Episode 39. The Spring and Autumn period transformed China's economy forever.

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The economic transformation of ancient China from 720-221 BCE presents a fascinating case study in how societies evolve from feudal structures to complex commercial economies. During this pivotal era, China underwent remarkable changes—from fragmented warring states to increasingly centralized kingdoms, from hereditary privileges to merit-based governance, and from simple barter to sophisticated monetary systems.

As we journey through the Spring and Autumn period into the Warring States era, we witness the emergence of China's first bronze currencies—knife and spade-shaped money that appears around 600 BCE, coinciding with similar monetary innovations in Anatolia. These early currencies reflect a society transitioning from simple agricultural exchange to more complex trade networks requiring standardized mediums of exchange.

What makes this period particularly relevant to modern listeners is how these ancient Chinese states grappled with economic questions we still debate today. Should governments intervene in markets? How much wealth inequality is socially sustainable? What's the proper balance between private enterprise and state control? When ministers warned that "ill-gotten wealth from good prices in the marketplace" would lead to "no shortage of tradesmen" while "men of conscience and fortitude will be few," they could have been speaking at a contemporary economic forum.

The reformer Li Kui emerges as a particularly compelling figure. Rising from commoner to Prime Minister, he instituted revolutionary policies abolishing hereditary slavery, establishing merit-based governance, implementing fair taxation, and allowing private land ownership. When farmers could own their land rather than working for nobles, productivity increased dramatically—an early demonstration of how economic incentives drive behavior.

Perhaps most fascinating is how these ancient states developed sophisticated price stabilization measures, with governments purchasing grain after abundant harvests to prevent price collapses, then selling stored grain during shortages to prevent inflation. This form of price smoothing to protect both producers and consumers became a fundamental feature of Chinese economic policy for centuries.

Discover how China's early economic innovations—from standardized weights and measures to diverse currencies and regional specialization—created the foundation for one of history's greatest civilizations, and consider what lessons these ancient experiments in governance and commerce might offer our own economic challenges.

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Episode Transcript

Speaker 1 (00:02):
Hi, I'm Mike D.
This is the History of Money,banking and Trade podcast.
My goal is to expand yourknowledge of the history and
evolution of trade, along withmoney, banking and credit, from
ancient civilizations topresent-day market innovations.
I have an MBA and around 20years working in various

(00:24):
financial roles, but I am not ahistorian.
However, I find that if I studythe history of financial
changes and trade, complexmodern international activities
are much easier to understand.
The spring and autumn periodspanned from about 720 BCE to

(00:49):
around 481 BCE.
This was a period of intenseconflicts, which led to a period
of chronic warfare between theZhou peoples and their neighbors
.
China was fragmented as severalhundred newly independent
agrarian city-states emerged,but also larger cultures emerged
as well the Jin in the north,the Qi in the east and the Chu

(01:19):
stretching across the southernperimeter of the Zhou.
The fertile soil of the middleand upper regions of the Yellow
River Valley was very valuable,of which people have been
farming for over 9,000 years.
Everyone knew this.
As such, the djinn expandednorthward towards the Yellow
River Valley and essentiallysupplanted the djo.

(01:39):
However, things weren't allrosy for the Jin, as they would
experience a coup d'etat in 678BCE.
The reason was the Jin had aGreek city-state feel to them,
as they were a semi-independentstate that had cultural ties
with each other, but they spentas much time fighting each other

(02:01):
as they did, united fightingeach other as they did, united,
and it sounds like othercultures around China may have
been concerned a bit about this.
As such, lord Huan of Qi, whoruled around 685 to 643 BCE well
, he was asked by the Zhou Kingto assemble the rules of the

(02:25):
various states and negotiatetruces and succession disputes
and then marshal the collectiveforces of the various states to
pursue military campaignsagainst the non-Zhou peoples.
However, by the end of the 7thcentury BCE, the Jin was now the
hegemon of China.
However, by the end of the 7thcentury BCE, the Jin was now the

(02:46):
hegemon of China.
However, the other regionswould get challenged by the
newcomer, the southern state ofChu.
In reality, the Zhou rulerswere mostly puppets on the
throne by this time.
On the throne by this time,while the real power laid with

(03:09):
the local nobles ruling theseveral large states as the rule
of the Eastern Zhou startedwith about 150 independent
states that formallysubordinated to the kings.
With this amount offragmentation, that would mean
that most of them were quitesmall, consisting of only one
city and its immediatesurroundings.

(03:29):
Most of these smaller stateswere annexed by one of the 15
larger states.
Then you have almost thetypical historical situation,
whereas a single noble tries tounite the population, only to
have more civil wars break outwhen the strong leader dies and

(03:53):
the kids start fighting eachother.
This happened countless timesthroughout history, and in China
it was no different.
You saw it a lot in Assyria,you saw it in Babylonia and, of
course, it's going to happen inChina as well.
This exact situation happenedwith the Zhou, this resulting in
barbarian tribes seeing thisinstability only to invade the

(04:17):
Yellow River Valley.
While all this chaos washappening, the Duke of Qi
decided it would be a good timeto clean up things a bit and add
some stability.
So in 651 BCE, his grand ideawas let's all get the leaders

(04:37):
together and figure things out.
Therefore, several major statesagreed to respect the
patriarchal traditions of theold with respect to succession.
They also agreed to respecteach other's borders from an
economic and trade perspective.
They decided to preserveirrigation systems and set up

(05:01):
international trade agreementswith respect to grain, but but
at the same time, an agreementwas made that no administrative
office should be hereditary,which promoted a system of
meritocracy.
This took direct aim at the oldfeudal mentality.
But in an ironic twist twistthe Duke died in 643 BCE.

