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

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.

Chapters

• 0:00 Introduction to China's Financial History
• 7:13 The Spring and Autumn Period Begins
• 12:37 Political Fragmentation and Early Reforms
• 29:12 Agricultural Innovation and Currency Development
• 42:55 Rise of Confucianism and Economic Philosophy
• 57:31 Trade Regulation and Market Controls

Transcript

Speaker 1: 0:02

Hi, I'm Mike D. This is the History of Money, banking and Trade podcast. My goal is to expand your knowledge of the history and evolution of trade, along with money, banking and credit, from ancient civilizations to present-day market innovations. I have an MBA and around 20 years working in various financial roles, but I am not a historian. However, I find that if I study the history of financial changes and trade, complex modern international activities are much easier to understand.

Speaker 1: 0:43

The spring and autumn period spanned from about 720 BCE to around 481 BCE. This was a period of intense conflicts, which led to a period of chronic warfare between the Zhou peoples and their neighbors. China was fragmented as several hundred 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 stretching across the southern perimeter of the Zhou. The fertile soil of the middle and 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 expanded northward towards the Yellow River Valley and essentially supplanted the djo. However, things weren't all rosy for the Jin, as they would experience a coup d'etat in 678 BCE. The reason was the Jin had a Greek city-state feel to them, as they were a semi-independent state that had cultural ties with each other, but they spent as much time fighting each other as they did, united fighting each other as they did, united, and it sounds like other cultures around China may have been concerned a bit about this. As such, lord Huan of Qi, who ruled around 685 to 643 BCE well, he was asked by the Zhou King to assemble the rules of the various states and negotiate truces and succession disputes and then marshal the collective forces of the various states to pursue military campaigns against the non-Zhou peoples. However, by the end of the 7th century BCE, the Jin was now the hegemon of China. However, by the end of the 7th century BCE, the Jin was now the hegemon of China. However, the other regions would get challenged by the newcomer, the southern state of Chu. In reality, the Zhou rulers were mostly puppets on the throne by this time. On the throne by this time, while the real power laid with the local nobles ruling the several large states as the rule of the Eastern Zhou started with about 150 independent states that formally subordinated to the kings. With this amount of fragmentation, that would mean that most of them were quite small, consisting of only one city and its immediate surroundings. Most of these smaller states were annexed by one of the 15 larger states. Then you have almost the typical historical situation, whereas a single noble tries to unite the population, only to have more civil wars break out when the strong leader dies and the kids start fighting each other. This happened countless times throughout 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 in China as well. This exact situation happened with the Zhou, this resulting in barbarian tribes seeing this instability only to invade the Yellow River Valley. While all this chaos was happening, the Duke of Qi decided it would be a good time to clean up things a bit and add some stability. So in 651 BCE, his grand idea was let's all get the leaders together and figure things out. Therefore, several major states agreed to respect the patriarchal traditions of the old with respect to succession. They also agreed to respect each other's borders from an economic and trade perspective. They decided to preserve irrigation systems and set up international trade agreements with respect to grain, but but at the same time, an agreement was made that no administrative office should be hereditary, which promoted a system of meritocracy. This took direct aim at the old feudal mentality. But in an ironic twist twist the Duke died in 643 BCE. His six sons immediately started fighting for succession, despite their father's attempts to prevent exactly that. As a result, the state of Qi lost its place as the dominant hegemon. The biggest beneficiaries were the state of Song, led by Duke Cheyenne. Now, it's also around this time that the use of ox-drawn plows were most likely introduced. However, according to historical records, they weren't initially mentioned for farming, but instead they were used to build flood-controlled dikes along the El River in 602 BCE. So while the various kingdoms were trying to stabilize trade, bronze currency in the shape of knives and spades first appeared around 600 BCE. This was also around the same time when the Lydians were introducing their coinage in Anatolia. The physical shapes of these currencies derived from useful tools. The earliest spade currency, apparently, was issued in the name of the Zhou King by 575,. The power in China had transformed as a full-scale war resulted in a victory for the Jin and its allies against the Chu. The powerful state of the Jin went through a new set of restructurings by further developing a meritocratic system where the best leaders would be in charge of the administrative system. The result was capable leaders and administrators gave the Jin a state of internal stability. But once these reforms took