Guanzi (《管子》) -- Non-Hegemonic Political Economy(8-11): On Statism, Law, Finance, & Sustainability

Guanzi (《管子》) -- Earliest Masterpiece on Political Economy in Human History (8-11): Non-Hegemonic Theory On Statism, Law, Finance, & Sustainability

Condensed translation from Chinese (including quotations from classics) by Sherwin Lu

EDITOR’S NOTE: The dynamic interaction between Yin and Yang toward a balance is the way of Nature, the way of everything and every process, of existence as a whole, including all aspects of social economic life. Production and consumption, supply and demand, income and expenditure, labor and capital, the collective state and the respective individuals, man and Nature, thoughts and reality, etc., etc. all represent the balanced or imbalanced Yin and Yang aspects of existence. Good government and law that help promote balances on all levels of social life lead to stability and prosperity (near balance between mind and matter). Guan Zhong’s thoughts and practice provided a brilliant example for all later generations to follow.

(8) On Statism: Market Economy Based on State-Ownership of Means of Production

Guan Zhong believed that a state-regulated market economy was the fundamental guarantee against business tycoons plundering common people and an important means of securing social stability and effective management of the state, and that in such an economy the sovereign, as embodiment of the state, should own and provide people with means of production. When he suggested to the Duke of Huan that the latter perform the four seasonal tasks and the Duke asked what the four tasks were, Guan Zhong replied:

“Your Highness should get all ready that people need to use when each of the four seasons comes respectively. At the time of farm work planning in Spring, calculation should be done, such as how many people would need, and for how many days, things like lined Spring clothing, unlined Summer wear, bamboo poles, baskets, ropes, dustpans, sacks, crates, bamboo boxes, strings, etc. Poor peasants who cannot afford such articles as sacks, crates, bamboo boxes and ropes can loan them from the government to return after completion of work…. Hence, while the peasants provide man power, the state farming utensils….” (《管子》山国轨第七十四)

The above reveals that means of production was publicly owned by the state at that time while manpower belonged to private laborers, and the two sides contributed to production in a cooperative way. On another occasion, Guan Zhong remarked:

“The great benefit from ‘weighing and balancing’ lies in purchasing at raised prices for goods too cheap on the market and storing them to be sold later at reduced prices when they become too high, so that the supply of goods remain steady while prices would not fluctuate with the change of seasons; If the balance is not maintained, prices would soar. Knowing this, the sovereign would try to maintain it with the above measures, to make sure that a city of ten thousand households have ten thousand Zhong [volume unit -- translator] of grain and ten million strings of cash in store; a city of one thousand households have one thousand Zhong of grain and one million strings of cash in store. They are used to support farming during Spring ploughing and Summer weeding seasons. All farm tools, plant seeds and grain supplies are provided by the sovereign. Hence, wealthy traders would not be able to exploit the common people. Why, then, is all this? That is because the sovereign pays earnest attention to farming as the foundation of everything. During the times of Spring ploughing, he lends cash to people for buying silk from the peasants; During Summer hoeing, he grants loans to people for buying grains to be harvested in Autumn. Thus, people will not neglect their work, nor will the state lose wealth.”(《管子》国蓄第七十三)

Such was the kind of market economy Guan Zhong stood for, with means of production owned and provided by the state as represented by the sovereign. In such an economy, wealthy merchants were prevented from gaining extra advantage by unfair means and profiting at the expense of common people, so that the society would not be crippled by polarization between the rich and the poor.

Obviously, this idea of Guan Zhong’s, called “non-hegemonic statism” here, contained the germs, or some most important principles, of contemporary socialism, though still quite some distance from its more sophisticated version today.

One consensus about market economy in contemporary economic theory is that it should be one under the rule of law. But one should not, as quite many people do, take it for granted that only contemporary Western countries have economies under the rule of law, as this is sheer ignorance of world economic history, of ancient Chinese economic history, of the non-hegemonic political economy that existed long before Western classical political economy.

Guan Zhong did not only espoused and implemented the rule of law over the market and the state but, more importantly, the rule of GOOD law. As there was the demarcation between good law and evil law, he insisted that the law to be established should be an impartial and disinterested one, i.e., not favoring any special interests:

“A wise sovereign relies on law instead of petty shrewdness, on policy instead of talk, on all people instead of a few privately related, on the Supreme Way instead of minor principles, so that he can be free from care while peace reigns all over the land. A monarch who lost his state to others had been different: He discarded law and resorted to cleverness so that his subjects neglected production but pursued vain glory instead; He replaced policy with moralizing so that his people forsook practical things for empty talk; He abandoned public interests and sought private gain instead so that his subjects ignored the law and took rash actions; He deviated from the Supreme Way and depended on petty tricks so that he was wearied and vexed while his people baffled and his state in disorder. A wise sovereign would do otherwise – He just sticks to the key principles for running a state… and he will be able to sit relaxed to enjoy seeing all at peace.”(《管子》任法第四十五)

