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Monies, Markets, and Finance in China and East Asia, 1600-1900: Local, Regional, National, and International Dimensions - Research Framework

1. Scope of the research project

2. Key areas of research and their relevance

The individual studies that will be undertaken within this research project share at least one, if not several, of the spatial, temporal, structural, functional, or perceptional perspectives described below. It is by a combination of factual history research, analysis of both official and private rhetoric, the use of multidisciplinary approaches, and the adoption of inter-civilisational and intercultural comparisons that the research group aspires to throw new light on the history of money and finance in China and East Asia during the early modern period.

Monies, markets, finance and the emerging world system: Knowledge about developments in the fields of monies, markets, and finance is not only helpful for a better understanding of the internal state of the Chinese empire, but also for that of its external relations. It is one main target of this project to take into account the degree of China's dependence on the import of monetary metals, especially silver from the New World, Europe, and Japan, and copper from Japan. Some historians have argued that silver was the first real global commercial flow to take place within an emerging world system, and that the export of silver to China was one of the motors that drove this global trade. It is also often stressed that China's economic development became more and more dependent on the external silver supply, and that a dearth of silver bullion had deflationary impacts, with negative consequences for both state and society. Other authors, however, have emphasized that the impact of the international silver on the Chinese economy has been overestimated and the influence of other factors underrated. Based on available data of international bullion flow (silver and gold), prices, and monetary exchange ratios between silver bullion and copper coin, especially von Glahn showed for the case of the Chinese "seventeenth-century crisis" that the political (fall of the Ming, 1644) and/or economic developments (Kangxi depression, 1660-1690) cannot be explained in terms of a dwindling silver supply and its adverse consequences on economy and society, but can be better understood against the background of a subsistence crisis. This crisis led to a drop in both rural, industrial, and commercial activities and to deflation, encouraging those who had money to hold on to it and consequently resulting not only in a dearth of monetary silver, but also of copper cash. Rather than exclusively stressing the aspect of supply of money and monetary metals, the dimension of monetary demand of a given economy should be taken into consideration. In von Glahn's view, silver imports to China therefore rather reflected a sharp increase in the demand for money than being simply a mechanism of international bullion flow for offsetting trade imbalances (von Glahn 1996a).

Von Glahn also emphasized that copper cash, the other monetary medium, has been underestimated so far, and that it played a much more important role in the commercial economy than is usually realized. A proper evaluation of the copper cash currency would make it necessary not only to pay due attention to the supply side, but also to the demand driven by a growing economy and intensified commercial activities (von Glahn 1996: 252-257). The question of the relative importance of the silver and copper supplies, the extent of the circulation and flows of silver bullion and copper cash, and their effects on state, economy, and society in the late Chinese imperial period is, however, far from being resolved. Flynn and Giraldez (2002: 408n30), for instance, insist on the importance of the silver currency in China and contend "that Chinese demand for silver must have risen dramatically during the eighteenth century, although not as dramatically as would have been the case had copper monies not become so readily available." These two authors also identified two Chinese silver cycles (1540-1640, 1700-1750) of various length and different arbitrage rates, directing our attention not only to the quantitative dimension of silver imports, but especially to the profit rates derived from shipping silver to China. In contrast to Andre Gunder Frank, they argue that China's absorptions, over centuries, of huge quantities of silver did not result in an enrichment of China, but actually involved an immense drain of wealth from Chinese society in exchange. They also hold that not only the silver cycles, but also the porcelain, silk, tea, opium and other cycles, with their arbitrage rates, have to be taken into account in order to be able to recognize the various components of the vast, complex and organic world system. But while global interconnections started to alter the underlying characteristics of specific regions, these global connections simultaneously depended on regional distinctiveness (Flynn and Giraldez 2002: 402, 419, 420). In spite of certain differences in the evaluation of the importance of silver and copper and their effects on the Chinese economy, there can be no doubt that the hunger for these metals in China was a pivotal element for the development of both the intra-Asian and the world trade system.

By taking into account von Glahn's structural and functional approach as well as the systemic results of Flynn and Geraldez, this project intends to carry on this line of research. However, while not neglecting the silver question, we will concentrate instead on the copper currency sector. This requires the establishment of a firm quantitative basis indicating the amounts of mint metals produced, imported and transported, the number of cash coins cast by each individual mint each year, numismatic indicators for the quality of the coins, and the spatial and temporal variations of the exchange rate between copper cash, silver bullion and imported foreign silver coins on the Chinese domestic market. Moreover, these data have to be correlated with prices for rice and commodities, and with wages in order to arrive at a weighted and multi-dimensional evaluation of the various factors at play. In contrast to von Glahn's research focusing on the period between 1000 and 1700, this project will, however, mainly deal with the seventeenth to the late nineteenth centuries. Moreover, given the fact that the supply of mint metals was crucial in upholding the output of the Chinese mints and that mining and transport of mint metals was promoted, organized and heavily subsidized by the state, von Glahn's conclusion about the triumph of the market in the monetary field has to be qualified. Apart from his relative underestimation of the role of the state in providing a sufficient amount of monetary metals, one may also doubt von Glahn's statement that classical Chinese monetary thought - and he himself - believed that the value of copper coins was a function of its quantity rather than its quality or intrinsic value (von Glahn 1996, p. 251, 253). This is contradicted by the numerous changes in the official alloy of coins and the discussions in reaction to cycles of illegal melting down of coin of high intrinsic value for the production of brass utensils and counterfeit coins. Moreover, only by taking into account the state expenditures for mining monetary metals and transporting them to the various mints will we be able to properly evaluate the total costs for the state of casting and distributing coins.