hold, the Zhou kings lost their respect to the dukes and the rulers of the Jin and, as a result, the fighting reignited over the next several decades, resulting in a never-ending warfare, of which the smaller states usually faced the full brunt of this, and they typically lost their lands and often became ground zero for many of these battlefields for the major powers, for many of these battlefields for the major powers. As a result of this constant warfare, this led to another meeting of the four major powers in 546 BCE. Despite the warring states, systemic changes were taking hold of most of China, as the old familial feudal system was largely eliminated and replaced by a meritocracy, even for higher court officials, and the most qualified people became ministers. State territories were divided into several small administrative regions ruled by governors who directly answered to the ruler. Directly answered to the ruler. Since the meritocracy was taking hold again, the governors in charge of these particular regions weren't given these jobs. As a result of these meritocratic positions, china was able to achieve an advanced administrative system that allowed for better taxation, which allowed for more money to flow into the government treasuries, which allowed for more money to flow into the government treasuries. The reformed taxation policy considered the total size of the land that can be plowed and used to grow crops. The amount of the levy taxes also rose with the increase of farming output as well. The reason output increased was because the old feudal system was going away. In theory, all land belonged to the king, and the peasants had little incentive to work harder than they had to. Just like in communist states, the workers have little to no incentive to increase productivity. But as the loyal authority disappeared slowly, farmers gained the right of occupancy and later even ownership, making them more productive. Now, to be clear, ownership wasn't the only aspect. There was also advances in farming techniques and new technologies. Among those was connecting animals, mainly oxen, to the plows, allowing for deeper cuts into the soil. In addition, we are firmly into the iron age as well, so there was the use of stronger and more efficient iron tools that were used on the farm. The reason why they were able to produce so many good and productive iron tools was the people could generally produce kilns that could reach up to 1300 degrees Celsius, or about 2375 degrees Fahrenheit. In addition, pottery techniques advance enough for its products to be made into ceramics. When people think of China, they generally think of their fine silks as their premier export, but people generally don't know that their ceramics were extremely coveted for millennia. In fact I'm getting way ahead of myself, but their ceramics was a big reason why, when silver was discovered by the conquistadors during the age of exploration, a lot of the silver that was dug up in modern day Peru didn't go to Spain and Europe. In fact it actually ended up in China because China was exporting so much as far as ceramics and silks. But ceramics was really the probably most coveted item that was coming out of China. So this would have started around 500 BCE. So you can see, for literally 2,000 years Chinese ceramics were highly coveted by Europe. With more food surpluses and the new industrial products that came out of the rise of trade, which also became an important part of the late spring and autumn period, the development of trade coincided with the improvements of their infrastructure. In particular, the road networks were expanded. They were secured and maintained by the state. This increase in trade and the expansion of infrastructure meant a rise in wealth, which also meant that an accepted medium of exchange would need to be more readily available. As such, china actively minted more traditional coins not the physical shapes of coins like the spade currency that was issued in the name of the Zhou King around 600 BCE. These traditional coins really helped fuel productivity and improve trade, making economic life in ancient China healthier, pushing the various states into new highs. These traditional coins really helped fuel productivity and improve trade, making economic life in ancient China healthier, pushing the various states into newer heights. A side effect was members of the elite started to shift from a purely warrior class to a more intellectual one, from a purely warrior class to a more intellectual one. As such, confucianism took hold of many in East Asia. Confucius, who served the state of Lu and managed to create a universal code of conduct applicable to everyone, based on his interpretation of traditions and old feudal customs. His thought became one of the pillars of Chinese civilization, which still remains to this day. Old superstitions, such as relying on shamans to overcome droughts, or legends and customs to keep society in line, were weakening and losing their place in the Chinese states. Instead, confucianism rather relied on written codes of law and emphasized personal and governmental morality, personal and governmental morality, social relationships, justice, kindness and sincerity. In general, it could be said that rationality started to saturate the Chinese society in the spring and autumn period. The fact is, china still didn't have a law code like the code of Hammurabi that was written in Babylonia around 1750 BCE. So, in other words, china was still well behind ancient Babylon, and that was over a