1 00:00:00,080 --> 00:00:04,560 The following is part of Cornell Contemporary China Initiative Lecture Series 2 00:00:04,560 --> 00:00:07,920 under the Cornell East Asia Program. The arguments and viewpoints 3 00:00:07,920 --> 00:00:10,400 of this talk belong solely to the speaker. 4 00:00:10,400 --> 00:00:11,200 We hope you enjoy. 5 00:00:11,760 --> 00:00:14,800 Welcome everybody back to the Cornell Contemporary China Initiative 6 00:00:14,800 --> 00:00:20,480 for April 15th, 2019. Today we're very happy to welcome Zhang Taisu, 7 00:00:20,480 --> 00:00:23,200 an associate professor of law at Yale University Law School 8 00:00:24,320 --> 00:00:29,040 in mid-promotion, or newly promoted, and a member of the global faculty 9 00:00:29,040 --> 00:00:33,200 at the Peking University School of Law. He's a comparative legal historian 10 00:00:33,200 --> 00:00:36,400 working between China and Europe and his research centers around economic 11 00:00:36,400 --> 00:00:39,760 and property law especially the origins of those laws in the early modern period. 12 00:00:40,640 --> 00:00:43,840 He's also a Public Intellectual which is how I first came to know his work. 13 00:00:44,960 --> 00:00:48,640 His commentaries appear on Foreign Policy in Chinafile on Tea Leaf Nation 14 00:00:49,280 --> 00:00:52,000 He's a current Public Intellectuals project fellow with the committee 15 00:00:52,000 --> 00:00:56,160 on US-China relations, and, as I just found out today, has interned 16 00:00:56,160 --> 00:01:00,480 at the Supreme People's Court of China which maybe we'll get him to talk about 17 00:01:00,480 --> 00:01:03,680 later during the Q&A. We're very happy to have him 18 00:01:03,680 --> 00:01:05,200 and let's give him a warm welcome. 19 00:01:13,120 --> 00:01:16,560 Thank you Nick for the introduction and for the invitation. 20 00:01:16,560 --> 00:01:21,120 Let me start off by explaining to you guys why you're stuck listening 21 00:01:21,120 --> 00:01:26,640 to a lecture on Qing history despite the fact that this is actually 22 00:01:26,640 --> 00:01:31,840 a contemporary China series. I think the honest answer is I just 23 00:01:31,840 --> 00:01:35,520 messed up. I didn't really notice this was called the Cornell Contemporary 24 00:01:35,520 --> 00:01:38,880 China Initiative until it was a little bit too late to actually change the topic. 25 00:01:40,000 --> 00:01:43,840 So Nick kindly pointed this out to me last weekend. I think the way 26 00:01:43,840 --> 00:01:48,640 that I'm going to try to salvage this is by explaining to you guys 27 00:01:49,360 --> 00:01:52,320 over the course of the lecture why, even if you have absolutely no 28 00:01:52,320 --> 00:01:56,640 general interest in Chinese history whatsoever, as long as you have 29 00:01:56,640 --> 00:02:00,800 some interest in some core features of the current Chinese state 30 00:02:00,800 --> 00:02:03,120 and economic system, you should still care about this thing. 31 00:02:03,120 --> 00:02:07,840 This is I think I'm gonna be describing to you guys today 32 00:02:08,400 --> 00:02:11,360 one of the single most important episodes in modern Chinese 33 00:02:11,360 --> 00:02:15,520 history and one that has foundational impact on the way 34 00:02:15,520 --> 00:02:18,960 the entire Chinese state economic system currently functions 35 00:02:18,960 --> 00:02:22,800 and frankly has been functioning for the past 40, 50 years. 36 00:02:24,880 --> 00:02:28,000 Now actually let me start on that point because I think this will 37 00:02:28,000 --> 00:02:30,240 help you guys stay awake during the entire historical section. 38 00:02:32,320 --> 00:02:36,480 As you guys probably know by this point given your interest 39 00:02:36,480 --> 00:02:43,920 in China, China has an unusually statist economic system. So even after 1978 40 00:02:43,920 --> 00:02:48,880 when we had the so-called opening up phase and we supposedly transitioned 41 00:02:48,880 --> 00:02:56,720 away from a full-blown planned economy to a, in Chinese lingo, market economy 42 00:02:56,720 --> 00:03:00,080 with Chinese characteristics or like a socialist market economy 43 00:03:00,080 --> 00:03:04,160 with Chinese characteristics. It is still nonetheless true all the way 44 00:03:04,160 --> 00:03:09,280 up to now, and the trends actually seem to be getting more distinct in the pro-statist 45 00:03:09,280 --> 00:03:18,160 direction, that the state has always been at the center of the way the economy runs. 46 00:03:18,160 --> 00:03:22,640 Even when we say we want some kind of market economy, 47 00:03:23,280 --> 00:03:27,280 our state still plays a pretty large coordinating and policy-making role 48 00:03:27,280 --> 00:03:34,160 in that kind of market economy that virtually no other, probably no other 49 00:03:34,160 --> 00:03:37,920 state of this scale tends to play. You guys might think of the American 50 00:03:37,920 --> 00:03:41,120 government as relatively interventionist and sometimes pretty active 51 00:03:41,120 --> 00:03:46,800 in economic policy-making. Well compared to China that doesn't do nearly as much. 52 00:03:48,880 --> 00:03:52,320 The easy way to understand all of this, the cheap and easy way 53 00:03:52,320 --> 00:03:58,960 to understand of all of this is to say this is like a natural consequence 54 00:03:58,960 --> 00:04:02,000 of China being a nominally communist or socialist state. 55 00:04:02,960 --> 00:04:05,440 Communist and socialist states naturally have more governmental 56 00:04:05,440 --> 00:04:11,120 involvement in the way the economy is run. The thing is that might seem tempting 57 00:04:11,120 --> 00:04:15,120 to a large extent extent, and that is probably also partially true at least 58 00:04:15,120 --> 00:04:18,480 to some historical extent, but the thing is well before 59 00:04:18,480 --> 00:04:27,520 the Chinese state became communist in 1949, ever since 1900 60 00:04:27,520 --> 00:04:32,240 or something around that time, the distinct characteristic 61 00:04:32,240 --> 00:04:34,880 of the Chinese economy was the state envisioned itself 62 00:04:34,880 --> 00:04:39,360 playing a hugely active role in it. And the size of the Chinese state 63 00:04:39,360 --> 00:04:43,040 relative to the economy that's running, basically the size of the state 64 00:04:43,040 --> 00:04:47,200 vis-a-vis the GDP of the economy, has been on this continuously 65 00:04:47,200 --> 00:04:50,320 upward path for basically the entire 20th century 66 00:04:50,320 --> 00:04:56,640 and continuing even now. So essentially the statist tradition 67 00:04:56,640 --> 00:05:01,920 of the Chinese economy, the state-centered management-oriented 68 00:05:01,920 --> 00:05:05,200 economic policy-making did not really start with the PRC. 69 00:05:05,200 --> 00:05:09,040 In fact the PRC took on a large number of institutional elements 70 00:05:09,840 --> 00:05:13,040 that were passed down on to it by the previous nationalist governments 71 00:05:15,120 --> 00:05:20,400 in the republican era. So essentially if you really want to trace the origins 72 00:05:20,400 --> 00:05:23,200 of this relatively statist view of the economy you have to go 73 00:05:23,840 --> 00:05:27,840 all the way back probably to the late 19th century 74 00:05:27,840 --> 00:05:31,680 and to at least the early 20th century. The argument that I'm gonna present 75 00:05:31,680 --> 00:05:36,800 to you guys today is that all of this was a backlash, 76 00:05:37,920 --> 00:05:42,400 or at least back in the early 20th century it was a backlash 77 00:05:42,400 --> 00:05:47,520 against what was probably one of the most unusual phases in Chinese 78 00:05:47,520 --> 00:05:51,840 state building and economic regulation across China's 3000 year history. 79 00:05:52,480 --> 00:05:58,960 So the common view of Chinese history pre-1912 is that it's a series of cyclical 80 00:05:58,960 --> 00:06:02,240 dynasties. You guys have probably heard this. The dynastic view 81 00:06:02,240 --> 00:06:06,480 of Chinese history. It's like one dynasty after the other and most dynasties 82 00:06:07,760 --> 00:06:10,800 seem to resemble one another in terms of how they look. 83 00:06:11,360 --> 00:06:14,160 They have a similar government system, they have a similar legal system. 84 00:06:15,120 --> 00:06:19,360 They're technologically, to the uninitiated it probably seems pretty similar 85 00:06:19,360 --> 00:06:23,200 from something like 800 AD all the way to 1900. 