Monies, markets, and finance in an East Asian perspective: Monies, markets and finance in late imperial China not only had a global impact, but - more narrowly - also influenced other East Asian empires and regions. This influence was felt in monetary policy and thought, but also in real, physical terms, as Chinese cash coins were - more illegally than legally - exported to quite distant countries, such as Indonesia, to serve as legal tender there. In the reverse direction, cash from Vietnam, Korea, or Japan, together with silver dollars from Mexico, were used as means of exchange in many Chinese regions in various periods. The East Asian dimension of monetary circuits and policies also becomes evident when taking into account the particular hunger for monetary metals of the highly commercialised and monetarised economy of late imperial China. Thus silver was not only imported from the New World and Europe, but also from Japan. Intra-Asian competition existed especially with regard to the export of Japanese copper, a metal in substantial demand in China, Korea and the South Asian markets (Shimada Ryuto 2003).

So far, American and Japanese economic historians have mainly concentrated on price history, especially grain prices, of sixteenth to nineteenth century China, and not so much - apart from some notable exceptions - on the history of money and finance. Moreover, the history of money, finance and other related areas in China, Japan, and Korea has been investigated almost exclusively from a national perspective. It is the aim of this project to break up these national boundaries and to make an attempt at an integral and comprehensive investigation of these sectors. By this approach a research focus will be created that not only will be international in its forms of collaboration and outlook, but will also deal with a historical topic of international, especially East Asian, dimensions.

Monies, markets, finance and the fate of traditional East Asian states: The importance of the history of monies, markets, and finance for the fate of East Asian states is evident, if we, for instance, consider the fact that the outbreak of the First Opium War (1839-1842) had one of its roots in the monetary and fiscal turbulence in the 1830s and 1840s. The dearth of silver money (and thus the rise in value of silver vis-a-vis cash coins) had its origin probably in four intersecting trends: Chinese imports of opium, which were paid for in silver; economic depression in Europe, with a corresponding loss of foreign markets for Chinese tea and silk; a decline in world silver production; and a rise in the value of silver relative to gold, eliminating the incentive to export silver to China (von Glahn 1996: 256). The net-drain of silver from China caused inflationary effects which not only had a negative influence on industry, handicrafts, and commerce, but also on the income and the tax payments of peasant households, i.e., by far the largest part of the Chinese population. The reasons and effects of this monetary and economic crisis deserve further investigation.

Another example showing the relevance of the topic is the limited extractive power of the late imperial Chinese state, which left the government with insufficient means for building up or modernizing the infrastructure, handling subsistence crises, and financing warfare. Only by establishing a solid basis of knowledge of the history of monies, markets, and finance will we be able to contribute to a better understanding of the basic economic, social, and institutional structures and problems in late imperial China, or be able to compare it with the structures, developments and events in Japan and Korea.

Monies, markets, finance and the concept of the modern nation-state: A further main target of this project is to highlight the importance of the monetary economy and public finance for the construction of the concept of a national state. The general economic, social, political and cultural crises in nineteenth-century China resulted in a new distribution and perception of the respective roles of state institutions and social elite in the management of subsistence and military crises and public projects. This also triggered in the newly-emerging news media demands for more transparency of state finances; in the view of the critics these should become "public" finances. Another facet of this development is the increasingly intensive perception and adoption of foreign methods in monetary policy as well as in private and public finance. Imitation of Western and Japanese financial and monetary institutions was deliberate and aimed at solving problems hindering modernization. It can, however, also be shown that in the case of China the implementation of foreign ideas was often not as effective as was intended.

In taking the aspect of the modern nation-state into account, this project intends to bridge the divide introduced by a periodisation that separates pre-modern conditions in East Asia from the onset of modernity around 1850. We believe this separation to be unhelpful for our project, which is both interested in reconstructing "pre-modern" conditions as an aim in itself (i.e. not reducing the period 1600-1850 to a pre-history of modernity or focusing on "sprouts of capitalism" and factors inhibiting capitalist development) and in gaining a better understanding of the dynamics involved in the modernization and Westernisation that set in in the nineteenth century.