(05:24):
His six sons immediatelystarted fighting for succession,
despite their father's attemptsto prevent exactly that.
As a result, the state of Qilost its place as the dominant
hegemon.
The biggest beneficiaries werethe state of Song, led by Duke

(05:44):
Cheyenne.
Now, it's also around this timethat the use of ox-drawn plows
were most likely introduced.
However, according tohistorical records, they weren't
initially mentioned for farming, but instead they were used to

(06:07):
build flood-controlled dikesalong the El River in 602 BCE.
So while the various kingdomswere trying to stabilize trade,
bronze currency in the shape ofknives and spades first appeared
around 600 BCE.
This was also around the sametime when the Lydians were

(06:28):
introducing their coinage inAnatolia.
The physical shapes of thesecurrencies derived from useful
tools.
The earliest spade currency,apparently, was issued in the
name of the Zhou King by 575,.
The power in China hadtransformed as a full-scale war

(06:49):
resulted in a victory for theJin and its allies against the
Chu.
The powerful state of the Jinwent through a new set of
restructurings by furtherdeveloping a meritocratic system
where the best leaders would bein charge of the administrative
system.
The result was capable leadersand administrators gave the Jin

(07:13):
a state of internal stability.
But once these reforms tookhold, the Zhou kings lost their
respect to the dukes and therulers of the Jin and, as a
result, the fighting reignitedover the next several decades,
resulting in a never-endingwarfare, of which the smaller

(07:33):
states usually faced the fullbrunt of this, and they
typically lost their lands andoften became ground zero for
many of these battlefields forthe major powers, for many of
these battlefields for the majorpowers.
As a result of this constantwarfare, this led to another

(07:57):
meeting of the four major powersin 546 BCE.
Despite the warring states,systemic changes were taking
hold of most of China, as theold familial feudal system was
largely eliminated and replacedby a meritocracy, even for
higher court officials, and themost qualified people became
ministers.
State territories were dividedinto several small
administrative regions ruled bygovernors who directly answered

(08:20):
to the ruler.
Directly answered to the ruler.
Since the meritocracy wastaking hold again, the governors
in charge of these particularregions weren't given these jobs
.
As a result of thesemeritocratic positions, china
was able to achieve an advancedadministrative system that
allowed for better taxation,which allowed for more money to

(08:42):
flow into the governmenttreasuries, which allowed for
more money to flow into thegovernment treasuries.
The reformed taxation policyconsidered the total size of the
land that can be plowed andused to grow crops.
The amount of the levy taxesalso rose with the increase of
farming output as well.
The reason output increased wasbecause the old feudal system

(09:05):
was going away.
In theory, all land belonged tothe king, and the peasants had
little incentive to work harderthan they had to.
Just like in communist states,the workers have little to no
incentive to increaseproductivity.
But as the loyal authoritydisappeared slowly, farmers

(09:29):
gained the right of occupancyand later even ownership, making
them more productive.
Now, to be clear, ownershipwasn't the only aspect.
There was also advances infarming techniques and new
technologies.
Among those was connectinganimals, mainly oxen, to the

(09:51):
plows, allowing for deeper cutsinto the soil.
In addition, we are firmly intothe iron age as well, so there
was the use of stronger and moreefficient iron tools that were
used on the farm.
The reason why they were ableto produce so many good and

(10:16):
productive iron tools was thepeople could generally produce
kilns that could reach up to1300 degrees Celsius, or about
2375 degrees Fahrenheit.
In addition, pottery techniquesadvance enough for its products
to be made into ceramics.
When people think of China,they generally think of their

(10:38):
fine silks as their premierexport, but people generally
don't know that their ceramicswere extremely coveted for
millennia.
In fact I'm getting way aheadof myself, but their ceramics
was a big reason why, whensilver was discovered by the

(10:58):
conquistadors during the age ofexploration, a lot of the silver
that was dug up in modern dayPeru didn't go to Spain and
Europe.
In fact it actually ended up inChina because China was
exporting so much as far asceramics and silks.
But ceramics was really theprobably most coveted item that

(11:20):
was coming out of China.
So this would have startedaround 500 BCE.
So you can see, for literally2,000 years Chinese ceramics
were highly coveted by Europe.
With more food surpluses andthe new industrial products that

(11:41):
came out of the rise of trade,which also became an important
part of the late spring andautumn period, the development
of trade coincided with theimprovements of their
infrastructure.
In particular, the roadnetworks were expanded.
They were secured andmaintained by the state.
This increase in trade and theexpansion of infrastructure

(12:06):
meant a rise in wealth, whichalso meant that an accepted
medium of exchange would need tobe more readily available.
As such, china actively mintedmore traditional coins not the
physical shapes of coins likethe spade currency that was
issued in the name of the ZhouKing around 600 BCE.

