Fragmentation: Exceptions Proving the Rule
Before we take a closer look at some of these traits and their impact on development, it is worth starting by considering counterexamples—periods of fragmentation that tended to be associated with greater innovation. These phases reveal the conservative climate of universal empire through its temporary absence, and thus offer further support for the fragmentation thesis. More specifically, polycentrism and the pressures of war proved conducive to commercial development as competition opened polities to new influences and experimentation. As Jean Baechler put it, “Each time China was politically divided, capitalism flourished.”151
The Warring States period was marked by seminal creativity, from the rebuilding of state structures to the Hundred Schools of Thought that advertised a wide variety of worldviews. The centralizing measures taken to standardize landholdings, mobilize the general population, and protect it from local elites were quite radical. They also fostered selection, as polities either succeeded in copying adaptive traits or risked failure. The competitive state system created a vibrant marketplace of ideas in which roving experts (“sages”) changed patrons at will. Perhaps most important, given the much later European experience, the desirability of organizing and increasing resources for the purpose of competition was explicitly recognized.152
The imperial Qin and early Han regimes, by contrast, indulged physiocratic tendencies, privileging the agrarian sphere at the expense of commerce. The Qin conquered China in part by arresting the rise of the merchant class in the Central Plain, in economic terms the most advanced part of the region. Cities were turned into “bastions of bureaucratic rule.” When the Western Han, most notably under the emperor Wu, felt the need to mobilize greater resources, they sought to do so by supplanting private enterprise with state-run institutions.153
Centuries later, the Han collapse exposed northern China to foreign rule but released the more sheltered south from some of these strictures. Under the Southern Dynasties of the fifth and sixth centuries CE, the southern capital Jiankang grew into a prominent hub of commerce. In a turn away from older traditions, the city boasted more markets and fewer internal walls than the more regimented Han capitals had. The southern port of Guangzhou traded with Southeast Asia, India, and even Europe, and served as a conduit for Buddhism’s entry into China. Overall, the independent states of the south “stimulated robust economic growth.” The Sui/Tang unification subsequently slowed commercial development, sidelining Jiankang as a rival power center.154
Yet innovative development returned on an even larger scale from the late Tang period onward. The upheavals of the mid-eighth century had hollowed out imperial unity and made the central state dependent on salaried soldiers, some of whom were drawn from beyond the empire. Commercialized warfare escalated demands for revenue, which in turn gave a big boost to monetization, indirect taxes, and the professionalization of tax collection. At the same time, waning state power lifted restrictions on merchants and private commerce.155
Maritime overseas trade took off in the first half of the tenth century, when the independent coastal kingdoms of Nan Han (in Guangdong) and Min (in Fujian) emerged from the wreckage of the Tang empire and developed “unparalleled dependence on trade.” Urban poll taxes and tolls replaced revenue from land that was withheld by powerful landlords.156
Even though the Northern Song brought an end to political diversity in that part of China, the restored empire’s need to maintain an army in excess of a million men (at least on paper) to protect the northern border zone against the Liao and Western Xia polities in Manchuria, northwestern China, and Inner Mongolia encouraged the government to promote trade. Similar to conditions in later European states, the military absorbed as much as four-fifths of total revenue. The security situation worsened when the Jurchen took over northern China in the late 1120s. Thus, even in the absence of a fully fledged state system, the empire for once experienced sufficient competitive pressures to embrace policies and institutions that were conducive to commercial development.157
The Song empire confronted these challenges by shoring up its fiscal system. The share of indirect taxes in government revenue rose from about a third at the end of the tenth century to two-thirds by the 1070s. Excise taxes focused on urban consumption and long-distance trade. Massive urban growth, unfettered marketplaces, a huge expansion of water transport and exchange, and the growing sophistication of financial intermediation led to an economic boom that filled the state’s coffers: the silver value of revenue increased 140 percent between the end of the tenth and the late eleventh centuries.158
This boom also heightened demand for credit. From the late Tang period onward—a time of fading state capacity—merchants had developed novel financial instruments. Learning from these innovations, the Northern Song authorities introduced vouchers to pay suppliers, which then circulated and sustained a speculative securities market. The Southern Song, ever more pressed for income, expanded this market by issuing promissory notes. By the mid-thirteenth century, the notes in circulation equaled seven times annual state revenue: credit had become the principal means of funding war.