millennia prior to this point. With all the changes that were occurring over the centuries changes that were occurring over the centuries certain liberties taken by certain rulers remained somewhat the same. For example, in the Qi kingdom around 523 BCE, the Qi minister Yan Ying had apparently criticized the Qi ruler for tightly controlling the resources of the mines and the forests and the seas. To make matters worse, he allowed the palace women to essentially take the goods from the merchants without any form of compensation. People from the outskirts of the various towns and rural areas who entered the capital were abruptly drafted into heavy labor service and forced to pay excessive custom duties, and because of this abuse of power, the Qi minister predicted Qi's downfall. Others have claimed that these allegations may be a bit far-fetched because, in their view, government officials merely supervised marketplaces to keep order, but did not interfere in the marketplace. It was only when schemers began to hoard goods in order to manipulate prices that officials began to tax commerce as a way of preventing such behavior. Began to tax commerce as a way of preventing such behavior. However, certain statesmen deemed private business and the profiteering merchant class as threats to the monarchical state. Furthermore, others have stated that the concentration of too much wealth in the hands of too few merchants undermine the social order. Where we heard that before now that sounds pretty modern, considering the concentration of wealth and the hands of a few could lead to severe wealth inequality and ultimately destabilize many current societies, including the United States. However, the ancient Chinese took it a bit further, because many were concerned that people would abandon traditional careers, such as laborious work of husbandry, to seek easy profits of trade. It's the same concerns that the Greeks and classical Greeks would have right around the same time. Actually, a minister noted that quote. When ill-gotten wealth from good prices in the marketplace, there will be no shortage of tradesmen. When jobbers and forestallers earn twice as much as farmers and enjoy greater esteem than soldiers or plowmen, the men of conscience and fortitude will be few and the merchants and tradesmen will multiply. In other words, his fear was people will abandon traditional values and traditional work and seek fortune. It's not unlike today. I've worked on wall street for many years now and the one thing I've noticed is how, for years, people that have phds and some kind of scientific backgrounds would have worked at places like NASA or CERN or whatever it is, and they would have worked to ultimately better society, find out great scientific research and advancement. But they're not going there anymore or they're leaving places like that early and what they're doing is they're coming to New York and they're going to various quant funds to write mathematical models and they can make a great living on it. So really they have a choice. They can make $150,000 to $200,000 a year working at NASA, or they can go for a quant hedge fund and make $2 million a year, and you can't blame them for leaving the great work that they were getting at NASA and coming to New York and making a lot of money. So, in other words, what they're getting back in ancient China is kind of similar to today. In other words, if the profits from trade exceeded the returns from agriculture, farmers would leave their lands, which would be a serious problem if food production drops. In addition, the taxation system gets out of kilter because taxes were collected in kind, so the state needed to take more grain as taxes from individuals to make up for the lack of grain production caused by the former farmer leaving their profession. The result was the people would no longer have reserves in times of hardship. The volatility of seasonal and annual variations in the supply and demand for grain could cause ruinous cycles in price of foodstuffs, with potentially devastating consequences. Consequences. There is always a delicate balancing act with agriculture. Cheap grain bankrupts producers, while expensive grain jeopardizes the consumer. Thus, it often meant that the ruler would need to step in when the marketplace was out of whack in order to try and maintain a price equilibrium. In addition, the government also stepped in and essentially established quasi-zoning regulations. As such, they created various government workshops, of which the artisans were expected to reside at certain locations. In addition, the government had zoned marketplaces of which the merchants would occupy. With all that being said, it basically says that the various governments started to take a step towards regulating marketplaces and the economy in general. There could be many reasons for this, but it probably came down to the fact that they may not have trusted the marketplace to do the right thing, or maybe it's because they wanted to ensure a steady tax base, or maybe it was both. However, on the contrary or maybe it was both, however, on the contrary, confucius had rejected the goal of enriching the state to bolster its military might, but they readily agreed that the ruler bore the responsibility for the smooth functioning of markets, so that the people would not lack the necessities of life. In fact, many have described an economy in which the ruler should manage resources. To do this, the ruler should ensure the free movement of goods and farm products, so that the circulation