(12:27):
These traditional coins reallyhelped fuel productivity and
improve trade, making economiclife in ancient China healthier,
pushing the various states intonew highs.
These traditional coins reallyhelped fuel productivity and
improve trade, making economiclife in ancient China healthier,

(12:51):
pushing the various states intonewer heights.
A side effect was members ofthe elite started to shift from
a purely warrior class to a moreintellectual one, from a purely
warrior class to a moreintellectual one.
As such, confucianism took holdof many in East Asia.

(13:15):
Confucius, who served the stateof Lu and managed to create a
universal code of conductapplicable to everyone, based on
his interpretation oftraditions and old feudal
customs.
His thought became one of thepillars of Chinese civilization,
which still remains to this day.
Old superstitions, such asrelying on shamans to overcome

(13:43):
droughts, or legends and customsto keep society in line, were
weakening and losing their placein the Chinese states.
Instead, confucianism ratherrelied on written codes of law
and emphasized personal andgovernmental morality, personal

(14:09):
and governmental morality,social relationships, justice,
kindness and sincerity.
In general, it could be saidthat rationality started to
saturate the Chinese society inthe spring and autumn period.
The fact is, china still didn'thave a law code like the code
of Hammurabi that was written inBabylonia around 1750 BCE.
So, in other words, china wasstill well behind ancient

(14:33):
Babylon, and that was over amillennia prior to this point.
With all the changes that wereoccurring over the centuries
changes that were occurring overthe centuries certain liberties
taken by certain rulersremained somewhat the same.
For example, in the Qi kingdomaround 523 BCE, the Qi minister

(14:57):
Yan Ying had apparentlycriticized the Qi ruler for
tightly controlling theresources of the mines and the
forests and the seas.
To make matters worse, heallowed the palace women to
essentially take the goods fromthe merchants without any form

(15:18):
of compensation.
People from the outskirts ofthe various towns and rural
areas who entered the capitalwere abruptly drafted into heavy
labor service and forced to payexcessive custom duties, and
because of this abuse of power,the Qi minister predicted Qi's
downfall.

(15:38):
Others have claimed that theseallegations may be a bit
far-fetched because, in theirview, government officials
merely supervised marketplacesto keep order, but did not
interfere in the marketplace.
It was only when schemers beganto hoard goods in order to

(15:59):
manipulate prices that officialsbegan to tax commerce as a way
of preventing such behavior.
Began to tax commerce as a wayof preventing such behavior.
However, certain statesmendeemed private business and the
profiteering merchant class asthreats to the monarchical state
.
Furthermore, others have statedthat the concentration of too

(16:20):
much wealth in the hands of toofew merchants undermine the
social order.
Where we heard that before nowthat sounds pretty modern,
considering the concentration ofwealth and the hands of a few
could lead to severe wealthinequality and ultimately
destabilize many currentsocieties, including the United

(16:41):
States.
However, the ancient Chinesetook it a bit further, because
many were concerned that peoplewould abandon traditional
careers, such as laborious workof husbandry, to seek easy
profits of trade.
It's the same concerns that theGreeks and classical Greeks

(17:04):
would have right around the sametime.
Actually, a minister noted thatquote.
When ill-gotten wealth fromgood prices in the marketplace,
there will be no shortage oftradesmen.
When jobbers and forestallersearn twice as much as farmers
and enjoy greater esteem thansoldiers or plowmen, the men of

(17:26):
conscience and fortitude will befew and the merchants and
tradesmen will multiply.
In other words, his fear waspeople will abandon traditional
values and traditional work andseek fortune.
It's not unlike today.

(17:46):
I've worked on wall street formany years now and the one thing
I've noticed is how, for years,people that have phds and some
kind of scientific backgroundswould have worked at places like
NASA or CERN or whatever it is,and they would have worked to
ultimately better society, findout great scientific research

(18:07):
and advancement.
But they're not going thereanymore or they're leaving
places like that early and whatthey're doing is they're coming
to New York and they're going tovarious quant funds to write
mathematical models and they canmake a great living on it.
So really they have a choice.
They can make $150,000 to$200,000 a year working at NASA,

(18:27):
or they can go for a quanthedge fund and make $2 million a
year, and you can't blame themfor leaving the great work that
they were getting at NASA andcoming to New York and making a
lot of money.
So, in other words, whatthey're getting back in ancient
China is kind of similar totoday.

(18:47):
In other words, if the profitsfrom trade exceeded the returns
from agriculture, farmers wouldleave their lands, which would
be a serious problem if foodproduction drops.
In addition, the taxationsystem gets out of kilter
because taxes were collected inkind, so the state needed to

(19:08):
take more grain as taxes fromindividuals to make up for the
lack of grain production causedby the former farmer leaving
their profession.
The result was the people wouldno longer have reserves in
times of hardship.
The volatility of seasonal andannual variations in the supply

(19:28):
and demand for grain could causeruinous cycles in price of
foodstuffs, with potentiallydevastating consequences.
Consequences.
There is always a delicatebalancing act with agriculture.
Cheap grain bankrupts producers, while expensive grain
jeopardizes the consumer.

