The Rise of the Nation-State in East and West, and the Birth of Political Economy

1) The Nation-State Aims at Minben, Government for the People

In comparing the civilisations of East and West, the most important historical factor is the forming of the nation-state. The East was two thousand years ahead of the West in forming nation-states. In the Spring and Autumn and Warring States periods, which lasted until the third century BC, nation-states arose in the East. The West spent thousands of years as ancient conquest states and medieval religious states, and saw the birth of the nation-state only after the Peace of Westphalia in 1648. Being ahead in forming nation-states does not mean wisdom develops. Rather, only the direction of knowledge is decided. Philosophy too is a crystallisation of knowledge, never a matter of wisdom. The West’s age of ideology bears this out.

The birth of the nation-state demands, at the level of civilisation, new thought and philosophy. With the birth of the nation-state a philosophical change arises that respects natural philosophy. And minben thought (民本思想), which puts the people at the centre, is born. In a political-economic system minben thought means the economic autonomy of the individual, and this becomes the core of a successful political economy. If a civilisation has within it the fundamentals of minben thought and economic autonomy, centred on natural philosophy, the economy develops; if not, economic development is impossible.

When did the nation-state form in East and West? The West uses the concept of “the nation-state in the modern sense,” that is, “the democratic nation-state.” It must be a state with the democracy that appeared in the West after the Industrial Revolution. Only with a constitution and a system of checks and balances such as the separation of powers does it meet the conditions of a nation-state. In the East the abolition of the traditional dynasties matters above all. The idea is to see China’s 1911 Xinhai Revolution, Japan’s 1868 Meiji Restoration and Korea’s 1897 founding of the Korean Empire as the appearance of the nation-state. It is a view that comes from a Western-centred view of the world and of history.

But by this Western-centred method the civilisations of East and West cannot be compared. In the West the appearance of the nation-state and the establishment of democratic political systems came almost at the same time, in the seventeenth and eighteenth centuries. But in the East the nation-state came about in the fifth to third centuries BC, and democracy in the nineteenth and twentieth centuries.

Minben thought cannot be found in the West before the early modern era. Ancient Greece and Rome were an age of conquest states in which slaves were indispensable. In a system dividing citizens from slaves, minben thought was unnecessary. The Middle Ages were an age of religious states that followed and studied the commands not of human beings but of God, so a naturalist theory of human nature or minben thought was again unnecessary. So in the West before the early modern era, a political-economic philosophy centred on all the human beings within the state, the people, was unnecessary.

In the East, by contrast, the minben thought that arises as a state takes the form of a nation-state came two thousand years ahead of the West.

The appearance of the nation-state brings about a fundamental change in a civilisation’s current of philosophy. This change follows a system of “natural philosophy” for the survival of the state. The nation-state seeks survival not by the commands of leaders such as conquerors or prophets but by a “minben” centred on the nation. It goes through the process of making not revealed religion but a system of natural philosophy the centre of running the state. Survival, that is, the instinct of self-preservation, becomes the state’s first policy.

Kissinger points out that the emergence of the nation-state in the East came some two thousand years before the West:

In China the Warring States period lasted 250 years and came to an end with the unification by the First Emperor of Qin. In that time the feudal states gained autonomy and turned into independent states. The West had a similar experience in the period from the Peace of Westphalia in 1648 to the Second World War: the process in which European states fought to seize the lead within a balance of power.⁴⁰³

The American political scientist Fukuyama also points out that centuries of war between states transform the form of the state, and explains how the nation-state formed in East and West. In the Spring and Autumn and Warring States periods the East had already gone through such centuries of war, and nation-states were born. In the West, more than a thousand years later, centralised nation-states were born through a similar state of war:

In China the nation-states formed amid the constant wars of the Spring and Autumn and Warring States periods… This shows a very interesting situation in comparing East and West… In founding nation-states more than a thousand years later than the East, the West shows very similar results… In China and in Europe alike, the forming of nation-states came from the effort to prepare for war. Through the preparation for war, the lands of feudal lords were gradually integrated into the territory of one state, the power to govern the state was centralised, and modern independent administrative systems were born.⁴⁰⁴

Once nation-states form, there arise a bureaucracy, the administrative system for governing them; political-economic thought for running the domestic economy; and a political ethics of minben for running domestic politics. In the East such a system was already in place in the Warring States period before Christ.

If in the West the nation-state began after the Peace of Westphalia (1648), what form of organisation did the Western states before it have? Greek and Roman times had a system of conquest states. The people of conquered states were slaves. Conquest states such as Greece and Rome were made up of the citizens who formed the state and the slaves they had captured. Sparta had far more slaves than citizens; in Athens slaves were over half; in Rome about a third were slaves. Slaves were supplied by capture in war and plunder, or by purchase in slave markets. Caesar is known in Western history as the hero who conquered Gaul, but in conquering Gaul he amassed wealth by selling countless slaves. Once, on a day his army won a battle, it captured and sold fifty thousand slaves at a stroke, bringing great wealth to Caesar and his legionaries. Aristotle, as we saw earlier, saw slaves as beings like animals, without souls.

In the Greek city conquest states, winning wars and bringing back gold, silver, treasure and slaves was the best way to protect and enlarge the state’s economy. Rome too was a system of conquest states. In a conquest state founded on slavery there was no room for a theory of political economy addressed to all human beings.

After Greek and Roman times the West was for more than a thousand years of the Middle Ages a religious state. Because the Roman papacy held absolute power, religion centred on God, or the papacy, was the centre.⁴⁰⁵ Local lords and kings exercised only limited powers, so political-economic thought addressed to the whole people within a nation-state could not be born. During the Middle Ages Church and state coexisted in the West, but the Church held the upper hand in the system of running the state. The eschatology of revealed religion in particular played a large part.

Until the sixteenth century the history of Western Christianity was, in a word, a history of waiting: their history was waiting for when the end of human history would come, and waiting as that end kept being postponed. Though the specific forms of waiting changed with circumstances, waiting for the end was always the same.⁴⁰⁶ … Luther often said the end would come within a few years, and remarked that it might be this year. And he often said God would bring forward the time of the end for the sake of the elect, explaining that “in the course of time the next hundred years will shrink to ten.”⁴⁰⁷

So only after the Peace of Westphalia could states for the first time be separated from religion and exist as political systems. Nation-states, neither conquest states nor religious states, were born in the West for the first time.