This did not create a viable bond market: notes were redeemable in the short term, were traded in voucher and pawnshops, and were devalued by hyperinflation once the wars against the Mongols gathered steam. Even so, they represented an innovative and disruptive deviation from the conservative imperial tradition of prioritizing bronze coinage that was unlikely to have occurred under different circumstances, and was not in fact repeated after the end of Mongol rule. Thus, as William Liu observes, military needs turned the Song period into “probably the most creative period in the financial history of China.”159
Yet in the end, all of this remained atypical, for the simple reason that periods of persistent interstate competition along European lines were relatively rare in Chinese history. Apart from the chaotic dislocations of the Period of Disunion of the fourth through sixth centuries CE, the Song era was the only major exception. Traditionally, domestic revolts and frontier wars were the leading sources of conflict, far more so than symmetric interstate warfare was. Beginning under the Western Han, asymmetric competition with steppe opponents was the norm. In the fifth and sixth centuries CE, the Northern Wei state battled the Rouran. In the seventh century, the Tang campaigned from a position of strength; Ming clashes with Mongols led to a stalemate and upgraded border walls; and the Qing finally managed to pacify the steppe and ushered in a period of deceptive peace that ended once again in internal uprisings, whose ferocity dwarfed the impact of hostile European intervention.160
It might seem excessive to speak, as Giovanni Arrighi does, of “The Five Hundred Years’ Peace” from about 1400 onward, which, aside from campaigns along the steppe frontier, was punctuated only by brief encounters with Japan and, later, Britain, and a few engagements in Southeast Asia. But this phrase captures an important truth: from the sixteenth to the eighteenth century, China was at war with parties other than steppe opponents for merely 3 percent of the time. The empire’s huge size reliably deterred potential state-level challengers, insofar as there were any left in that part of the world.161
That said, campaigns and defensive measures against steppe enemies could also be expensive, and the need to fund them ended only after the 1760s. Nor was war completely marginalized: the Qing in particular cultivated a martial image. During the Mongol period, the sieges and combat on rivers and the sea that characterized warfare in southern China had been a boon for gunpowder weaponry and shipbuilding. Yet once these conflicts ended after 1368, the remaining wars against horsemen retarded Chinese firearms technology and reduced demand for naval assets. In Europe, by contrast, continuing and indeed steadily growing investment in precisely those two sectors provided a powerful stimulus for innovation in technology and financing. Thus, even as late imperial China engaged in warfare, the latter’s asymmetric character greatly reduced its developmental benefits.162
Monopolis
tic Policymaking
Under conditions of substantively uncontested unitary imperial rule and macro-regional hegemony, competitive pressures subsided while the scope for idiosyncratic centralized decision-making increased. Empires were not as autocratic as they were formerly portrayed in Western scholarship not because they were not organized around centralizing autocracies, which they usually were, but because their nascent despotism was tempered by the aggregate power of local elites. This does not mean, however, that imperial centers had no bite and could not, if unconstrained by external exigencies, decree sweeping measures without regard to human welfare and consultation with civil society. China’s history shows that rulers and their inner apparatus were perfectly capable of doing so, and sometimes in ways that inflicted serious damage on the economy.
Early Ming policies are an (in)famous example. In the late fourteenth century, the dynasty’s founder, the Hongwu emperor, embarked on ambitious antimarket reforms that sought to restore autarkic village economies and eliminate the inequalities brought about by market exchange. This goal was to be accomplished by returning to payments in kind and labor services in lieu of monetary transfers, and by reestablishing the kind of self-sufficient military farms that had gone out of fashion under the Tang 600 years earlier.163
These measures stand in stark contrast to the numerous institutional innovations that had peaked under the Southern Song, such as “commercial brokers, credit financing, bills of exchange, advance sales contracts, commenda partnerships, and joint-capital enterprises.” Past performance, as they say, does not guarantee future results, at least not as long as a monopolistic government could execute a U-turn without having to worry too much about the consequences.164
From the late fourteenth to the mid-fifteenth century, the shift from a market to a command economy resulted in widespread demonetization, as land taxes were rendered in-kind. Forced migrations and labor services curbed market interactions, and many farmers resorted to barter. The turn away from the market-oriented Song economy that had largely persisted under Mongol rule could hardly have been more radical.165
Multiple economic indicators expose the adverse effects of these policies. Per capita income was much lower under the early Ming than it had been in the eleventh century. Jiangnan, the most developed region, was no exception: land confiscations interfered with cultivation on more than half of its land, and rural household incomes fell. Elsewhere, the promotion of extensive farming likewise caused a major economic regression. Infrastructural investment focused on the Grand Canal: undertaken for the purpose of supplying the north with tax grain, these works bypassed many secondary cities, cutting them off from exchange. Coastal transport, which would have been cheaper, was neglected. Resources that were funneled to the north were unavailable for local investment, which created considerable opportunity costs. And in northern China itself, in order to strengthen military capabilities, the command economy expended great efforts on bolstering military farms and forcibly resettling farmers to reclaim land.166
Economic historian Richard von Glahn’s verdict deserves quoting at some length not only because of his eminence but also because of his generally optimistic perspective on China’s economic development:
