Introduction

Schools of economic thought become popular or obsolete from time to time, much like fashion, but David Ricardo’s formulation of land, labor and capital wears well. Now known as “factors of production”, land, labor and capital are identified by Ricardo as crucial elements determining the value of produce.1 An inquiry into one or all of these three “factors of production” will shed important light on how an economy works and how a society is organized. Working from this assumption, I study the salt certificate in the Ming dynasty. I tell a story of the accidental rise and the unintended fall of a public capital market in Ming China, in the form of speculation in salt certificates, between the early sixteenth century and the year 1617. Salt administration, defined as government control over the production, distribution and consumption of salt, was a long tradition in imperial China. Samuel A. M. Adshead observes that, in a global context, the Chinese salt administration “had the longest and most continuous history”, and “in intellectual sophistication, with its administrative handbooks, technical lan- guages and tradition of expert argument, it had no rival.”2 The rich heritage of Chinese salt administration poses a challenge to researchers. Edmund Worthy shows us that scholars of several generations have contributed to the Western scholarship on the Chinese salt administrations of various dynasties.3 Hans Ulrich Vogel has devoted much effort to exploring the technical and cultural aspects of salt in Chinese history.4 It is the mission of this book to use the same official archives but tell a story beyond salt administration, a story about finan- cial capitalism in Ming China.

1 David Ricardo did not discuss land, labor and capital in terms of “factors of production”, but in terms of rent, wages and profits belonging to landlords, labourers and capitalists, respectively. For a succinct statement of this point, see his On the Principles of Political Economy and Taxation, in Piero Sraffa ed., The Works and Correspondence of David Ricardo (Cambridge: University Press for the Royal Economic Society, 1951–1973), vol. 1, 49. 2 Samuel A. M. Adshead, Salt and Civilization (Basingstoke: Macmillan, 1992), 178, 321. 3 Edmund H. Worthy, “ ‘Regional Control in the Southern Sung Salt Administration’ ”, in John Winthrop Haeger ed., Crisis and Prosperity in Sung China (Tucson: University of Arizona Press, 1975), 101 ff. To Edmund Worthy’s literature review can at least be added Saeki Tomi’s paper, “Economie et Absolutisme dans la Chine Moderne: Le Cas des Marchands de Sel de Yangchow”, trans. Michel Cartier, Revue historique, T. 238, Fasc. 1 (1967), 15–30. 4 Yoshida Tora, Salt Production Techniques in Ancient China: The ‘Aobo Tu’, trans. Hans Ulrich Vogel (Leiden: Brill, 1993); Hans Ulrich Vogel, “Salt and Chinese culture: Some comparative aspects”, paper for the 8th Symposium on Chinese Dietary Culture (Sichuan University, 2003).

The Ming salt certificate was a product of the salt monopoly, known as the “grain-salt exchange” [kaizhongfa]. Along the eastern coastline of China, men from saltern households toiled in the salt fields, producing salt for the government monopoly. The Ming government divided the entire country into salt production and consumption areas; designated consumption areas were supposed to consume salt from particular production areas. Although the government monopolized salt production and supervised salt consumption, it delegated the task of salt transportation in a very peculiar way. The government invited merchants to deliver grain to its frontier garrisons; in return, merchants were given salt certificates with which they could draw salt directly from the salt fields. In essence this grain-salt exchange was a promise the Ming government made to merchants in return for their service in providing grain to soldiers at the borders. The salt certificate therefore was a public debt of grain, denominated in salt, that the government owed merchants. Certainly, the Ming government did not perceive the “grain-salt exchange” in terms of borrowing from the public, but in terms of “salt administration”. However, if one is looking for public credit in early modern China, the salt certificate must constitute the closest evidence. Once created, the salt certificate very quickly deviated from the itinerary the state planned for it and ventured into the unknown. Merchants found the salt certificate more convenient and valuable than real salt, so much so that they did not care to redeem the salt certificate for salt. A speculative market for the salt certificate emerged in the fifteenth century, leading to chronic collapse of the salt administration. Starting from the sixteenth century, the use of silver further fuelled speculation in salt certificates. In the early seventeenth century this phenomenon brought into being a group of powerful financiers, many of whom originated from Huizhou. Regarding the speculative “bubble” as a seri- ous breach of its administration, the Ming government struck a deal with these financiers, granting them a hereditary franchise in the salt trade, but at the same time imposing on them the hereditary obligation of paying a salt certificate tax. This “syndicate system”, established in 1617, effectively terminated the speculation in salt certificates and therefore also abolished the market for public debt. From 1617 onward, and throughout most of the Qing dynasty, the salt certificate was no longer a form of public debt, but a tax receipt. Such is the story of the Ming salt certificate in a nutshell. Before unfolding the story, however, it is important to delineate the theoretical context. To do so, we will have to turn back to capital, one of the three “factors of production”, identified by Ricardo, and briefly review its history in both China and the West. The capital market, in which capital circulates in varying forms (IOUs, notes of debt, securities, bonds, stocks, and futures), has long drawn the attention