86 00:06:24,880 --> 00:06:30,160 The notion is that China, whereas the West after something like 1400 - 1500, 87 00:06:30,160 --> 00:06:33,840 after the Black Death, the West was on an upward trend, 88 00:06:34,880 --> 00:06:38,000 you go from relatively undeveloped to highly developed over the course 89 00:06:38,000 --> 00:06:42,560 of a few centuries. Chinese history until 1912 moved in circles. 90 00:06:43,440 --> 00:06:47,840 You would have a dynasty come into power, grow rapidly, 91 00:06:47,840 --> 00:06:51,840 become really powerful and influential and wealthy. You start to have crises 92 00:06:51,840 --> 00:06:56,320 in the dynasty, it would eventually crumble under its own weight, 93 00:06:56,320 --> 00:07:01,200 and by the end what you have is a political system in shambles. 94 00:07:01,840 --> 00:07:05,040 That triggers political collapse, there's a new dynasty that replaces it, 95 00:07:05,040 --> 00:07:09,600 and things go in circles. The argument that I want to make 96 00:07:09,600 --> 00:07:14,320 is that that may well be true on the dimensions that I care about today, 97 00:07:14,320 --> 00:07:17,280 which is I'm gonna talk to you guys about fiscal policy-making. 98 00:07:17,920 --> 00:07:20,640 You guys may not care so much about taxes right now but trust me 99 00:07:20,640 --> 00:07:24,400 once you actually start working for a living, once you get past your student phase 100 00:07:24,400 --> 00:07:29,840 you're gonna care a lot about your tax policies. So the claim 101 00:07:30,560 --> 00:07:34,160 is that the fiscal policy of these various Chinese dynasties 102 00:07:34,160 --> 00:07:37,120 is at the core of what actually determines 103 00:07:37,680 --> 00:07:41,680 their relationship vis-a-vis the economy and also what determines 104 00:07:41,680 --> 00:07:44,640 how the economy actually functions. And then the argument is that 105 00:07:44,640 --> 00:07:51,680 China's very last dynasty before 1912, before this massive revolutionary phase, 106 00:07:51,680 --> 00:07:54,480 which is the Qing dynasty, was distinctly different 107 00:07:54,480 --> 00:07:58,320 from every previous dynasty that had come before it. 108 00:07:58,320 --> 00:08:02,160 And also the unusual tendencies of the Qing dynasty in terms of fiscal 109 00:08:02,160 --> 00:08:06,800 policy-making laid the groundwork for the intellectual and political backlash 110 00:08:07,840 --> 00:08:11,600 that happened after 1912 which then led to the current shape 111 00:08:11,600 --> 00:08:14,240 of the Chinese party-state and the overall Chinese state, 112 00:08:14,880 --> 00:08:17,280 the state-run economy that you actually see nowadays in China. 113 00:08:19,600 --> 00:08:24,000 So let me begin by giving you a sense of what Qing fiscal 114 00:08:24,000 --> 00:08:28,320 policy-making was all about. Pretty much every single human 115 00:08:28,320 --> 00:08:34,720 society before like the early 20th century insofar as fiscal policy-making 116 00:08:34,720 --> 00:08:38,880 the fiscal apparatus you're talking about, like where the taxes come from, 117 00:08:38,880 --> 00:08:45,920 is an agrarian fiscal policy. The number one source of income is always you tax land, 118 00:08:45,920 --> 00:08:49,920 you tax peasants, you tax agriculture, and you use that money to fund 119 00:08:49,920 --> 00:08:55,920 other things. The thing is, I don't know how many people 120 00:08:55,920 --> 00:08:59,440 are actually from China in this audience but if you are from China you went 121 00:08:59,440 --> 00:09:02,800 to the Chinese high school system like I did. The conventional Chinese 122 00:09:02,800 --> 00:09:06,240 understanding of Chinese fiscal policy-making was that the vast majority 123 00:09:06,240 --> 00:09:10,160 of Chinese dynasties were bloodsuckers. They wanted to suck every little bit 124 00:09:10,160 --> 00:09:14,400 of blood from the peasants as they could possibly manage and usually 125 00:09:14,400 --> 00:09:18,560 because of that what usually caused their eventual collapse at the end 126 00:09:18,560 --> 00:09:23,120 of the dynasty was they taxed the peasants too heavily and the taxed would rise up 127 00:09:23,120 --> 00:09:27,920 and revolt and eventually kill off the dynasty. That is all false. 128 00:09:29,200 --> 00:09:31,680 But let me explain to you why it's false and how it's false 129 00:09:31,680 --> 00:09:34,160 and how that helps you understand why the Qing was so unusual. 130 00:09:34,960 --> 00:09:39,440 It is generally true of all previous Chinese dynasties up until the Qing 131 00:09:40,160 --> 00:09:47,120 that starting from around mid-dynasty the weight of their fiscal extraction, 132 00:09:47,120 --> 00:09:50,560 like how many taxes you actually charge you population, starts to grow 133 00:09:50,560 --> 00:09:55,040 at a pretty rapid pace. The reason for this generally speaking is you can understand 134 00:09:55,040 --> 00:10:00,800 this in a very simple Malthusian cycle. Usually a dynasty comes into power 135 00:10:00,800 --> 00:10:05,360 after a period of turbulence and chaos, after civil war. That usually means 136 00:10:05,360 --> 00:10:09,520 the population is very low at the start of the dynasty because usually 30% 137 00:10:09,520 --> 00:10:13,440 or more of the population has been  killed off in the previous couple decades 138 00:10:13,440 --> 00:10:18,400 of turmoil. When the dynasty comes into power it enforces stability, 139 00:10:18,400 --> 00:10:22,000 it calms everything down. The economy starts to grow again, 140 00:10:22,000 --> 00:10:24,400 people start having kids in greater numbers, 141 00:10:24,400 --> 00:10:27,680 and eventually by mid-dynasty the population and the economy grow 142 00:10:27,680 --> 00:10:31,840 to a much larger scope than what it was at the start of the dynasty. 143 00:10:32,800 --> 00:10:36,240 This has been true of every single regime in Chinese history, including the PRC. 144 00:10:38,880 --> 00:10:44,160 Around mid-dynasty because you are now facing a much larger population to govern 145 00:10:44,160 --> 00:10:47,600 you tend to come to the realization that your previous bureaucracy 146 00:10:48,160 --> 00:10:51,440 is usually not gonna be large enough. So you're you're going to want 147 00:10:51,440 --> 00:10:54,240 to expand the bureaucracy, and if you want to expand the bureaucracy 148 00:10:54,240 --> 00:10:56,640 you got to pay for the bureaucrats. If you want to pay for the bureaucrats, 149 00:10:56,640 --> 00:11:01,360 you have to expand taxes. And because, up until like 1912, 150 00:11:01,360 --> 00:11:04,640 all the previous dynasties were predominantly agricultural 151 00:11:04,640 --> 00:11:09,200 in economic characteristic, when you say raise taxes 152 00:11:09,200 --> 00:11:14,320 you mean raising taxes on peasants. This actually does not usually kill off 153 00:11:14,320 --> 00:11:19,040 the dynasty because for the most part the peasants weren't taxed that brutally 154 00:11:19,040 --> 00:11:24,240 even after the tax hike. But it is generally true of all previous Chinese dynasties, 155 00:11:24,240 --> 00:11:27,840 and it is generally true of pretty much every other comparative regime 156 00:11:28,400 --> 00:11:32,160 in human history, that somewhere in the middle of their existence 157 00:11:32,160 --> 00:11:36,880 they tend to raise taxes on peasants. This is true of every Chinese dynasty, 158 00:11:36,880 --> 00:11:40,720 it's true of the French, the Germans. If you look across the entire world 159 00:11:41,280 --> 00:11:47,360 in the early modern era, this period up until 1700-1800, this entire 300 years 160 00:11:47,360 --> 00:11:50,160 during which the world was first beginning to industrialize 161 00:11:50,160 --> 00:11:54,320 and international commerce was first a thing, global connections were first made 162 00:11:54,320 --> 00:11:59,280 between Europe and various parts of Asia, and the new world and so on and so forth. 163 00:12:00,320 --> 00:12:04,960 Around this entire period, for the most part, in terms of fiscal policy-making, 164 00:12:04,960 --> 00:12:11,920 every single state is expansionist. The states, because of the growth 165 00:12:11,920 --> 00:12:14,880 in population, the expansion of the economy, they have a pretty 166 00:12:14,880 --> 00:12:18,400 reasonably strong incentive to make themselves larger 167 00:12:18,400 --> 00:12:22,480 so that they can actually keep up with the economy and the population 168 00:12:22,480 --> 00:12:30,640 they're governing. In this context the Qing dynasty, which is this Manchu-run 169 00:12:30,640 --> 00:12:35,760 dynasty, they govern China from 1644 to 1912 and this is China's last 170 00:12:35,760 --> 00:12:39,280 imperial dynasty, was an extreme outlier. 