Guanzi (《管子》) -- Earliest Masterpiece on Political Economy in Human History (12-15): Non-Hegemonic Theory On Employment, Welfare, Market Revolution & Value Theory

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

EDITOR’S NOTE: “Economics as a branch of human thought originated in China over 2000 years ago, not in the West 300 years ago.” But the history of human civilization has long been distorted to serve imperialist-hegemonist purposes by mainstream Western academia and media; which have been raping the human spiritual conscience for centuries while their patronizing masters raping the human material world under the cloak of spreading so-called “universal values”, religious or not religious. Now is the time to re-reverse all that has been criminally reversed for too long. Let us, the 99% exploited and oppressed of the world, unite and work towards true freedom, equality and fraternity over the whole globe.

Guanzi(《管子》): Earliest Masterpiece on Political Economy in Human History (I)

Guanzi (《管子》) -- Earliest Masterpiece on Political Economy in Human History (2): Non-Hegemonic Theory On Market Economy

Guanzi (《管子》) -- Earliest Masterpiece on Political Economy in Human History (3-5): Non-Hegemonic Theory On Property Rights, Resources, and Currency

Guanzi (《管子》) -- Earliest Masterpiece on Political Economy in Human History (6): Non-Hegemonic Theory On Government

Guanzi (《管子》) -- Earliest Masterpiece on Political Economy in Human History (7): Non-Hegemonic Theory On Macroeconomic Regulation

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

(12) On Employment: Fundamental Solution to Internal and External Crises

        Guan Zhong paid special attention to the issue of employment, viewing it as the fundamental way out of troubles at home and from abroad:

        “I think that it is more advisable not to interfere with people during the farming season than to grant them wealth, or not to take away their jobs than to give them food. This is the way to avoid troubles domestically or from outside.” (《管子》侈靡第三十五)

        How then to secure a job for everyone? Here are the measures Guan Zhong prescribed:

1. Spur on  the rich to spend on luxuries and develop the tertiary industry such as leisure and amusement services

        Guan Zhong believed that both the state and people in general should practice economy and objected to spending on luxuries beyond one’s income. But as wealth disparity between the rich and the poor had already become an established fact and, with low marginal consumption by the well-off, had led to market imbalance and increasing unemployment, he thought of developing leisure and amusement products and services as a good measure for creating jobs and promoting the economy, and believed that the key in developing the tertiary industry lay in spurring on the wealthy feudal lords, noblemen and big merchants to spend on luxuries:

        “Can one carefully study and choose from all governing measures, old and new, to keep the state in order and then adjust his policies to suit the changing times? A rich countryside surrounding poor cities is favorable to the royal court, while rich cities side by side with a poor countryside provide conditions for prosperous markets. The market is a stimulating force, serving to push the economy forward, so that farming gets further improved while secondary businesses also promoted. Without luxury consumption, farming cannot stand its ground.” (《管子》侈靡第三十五)

        How should the state spur on the well-off to spend on luxuries, then? According to Guan Zhong, it was necessary to have them adorn their chariots and enjoy their trips, and let them enjoy their eating and drinking pleasure:

        “One should accumulate wealth when there is no trouble so as to save against a rainy day. Concretely speaking, those who are well-off should spend their extra wealth on chariot ornaments for pleasant trips and on good wine and food for enjoyment to their heart’s content. In this way, they would not be reduced to begging for food in a thousand years, because this helps the farming business. Those who are in charge of the financial affairs of a county would also collect wealth to meet needs. If wealth is not spent on necessities in this way, it will be placed on the market to yield profits. But, while sometimes wealth thus accumulates, at other times it dwindles, because profits are not always secure. The common people have no other treasures to look forward to but profit-seeking as most important. One can get higher or lower in status, depending on his wealth. When there is extra wealth, it can be made to circulate; When there is need for circulation, cities grow. If wealth stays uncirculated, then it is necessary to find out the cause and change the approach.” (Ibid.)

     As a result, the growth of tertiary businesses both facilitated supply-demand balance and boosted employment.

2. Sponsor public construction, mining and deep processing, and develop secondary industry

       Guan Zhong stood for deep processing side by side with mining, that is, for extending industrial chains at the same time as initiating new industries, so as to create jobs:

        “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.)