is not hampered or stymied. Goods should naturally flow to where the demand is. Goods should naturally flow to where the demand is. In addition, some have raised concerns that excessive taxation and other expenditures would discourage production. It's the same arguments we're having to this day. Many of the legalist philosophers weren't quite on board with a more laissez-faire approach, which means hands-off. Their main concern was the destructive effects of private wealth and inequality. In their view, they wanted to first secure the welfare of the people by first enriching the state. In order to accomplish this, they felt the state should eradicate the self-interested entrepreneurial merchant. Regardless as to how the people felt about the role of the government playing. The fact remains that there was an ever-increasing stratification of society as the ruling class's wealth strengthened. This vastly increased the disparity in wealth and power between the rulers and the rest of nobility, which meant that there would end up being extremely powerful monarchs that ultimately destroyed many of the old noble lineages. At one point, it felt like the various Chinese regions were moving to a more modern economy. However, this ever-increasing wealth gap pushed China the other way, as rulers asserted direct control over the land, which they awarded to farming families in return for tax payments, labor duties and military service. And now that China was moving more firmly into the Iron Age, warfare was changing. For the longest time, chariot warfare was conducted by the nobles under strict rules of chivalry, not unlike medieval European warfare. However, the rules of engagement shifted and now warfare was becoming far bloodier. War was increasingly fought by enormous infantry armies drafted from the rural population and equipped with iron weapons, including potent crossbows. In fact, this probably started with the Chu government, when they conducted the first universal registration of able-bodied adult men for military service in 589 BCE. By 548 BCE, the Chu undertook a complete survey of its land, forests, mineral output and livestock resources for taxation purposes, of which much of the tax revenue was used for military expenses. By 500 BCE, the population registers apparently had been introduced in Qi as well. By that time, a land tax was implemented that amounted to about 20% Now. With that being said, there were some minor changes happening as well, as there was a slight rise in independent farming families. However, this may have been a bit misleading, as the lands received were not really private property, but rather limited rights conditionally bestowed upon the state in return for goods and services. In addition, there was a noticeable rise in forced labor, as it became much more important to the economy of the autocratic states than in the city-states of the past. In fact, the practice was so widespread that Qin law established distinctions between convict laborers and government slaves. Both groups were fundamentally the same, as they were outright laborers to the states. It is also around 500 BCE that the eastern seaworth states of Qi and Yan began to issue a distinctively different knife and spade currency. While Qi later introduced their first round bronze coins known as the bangleang, the southern states of Chu had the most unique monetary system, which seemed to mimic other states and look to the past, as they introduced gold pieces and bronze imitations of cowrie shells, as well as the spade-shaped bronze currency. Because of its multiple currencies, chu established a means of monetary value that had enabled conversions of the values between the different types of money. Chu's gold currency also served to some degree as an international currency, particularly in Qi and Qin. On the other hand, the Qi knife currency and the Qin Banliang coins really didn't circulate much outside of their particular regions, so it appears that many of these kingdoms relied on Chu gold tokens for interstate exchange. However, later on, the Jin successor states and other kingdoms of the central plain issued various bronze currencies that circulated generally across state borders. The Jin successor states of Zhao and we also established several denominations of bronze currency. This would be important as there was extensive trade between the various regions. One of the side effects of the increased production of coinage and trade was the fact that there was a major shift in the way the government operated, and this caused a reemergence of a class of private merchants. A perfect example of this was the Prime Minister of the UAE resigned his position in 473 BCE and is said to have traveled to Qi and devoted himself to agriculture, earning a fortune of several hundred thousand coins. From there he moved to Dao, the major commercial hub in the central plain where he quote, established his business storing away goods, looking for profitable time to sell, for a profitable time to sell and in the course of 19 years three times made a fortune of 100,000 caddies of gold end quotes. So, in other words, you can see how someone that was in the government decided to give this up, kind of went into private business for himself and made a fortune. The prime minister, we was said to have pursued strong commercial policies, such as reducing the customs duty on commercial goods from 10 to 5%. This emergence of merchant entrepreneurs allowed the local rulers to stockpile resources, but also, without realizing it, resulted in