171 00:12:40,880 --> 00:12:45,280 So generally speaking I think the common historical perception 172 00:12:45,280 --> 00:12:50,000 of Chinese governance pre-1900 or perhaps even pre-1949 173 00:12:50,560 --> 00:12:53,200 was, or at least the the version of it that the Communist Party 174 00:12:53,200 --> 00:12:56,240 really wants to sell people, is that it was unusually oppressive. 175 00:12:57,840 --> 00:13:06,400 It was unusually brutal. It was very oppressive. It was large and governing. 176 00:13:07,120 --> 00:13:12,000 It was the kind of nearly totalitarian state that a republican government 177 00:13:12,000 --> 00:13:14,400 would justifiably rise up against and try to overthrow. 178 00:13:15,520 --> 00:13:18,480 The thing about the Qing is nothing could be further from the truth. 179 00:13:18,480 --> 00:13:22,800 when it came to this one dynasty. You may say the totalitarian, authoritarian 180 00:13:22,800 --> 00:13:27,200 label, the expansionist label, the heavy governance label may apply 181 00:13:27,200 --> 00:13:30,480 to virtually every previous Chinese dynasty except the Qing. 182 00:13:30,480 --> 00:13:35,760 But the Qing was a unique governmental system in human history. 183 00:13:36,560 --> 00:13:41,200 And to illustrate this let me give you two kinds of comparisons. 184 00:13:41,200 --> 00:13:45,520 One is horizontal. Compare the Qing with its peers roughly at the same point 185 00:13:45,520 --> 00:13:49,200 in time. Comparing with other kinds of governments in the 18th, 19th, 186 00:13:49,200 --> 00:13:51,360 and early 20th centuries. And the second is vertical. 187 00:13:52,480 --> 00:13:58,080 As a matter of horizontal comparisons, if you looked in something like 1850 188 00:13:58,080 --> 00:14:02,480 at the size of the state relative to the size of the economy and the population 189 00:14:02,480 --> 00:14:06,400 it governed. The basic measure that you have of this, for example, 190 00:14:06,960 --> 00:14:13,040 would be something like the government's tax income every year relative to the GDP. 191 00:14:13,840 --> 00:14:19,520 So just as a basic curiosity how many of you guys know how much of your income 192 00:14:19,520 --> 00:14:24,640 the US government taxes every single year? What's the total ratio of the US 193 00:14:24,640 --> 00:14:28,080 government's fiscal intake vis-a-vis the overall size of the American economy? 194 00:14:29,040 --> 00:14:32,080 Anyone know this? Guesses? 195 00:14:35,840 --> 00:14:37,200 35%? That's pretty close. 196 00:14:38,160 --> 00:14:41,120 It's around 40%. For European governments it's more like 50%. 197 00:14:41,920 --> 00:14:45,600 That's what a modern state looks like. In the pre-modern phase states were 198 00:14:45,600 --> 00:14:50,480 of course much smaller because they didn't have the technological 199 00:14:50,480 --> 00:14:56,400 apparatus to actually collect that high a tax level. But that said most governments 200 00:14:56,400 --> 00:15:00,880 were reasonably sized vis-a-vis their population. So England at this point 201 00:15:00,880 --> 00:15:07,600 in time collected roughly 25% of GDP. Japan collected something like 20 to 25%. 202 00:15:09,440 --> 00:15:12,080 Continental European powers were usually between 10 to 15%. 203 00:15:14,720 --> 00:15:18,400 Large land-based Asian empires were somewhat smaller than that 204 00:15:18,400 --> 00:15:26,800 but usually they were still between 5 to 10%. So that's the norm for early modern states. 205 00:15:28,160 --> 00:15:33,440 The larger you are, the more land-based you are, the ratio of the government 206 00:15:33,440 --> 00:15:38,400 vis-a-vis the economy shrinks a little bit but it still stays above 5%. 207 00:15:38,400 --> 00:15:41,840 It usually goes up to as high as 10 in the vast majority of cases. 208 00:15:43,600 --> 00:15:54,560 Up until the Qing every other Chinese dynasty had always also fell into that box 209 00:15:55,120 --> 00:16:00,480 So the Ming was roughly a 10% state, the Song was a 20% state, the Tang 210 00:16:00,480 --> 00:16:07,120 before that was a 10 to 15% state. So in line with every other early modern 211 00:16:07,120 --> 00:16:12,000 or pre-modern empire or state that you could actually find in human history 212 00:16:12,000 --> 00:16:16,480 that was about as large and sophisticated to be a reasonable comparison 213 00:16:16,480 --> 00:16:23,280 to the Chinese state. So compared against all of that the Qing is this extreme outlier. 214 00:16:24,240 --> 00:16:28,800 After 1800 the size of the Chinese state in terms of how much taxes it collected 215 00:16:28,800 --> 00:16:35,200 vis-a-vis the economy was 1%. Wrap your heads around that for a moment. 216 00:16:37,440 --> 00:16:41,280 I'm a comparativist and I studied all kinds of historical societies. 217 00:16:41,280 --> 00:16:44,800 I do not know of a single other society where the tax rate was that low. 218 00:16:44,800 --> 00:16:50,480 And not only is it that low it's dramatically lower than every other state that you can 219 00:16:50,480 --> 00:16:56,720 actually find in human history. So this in fact is the major characteristic 220 00:16:56,720 --> 00:17:00,800 of the pre-1912 Chinese state. It was the complete opposite 221 00:17:00,800 --> 00:17:05,840 of the usual Chinese communist discourse about some kind of large oppressive, 222 00:17:05,840 --> 00:17:12,000 expansionist, totalitarian imperial state, rather, the main characteristic and problem 223 00:17:12,000 --> 00:17:18,160 with the Qing states was that it did not exist. If you lived in a Chinese locality, 224 00:17:18,160 --> 00:17:23,200 if you live in the county in the middle of China you couldn't feel the government's 225 00:17:23,200 --> 00:17:27,440 presence at all in your daily life. Everything was more or less regulated 226 00:17:27,440 --> 00:17:32,560 by local lineages, social groups, guilds, all kinds of commercial organizations. 227 00:17:33,200 --> 00:17:37,920 It was self-governance by local social groups for the most part. The state, 228 00:17:37,920 --> 00:17:42,320 I mean it existed. There was a county magistrate. There was a court 229 00:17:42,320 --> 00:17:47,200 that you could use to sue and settle disputes. But for the most part 230 00:17:47,200 --> 00:17:50,640 apart from the government coming in every single year and asking for 1% 231 00:17:50,640 --> 00:17:54,560 of your income as their fiscal intake you didn't see these guys at all. 232 00:17:55,760 --> 00:18:00,480 And you might think that sounds great. God knows most of us especially 233 00:18:02,480 --> 00:18:07,280 after I started having an actual job I've really come to appreciate lower taxes. 234 00:18:07,280 --> 00:18:12,320 But trust me 1% percent taxes isn't safe. It means the government is completely 235 00:18:12,320 --> 00:18:19,200 non-functional for everything from military expenditures to economic regulation 236 00:18:19,200 --> 00:18:24,080 to any kind of industrial policy. So now that means that you have 237 00:18:24,080 --> 00:18:28,640 the perfect Laissez-faire, completely decentralized -- not completely 238 00:18:28,640 --> 00:18:32,880 but almost completely decentralized -- economy in this Qing economy. 239 00:18:32,880 --> 00:18:37,840 It's probably the best example of a non-centrally regulated economy 240 00:18:37,840 --> 00:18:42,480 that you can get not only in Chinese history but I'm pretty willing to bet 241 00:18:42,480 --> 00:18:46,880 across human history as well. Again that sounds great if you're 242 00:18:46,880 --> 00:18:51,120 a full blown capitalist. But the problem is that again everybody knows markets 243 00:18:51,120 --> 00:18:55,120 can fail. And there are all kinds of collective action problems, 244 00:18:55,120 --> 00:18:58,480 there are transaction cost problems with economies, and so on and so forth. 245 00:18:58,480 --> 00:19:01,840 And if you let an economy completely run without governmental intervention 246 00:19:02,640 --> 00:19:07,040 there are going to be certain kinds of problems. And the major problem 247 00:19:07,040 --> 00:19:10,720 that I care about, that I care about in my research, is industrialization. 