(19:49):
Thus, it often meant that theruler would need to step in when
the marketplace was out ofwhack in order to try and
maintain a price equilibrium.
In addition, the governmentalso stepped in and essentially
established quasi-zoningregulations.

(20:12):
As such, they created variousgovernment workshops, of which
the artisans were expected toreside at certain locations.
In addition, the government hadzoned marketplaces of which the
merchants would occupy.
With all that being said, itbasically says that the various
governments started to take astep towards regulating

(20:35):
marketplaces and the economy ingeneral.
There could be many reasons forthis, but it probably came down
to the fact that they may nothave trusted the marketplace to
do the right thing, or maybeit's because they wanted to
ensure a steady tax base, ormaybe it was both.

(20:56):
However, on the contrary ormaybe it was both, however, on
the contrary, confucius hadrejected the goal of enriching
the state to bolster itsmilitary might, but they readily
agreed that the ruler bore theresponsibility for the smooth
functioning of markets, so thatthe people would not lack the

(21:17):
necessities of life.
In fact, many have described aneconomy in which the ruler
should manage resources.
To do this, the ruler shouldensure the free movement of
goods and farm products, so thatthe circulation is not hampered
or stymied.
Goods should naturally flow towhere the demand is.

(21:38):
Goods should naturally flow towhere the demand is.
In addition, some have raisedconcerns that excessive taxation
and other expenditures woulddiscourage production.
It's the same arguments we'rehaving to this day.
Many of the legalistphilosophers weren't quite on

(22:04):
board with a more laissez-faireapproach, which means hands-off.
Their main concern was thedestructive effects of private
wealth and inequality.
In their view, they wanted tofirst secure the welfare of the
people by first enriching thestate.
In order to accomplish this,they felt the state should
eradicate the self-interestedentrepreneurial merchant.

(22:25):
Regardless as to how the peoplefelt about the role of the
government playing.
The fact remains that there wasan ever-increasing
stratification of society as theruling class's wealth
strengthened.
This vastly increased thedisparity in wealth and power

(22:45):
between the rulers and the restof nobility, which meant that
there would end up beingextremely powerful monarchs that
ultimately destroyed many ofthe old noble lineages.
At one point, it felt like thevarious Chinese regions were

(23:06):
moving to a more modern economy.
However, this ever-increasingwealth gap pushed China the
other way, as rulers asserteddirect control over the land,
which they awarded to farmingfamilies in return for tax
payments, labor duties andmilitary service.
And now that China was movingmore firmly into the Iron Age,

(23:33):
warfare was changing.
For the longest time, chariotwarfare was conducted by the
nobles under strict rules ofchivalry, not unlike medieval
European warfare.
However, the rules ofengagement shifted and now
warfare was becoming farbloodier.
War was increasingly fought byenormous infantry armies drafted

(23:56):
from the rural population andequipped with iron weapons,
including potent crossbows.
In fact, this probably startedwith the Chu government, when
they conducted the firstuniversal registration of
able-bodied adult men formilitary service in 589 BCE.
By 548 BCE, the Chu undertook acomplete survey of its land,

(24:20):
forests, mineral output andlivestock resources for taxation
purposes, of which much of thetax revenue was used for
military expenses.
By 500 BCE, the populationregisters apparently had been
introduced in Qi as well.
By that time, a land tax wasimplemented that amounted to

(24:42):
about 20% Now.
With that being said, therewere some minor changes
happening as well, as there wasa slight rise in independent
farming families.
However, this may have been abit misleading, as the lands
received were not really privateproperty, but rather limited

(25:05):
rights conditionally bestowedupon the state in return for
goods and services.
In addition, there was anoticeable rise in forced labor,
as it became much moreimportant to the economy of the
autocratic states than in thecity-states of the past.
In fact, the practice was sowidespread that Qin law

(25:31):
established distinctions betweenconvict laborers and government
slaves.
Both groups were fundamentallythe same, as they were outright
laborers to the states.
It is also around 500 BCE thatthe eastern seaworth states of
Qi and Yan began to issue adistinctively different knife

(25:53):
and spade currency.
While Qi later introduced theirfirst round bronze coins known
as the bangleang, the southernstates of Chu had the most
unique monetary system, whichseemed to mimic other states and
look to the past, as theyintroduced gold pieces and

(26:15):
bronze imitations of cowrieshells, as well as the
spade-shaped bronze currency.
Because of its multiplecurrencies, chu established a
means of monetary value that hadenabled conversions of the
values between the differenttypes of money.
Chu's gold currency also servedto some degree as an

(26:39):
international currency,particularly in Qi and Qin.
On the other hand, the Qi knifecurrency and the Qin Banliang
coins really didn't circulatemuch outside of their particular
regions, so it appears thatmany of these kingdoms relied on

(26:59):
Chu gold tokens for interstateexchange.
However, later on, the Jinsuccessor states and other
kingdoms of the central plainissued various bronze currencies
that circulated generallyacross state borders.
The Jin successor states ofZhao and we also established

(27:21):
several denominations of bronzecurrency.
This would be important asthere was extensive trade
between the various regions.
One of the side effects of theincreased production of coinage
and trade was the fact thatthere was a major shift in the
way the government operated, andthis caused a reemergence of a

