Tuesday, October 24, 2023

A Political and Economic History of China, Part 3: The Tang Dynasty

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7 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff last discussed the Chinese Han dynasty (206 BC – 220 AD) and the entry into northwest Xinjiang. This week we’ll discuss the Han’s fall and the later Tang dynasty.
Tang Empress Wu Zetian
Cautious Rockers who wish to go back and read the Economics Correspondent's previous entries on the Qin dynasty (221 BC-206 BC) and the first emperor of a unified China, or the Han dynasty and its initiation of Chinese expansion into northwest Xinjiang, can find links in the comments section.


After enjoying one of China’s handful of “golden ages,” the Han dynasty began to weaken in the 2nd century. In a narrative that would go on to repeat itself with future dynasties corrupt palace eunuchs gained too much political influence, in this case surrounding the boy emperor Ling and securing his favor.

When a plague devastated the country in the 170’s, the boy emperor raised taxes on the already overburdened peasants who in turn gravitated towards a faith healer named Zhang Jue. Zhang eventually led the great Yellow Turban Rebellion which was put down by the army, but the violent and costly process of suppression fragmented the empire with regional warlords drawing power away from the capital.

Later when the adult Emperor Ling died his teenage son was declared emperor by the empress dowager whose brother, in turn, moved against the eunuchs to reduce their hold on the power apparatus. The eunuchs lured the empress dowager's brother into the capital where they assassinated him, at which point imperial troops seized the palace and killed two thousand eunuchs. In the chaos that ensued a general seized power from the teenage emperor and tried to install his own puppet boy emperor, but that plot failed when the general was killed by his own bodyguard. Soon warlords were fighting warlords and the Han collapsed in 220.

As the Correspondent mentioned in the last column, the Han was brought down by problems that would repeatedly topple future dynasties: in this case corrupt eunuchs, central and regional power struggles, court intrigue, a plague, and internal rebellions.

After the Han dynasty fell China split into three kingdoms in what’s appropriately enough named the “Three Kingdoms Period” (Wei, Shu, and Wu), a 260-year period of Chinese disunity. The “nationsonline” website provides a good short synopsis:

”An era of disunity, when three kingdoms Wei, Shu, and Wu were competing for control of China. As a result of the disintegration of the society, constant foreign incursions, and alien reign throughout the North, many fundamental changes occurred in China during this period. The Confucian system that had ordered society was in ruins, and the growing influence of Taoism and the importation of Buddhism worked profound changes everywhere.”

Although there is so much that can be said about the Three Kingdoms Period the Correspondent is going to skip over the transitory period leading up to the Tang dynasty, and also skip another chaotic period after the Tang; because he’s in a bit of a hurry to get to the Song dynasty, after which the last thousand or so years of Chinese history is more orderly: a string of wholly unified dynasties transitioning from one to another before ending with the pivotal Qing dynasty.

The Qing (pronounced "ching") beginning in 1644 and surviving all the way to 1911, was so consequential in the development of modern China that the Correspondent will likely post more articles on that era than all the other dynasties combined.


The Chinese map becomes considerably less complicated with the founding of the Tang dynasty in 618.

The preceding and short lived Sui dynasty (581-618) collapsed when its last emperor burned through a treasure on his lavish and palatial lifestyle and embarked on multiple wars of expansion, ending with a disastrous campaign into Korea which led to internal rebellions and his own assassination.

One of his officials rose to power and established the Tang dynasty in 618 (pronounced “tahng”).

In his past study of Chinese history the Economics Correspondent repeatedly read the Tang was *the* golden age of Chinese golden ages. Prosperity, art, culture, poetry, and territory all reached contemporary pinnacles although two later dynasties’ borders would extend further. During the Tang the Chinese empire became the most populous in the world and its capital, Chang’an (modern day Xi’an) was the most populous city on earth.

Also some of the Correspondent’s Chinese family members have expressed the same sentiment about the Tang being the greatest dynasty of them all—for what that’s worth.

Incidentally while China’s population growth from 50 million to 80 million during the three centuries of the Tang is impressive, it’s worth putting into more recent historical perspective. By comparison, after centuries of growing its population by only 3% every hundred years, Great Britain’s headcount more than doubled during the first century of the Industrial Revolution.

But back to the Tang, one evening over dinner the Correspondent heard a dissenting opinion from an academic acquaintance of his from San Jose State University. This professor was reading a book on the economy of the later Song dynasty from which he concluded the Song was *the* golden age. When asked about the alternative Tang he was adamant that the true golden age of Chinese history was during the Song. Hence now it’s less clear what the golden age of Chinese golden ages really is although several Internet sources agree with what the Correspondent has seen in so many history books: it’s the Tang.

Regardless, some of the notable achievements of the Tang include the inventions of:

-Compass navigation
-Wood block printing
-The first mechanical clock
-Water-powered air conditioning
-Paper money

Many more advances are recorded in law, architecture, medicine, and literature.