248 00:19:12,960 --> 00:19:17,760 It turns out that industrialization, that massive technological leap 249 00:19:17,760 --> 00:19:22,800 you make from a largely human labor based pre-industrial economy 250 00:19:22,800 --> 00:19:28,160 to a machine-based post-industrial economy, that's the kind of thing 251 00:19:28,880 --> 00:19:36,560 that usually takes very large amounts of, in our economic historian lingo 252 00:19:36,560 --> 00:19:40,080 we call it capital accumulation. Capital accumulation means 253 00:19:40,640 --> 00:19:43,840 what you really need for a country to industrialize, for an economy 254 00:19:43,840 --> 00:19:48,560 to industrialize, is that you need the major economic players in that economy, 255 00:19:48,560 --> 00:19:53,120 whether it's large entrepreneurs, businessmen, or sometimes the state, 256 00:19:53,120 --> 00:19:56,480 to have tons and tons of capital to actually invest in these new technologies. 257 00:19:57,200 --> 00:20:00,080 The reason why you need this is that most of these technologies, 258 00:20:00,080 --> 00:20:04,480 the steam engine, the spinning wheel, and so on and so forth, were not actually 259 00:20:04,480 --> 00:20:08,720 cost effective, especially in their earlier phases, unless you could actually 260 00:20:08,720 --> 00:20:13,680 invest in them at very large scales. The steam engine is the perfect example. 261 00:20:13,680 --> 00:20:18,320 of this. If you only have one engine and doing some kind of thing it's usually 262 00:20:18,320 --> 00:20:23,360 much more cost effective to just buy oxen or have human beings do the job. 263 00:20:23,360 --> 00:20:26,800 The only cases in which it's actually cost effective to have steam engines 264 00:20:26,800 --> 00:20:31,200 do certain kinds of jobs is when the job is of a sufficiently large scale 265 00:20:31,200 --> 00:20:35,280 that employing that many human beings would not be terribly effective. 266 00:20:36,720 --> 00:20:40,240 So essentially industrialization is the kind of thing that takes a ton 267 00:20:40,240 --> 00:20:44,720 of capital accumulation. The thing is one of the single most 268 00:20:44,720 --> 00:20:47,840 important sources of capital accumulation usually is the state. 269 00:20:49,360 --> 00:20:52,240 It is possible for you to get capital accumulation through other means 270 00:20:52,240 --> 00:20:56,240 and much of my other work is involved in explaining why the Chinese economy 271 00:20:56,240 --> 00:21:00,240 could not have that kind of privatized capital accumulation. 272 00:21:00,240 --> 00:21:04,400 But there are plenty of societies in the world that industrialize 273 00:21:04,400 --> 00:21:09,440 because of aggressive state investment. So the paradigmatic example of this 274 00:21:10,160 --> 00:21:15,920 are two countries. Germany and Japan. In terms of success stories 275 00:21:15,920 --> 00:21:18,160 vis-a-vis industrialization, these are the two probably most 276 00:21:19,120 --> 00:21:24,960 successful examples of industrialization process that you can actually find 277 00:21:24,960 --> 00:21:31,120 in modern history. They expanded the fastest, their economic standing 278 00:21:31,120 --> 00:21:35,760 across all countries in the world grew most rapidly over the shortest period. 279 00:21:36,880 --> 00:21:40,400 Both of those countries the process was driven by governmental investments. 280 00:21:42,480 --> 00:21:47,280 China tried to industrialize at about the same time as Japan did. 281 00:21:48,240 --> 00:21:50,960 Those of you who know some Chinese history will know that China and Japan 282 00:21:50,960 --> 00:21:57,920 entered into an arms race around 1860. And they were aware 283 00:21:57,920 --> 00:22:01,920 of each other's attempts to industrialize and build a modern military. 284 00:22:01,920 --> 00:22:05,040 So it really was a parallel arms race between those two countries. 285 00:22:05,600 --> 00:22:09,280 Of course everybody knows Japan won by a huge amount and it smashed 286 00:22:09,280 --> 00:22:15,520 the Chinese navy and military in a series of wars in the 1890s. And then eventually 287 00:22:15,520 --> 00:22:20,000 it got so powerful they basically colonized half of China during World War II. 288 00:22:21,120 --> 00:22:25,680 But the foundation of all of that, the major cause for why the Japanese 289 00:22:25,680 --> 00:22:29,360 economy was able to industrialize so much faster than the Chinese economy 290 00:22:29,360 --> 00:22:34,320 was the Japanese state had even in absolute terms something like 291 00:22:34,320 --> 00:22:41,120 3 to 4 times the actual fiscal capacity of the Chinese state. And in terms 292 00:22:41,120 --> 00:22:46,480 of per capita terms it had roughly 25 times the capacity of the Chinese state. 293 00:22:47,280 --> 00:22:52,240 So in terms of how much money you could actually spend on industrial policy-making, 294 00:22:52,240 --> 00:23:00,000 on investments, on banks, on factories, just in absolute terms, despite the fact 295 00:23:00,000 --> 00:23:03,440 the Japanese economy started off being only 1/3 of the size 296 00:23:03,440 --> 00:23:07,600 of the Chinese economy, the amount of money the Japanese government 297 00:23:07,600 --> 00:23:13,600 had at its disposal to actually throw into industrialization was something like 298 00:23:13,600 --> 00:23:16,000 5 to 6 times larger than the Chinese government. 299 00:23:17,440 --> 00:23:21,840 Unsurprisingly because of that kind of stuff you won the arms race. 300 00:23:22,400 --> 00:23:26,480 So the reason why you care about the size of the state in this kind of context 301 00:23:26,480 --> 00:23:31,040 is in the context of industrialization in this early modern global arms race 302 00:23:31,040 --> 00:23:32,880 that eventually decided the shape of the modern world, 303 00:23:33,440 --> 00:23:40,320 having a powerful state really matters So in that general context the fact 304 00:23:40,320 --> 00:23:45,760 the Chinese state, the Qing state, was so much smaller than all of its peers, 305 00:23:45,760 --> 00:23:49,840 all of its predecessors in Chinese history, was a massive problem. 306 00:23:50,800 --> 00:23:55,360 This is one of the single most important problems in all of Chinese history 307 00:23:55,360 --> 00:23:57,920 and it's one of the most foundational things you have to look at 308 00:23:57,920 --> 00:24:01,120 if you want to understand how China came to be what it is right now. 309 00:24:01,120 --> 00:24:06,000 Because the starting point for modern Chinese history, why you have 310 00:24:06,000 --> 00:24:09,600 an anti-imperial backlash after 1912, why you have a communist revolution, 311 00:24:10,240 --> 00:24:16,080 is this overwhelming perception of Chinese weakness vis-a-vis Western powers, 312 00:24:16,080 --> 00:24:21,440 vis-a-vis Japan, et cetera et cetera. And all of that to a very large extent 313 00:24:21,440 --> 00:24:23,920 starts with the fact that the Chinese state was too small. 314 00:24:25,520 --> 00:24:29,120 So the question then is why was the Chinese state too small? 315 00:24:29,120 --> 00:24:32,640 This is the part that's completely historical and I don't want to bore 316 00:24:32,640 --> 00:24:37,440 you guys too much with the details. So let me give you a 5 to 10 minute 317 00:24:37,440 --> 00:24:38,480 bare bones explanation. 318 00:24:43,280 --> 00:24:46,160 Very often historians when faced with this problem say 319 00:24:46,160 --> 00:24:50,160 of course the Chinese state didn't tax too heavily, it's Confucian. 320 00:24:51,520 --> 00:24:53,120 I don't know how much you guys know about Confucianism 321 00:24:53,120 --> 00:24:56,800 but there's a common perception that Confucian states are states 322 00:24:56,800 --> 00:25:04,240 that have this innate moral anxiety, some kind of innate moral suspicion 323 00:25:04,240 --> 00:25:09,040 of taxation. Starts off with Confucius himself who at one point said 324 00:25:09,760 --> 00:25:13,760 that the gentleman, the truly morally upright person is not the kind of person 325 00:25:13,760 --> 00:25:16,000 that talks about material profit. 