(Translated by Jiangyue Zhai)
75．The Flexible Economic Policies Taken by the Mountainous States
Duke Huan asked Guanzi，“Would you please tell me the right tactics to use to secure the authority of the throne?’’ Guanzi replied，“Heaven uses the weather of the four seasons as tactics．The Earth uses things produced by it as tactics．Human beings use their strength as tactics．Sovereigns use edicts as tactics．If the tactics of Heaven are missed，the tactics of both human beings and the Earth will fail too．”Duke Huan asked，“What does‘if the tactics of Heaven are missed，the tactics of both human beings and the Earth will fail too’mean?”Guanzi replied，“During the time when Tang was in power，there was a severe drought that lasted for seven years．During the time while Yu was in power，catastrophes caused by floods lasted for five years．At that time，the common people did not have anything to eat so they were forced to sell their children for survival．Tang mint money with the metal produced by Mount Zhan to ransom children sold by their parents because they did not have enough food to support them．Yu mint money with the metal produced by Mount Li to ransom children sold by their parents，because they did not have enough food to support them．So，if the tactics of Heaven are ignored，those of the human beings and the Earth will consequently fail．Hence, if a sovereign stores three tenths of the harvest every year，grain stored for a period of a little bit longer than three years can support the whole state for one year．If this measure can be taken for thirty-three years in a row，the store of grain can support the state for ten years．Moreover，since only one third of the grain output is stored，that will do no harm to the common people and they can also be encouraged to work hard in the fields．Thus，even though the farm work might be impeded by some natural catastrophes，such as disastrous droughts or floods，the common people will not starve to death in ravines or cadge for a living．That is the right way for taking suitable measures according to the tactics of Heaven．”
Duke Huan said．“Fine．I am going to take economic policies according to these three kinds of tactics．What shall I do then?”Guanzi replied，“Qian Qian (possibly it might be a kind of red silk of very high quality) and Ye Shi (possibly it is a kind of precious stone，which is luminescent during the night) produced on the southern side of Liang Shan are unequaled all over the world．”Guanzi continued，“You can trade these things for grain．And if you can store one tenth of the grain output every year，the price of grain of the state will go up ten times in five years．”He continued，“Please issue some money．You can hire some people to mine copper at the cost of the grain stored for two years and arrange a certain place to mint money there．And be sure to regulate the prices of things according to those of other states．When the prices of things of our state are higher compared with those of other states，they will dump goods in our state．And when the prices of things of our state are lower，our goods will flow into other states．Both of these two cases are mistakes in our economic tactics．If the state cannot prevent various natural disasters such as drought and flood，the common people will have to borrow things for survival．Thus，it is somewhat the same as allowing people to enslave each other．That is both the reason for penalties and the roots for all kinds of troubles and chaos．Thus，the balance among the people will be broken，the newly enriched people will become worse compared with the time when they were poor and the resources and savings of the state will be used up．In this case，a11 three kinds of tactics are lost．”
Duke Huan asked．“What shall I do in order to master these three tactics?”Guanzi replied，“Store half of the grain produced in the state when the harvest is good．And also store half of the grain produced when the harvest is bad．’’ Duke Huan asked，“At the time when the harvest is bad，the people should be aided with the store of grain of the state．Why should I keep half the harvest to myself then?” Guanzi replied，“At the time when the harvest is bad，the price of grain will simply go up．If one share of money is invested，it will be paid back with ten shares later on．And if ten shares are invested，it will be paid back with one hundred shares．When the harvest is bad，sell the grain you have stored at a price ten times higher compared with the original price you paid when you purchased it during the time when the harvest was good．You can buy grain at the time when the harvest is good at one tenth of the price compared with the price when the harvest is bad．Thus，you can net a profit nine times higher．Then take measures to regulate the grain produced at the time when the harvest is good．Thus you will master the right tactics in all these three areas．That can be classified as the economic tactics of the state．”
Duke Huan asked Guanzi，“Would you please tell me something about the fixed policies of a nation?” Guanzi replied，“A state should not have any fixed policy because the output of grain of various lands is different．”Duke Huan asked．“What does‘a state should not have any fixed policy because the output of grain of various lands is different’ mean?”Guanzi replied．“The output of the best fields is ten dan (referring to the grain produced by one mu of land)，the output of the secondary fields is five dan，the output of the third-rate fields is three dan，and the rest of the territory can be regarded as wasteland．Normally，one farmer can take care of one hundred mu of land．If one dan of grain produced by the best fields can cost one jin of gold in the local region，that of the secondary，third-rate and the wasteland can cost ten，thirty and one hundred jin respectively．Therefore，if grain is traded correctly，the income of one hundred mu of land can match that of one thousand．Thus。the wealth of the state of one hundred chariots can match that of a state of one thousand chariots and similarly，the wealth of a state of one thousand chariots can match that of a state of ten thousand chariots．So，the land has a fixed output，but a state should not have any fixed policy．”Duke Huan said，“Excellent．I want to establish a formidable power．and then use it to unify the whole world，but I see that if I cannot master the right economic tactics，I can never reach that goal."