While paper money didn’t appear in the West until the late Renaissance, it was being used over eight centuries earlier in 8th century Tang China. Traveling merchants wishing to lighten their load would deposit their coins with a local government office in exchange for promissory paper notes. When the merchants arrived at their destination, often the capital city, they would redeem the notes at another government office and from there conduct their business using heavier, fungible coinage.

The money came to be known by Tang Chinese as “flying cash” since, unlike metallic coins, it flew in the air when the wind blew.

By 812 AD the Tang government declared paper notes a valid means of general exchange and shortly thereafter began printing them for its own revenue purposes, initiating the concept of the monetary economy. Since the notes were redeemable in coin the Tang never got around to generating hyperinflation, but had the dynasty not fallen just 95 years later it may have eventually discovered the extractive properties of fiat money.

But not to worry, future dynasties would more than make up for the Tang’s purported discipline when abuse of the printing press would create hyperinflations during virtually all the ensuing dynasties and even Chiang Kai-Shek’s Nationalist government.

And if we jump forward for just a moment to the Mongol Yuan Dynasty (1279-1368), Italian merchant Marco Polo took detailed notes of how the great Kublai Khan made use of paper money, bringing the novel idea back to Italy although it took a few more centuries for European banks to begin issuing hand-to-hand paper currency. Nevertheless, to its credit or blame, the invention of paper money ultimately lies with the Tang dynasty.


One other notable curiosity of the Tang dynasty is the only female ruler to officially assume the Chinese imperial throne.

Although Chinese history records other women who have controlled de facto imperial power, in all those cases the emperor’s throne has still been officially occupied by a male child sovereign, an ill husband, or in the case of Han dynasty Empress Lu, an adult son with no interest in affairs of the state.

Empress Wu Zetian is the sole exception and she remains famous in China even today, her likeness appearing in countless Chinese movies and soap operas.

Wu Zetian (pronounced "Woo dzuh teeyan”) was first empress consort of the Tang emperor Gaozong and enjoyed an elevated position due to the birth of her two sons, each of whom would become emperors decades later. Even in her early days as empress consort Wu was ideological and gained influence in court affairs, but her elevation to power was greatly assisted by the emperor Gaozong himself who suffered a stroke in 660. 

Gaozong survived but his health would deteriorate slowly over the course of twenty-three years, during which time Wu assumed more and more responsibilities of state administration on his behalf. Gaozong’s long illness and deterioration provided the perfect set of circumstances for Wu to gradually achieve full power.

When the emperor died in 683 Wu’s eldest son occupied the throne, but using her considerable power she had him deposed for attempting to govern independently and appointed her younger and underage son as emperor which she used as rationale to assume the regency. By 690 she broke away from the Tang system and founded the short-lived Zhou dynasty as empress regnant (i.e. official head of state, not just emperor’s consort of empress dowager/mother). 

Although she already had effectively ruled China for many years prior, Wu legally held the throne for fifteen years until, in 705, the aging and ailing empress was overthrown by her eldest son in a coup that restored both the Tang and his own emperorship.

She died shortly afterwards.

As for Wu’s legacy as head of state, she’s regarded not only as cruel, vindictive, cunning, and ruthless, but also as a highly effective administrator who was largely responsible for the Tang’s rise to golden age status. Under Wu China’s territory expanded, government corruption was reduced, a cultural renaissance took place, and the Tang grew into a genuine world power. A short quote from historians Cotterell and Cotterell sums up Wu’s reign pretty nicely:

”Though she was ruthless towards her enemies, the period of her ascendancy was a good one for China. Government was sound, no rebellions occurred, abuses in the army and administration were stamped out and Korea was annexed, an achievement no previous Chinese had ever managed."

Next installment we’ll work our way into the Song (960-1279) and Southern Song (1127-1279) dynasties.

Wednesday, October 18, 2023

MMT Objections to MMT Objectors

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6 MINUTE READ - A Modern Monetary Theory/MMT update and exchange from the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff.

Now that Modern Monetary Theory (MMT) has been discredited by the 2021-2023 inflation that many of its proponents said wouldn’t happen for a very long time if the central bank printed vast amounts of money to pay for:

-the Green New Deal
-free college for all
-socialized medicine
-government jobs guarantee program
-universal basic income
-free child care and day care
-racial reparations
-complete rebuild of public infrastructure

…it seems like a good time to combine several online exchanges the Cautious Optimism Economics Correspondent has had with MMT’s enthusiasts, most of whom are very sure of themselves after reading a few blog entries by Stephanie Kelton or Warren Mosler.

Note: The Correspondent has actually had these conversations with MMT’ers and takes pain to present their arguments accurately. There are no straw men here. They routinely say these things, so you'll get a partial picture of what MMT promises its followers.


