Economic Thought in Modern China: A Conversation with Margherita Zanasi

In Economic Thought in Modern China: Market and Consumption, c. 1500–1937 (Cambridge University Press, 2020), Margherita Zanasi skilfully marshals a wide range of primary sources and secondary literature in several languages to take readers on a fascinating journey through several hundred years of Chinese economic thought.

Ghassan Moazzin: Your first book, Saving the Nation: Economic Modernity in Republican China (University of Chicago Press, 2006), focused on economic modernisation during the first half of the twentieth century and particularly the Nanjing Decade (1927–37). What are the connections between your earlier work and your new book?

Margherita Zanasi: Both books are the product of the same desire to explore Chinese economic thought—a still underdeveloped area of study in the field of Chinese history. When I started researching Saving the Nation, I felt that we often rely on Western-centred economic theories and models when examining the Chinese economy because we lack an understanding of how Chinese leaders and reformers perceived the economic conditions of their country. This approach hinders a proper understanding of the policies they implemented because it ignores their real objectives, which are rooted in distinctive local circumstances. In this vein, Saving the Nation explores the domestic debate in the 1930s on economic nation-building, revealing the extent to which it was dominated by anti-imperialist objectives. While industrialisation was a commonly recognised priority, different views on what kind of industrial growth would best serve these objectives remained a contentious issue, creating momentous political divisions. The economic nation-building strategies implemented by the Republican government, therefore, followed a distinctive logic in pursuit of goals that did not necessarily adhere to Western theories of economic development.

Writing Saving the Nation inspired me to expand my research further into Chinese economic thought. I decided to focus my next book on the ideas of market and consumption because changes in the perception of those ideas in late eighteenth-century Europe are considered to be at the very core of economic modernisation. My goal was to examine Chinese thinkers’ understanding of these two economic functions before the arrival of Western economic ideology in the late nineteenth century and then evaluate the changes caused by the impact of Western ideas. It soon became clear, however, that the arrival of Western thought did not mark a significant shift in the Chinese understanding of the roles that market and consumption played in the economy. Their views were quite sophisticated, and the introduction of Western theories did not lead to significant re-conceptualisation, although it led to the adoption of Western economic terminology (as I discuss in Chapter 4). The Opium Wars certainly imposed new political and economic priorities, but the Chinese leaders’ understanding of China’s economic circumstances heavily influenced their reception of Western economic theories.

At this point, I decided to go back in time to trace the origins of the notions of market and consumption circulating during the Qing. I soon realised that they were the product of an evolution in economic thought that had started with the beginning of the Commercial Revolution (Song Dynasty, 960–1279) as Chinese thinkers observed the changing conditions in the economy of the empire brought about by the new high level of commercialisation—something I discuss in Chapters 1 and 2. Beginning in this period, Chinese scholars formulated theories of the self-regulating market (Song) and of the positive effect of luxury consumption on the economy (mid-Ming, ca. 1500).

For this reason, I chose to adopt a longue durée approach. This allowed me to trace long-term transformations and highlight the interrelation of, on the one side, evolving economic circumstances and political objectives and, on the other, innovative intellectual interpretations of market and consumption. This interrelation convinced me of one more reason it is important to bring to light Chinese economic thought. Through the Chinese scholars’ commentaries, we can, in fact, acquire a better understanding of the nature and workings of the economy of the empire. The many Ming–Qing writers I researched showed remarkable clarity and pragmatism in observing local circumstances. Despite often using the established philosophical language and tropes, they very rarely used ideological or moralist lenses to interpret what they observed.

GM: Given the long time span the book covers, collecting and assembling the sources for this study must have been especially challenging. Could you talk about the sources you used for the book and how you went about collecting them?

MZ: Finding sources was indeed a challenge. Locating relevant essays and treatises among the large volume of writings produced by many authors in the four centuries covered in the book was a daunting task. Locating commentaries on market and consumption was especially complicated since they tend to be woven within discussions of seemingly unrelated matters and are not neatly organised in dedicated chapters—as might be the case for discussions of taxation and land tenure. Printed collections of primary sources were initially very useful but tended to confine research to a small group of well-known economic thinkers. What really allowed me to understand how widely economic issues were discussed among Chinese scholars at large were electronic databases such as the China Text Project and various collections of primary sources produced by Academia Sinica. I can hardly express my gratitude to those who invested so much time and expertise in creating them. It was through these databases that I was able to discover the importance of economic issues to Chinese scholars who are generally not associated with economic thought. These collections of electronic sources make possible a project like mine that attempts to understand long-term trends on a specific theme through the writings of many thinkers, rather than focusing on one philosopher or a school of thought in a delimited period.