Duke Huan asked，“If I am going to use these economic tactics，what kind of situation do you think I will encounter then?”Guanzi replied．“If you can master the right economic tactics for administering both the big states and the small ones，you will not fear the big states because your own is small．And if you know the degree of seriousness of the issues，you will not fear states with huge amount of wealth because your own is less wealthy．These should be the most important tactics of a state．”Duke Huan said，“Fine．If I am going to unify every place under the sun，maintain power over the whole world and be praised endlessly by posterity，do you think there is some way to achieve that?”Guanzi replied，“Yes．There is a way to realize that．It is to study economic statistics scrupulously，take control over the price policy to regulate the circulation of grain，all kinds of other goods and the currency，be prepared to take the right measures even before certain products are produced and then manipulate the products after they are successfully produced．Thus，wealth can be multiplied ten times more，and the state can gain an interest of nine times higher compared with the amount you originally invested．Edicts of greater or less urgency and measures used to regulate prices are all aimed at multiplying the wealth of the state so that one share of money invested can be incremented to ten shares，and ten shares can be incremented to one hundred．After that，you should save four fifths of the half of the wealth created this way，and invest the other half to sponsor profitable undertakings of the state．You should also decide when and how to inflate or deflate the economy of the state．”
Duke Huan asked，“What does inflating or deflating the economy of the state mean?” Guanzi replied，“If you do not attach importance to the principle of benevolence，the common people will not help each other in need．If you do not attach importance to the principles of kindness and filial piety，the common people will not take their parents seriously，nor will they pay attention to the mistakes they committed．These kinds of situations are the beginning of troubles and chaos．Thus，you should use that one tenth of the wealth created by taking the right economic tactics to erect landmarks and heighten the memorial archways，send local officials of each xiang to drop in on the homes of dutiful children to present them with some money and exempt them from military service no matter how many brothers they have．If the landmarks are erected and the memorial archways are heightened to honor people of such virtues as benevolence，kindness and filial piety，goods will be circulated and their prices will become low．Then you can take the right economic measures to collect these things while they are cheap．Thus one half of the wealth of the state will be in your hand again．After that, use this half efficiently and make sure that it will bring profits to you over and over again just like the sun and the moon will rise every day and night．That is the right method for maintaining the authority over the world for good and it is addressed as ‘Zhun Dao’(referring to taking the right economic tactics on governing the state).”
Duke Huan asked Guanzi，“Would you please tell me something about the right methods for popularizing moral education?”Guanzi replied，“For people who are good at farming，reward them with one jin of gold．That is about eight dan of grain．For people who can make all the six kinds of livestock propagate well，reward them with one jin of gold．That is about eight dan of grain．For people who are clever at horticulture，reward them with one jin of gold．That is about eight dan of grain．For people who are adept in growing melons，all kinds of vegetable and fruit，reward them with one jin of gold．That is about eight dan of grain．For people who are expert in curing the diseases of others，reward them with one jin of gold．That is about eight dan of grain．For people who are familiar with the weather patterns and can forecast natural disaster and therefore tell whether the harvest of certain kinds of crops will be good or bad in advance，reward them with one jin of gold．That is about eight dan of grain．For people who are accomplished in growing mulberry trees，raising silkworms and protecting them from all kinds of diseases，reward them with one jin of gold．That is about eight dan of grain．Listen to the viewpoints of these people carefully．Make records and keep them on file．Make sure that these people will not be drafted into military service．These are the most important policies of a state．Thus，all kinds of expenditure of the state can be met and there will be enough resources to run all kinds of utilities．Then set up four limits to define the area where the circulation of goods and money can take place．Use the right price policy of either greater or less urgency according to the circumstances to regulate the prices and the circulation of all goods．Moreover，five kinds of talented officials should also be appointed and employed．”
Duke Huan asked，“What does appointing five kinds of talented officials mean?” Guanzi replied，“Epic is used to record significant events of the state．The Order of Things is used to record things happening all year round．The Spring and Autumn is used to record success and failure of some important actions．Manners and Behavior is used to edify people to know the advantages and disadvantages of their conduct．The Change is used to foretell good fortune and misfortune，success and failure．The Divination is used for fortune-telling．Reward people who have mastered these skills with some land that can be ploughed by one horse and with some clothes bought with one jin of gold．This is the right method to prevent the sovereign from being hoodwinked and confused．As for all these six kinds of officials，they should foresee problems of the state when the problems start to occur．For the official familiar with the Order of Things，he should be able to foretell the development of various issues，situations and also warn the sovereign of them in advance．Then the sovereign will not miss any opportunity or make any mistake．As a result，the whole state will be prosperous without suffering from any loss or disadvantage．The official in charge of the Divination can foretell gain and loss to assist the moral education，the official in charge of Epic can edify the people not to commit crimes，the official in charge of Manners and Behavior can educate the people not to behave against the principle of righteousness，and the official in charge of the Change can foresee good fortune，misfortune，so that troubles might be avoided．These are the most important powers all sovereigns should control.”