1) MMT disciple: MMT is not a “theory.” It’s a description of how our monetary economy actually works. None of the other economic schools understand the monetary system. Government deficits are a good thing. Every time the government spends a dollar more than it collects in taxes, the Federal Reserve makes a keystroke entry that creates a new dollar of money into existence which the economy cannot survive without. MMT opponents don’t understand our economy cannot exist without government deficits to create money.

Economics Correspondent: Deficit spending does not “create” money. The central bank creates base money (reserves) when it buys securities in open market operations, and the private banking system multiplies reserves into greater demand deposit balances through lending—all longstanding standard textbook stuff.

2) MMT disciple: No, those textbooks and academics don’t understand the monetary system. I’m telling you when the government spends money that it hasn’t first collected in taxes, it mails an overdraft check to a recipient who deposits it at his bank. The Fed then uses a computer keystroke to credit his private bank with dollars and new money is created into existence. Under our current system there is no limit to how much Congress can spend and deficit spending is literally what creates the money we rely on to run our modern economy. It's simple accounting.

Economics Correspondent: You left out the other half of the transaction accounting. Namely… when the Fed credits the recipient of the government’s check at his bank’s reserve account, the central bank must also necessarily debit the Treasury’s account at the Fed—named the  Treasury General Account or TGA—by the same amount. The dollar credited at the private bank is offset by the dollar debited from the Treasury. One dollar in reserves is simply transferred from the Treasury’s account to the private bank’s account. No new money is created, and when the TGA balance reaches zero the government can no longer spend without either taxing or borrowing first. The Treasury has also been forbidden by law from running an overdraft at all since 1981.

3) MMT disciple: That’s not true.

Economics Correspondent: No, it absolutely is true, but to make this simple why don’t you just show me the government accounting that proves your case? Find me anywhere in the U.S. Treasury’s daily, weekly, or monthly statements of operations the deficit spending offset accounting item for “new money created for the Treasury by Federal Reserve.”

4) MMT disciple: I don’t care what you say, it’s still not true.

Economics Correspondent: Does that mean you haven’t found any Treasury financial statements to prove it?

5) MMT disciple: I don’t need accounting. The Fed’s creation of new money from deficit spending is a tautology that needs no proving.

Economics Correspondent: OK don’t just take my word for it then. How about monetary economist George Selgin who writes:

“[MMT economist Stephanie Kelton] unaccountably forgets to mention that, to complete the clearing transaction in question, the Fed must also debit the Treasury’s own account, known as the Treasury General Account, or TGA, for short. What difference does this make? …it means that there is, after all, a practical limit to how much Congress can spend, and that limit really isn’t all that different from those faced by ordinary households or businesses: when the rest of us write checks, our banks also end up debiting our checking accounts by corresponding amounts as the checks are returned to them for payment. That matters because at some point, if we spend too much, our bank balances will be depleted, and our checks will start bouncing...."

"...although most bank depositors enjoy certain overdraft privileges, and the Fed once granted similar privileges to the Treasury, in 1981 Congress itself permanently eliminated the Treasury’s overdraft privileges. Consequently, if Congress is to avoid running out of money, it can’t write checks in amounts exceeding the balances in its TGA account."

6) MMT disciple: Whoever George Selgin is, if he’s not an MMT economist then he doesn’t understand how the monetary system really works. Regardless of what you say, the reality is whenever Congress deficit spends it creates new money through the Fed system. When Congress runs a surplus it destroys money that the economy needs. Critics of deficits are unsophisticated and don’t realize the government’s deficit is the private sector’s savings.

Economics Correspondent: OK then, let’s check that “money from deficits” claim against real world observation.

The last year and a half Congress spent far more than it collected in taxes, running a deficit of $2.2 trillion. According to MMT the money supply should have expanded by $2.2 trillion, but it has actually fallen by over a trillion dollars (link at https://fred.stlouisfed.org/graph/?g=19RcK). So, where do I find all the new money that these huge deficits are supposed to be creating?

7) MMT disciple: You’re measuring the money supply by M2. I’m referring to the monetary base (currency plus reserves) which is what the Fed really controls.

Economics Correspondent: OK, the monetary base has fallen too: by over half a trillion dollars (link at https://fred.stlouisfed.org/graph/?g=19Rcx). That’s a big difference from rising by $2.2 trillion. So again, where is all the new base money and reserves these government deficits have created?

8.) MMT disciple: Well the U.S. runs a trade deficit which drains money out of the system. That’s where it’s going.

Economics Correspondent: In late 2023 the trade deficit is at a three year low. 

Furthermore, if we go back to the late 1990’s the government was running a small surplus and the U.S. was also running a trade deficit. Since MMT alleges both “drain money from the economy” the money supply should have unquestionably contracted. But the money supply and monetary base did the opposite—M2 expanded by +20.1% and the monetary base by +22.9% from 1998 through 2000 (links below).