regional specialization 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 rather than managing them directly. This was all because the king was advised that it's better to allow private enterprise to pursue profit and collect a share of the output, and this share was typically 30%. Once again, this sounds very modern transforming. Something else was happening, which may or may not have been true, but a Yue princess who was married to one of the princes of the neighboring state of Wu left, her husband fled back to the state of Yue, and this marital problem ultimately sparked a war between the UA and the Wu. When the UA king died in 465 BCE, it marked the last major conflict of this spring and autumn period. During the 5th century, a new political order was rising. This period would be known as the Warring States Era, which lasted from 453 BCE to 221 BCE. This new order was one where the monarchs became even more powerful because they were able to increase tax revenues and use those revenues to raise much larger armies. You may be asking yourself what about the nobles? Wasn't China looking more and more like medieval Europe fiefdoms? Well, it was until it wasn't, because the monarchs simply stripped the nobility of the lands and the officers From there. They granted rights to the farmers in return for labor and military service and taxes paid directly to the ruler's treasury. From this time, the married household became the basic unit of agricultural production and taxation. Small-scale agricultural epitomized by the family farm would remain a distinctive feature of the Chinese economy. Throughout the Warring States period, china was able to get some level of economies of scale with regards to its iron metallurgy. As a result, they were able to cause a military revolution. The end result was chariot warfare ended up becoming obsolete. But of course, it wasn't just warfare that improved. This also meant economies of scale in farm production, as farming tools were rapidly becoming made of iron. In the past, when China was in the Bronze Age, it wasn't uncommon for bronze to be too precious for farm tools, and therefore they may have been more reliant on primitive tools. But now it appears that China had a different view when it came to iron farm tools. However, equipping the large infantry armies with iron tools took priority over manufacturing agricultural tools. A more centralized government's continued growth of a money economy spurred inter-regional trade and the rise of the independent merchant class. This merchant class was vital to the emperors because they ultimately allowed the king to make it easier to centralize control over economic resources. So therefore, a lot of the concentration of wealth ultimately ended up with the king and their immediate families, along with some of the other high officials and most likely, with some of the more powerful merchants. The once mighty nobles had lost their lands and had lost their wealth and immediately slid into poverty. I can only imagine that a lot of the serfs and the peasants didn't exactly cry any tears over them either. So who knows, maybe they got what they deserved in the end. Maybe it was an ancient version of schadenfreude, which is a great German expression, that you take pleasure in the downfall or misfortune of others. With that being said, this also had some unintended consequences, as this caused cities to get much larger, but this wasn't the case for every region either. These trends strengthened under the imperial rule of the Qin and the Han dynasties, while empires weakened. In 453 BCE, the Qin was divided up into three states the Wei, the Han and the Zhao. It was actually the Wei kingdom that initiated these institutional reforms that led to the dictatorial rule of the Warring States period. That led to the dictatorial rule of the Warring States period. In 419 BCE, wei's armies inflicted a significant defeat on the Qin and annexed the rich agricultural lands on the western edge of the central plain. The Wei lands were the most densely populated lands of China. Li Gui, the prime minister of the Wei, started out as just a regular local official, but his decision-making and experience was noticed by important people such as the king, and, as a result, he quickly worked his way up to become the prime minister. He will have a major impact on this kingdom, as he instituted many significant reforms. First and foremost, he banned the hereditary system of slavery. In addition, he was probably the person that was most responsible for kicking the hereditary nobles off their lands and, as such, he believed that a prince should be in charge of the local land to govern From there. He had the prince divide the lands into smaller pieces, of which a minister would oversee. So what he was basically doing was instituting a system of a chain of command that would lead directly back to the king. In addition, he abolished the hereditary system of the father and son. Whereas the father would be a local official who received a relatively high salary and then, when he died or retired retired, his position would be passed down to his son. As you can imagine, this wasn't a very good system, because you can have a poor manager for many years. So instead he would install a meritocracy and since these were relatively highly paid jobs, he knew that he would get the most talented people pushing for these positions. So after he established this new chain of command with talented local officials, he then went on to do a complete reassessment of all the lands in the