        According to Guan Zhong, during times of natural disasters, when managing to survive was the most basic need of the people, the state should increase investment in public construction works such as building or repairing halls and palaces to expand job opportunities:

        “At times of droughts or floods, when people cannot work the land to make a living, we should build palaces and halls by employing those who cannot afford to raise dogs or pigs, so that they can survive. That means that it is not for the sight-seeing pleasure but is an economic measure for maintaining stability and peace in the state.” (《管子》乘马数第六十九)

     This is to say that when a disaster destroys harvest and threatens people’s lives, the government can provide work and survival opportunities, instead of outright grants, by investing in infrastructure construction projects.

        Obviously, Guan Zhong’s approach was more feasible than that of Keynes, who suggested the state employing the jobless to dig holes that were not meant for any specific use, as digging holes for digging’s sake did not create social wealth while construction of palaces and halls did.

3. Encourage elaborate funerals for the rich to spread wealth around and create jobs

        Guan Zhong also saw opportunities for shifting wealth form the rich to the poor and creating jobs in encouraging the well-off to spend more on tombs and funerals:

        “If wealth is spread among lower class, people will easily see. Therefore we have to adopt ways to spread wealth… We can prolong the period of time for mourning to have the rich spend money for that purpose during a longer time; We can push for more elaborate funeral ceremonies to have them spend more wealth on it, while at the same time also enhancing kinship ties through their mutual comings and goings on such occasions by making it an established custom… By demanding huge burial rooms, more jobs can be created for the poor; by recommending more elaborate tomb decorations, jobs created for carving craftsmen and artist-painters; by requiring huge and multilayer coffins, opportunities provided for carpenters to make a small fortune; and by demanding more burial clothing, seamstresses benefited. And more than that, such as all varieties of tomb embellishments, funeral supplies and immolation articles. Provision of all the above helps the worse-off to earn a living, so that people mutually benefit and the state is better conditioned either for guarding peace or for war. ” (《管子》侈靡第三十五)

(13) On Welfare: Establish Social Security Mechanism to Prevent Polarization

     Agricultural economy was one much dependent on natural conditions and vulnerable to droughts, floods and other natural disasters, which would deprive the peasants of all their expected harvests and sink them into plight. And, to add insult to injury, profiteers and usurers would often take advantage of the situation to exploit the poor. In view of this, Guan Zhong proposed to follow the example of Shen Nong, or Patron of Agriculture, one of China’s earliest ancestors, and set up a credit security mechanism to ensure peasants’ survival and continued farming business in the event of natural disasters:

        “Guan Zhong said: We know from Shen Nong’s statistics that, when the harvest of one grain product was lost, the price of grains might go up ten times, and, when the harvest of two grain products was lost, the price of grains might go up twenty times. In such cases, we should advise people to take vegetables as substitute for grains, provide the starved with old grains from previous harvests and loan new seeds to those in need. Then, there would not be chances for merchants to rake in ten times of profits, nor for usurers to exact one hundred percent interest on loans.” (《管子》揆度第七十八)

        Guan Zhong also proposed to aid widows or widowers and childless elders and see that they have a secured livelihood while at the same time to award the diligent and punish the lazy ones:

        “Guan Zhong said: ‘Male adults who have lost their wives are called widowers; female adults who have lost their husbands widows; and elders who have no children the childless. The sovereign should find through census those elders who have lost their children in military services and become childless and the state take care of their burial services after their death… If the child killed in a military action was the only son, the state should reward the parents with so much land that a horse can work on over a day, so that they will not suffer from the sacrifice of their son for the state. When during year-end inspection tours the sovereign comes upon families who have average man power but a much better house and, so, must be hard-working people, he should award them with two bunches of dried meat and one shi (石 – capacity unit) of wine. If anybody in good health is found to be fooling around all the time without doing any work, he should be either censured if he is an elder, or sent to work in the border area if in his prime of life. If somebody cannot afford to start farming, the state should loan him some land or money. In this way, all businesses would be prosperous, leaving nobody idling or missing the farming season. All these are measures for implementing the state’s policy.’” (Ibid.)