(27:44):
class of private merchants.
A perfect example of this wasthe Prime Minister of the UAE
resigned his position in 473 BCEand is said to have traveled to
Qi and devoted himself toagriculture, earning a fortune
of several hundred thousandcoins.
From there he moved to Dao, themajor commercial hub in the

(28:08):
central plain where he quote,established his business storing
away goods, looking forprofitable time to sell, for a
profitable time to sell and inthe course of 19 years three
times made a fortune of 100,000caddies of gold end quotes.
So, in other words, you can seehow someone that was in the

(28:29):
government decided to give thisup, kind of went into private
business for himself and made afortune.
The prime minister, we was saidto have pursued strong
commercial policies, such asreducing the customs duty on
commercial goods from 10 to 5%.
This emergence of merchantentrepreneurs allowed the local

(28:50):
rulers to stockpile resources,but also, without realizing it,
resulted in regionalspecialization of products, of
certain goods, such as iron,salt and silk In particular, the
Chin made mines and salt ponds,whereas they levied excise
taxes on these industries ratherthan managing them directly.

(29:13):
This was all because the kingwas advised that it's better to
allow private enterprise topursue profit and collect a
share of the output, and thisshare was typically 30%.
Once again, this sounds verymodern transforming.

(29:41):
Something else was happening,which may or may not have been
true, but a Yue princess who wasmarried to one of the princes
of the neighboring state of Wuleft, her husband fled back to
the state of Yue, and thismarital problem ultimately
sparked a war between the UA andthe Wu.
When the UA king died in 465BCE, it marked the last major

(30:05):
conflict of this spring andautumn period.
During the 5th century, a newpolitical order was rising.
This period would be known asthe Warring States Era, which
lasted from 453 BCE to 221 BCE.
This new order was one wherethe monarchs became even more

(30:25):
powerful because they were ableto increase tax revenues and use
those revenues to raise muchlarger armies.
You may be asking yourself whatabout the nobles?
Wasn't China looking more andmore like medieval Europe
fiefdoms?
Well, it was until it wasn't,because the monarchs simply

(30:49):
stripped the nobility of thelands and the officers From
there.
They granted rights to thefarmers in return for labor and
military service and taxes paiddirectly to the ruler's treasury
.
From this time, the marriedhousehold became the basic unit
of agricultural production andtaxation.

(31:09):
Small-scale agriculturalepitomized by the family farm
would remain a distinctivefeature of the Chinese economy.
Throughout the Warring Statesperiod, china was able to get
some level of economies of scalewith regards to its iron
metallurgy.

(31:29):
As a result, they were able tocause a military revolution.
The end result was chariotwarfare ended up becoming
obsolete.
But of course, it wasn't justwarfare that improved.
This also meant economies ofscale in farm production, as
farming tools were rapidlybecoming made of iron.

(31:51):
In the past, when China was inthe Bronze Age, it wasn't
uncommon for bronze to be tooprecious for farm tools, and
therefore they may have beenmore reliant on primitive tools.
But now it appears that Chinahad a different view when it
came to iron farm tools.
However, equipping the largeinfantry armies with iron tools

(32:15):
took priority over manufacturingagricultural tools.
A more centralized government'scontinued growth of a money
economy spurred inter-regionaltrade and the rise of the
independent merchant class.
This merchant class was vitalto the emperors because they

(32:38):
ultimately allowed the king tomake it easier to centralize
control over economic resources.
So therefore, a lot of theconcentration of wealth
ultimately ended up with theking and their immediate
families, along with some of theother high officials and most
likely, with some of the morepowerful merchants.
The once mighty nobles had losttheir lands and had lost their

(33:02):
wealth and immediately slid intopoverty.
I can only imagine that a lotof the serfs and the peasants
didn't exactly cry any tearsover them either.
So who knows, maybe they gotwhat they deserved in the end.
Maybe it was an ancient versionof schadenfreude, which is a
great German expression, thatyou take pleasure in the

(33:24):
downfall or misfortune of others.
With that being said, this alsohad some unintended
consequences, as this causedcities to get much larger, but
this wasn't the case for everyregion either.
These trends strengthened underthe imperial rule of the Qin

(33:44):
and the Han dynasties, whileempires weakened.
In 453 BCE, the Qin was dividedup into three states the Wei,
the Han and the Zhao.
It was actually the Wei kingdomthat initiated these
institutional reforms that ledto the dictatorial rule of the

(34:05):
Warring States period.
That led to the dictatorialrule of the Warring States
period.
In 419 BCE, wei's armiesinflicted a significant defeat
on the Qin and annexed the richagricultural lands on the
western edge of the centralplain.
The Wei lands were the mostdensely populated lands of China
.
Li Gui, the prime minister ofthe Wei, started out as just a

(34:28):
regular local official, but hisdecision-making and experience
was noticed by important peoplesuch as the king, and, as a
result, he quickly worked hisway up to become the prime
minister.
He will have a major impact onthis kingdom, as he instituted
many significant reforms.