Once again as conventional monetary economics states, Federal Reserve monetary policy and open market operations grow and contract the money supply, not government deficits.

9) MMT disciple: Well the money supply is contracting today because private banks are cutting back on lending and reducing demand deposit balances.

Economics Correspondent: That’s not a new insight. All economic schools, not just MMT, understand that when banks cut back on lending M1 and M2 are more likely to fall. 

Remember you also just said the broad M2 money supply doesn’t matter, only the monetary base which bank lending doesn't impact, only Fed operations. Well the monetary base has fallen by over half a trillion dollars at a time when MMT argues deficits are supposed to have printed 2.2 trillion new dollars in reserves. That hasn’t happened.

10) MMT disciple: You don’t understand how the economy works. Sovereign money doesn’t behave like a household. The government never has to worry about running out of money. We can deficit spend to finance a Green New Deal, universal basic income, a jobs guarantee program, universal healthcare, free college tuition, free daycare for working parents, and racial reparations. The government doesn’t have to worry about how to pay its bills because it is the monopoly issuer of its own currency.

Economics Correspondent: The government has barely even started spending on any of those massive programs and we’ve already suffered from runaway inflation. So no, Congress can’t pay for some socialist utopia using the printing press. And the fact remains unchanged that the government has run huge deficits the last 18 months yet every measure of money, including those you accept one moment and don’t accept the next, have all fallen. Those trillions of deficits have not inflated the monetary base, reserves, M1, or M2, all of which have fallen due to the Fed’s well-established monetary policy decisions.

<end of combined discussions>

Conclusion? MMT is just the latest in a long history of something for nothing fads, like another promise of the perpetual motion machine—with an electric cord under the tablecloth.

”There’s nothing new that’s true and nothing true that’s new in Modern Monetary Theory.”

-George Selgin

Monday, October 16, 2023

Next-Level TDS: Blaming Trump for Obama/Biden Fed Appointees

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Next level TDS comment and reply on finance story "The Fed's next 'rate hike' has already arrived."

Timmy: "I am sick and tired of Fed Society Puppets in the Fed raising interest Rates on working class Debt and rewarding the Price Gougers who own them. Biden should FIRE all these Trump trickle down clowns NOW"

Cautious Optimism Economics Correspondent: "Eight of the twelve Federal Open Market Committee members (who vote on interest rate policy) were appointed by Biden or Obama. The ninth, Jerome Powell, was appointed to the FOMC by Obama in 2012, appointed Federal Reserve Chairman by Trump and a Republican senate in 2018, and reappointed by Biden and a Democratic senate in May 2022 (when inflation was raging at its peak)."

