Kenneth Pomeranz and Steven Topik,TheWorld That Trade Created Society, Culture, and the World Economy, 1400 to thePresent, London and New York: Routledge,Taylor & Francis Group. PP.10-15.

 

1.1 TheFujian Trade Diaspora

1.2The ChineseTribute System

When nineteenth-century Europeans camebanging on the gates of China, one of their most vociferous demandswas the abolition of the “tribute system,” in which foreign trade was licensedas part of an elaborate set of diplomatic exchanges in Beijing. While part oftheir hostility was due to the way in which tributary diplomacy wassymbolically different from diplomatic exchange among equals—John Quincy Adams evenclaimed that the demand that foreign diplomats kneel was “thetrue cause” of the Opium War—they also ridiculed the tribute system for forcingthe practical matters of trade into a straitjacket of ritual. To anineteenth-century Western European, convinced that humans naturally soughteconomic gain above all, no further proof could be needed that China stiflednormal human impulses and would be better off if it was “opened up” tolaissez-faire—even by violence.

     But were pomp and pragmatism really atodds in the tribute system? A closer look shows that they complemented eachother—but only once we recognize that economics is always embedded in culturaland social practices.

   For the Chinese court, “foreign” and“domestic” trade were not distinguished in the same way as today. Their worldwas not one of sharply separated sovereign nations, each with its own laws,customs, and relatively stable boundaries. Instead, they saw one truecivilization—their own—which was based on principles appropriate to all people,wherever they came from, and one ruler—the Chinese emperor, or “son of heaven,”who represented all humanity before the heavens.Those who were ruled directly by the emperor and by officials hehired and fired composed an inner circle of humanity; they paid compulsorytaxes, though they might also offer (theoretically) voluntary “tribute.” Thosewho lived under partially assimilated native chiefs or kings (even if theyoccupied the hill country in China itself, with Chinese settlements andmilitary garrisons in the valley all around them) and followed at least somecustoms and laws of their own constituted a second circle: their representativesbrought tribute frequently, and private trade in virtually any articles wasencouraged as well.

A further circle of less assimilated rulers brought tribute lessfrequently, received fewer gifts in return, and had more restrictions on theirprivate traders. An outermost group of “barbarians” who did not pay even lipservice to Sinocentrism was excluded from the tribute rituals entirely; theywere either allowed very limited trading rights at one or two specific borderspots (the British at Canton in the eighteenth century, the Russians atKiakhta) or traded indirectly by having their goods included in the tributeoffered by somebody else. (Portuguese goods, for instance, might be purchasedby a Siamese ruler and included in his tribute offerings.)

By exchanging gifts with these emissaries, the emperor confirmedhis approval of them as rulers, but also he made clear who was the superior andwho was the inferior in this relationship. The foreign emissaries, even if theywere kings themselves, bowed to him, but not vice versa. Moreover, the natureof the goods exchanged was heavy with symbolic importance. The goods foreignerspresented were supposed to be exotic and were valued more for what owning themsaid about the emperor than for any use value: by including exotic animals intheir zoo, for instance, Ming rulers reinforced their claims to universaloverlordship. The goods given by the emperor in returnwere symbols ofrefinement and civilization: books (especially the Confucian classics), musicalinstruments, silk, porcelain, paper money (a uniquely Chinese product forseveral centuries after its creation in the 1100s), and so on. Many were mostuseful to the rulers of tributary states as gifts that they could give to theirfollowers, creating clients and reinforcing their right to rule by remindingother aristocrats back home that they were the ones with a special pipeline tothe court that defined elegance for much of the world.

Clearly, then, the design and basic dynamics of the system camefrom concerns about culture, politics, and status, not about profitmaximization. But at the same time, the system defined the ground rules for avigorous trade. When the Qing rewarded Siam’s “civilized behavior” in shippingrice to Canton (rather than a frivolous good such as sugar, much less opium) byexpanding tribute trade (which was more profitable for the Siamese than the riceshipments), they were rewarding political loyalty—but also they were keepingSouth China food prices down.

When we look closely at the tribute missions themselves, moralorder and economic profit prove to be linked in many ways. Not only didmerchants accompany the tribute mission, bringing trade goods that they couldsell privately while in Beijing; even gifts from the emperor were often quicklyrecycled. (Indeed, Chinese traders joined some foreigners in complaining that thecourt did not give the foreigners enough gifts; they knew well that it was aportion of these gifts, quickly off-loaded for cash, that gave foreigners the wherewithalto buy other Chinese goods.) And the tribute exchanges established value formany Chinese goods, making them valued luxuries abroad because they were thesorts of things that emperors gave.

This applied not only to things like ivory chopsticks (even incountries where people ate with their hands), but to money itself. When Chinesegovernments printed too much paper currency (as they often did), thetribute-bearers who were given some had little to gain by swapping it for goodswithin China; but back home it still had cachet, and so value (even if thatvalue was unrelated to what denomination was printed on the currency). So wassomebody who brought his paper currency home chasing a useless status symbol,or was he, like any good trader, simply not disposing of it where there wasalready a glut? And was the man who carried silk home that different?True, printed Chinese silks could be worn, unlike paper money, butalso they were—like paper money—an acknowledged store of value that was almostas hard to counterfeit then as a greenback is today; and they were also astatus symbol, even if one never wore them. So silks became both the fabric ofthe elite and a form of money: in many areas one could (or even had to) paypart of one’s taxes in silk. (Until roughly 1600, this was true in Chinaitself—and Ming rulers often used a substantial portion of this silk to buy peacewith the Mongols and other potential invaders.) So the tribute system—which soclearly subordinated economic gain to other priorities—at the same time helped definea vast common market, giving it its currencies, defining tastes that helpedcreate markets worth producing for, and creating the standards (both of fashionand of behavior) by which its elites recognized in each other the people theycould deal with without either lowering themselves or running too much risk ofdefault. Today, we may have dispersed those functions among many seeminglyunrelated players—from the International Monetary Fund to YvesSaint-Laurent—but we have not dispensed with any of them. When they werecentralized in Beijing, the tribute trade was no less commerce for beingritualized—and no less ritualized for being commerce.