Obviously, in Guan Zhong’s view, the system of laws and regulations should be in line with the will of “all people instead of a few privately related” and with Nature’s “Supreme Way instead of minor principles” or, in other words, should be “people-oriented”, or “taking people’s prosperity as first priority” in state management. Therefore, the laws and rules thus instituted are good ones, not evil ones. When Duke Huan asked “Now that my people are living and working in peace and happiness and we have accomplished what is expected at home, I would like to meet with other dukes and princes to achieve peace under heaven. What would you say? ” Guan Zhong replied:

“Not quite feasible yet, because the popular mood has not quite settled down yet… We need to revise old laws and choose good ones for continued implementation and strict enforcement, to show concern for people and provide relief to poor families, to ease tax and service burdens on people and hold them in respect, so that the state will be prosperous and the people contented.” (《管子》小匡第二十)

After good laws are enacted, Guan Zhong made a point of the sovereign’s conscientious compliance to them so as to guarantee the rule of law over the whole state:

“Following moral principles without failure is called ‘the Way (Dao). When moral standards are set, people will have the code of conduct to abide by. A sovereign with moral integrity is good at defining and establishing law for the state, never to impede it for selfish purposes. In contrast, a morally insensible monarch would ignore the law to satisfy his own desires, even if he has made the law. When the sovereign disregards the law out of selfish motives, his ministers would pursue private interests through their manipulation of public affairs, and those who are supposed to uphold justice become personal gain seekers…… Finally… there would happen internal warfare, which in turn would induce invasion from external enemies – Such are signs of the sovereign’s fall from power. ” (《管子》君臣上第三十)

Following after a discussion on the relationship between the sovereign and his ministers, Guan Zhong’s above remark about the importance of the ruler’s moral integrity to the rule of law and, further, to social order and peace was actually the earliest expression in human history of the idea of “equality before the law”, an idea of universal significance.

In a word, Guan Zhong was well aware that it was not sufficient to make good laws in line with moral principles but that the effectiveness of such laws lied in the top leader’s exemplary role in complying with them. As the saying goes, “Fish rots from the head”. Therefore, he stressed that governing the state by law is the only right way, as he said:

“A wise sovereign would consolidate all legal codes and regulations and uphold them firmly, so that all people would follow whenever orders are issued. The law is the code of conduct for everybody in doing everything. The duties performed by the officials concern people’s lives and, so, an enlightened ruler would award those officials who defend the law and punish whoever obstructs it. Thus, people would not grumble when punished even by death according to law, and they do not need to feel grateful when rewarded for their merits assessed according to law. All this would result from governing the state by law. Hence, in the chapter ‘Awareness of the Law’ (《管子· 明法》) it is said that ‘Governing the state by law is the right way.’” (《管子》明法解第六十七)

And then, once laws that serve the interests of the public, that embody or promote benevolence, justice, proper rites and ritual music, were established, it was imperative to execute them firmly and persistently:

“Benevolence, justice, proper rites and ritual music all originated in the law, which was meant by ancient sages to serve the purpose of coordinating people’s actions. The Book of Zhou says: ‘If the law of the state is no longer binding on people, it would be an inauspicious sign for the sovereign; If people stop observing the law, it would be inauspicious; If the state rashly changes its law when managing the people, it would be inauspicious; If the ministers stop educating people in awareness of the law and rules of propriety, it would be inauspicious; If officials take the liberty of tampering with the law in running state affairs, it would be inauspicious.’ Therefore, the law, which was set by the wise sovereign as the highest code of conduct for all and on which were hinged social order and state security, is what everybody should abide by all the time, no matter whether he is the sovereign or his minister, whether he is in a high or low, noble or humble social position. Hence it is called ‘the law’.” (《管子》任法第四十五)

Guan Zhong stood for an income-expenditure balance against any deficits in both family and state finance:

“If the sovereign lives in magnificent palaces but without savings, if the common people spend money on elegant clothing without saving any, if their carriages are overly ornamented, or foot passengers wearing extravagant costumes, if more is invested in luxuries than in farming – all this is the custom of an ostentatious state. Extravagance on the part of the state incurs wastefulness in its expenses, which in turn leads to poverty on the part of the people, which triggers crafty and evil thoughts, which would then evolve into crafty and evil acts. Hence, evil and craftiness originate in deficiency in supply of necessities as a result of overinvestment in luxuries induced by unrestrained consumption. Therefore, the top priority in state administration is to carefully look into expenses, save on clothing and ornaments, practice thrift in all expenditure and ban luxuries. Whoever does not understand this principle should not be entrusted to run the state.” (《管子》八观第十三)

This tells us that Guan Zhong was against indulging in extravagancy, against overinvestment in luxury production, for income-expenditure balance in both public and private finance, and for investing mostly in the production of basic necessities for people’s livelihood. On the other hand, while warning the general public against overspending beyond their income, he did not object, however, to the rich people spending on luxury consumption, but on the contrary he thought it necessary to encourage them to consume, because this could alleviate insufficiency in effective demand, thus promoting production and employment (see upcoming Part (15), On Employment).