The use of electronic databases brought up two issues. The first was the accuracy of the optical character recognition scanning process and the possibility of mistakes in the online version of documents. It was crucial, therefore, to always go back to the printed version. This proved to be important for reasons beyond just double-checking the accuracy of the texts. Consulting the paper volume of collected essays also allowed for a better understanding of the text’s wider context and, at times, for the discovery of additional relevant passages.

The second challenge of this research method was terminology. Searches in online databases revealed the inadequacy of thinking about Chinese economic ideas in the late-imperial period by using contemporary Western terminology. As I explain in the introduction to the book, searches using the two contemporary terms ‘market’ (市場) and ‘consumption’ (消費) would have yielded very few results. It was important to break down these terms into different concepts that reflected how their functions were conceptualised by Chinese thinkers. For example, to locate late-imperial writings on consumption, I ended up using mostly Chinese characters associated with the ideas of ‘frugality’ and ‘luxury’, indicating two different lifestyles and modes of consumption. Discovering the proper Chinese terminology was a much-needed first step in delinking our understanding of economic thought in late-imperial China from Western economic theories. Above all, it was important for illustrating how distinctive and innovative economic ideas could have been formulated outside contemporary Western-centred terminology.

GM: Economic Thought in Modern China identifies an important shift away from supportive attitudes towards laissez-faire economics and consumption in the nineteenth century. What brought about this change?

MZ: I am reluctant to apply the term laissez-faire economics to late-imperial China, where an increased reliance on the free market and expanded modes of consumption did not automatically translate into a Western-style liberal ideology. These ideas were not inexorably linked to the development of European-style economic liberalism. There is not an inexorable linear development in economic thought that rigidly ties one concept to one political and economic system. This book illustrates that a similar understanding of an economic function can lead to the development of different systems, reflecting circumstances specific to a particular region and historical period. In China, the ideas of a self-regulating market and luxury consumption did not develop into an overarching ideology but rather became tools to be deployed for achieving specific objectives.

For example, as I discuss in Chapter 1, as early as the Song Dynasty—at the beginning of the commercial revolution—Chinese officials observed the market’s new interregional reach and self-regulating power. Based on these observations, they argued that the state could now rely on private merchants to help solve the problem of circulating resources through the empire (a crucial objective for famine prevention and a main concern of the state) or to take over other tasks that had previously been relegated to the imperial administration. With the maturation of the commercial revolution in the mid-Ming period, Chinese scholars and officials came to believe that China was experiencing a new economy of plenty, especially in the Jiangnan region. In this context, luxury consumption no longer appeared to be a waste of limited resources, causing scarcity among the population, but instead represented a positive development contributing to improving the living standards of the people. The idea of an economy of plenty led to a redefinition of luxury consumption and to the idea that it could support economic prosperity. This acceptance of luxury consumption, however, mostly influenced the state’s attitude towards the Jiangnan economy and did not become a fully fledged economic ideology supporting policies to be applied to the entire empire.

GM: You explain that two major interventions the book makes are that it ‘locates in China, rather than in Europe, the earliest formulations of the ideas of a self-regulating market and consumption-driven economy’ and ‘challenges the neoliberal narrative of economic modernization as a march toward increased reliance on an unregulated market’. Could you elaborate on how your book complicates our understanding of the development of global economic thought?

MZ: I first want to emphasise that the argument that the idea of a self-regulating market emerged earlier in China than in Europe is not intended to start a competition over who thought what first. Rather, I intend to illustrate that this idea was not unique to the development of economic liberalism in eighteenth-century Europe. Economic thinkers in other regions and contexts could also develop this concept by observing highly commercialised economies, as was the case in China, where the commercial revolution pre-dated that of Europe.