Tuesday, October 10, 2023

A Political and Economic History of China, Part 2: The Han Dynasty and Xinjiang

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7 MIN READ - For a diversion from the heinous terrorist attacks in Israel the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff continues with his series on a brief political and economic history of China, this time with a few words on the Han dynasty (202 BC-220 AD) and Xinjiang. The Chinese stories have their share of violence too, but being centuries old they shouldn’t foment the same level of dread as today’s news.
The Han Dynasty including expansion into northwest territories
Last week we devoted a column to the fifteen year Qin dynasty (221 BC-206 BC) because, despite its short life, the Qin was extremely important in establishing the nation of China itself. After the first Qin emperor died his heirs and senior advisors fought for power leading to the dynasty’s collapse and overthrow by some of its own governors, officials, and everyday people who blamed the Qin for its excessive cruelty. The Han dynasty replaced the Qin and during its 400+ year reign would briefly enjoy one of China’s handful of “golden ages,” a period during which peace, prosperity, and cultural development thrived. For example, writing paper was invented during the Han in 105 AD. The Economics Correspondent will only write a little on the Han and other early dynasties as his focus admittedly is much heavier on the last dynasty (the Qing), Chiang Kai-Shek, and especially the communist era. Like other long-lived dynasties, the Han followed a familiar rise-and-fall pattern. It benefited from one or more highly competent emperors in its early days before succumbing to decline in its later century or centuries. Depending on the dynasty itself, any number of factors contributed to collapse including power struggles, court intrigue, corruption, domestic rebellions, plagues, natural disasters, outside invasions, or possibly some combination of these. Regarding corruption, that problem nearly always beckoned imperial eunuchs who constantly jockeyed for political favoritism, embezzled money, and over millennia became universal symbols of dynastic decay. Anyone who’s watched enough low budget Hong Kong and Chinese kung fu movies may have noticed arch villains and evil masterminds are usually white-haired palace eunuchs, often possessing supernatural martial arts powers and throwing lighting bolts at the story’s heroes. In the case of the Han dynasty, the standout emperor who engineered its early ascent was Wudi (reign: 141 BC to 87 BC, pronounced woo-dee) who established a strong administrative apparatus, greatly expanded China’s territory, and encouraged a flourishing of the arts, poetry, and religion. The emperor Wudi ruled for 54 years, a tenure that remained unsurpassed for eighteen centuries until the great Qing emperor Kangxi’s 61 years (r. 1661-1722). But because Kangxi descended from a royal lineage of invading Manchurian sovereigns, Han Wudi’s reign remains the longest ever by an ethnic Chinese emperor. For these reasons Wudi is counted in the exclusive list of China’s seven or eight greatest emperors. HELL HATH NO FURY If we go back a few decades there’s also a scandalous story involving the Han empress Lu (241 BC-180 BC), a consort of the first and founding Han emperor Gaozu. After the emperor died the now-empress dowager Lu’s son ascended to the throne. Lu then moved quickly to arrest another of her late husband’s consorts, the concubine Qi (pronounced “chee”), who she personally hated and whose son posed a competing threat for the throne. Empress Dowager Lu had Concubine Qi’s son poisoned and then inflicted her malevolence on Qi in unimaginably sadistic ways. A passage from Wikipedia best sums up Qi’s fate from the “Records of the Grand Historian” recording that (warning: graphic)… ”[Lu] had Qi's limbs chopped off, eyes gouged out, ears sliced off, nose sliced off, tongue cut out, forced her to drink a potion that made her mute, and had her thrown into a latrine. She called Qi a human swine’. Several days later, [Lu’s son] Emperor Hui was taken to view the ‘human swine’ and was shocked to learn that it was Concubine Qi. He cried loudly and became ill for a long time. He requested to see his mother and said, ‘This is something done not by a human. As the empress dowager's son, I'll never be able to rule the empire.’ From then on, Emperor Hui indulged himself in carnal pleasures and ignored state affairs, leaving all of them to his mother, and this caused power to fall completely into her hands.” Of course this drama took place in 195 BC. In 21st century America everyone knows no wife of a former head of state would ever have her rivals or perceived threats killed off, particularly in some bloodthirsty lust for political power. XINJIANG During its territorial expansion the Han dynasty entered the modern-day northwest province of Xinjiang around 130 BC (pronounced "sheen-jeeahng"). At that time the tribal people of the remote northern steppes, called the Xiongnu, were considered one of the many “northern barbarians” since they had invaded central China many times and briefly forced the Han to act as a subservient vassal state. After a series of conflicts the Han gained control of the region around 60 BC and in a role reversal the Xiongnu became vassals of the Chinese. Under Han control the first Silk Road trade routes were found connecting Europe and China. History records Roman merchants visiting China shortly after, and the two dominant world powers became aware of each other's existence. The Han controlled Xinjiang for many decades before being pushed out by an uprising, only to return in 127 AD. On again, off again Chinese governance of Xinjiang continued into the Tang dynasty (618-917). Tang protectorates extended as far as Kabul until the new religion of Islam and its warriors invaded the region. Coincident with the arrival of Islam, a major upheaval in China’s heartland—the Lushan rebellion—resulted in the Tang’s withdrawal from the northwest. Although we’re getting a bit ahead of ourselves here, the Mongol Yuan dynasty (1279-1368) reintegrated Xinjiang into its domain which, though seated in Beijing, was the largest territorial empire in history, spreading throughout most of Asia into the Middle East and Eastern Europe. With the fall of the Yuan China once again withdrew, but in 1755 the great Qing dynasty (1644-1911) invaded Xinjiang, by now called Dzungaria by its Mongol inhabitants. Ironically the Qing emperor Qianlong was actually invited to invade Xinjiang by a Dzungar Mongol khan named Amursana who was locked in a regional power struggle and swore allegiance to China if they helped him defeat his rival. With Chinese help Amursana defeated his foe but afterwards decided he didn’t like the idea of sharing power after all and rebelled against the Qing, wiping out most of the Chinese garrison stationed in the capital city of Ghulja. An enraged Qianlong crushed the rebellion and ordered the “Dzungar genocide” which exterminated vast numbers of Dzungar Mongols, considerably more by smallpox than warfare. The emperor justified his decision proclaiming “to sweep away barbarians is the way to bring stability to the interior,” the key word being “stability” which has been covered in the previous column on the emperor Qin Shi Huang and the CCP. China has pretty much administered the region ever since. All in all going back to 130 BC China has governed Xinjiang a total of six centuries including virtually all of the period from 1759 to present day. In the 21st century communist China has dealt with Muslim separatist terrorist bombings and other attacks (including targeting civilians in heavily populated eastern Chinese cities), responding with heavy-handed crackdowns, widespread arrests and prison sentences without trial, seizing the children of ethnic Uighurs and interring them in CCP indoctrination schools (if they run out of space Harvard and UC Berkeley have offered their classrooms), and a network of labor camps. Human rights groups have used more strongly worded criticisms of alleged “ethnic cleansing” and even “genocide,” although the CCP’s campaign looks downright civilized when compared to Emperor Qianlong’s Dzungar genocide. The Economics Correspondent takes a balanced position on this problem. Separatist bombings of marketplaces are a genuine problem while, on the other hand, the PRC has dealt with it using overly-dictatorial methods involving the punishment of innocent victims and their children. But the larger point is that Chinese administration of Xinjiang is not some new phenomenon. Chinese governments, ethnic Chinese, and Turkic central Asian peoples have coexisted in the region over two-plus millennia. And unlike the case of Ukraine and Russia's long past, China hasn't signed a treaty recognizing the sovereignty of Xinjiang as an independent nation nor promised never to attack in exchange for Xinjiang handing over all Chinese nuclear weapons previously stationed in the area. Xinjiang has also been part of China longer than, say, the United States has existed, and even going back to the time of ancient Rome (not just the empire but even the Roman republic), something westerners should keep in mind when jumping to conclusions that China somehow just “invaded” Xinjiang in the 21st century. Once again the Economics Correspondent feels it necessary to repeat he's not condoning China’s heavy-handed tactics in Xinjiang. His point is to cast some light on how far Chinese administration of the region goes back in history: beginning with the Han dynasty. Next column we'll continue with the Tang and maybe the Song dynasty.