326 00:25:16,000 --> 00:25:18,320 [Chinese] 327 00:25:19,120 --> 00:25:23,760 If you believe in that, a morally just person must not pursue material gain, 328 00:25:24,800 --> 00:25:26,560 this leads to all kinds of possible interpretations 329 00:25:26,560 --> 00:25:31,200 including this very long-standing argument in Chinese history 330 00:25:31,200 --> 00:25:34,000 about whether Confucian states were tolerant of merchant behavior 331 00:25:34,000 --> 00:25:37,440 or commercialization. And the argument was that because Confucius said 332 00:25:37,440 --> 00:25:40,880 that the morally upright gentleman does not speak of material profit, 333 00:25:41,440 --> 00:25:44,800 any person who pursues commercial profit has to be an asshole. 334 00:25:47,360 --> 00:25:50,960 That led to low social status for merchants and so on and so forth. 335 00:25:54,720 --> 00:25:58,560 That's one of the things people point to for saying this is why the Chinese economy 336 00:25:58,560 --> 00:26:03,360 fell behind. That turns out not to be true. The position of merchants in Chinese 337 00:26:03,360 --> 00:26:06,400 society was perfectly high for most of Chinese history and especially 338 00:26:06,400 --> 00:26:11,040 in the later stages. But what was true was that most Chinese bureaucrats 339 00:26:11,040 --> 00:26:14,880 and Chinese officials throughout Chinese imperial history, when you ask them 340 00:26:14,880 --> 00:26:18,640 what's your position vis-a-vis taxation, they'll at least make a show of saying 341 00:26:18,640 --> 00:26:22,400 I'm not morally comfortable with this, I think the morally just state 342 00:26:22,400 --> 00:26:26,800 should be a state that taxes as lightly as it can and it's not morally good 343 00:26:26,800 --> 00:26:29,680 for you to tax it heavily because of all these things that Confucius once said. 344 00:26:32,000 --> 00:26:34,880 That seems pretty intuitive. That kind of thing seems to feed into 345 00:26:34,880 --> 00:26:38,240 an explanation for why the Qing state was so small. They couldn't tax 346 00:26:38,240 --> 00:26:42,320 because it was Confucian and Confucian states have a tendency to undertax. 347 00:26:42,320 --> 00:26:46,240 The problem with all that of course is the fact that Confucius said 348 00:26:46,240 --> 00:26:50,960 all this stuff, did not stop any of the previous dynasties in Chinese history 349 00:26:50,960 --> 00:26:55,040 from growing taxes eventually. When they really had to grow their tax base 350 00:26:55,040 --> 00:26:59,440 they did so. And they might've made a moral show of feeling bad about it 351 00:26:59,440 --> 00:27:04,800 but in the end they were like well whatever, we have to have a larger tax base, 352 00:27:04,800 --> 00:27:06,960 we have to have more money, we have to have a larger military, 353 00:27:06,960 --> 00:27:10,880 we have to have more bureaucrats, even if it's morally questionable to do 354 00:27:10,880 --> 00:27:16,000 all these things we're going to do it anyway. This is I think a general phenomenon 355 00:27:16,000 --> 00:27:20,000 in human history. I don't know how much faith you guys have in your bureaucrats 356 00:27:20,000 --> 00:27:25,040 in Washington DC or in Albany or whatever. I really don't think 357 00:27:25,040 --> 00:27:30,400 there really has ever been a major historical example of moral norms 358 00:27:30,400 --> 00:27:33,840 really constraining governmental behavior when it comes to taxation. 359 00:27:34,880 --> 00:27:38,320 Bureaucrats are bureaucrats. They're pragmatic people who know 360 00:27:39,520 --> 00:27:42,960 what kinds of fiscal income levels it actually takes to run the government. 361 00:27:42,960 --> 00:27:48,000 And if you starve yourself of taxation, not only is it against the government's 362 00:27:48,000 --> 00:27:52,240 interest, it's also against their personal  interest. Against that really strong 363 00:27:52,240 --> 00:27:56,640 material incentive, no one really cares about morality all that much. 364 00:27:57,600 --> 00:28:01,600 It's a sad thing, but moral commandments have never stopped governments 365 00:28:01,600 --> 00:28:02,560 from raising taxes. 366 00:28:04,160 --> 00:28:10,240 So what was different about the Qing? Why was it the only dynasty 367 00:28:10,240 --> 00:28:15,920 in Chinese history that once it sets a reasonably sustainable tax level 368 00:28:15,920 --> 00:28:21,600 around 1720 it stuck to that tax level for, at least for peasants, for agriculture, 369 00:28:21,600 --> 00:28:27,040 it stuck at that tax level for the next 200 years without any growth even 370 00:28:27,040 --> 00:28:32,720 in absolute terms. This is unprecedented. I don't know of a single other human 371 00:28:32,720 --> 00:28:39,920 example where the absolute volume of fiscal intake in some large states 372 00:28:39,920 --> 00:28:46,080 stays completely the same for that long. If you're a civil society of even if you're 373 00:28:46,080 --> 00:28:48,880 a war-torn society there usually will be some incentive 374 00:28:48,880 --> 00:28:51,760 for the government to raise taxes at some point. So every government 375 00:28:51,760 --> 00:28:57,120 raises taxes if you give them that long a time horizon. The Qing never 376 00:28:57,120 --> 00:29:01,680 raised taxes on agriculture. And that was what eventually killed off the dynasty 377 00:29:01,680 --> 00:29:05,680 and wrecked the Chinese economy. So the question is why do you not do this? 378 00:29:07,520 --> 00:29:11,840 It turns out that if you look at the broader scope of Chinese history, 379 00:29:13,840 --> 00:29:18,320 we talk all the time about peasant rebellions killing off Chinese dynasties 380 00:29:18,320 --> 00:29:21,520 Every good Chinese person who has been through high school 381 00:29:21,520 --> 00:29:25,200 can rattle off a series of major peasant rebellions that seem to end a lot 382 00:29:25,200 --> 00:29:30,400 of dynasties. The interesting thing is up until the Ming not a single one 383 00:29:30,400 --> 00:29:33,200 of those peasant rebellions have actually killed off a dynasty before. 384 00:29:34,960 --> 00:29:37,920 Sure they caused some trouble but usually the elites of that dynasty 385 00:29:37,920 --> 00:29:40,400 usually had no trouble putting down those peasant rebellions. 386 00:29:42,480 --> 00:29:47,680 The Qing was different in that it came directly after the only 387 00:29:47,680 --> 00:29:53,040 Chinese state in imperial Chinese history to really be killed off by a peasant 388 00:29:53,040 --> 00:29:57,440 rebellion. The peasant rebellions at the end of the Ming were, 389 00:29:58,640 --> 00:30:04,400 they were the only example of a peasant rebellion sacking the capital, killing off 390 00:30:04,400 --> 00:30:13,680 the emperor, and come to the verge of completely establishing a new dynasty 391 00:30:13,680 --> 00:30:19,440 based off of a peasant rebellion. None of the previous peasant rebellions 392 00:30:19,440 --> 00:30:24,400 ever came close to that. The one example the one exception might be the rebellions 393 00:30:24,400 --> 00:30:28,080 against the Mongols at the end of Mongol rule. You guys may or may not care 394 00:30:28,080 --> 00:30:30,640 about this but usually the conventional interpretation of that was that 395 00:30:30,640 --> 00:30:34,880 that was not a peasant rebellion at all. That was an ethnic Han uprising 396 00:30:35,840 --> 00:30:39,360 against the Mongol conquerors and that had very little to do 397 00:30:39,360 --> 00:30:41,200 with how grieved the peasants actually felt. 398 00:30:41,920 --> 00:30:44,800 The only really major, like in the consciousness 399 00:30:44,800 --> 00:30:51,600 of Chinese political elites, the late Ming peasant rebellions that started 400 00:30:51,600 --> 00:30:56,480 around 1630 and eventually killed off the dynasty in 1644 are the only example 401 00:30:56,480 --> 00:30:59,280 of a peasant rebellion really killing off a major dynasty. 402 00:31:00,640 --> 00:31:05,200 And let me put it this way. That kind of thing leaves intellectual scars 403 00:31:05,920 --> 00:31:09,920 that is simply unfathomable to people who haven't actually lived through that. 404 00:31:10,640 --> 00:31:17,760 So to give you a modern equivalent. So this is the equivalent of the changes 405 00:31:17,760 --> 00:31:23,520 to modern Western political elites in terms of their ideological orientation 406 00:31:23,520 --> 00:31:26,320 or the way that they think about the world, the way they think about economic 407 00:31:26,320 --> 00:31:30,720 policy-making, And the role of the state after something like World War II. 408 00:31:30,720 --> 00:31:36,560 But that was probably one of the more appropriate comparisons to how big 409 00:31:36,560 --> 00:31:40,800 a seismic shock this actually was. Up until that point dynasties came and went 410 00:31:42,240 --> 00:31:46,240 but the ruling elite itself never actually completely lost power to the peasants. 