The concept “whose realm, his religion” is an expression supporting the sovereignty of the state’s ruler. It means that whatever the ruler’s view of religion, within the territory he rules the state stands above religion. But this concept became possible only towards the end of the Thirty Years’ War. It became possible because the Germans, in making peace, could establish the principle that religion no longer had any power it could exercise over questions of war and peace.⁴⁰⁸

With the rise of the nation-state the state in the West at last came to think about its future by the mind, not by religious judgements of good and evil, in order to survive. Such a philosophical system becomes independent of the deductive system of command of conquerors or of revealed religion. Then nation-states naturally leave the deductive system of command and follow the inductive system of natural philosophy, which they cannot but discover for themselves.

The thought that what is to come is not inevitable limits at once the power religion would naturally exercise. The concept of the Last Judgement allows only one condition in the choice between good and evil. But the statesman, for the future of the state, must make a moral rather than a religious judgement in choosing not between good and evil but between the worst and the lesser evil. In this respect Richelieu judged foresight the most important thing in running the state, because only with foresight can the statesman avoid the evils that come upon the state. Once evil begins, it becomes harder and harder to avoid.⁴⁰⁹

How is minben thought born? Minben thought, which appeared with the nation-states formed in the Spring and Autumn and Warring States periods, becomes the most important element in the survival of the state, because only by minben can a nation-state survive. Minben thought is the idea that the people matter most to the state, not the guidance of a conquering leader or of revealed religion. From the Spring and Autumn and Warring States periods on, minben thought was written in many expressions: for the people (爲民), protecting the people (保民), shepherding the people (牧民), loving the people (愛民). Mencius had already set out the essence of minben thought in the fourth century BC: “The people are the most precious, the altars of the state come next, and the ruler is the lightest” (Mencius, “Jin Xin, Part Two”). Mencius is one of the philosophers who actively put the importance of the people in the forefront. The reason is simple: minben thought was needed for the “survival” of the state and the people. Even before Mencius, minben was already appearing as a core theme of Eastern natural philosophy in Confucius and in the Daodejing.

In the West minben thought took philosophical root with the eighteenth-century French thinker Rousseau. Before that, the “age of conquest” of Greece and Rome and the medieval “age of ecclesiastical power” went on for thousands of years, and minben could not arise in the West. Only in the seventeenth century were nation-states born in the West that needed minben, and the institutions and models of democracy, which replace leaders democratically, spread to the Western countries in the nineteenth century. The East too imported these institutions and models and adapted to them. In that process the minben thought the East already had played an important part. When the East took in the West’s democratic institutions, the East’s minben thought already existed in its civilisation. “Culture is the mother, institutions her children.” Without the culture, institutions do not take.

Rousseau’s thought centred on the people was an entirely new view in the West. The one deeply impressed by it was the German philosopher Kant. Kant left a record that until he read Rousseau he had not known the importance of “the people.” Western thinkers before Kant lived for more than two thousand years within a Western system of civilisation that valued the conquering leaders of the age of conquest or the religious leaders of the age of ecclesiastical power. But after the Peace of Westphalia in 1648 the bounds of political-ethical thought in the West changed. Only after the appearance of the nation-state did the whole of “the people” become necessary to the survival of the state for the first time in the West, and thinkers arguing for it appeared.

Minben thought did not develop because it is an ideology or philosophical concept that states or democracy naturally value; it arose of itself within the bounds of the founding of the nation-state. When an age of rampant war goes on, for everyone in the state to survive, not the leaders or the nobles but the whole people must strive to defend the state. This conclusion comes not from philosophy or ideology but from the self-preservation instinct of human nature. From this need a system of natural philosophy is at last born.

Minben vs Democracy

“The East formed nation-states two thousand years ahead of the West”: this means that the birth of “minben,” which necessarily follows the forming of the nation-state, came two thousand years earlier in the East than in the West. The claim that minben came earlier does not mean that the system of “democracy” came earlier in the East than in the West. Democracy includes “the peaceful replacement of leaders” by law and institutions. In particular, writing the peaceful replacement of leaders into a constitution and building this aim into a political system that reflects checks and balances came about in the West in the eighteenth century. These are developments the East’s minben did not achieve; all were learned from the West.

In comparing East and West, the birth of “natural philosophy,” “minben” and the “political-economic system” that supports them must be traced not to the appearance of democracy but to the appearance of the “nation-state.” Minben is a political-economic idea developed early in the East. It carries the meaning that the people are the foundation of the state. In the fourth century BC Mencius argued for a theory of dynastic change, the theory of the change of mandate (易姓革命). It was the appearance of the East’s minben thought two thousand years ahead of the divine right of kings, which the West maintained until the age of absolute monarchy in the seventeenth century. The idea that the people are precious and the ruler light (民貴君輕) is a philosophical system holding that only when the people are respected and their lives cared for does political economy develop and the state properly endure and prosper.

Even before Mencius the Book of Documents sets out the idea that the people alone are the root of the state (民惟邦本): the people are the foundation of the state, and only when the people are secure is the country at peace. The meaning that the heart of the people is the heart of Heaven is the idea that the country is stable only when the leader does not go against the people’s will and listens to their voice. The idea that the people alone are the root of the state seems to have been established around the tenth century BC, in the early Zhou. So minben thought such as 民惟邦本 and 民貴君輕 already had long roots in Chinese civilisation before the appearance of nation-states in the Warring States period.

Mencius in particular, amid the continuing wars of the Warring States period, went a step beyond the idea that the people alone are the root of the state and developed it into the idea that the people are precious and the ruler light, arguing for the change of mandate: that an incompetent leader may be replaced. But until the nineteenth century the East could not escape the institution and habit of lifelong rule, in which the leader remains leader until death. When an incompetent leader appeared, the ethical question could only go on: should one keep serving him, or replace him? It was Western democracy that set up, on top of this lifelong rule of more than two thousand years, the revolutionary institution of peacefully replacing leaders. The Glorious Revolution in England and the civil revolution in France in the seventeenth and eighteenth centuries became the occasions for establishing democracy in the West.