Duke Huan asked Guanzi，“Now that I have been taught the powers of the throne，how can I maintain the state for good?”Guanzi said．“After you have appointed all the talented people who are accomplished in weather patterns，who can foresee gain，loss and the development of things and situation to suitable positions，you may administer the rest according to common rules and reasonable policies.” Duke Huan asked．“What does‘administer the rest according to common rules and reasonable policies’ mean?” Guanzi replied，“Grain is decisive for survival and intelligence can serve as assistance to people．When the common people are intelligent，the sovereign must be fatuous．When the common people are wealthy，the sovereign must be less wealthy．When the common people are poor，the sovereign must be rich．These two opposite factors can be regarded as the two sides of the coin．The most important factor in a state is to issue the right policies of either greater or less urgency according to the actual situation．The most important principle a sovereign should master is to establish a suitable and just law．The most important factor of regulating the hearts of the common people is to remove evil ideas from their minds．”
Duke Huan asked，“What does‘establish a suitable and just law’ and ‘remove evil ideas from the minds of the common people’mean?” Guanzi replied．“Establishing suitable and just law means to allot the common people some tasks according to their capability．Removing evil ideas from their minds means to draw lessons from the past to avoid future mistakes．Thus，there will be no troubles and the common people will not worry about any future disasters.” Duke Huan said，“Please tell me something about restraining the evil ideas of the heart．”Guanzi replied，“There used to be some disloyal officials in the state of Jin．They were planning to murder their sovereign．These people were addressed as ‘Gong Guo (which means public enemies)’．All relatives of ‘Gong Guo’ had been sentenced to death and none of them was allowed to work for the regime any more．That was a mistake of the state of Jin．‘Gong Guo’of Qi are judged according to the misdeeds they have committed．Moreover，punish the violent and reward people of achievement．That is the right way to remove evil ideas．So，they are recognized as commandments to the nation．”
Duke Huan asked Guanzi。“It seems that we have taken all measures for regulating the prices and circulation and governing the state．Are these all the measures a state can take?”Guanzi said，“No．You should also make good use of the deified national treasures．”Duke Huan asked，“What does ‘make good use of the deified national treasures’ mean?”Guanzi replied．“Someone of Bei Guo found a turtle while digging the ground．Therefore，he has got one hundred square li of land because of the turtle．”Duke Huan asked，“What does ‘got one hundred square li of land because of the turtle’mean?”Guanzi replied．“This man of Bei Guo was ordered to put the turtle on a huge flat plate．Then the sovereign sent out messengers leading ten carts and carrying one hundred jin of gold as gift money to him and issued an edict as follows：‘You are conferred the rank of‘Zhong Da Fu’(the title of a position which is lower than Da Fu)，and‘The son of the god of the East Sea looks like a turtle．Now he is staying at your place．Hence，I confer you to be Zhong Da Fu during your lifetime and reward you with one hundred jin of gold．’That turtle was priceless，so it was kept on a huge platform．Every day the flesh of four cows was sacrificed to the turtle，and it was addressed as‘Wu Zi’(it means an invaluable treasure)．Four years later，military action was launched to attack the state of Gu Zhu．At that time grain stored by the Ding family was enough to support the troops of all the three armies of the state for five months．The sovereign called in the patriarch of the Dings and ordered him：‘I have a priceless treasure named Wu Zi here．And now I am going to take some very important military actions，so please allow me to present this treasure as deposit for your grain．’The Ding bowed twice towards the north and presented his grain store to the state，but did not dare accept the deposit．Duke Huan then ordered him：‘Now I am getting old，and my sons do not know how to value this treasure．Please do accept it．’The Ding went home，built another building and prepared a special mat for the turtle．Four years later，military action was launched to attack Gu Zhu，and people said that the private store of grain of the Dings had supported troops of all the three armies of the state for five months．Duke Huan issued another economic policy on administering finance by using deified turtles．It said：‘The value of the Wen Hang (the name of one turtle) amounts to seven thousand jin of gold．The value of the Nian Gui (the name of one turtle) amounts to four thousand jin of gold．The value of Hei Bai Zhi Zi (the name of one turtle) amounts to one thousand j in of gold．’The income gained by the economic policy taken on these deified turtles can be about two times higher than the value of the land of the state of Qi．Regarding the function of these deified turtles，they can be used as deposits when the state is in danger，and they can be put into circulation like other goods when the state is at peace．”
Duke Huan asked，“What is their function in circulation?”Guanzi replied．“If there are some people manipulating the market and monopolizing trade，you will not be able to popularize your economic policies and the common people will lose the means to sustain their lives．Hence，a sovereign who is good at governing the world will also take firm control over other goods besides grain and money.” Duke Huan asked，“What are goods besides grain and money?”Guanzi replied．“For a state with ten thousand chariots，the total amount of treasure saved by the state should value no less than ten thousand jin of gold．For a state with one thousand chariots，the total amount of treasure saved should value no less than one thousand jin of gold．And for a state with one hundred chariots，the total amount of treasure saved by the nation should value no less than one hundred jin of gold．Making good use of these things and issuing suitable policies to regulate prices according to the actual situation is regarded as the timely grasping of opportunities.”
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