411 00:31:47,760 --> 00:31:52,880 So the rulers could tell themselves that our policies work. The peasants may 412 00:31:52,880 --> 00:31:59,600 sometimes rebel but it's controllable and we can bring things back under control 413 00:31:59,600 --> 00:32:05,600 through some pretty tried and true methods. Expanding the military, giving off 414 00:32:05,600 --> 00:32:08,080 some kind of economic relief, making sure we have enough 415 00:32:08,080 --> 00:32:14,480 family relief for the peasants. By this point around 1600 in the later Ming 416 00:32:14,480 --> 00:32:17,520 people were thinking we have a pretty nice playbook for dealing 417 00:32:17,520 --> 00:32:21,440 with peasant rebellions. We know how to manage them. Then the late Ming 418 00:32:21,440 --> 00:32:25,200 rebellions come along, they kill off the dynasty, and this completely shifts 419 00:32:25,200 --> 00:32:31,280 the way that elites think about peasants. Up to this point you could talk mainly 420 00:32:31,280 --> 00:32:36,320 about tax policy and you could talk about the state-peasant relationships 421 00:32:36,320 --> 00:32:41,600 largely in the domain of morality. You could say raising taxes was 422 00:32:41,600 --> 00:32:45,920 morally questionable but it's not the kind of thing that we really think 423 00:32:45,920 --> 00:32:50,480 is likely to kill off the entire dynasty. It's not likely to be the kind of thing 424 00:32:51,440 --> 00:32:55,840 that fundamentally threatens the entire existence of us the political elite. 425 00:32:57,280 --> 00:33:01,680 That all changes after the end of the Ming. Because for the first time you actually have 426 00:33:01,680 --> 00:33:06,320 a dynasty that's killed off by the peasants. And so right after the Ming collapse 427 00:33:06,320 --> 00:33:09,920 during the Ming-Qing transition governmental thinking about 428 00:33:09,920 --> 00:33:13,200 what the appropriate size of the state actually is completely changes. 429 00:33:14,480 --> 00:33:19,200 Instead of arguing that raising taxes is immoral anymore, for now 430 00:33:20,720 --> 00:33:24,320 the overwhelming argument being presented by the elites is well actually 431 00:33:24,960 --> 00:33:28,320 it's not that raising taxes isn't moral anymore. We knew that it was immoral 432 00:33:28,320 --> 00:33:31,680 all along but we were willing to bear with the moral consequences 433 00:33:31,680 --> 00:33:37,920 as long as there was some other greater good to be gained. But now we have 434 00:33:37,920 --> 00:33:42,800 an actual example we know for sure that given our current economy if taxes 435 00:33:42,800 --> 00:33:46,320 go beyond a certain level the peasants are gonna rise up and kill us. 436 00:33:47,920 --> 00:33:52,720 And that triggers a massive sea change in the way that they deal with fiscal policy. 437 00:33:52,720 --> 00:33:56,880 'Cause again morality is a constraint against governmental behavior 438 00:33:56,880 --> 00:34:01,840 but it's a weak constraint. You can reason yourself out of moral problems all kinds 439 00:34:01,840 --> 00:34:07,200 of ways. You can in your head engage in all kinds of dumb trolley problems 440 00:34:07,200 --> 00:34:11,120 to talk yourself out of pretty much any possible moral conundrum. 441 00:34:14,720 --> 00:34:19,360 When that kind of logic hardens into self-survival the mental concerns 442 00:34:19,360 --> 00:34:26,320 become much harder. Saying that peasant rebuttals are going to kill you if you 443 00:34:26,320 --> 00:34:30,960 raise taxes is a vastly stronger political constraint against governmental 444 00:34:30,960 --> 00:34:40,560 behavior than saying raising taxes are immoral. Honestly I tend 445 00:34:40,560 --> 00:34:45,280 to think of this as just innate human nature. When I tell my kids, who are 7 and 5, 446 00:34:46,160 --> 00:34:52,400 that it's wrong for you to do x, 5 out of 10 times they might actually pay attention 447 00:34:52,400 --> 00:34:57,120 to me but I'm pretty lucky if 2 out of 10 times they actually listen to me. 448 00:34:58,160 --> 00:35:03,600 Moral persuasion works sometimes with toddlers but usually they'll think 449 00:35:03,600 --> 00:35:07,520 whatever, dad is writing off about morality again, who cares. 450 00:35:08,960 --> 00:35:14,560 That said when I say do this and you will go to your room for 20 minutes, 451 00:35:15,120 --> 00:35:19,200 that works so much better than saying do this and it's immoral. 452 00:35:19,200 --> 00:35:22,480 Of course the best kind of parenting usually is the kind that uses both. 453 00:35:22,480 --> 00:35:28,160 You have to have a moral carrot and you have to have a stick as well. 454 00:35:28,800 --> 00:35:35,200 But in this case only until the Qing did the stick actually really emerge 455 00:35:35,200 --> 00:35:39,600 in Chinese political thoughts. Up until then it was only the moral carrot, 456 00:35:39,600 --> 00:35:42,720 and the moral carrot didn't really work for most of Chinese history. 457 00:35:43,600 --> 00:35:46,720 Now you have the stick and all of a sudden governmental policy completely firms up. 458 00:35:50,640 --> 00:35:55,040 The interesting thing in all of this is the historians. The interpretation 459 00:35:55,040 --> 00:36:01,520 of Ming collapse, the Ming collapsed because it raised taxes too heavily 460 00:36:01,520 --> 00:36:06,880 on peasants, is actually kind of ridiculous. 'Cause late Ming taxes, as far as we can 461 00:36:06,880 --> 00:36:10,240 tell didn't really have much to do with peasant rebellions at all. 462 00:36:10,240 --> 00:36:14,960 Rather the problem with the late Ming, the reason why you have so many 463 00:36:14,960 --> 00:36:18,400 peasant rebellions in the late Ming is actually the opposite. Because of 464 00:36:18,400 --> 00:36:24,720 this little ice age, temperatures plummeted across the globe in the early 1600s 465 00:36:24,720 --> 00:36:27,440 Because of that, because of climate change -- climate change right -- 466 00:36:27,440 --> 00:36:30,880 because of climate change there were massive famines in Northwestern China. 467 00:36:30,880 --> 00:36:36,320 The state at that point was so strapped of cash that it didn't have the resources 468 00:36:36,320 --> 00:36:40,240 to offer famine relief to peasants who are suffering because of the famines. 469 00:36:40,240 --> 00:36:46,240 When peasants starve they revolt and want to sack their landlords' households 470 00:36:46,240 --> 00:36:51,200 and want to sack estates to get food. The famine goes on long enough, 471 00:36:51,200 --> 00:36:53,760 they will want to sack governmental granaries to get grain and so on 472 00:36:53,760 --> 00:36:56,720 and so forth. So the real problem with the peasant rebellions actually 473 00:36:56,720 --> 00:37:00,160 was the complete opposite of the state taxing too heavily. 474 00:37:00,160 --> 00:37:03,120 Rather the problem really was the state was taxing too little 475 00:37:03,120 --> 00:37:07,200 from non-famine stricken areas so that it didn't have the cash 476 00:37:07,200 --> 00:37:11,200 to actually offer family relief to the peasants. Which begs 477 00:37:11,200 --> 00:37:16,400 the question, if that was the case, which is what historians believe now 478 00:37:16,400 --> 00:37:21,520 it is, why did Qing elites actually buy completely into the "we raised taxes 479 00:37:21,520 --> 00:37:25,520 too heavily therefore the peasants killed us off" kind of narrative of late Ming collapse. 480 00:37:26,720 --> 00:37:31,600 This is something that draws upon a branch of cognitive theory, 481 00:37:31,600 --> 00:37:34,400 a branch of psychology. I don't know if there are any psych majors 482 00:37:34,400 --> 00:37:41,040 in the audience today. Human beings tend to interpret facts according 483 00:37:41,040 --> 00:37:43,280 to their a priori normative worldview. 484 00:37:48,880 --> 00:37:52,320 There was an example a couple years ago done by a bunch of people 485 00:37:52,320 --> 00:38:00,480 at Harvard. So if I had to tell you I bring a bunch of right-wing Republicans 486 00:38:00,480 --> 00:38:04,000 and a bunch of left-wing Democrats and I give them the same kind 487 00:38:04,000 --> 00:38:08,400 of information about climate change, based off of your intuitions do you think 488 00:38:08,400 --> 00:38:13,600 that will make them move towards the middle, come to a consensus 489 00:38:13,600 --> 00:38:16,400 about climate change or do you think it's going to make them more polarized? 