The realisation of democracy arose within the West’s philosophical system grounded in the manifest. Some hold that among Western thinkers, in the power struggle between the ecclesiastical authority that had ruled the thousand years of the Middle Ages and newly rising royal power, attention turned to a system of “checks and balances,” and so the foundation on which democracy developed was laid. The view that “realising ideals,” fundamentally changing the world human beings live in, is possible can be seen as what made the launch of democracy possible in the West’s thought of the manifest. In the East’s thought of the unmanifest, one can say, there is a side too realistic to achieve the revolutionary transformation of minben into democracy. That democracy developed in the West can be seen as the difference between the East’s thought grounded in ethics and the West’s civilizational thought grounded in law. In fact the peaceful replacement of leaders in the East became possible only after the nineteenth century, when it imported institutions grounded in the West’s democratic philosophy.

When we compare in this way the starting point of the East’s minben with the starting point of the West’s minben before democracy, we come to understand the gap that necessarily arises in comparing the civilisations of East and West.

In comparing the civilisations of East and West, taking into account the appearance of the nation-state, we set an interval of two thousand years between the thinkers of East and West. In comparing the civilisations of East and West, comparisons between concepts or thinkers such as Daoism vs deism, Confucianism vs natural philosophy, the idea of wuwei (無爲, non-action) vs laissez-faire, Han Feizi vs Machiavelli, and Sunzi’s Art of War vs Clausewitz’s On War show a gap of two thousand years. Daoism, Confucianism, the idea of wuwei, Han Feizi and Sunzi are all figures before Christ, or ideas formed at that time. The Western figures or ideas set against them include deism, natural philosophy, laissez-faire, Machiavelli and Clausewitz, all ideas or figures established in the early modern West. They all follow not the system of revealed religion but that of natural philosophy. Only with their appearance does comparison of the ideas and figures of the systems of natural philosophy of East and West become possible.

In the East the concept of the nation-state is so natural that it is not a concept needing fresh thought. Because the East has lived in nation-states for thousands of years, it is not used to other kinds of state. But, as we saw earlier, the nation-state is a concept the West first began to experience in the early modern era. The ancient Greek and Roman conquest states were states in which many peoples lived together, made up of citizens and all kinds of slaves. For more than a thousand years of the Middle Ages the West divided states around religion, so it was a form in which many peoples lived together within a state.

The Roman pope was deeply involved in running the Christian states, and in the Reformation the states were founded divided into Catholic and Protestant. Within a Catholic state many peoples who believed in Catholicism lived together, and Protestants could not live there. Likewise within a Protestant state many peoples who believed in Protestantism lived, and Catholics could not live there. Through the long wars between Protestants and Catholics in the seventeenth century, this form in the end gave birth, for survival, to states centred on the nation and unrelated to religion. That is, within one state people of the same nation, believing in Catholicism or Protestantism, came to live together. At last, after centuries of war, the nation-state appeared and a new system of running the state was born. Here the West at last established natural philosophy and a political-economic philosophical system of minben.

The founding of nation-states in the West came about in the seventeenth century. Thinkers appeared who called for natural philosophy. Bacon, who stressed natural philosophy and empiricism in the West, belonged to that age: “Man is the servant and interpreter of Nature.” After Bacon, Spinoza went a step further in arguing for natural philosophy. As we saw earlier, he proclaims that God and nature are one. Quesnay of France and Adam Smith of England, who called for a laissez-faire political economy, followed them: “Laissez faire, laissez passer, and the world goes on by itself” became their philosophy. They were inspired by the idea of wuwei in Eastern natural philosophy.

2) Minben Political Economy in the East: Guanzi, Xunzi, Han Feizi, Sima Qian and the Daodejing

The nation-state naturally relies, for its survival, on a minben political-economic philosophy. Western thinkers before the modern era had no nation-states, so they had no need to think about the political-economic thought that arises in nation-states. Only in the seventeenth century were nation-states born in the West, and on this basis the political-economic thought called Physiocracy arose in eighteenth-century France. Then Adam Smith of England came to the fore as a Western political-economic thinker.

Plato and Aristotle of Greece set out theories and philosophies across every field, but hardly a trace of political-economic thought can be found in them. Because they lived in a civilisation of the age of conquest, the “political-economic thought” they conceived was limited to a few views on the question of political ethics of what property human beings ought to have in society. They had no need to take an interest in a political economy addressed to everyone in the state or polis, that is, to “the people.”

But within the nation-state, for survival, concern for all “the people” within the state becomes most important. How to put the people to use in economic activity becomes a grave purpose of the state’s strength and the state’s survival. This is precisely why minben thought must appear. Accordingly political-economic thought began to be born for the first time on the basis of minben thought. In the Warring States period of the sixth to third centuries BC, Eastern thinkers began to set out political-economic thought. For them the most important first step was to establish the view of human nature that underlies political-economic thought: establishing human nature on the basis of natural philosophy. On this basis they went on establishing the core of political-economic philosophy. Let us look at the Guanzi (管子), Xunzi (荀子), Han Feizi (韓非子), Sima Qian’s Records of the Grand Historian (史記), and Laozi’s Daodejing (道德經).

The Guanzi (管子, a book written in the Spring and Autumn and Warring States periods). Guan Zhong (管仲) was a figure of the Spring and Autumn period, before the Warring States, when the feudal system was passing into nation-states. He was the statesman who actually governed the state of Qi for forty years, from 685 to 645 BC. The book that sets out the philosophy of the many people who shared a philosophy like his is the Guanzi (管子). It may well be counted the first book of political economy in East or West. The Guanzi seems to have begun in the Spring and Autumn period, greatly influenced the contending thinkers of the Hundred Schools in the Warring States period, and been edited and arranged in the Warring States period. Among the philosophies written in the Guanzi are many ideas of economic policy towards all the people within the state. The East’s minben differs from the West’s democracy. Western democracy expresses a vision or ideal that human beings must achieve at all costs. The East’s minben is not an ideological idea that every country or individual must fight for. It has, rather, a very realistic goal: for the state and the individual to survive in the Warring States period. That is, it has the very realistic goal of “self-preservation.” It rests on a fundamental realism: one can survive the Warring States period only by building up national strength, and for that one must see the whole people as the most important factor in the state and put them to use. Minben becomes the basis of the nation-state’s philosophy of survival.

