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May 2016

Monopoly & Empire: Ancient China’s Debate on Salt and Iron

Without the state’s incredible, Heaven-mandated, virtually godlike concentrated power, “Who would build the roads?”

The Chinese Han Dynasty (206bce-220ce) cost an awful lot of money.  At every border, from the frozen North to the sweltering South, enemies like the steppe Xiongnu Empire (209bce-93ce) threatened Han imperial integrity.  Not surprisingly, the costs of maintaining an empire from Hainan to Gansu surpassed the population’s willingness to pay, forcing the earliest Chinese emperors to ceaselessly seek new revenue streams.  Responding to popular calls for lower taxes, Han rulers gradually lowered duties and in their place erected a series of state commodities monopolies.  The architects of the new monopoly system erected dozens of iron foundries and salt mines outfitted with the latest technological wonders.  Emperors later expanded the system to monopolize copper, bronze, all money production, and elements of the liquor trade.  Prices soared alongside government revenues, prompting popular outrage and reformist desires to abolish the monopolies.  In 81BC, sixty Confucian “learned men” convened to debate the Court faction over the wisdom of standing policy.  The subsequently-published Debate on Salt and Iron contains valuable ancient commentaries on the hidden costs of Empire, including the health of popular ethics:

The learned men responded:  Recently, a system of salt and iron monopolies, a liquor excise tax, and an equable marketing system have been established throughout the country.  These represent financial competition with the people which undermines their native honesty and promotes selfishness. 

The Confucians argued that government sponsorship of business enterprises created a moral hazard, positively encouraging immoral behavior and distorting individuals’ decision-making processes.  Without the unnatural, state-driven development of production and distribution, individuals remained content with their position in the world.  Therefore,

We desire that the salt, iron, and liquor monopolies and the system of equable marketing be abolished.  In that way the basic pursuits will be encouraged, and the people will be deterred from entering secondary occupations.  Agriculture will then greatly prosper.  This would be expedient.

The minister:  The Xiongnu rebel against our authority and frequently raid the frontier settlements.  To guard against this requires the effort of the nation’s soldiers.  If we take no action, these attacks and raids will never cease. 

The Court faction belabors the recent imperial efforts at containing the ever-present Xiongnu threat on the northern border.  The Qin and Han dynasties had long and diligently built a veritable military-industrial complex of fort-building, beacon-relay construction projects, and the management, staffing, and provisioning of garrisons.  Should the state lose its commodities monopolies, how would the Emperor pay to protect his people on the frontier and, once the frontier had fallen, the Chinese heartland itself?  The Confucians responded with a critique of the entire imperial project:

The learned men:  The emperor should not talk of much and little, nor the feudal lords of advantage and harm, nor the ministers of gain and loss.  Instead they all should set examples of benevolence and duty and virtuously care for people, for then those nearby will flock to them and those far away will joyfully submit to their authority.  Indeed, the master conqueror need not fight, the expert warrior needs no soldiers, and the great commander need not array his troops.

If you foster high standards in the temple and courtroom, you need only make a bold show and bring home your troops, for the king who practices benevolent government has no enemies anywhere.  What need can he then have for expense funds?

The Court responded with appeals to racism and xenophobia, declaring the Xiongnu “savage and cunning.”  With unstoppable, frenzied force, “They brazenly push through the frontier passes and harass the interior,” empowered in part by the kindness of the Emperor in lowering taxes to ease popular suffering.  Once again, the Scholars undermined the supposed virtues of Empire:

The learned men:  The ancients honored the use of virtue and discredited the use of arms.  Confucius said, “If the people of far-off lands do not submit, then the ruler must attract them by enhancing his refinement and virtue.  When they have been attracted, he gives them peace.”

At present, morality is discarded and reliance is placed on military force.  Troops are raised for campaigns and garrisons are stationed for defense.  It is the long-drawn-out campaigns and the ceaseless transportation of provisions that burden our people at home and cause our frontier soldiers to suffer from hunger and cold.

At this point, the Court abandoned the argument-from-empire, advancing instead a rudimentary defense of the division of labor to counter traditional Confucian agrarianism.  The Minister argues that from ancient times, China depended upon a wide variety of occupations each contributing to the greater well-being of the population.  With an array of crafts and trades, mercantile fairs flourished and the people prospered.  Government sponsorship of commodities production and distribution, therefore, could not only defray the costs of Empire, but could guarantee the material well-being of all classes of laborer and consumer.  The Confucians, however, responded that state intervention warped the natural orders of individual ethics and economic activity, despite the directly observable revenues and products:

The learned men:  If virtue is used to lead the people, they will return to honesty, but if they are enticed with gain, they will become vulgar…Vulgar habits lead them to shun duty and chase profit; soon they throng the roads and markets.  Laozi said, “A poor country will appear to have a surplus.”  It is not that it possesses abundance, but that when wishes multiply the people become restive.  Hence, a true king…restrains the people’s desires through the principles of ritual and duty and arranges to have grain exchanged for other goods.  In his markets merchants do not circulate worthless implements.