(34:50):
First and foremost, he bannedthe hereditary system of slavery
.
In addition, he was probablythe person that was most
responsible for kicking thehereditary nobles off their
lands and, as such, he believedthat a prince should be in

(35:13):
charge of the local land togovern From there.
He had the prince divide thelands into smaller pieces, of
which a minister would oversee.
So what he was basically doingwas instituting a system of a
chain of command that would leaddirectly back to the king.
In addition, he abolished thehereditary system of the father

(35:37):
and son.
Whereas the father would be alocal official who received a
relatively high salary and then,when he died or retired retired
, his position would be passeddown to his son.
As you can imagine, this wasn'ta very good system, because you
can have a poor manager formany years.

(36:00):
So instead he would install ameritocracy and since these were
relatively highly paid jobs, heknew that he would get the most
talented people pushing forthese positions.
So after he established thisnew chain of command with
talented local officials, hethen went on to do a complete

(36:23):
reassessment of all the lands inthe kingdom and he then
formulated a reasonable tax codeand policy.
This policy imposed only modestlevies on farmers, while
curbing extravagant consumptionthrough regulation and
restraining merchants frommanipulating prices to the

(36:45):
disadvantage of the producersand consumers.
It appears to me that hehimself would have understood
this more than any other king ornoble, because Lee had rose
through the ranks, because hehimself was a commoner, and it
was the commoners that wereultimately severely harmed when

(37:06):
these greedy merchantsmanipulated prices.
As such, he was extremelyconcerned with wealth
inequalities, as he knew thatthis would have undermined
social order and the stabilityof the states.
The fact that he knew thatsevere wealth disparities could
undermine social order wassomething that had been a

(37:26):
concern with modern societiesever since.
In fact, when the city ofChicago was being built in the
late 1800s, many of the richpeople would build extravagant
homes on the outskirts of thecity because they feared that
one day the workers would riseup and essentially attack them,

(37:46):
so they wanted to be in aposition where they could flee
quite easily.
As for Li Kui, he alsoimplemented a system that would
allow for any land that was leftbarren and on farm to be
allocated to regular farmers.
There was also wasteland thathe encouraged commoners to try

(38:07):
and farm and try to get any kindof output out of.
With regards to these lands, heencouraged planting of
mulberries and other non-foodcrops.
In addition, one of the biggestthings he was known for was he
allowed for the private sale ofland of which ordinary farmers
could buy and farm forthemselves.

(38:29):
And, wouldn't you know it,productivity increased
dramatically.
It is amazing what happens whenindividuals can farm their own
lands and not be coerced bylocal nobles who basically
didn't pay them their worth.
So, in other words, for manyyears, the people farming the

(38:51):
land had little to no incentiveto increase productivity.
Li Kui emphasized thecultivation of multiple stable
crops, including millets, wheat,hemp and soybeans.
He believed that diversifyingthe crop production could reduce

(39:11):
the risk of harvest failure.
Li Kui also promoted a form ofindirect prices by having the
state purchase grain afterabundant harvests when grain
prices would have been low, inorder to boost prices and
thereby keep income levels forfarmers from dropping to the

(39:31):
point of ruin.
He also wanted to protect theurban consumers as well, so he
would sell the built-upinventory when grain production
was much less.
Thus, there would have beenprice inflation without
government intervention.
In the end, what Li Kui wasaccomplishing was a form of

(39:55):
price smoothing by keepingprices for farmers higher during
periods of excessive outputsand prices lower when inflation
would have taken hold whenproduction was low for one
reason or another.
This form of state interventionto smooth out fluctuations in
food prices became a fundamentalfeature of the political

(40:16):
economy of the Chinese imperialstate.
Li Kui also collected law codesfrom various kingdoms and used
those as templates to create hisown legal code.
This new law code wouldestablish legal rights to the
people.
This also applied to localofficials, and not just the

(40:40):
commoners.
Unfortunately for us, these lawcodes did not survive, but
apparently these law codes werethe basis for the law codes that
were erected in the Han and Qinempires.
Another Li Kui reform was hereformed the military system by

(41:01):
establishing a standing armythat would be trained year-round
.
In addition, they wereprofessionalized through
reorganizations which allowedfor meritocracy, as competent
officers and foot soldiers wereable to rise through the ranks.
In the end, li Kui's reformsultimately made the we the

(41:23):
strongest and most prosperouskingdom in China, and many would
say that this was the first andmost successful political
reform ever done by a non-kingin China.
Prior to all these reforms,chinese cities were typically
fortified by putting up a giantwall around the palace in the

(41:47):
center of the walled city.
In other words, most citieswould have had two walls, one
protecting the city itself andthe other one protecting the
ruler.
But by the time we get to theWarring States period, this had
changed slightly, whereas thecity was divided up into two
sectors, with walls and canalsbeing around the upper sector,

(42:10):
which would have included thepalace along with other temples
and important buildings, thelower sector being where the
commoners would have lived,which wasn't unlike most ancient
cities.
In fact, it wasn't all thatuncommon for certain ancient
cities and towns not to evenbother to protect the lower

(42:31):
class.
Other notable changes in thisperiod of Chinese history was
the use of Xi, as this wastypically meant as a gathering
place for its citizens duringthe spring and autumn periods.
This gathering place wastypically for certain festivals
and other assemblies, whichwould have included public

(42:53):
executions.
But by the time we get to theWarring States period, the word
she or possibly pronounced assure now meant the urban
marketplace.
In other words, during thespring and autumn periods, the
urban marketplaces may not havebeen as important or hardly
existed at all, but by the timewe get to the period of the

