Chapter 1052: Capitalism Born of Losses! (Please Subscribe)

"Manager Zhang, you're saying that even running a farming estate can lose money?"

Wu Sanmei's question sounded amateurish at once — not amateurish about farming, but amateurish about business. Every kind of trade has its gains and losses, and farming is certainly no exception.

So Zhang Guanghui grew all the more certain in his mind: of the two before him, the man was an assistant manager of the Royal Chamber of Commerce — most likely the sort sharper than a monkey and more ruthless than a wolf. And the woman was surely the daughter of some military house in Liaodong, the kind this Assistant Manager Zhu must have spent a great deal to marry, and whom he spoiled every day until she knew nothing of the world.

And the reason she was now so concerned about farming estates in Liaodong was most likely that her family wanted to set one up there. A Liaodong military house, after all — fallen leaves return to their roots, the heart clings to one's homeland, and they probably cared nothing for profit or loss.

"Of course some lose money!" Zhang Guanghui's thoughts had already turned several times over, and he had caught the scent of gold and silver. Then he sighed. "The farming trade has never been easy. Drought, flood — either way you lose! Even without drought or flood, and without any insect plague, there's no guarantee grain prices won't fall. Ever since the great Yellow River–Huai River canal project was completed, the price of wheat and millet in the Great Ming has been falling without stop. Nowadays a shi of top-grade white flour won't fetch even six qian of silver! If Liaodong truly recovers, and the lands along both banks of the Liao River are opened up on a large scale, grain prices will drop at least another twenty percent — a shi of white flour, I reckon, won't even find a buyer at five qian!"

"But even back when grain prices were soaring, plenty of people still lost money farming."

"How could anyone lose money when grain prices were soaring?" Wu Sanmei asked, puzzled.

Zhang Guanghui gave a bitter smile. "When grain prices were high, land was scarce; when land was scarce, land prices were high, and the cost of renting land to farm was dear. And with little land and many people, the farmers themselves had to eat, so labor was relatively dear too. Once land prices rose and labor rose, there was little capital left. Farming requires capital! If you had none of your own, you had to borrow, and the interest was unbearably high. If you refused to borrow, then you had to skimp on seed, tools, and irrigation. So whether you borrowed or not, the chance of losing money was hardly small!"

"Then what if a family has its own land and its own capital?" Wu Sanmei asked. "That should be a sure profit with no loss, right?"

Zhang Guanghui's smile grew even more bitter. "That loses even more! What were land prices in the first year of Hongxing? What are they now? In the first year of Hongxing, even hillside land cost more than flatland does today. Those who spent money buying land back then are weeping now and can't even cry it out. If they grabbed cheap hillside land, they can't even rent it out now. Over in the two prefectures of Dengzhou and Laizhou, landowners are howling with losses everywhere. Even a great house like the Zuo family of Laiyang was badly wounded by buying up land in a frenzy after the Five-Year Pact!"

"I never imagined farming could be so hard!" Wu Sanmei furrowed her delicate brows and cast a glance at the Zhu Emperor — Aren't you supposed to be a wise sovereign? How come all the common folk under you are losing money!

Zhu Cilang understood Wu Sanmei's meaning, and could only answer with a wry smile — You can't blame this wise sovereign; it's all capitalism's fault!

This capitalism, you see, was actually born out of losses!

Behind every small workshop turned great factory, and every smallholder turned great estate, lie countless small workshop masters and small farm owners who lost their entire capital.

"Still, although some lose money running farming estates, it's more reliable than trade — agriculture is the root, commerce the branch!" Zhang Guanghui shifted his tone at this point. "Those who lost money farming were either without capital or simply too greedy. If one only wants to preserve one's patrimony through agriculture, it's still quite steady."

Wu Sanmei said, "But what if one has no time to manage it personally? How is the land-leasing market these days?"

"That... depends." Zhang Guanghui said. "In leasing land there are big tenants and small tenants. Big tenants have capital — they rent several hundred mu at once, the rent is secure, but they won't pay top rates. Small tenants are all without capital, and they even have to borrow at usurious rates from the landowner. Tenants like that, you must not lease your land to!"

"Why not?" Wu Sanmei asked, while stealing a glance at the Zhu Emperor — This one is a usury emperor! His loans reach as far as France and England! Why would he fear a few tenants defaulting?

"You and Assistant Manager Zhu are people of great wealth and rank — could you really go live in the countryside and watch over a bunch of miserable tenants?" Zhang Guanghui laughed. "If you don't keep a close eye on them, will they honestly pay their rent and debts?"