When the state is rich, people come from afar. When land is opened to all for cultivation without distinction, people settle. When the granaries are full and the people have enough to eat, they become restrained and modest. When clothing and food are ample, the people know respect and shame. (Guanzi 1:1)⁴¹⁰

This minben thought connects with the idea of wuwei. The leader’s philosophy of embracing people without discrimination is to find its ground in the idea of wuwei, which follows the philosophy of nature.

Do not say, “You are not of our family.” Then those who hear it will not listen to your words. Do not say, “You are not of our district.” Then those who hear it will not follow your orders. Do not say, “You are not of our country.” Then those who hear it will not follow you. Act like the earth. Act like heaven. Earth and heaven single out no one and favour no one. Act like the sun. This is the rule of conduct of a true leader. (Guanzi 1:5)

Guanzi greatly increased the wealth of the state of Qi by making the distribution of salt and iron a state monopoly. And he used it to establish an economic policy of adjusting the amount of coin (money) according to the volume of grain and other goods in circulation. It appears to be the first case of monetary policy used systematically to manage national wealth.⁴¹¹ When grain prices collapsed, Guanzi released money to buy grain and raise the price; when grain prices soared, he sold grain to stabilise them. In emergencies such as famine or war he secured revenue by issuing additional money or selling goods. He used Qi’s gold and money to buy and sell the specialties of Qi and its neighbours, maximising Qi’s gain. Guan Zhong carried out a policy linking fiscal and monetary policy by receiving and paying all taxes and the costs of public works in money rather than in kind. This is explained in the “Light and Heavy” (輕重) chapters of the Guanzi. Guan Zhong’s answer to Duke Huan’s question “Can the prices of all under heaven be stabilised?” was the art of light and heavy. The art of light and heavy (輕重之術) is the principle of the market economy, that when goods are plentiful prices fall and when goods are scarce prices rise, and means pursuing sound management of state finances (理財) by using money within this economic environment.⁴¹² On this basis Guan Zhong made Duke Huan (桓公) of Qi the first of the Five Hegemons of the Spring and Autumn period.⁴¹³

Xunzi (荀子, c. 310–235 BC), in Chapter 10 of his book, “Enriching the State” (富國), explains how the state’s economy should be run, much as Adam Smith’s eighteenth-century Wealth of Nations (國富論) does. In “Enriching the State” Xunzi explains that if the people do not become rich, taxes cannot be collected from them, and if the people are not protected, they cannot be made to work.

To make the state’s economy sound is to make the state’s spending frugal, to make the people rich, and to store the surplus well. Making the state’s spending frugal means cutting the state’s budget, and by running the state well the people can be made rich. When the people become rich, the state’s finances have room to spare.⁴¹⁴

And an especially interesting point is that the concept of the “invisible hand,” which Adam Smith made popular, was explained in a similar way by Xunzi two thousand years earlier: even though each does not make things for himself, the products in the end contribute to the good of the whole. What is interesting is that Adam Smith put forward the Western theory that by the invisible hand “private interest creates the public interest,” whereas Xunzi explains that through “circulation” “each person’s effort” goes on making “a benefit everyone uses”:

Through natural circulation, people come to use many goods from home and abroad without producing them themselves. People who live by the sea use vessels made of wood, and people who live in the mountains consume the products of the sea. Farmers, without working wood or clay themselves, use the goods carpenters and masons make. Likewise craftsmen and those engaged in trade enjoy the many grains farmers produce without making them in the fields themselves (Xunzi 9:12)

Xunzi holds that through circulation everyone comes to use goods all enjoy, and here he voices a view different from Adam Smith’s. He saw circulation as creating the public interest. But Xunzi voices the view that circulation too can be damaged by individual greed.

Human nature and feeling, left unchecked, give birth to disorder and violence; human nature and feeling can be managed by ethics. One must follow fine teachers and principles. (Xunzi 23:1)

He holds that if private interest is left unchecked according to human nature, the public interest is damaged. So he comes to argue that, for the public interest, human nature must be managed by law and ethics.

Han Feizi (韓非子, late third century BC) sets out his philosophy of political-economic thought in his book, the Han Feizi. His philosophy of distinguishing public and private interest stands out in particular: “In ancient times, when Cangjie made the characters, he drew a circle and called it private, and what lay outside the circle he called public. Already then it was known that the private and the public conflict.”

Ministers pursue the public interest rather than private interest when the ruler is wise and able. Ministers cling to private interest rather than pursuing the public interest when the ruler is dull and incapable. (Han Feizi 19, “Shi Xie”)

Han Feizi’s theory of the conflict of private and public interest connects with his philosophy that for the leader who runs the state, shuzhi (術治), governance by statecraft, is one of the essentials:

Laws and administrative measures are the means of removing the ways ministers pursue private interest. When law and administrative measures succeed, the pursuit of private interest vanishes. Private interest is the thread that leads to breaking the law… If the ruler employs ministers according to his personal tastes, the ministers devote themselves not to the public interest but to satisfying the ruler’s tastes (Han Feizi 45:6)

Han Fei explains that the best way for the state to survive is for the people, by their own efforts, to enlarge the wealth of the state. He explains, as the starting point of his political-economic philosophy, that all human effort seeks individual gain, and that the state’s policy must take this as its basis:

When the landowner hires labourers to clear his land and sow seed and gives them food and money, it is not because he loves the labourers, but because giving food and money generously makes the labourers work well. When the labourers do their utmost to clear the land and sow the seed, it is not because they love the landowner, but because if they work hard they will be paid good food and money… In the end every human being takes working for himself as the basis.⁴¹⁵

In these circumstances, he makes clear, the state must keep equality of opportunity and must not pursue equality of outcome:

Individuals are poor basically because they are lazy or spend money recklessly. Conversely, individuals live well basically because they work hard and save money. If the ruler takes from those who live well and gives to the poor, it is the same as taking from those who work hard and save and giving to those who are lazy and spend recklessly. Then the result will be that people get what they want without working hard or saving. (Han Feizi 50:3)

On the ground of the theory of the conflict of public and private interest, Han Fei makes clear that protecting the public interest is the purpose of the state and the leader. Since Han Fei lived at the end of the Warring States period, a bureaucracy was already in place within the nation-state. He explains how leaders and ministers pursue their interests within the bureaucracy. He teaches precisely the core of shuzhi (術治).