        This shows that, while pushing to increase production, Guan Zhong stood for social protection of those living alone and of parents who lost their son(s) on the battlefield through grants of land, food and loans. He also stood for aids to people in predicament -- When Duke Huan asked what it means to win people over from all under heaven, Guan Zhong replied:

        “Please appoint one chief official for each zhou (州) and have five cellars of grain stored in each li (里). Grant long-term loans to those who cannot afford to pay taxes and relief to those families who cannot afford funeral expenses. If those who are suffering from starvation get fed, those suffering from cold get clothed, the dead get buried, and those who need capital get credit loans, then people will come from all corners of the world to join us for protection like water flowing into low-lying areas. This is what is meant by winning over people from all under heaven. Hence, a sage-king is good at putting into service the wealth that do not belong to him and people not under his command, so that all common people, once called upon, will flock to him.” (《管子》轻重甲第八十)

       When Duke Huan, after giving his comment “Well said” on the above, asked further “How came it that Tang of Shang (商汤) , starting from a small home base of only 70 li (里) , took all the land from Jie (桀 – last ruler of Xia dynasty) ?” Guan Zhong went on:

        “Jie did not allow people to put up bridges over creeks in winter nor allow them to use rafts to cross rivers in summer so that he could enjoy seeing people suffer from cold or being drowned. He set tigresses free onto streets so that he could enjoy seeing people terrified. In contrast, Tang of Shang did the contrary. He had vegetables and grains put in store to be used to feed people suffering from hunger, provided clothes to those who were suffering from cold, and sent relief to the poor, so that people from all under heaven submitted themselves to him for protection like water flowing to low-lying areas. This was how Jie lost his world.” (Ibid.)

       From the above we can see that Guan Zhong highly praised and strongly proposed to follow Shen Nong and Shang Tang’s examples to grant relief to disaster victims and set up a grain storage system offering social relief and security to common people. This is the non-hegemonic theory on welfare.

(14) On Market Revolution: Redistribute Wealth from the Rich and Powerful to Increase Supply and Balance the Market

    With the development of market economy, polarization between the rich and the poor in distribution of social wealth led to the over-concentration of capital and, with limited marginal consumption by feudal aristocrats and other rich people, to massive hoarding of commodities and cash, to serious insufficiency of effective market supplies, shortness of goods, soaring of commodity prices, and to blocked market circulation. On noticing this situation, Duke Huan sought advice from Guan Zhong on how to disperse the over-concentrated wealth from among the aristocrats and other rich people and relieve the poor:

        “Duke Huan asked Guan Zhong: ‘Now I would like to regulate commodity prices, redistribute over-concentrated wealth and stop hoarding grains for speculation lest the concentration and hoarding process should never cease but become ever more threatening to the survival of the poor and lowly, the widows and widowers and the childless elderly. Are there proper ways and methods for doing this redistributing and dispersing?’

        “Guan Zhong replied: ‘This problem can be solved only by those who are expert in weighing and balancing economic factors. Please summon those experts to the presence of Your Highness.’

      “The Duke responded with ‘Fine’ and sent chariots to pick up Guiyi (癸乙) from Zhouxiayuan (周下原). When he and Guan Zhong were joined by Guiyi and another person called Ningqi (宁戚), he continued: ‘May I ask about the art of weighing and balancing economic factors?’

        “Guiyi replied: ‘Those who over-tax the people would lose their allegiance; those who habitually break promises to other states have no allies.’

        “Then he was questioned by Guan Zhong, who was seated shoulder to shoulder by him: ‘How can we support our army, then, without taxing the people? How can we resist attacks from other neighboring states without taxing the people?’

        “Guiyi responded: ‘Only by putting back goods and money [hoarded by the powerful and rich] into circulation on the market so that, when there are plenty of goods in supply, their prices would come down and all kinds of commodities be fully utilized. If goods are known to be useful but not used, they would be drained into other states; which would be a great peril to our state.’