"That's true enough!" Wu Sanmei nodded, but thought to herself: Why does His Majesty never worry about his loans not being repaid? Surely he doesn't have the Embroidered Uniform Guard collecting debts for him?

"Assistant Manager Zhu, Madam Zhu," Zhang Guanghui said with a smile, "if you two wish to take advantage of the court's land-bond issue to buy farmland in western and eastern Liaodong as your patrimony, it would be best in the end to lease it long-term to big tenants — even if the rent is somewhat lower. The land in western and eastern Liaodong, even if brought back under cultivation, will require a great deal of capital sunk into it. And you two could hardly go live permanently in such a freezing place! Entrusting it to a steward would be even less reassuring. Better to contract the land out and let those big tenants who have capital and know farming open the wasteland first. After five or six years, when the fields are mature and the irrigation works are done, and the official roads and waterway docks of eastern and western Liaodong are built up, then you can take it back and raise the rent — everything will be easier to negotiate."

"But where are we to find big tenants who know how to farm dry land?" Wu Sanmei asked.

"I happen to know quite a few," Zhang Guanghui said with a smile. "When it comes to dry-land farming, none are better than us old Shandong farmers. Why doesn't Assistant Manager Zhu leave me a calling card, and after Liaodong is recovered, I'll introduce you two to a few big tenants. How about it?"

"All right." That naive sweet fool Wu Sanmei actually agreed readily, but the moment the words left her mouth she sensed something wrong. What was written on Zhu Cilang's calling card? Emperor of the Great Ming?

"Good, good, very good." Zhu Cilang nodded with a smile, and even produced a calling card he had prepared long ago and handed it to Zhang Guanghui.

On the card was boldly printed: Zhu Yaofei, Assistant Manager, Securities Department, Head Office of the Royal Chamber of Commerce.

"My lord, that Manager Zhang is a good man. How could you fool him with a fake calling card?"

On the way back to the traveling palace at Liaocheng, Wu Sanmei frowned slightly as she scolded the great Zhu Emperor.

Zhu Cilang burst out laughing. "You silly, naive woman — that Zhang Guanghui is the one deceiving you!"

"Deceiving me?" Wu Sanmei was taken aback. "How is he deceiving me?"

Zhu Cilang said with a smile, "You don't know yet, but once you hand your Liaodong estate over to his people to manage, you'll find out how he cheats you out of your money. By the way, when you get back, tell your father and Wu Sanfu — whatever you do, don't go messing around with estates beyond the passes."

"Aren't estates beyond the passes quite good?" Wu Sanmei asked, puzzled. "The land beyond the passes is fertile, can be joined into large tracts, suits horse-drawn plowing, and is convenient for transport. How could it lose money?"

"What trade has no losses?" Zhu Cilang smiled. "So what if the land is fertile and forms large tracts? Managing land is a meticulous business — you must calculate every detail and fight over every fraction. You can't be an absentee owner! This is a business that neither your father nor your brother can handle. Even I couldn't handle it."

There is no easy business in this world! Especially in freely competitive industries, business is all the harder.

An emperor as skilled at trade as Zhu Cilang — his Royal Chamber of Commerce only made big money in finance and real estate. In his previous life he had been in finance; his vision and management ability were unquestionably first-rate for this era, and he had also brought in the Huaiyang salt merchants and the southeastern sea merchants as partners, so of course it profited. As for real estate, it was mainly a matter of vision — he of course knew which parts of China had the most potential for development, and being emperor, he held the dominant hand in local development.

Outside of finance and real estate, Zhu Cilang invested very cautiously, making large investments only where he had no choice — iron smelting, armaments, shipbuilding, and the like. But because the Nanjing shipyard (which also had a branch in Shanghai) was poorly run, the Royal Chamber of Commerce's investments in "heavy industry" yielded little return.

Zhu Cilang continued, "If you want to make money, follow me, Zheng Zhilong, and Shen Tingyang. Whatever we buy, tell them to buy too — nine times out of ten they'll profit. If they go messing about on their own, sooner or later they'll lose their entire capital."

Wu Sanmei pouted slightly and nodded. "My father and third brother truly have no head for business. For more than ten years now, nothing they've traded in has made money. Only the two streets you gave them in Shanghai have profited."

Zhu Cilang chuckled. "Heh heh, your eldest and second brothers can't do business either. They ran two military governorships into such terrible losses! The people of your family all have the temperament of 'righteousness cannot manage wealth.' They can't do business — better to honestly serve as officials!"

(End of Chapter)