490 00:38:17,200 --> 00:38:19,680 Just show of hands, how many of you think it's going to make them come 491 00:38:19,680 --> 00:38:20,400 to a consensus? 492 00:38:22,080 --> 00:38:26,400 I show them extensive neutral objective scientific research about climate change. 493 00:38:27,840 --> 00:38:30,400 How many people think that's going to generate political consensus 494 00:38:30,400 --> 00:38:31,840 on climate change? 495 00:38:33,040 --> 00:38:35,440 Okay you guys are more jaded than I thought but this is good. 496 00:38:36,320 --> 00:38:41,040 So the experiments show that if you show people with a priori biases 497 00:38:41,040 --> 00:38:44,320 against a certain kind of thing information about that thing, 498 00:38:45,360 --> 00:38:48,080 they're not going to interpret the information neutrally. 499 00:38:48,080 --> 00:38:51,840 They're going to interpret the information in whatever way best conforms to their 500 00:38:53,360 --> 00:38:58,480 normative or psychological priors. So the thing about the Chinese elites 501 00:38:58,480 --> 00:39:02,240 in the late Ming period was they have a normative prior telling them taxation 502 00:39:02,240 --> 00:39:08,080 is morally bad. So when a peasant rebellion comes along and kills off the dynasty 503 00:39:08,880 --> 00:39:12,560 their natural inclination given that kind of worldview is to think 504 00:39:12,560 --> 00:39:20,560 finally the fates have caught up with us. We were tempting fate for so long 505 00:39:20,560 --> 00:39:24,480 by raising taxes even though we knew it was morally bad and now finally 506 00:39:24,480 --> 00:39:27,520 the peasants have come along to punish us. When you have 507 00:39:27,520 --> 00:39:32,640 that kind of normative worldview lurking in the background and something 508 00:39:32,640 --> 00:39:39,520 catastrophic happens that semi-reasonably lends itself to a certain kind of empirical 509 00:39:39,520 --> 00:39:43,520 interpretation that reinforces your normative priors, most likely you're gonna 510 00:39:43,520 --> 00:39:47,040 embrace that kind of interpretation. And that's exactly what happened 511 00:39:47,040 --> 00:39:50,880 in the Ming-Qing context. So because they had this normative prior 512 00:39:50,880 --> 00:39:54,080 that taxation was bad, once the peasant rebellions came along they completely 513 00:39:54,080 --> 00:39:58,240 bought into the narrative that was initially pitched by a couple of people that raising 514 00:39:58,240 --> 00:40:04,000 taxes killed off the previous dynasty. Once they bought into that and once 515 00:40:04,000 --> 00:40:12,960 the moral commandment becomes a pragmatic self-survival kind of common 516 00:40:12,960 --> 00:40:18,720 sense, that's when the entire behavioral foundations of the Qing political elite 517 00:40:18,720 --> 00:40:22,880 completely shift against taxation. And so for the next 200 - 230 years 518 00:40:22,880 --> 00:40:28,880 you operate under a constant living fear of raising taxes too high that the peasants 519 00:40:28,880 --> 00:40:29,680 are gonna kill you off. 520 00:40:31,760 --> 00:40:35,600 So how does this finally come to an end at the end of the Qing? 521 00:40:35,600 --> 00:40:41,040 At the end of the Qing the state runs into an extremely severe fiscal crisis 522 00:40:41,040 --> 00:40:43,760 for a number of reasons. It keeps losing battles to foreign powers. 523 00:40:44,480 --> 00:40:48,320 There are again a number of other famines, but the main problem was losing battles 524 00:40:48,320 --> 00:40:52,320 to foreign powers, especially losing battles to the Japanese. 525 00:40:54,400 --> 00:40:58,080 Back then if you lost the war against the foreign nation, the foreign nation usually 526 00:40:58,080 --> 00:41:01,680 charged you massive amounts of indemnities. You saw this in 527 00:41:01,680 --> 00:41:05,280 the Versailles Treaty after World War I and that was an argue of the main cause 528 00:41:05,280 --> 00:41:14,080 for the rise of the Nazi Party in Germany. So China got slapped with massive 529 00:41:14,080 --> 00:41:17,200 war indemnities that it owed to various kinds of foreign powers -- 530 00:41:17,200 --> 00:41:22,160 Japan, England, France. And by 1900 because of all that it had gone completely 531 00:41:22,160 --> 00:41:26,400 bankrupt. Once the state finally goes completely bankrupt, despite all this 532 00:41:26,400 --> 00:41:34,560 incredibly strong fear of peasant rebellion, it has to raise taxes no matter what, 533 00:41:34,560 --> 00:41:39,600 otherwise it's going to kill itself. So finally it raises taxes. And guess what, 534 00:41:39,600 --> 00:41:44,080 because it had kept the tax rate, the absolute volume of taxes 535 00:41:44,080 --> 00:41:50,720 completely unchanged, for 200 years, during that same period, the economy 536 00:41:50,720 --> 00:41:57,840 and the population both tripled. Taxes were unprecedentedly low in Chinese history 537 00:41:57,840 --> 00:42:02,480 at this point in time so if you raise taxes, well I mean the peasants won't care so much. 538 00:42:03,360 --> 00:42:09,200 If you raise taxes from 1% to, I don't know, 2%, well yeah they're going to grumble 539 00:42:09,200 --> 00:42:14,240 but honestly it's not that big a dent in their overall financial circumstances. 540 00:42:14,880 --> 00:42:21,120 So after 1900 when they're finally forced out of complete desperation to raise taxes 541 00:42:21,120 --> 00:42:24,000 they finally discovered, oh my god, we can raise taxes and not have 542 00:42:24,000 --> 00:42:31,200 the peasants kill us. So that sets off a series of tax hikes going past the end 543 00:42:31,200 --> 00:42:36,480 of the dynasty after 1912, going into the republican era, going into the PRC, 544 00:42:36,480 --> 00:42:45,600 where the tax rate on agriculture goes from 0.8% in 1900 all the way up to 12-13% 545 00:42:46,400 --> 00:42:53,200 in the early PRC. So once the government finally realizes that contrary to this 546 00:42:54,240 --> 00:42:58,720 dominant Qing political ideology of low taxes, we can actually raise taxes 547 00:42:58,720 --> 00:43:05,680 and not die from it, once it realizes it can do that it gets the taste of things 548 00:43:05,680 --> 00:43:09,920 and just never stops doing it all the the way across most of modern Chinese history. 549 00:43:09,920 --> 00:43:17,600 Until by the mid-20th century, by the mid-PRC like by the 1960s, China actually 550 00:43:17,600 --> 00:43:22,640 had one of the most aggressive agricultural tax regimes in the entire world. 551 00:43:23,680 --> 00:43:27,920 The interesting thing is because of that raising taxes, because of the fiscal 552 00:43:27,920 --> 00:43:31,680 surplus that brought to the Chinese state, China was actually finally 553 00:43:31,680 --> 00:43:36,280 able to industrialize in the 1950s and '60s. So up until that point you starve yourself 554 00:43:36,280 --> 00:43:42,080 of taxes, you treat your people leniently and nicely, you don't raise taxes, 555 00:43:42,080 --> 00:43:45,680 everything's fine. But you can't industrialize because the state's too small. 556 00:43:46,880 --> 00:43:52,080 Once you finally, after the early PRC, once the communist regime completely 557 00:43:52,080 --> 00:43:56,160 ditches all caution to the wind and thinks we're just gonna tax the hell out of 558 00:43:56,160 --> 00:44:01,760 these peasants, we're gonna tax them up to the point where they're nearly 559 00:44:01,760 --> 00:44:05,040 on the verge of breaking, we're gonna maximize our fiscal income, 560 00:44:05,040 --> 00:44:08,240 we're gonna maximize the size of the state because we really want to industrialize. 561 00:44:08,240 --> 00:44:11,760 It turns out they can actually get away with that. And even despite the fact that 562 00:44:11,760 --> 00:44:16,240 that kind of policy was arguably partially responsible for massive peasant suffering 563 00:44:16,240 --> 00:44:20,960 during the Great Leap Forward, all kinds of peasant famines in the early PRC, 564 00:44:21,760 --> 00:44:25,040 despite all that the peasants still don't rebel. Because honestly rebellion 565 00:44:25,040 --> 00:44:28,160 is a hugely costly thing for peasants. Like why would you want to risk 566 00:44:28,880 --> 00:44:34,800 a 50% chance of death in a rebellion when you have any reasonable shot 567 00:44:34,800 --> 00:44:40,560 of staying alive as usual peasants. Peasants don't rebel unless they're 568 00:44:40,560 --> 00:44:44,640 completely desperate. So it turns out you can tax them really heavily. 