Tuesday, October 3, 2023

A Political and Economic History of China, Part 1: The Qin Dynasty

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7 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff earlier hinted at starting a new series on Marxism and communism which he now sees being postponed into 2024. However as consolation the Correspondent will instead begin a series of articles on a subject somewhat linked to Marxism and communism anyway: a glancing history of China. Although the focus of China will shift to economics (with a heavy dose of communism) soon enough, much of the early content will be standard history starting with today’s look at one of China’s early and most important dynasties.

China's first emperor: Qin Shi Huang

Most Americans are aware that China has the world’s longest continuous history stretching back thousands of years. We’ve also heard of the many Chinese dynasties whose names are easy to lose track of and easily confused with one another.

The Economics Correspondent will eventually focus on China’s more recent dynasties (“recent” being a relative term, in the Chinese context meaning about 1271 to 1911), but it’s important for even the casual student of Chinese history to read about the momentous Qin dynasty (pronounced “chin”).

Note: Communist China’s system of romanizing its written characters for western readers, called pinyin, differs from the older Wade-Giles system still used in Taiwan. Under pinyin, the letter “q” is pronounced like “ch” in English. Despite both this counterintuitive use of the letter q and the Economics Correspondent’s dislike of communist regimes in general, two-plus decades of reading pinyin has led him to the easy conclusion that communist pinyin is nevertheless a better and more logical system of romanization than the older Wade-Giles. All romanization in his posts will use pinyin.


The Qin dynasty only lasted 15 years, from 221 BC to 206 BC. Yet despite its short duration the Qin’s importance in Chinese history is immeasurable as it shaped the country’s future for thousands of years to come.

Prior to the Qin, China was broken up into 100 small kingdoms that frequently fought one another in the “Warring States” period. Over the course of 250 years the warring states slowly consolidated into smaller numbers through conquest and alliances, settling into about seven major kingdoms by the beginning of the third century BC.

One of these kingdoms was Qin, and its young prince grew to be obsessively focused on annexing the other six into a single unified empire. Once he took the throne “Qin Wang” (literally “Qin King,” or the “King of Qin”) warred on some of his neighbors, signed treaties with others, and sometimes entered into alliances just to renege and invade when his allies were momentarily weak. Qin Wang was ruthless and didn’t hesitate to order atrocities that would make modern communists look like spiritual brothers—the obvious difference being such behavior was par for the course in 221 BC but considered barbaric in the 20th and 21st centuries.

Further aiding the King of Qin was the fact that his kingdom was furthest west of the seven, located around the modern city of Xi’an (pronounced “shee-ahn,” the “x” in pinyin being pronounced “sh”) with mountains and barren deserts behind him. Thus, unlike his rivals Qin didn’t have to worry about multiple enemies on his border or having to fight multifront wars.

(A map of the seven warring kingdoms can be found below)

Eventually Qin had whittled down his resistance to just two or three remaining kingdoms for whom the situation was looking increasingly bleak. So in a timeless story taught to all grade schoolers in China, the Kingdom of Yan sent an “emissary” named Jing Ke—who was really an expert assassin—to be received in the court of the Qin king. Jing Ke (pronounced “jing kuh”) brought and slowly unscrolled a map of Yan to entrance the Qin king into distraction, for hidden in the center of the scroll was a dagger which he pulled out and attempted to take the king’s life with.

The assassin obviously failed and Qin took his wrath out on Yan pretty much how he had originally planned anyway: invasion, brutal repression, and more atrocities. Jing Ke just gave him an easy pretext. 