(43:14):
Warring States, the marketplaceof the city had taken on much
more significance.
In fact, the marketplace hadbecome synonymous with the city
itself.
An ancient book known as MarketLaws from the Qi indicated the

(43:34):
importance of the marketplace inthe Chinese city and basically
what it says is that a mid-sizedkingdom will profit from
commerce, whereas a smallkingdom absolutely depends on
commerce, because the marketwill be the ultimate source of
goods that could be at theking's disposal.
Therefore, a mid-sized kingdomwill be able to profit from the

(43:59):
market and therefore will beable to become much stronger.
The smaller kingdom needs themarketplace to remain secure.
The book goes on to say thatwhen the market flourishes,
goods will circulate and thepeople will benefit, and
therefore wealth and possessionsof the various states will
arrive.

(44:19):
Even in the small kingdoms,they will become rich.
The warring states period sawthe goods obtained from trade
meant that the kingdom couldgenerate revenues through taxing
commerce.
This was 100% vital to thestate's survival.
Just like the book Market Lawsays, the value of commerce to

(44:42):
the state was greatest in thesmallest kingdoms, which lacked
the manpower to field greatarmies.
When you get to medievalItalian city-states, these
independent states were quitesmall, but they generated a ton
of revenue through trade and, asa result, they could raise
decent sized armies, not fromtheir own people but through

(45:03):
mercenary soldiers.
But we aren't quite there yet,as this is still ancient China,
but I'm just trying to give youan idea of how a small kingdom
could actually protect itself.
Now, with all this being said,it was quite obvious that the
kings were much more in tune towhat was going on in the

(45:24):
marketplace, and they would havehired inspectors to supervise
the activities of variousmerchants to make sure that they
weren't acting unethically andriling up the local population.
In fact, the book Market Lawsprescribes that markets must be
located in towns and the size ofthe marketplace should be

(45:48):
proportional to the size of thetown.
In addition, there were manysecurity measures that were
imposed by the book, such asthere should be walls that limit
access but at the same time,were designed so that people
could easily move goods in andout of the marketplace.
In addition, the shops shouldbe arranged in an orderly

(46:14):
fashion, depending on the sizeand prices of the goods.
Another book that was quitepopular and commonly used was
the book of Lord Chang thatasserted that, quote the
security of the state dependedon agriculture and war.
Unquote, which is kind ofcommon sense, because if you
can't provision your army, thenyou're not going to have an army

(46:38):
much longer, and thus you wouldhave national security issues.
As such, we call this timeperiod the warring states period
.
For this particular reason,battles were becoming bloodier
and campaigns lasted longer.
Now I suspect that one of thebig reasons we see this
happening was because of theeconomic booms to the technology

(47:03):
that was being developed andexpanded trade, which led to
increased farm productivity,which led to population booms.
You have more people, campaignscan last longer and they become
deadlier, since certain stateswere getting bigger and more
powerful.
Then, therefore, the inevitablehappened as smaller states got

(47:25):
gobbled up by the more powerfulstates.
During this consolidationperiod, the Yan state emerged in
the north, around present-dayBeijing.
This was the last state toemerge as a powerhouse.
The last state to achievecentralization of power was the
Qin.
The Chu never became anabsolute monarchy, as they still

(47:49):
had powerful barons.
Either way.
During the Warring Statesperiod, agricultural output per
farmer surged.
This meant more food for thepopulation, which meant a rise
in population, which also meantthe possibilities for a division
of labor.
Therefore, people could moveinto other specialties, which

(48:12):
meant an increase in the numberof people employed in mining,
logging, craft specializationand even transportation.
As such, each region was ableto specialize and produce
excessive goods and commodities.
This meant long-distance tradeflourished with the growing

(48:33):
independent merchant class.
This also was aided by anincrease in bronze currencies.
All this happened after theheartland of the North China
Plain weakened after thedivision of Jin into three
separate states the Wei, the Hanand the Zhao in 453 BCE.

(48:57):
Additionally, privateentrepreneurship stimulated
industrial and commercialexpansion.
Stimulated industrial andcommercial expansion.
The Qi reform absolutely shapedthe Wei precedent.
The reason being was in 385 BCE, the Qin prince was forced into
exile into Wei.

(49:17):
However, he returned to the Qinand reclaimed the throne.
This fact recalls stories ofPhilip II of Macedonia being
held as a political hostage, andfrom there he basically took
everything he learned from theThebans as the model for reform

(49:38):
in Macedonia.
Similar kind of situationhappened here.
The wee governments orderedlarge-scale irrigation projects
in the region, thus boostingfarm production, which
ultimately meant more money forthe farmers, but also increased
tax revenue.
The Chin rulers saw thisfirsthand and, as a result, they

(50:01):
wanted their own version ofthese new and approved
irrigation techniques.
As such, by around 250 BCE, theShanggu plain in Sichuan was
transformed into a fertilerice-growing region.
The result from theseirrigation reforms was the Qin

(50:23):
were able to see an unforeseenrise in power in the 4th and 3rd
centuries BCE.
Agricultural outputs rose.
As typical farming household offive persons cultivated 800
mule of land, which equated toabout 4.5 acres.
That yielded a total harvest of150 she of grain.