kingdom and he then formulated a reasonable tax code and policy. This policy imposed only modest levies on farmers, while curbing extravagant consumption through regulation and restraining merchants from manipulating prices to the disadvantage of the producers and consumers. It appears to me that he himself would have understood this more than any other king or noble, because Lee had rose through the ranks, because he himself was a commoner, and it was the commoners that were ultimately severely harmed when these greedy merchants manipulated prices. As such, he was extremely concerned with wealth inequalities, as he knew that this would have undermined social order and the stability of the states. The fact that he knew that severe wealth disparities could undermine social order was something that had been a concern with modern societies ever since. In fact, when the city of Chicago was being built in the late 1800s, many of the rich people would build extravagant homes on the outskirts of the city because they feared that one day the workers would rise up and essentially attack them, so they wanted to be in a position where they could flee quite easily. As for Li Kui, he also implemented a system that would allow for any land that was left barren and on farm to be allocated to regular farmers. There was also wasteland that he encouraged commoners to try and farm and try to get any kind of output out of. With regards to these lands, he encouraged planting of mulberries and other non-food crops. In addition, one of the biggest things he was known for was he allowed for the private sale of land of which ordinary farmers could buy and farm for themselves. And, wouldn't you know it, productivity increased dramatically. It is amazing what happens when individuals can farm their own lands and not be coerced by local nobles who basically didn't pay them their worth. So, in other words, for many years, the people farming the land had little to no incentive to increase productivity. Li Kui emphasized the cultivation of multiple stable crops, including millets, wheat, hemp and soybeans. He believed that diversifying the crop production could reduce the risk of harvest failure. Li Kui also promoted a form of indirect prices by having the state purchase grain after abundant harvests when grain prices would have been low, in order to boost prices and thereby keep income levels for farmers from dropping to the point of ruin. He also wanted to protect the urban consumers as well, so he would sell the built-up inventory when grain production was much less. Thus, there would have been price inflation without government intervention. In the end, what Li Kui was accomplishing was a form of price smoothing by keeping prices for farmers higher during periods of excessive outputs and prices lower when inflation would have taken hold when production was low for one reason or another. This form of state intervention to smooth out fluctuations in food prices became a fundamental feature of the political economy of the Chinese imperial state. Li Kui also collected law codes from various kingdoms and used those as templates to create his own legal code. This new law code would establish legal rights to the people. This also applied to local officials, and not just the commoners. Unfortunately for us, these law codes did not survive, but apparently these law codes were the basis for the law codes that were erected in the Han and Qin empires. Another Li Kui reform was he reformed the military system by establishing a standing army that would be trained year-round. In addition, they were professionalized through reorganizations which allowed for meritocracy, as competent officers and foot soldiers were able to rise through the ranks. In the end, li Kui's reforms ultimately made the we the strongest and most prosperous kingdom in China, and many would say that this was the first and most successful political reform ever done by a non-king in China. Prior to all these reforms, chinese cities were typically fortified by putting up a giant wall around the palace in the center of the walled city. In other words, most cities would have had two walls, one protecting the city itself and the other one protecting the ruler. But by the time we get to the Warring States period, this had changed slightly, whereas the city was divided up into two sectors, with walls and canals being around the upper sector, which would have included the palace along with other temples and important buildings, the lower sector being where the commoners would have lived, which wasn't unlike most ancient cities. In fact, it wasn't all that uncommon for certain ancient cities and towns not to even bother to protect the lower class. Other notable changes in this period of Chinese history was the use of Xi, as this was typically meant as a gathering place for its citizens during the spring and autumn periods. This gathering place was typically for certain festivals and other assemblies, which would have included public executions. But by the time we get to the Warring States period, the word she or possibly pronounced as sure now meant the urban marketplace. In other words, during the spring and autumn periods, the urban marketplaces may not have been as important or hardly existed at all, but by the time we get to the period of the Warring States, the marketplace of the city had taken on much more significance. In fact, the marketplace had become synonymous with the city itself. An ancient book known as Market Laws from the Qi indicated the importance of the marketplace