 

1.3 Funny Money, Real Growth

Endless books have been written about the dangers of governmentsprinting too much money. But for centuries the opposite problem was just ascommon: governments often could not mint enough coins (or the right coins) tomeet their subjects’ needs. When currency famine struck one of the most dynamicpremodern economies—that of Tang (645–907) and Song (960–1127) China—it spawnedinnovations that ranged from coins made of lead and pottery, on the one hand,to the world’s first paper money, on the other. Surprisingly, the awkward coinssurvived longer than the modern-sounding paper money. Therein lurks asurprising lesson: a single convenient currency is not always what a complexeconomy needs.

     The basic problem was simple: “medieval”China’s economy was growing and commercializing too fast for both its politicalinstitutions and its metal supply. The Chinese had used copper, bronze, and(more rarely) gold coins for centuries, but the dizzying speed of economicchange meant that too many exchanges were happening for the supply of coins.The eleventh century alone saw a twentyfold increase in the annual output ofgovernment mints, plus lots of private coinage—and it still was not enough.Lead and iron coins were used locally where those metals were plentiful,despite their inconvenience; and silk, tea, and other luxury commodities wereregularly used as “money” for large transactions. Then, to avoid the costs andhazards of transporting commodity “money,” both tax collectors andlong-distance traders began printing commodity-based notes: thus somebodydelivering, say, salt to Hangzhou could receive not silk or copper to takehome, but a piece of paper that could be exchanged for silk or copper once hegot home. Then the government—concerned about the confusion, fraud, and hightransaction costs created by the wide variety of moneys—began issuing morenotes of its own, making them exchangeable for any commodity, and insistingthat merchants use those notes instead of printing others. By 1024—centuriesbefore anything comparable in the West—we find Chinese governments printingrecognizable paper money.

      Just one more step—issuing standard notesin small denominations to replace most of the varied mass of coins—would havecreated the kind of currency system we are used to. So why did not this happen?The problem was that “money” had at least three distinct functions in thisperiod, which often clashed. It was the way of settling accounts for large,long-distance transactions: forwarding taxes from the provinces to the capital,provisioning armies, and buying rare luxuries. It was the essential lubricantfor the millions of small daily transactions in a society far moremarket-driven than the Europe of its day. And, as something that the Chinesemade more skillfully than others in East and Southeast Asia (who trailed inboth printing and minting technology), it was an export good in high demand.

Papermoney was ideal for large-scale domestic trade and made considerable headwayagainst coins of all sorts. High-quality copper (and some gold) coins were goodto export, since foreigners could test their reliability more easily than paperand remint them if they chose. As a result, paper, gold, and copper shared atendency to disappear from local circulation—especially in areas that importednecessities (such as salt) from elsewhere in China or had trouble meeting theirtax bills. Those areas suffered frequent liquidity crises and adjusted byminting whatever was at hand. In fact, for such areas, very awkwardcurrencies—lead, iron, pottery—were actually ideal; since it would not be veryprofitable to carry such bulky currencies away, it was better for merchants whosold in these markets to take home commodities. Thus “junk money” not onlyensured that there would be some money around to fuel local circuits ofexchange in poor areas; it also provided a hidden subsidy to the “exports”those areas needed to balance their “imports.” (In areas that exportednecessities like salt, “bad” money was not needed and seems to have been muchless common.) So while one reformer after another sought to curb these localmoneys, it was no accident that none ever succeeded—and it would have beendisastrous if they had. Instead, sophisticated markets developed in which localcurrencies could be exchanged for more standard moneys, but only in limitedquantities—a solution that balanced the needs of a huge interdependent economywith the protectionist needs of poorer localities.

In the long run, paper money proved more vulnerable than clumsy coins. Since paper wassupposed to be trustworthy enough to circulate over huge distances, periodicprinting press inflation compromised its usefulness much more than overmintingdamaged local currencies. And as the currency designed for large, long-distancetransactions, paper money became far less useful when politicaldisruptions—particularly the wars that accompanied the collapse of Mongol rulein the mid-1300s—obstructed long-distance trade. Long-distance trade recoveredand then reached new heights in the 1500s, but by then a new medium of exchangewas available: silver, which came first from Japan, Vietnam, and Burma andthen, in unprecedented amounts, from the New World. For the next 300 years,perhaps one-third of the world’s silver production found its way into China’smoney supply, joining but not replacing other local coins, while becoming thestandard for long-distance trade. Meanwhile the rest of the world enjoyedsilks, porcelain, and other goodies they could not have purchased had China’sexperiment with paper money not proved abortive.

Onlyafter the nineteenth-century opium trade reversed this silver inflow did theChinese government return to printing paper money. And as poorer areas onceagain found silver and copper scarce, bronze, iron, and other local coins againproliferated, much to the dismay of foreigners. But what Westerners thought wasmonetary chaos permitted by a government that had never cared enough abouttrade to create a reliable currency was really something very different: thereturn of mechanisms that mediated the many levels of a complex economy in away that no one currency could do.