The purpose of merchants is circulation and the purpose of artisans is making tools.  These matters should not become a major concern of the government.

The Minister, refusing to yield the trade issue, maintained that China’s endlessly lucrative access to luxury goods depended upon state-run internal improvements projects.  Complex society demanded mercantile activity and in turn, “the ancient sages built boats and bridges to cross rivers; they domesticated cattle and horses to travel over mountains and plains.  By penetrating to remote areas, they were able to exchange all kinds of goods for the benefit of the people.”  The Minister drew upon China’s legendary history, in which Great Heroes (like Yu) personally conferred discoveries and inventions (like irrigation) upon the whole of Chinese civilization.  Without the state’s incredible, Heaven-mandated, virtually godlike concentrated power, “Who would build the roads?”

The Scholars, for their part, returned to the moral hazards of state intervention, drawing upon the exact same heroic, legendary foundations of ancient China:

The learned men:  If a country possesses a wealth of fertile land and yet its people are underfed, the reason is that merchants and workers have prospered while agriculture has been neglected.  Likewise, if a country possesses rich natural resources in its mountains and seas and yet its people are poor, the reason is that the people’s necessities have not been attended to while luxuries have multiplied.  A spring cannot fill a leaking cup; the mountains and seas cannot satisfy unlimited desires.  This is why Pan Geng practiced communal living, Shun concealed the gold, and Gaozu prohibited merchants and shopkeepers from becoming officials.  Their purpose was to discourage habits of greed and to strengthen the spirit of sincerity.  Now, even with all of the discriminations against commerce, people still do evil.  How much worse it would be if the ruler himself were to pursue profit!

The Court then followed with a history of the “equable marketing system,” of government commodities distribution.  As imperial power and wealth concentrated, the state channeled resources to developing infrastructure primarily “to assist in speeding the delivery of tribute and taxes from distant regions.”  Government-sponsored commodities production funneled all monopolized goods to the capital, which then redistributed them throughout the Empire.

The minister:  Because goods were bought when prices were low and sold when prices were high, the government suffered no loss and the merchants could not speculate for profit.  This was called the balancing standard. 

The balancing standard safeguards the people from unemployment; the equable marketing system distributes their work fairly.  Both of these measures are intended to even out goods and be a convenience for the people.  They do not provide a ladder for the people to become criminals by opening the way to profit!

The Confucians, however, note the fundamental bias of the Court faction—they in fact represent only their own selfish interests.  Should the Emperor adjust his vision of society, view the world—if even for a time—from the eyes of the commonest peasant farmer, and contemplate the true and natural interests of the majority, he would assuredly abolish the monopoly system.  The Scholars concluded:

The learned men:  The ancients in placing levies and taxes on the people would look for what they could provide.  Thus farmers contributed their harvest and the weaving women the products of their skill.  At present the government ignores what people have and exacts what they lack…cheaply to satisfy the demands of the government… Where is the equability in this marketing?

The government officers busy themselves with gaining control of the market and cornering commodities.  With the commodities cornered, prices soar and merchants make private deals and speculate.  The officers connive with the cunning merchants who are hoarding commodities against future need.  Quick traders and unscrupulous officials buy when goods are cheap in order to make high profits.  Where is the balance in this standard?

In the end, the Confucians’ did not hold fast to a curmudgeonly agrarianism or national autarky.  Rather, they propounded both moral and economic arguments against state intervention in the economy as well as the extension of state power to unwilling subjects.  All power wielded without matching virtue enriched the wicked few and impoverished the beneficent many.  Though in the short-term they failed to overturn the monopoly policy, the Confucians successfully established a strong intellectual position, tradition, and launching point for later and historic policy changes toward a more laissez-faire Han dynasty.


Source text available in:  Patricia Ebrey, Chinese Civilization:  A Sourcebook, Second Edition Revised & Expanded, New York:  The Free Press.  1981.

See also:  Valerie Hansen:  The Open Empire:  A History of China to 1600.  New York:  W. W. Norton & Co.  2000:  97-144.