China can claim to have invented in its Song Dynasty (AD 960-1279) the policy of easy credit that has led to its recent real estate debacle. Yet the Song’s use of paper money was much more careful than that of today’s China (or of its decadent Western competitors). In other respects: its respect for merit, its generally pacific nature and its technological and cultural innovation, Song China was a model, far ahead of its contemporaries. A return to Song virtues would be a Chinese development we could all welcome.
The 11th century AD was not a high point in human existence. In Britain, Cnut provided a model of calm Scandinavian good sense, but the remaining Kings of that century were either very unpleasant (the two Williams) hopelessly ineffectual (Edward the Confessor) or both (Ethelred the Unready). In France, no normal person can recite the Kings of that miserable century, whose Kingdom was in any case limited to about 10 miles around Paris; the estimable Louis the Fat, who built St. Denis, did not take over until 1108. The Holy Roman Empire was a little better, but for most of that century was in perpetual struggle with the papacy, leading to Henry IV getting a serious case of frostbite at Canossa in 1077.
The Islamic world had a distinctly better century, highlighted by the Umayyad Caliphate in Spain and the even more distinguished Ismaili state headed by Hassan-i-Sabbah, centered at Alamut and giving rise both to the “Assassin’s Creed” video game and to an immensely elegant Slovenian historical novel named after its headquarters. If Fate condemned you to live in the 11th Century, Alamut was probably the place to go.
With one exception: the extraordinarily gentlemanly civilization (by 11th Century standards, or indeed by any standards) of Song Dynasty China. For one thing, we are told that, unlike any other 11th Century civilization I can think of, the Songs did not value military prowess highly, preferring to focus on intellectual ability. Of course, in the long run they got whupped by a civilization (the Mongols) who did value military prowess highly, but that wasn’t until 1279, which is a pretty decent run.
The Song emperors selected their high officials by an intensive series of examinations, during which the officials had to prove their supreme mastery at composing poetry. I have a considerable admiration for this approach to selecting senior civil servants; it has a greater air of practicality than the 19th Century Oxbridge curriculum. Regrettably however, I don’t think my own talent for mildly off-color limericks would have passed muster with the Song examiners.
Still, even without being a top Mandarin, life in Song China was pretty pleasant, at least in the first half of the Dynasty’s rule. China’s population was then only around 60-80 million, so there was plenty of land to go around, and the country’s living standards may have been higher than at any time until the 1990s. Regrettably, the bugbear of Thomas Malthus reared its head, and by 1250 the population of China was about 150 million – the adoption of rice growing in southern China performed the same function as the adoption of potato growing in eighteenth century Ireland; it allowed far more people to subsist from the same amount of land, thus causing population to soar, but at appallingly low living standards. For the Southern Song peasants, there was no United States to which they could emigrate!
However, living standards even in 1250 among the Southern Song were undoubtedly higher than in the 19th Century, when three times that number of people lived on roughly the same area of land, without any significant technological advances; indeed, several technologies that had been known among the Song had been forgotten in China by that time. The social and economic history of China from Song times onwards is a testimony to the value of industrialization, the only reliable antidote (so far) to Malthus’ dismal predictions.
There is no such thing as an ideal society, particularly in a pre-industrial world, but Song Dynasty China came pretty close, possibly closer than my own favorite of eighteenth-century England, whose wealth was supported by some unpleasant sources, such as slave-driven agriculture in the West Indies, while slavery was largely absent from the Song society. The society was relatively open, through the mechanism of the examination system for selecting officials, and literacy was very high for the period, as a consequence of the incentives provided by that system. Song China was also far more inventive than subsequent Chinese eras, with most of the inventions that Europe took from China dating from this period.
One reason why Song literacy was high was that it had a full printing technology, including movable type rather than simply woodblocks, which previous Chinese eras used. This enabled the experiment with paper money, which required a sophisticated printing technology to prevent fraud.
Before and during Song times, China suffered a severe shortage of all metals, not just gold and silver, and currency took the form of strings of metal disks, or “cash.” Song paper money, the Jiaozi, was initially issued by merchants, as receipts for strings of generally 1,000 cash. Since the strings were very bulky, the receipts were much more convenient for travelling merchants, their principal users. The receipts were then exchangeable for similar strings of cash at other merchants who were part of the overall network. 750 years in advance, the Jiaozi at this stage were close equivalents of the banknotes of the English country banks of the late 18th Century.
In 1024, the government took over the task and power of issuing Jiaozi. The government-issued Jiaozi differed from modern paper money in two respects, however: they were at least theoretically exchangeable into silver on demand and they had a fixed expiry date, three or five years after their issue. This solved the problem, which troubled Liverpool in 1826, of notes being outstanding for long periods of time and therefore forming an ever-increasing money supply against a fixed stock of specie – it had allowed country bank notes to get out of control before the 1825 crash.
The Song paper money eventually became inflationary, but it survived a change of regime – Marco Polo, writing under Kublai Khan of the subsequent Yuan dynasty, wrote that paper money was extraordinarily convenient, since one could carry fully ten bezants of value with a weight less than that of one bezant. Regrettably the paper money system collapsed into hyperinflation after Kublai Khan’s death in 1294, but in principle, with some reformulations it had by then lasted almost three centuries, a duration not yet reached by the U.S. dollar, for example.
Xi Jinping no doubt sees himself as one of the great Chinese leaders, possibly Mao, but more likely one of the great conquering Emperors, perhaps Qin Shi Huang, who united China in 221-210BC. However, Qin Shi Huang was a miserable Emperor to live under, let alone to coexist with as a foreign state within reach of his Qin Empire. He burned books, executed scholars and wasted vast amounts of forcibly-extracted taxpayers’ money not only on the Great Wall of China, military justifiable, but also on the Terracotta Army, a gigantic vanity project. Qin may have united the country, but he in no way improved the lot of its inhabitants.
A new Song Dynasty, on the other hand, would be an ideal neighbor for the rest of us as well as ensuring that the lives of its citizens were truly improved. It would be pacific, no threat to its neighbors or the rest of the world, despite its vast power. It would pursue intellectual advancement, so the vulgar materialism of recent Chinese society would be renounced, and the magnificent capabilities of the Chinese people would be devoted to the advancement of human civilization, with the scientists honored worldwide and the finest non-scientific minds admitted into a New Mandarin system to govern the country.
Since the society would be intellectual and non-materialist, advancement would be open to even the humblest rural peasant, but material inequality would be only moderate, as gross material overindulgence would be frowned upon socially. If the New Song China had paper money, it would back it with precious metals, to ensure that the scourge of inflation and wasteful overinvestment in real estate was avoided.
In the 11th Century, China produced by far the finest civilization the world had known to that date, even the artifacts and memories of which enriched humanity for a millennium to come. Today China must reach back, not to its evil feudal warlords or its Communist dictators but to the best of its past, a best that all can admire, and take its place leading the advancement of the human race rather than destroying it through war, greed and conquest.
-0-
(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)