in the Chinese city and basically what it says is that a mid-sized kingdom will profit from commerce, whereas a small kingdom absolutely depends on commerce, because the market will be the ultimate source of goods that could be at the king's disposal. Therefore, a mid-sized kingdom will be able to profit from the market and therefore will be able to become much stronger. The smaller kingdom needs the marketplace to remain secure. The book goes on to say that when the market flourishes, goods will circulate and the people will benefit, and therefore wealth and possessions of the various states will arrive. Even in the small kingdoms, they will become rich. The warring states period saw the goods obtained from trade meant that the kingdom could generate revenues through taxing commerce. This was 100% vital to the state's survival. Just like the book Market Law says, the value of commerce to the state was greatest in the smallest kingdoms, which lacked the manpower to field great armies. When you get to medieval Italian city-states, these independent states were quite small, but they generated a ton of revenue through trade and, as a result, they could raise decent sized armies, not from their own people but through mercenary soldiers. But we aren't quite there yet, as this is still ancient China, but I'm just trying to give you an 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 to what was going on in the marketplace, and they would have hired inspectors to supervise the activities of various merchants to make sure that they weren't acting unethically and riling up the local population. In fact, the book Market Laws prescribes that markets must be located in towns and the size of the marketplace should be proportional to the size of the town. In addition, there were many security measures that were imposed by the book, such as there should be walls that limit access but at the same time, were designed so that people could easily move goods in and out of the marketplace. In addition, the shops should be arranged in an orderly fashion, depending on the size and prices of the goods. Another book that was quite popular and commonly used was the book of Lord Chang that asserted that, quote the security of the state depended on agriculture and war. Unquote, which is kind of common sense, because if you can't provision your army, then you're not going to have an army much longer, and thus you would have national security issues. As such, we call this time period the warring states period. For this particular reason, battles were becoming bloodier and campaigns lasted longer. Now I suspect that one of the big reasons we see this happening was because of the economic booms to the technology that was being developed and expanded trade, which led to increased farm productivity, which led to population booms. You have more people, campaigns can last longer and they become deadlier, since certain states were getting bigger and more powerful. Then, therefore, the inevitable happened as smaller states got gobbled up by the more powerful states. During this consolidation period, the Yan state emerged in the north, around present-day Beijing. This was the last state to emerge as a powerhouse. The last state to achieve centralization of power was the Qin. The Chu never became an absolute monarchy, as they still had powerful barons. Either way. During the Warring States period, agricultural output per farmer surged. This meant more food for the population, which meant a rise in population, which also meant the possibilities for a division of labor. Therefore, people could move into other specialties, which meant an increase in the number of people employed in mining, logging, craft specialization and even transportation. As such, each region was able to specialize and produce excessive goods and commodities. This meant long-distance trade flourished with the growing independent merchant class. This also was aided by an increase in bronze currencies. All this happened after the heartland of the North China Plain weakened after the division of Jin into three separate states the Wei, the Han and the Zhao in 453 BCE. Additionally, private entrepreneurship stimulated industrial and commercial expansion. Stimulated industrial and commercial expansion. The Qi reform absolutely shaped the Wei precedent. The reason being was in 385 BCE, the Qin prince was forced into exile into Wei. However, he returned to the Qin and reclaimed the throne. This fact recalls stories of Philip II of Macedonia being held as a political hostage, and from there he basically took everything he learned from the Thebans as the model for reform in Macedonia. Similar kind of situation happened here. The wee governments ordered large-scale irrigation projects in the region, thus boosting farm production, which ultimately meant more money for the farmers, but also increased tax revenue. The Chin rulers saw this firsthand and, as a result, they wanted their own version of these new and approved irrigation techniques. As such, by around 250 BCE, the Shanggu plain in Sichuan was transformed into a fertile rice-growing region. The result from these irrigation reforms was the Qin were able to see an unforeseen rise in power in the 4th and 3rd centuries BCE. Agricultural outputs rose. As typical farming household of five persons cultivated 800 mule of land, which equated to about 4.5 acres. That yielded a total harvest of 150 she of grain. One she was equivalent to about 20 liters, so this meant that about 3,000 liters of grain was produced. The she state