A Tale of Salt & Iron | Eastern North Carolina Now

    Publisher's note: This article appeared on John Hood's daily column in the Carolina Journal, which, because of Author / Publisher Hood, is linked to the John Locke Foundation.

    I spent most of Thursday trying to meet a magazine deadline. On the way home, I re-listened to a lecture series on the history of China - which reminded me of the column I wrote the last time I listened to the series. Back Monday with a fresh DJ.

    RALEIGH - I didn't need to listen to an 18-hour lecture series on the history of China to be reminded of the drawbacks of government monopolies, but it never hurts an argument to discover a new example of its thesis.

    I should say right off the bat that the Teaching Company series in question - From Yao to Mao: 5,000 Years of Chinese History, by Professor Kenneth Hammond of New Mexico State University - is excellent. If you want to understand the complex development of a society that, for much of its history, boasted the most powerful and advanced civilization on Earth, Hammond will at least point you in the right direction.

    Even after 36 lectures, the listener will have only glimpsed the bare outlines of China's story. I had done some reading in the area before but now I've been inspired to study several periods of Chinese history in greater depth. A particular interest was Hammond's account of the rule of Wu-ti, the so-called Martial Emperor of the Han dynasty, whose rule began in 140 B.C.

    I first encountered the story of Wu-ti many years ago while researching an article for Military History magazine on the life of Chang Ch'ien, often called the Chinese Marco Polo. One of the most famous and colorful emperors in the country's history, Wu-ti reorganized the armies of Han China to repel invasion by the horsemen of the steppe, and later to expand Chinese influence into Vietnam, Korea, Burma, and the trade routes of Central Asia. In preparation for the latter conquests, he sent Chang Ch'ien westward to gather intelligence and seek allies and war materiel, including horses.

    While Wu-ti was an impressive leader in many ways, especially during the early years of his reign, he was also influenced by a noxious Chinese school of thought known as Legalism. At the risk of oversimplification, the Legalists rejected both the traditionalism of Confucius and the skepticism of Daoism, arguing instead that emperors should use the absolute power of the state to control the actions of the people for their own good.

    Wu-ti may not have taken Legalism to the extremes that previous adherents had, but he did appear to believe that he should use state power to manage large swaths of his country's economic and social life. Faced with the need to finance his far-flung military campaigns, Wu-ti decided to establish state-run monopolies in salt, iron, and other key commodities, supposedly to prevent private merchants from charging "excessive" prices but in reality to capture more revenue for the state. He even established a government monopoly over the sale of alcohol. Sound familiar?

    While the emperor's generals and personal allies tended to favor his policy, the scholars who traditionally played a significant role in the administration of Chinese government were deeply suspicious of the state engaging in commerce. During the early decades of the Han dynasty, the emperors had mostly maintained a hands-off policy towards the economy, even privatizing a previous state monopoly over the minting of coins. It was during this period that the foundations of the Han state were laid - a state that was a contemporary of the Roman Empire, nearly as extensive, and far richer.

    Not content merely to grumble, the scholars engaged their bureaucratic adversaries in spirited debate about Wu-ti's proliferating state monopolies. Fortunately for history, some of these debates were recorded in a book entitled Discourses on Salt and Iron. Published shortly after the emperor's death, the book presented each side's case.

    In addition to stressing the military value of the goods, the monopolists argued that when private manufacturers and merchants had previously controlled the trade in salt and iron, they had induced too many peasants to abandon agriculture in favor of industrial work, which might change their political loyalties over time. The monopolists further complained that the merchants had been earning profits merely by buying goods where they were abundant and cheap and then selling them where the goods were scarce and expensive - a practice that the emperor's defenders portrayed as crass and wasteful.

    Again, sound familiar?

    The scholars responded that by establishing state monopolies, the government was making it even more likely that both workers and consumers would be taken advantage of. Without competition, they argued, the affected industries would be less efficient and more likely to invite political corruption. The reformist scholars lacked the terms and tools of economic analysis, which wouldn't be invented for 2,000 years, but their knowledge of history and human nature led them to doubt the wisdom of government meddling in the economy.

    They eventually prevailed. Many of Wu-ti's monopolies were dismantled by future Han rulers. It's the kind of story that people who work at think tanks find inspiring - for obvious reasons.

    Hood is president of the John Locke Foundation, which has just published First In Freedom: Transforming Ideas into Consequences for North Carolina. It is available at JohnLockeStore.com.