The Records of the Grand Historian (史記, around 91 BC) is the history written by Sima Qian, and can be compared with the book of Herodotus, the first historian of the West. The biographies (列傳) of the Records in particular are very like Plutarch’s Lives, in being records of the lives of the heroes of their day in East and West. But the Records hold political-economic thought found nowhere in Herodotus or Plutarch’s Lives. In Sima Qian’s time the forming of nation-states was already complete in the East, and political-economic thought had become as important a factor in the fate of the state as war.

Chapter 69 of the biographies of the Records is titled “The Biographies of the Money-Makers” (貨殖列傳). 貨 means wealth and 殖 means increase. That is, it records why wealth matters, the ways to increase wealth and become rich, and how wealth was used. Here lies Sima Qian’s insight into the human nature that explains political-economic thought. He makes clear that in human nature, gain and wealth are the fundamental reasons that move human beings:

All the people under heaven come gladly, all in pursuit of gain;

all the people under heaven scatter like a crumbling wall, all going after gain. (Records 129:2)

Sima Qian, examining history and the currents of the human heart, perceives that the force moving human beings is in the end governed by their own interest. He held that the situation in which officials, unless made to work for the public interest, pursue private interest lies in the same human nature by which ordinary people pursue gain.

As a rule, when another man’s wealth is ten times one’s own, people slander him; when a hundred times, they fear him; when a thousand times, they do his work; when ten thousand times, they become his slaves. This is the way of all things. (Records 129:29)

Officials twist administrative orders, steal and use seals, and commit crimes, and their aim is to extort money. Farmers, craftsmen, merchants and herders all strive to take more money while doing their work. In the end everyone strives every day to use their ability and skill to take a little more monetary gain. (Records 129:27)

Human nature being so, what the government or leader must never do is “statist greed.” That is, he stresses that the leader must not contend with the people to pursue his own gain.

The best way to run a state is to let the people do what they wish… The worst is for the leaders of the state to compete with the people in pursuit of profit. (Records of the Grand Historian 129-1)

Sima Qian explains that, as Xunzi and Han Feizi declared, and as Quesnay and Adam Smith strove for two thousand years later, basing the running of the national economy on the idea of wuwei (in the West, laissez-faire) is the best way:

So agriculture produces food, the land produces goods and materials of many kinds, those in industry make things, and merchants set these moving in circulation. These things happen of themselves, without the government regulating, forcing, or seizing and doing them instead. The people simply do their utmost, each to take what he wants… They happen of themselves without being asked. That is, they only follow the Dao. (Records 129:3)

He argues that making circulation flow smoothly is the way to revive the economy. This teaches the usefulness not of state intervention but of the market economy.

Goods and money must be allowed to flow naturally, like water (Records 129)

The Daodejing (traditionally the sixth century BC): the Guanzi, Xunzi, Han Feizi, the Records and others draw the great picture of political-economic thought two thousand years ahead of the West. But the classic that explains political-economic philosophy best is Laozi’s Daodejing. In particular it offers political-economic philosophy together with the idea of wuwei, the Daodejing’s guide to conduct. The Guanzi, Xunzi, Han Feizi, the Records and others all share the idea of wuwei, but its source is in the Daodejing. The idea of wuwei is offered on the foundation of understanding human nature and the relationship of human beings and nature. Below is part of the political-economic philosophy stated in the Daodejing.

The people’s livelihood first (Daodejing 53): The court is splendid, but the fields are thick with weeds and the granaries stand empty. Yet on one side they wear silk, carry sharp swords, eat to surfeit, and have wealth to spare. What is this, if not robbery?

Simple laws (Daodejing 57): The more prohibitions and taboos, the poorer the people. The more sharp weapons the people handle, the more disordered the state. The more cunning among people, the more strange things happen. The more laws and orders are flaunted, the more thieves there are.

Small government (Daodejing 58, 75): The simpler the governing, the more it benefits the people. The more complicated the governing, the more it harms the people… The people are hard to govern because those above make too many policies and interfere.

Private initiative (Daodejing 65): A leader who forces his plans on the people is a curse to the state. A leader who does not force his plans on the people is a blessing to the state.

Low taxes (Daodejing 75): The people starve because those above take too much in taxes and spend it only on themselves.

Social balance (Daodejing 77): The Dao of Heaven takes from those who have much and helps those who have nothing. The Dao of man takes from those who have nothing and helps those who have much. Who among leaders can balance the surplus? Only one who understands the Dao.

The integrity of the leader (Daodejing 81): The leader does not seek wealth for himself. He finds his joy in working for others. So the more he gives to others, the richer he becomes.

Let us compare the interest the Daodejing and the Pentateuch of Moses take in political economy. In the Bible it is not easy to find direct mention of political-economic activity. The Bible, completed before nation-states had formed, does give in Exodus, Deuteronomy, Numbers and elsewhere some direct “laws” concerning political-economic activity. For example:

When you take a census of the children of Israel, according to those who are counted among them, then each man shall give a ransom for his soul to Yahweh. (Exodus 30:12)

You shall surely tithe all the increase of your seed, that which comes out of the field year by year. …… At the end of every three years you shall bring all the tithe of your increase in the same year, and shall store it within your gates. The Levite … and the foreigner, the fatherless, and the widow who are within your gates shall come, and shall eat and be satisfied; that Yahweh your God may bless you in all the work of your hand which you do. …… When you come into your neighbour’s vineyard, then you may eat your fill of grapes at your own pleasure; but you shall not put any in your container. When you come into your neighbour’s standing grain, then you may pluck the ears with your hand; but you shall not use a sickle on your neighbour’s standing grain. (Deuteronomy 14:22–29; 23:24–25)

He shall confess his sin which he has done, and he shall make restitution for his guilt in full, and add to it the fifth part of it, and give it to him in respect of whom he has been guilty. (Numbers 5:6–7)

What matters in comparing East and West is that the West’s limited thoughts on political economy all take the form of religious law, that is, of law. Since the God of the West showed no interest in political economy, even these passages on economic activity in the five books of Moses put their emphasis not on political economy but on the character of “law”: things human beings must keep, or be punished for breaking. In the same vein, Greco-Roman culture was built on slavery, and on a tradition and culture that actively promoted a selfishness whose main means were war, conquest and plunder. In letting individual selfishness run free, modern Western political-economic thought resembles the ancient thought of Athens and Rome. It is a state before political-economic thought grounded in minben thought had yet been born.