        “When the Duke continued to ask ‘How, then, can we put back to use the hoarded goods and money?’ Guiyi said: ‘We have not enough war chariots while having more than enough wealth, so please have the high-ranking officials and fief owners provide funds for such chariots; those in high positions and own hereditary fiefs are wealthy at home but contribute nothing to the cost of foreign affairs, so please have them pay for it. In this way, hoarded goods and cash would be put back into circulation on the market, and then there would be plenty of goods in supply, their prices come down and all kinds of commodities be fully utilized. Only those who know about the three measures [i.e., to regulate commodity prices, redistribute over-concentrated wealth and stop hoarding grains for speculation] from one policy concern can run all under heaven, while those who fail to understand the three are serving one policy cannot. Therefore, these measures need to be declared as edicts and implemented at appropriate paces in a coordinate way, so that people will come over from all corners of the world to pledge allegiance to us like water flowing to low-lying areas. This is the art of weighing and balancing economic factors.’” (《管子》轻重甲第八十)

      Guan Zhong knew very well how to redistribute over-concentrated wealth by applying the art of weighing and balancing economic factors but, out of tactical concerns, as he also knew that this was a sharply sensitive issue which would involve the powerful and rich nobility, he had recommended to Duke Huan an expert in this approach, instead of directly speaking his mind. Thus, he tactfully had his own idea expressed through Guiyi’s mouth, i.e., to redistribute the aristocrats’ wealth so as to increase effective social supplies to realize balanced prosperity of the market, which amounted to a mild market revolution.

      This idea was accepted by the Duke, who, by using his authority as head of the state, ordered all princes, aristocrats and other wealthy people to put out their overly hoarded goods and money onto the market to increase supply and promote exchange, thus driving down commodity prices and pushing the circulation of goods gradually back to normal, i.e., towards a balance between supply and demand.

     Obviously, the application of the art of weighing and balancing economic factors in such a way was in essence a secondary distribution of social wealth with a view to narrowing the gap between the rich and the poor, increasing effective supply, promoting commodity circulation and thus restoring the normal process of a market economy; or, a kind of revolution of the market.

(15) Germs of Labor Theory of Value and Utility Theory of Value

        According to Guan Zhong, it was human labor and land that jointly created the value of wealth:

        “People cannot survive without grains; grains cannot grow without land. Land would not yield anything without people; wealth would not be produced without people exerting efforts. All wealth under heaven grows out of exertion of strength; strength grows out of exertion of the physical body.” (《管子》八观第十三)

This is to say that grains and all wealth are produced from the land, but land cannot produce wealth without human labor. Therefore, Guan Zhong held the view that the value of all wealth was jointly created by land and labor. This view of his was echoed by William Petty 2000 years later in his famous metaphor: Land is the mother and labor the father of wealth. Though no special discussion on value theory was found in Guanzi, the above quote already presented a rudimentary expression of labor theory of value.

        Besides viewing labor as a major source of value, Guan Zhong also touched on the topic of how to judge, or by what to determine, the value of goods:

        “Money is used to denote the prices of goods. Prices are determined by the degree of importance people attached to them. ” (《管子》侈靡第三十五)

Apparently, this was Guan Zhong’s another original thought on value, which contained the rudiments of the utility theory of value.

       The copious quotations from Guanzi in this long series of discussion have convincingly justified the following conclusion:

        Guanzi touched all the major topics in political economy with extensive and profound analyses, some of which were already quite mature, advanced and sophisticated, such as its systematic theories on market economy and on macro-economic regulation and control of the market.

        Its non-hegemonic principles of being people-oriented, of placing people’s prosperity before other state affairs, and of sharing wealth with all people, as reflections of its author’s broad-mindedness and profound wisdom, are the most essential ones not only in Chinese culture and in pre-classical political economy but in all- mankind political economy. They belong to the great spiritual-cultural heritage of all humanity, still retaining their validity and advanced nature today.

     Due to space constraints, this discussion is far from a complete and all-round inquiry and elucidation of the ideas contained in Guanzi, but we can confidently declare:

       Guanzi was THE earliest masterpiece in political economy in the history of all mankind, which is comparable to The Wealth of Nations by Adam Smith, Capital by Karl Marx, and The General Theory of Employment, Interest, and Money by John Maynard Keynes;

        Guan Zhong was THE earliest great political economist in the history of all mankind;