Organisational capacity of the state: A substantial number of projects are concerned with the organisational capacity and flexibility of East Asian states in dealing with macro-economic challenges, especially in a period like the nineteenth century, which was beset by an increasingly complex political, economic and social environment, both internally and externally. Therefore, these projects will explore the historical development of the state's monetary and financial measures and adjustments. In addition, they will highlight the shares of tradition and innovation in the composition of these measures and adjustments. For instance, scholarly opinions on the performance of the late imperial Chinese state vary considerably. Some historians come to the conclusion that the efficiency of the imperial bureaucracy declined drastically during the nineteenth century, while others hold that in the very same century Qing officials still showed much capability and flexibility when dealing with complex challenges (Leonard 1996: 252-253). Monetary policy and finance are ideal subjects for testing the validity of these divergent interpretations. By adopting a structural and typological approach, the results of each of these investigations will provide a solid basis for cross-civilisational comparisons between the conditions in China, Japan, Korea, and, partly, also in the West.

State and society: The sectors of money, mining and finance in China were all characterised by systems of co-optation - but also of competition - between the state and private individuals or groups, mostly merchants or gentry. The study of the monetary system is particularly suitable for this purpose, not only because the bimetallic system itself was marked by the dichotomy of a state monopoly in copper cash production and largely private control in the silver bullion sector, but also because in the copper cash sector the state monopoly was threatened by market forces aspiring to a system of free coinage. Other examples are the mining sector, the transport of mint metal in the interior, and the import of copper from Japan, which were characterized by various forms of cooperation and co-optation between state and private groups. These cooperative, and sometimes competitive, arrangements not only influenced commercial performance, but often had also a substantial impact on local and regional resources.

Given the high commercial and fiscal value of silver and copper, promotion and control of mining and trade as well as improvements in mining and smelting technologies became a crucial issue for shogunal and domain authorities in Japan. As in the case of Chinese mint metal mining, various forms of cooperation, co-optation and coercion existed in Japan between political authorities on the one hand and mine masters, smelters and merchants on the other. A comparison of the variety of structures existing, for instance, in the mining sectors of China and Japan, is an important objective, as it will shed new light on differences in economic, social, and political organization as well as cultural self-perception in the late imperial period. Juxtaposing the eighteenth and the nineteenth centuries will, moreover, help elucidating shifts and changes in the relationship between state and society and their importance for the process of nation-building.

Monies, markets, and finance from regional and local perspectives: In spite of the international or even global context of bullion and mint metal supply in the late imperial period, the importance of regional and local contexts of daily transactions should not be underestimated. As is stressed by Kuroda Akinobu clear differences existed between the monetary systems of China, Japan and Korea from the seventeenth to the nineteenth centuries despite their geographical closeness and common historical background. One of the key questions in comparing these systems is whether we are dealing with substitutive or complementary monies and how these types of systems influenced the structure of the mutual dependency between monies, markets, and public finance. Such a comparison between the monetary systems of the three East Asian states has to be based on an analysis of the development of the respective currency usages, price movements, exchange ratios, as well as on the concepts of currency circuits and multiple markets (Kuroda Akinobu 2000 and 2003). Contrasting the structural characteristics in monies, markets and finance will help us not only to more fully understand the differing historical courses in these three countries, but also to appreciate the peculiarity of early modern East Asia from a the global perspective.

Perceptions of money, wealth, and poverty: In order to attain a more complete picture on the impact of monies, markets and finance on localities and regions and the influence these factors exerted on the mentalities of people outside the official circles, the discourses in a variety of literary genres will be analysed for correlating them with monetary and financial developments and as a contrast to officially promoted statements. Using information from fiction, for instance, may provide us with insights into the mentalities of members of the society otherwise not present in the official literature or state documents. Fiction, short stories and other types of literature may also provide data and descriptions of monetary usages, market conditions, and financial customs unavailable in other types of sources. In addition they will help us to differentiate more clearly between the more official types of discourse and that of private strata of society as well as between proponents of "realistic" ideas and those of "radical" and "euphoric" proposals (Metzger 1973, pp. 74-80). Correlations between religious beliefs and cults on the one hand and the development of monetary and economic conditions have been pointed out in an article by von Glahn (1991) on the history of the Wutong cult. One of his findings was that the ambiguous and unpredictable Wutong god was replaced by more civilized and domesticated forms of deities both as a result of more settled conditions in the monetary domain and prohibitions and campaigns initiated and carried out by state officials.

Apart from dealing with notions of money, wealth, and poverty from empire-specific or intra-East Asian points of view, the project will also investigate relevant cross-civilisational perceptions both in East Asian countries and in the West. This is necessary because the emergence of a world system not only was a matter of economic, social, and political effects, but manifested itself also in the realm of thought and mentalities which by themselves could shape actions of statesmen, administrators, merchants, and the population in general.


4. Approaches and methods

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