(11) On Sustainable Economic Development: Balance between Resource Supply and Demand

Malthus in his An Essay on the Principle of Population, which centered on the conflict between population increase and limited resource for economic development, suggested resolving the conflict through pestilence and war. The idea about such cruel and inhuman solutions has been haunting the souls of those incompetent and pessimistic politicians and economists like a specter.

2. Guan Zhong on Stimulating Consumption for Industrial and Commercial Development

The same issue confronted Guan Zhong as early as 2000 year ago in China, but his way of resolving it was quite different – it was to promote the 2^nd and 3^rd industries in order for the rich to spend on luxury consumption. In reply to Duke Huan’s question about the changed conditions of his time as compared with those of remote antiquity, Guan Zhong said:

“The changes are manifested in the two fields of administration and criminal law. In the times of Emperors Ku (喾) and Yao (尧), gold lay hidden under Mountain Kunwu, unexploited by anybody. It was not due to any usual measures - it was just because there were more than enough lumber supply in the mountain forests and aquatic products in the rivers to meet people’s needs. People farmed to feed themselves and offered their surplus grain to the Emperor as tribute, so that peace reigned over the whole land. Different groups of herdsmen would not encounter each other; Different tribes did not know each other’s customs; Social life was peaceful with no need for attention from high-ranking officials. The punishment for criminals to wear a straw sandal on one foot and a regular hemp shoe on the other was equivalent to death sentence, whereas, in the times of Duke Zhou, severed fingers, feet and heads were strewn all over the altar and yet those sentenced to death still refused to yield. It was not because they did not fear death but because they had been driven by abject poverty. When land was precious and there was need to feed more people, life was miserable with a short supply of grain. Only when secondary industries of manufacturing and commerce are developed, could people’s livelihood get improved. This requires placing the public’s practical need before one’s personal reputation. A wise sovereign would keep close watch over the state’s farming business as the principal industry while at the same time develop leisure and recreation industry as secondary, which can proceed day and night. ” (《管子》侈靡第三十五)

This remark indicates that Guan Zhong already noticed at that early time of human history the discrepancy between the demand from an ever-growing population and the limited supply of natural resources and, therefore, suggested promoting industry and commerce to cope with it. On the same occasion, in his talk to Duke Huan, he proposed deep processing of goods to add value to them and to stimulate consumption by the well-off:

“Enjoyment of good food and other pleasures is what people wish for. So, only by satisfying their desires and wishes, can their service be called for. If they only have animal skin and horns to wear, weeds to eat, and unclean water to drink, who can use them? Unhappy people cannot do a good job. Hence, let them have the best food, listen to the best music, and cook carved eggs by burning carved wood. Keep cinnabar mines open to facilitate transportation by merchants. Let the better-off spend on luxuries and the worse-off earn a living by work, so that everyone is provided for, in good spirits and contented. This cannot be achieved by individuals single-handedly but requires state administration to accumulate wealth for all people.” (Ibid.)

Guan Zhong was well aware that no resources should be over-exploited and over-used in developing industry and commerce and that sufficient attention be paid to farming as the primary industry so that the balanced development of multiple industries would secure the sustainability of economy. He said:

“Though we have vast mountain forests with luxuriant trees, there should still be proper restrictions and seasonal banning of cutting and using forest timber for building halls and palaces. Why? Because it is beyond one man’s ability to fell, to lift and to move huge trees and because large pieces of wood should not be used on shanty structures… Though we have big rivers, lakes and seas providing abundant aquatic products, the fishing industry must be regulated and fishermen should not live on fishing alone. It is not out of preferential concern for plant and aquatic life but to take precautions against people neglecting grain production. In other words, it was to have people concentrate on grain production that ancient kings restrained them from lumbering and fishing.” (《管子》八观第十三)

This shows that, in his approaches to the development of economy, besides deep processing of products to raise their extra value and facilitating amusement and service industry, Guan Zhong proposed to follow ancient kings’ resource mangement policy, i.e., to focus on grain-growing, accompanied by a multiplicity of secondary businesses like forestry, animal husbandry, fishery and others, object to “draining the pond to catch all the fish”, enforce seasonal bans on lumbering, fishing and hunting, and restrict large-scale construction of halls and palaces and gold- and jade-mining, so as to ensure sustainable production in line with the way of Nature.