Going back to your question, we first need to consider what we mean by ‘global economic thought’. In the case of Western economic liberalism, we are talking about an ideology that supported the Western imperialist expansion rather than a set of policies consistently applied by Western countries domestically or in the territories they controlled. Britain, for example, generally departed from liberal economic policies in the colonies. There was never a moment in which an economic theory or model was even close to being ‘global’, apart from when it was imposed by post–World War II developmental agencies such as the International Monetary Fund and the World Bank. In the late nineteenth and early twentieth centuries, economic liberalism might have assumed a global dimension as an ideology of conquest, but its application around the world always was mediated by local circumstances and the reality on the ground—which often made liberal policies impracticable—or was outright ignored. As I discuss in Chapter 4 of my book, in China since the late nineteenth century, domestic priorities influenced the acceptance of newly introduced European economic ideas, indicating the limit of the globalising power of Western economic liberalism. What became global was the adoption of Western economic terminology, which created a language that allowed for conversations on the economy to become understandable globally. If we want to identify a truly global force that shaped the modern period, we must turn to capitalism, which is not directly or exclusively associated with liberalism.

The challenge the Chinese case poses to the Western liberal narrative of development is twofold. First, it challenges the narrative of the Western Europe of the Enlightenment as the only region and cultural environment possessing the unique ability to break with ‘traditional’ (whatever that means) thought. Other regions were similarly innovative, as the Chinese attitude towards market and consumption discussed above demonstrates. This point is already widely accepted in Asian Studies, although still mostly ignored in European and US history.

The second challenge is that posed by the rise of the developmental state to the liberal narrative of development, which posits lack of government intervention as the prerequisite for economic growth—even though we could debate whether neoliberalism really argued for a lack of government intervention, as a more accurate description would be a strictly pro-business lack of intervention in selected areas accompanied by pro-business actions in others. The more statist policies adopted by Chinese leaders in the nineteenth century could be seen as foreshadowing the developmental state of Japan and, after World War II, the Four Little Tigers. This shift was not ideologically inspired but was prompted by observations of changes in the economy, as had been the case for the earlier pro-market shift. In the early nineteenth century, economic decline and the pressure on resources caused by unprecedented population growth generated the idea that China’s age of prosperity was over and the empire was now facing an economy of scarcity. Although Chinese scholars and officials still recognised the crucial role played by the free market in the empire’s economy, they came to believe that the new circumstances required an attempt to make it work in support of the state’s goals in fighting poverty. For example, they envisioned rechannelling the power of demand in support of daily-need goods—while discouraging demand for luxury items—to stimulate the national production of goods essential for improving the living standards of the Chinese population. These schemes went in the opposite direction from the late-Qing and Republican plans that instead focused on developing the industrial production of luxury products (such as tea and silk) destined mostly for export.

In other words, in the changing circumstances of the nineteenth century, letting consumption trends and the market shape production appeared not to serve the objectives of the Chinese State as well as it had done before. This does not mean that Chinese officials turned to outright control over the market or suddenly underestimated the importance of consumption. Rather, they tried to manipulate both to make them serve their goals. In other words, they began to envision the creation of a hybrid economy that anticipated the developmental state of the Republican period.

GM: In your book, you introduce readers to a wide range of Chinese economic thinkers. While we of course encounter well-known figures like Ma Yinchu and Sun Yat-sen, I also learned about many thinkers of whom I had not been aware before. Is there any economic thinker you met in your research whose work and life you found particularly interesting or surprising?

MZ: I indeed found a few surprises. Above all, I had not imagined that scholars of the Kaozheng School of Confucianism, which emerged in the late Ming, had developed such innovative views of the economy. It makes sense, however, considering their preference for practical studies and their critique of the neo-Confucian stress on morality. The Kaozheng scholars’ focus on all things related to state administration and their pragmatic approach would inevitably create an interest in the historically all-important issue of managing the resources of the empire.

While I was aware of the economic thought of Huang Zongxi (黃宗羲) through the work of William T. Rowe (2002), I was surprised by Wang Fuzhi’s study of the early Qing economy. I was particularly intrigued by his characterisation of state control over the market as a form of despotism—a position shared almost a century later by Adam Smith and other early European proponents of economic liberalism. It was not a surprise to find that Wang’s notion of economic despotism varied vastly from that of the liberal economists. Above all, it rested on his understanding of the relationship between the state and China’s ‘natural economy’, which was local in scope and based on small-scale markets. Wang denounced the Qing’s special trade licences—especially monopolies—and price manipulation as hindering the regular working of the ‘natural economy’, which he considered to be the very foundation of the empire. He also criticised the state’s cooperation with big merchants engaged in the silver-based interregional market for extracting resources from local economies due to the unfavourable exchange rate between silver and local copper currencies. Wang’s critique of interregional trade revealed a new economic dynamic brought about by the commercial revolution. His denunciation of monopolies, trade licences, and price manipulation, however, echoed longstanding Confucian concerns about state predatory economic policies dating back to the Debate on Salt and Iron and the debate surrounding Wang Anshi’s policies (which I discuss in Chapter 1). While Wang’s deep-rooted anti-Manchu sentiment did indeed tinge his idea of Qing economic despotism—which he defined as an expression of their ‘barbarian’ nature—ignoring the complex economic views that supported his position would be an oversimplification.