Once the forced unification of the warring kingdoms was complete, Qin established what historians today consider the unified nation of China although its geographic size in 221 BC was much smaller than today’s China. Qin ruled his empire with an iron first, tolerated zero criticism, and in one famous example burned classic Confucian works along with poetry, history, and philosophy, right before burying 460 scholars alive.

In a tangential connection to the modern Chinese Communist Party (with more in just a moment) Mao Zedong boasted in 1958 of his own intolerance and persecution of dissenting intellectuals:

“He buried 460 scholars alive; we have buried forty-six thousand scholars alive... You [intellectuals] revile us for being Qin Shi Huangs. You are wrong. We have surpassed Qin Shi Huang a hundredfold. When you berate us for imitating his despotism, we are happy to agree! Your mistake was that you did not say so enough.”

-Mao Zedong, CCP Eighth Party Congress speech

But back to the Qin dynasty, instead of settling for the title of Qin Wang or “King of Qin,” the victorious king promoted himself to “Huangdi” (pronounced hwahng-dee, or “emperor"), a title that was bestowed upon over 550 emperors for China’s next 2,000+ years of dynastic rule. Today if you mention the name “Qin Shi Huang” to any Chinese they’ll know instantly which superstar of their history books you are referring to: the Qin emperor.

By the way, Chinese call their own country “zhongguo” (pronounced zhuhng gwoh, or “middle kingdom”), but the western names of China—China in English, China (“chee-nah”) in Spanish, or “Chine” in French—all originate from Emperor Qin’s name.

Meanwhile for all his cruelty and ruthlessness, Qin did go about uniting the new country with a common currency, shared weights and measures, an extensive road network tying it all together, and other internal improvements. He also joined the many separate northern barriers that had been constructed by smaller states going back to the 5th century BC into a single unified wall known today as the Great Wall. Historians estimate Qin Shi Huang sent 800,000 people to construct the wall (about 20% of the population) of whom half died during the project. Hence to most Chinese Qin Shi Huang is still a semi-revered figure responsible for giving them the great nation of China, even as most are aware of his cruel exploits.

Unfortunately, Qin wasn’t satisfied with the idea of mortality and sent his advisors to the edges of his empire to find an elixir of eternal life. Even more unfortunately (for him) they advised drinking small, regular doses of mercury to extend life which of course had the opposite effect. Qin died prematurely at the age of 49, buried in a secret underground tomb 10 miles east of the modern city of Xi’an and protected by the thousands of Terracotta warriors we regularly see in photographs.

After Qin Shi Huang’s death his son, nephew, and senior officials bickered and fought for power, leading to the collapse of the dynasty after only 15 years. It was overthrown by the Han dynasty that survived much longer—over 400 years—and contains what’s considered one of China’s handful of imperial golden ages.

But despite its short life, the Qin is a vitally important part of Chinese history as it marks the bloody birth of a unified nation that we know today as the 2,000+ year old China.


And is there a communist connection? You bet there is.

Normal, orthodox Marxism preaches that life before communism is always horrible, denoted by slavery, feudalism, exploitative capitalism, constant war, imperialism, poverty and misery. Once socialism and communism arrive, Marxists say, the world transforms into a paradise of wealth and superabundance in contrast to the subhuman conditions of all socioeconomic systems that came before it including imperial monarchies and dynasties.

Consistent with Marx’s teachings, whenever communists have seized power they have typically commandeered the press and the schools which in turn pump out endless propaganda about not only how much richer their subjects are now than those starving in the capitalist countries, but also how much better off they are than under the criminal/corrupt rulers of pre-communist days.

But China is somewhat of an exception.

Instead of following the standard Marxist playbook and bashing Qin Shi Huang as an oppressive tyrant who brought misery and suffering to the pre-communist masses, the CCP somewhat reveres him in its propaganda and lectures the Chinese people to pay their respects to him. The Correspondent’s own cousin in Hong Kong tells him when visiting Qin’s burial site and the Terracotta warriors, the government’s order is “take off your hat and pay respects to the emperor,” hardly the kind of attitude one would expect from communists towards a hell on earth pre-Marxism despot.

So why the unusual deference to the Qin emperor? As is usually the case with the CCP the motivations are political.

As most Cautious Rockers have read, the CCP is always worried about losing power—as it should be. Many dynasties have fallen in the centuries before Mao established the CCP dynasty, often violently. And as is typical with most communist regimes, the CCP protects its power by censoring speech, controlling the press, pushing its political agenda in schools, and employing harsh and dictatorial measures to maintain its political dominance—usually in the name of “preserving stability.”

Hence the Qin emperor makes a useful historical case to rationalize the CCP’s methods. For Qin also stifled speech, controlled his third century BC version of the press, and resorted to brutal methods to gain and keep power. But in return (the CCP says) he led China out of the unstable, 250-year long Warring States period and unified the glorious nation of China we all enjoy today, so it was all worth it.