(50:47):
One she was equivalent to about20 liters, so this meant that
about 3,000 liters of grain wasproduced.
The she state collected a landtax of about 10%, so the state
would have collectedapproximately 3,000 liters of
grain in tax per year.
Additionally, each year the taxcollection calculation was

(51:07):
adjusted based upon currentyields.
According to Li Kui, who wasthe prime minister of the we, he
supposedly said that the familyrequired 90 shi of grain for
its own subsistence.
So we're talking about 1,800liters of grain, leaving a
surplus of 45 shi, or about 900liters of grain.

(51:28):
At a market price of 30 coinsper shi, the surplus was
equivalent to about 1,300 coinsto 1,400 coins.
Community ritual observancecost about 300 coins annually
and clothing for five persons atotal of about 1,500 coins.
Thus the household incurred anannual deficit of 450 coins, and

(51:50):
that didn't include forunfortunate events like illness
or death or if you had to bury aloved one.
The fact is, farmers weretypically put in a bad spot.
Now factor in volatility offarm prices and things could get
very serious for families.
This was a major reason why thegovernment did all it could to

(52:14):
protect farmers from severefluctuations in prices.
It should be worth noting thatthese figures may not be 100%
accurate, because these figureswere attributed to Li Kui.
As such, he appeared in thehistorical record long after the
time of the first century.
A skeptic, therefore, might nottake these records at face

(52:35):
value if it was written inancient times, potentially 100
years after the events actuallyhad occurred.
However, getting back to thereforms made by the Qin, of
which much of the reforms weremodeled on the Wei, the Qin
appointed market examiners tocollect taxes on trade.
They established householdregisters for military service

(52:57):
and moved the Qin capital fromYang to Yue, which was a
practical move, as this meantthat the capital would be much
more centrally located, withready access to commercial
networks of the we and thecentral plane, because the
central plane was where farmproductivity was the highest.
Upon reaching adulthood, eachson would be given his share of

(53:22):
the family legacy in order tolive apart as a separate
household.
Individual households wererequired to provide both labor,
service and military service tothe state on a regular basis In
344 BCE.
Other reforms were also enactedthat ultimately would make
trade more efficient for the Qin, especially when they adopted

(53:47):
standardized weights andmeasurements.
This also enabled a moreequitable collection of taxes as
well, because prior to thesereforms, taxes would have been
based on local weights andmeasures, meaning some areas
would pay less or more thanother areas due to the previous
lack of standardization.
Also, it appears that taxcollection may have been

(54:15):
partially in coinage by 336 BCE.
When the Ban Lian coin becamemore widespread, qin monetary
policy linked private enterpriseto public obligations.
The Qin rulers also wanted todifferentiate their banlian
coins from the knife and spadecurrencies of the central plain.
The banlian coins were roundand different in weight as well.

(54:38):
Also, they included laws thatmade the use of the coin
official and instituted harshpenalties for counterfeiting or
using the currencies of otherstates.
Unfortunately, the Qin monetarysystem was broken down into
three separate currencies thatwere used in everyday

(54:59):
transactions the Ben Liang coin,gold pieces in various sizes
and weights, and bolts of hempcloth coin, gold pieces in
various sizes and weights andbolts of hemp cloth.
However, the Qin primarilyrelied on the Banlian coins as a
means of exchange, and the hempcloth was used as a form of
payment to make soldiers'uniforms rather than as a means
of exchange in private trade.

(55:20):
However, this appears to havedisappeared by about 186 BCE.
Apart from the awards that weremade to soldiers and other
government officials, goldappears to not have had much of
an importance in the Qin fiscalgovernment.
I'm not 100% sure why, but itprobably has to do with the fact

(55:41):
that it was so rare that itjust wasn't really practical for
everyday uses.
It was so rare that it justwasn't really practical for
everyday uses.
Similarly, in Mesopotamia,silver was used much more than
gold because silver was moreabundant and could be used in
everyday transactions where goldwas just too rare to be used.
So, not surprisingly, after thedeath of Qin Shi Huang, the

(56:03):
first emperor of China, therewas a notable increase in
counterfeiting of the coinage,particularly of the Banlian
coins, which were the standardcurrency of the Qin dynasty.
To combat the widespreadcounterfeiting and tampering,
the second emperor, qin Erxi,initiated a reminting of the

(56:25):
coinage.
This process involved reducingthe weight of the Banlian coin
significantly, by more than half.
In many cases, coins werelighter and more standardized,
making counterfeiting moredifficult.
In helping to restoreconfidence in the currency
system, this effect was part ofa broader measure to stabilize

(56:48):
the economy and control thecurrency amidst social and
political upheaval following thedeath of the emperor.
The re-minted coins continuedto be used during the Han
Dynasty as well during the HanDynasty as well.

(57:10):
I want to thank you for takingthe time to listen or watch this
episode, the next episode.
We will continue on with thedevelopment of ancient Chinese
economies and the further use ofcoinage.
If you like what you hear andwant to donate to the show, you
can visit us at patreoncom slashhistory of money banking trade

(57:31):
or you can visit our website atmoneybankintradecom.
Thank you very much.
Talk to you soon.