collected a land tax of about 10%, so the state would have collected approximately 3,000 liters of grain in tax per year. Additionally, each year the tax collection calculation was adjusted based upon current yields. According to Li Kui, who was the prime minister of the we, he supposedly said that the family required 90 shi of grain for its own subsistence. So we're talking about 1,800 liters of grain, leaving a surplus of 45 shi, or about 900 liters of grain. At a market price of 30 coins per shi, the surplus was equivalent to about 1,300 coins to 1,400 coins. Community ritual observance cost about 300 coins annually and clothing for five persons a total of about 1,500 coins. Thus the household incurred an annual deficit of 450 coins, and that didn't include for unfortunate events like illness or death or if you had to bury a loved one. The fact is, farmers were typically put in a bad spot. Now factor in volatility of farm prices and things could get very serious for families. This was a major reason why the government did all it could to protect farmers from severe fluctuations in prices. It should be worth noting that these figures may not be 100% accurate, because these figures were attributed to Li Kui. As such, he appeared in the historical record long after the time of the first century. A skeptic, therefore, might not take these records at face value if it was written in ancient times, potentially 100 years after the events actually had occurred. However, getting back to the reforms made by the Qin, of which much of the reforms were modeled on the Wei, the Qin appointed market examiners to collect taxes on trade. They established household registers for military service and moved the Qin capital from Yang to Yue, which was a practical move, as this meant that the capital would be much more centrally located, with ready access to commercial networks of the we and the central plane, because the central plane was where farm productivity was the highest. Upon reaching adulthood, each son would be given his share of the family legacy in order to live apart as a separate household. Individual households were required to provide both labor, service and military service to the state on a regular basis In 344 BCE. Other reforms were also enacted that ultimately would make trade more efficient for the Qin, especially when they adopted standardized weights and measurements. This also enabled a more equitable collection of taxes as well, because prior to these reforms, taxes would have been based on local weights and measures, meaning some areas would pay less or more than other areas due to the previous lack of standardization. Also, it appears that tax collection may have been partially in coinage by 336 BCE. When the Ban Lian coin became more widespread, qin monetary policy linked private enterprise to public obligations. The Qin rulers also wanted to differentiate their banlian coins from the knife and spade currencies of the central plain. The banlian coins were round and different in weight as well. Also, they included laws that made the use of the coin official and instituted harsh penalties for counterfeiting or using the currencies of other states. Unfortunately, the Qin monetary system was broken down into three separate currencies that were used in everyday transactions the Ben Liang coin, gold pieces in various sizes and weights, and bolts of hemp cloth coin, gold pieces in various sizes and weights and bolts of hemp cloth. However, the Qin primarily relied on the Banlian coins as a means of exchange, and the hemp cloth was used as a form of payment to make soldiers' uniforms rather than as a means of exchange in private trade. However, this appears to have disappeared by about 186 BCE. Apart from the awards that were made to soldiers and other government officials, gold appears to not have had much of an importance in the Qin fiscal government. I'm not 100% sure why, but it probably has to do with the fact that it was so rare that it just wasn't really practical for everyday uses. It was so rare that it just wasn't really practical for everyday uses. Similarly, in Mesopotamia, silver was used much more than gold because silver was more abundant and could be used in everyday transactions where gold was just too rare to be used. So, not surprisingly, after the death of Qin Shi Huang, the first emperor of China, there was a notable increase in counterfeiting of the coinage, particularly of the Banlian coins, which were the standard currency of the Qin dynasty. To combat the widespread counterfeiting and tampering, the second emperor, qin Erxi, initiated a reminting of the coinage. This process involved reducing the weight of the Banlian coin significantly, by more than half. In many cases, coins were lighter and more standardized, making counterfeiting more difficult. In helping to restore confidence in the currency system, this effect was part of a broader measure to stabilize the economy and control the currency amidst social and political upheaval following the death of the emperor. The re-minted coins continued to be used during the Han Dynasty as well during the Han Dynasty as well. I want to thank you for taking the time to listen or watch this episode, the next episode. We will continue on with the development of ancient Chinese economies and the further use of coinage. If you like what you hear and want to donate to the show, you can visit us at patreoncom slash history of money banking trade or you can visit our website at moneybankintradecom. Thank you very much. Talk to you soon.