In the Western Enlightenment the books and philosophies of Eastern thinkers such as Guanzi, Xunzi, Han Fei and Sima Qian had not yet been introduced to the West. In the Enlightenment only the books of Confucianism and Daoism were introduced to the West, and Western thinkers were impressed by them. So the political-economic philosophy of Daoism, together with the idea of wuwei, Daoism’s core principle of conduct, had a decisive influence on the current of Western political-economic thought that began to form at that time. The forming of the nation-state in the end starts the process of overcoming statism.

3) The Rise of the Nation-State in the West: From Mercantilism to Laissez-Faire

The West calls the fifteenth to eighteenth centuries the Age of Discovery. It refers to the age of the West’s conquest of the world. The Western powers began a competition across the whole world for colonies, gold and silver, spices and slaves. As their means they relied mainly on exploration, piracy and seizure. Spain and Portugal, led by the Atlantic and Indian Ocean ventures of Columbus and Vasco da Gama, were the first to succeed. Portugal took the lead, but its population was too small and it was overtaken by Spain. Through the exploits of the so-called conquistadors, such as Cortés (1485–1547) and Pizarro (1471–1541), Spain seized the gold and silver of the Aztec and Inca empires. Conquistador means conqueror in Spanish. Bringing home the vast gold and silver gained from the Americas, Spain rose to become the greatest power in Europe.

England, for its part, concentrated on attacking and seizing the ships that carried Spain’s gold, silver and spices. The famous Drake (1540–1596) is the representative figure. Queen Elizabeth invested in Drake’s piracy, so that in some years she secured about half the royal revenue from it.⁴¹⁶ Drake was an extraordinary figure, active as pirate, explorer, admiral, entrepreneur and politician; he was knighted, and won brilliant distinction in the sea battle against the Spanish Armada in 1588. To the English he was a patriot without equal; to Spain, the most dangerous pirate chief for its ships crossing the Atlantic, with a large bounty on his head.

This competition between Spain and England, with small clashes growing frequent all over the seas, led in the end to full-scale war. In the sea battle fought in the Channel in 1588 (the Battle of Gravelines), very important in Western history, the destruction of the Spanish Armada and the victory of the English navy decided the fates of the two countries.⁴¹⁷

With the development of shipping and the opening of overseas colonies, the European states threw themselves into international trade. They concentrated on pursuing colonies and territorial expansion and increasing national wealth through the management of international trade. This behaviour came to be called “mercantilism” (重商主義). The word mercantilism comes from the Latin mercans, meaning one who trades. Pursuing mercantilist policies, the European powers entered a state of almost unlimited war among states. From the late fifteenth to the eighteenth century, for nearly three hundred years, this worship of mercantilism went on. The idea was to rise as a great power by securing gold and silver in colonies, as Spain had.

The national economic policy they adopted, mercantilism, is not a philosophy with a worldview of promoting commerce to improve the people’s livelihood or of keeping world order. To survive and reign as the strongest state, it took as its most important means of competition conquering others and seizing the goods it needed, or securing national gain through terms of trade favourable to itself. This is mercantilism. The policy is to achieve a trade surplus in international trade by any means, and through it to maximise the state’s wealth, that is, its holdings of gold and silver. Naturally extreme protectionism flourished. Under the banner of protectionism the Western countries put all their strength into achieving trade surpluses. Mercantilist policy is expressed as follows:

We must not import more from abroad than we sell. We must hold to this policy, because if we break it we grow poor and the other side grows rich.⁴¹⁸

So every country carries out policies to maximise exports and minimise imports. And according to this position the European countries compete to secure overseas colonies and to control trade within their empires. Mercantilism came to create the pattern of the Atlantic triangular trade. That is, cotton, sugar, tobacco and the like were exported from the American colonies to Europe; Europe exported manufactured goods made from them, such as textiles and rum distilled from sugarcane, to Africa and other colonies; and Africa exported slaves to the Americas: a trade the European countries led the way in pursuing.

State monopolies and private monopolies became the general pattern of mercantilist policy. So modern economists such as Adam Smith saw mercantilism as a vast economic system in which state power, manufacturers and merchants colluded to harm consumers. In fact the mercantilists were represented by government officials and merchants. In fact merchants held monopolies in domestic markets from which foreign competition was excluded, and took huge profits, at the cost, in the end, of labourers and consumers. And the state could levy high tariffs and monopolise the taxes merchants paid. The mercantilists naturally saw keeping workers tied to low wages as necessary for national wealth and for the survival of the state. They held that giving labourers and the lower classes education, leisure or wages above the minimum would lead the nation into idleness and vice. So at home they actively held down rising wages to raise their competitiveness in trade.

In political-economic terms, the one phenomenon running through both the early policy of colonisation and exploitation and the later policy of protectionism can be expressed as statism. The West’s colonial-mercantilist policy comes down, in political-economic terms, to statism:

Mercantilism reached its peak in Europe in the seventeenth and eighteenth centuries. It was a kind of statism: a system that used economic reasoning full of errors to build imperial power, and gave monopolies or subsidies to groups or individuals the state chose.⁴¹⁹

Pursuing mercantilist policies, the monarchs of each country sought to control the state’s economic and trade policies tightly for their own gain. Of course the monarchs of the time, amid repeated wars and urgent competition, also put first the state’s security and wealth, a rich country and a strong army. At the time there was no distinction between the state and the monarch. Louis XIV is famous for declaring, “I am the state.” There was no distinction between the pretext of serving the state and the pursuit of individual selfishness or greed through statism.