The anti-commercial policies of the early Ming state, coupled with its expropriation of the wealth of the Jiangnan elite, wreaked havoc on the flourishing market economy of the Jiangnan region and arrested the commercial and urban growth that had continued with little disruption throughout the era of Mongol rule. Commerce and industry foundered, hampered by mismanagement of the monetary system, a sharp decline in overseas trade, and a system of hereditary artisan households that impeded the rational allocation of labor. Urban population fell, and many market towns were abandoned. The economic malaise that resulted from the traumatic transition from Mongol to Ming rule persisted for more than a century.167
Even in the absence of plausible alternatives, despotism had its limits. None of these deleterious policies could be maintained for very long: communal organization of labor, hereditary occupational groups, and labor services all faded in the course of the fifteenth century. Market activity and prices recovered in the sixteenth century, yet without ever quite matching the levels of the Song era. What matters most, however, is that hegemonic empire made such sweeping interventions possible to begin with.168
Top-down decisions on how to engage with the outside world fall in the same category. In chapter 11, I consider in some detail the extravagant naval expeditions of the early fifteenth century and their sudden termination. They exemplify a textbook case of monopolistic decision-making: launched at enormous expense for no tangible material benefit, they were equally swiftly shut down once political preferences at the imperial court changed.169
Restrictions on trade and seafaring were imposed with greater frequency, invariably in the context of uncontested imperial hegemony: reduced competitive pressures not only weakened the state’s need to profit from commercial exchange but also gave it more leeway in passing deleterious regulation. Thus, the Mongol regime first set up a state monopoly on overseas trade and then banned private merchants from dealing with foreign parties altogether. The Ming followed suit: in the late fourteenth century, coastal residents were forbidden to venture overseas. Only state-run “tribute missions” were allowed to do so. Further bans of private maritime commerce were issued in the fifteenth century and sometimes even extended to coastal shipping.170
At various points in the sixteenth century, the government prohibited the construction and operation of large oceangoing ships and authorized coastal authorities to destroy such vessels and arrest any merchants on them. In a back-and-forth that highlights the intrinsic capriciousness of monopolistic decision-making, the ban on private overseas trade was partially rescinded in 1567, then reintroduced in the early seventeenth century and again by the early Qing during their campaign against Taiwan until 1684. A short interlude of relaxation was followed by renewed bans from 1717 onward, until Guangzhou was designated as the only legitimate port for foreign trade in 1757. As Mark Elvin points out, it was precisely the huge size of the empire that made such policies possible in the first place: smaller states could not readily have shut themselves off like this, or would have paid dearly if they had done so.171
Bans did not stop trade but slowed it down, most notably from the fourteenth through the sixteenth centuries, when European overseas commerce embarked on its great expansion. Yet even if state fiat could not hope to put an end to private ventures, it did create antagonism between the authorities and merchants, deprive government of revenue, limit the scale of exchange, and promote corruption. The criminalization of commercial activities imposed additional costs, as merchants were forced to evade detection and bribe state agents to turn a blind eye. Instead of entering European-style partnerships with the state, “the energies of tough seafaring folk, which might have been turned outwards, were spent in running contraband and fighting with government troops.”172
Land-based gentry who protected smugglers benefited from trade restrictions. Their involvement strengthened the nonmercantile element of Chinese society, keeping traders dependent on patronage. It was structural trends such as this that mattered most in the long run, more than whether particular forms of trade were permitted or constrained at any one point in time. Thus, even when merchants and officials entered a symbiotic relationship under the later Qing, it was on the latter’s terms.173
Much of what was achieved was accomplished despite the state rather than thanks to it. Even earlier, under the Song and Yuan, when the political climate had been more favorable, the development of commerce in coastal Fujian had been held back by the fact that maritime and property laws and contracts only stood a chance of being enforced “when local government was not particularly corrupt.”174
In the late imperial period, Chinese traders did not generally receive active support from the state. At that critical juncture of emergent global integration, China’s commerce was both lais
sez faire and constrained, rather than “state-pulled” and protected as it was under the European system of mercantilism and its reinforcement by naval power that boosted trade. In this respect, of course, China’s experience was representative of that of traditional empires overall: regardless of whether their leaders were sympathetic, indifferent, or hostile to trade, such polities were invariably deficient in institutionalized bourgeois power and the commerce-and growth-oriented policies their influence might have inspired.175
Much the same was true of domestic exchange. In late imperial China, merchants’ involvement in the grain trade was circumscribed by hoarding in state granaries and relief schemes that sought to limit their profits. Merchant groups associated with salt and iron monopolies were closely supervised and acted mainly as distributors, performing functions the state had outsourced to them. Monopolies were less common than in Europe, offering fewer opportunities and “privileged niches” for entrepreneurs. Moreover, even though domestic trade was only lightly taxed, the authorities remained concerned about high profits and merchant wealth and could arbitrarily decide to intervene. Unlike in Europe, merchants were thus subordinates rather than partners of the state, and their position was much more precarious.176
Monopolistic decision-making in other domains added to the burden. For instance, the repeated relocation of capital cities interfered with cumulative growth in metropolitan centers and the surrounding regions. Bans on ideas were also an option. The central authorities had little compunction about suppressing unwelcome thought by fiat and force. Ming censorship led to the punishment or maltreatment of outspoken memorialists. The Qing conquest regime was sensitive to anti-Manchu sentiments, a stance that encouraged a retreat into apolitical and conservative scholarship.177
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