569 00:44:45,840 --> 00:44:50,480 Once you do that though that finally gives the state the fiscal resources 570 00:44:51,040 --> 00:44:58,000 to industrialize. So that process, the discovery that you can actually tax 571 00:44:58,000 --> 00:45:03,440 and not die, the constant rewriting of the elite perception of what is 572 00:45:03,440 --> 00:45:07,680 the fiscal limitation of the governing  economy throughout the early 20th century, 573 00:45:07,680 --> 00:45:12,720 that entire process fundamentally changes the government's imagination of what role 574 00:45:12,720 --> 00:45:16,880 the state should actually play in the economy. Because throughout 575 00:45:16,880 --> 00:45:20,560 the entire Qing, because the state is constantly shrinking vis-a-vis the economy, 576 00:45:21,520 --> 00:45:24,240 it has no administrative capacity, has very little economic capacity, 577 00:45:24,800 --> 00:45:29,600 the state basically plays no role. The economy self-regulates. 578 00:45:29,600 --> 00:45:35,520 Everything is conducted on a market to market basis. Because of that 579 00:45:35,520 --> 00:45:39,200 and a set of other reasons that we can talk about later, there is very little capital 580 00:45:39,200 --> 00:45:44,480 accumulation in the overall economy. Finally once you start to change all that, 581 00:45:44,480 --> 00:45:50,000 once you start to more aggressively tax, the state has the fiscal resources 582 00:45:50,000 --> 00:45:53,680 to finally do something to the economy. And once it starts doing that and having 583 00:45:53,680 --> 00:46:00,160 some moderate success, even in the pre-PRC republican era, of seeing returns 584 00:46:00,160 --> 00:46:03,840 to that, seeing that the economy slowly beginning to industrialize, seeing China 585 00:46:04,480 --> 00:46:08,720 slowly not quite pull even but pull closer to first world countries in terms 586 00:46:08,720 --> 00:46:14,240 of economic capacity, that fundamentally shifts the entire policy orientation 587 00:46:14,240 --> 00:46:20,080 of Chinese elites. And so in much the same way that the Qing 588 00:46:20,080 --> 00:46:24,400 response to Ming collapse was never again, like never again 589 00:46:24,400 --> 00:46:29,440 will we raise taxes so aggressively, the republican and the PRC response 590 00:46:29,440 --> 00:46:34,880 to the Qing is also never again. Never again will we stick ourselves 591 00:46:34,880 --> 00:46:37,760 with that weak a state apparatus. Look what it gave us. 592 00:46:37,760 --> 00:46:43,200 It gave us a century of suffering, it gave us multiple decades of humiliation 593 00:46:43,200 --> 00:46:46,720 and constant military defeats at the hands of foreign powers. 594 00:46:47,440 --> 00:46:49,680 Never again will we actually put ourselves through that. 595 00:46:50,400 --> 00:46:54,800 So what do we do now? The path towards national prosperity, 596 00:46:54,800 --> 00:46:58,160 the path towards military power, the path towards modernization 597 00:46:58,160 --> 00:47:03,120 runs through the state. The Chinese belief in the state, this incredibly strong 598 00:47:03,120 --> 00:47:08,000 Chinese elite belief in the state playing the major role in the economy 599 00:47:08,960 --> 00:47:13,600 starts off in the early 20th century as a backlash against what they perceive 600 00:47:13,600 --> 00:47:19,360 to be Qing weakness. And it was, unlike the Ming perception, this was 601 00:47:19,360 --> 00:47:24,880 an accurate perception. The Qing had indeed suffered because of the weakness 602 00:47:24,880 --> 00:47:30,640 of its state. China's international standing had indeed plummeted and completely 603 00:47:30,640 --> 00:47:36,400 caved because of the weakness of the Chinese state. And so once they 604 00:47:36,400 --> 00:47:40,240 start to finally realize this the Chinese economy does start to take off 605 00:47:40,240 --> 00:47:44,480 a little bit again. But more importantly as a matter of political ideology, 606 00:47:44,480 --> 00:47:49,200 it completely locks the Chinese elite for the next century or so in this mode 607 00:47:49,200 --> 00:47:54,000 of thinking that the state has to be king in the economy. And that precedes 608 00:47:54,000 --> 00:47:58,240 socialism, it precedes communism, it's a constant theme of the Chinese elite 609 00:47:58,240 --> 00:48:01,680 throughout the entire 20th century. It continues even today. 610 00:48:02,400 --> 00:48:07,120 Because honestly right now if you ask the Chinese government honestly, 611 00:48:07,120 --> 00:48:10,720 Xi Jinping's policy makers, if you ask Liu He, how much do you actually believe 612 00:48:10,720 --> 00:48:14,880 in state planning? Well no one really believes in planned economies 613 00:48:15,600 --> 00:48:19,840 according to the socialist ideal. None of these guys are really socialist 614 00:48:19,840 --> 00:48:22,960 or communist in the way that they understand the economy. 615 00:48:22,960 --> 00:48:27,760 But at the same time they remain completely committed to a statist notion 616 00:48:27,760 --> 00:48:36,640 of the economy. To give you guys a sense of how this plays out in current affairs, 617 00:48:37,760 --> 00:48:41,280 no matter what the Trump administration does China is never gonna give up 618 00:48:41,840 --> 00:48:47,133 its industrial subsidies to firms. It's never gonna give up a state-run, 619 00:48:47,920 --> 00:48:53,280 state-driven industrial policy. It's never gonna allow the Chinese economy 620 00:48:53,280 --> 00:48:58,800 to completely be a relatively unregulated market economy in the American, 621 00:48:58,800 --> 00:49:05,200 or perhaps I don't know Indian, model. That belief in the prominence of the state, 622 00:49:06,160 --> 00:49:11,360 of the critical importance of the state to the economy is so deep in the Chinese 623 00:49:11,360 --> 00:49:16,560 elite political psyche that honestly it would take something catastrophic, 624 00:49:16,560 --> 00:49:20,560 perhaps like a deep deep recession that might overthrow the party, 625 00:49:20,560 --> 00:49:24,560 to actually overturn that. So this is the way that intellectual 626 00:49:24,560 --> 00:49:32,640 and political paradigms lurk, operates. As a general matter, human political 627 00:49:32,640 --> 00:49:38,640 ideology is not continuous. No matter what scholars want you to think, 628 00:49:38,640 --> 00:49:44,000 politics, ideology, your beliefs about how the world works as a matter of general 629 00:49:44,000 --> 00:49:47,680 social and political belief, they don't operate in a continuous 630 00:49:47,680 --> 00:49:51,920 rational fashion. No one is constantly reassessing their beliefs based on 631 00:49:51,920 --> 00:49:58,560 empirical evidence. What tends to happen, the only way you get major paradigm shifts 632 00:49:58,560 --> 00:50:03,680 is through major crises. Ming collapse, the collapse of the Qing, the collapse 633 00:50:03,680 --> 00:50:07,120 of the imperial system. It would take something of that scale, 634 00:50:08,880 --> 00:50:13,680 some fundamental economic catastrophe, the likes of which we have not yet seen 635 00:50:13,680 --> 00:50:17,200 in modern Chinese history to probably force the Chinese elites 636 00:50:17,200 --> 00:50:21,840 out of this statist mode of thinking that they entered after the Qing collapse. 637 00:50:23,280 --> 00:50:27,440 And so that's I think why you should care about this part of Chinese history 638 00:50:27,440 --> 00:50:32,080 even if you don't really care about Chinese history in general because this is the part 639 00:50:32,080 --> 00:50:36,560 of Chinese history that directly explains one of the deepest political instincts 640 00:50:36,560 --> 00:50:40,240 of the modern Chinese political elite when it comes to economic policy-making 641 00:50:40,240 --> 00:50:44,080 and when it comes to designing the overall shape of the party state 642 00:50:44,080 --> 00:50:45,040 or the Chinese economy. 643 00:50:46,480 --> 00:50:49,520 So I hope I've at least made a reasonable case of that to you guys 644 00:50:50,080 --> 00:50:54,560 and for now let's say we have 35 minutes of questions. 645 00:50:55,120 --> 00:51:02,320 Okay, great. Thank you.