For Western political economy to be freed from these fetters, the founding of the nation-state in the West had to come first. As the nation-state at last began in the West with the Peace of Westphalia in 1648, great change came to Western political economy. The nation-state opened its eyes to a system of thought entirely different from the conquest state, in order to survive. In political economy Western thinkers came to open their eyes to the idea of excluding government interference and securing the economic autonomy of the people to grow the national interest. With this, as the mercantilism of the age of conquest that had ruled the West for three centuries withdrew, laissez-faire at last blossomed in Western political economy.⁴²⁰

The thought that ruled Western political economy in the age of conquest was statism: a way of surviving at a time when monarchy was kept and the survival of the king was identified with the survival of the state. But in the seventeenth and eighteenth centuries, with the introduction of nationalism, the West could no longer rely on statism for the national economy. For survival it attempted bold reform of the state. In this transitional period revolutions broke out often in the West and all kinds of ideas swelled. Above all it had to leave behind the conquest state’s institution of mercantilism. With the launch of nationalism, a new system of thought needed by the nation-state became necessary, for the survival of the nation-state. Eighteenth-century nationalism in the West came to try laissez-faire instead of statism in political economy.

4) Laissez-Faire Drew Inspiration from the Daoist Idea of Wuwei

In the early modern Enlightenment the West was struggling to escape the thorough state control called mercantilism. The first to throw down an intellectual challenge to mercantilism were the French Physiocrats. They came to think that, instead of states competing without limit in conquest and exploitation under the slogan of mercantilism, national strength could be built in another way. They came to argue that the wealth of the state could be increased by making the fullest use of the farmland within their own countries, colonies included, and so raising agricultural production. They came to know that agriculture in the East was achieving high productivity. And they were deeply captivated by the idea of wuwei that formed its background.

Just as Western thinkers came to argue for the economic autonomy of the people, the Eastern idea of wuwei became known in the West. As the philosophy of wuwei, which would exclude artificial interference, government included, was introduced to the West, it came to Western thinkers as a groundbreaking and revolutionary philosophy. The French Physiocrats concentrated on individual autonomy, the core of political-economic philosophy. They spread in the West the idea of laissez-faire, which touches the idea of wuwei. The word “laissez-faire” had been in use among French merchants before them, but some scholars hold that the Physiocrats put the Daoist “idea of wuwei” into the word as they spread it.⁴²¹ Laissez means “let” and faire means “do,” so laissez-faire means “let it be done,” that is, wuwei. In the West laissez-faire arose as a new, revolutionary idea that could replace mercantilism. Adam Smith too came to France, met the Physiocrats and learned it. In introducing this important idea, the English-speaking world made no new word but used the French laissez-faire as it was in English.

Political-economic philosophy is a philosophy that developed in the East with the forming of nation-states far earlier than in the West. The core Daoist idea of wuwei is applied to political-economic philosophy. The idea of wuwei warns against youwei (有爲, purposeful action), and is a political, economic and ethical idea important enough for individuals and leaders to take as their principle of conduct. The idea of wuwei, Daoism’s principle of conduct, carries such important economic content that it was later translated in the West as laissez-faire. The idea of wuwei would minimise human interference; laissez-faire would minimise state interference. The idea of wuwei concerns the whole of human conduct, economics included; laissez-faire is limited to human economic conduct.

The Physiocrats concentrated on how to make state interference small and grow the productive capacity of individuals. The core was how to express that individual effort matters to the economy. Behind it lay a philosophy of growing national wealth by valuing nature and agriculture rather than securing gold and silver through overseas conquest. The problem was how to express and systematise this. At this point the Daoist idea of wuwei greatly influenced the French Physiocratic philosophers. How the Physiocrats spread in the West the new concept of laissez-faire from the idea of wuwei has lately become gradually known through Westerners. The Western philosopher Durant explains the genesis of laissez-faire in his book Our Oriental Heritage.

The French Physiocrats appear to have been influenced by Laozi and Zhuangzi in their doctrine of laissez-faire.⁴²²

At the level of political economy, the French Physiocratic philosophers were captivated by China’s agricultural system, the ethical role of the government that ran it, and the idea of wuwei, the economic philosophy it contained. They bound this into the idea of laissez-faire and made it fashionable in the Western Enlightenment:

A wise leader must know that the essence of governing lies largely in leaving things as they are and doing nothing. This philosophy is inherent in the Eastern Daoist idea of wuwei (無爲). The French translated it as laissez-faire and passed it on to the West…… This idea of wuwei moved Quesnay, and through Adam Smith, who learned from Quesnay, it came to form the foundation of modern Western political economy.⁴²³

The French Physiocrats held that the wealth of the state comes from agriculture, and argued that agriculture yields the greatest effect when human beings work according to the providence of nature and the mechanism of the market, without government involvement. The word Physiocracy is a compound meaning “nature” and “rule.” It is the idea of managing national wealth by relying on nature, as agriculture does.

French Physiocracy: Quesnay, de Gournay, Poivre

In the eighteenth century the political and cultural centre of the West was France. In France, for the first time in Western history, philosophers appeared who thought about political economy. In 1758 Quesnay published the Tableau économique (Economic Table), which traces the movements of the economy within a state. He became the first political-economic philosopher of the West. Quesnay, the doyen of French Physiocracy, is counted as the figure who linked laissez-faire, the founding idea of modern economics, with the Chinese idea of wuwei and spread it through the eighteenth-century West. J. J. Clarke, the author of Oriental Enlightenment, says that wuwei is rendered in French as laissez-faire.⁴²⁴ Laissez-faire was a concept that shook the history of Western political economy, and because it arose in France, English too uses the French word as it is.

Quesnay (1694–1774) represents the French Physiocrats.⁴²⁵ The idea of freeing political economy from government interference ruled them. It followed as it was the Eastern philosophy of wuwei: “The more the government interferes, the harder the people’s lives.”

Quesnay’s argument, founded on the new idea of laissez-faire, was revolutionary at the time. The idea of laissez-faire put forward by the French Physiocratic thinkers spread to England. It had a direct and profound influence on the Western free-market economic system centred on England.⁴²⁶ In fact Adam Smith visited Quesnay in Paris in the 1760s and conferred with him on the idea of laissez-faire.⁴²⁷ The concept of laissez-faire had been used to some extent among French businessmen even before Quesnay, in the late seventeenth and early eighteenth centuries.⁴²⁸ But it is hard to deny the connection, in the background of the spread of the idea of laissez-faire, with the Daoist idea of wuwei.