But my favourite character in this book is undoubtedly Lu Ji (陸楫). He personifies the kind of Jiangnan Kaozheng scholar who favoured a free-market economy fuelled by luxury consumption. Like other scholars in his area, he devoted himself to practical studies and decided not to pursue the examination, which required focusing on the neo-Confucian texts criticised by Kaozheng practitioners. A keen observer of the society of his time, Lu Ji brings to life the ‘floating world’ of Hangzhou’s West Lake in his brief but informative treatise ‘A Critique of the Ban on Extravagance’ (禁奢辨), describing lively scenes of leisure and luxury consumption populated with crowds of shoppers, sightseers, and participants in temple fairs. In other words, Lu Ji’s writings were essential to understanding the social, economic, and cultural background of the Jiangnan pro-market thought.

GM: The analysis in your book largely ends with the 1930s but you also hint at continuities beyond that decade. Could you talk about the main implications of your findings for our understanding of economic thought and development in the People’s Republic of China (PRC) since 1949?

MZ: The main implication of highlighting continuities with the PRC period involves complicating the common compartmentalisation of academic disciplines into time bands delineated by political watersheds. It is true that both the 1911 and 1949 revolutions brought dramatic and far-reaching transformations, and I do not object to using them to demarcate the Republican China area of studies. However, this kind of historical demarcation, which prioritises political changes, tends to overshadow other, less visible defining moments of change. My book highlights one of these overshadowed watersheds and its implications for drawing alternative historical time bands. I refer to the nineteenth century as the end of the ‘prosperous age’ (盛世) and the beginning of a new economy of scarcity that plagued China across both the 1911 and the 1949 divides. In other words, the problems that had surfaced in the nineteenth century and led to a shift towards more statist policies continued to impact economic decision-making throughout the Republican and the PRC periods. I am arguing not that the late-Qing, Republican, and PRC governments pursued the same policies—although we do find some similarities—but that they faced similar problems and tried to find solutions for them. Fighting economic scarcity remained a unifying feature for the era spanning the long nineteenth century through the PRC period.

The rural–urban gap is another feature of this proposed new time band in Chinese history crossing over the two revolutions. Today a main concern of the Chinese Communist Government, this gap emerged as an issue worthy of notice as early as the period of the Ming–Qing transition (as I discuss in Chapter 2). We can speculate that the problem originated in the very nature of the ‘prosperous age’, which was fuelled by the growth of a maritime trade that propelled the coastal areas into unprecedented commercialisation and economic growth but left the hinterland behind.

I have recently started a small research project tentatively titled ‘Qinjian jianguo (勤俭建国): Frugality and Nation-Building Across 1949’. In this project, I explore continuities in the deployment of frugality, as a mode of minimal consumption, in the plans for economic development of the Republican and early PRC governments. In both cases, frugality was presented as a solution to overcome China’s economy of scarcity and fight poverty. The promotion of frugal consumption, however, was primarily motivated by the choice to pursue a model of development that prioritised the state-led heavy-industry sector over improving the living standards of the people through a focus on consumer industries. The Republican government’s attempts to promote frugality were hardly successful since it did not possess the PRC’s power for mass mobilisation. The communist state-controlled economy allowed for new and more effective ways of deploying frugality in support of state goals. As frugality campaigns swept the country, the ‘frugal and diligent’ behaviour of the individual became an expression of ardent nationalism and commitment to the revolution, as well as the foundation of a Maoist path to socialist nation-building.

References

Rowe, William T. 2002. Saving the World: Chen Hongmou and Elite Consciousness in Eighteenth-Century China. Stanford, CA: Stanford University Press.