruler who made every citizen of Lanka prosperous and wealthy, says after his death that his nephew and successor, Wijayabahu II, had to provide relief to people by releasing those who had been arbitrarily imprisoned by his uncle and restoring them with the property which had earlier been expropriated by the King. Four years after King Parakramabahu’s death, King Nissanka Malla had to offer a stimulus package to people in Lanka by reducing the high taxes which had been levied by King Parakramabahu earlier.

Perhaps, one may speculate that 33 years is a too long a period even for a merciful monarch to keep on to the governance principles to which he had been committed in the initial era of his rule.

Based on a speech delivered by the writer at a roundtable discussion at the Postgraduate Institute of Management. 

*Writer is a former Deputy Governor – Central Bank of Sri Lanka and teaches Development Economics at the University of Sri Jayewardenepura. This article first appeared in Daily FT  – W.A. Wijewardena can be reached at

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