The French Physiocratic thinkers thought that one need not necessarily seize what belongs to others to become rich, as the mercantilists did; producing many crops on the farmland one has could be the source of national wealth. It was a revolutionary idea. Mercantilism held the idea of growing national wealth by securing as much gold and silver as possible from colonies gained through military conquest. Widen the meaning contained in the concept of mercantilism, and Alexander, Caesar, Charlemagne in the Middle Ages, Spain’s conquest of Central and South America, and the colonial conquests of England and the European countries all share the core concept of mercantilism: the state that holds much gold and silver becomes a great power. That is, the state’s role of conquering other countries becomes as important as possible for national wealth. It is the political-philosophical concept of the ancient, medieval and early modern conquest states of the West, in which the productive power of individuals within the state has no individual value at all.

De Gournay (1712–1759), an economic thinker of Quesnay’s time, is the figure who spread laissez-faire widely in the West. In the period when Quesnay and de Gournay were active, China’s advanced agriculture, the laissez-faire policy of the government that ran it, and the concepts of Daoist naturalist philosophy were influencing French thought directly or indirectly. Under their influence the motto “Do not govern too much!” (d’Argenson) and the slogan “Leave it to nature!” (Boisguilbert), both in tune with Daoist thought, became widely fashionable among French intellectuals. On this basis, and of one mind with Quesnay, de Gournay zealously spread the slogan “Laissez faire, laissez passer!” to remove state regulation of commerce and industry, as was his conviction. His slogan also became fashionable in French thought in a more developed form: “Laissez faire, laissez passer, the world goes on by itself!”

The Physiocratic philosophy de Gournay cried out, “Laissez faire! Laissez passer! The world goes on by itself!”, carries the meaning of fundamentally reversing the political philosophy of the conquest state and of mercantilism, which would strengthen the role of government. His Physiocratic philosophy has the same content as the Daoist philosophy “By letting things be, the people transform of themselves” (Daodejing 57). The Physiocratic slogan “Leave it to nature!” fits exactly the Daoist philosophy “The Dao of Heaven benefits and does not harm” (Daodejing 81). The Physiocratic slogan “Do not govern too much!” is the same expression as the Daoist thought “A leader who forces his plans on the people brings harm to the state” (Daodejing 65). The idea of wuwei is a philosophy Confucianism shares too: “What does Heaven say? The four seasons run their course and all things grow well; what does Heaven say?” (Analects 17:19)

Poivre (1719–1786) is another important figure who, after de Gournay, spread the idea of wuwei in the West. He travelled widely in the Chinese provinces for four years. He is the figure who experienced an agricultural economy more advanced than the West’s and the government’s laissez-faire policy and role supporting it, and made them known in France. In fact Quesnay and the French Physiocrats saw in Chinese agriculture and its philosophical pillars, Confucian and Daoist thought, the future and model of Western political economy. Quesnay obtained much information from Poivre, and in their contact they deeply influenced each other. Poivre gave Quesnay the vivid information and thoughts of an eyewitness on Chinese agriculture and Daoist thought, and Quesnay had a decisive influence in making Poivre a Physiocratic philosopher.

Poivre had a great interest in horticulture, and in his youth was sent to China as a Catholic missionary, working in the Canton and Macao region. Unlike the other Jesuit fathers, who lived in Beijing and concentrated on Confucianism, Poivre took an interest in horticulture, travelled widely in the provinces for four years on two occasions, and came to pay great attention to agriculture. He went on to continue his research in Southeast Asia, Africa and Central America. And he set these thoughts in order and published a book, Voyages d’un philosophe (Travels of a Philosopher).

In this work Poivre, having observed China’s agricultural economy, compared it with the agricultural conditions of Africa, the Americas and Europe, and concluded that all should emulate China’s efficient and highly productive agricultural system.⁴²⁹ He was a eulogist of agriculture. Criticising how the European powers, within the bounds of mercantilism, ran their political-economic policy concentrating only on competition through trade and paying no attention to production, he argued that output could be greatly increased through agriculture. In this Poivre came to share the mind of the Physiocratic thinker Quesnay.

In his work Poivre wrote that “the flourishing of agriculture, the backbone of the country, in China is owed to simple ethics and rules, and these ethics and rules were made according to what nature and the mind command.” Criticising the normative government policies of the West at the time by comparison with China’s natural, laissez-faire government policies, he argued that the West should emulate China’s natural policies of government and the people’s lively work ethic. “Elsewhere the people follow dubious rules or policies with hidden intentions, made by cunning men who seek to deceive others, and this makes a good contrast with China,” he wrote.⁴³⁰

He found that China’s agriculture and system of thought imitated nature and followed the way of nature, and that this way had the support of the government, which strove to refrain as far as possible from interfering in individuals’ economic activity and to reduce taxes. He saw this Chinese political-economic thought as condensed in the Daoist concepts of the Dao and wuwei. So he observed that in China the monarch gave up the idea of interfering in or directing the national economy, and concentrated on letting the people follow their own way, that is, the Dao.⁴³¹

The French Physiocratic thinkers held that every spring the Chinese emperor gives a demonstration of sowing, setting an example to foster the people’s work ethic, and that this carries the meaning of respecting nature. But in Eastern civilisation respect for nature did not carry the implication, as in Western religion, that nature is divine or holy. For, they held, within the Chinese system of thought, philosophies that hold the supernatural sacred were not respected; rather, they were felt with contempt. Eastern civilisation held that a self-regulating system working by the laws existing in nature is the best way, and thought that by doing so it brings everyone the greatest benefit. So the best way for a ruler to rule is not to interfere beyond setting an example for the people: this is precisely the idea of wuwei.

For Enlightenment thinkers the importance of the idea of wuwei was not limited to the Physiocrats, Quesnay, de Gournay and Poivre and the like. They held that law and political-economic thought alike should emulate natural philosophy and the idea of wuwei. As the historian Basil Guy puts it, for them “the lawgiver and the law alike had to acknowledge the principles of the natural order, and in so doing they came to follow the Chinese ideal that had always inspired the Chinese theory of government, namely wuwei.”⁴³²