Per the CCP party line Qin was cruel, but he was strong and 3rd century BC Chinese were better off, even lucky, having been ruled by him. Likewise the CCP can be harsh sometimes (this is still the CCP talking here), but China needs a tough government that crosses the line in order to build a strong nation and preserve stability too.

So don’t fight us, and don’t talk back.

Throughout future articles this theme will repeat itself, with the Communist Party selectively employing “exceptions” to standard Marxist historical theory whenever it proves expedient to serve its own ends.

ps. For those who wish to see a cinematic and overly sympathetic portrayal of the Qin emperor (approved by the Chinese government of course), the Correspondent can still recommend the 1998 Chinese film production “The Emperor and the Assassin.” Although it’s a bit overly melodramatic at times and an epic 2 hours 40 minutes, it’s nevertheless an entertaining and (at the time) high budget telling of both the Qin conquest of the warring kingdoms and the famous tale of the attempt on Qin Shi Huang’s life. Anyone who watches it will get a taste of what every Chinese child is taught in school.

Map of China, 260 BC.

"Free Versus Regulated Banking" now available in paperback on Amazon

Click here to read the original Cautious Optimism Facebook post with comments

The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff has a new book out on Amazon: Free Versus Regulated Banking: Three Centuries of Crisis and Stability in Great Britain and North America for the General Reader.

For those new to CO or who missed it, nearly three years ago the Economics Correspondent began a series of articles on banking crises. What started as a few posts grew to thirty-five on a general history of banking, bank regulations, and financial crises in Great Britain, the United States, and Canada.

The conclusion? The origins of virtually every systemic banking crisis in history can be traced back to a central bank and/or some destabilizing government regulation(s), and the Correspondent provides the laws and subsequent financial crises to prove it.  

But who wants to read thirty-five online articles when they can have it all in a convenient paperback anyway? Chapters are short and written in non-academic style with illustrations. Also 313 pages including endnotes, sources, and three bonus chapters on the pivotal role of 1920's banking regulations in starting the Great Depression. 

An added bonus is any reader with questions gets direct access to the author through comments on Cautious Optimism Economics Correspondent posts.

A Kindle edition is in the works, and for those who might object to patronizing Amazon let us know if you’re interested in having the book also placed on Barnes and Noble’s website.


1. Introduction and Orthodoxy
2. British Parliament and the Bank of England
3. The Bank of England: Post-Napoleonic Reforms and Peel’s Act
4. The Bank of England: Bagehot’s Dictum and Stability Achieved
5. Addendum: Do Modern Central Bankers Really Abide by Bagehot’s Dictum?
6. Scotland’s Free Banking Era, Part 1
7. Scotland’s Free Banking Era, Part 2
8. Scotland’s Free Banking Era, Part 3
9. Scotland’s Free Banking Era, Part 4
10. Introduction to the United States and Canada
11. The United States: Crippled by Unit Banking Regulations, Part 1
12. The United States: Crippled by Unit Banking Regulations, Part 2
13. The United States: Crippled by Unit Banking Regulations, Part 3
14. The First Bank of the United States
15. The First Bank of the United States and the Revolutionary War Debt
16. The First Bank of the United States and the Panic of 1792
17. The First Bank of the United States and the Panic of 1797
18. The Second Bank of the United States and the Panic of 1819, Part 1
19. The Second Bank of the United States and the Panic of 1819, Part 2
20. Andrew Jackson, Nicholas Biddle, and the Bank War
21. The American Panic of 1837
22. The American “Free Banking Era” of 1837-1862
23. The U.S. National Banking System of 1863-1914, Part 1
24. The U.S. National Banking System of 1863-1914, Part 2
25. The U.S. National Banking System and the Panic of 1893
26. The Panic of 1893 Retires a Banker Conspiracy Theory
27. A Glancing History of Canadian Banking
28. Canada’s Free Banking Era: Deregulation and Stability
29. Did Canadian Free Banking Have Any Regulations? Part 1
30. Did Canadian Free Banking Have Any Regulations? Part 2
31. Present-Day Criticism and the Post-Keynesian School, Part 1
32. Present-Day Criticism and the Post-Keynesian School, Part 2
33. Present-Day Praise and Disagreement
34. Why Was the Bank of Canada Established?
35. Canada’s Post-1935 Success and the USA’s Failures
36. Did Canada’s Glass-Steagall Safeguard its Banks in 2008?
37. What Does Silicon Valley Bank’s Collapse Tell Us About Depositor Losses Under Canadian Free Banking?
38. What Really Started the Great Depression? Part 1
39. What Really Started the Great Depression? Part 2
40. What Really Started the Great Depression? Part 3
Sources and Credits