Chapter 301: Reflections on the Fiscal Crisis

The rise of the Great Ming Empire occurred in an era of warlords contending for supremacy, a time of turbulence and instability.

The Mongol rule could no longer be sustained after just over sixty years, and within barely a century it was completely overthrown. They had won the empire on horseback and tried to govern it from horseback as well, with decades passing and not a single reform. Even the famed chancellor Toqto'a was powerless to turn the tide.

As the saying goes, when the Yuan "lost the deer, all under heaven gave chase."

The warlords contending at the end of the Yuan were nothing like the roving bandits of today, who play at children's games. Men we can rattle off at will—Guo Zixing, Chen Youliang, Zhang Shicheng and the like—were heroes of their moment, but the Chongzhen Emperor understood that every single one of them, placed in the present age, would be a thousand times superior to the likes of Li Zicheng and Zhang Xianzhong.

If it were Chen Youliang holding the northwest right now, the Chongzhen Emperor admitted to himself that he would be utterly no match for that ambitious and ruthless warlord.

The end of the Han saw heroes emerge in abundance, and the realm ultimately returned to unity. The end of the Yuan likewise saw warlords contend, and a single king rose above them all to gather the realm under his rule—and that king was a beggar-born monk named Zhu Chongba.

Truly speaking of emperors of lowly origin, no one in any dynasty could match Zhu Yuanzhang. Remember, Liu Bang had at least been a village head overseeing a territory of thirty li.

In 1368 AD, Zhu Yuanzhang proclaimed himself emperor in Nanjing, establishing the Great Ming Empire—which had endured to this very day, now tottering and trembling like a man in his dotage.

The Chongzhen Emperor had at least attended university in his later life, so he naturally understood one principle: throughout China's long feudal society, the forces working behind the rise and fall of dynasties were often things not fit to be spoken of openly, because what was put on display was always class struggle—but what lay behind it all was, in truth, economics.

As a vital component of the economy, the role of taxation could not be underestimated.

In ancient times, taxation took many forms, and very little of it was directly called "tax." The Chongzhen Emperor, inheriting the memories of his previous life, had also gained a considerable understanding of the taxation of this era.

The taxation of this period mostly appeared under names such as levies, tribute, military supplies, corvée labor, miscellaneous exactions, and so forth. The methods of payment were also numerous—some in kind, some in currency, some in labor service, and so on.

When the Chongzhen Emperor had first crossed over, he exempted the realm from levies for three years and permanently abolished the three "military supplies" for the Liaodong army, but he had not exempted "taxes" for three years. This was clearly the correct move, because the meaning contained in the character "tax" was far too broad.

What the Ming dynasty called "tax" was often linked to "compensated" exchange—such as leases, interest, buying and selling, and so forth. In short, the "tax" of this era carried numerous meanings, vastly different from the "tax" that later generations loudly proclaimed.

In fact, as early as when Zhu Yuanzhang first established the Great Ming, he had already realized that merchants amassing excessive wealth would create a fiscal crisis, and he had already set up a basic set of rules and government offices for levying "commercial taxes."

Only, the "commercial tax" of that time was not the same "commercial tax" that the Chongzhen Emperor now wished to collect.

The purpose of the commercial tax system Zhu Yuanzhang had established was merely to restrict merchants from reaping excessive profits and to let the court turn a profit—not the desperate expedient of the present Chongzhen, who, with no way to cope with the court's annual fiscal deficits, sought to take money from merchants' pockets to fill the national treasury.

In the early years of the Ming's founding, Zhu Yuanzhang vigorously rectified commerce and the court. Besides launching great purges to lay the foundation for later generations, he established Tax Collection Offices at the prefecture level, Tax Collection Bureaus at the county level, and branch offices and branch bureaus at the circuit and town level, suppressing the plutocrat cliques.

According to certain records in the court, during the Hongwu reign, across the entire realm's two capitals and thirteen Provincial Administration Commissions, there were fully over four hundred and fifty tax collection offices and bureaus. The commercial taxes collected by each office and bureau had to be remitted to the Provincial Administration Commission at year's end, which would then forward them to treasuries such as the Taicang treasury in the capital, to be held for national use.

One could well imagine what enormous profits this represented.

In court deliberations, the Chongzhen Emperor learned from Jiang De that the commercial taxes currently collected by the court were divided into transit taxes and residence taxes. Transit taxes were levied on goods and vessels passing through—including customs at industrial checkpoints, tariff barriers, and gate taxes. Residence taxes referred to taxes on goods being unloaded, stored, warehoused, kept in shops, or sold from stalls.

During the Hongwu and Yongle reigns, the court's "commercial tax" revenue came mainly from two sources. The first was the warehouse tax, originally called official shop fees—a matter the Chongzhen Emperor had only dug up by flipping through old records when he had nothing better to do after crossing over.

Chongzhen now very much enjoyed examining the things left by the Old Ancestor, because these were things that later generations could never find no matter how they searched. Some things the Old Ancestor had left behind could be discarded, but others, when brought back out, proved extremely useful—there were always surprises.

In the early Ming, merchants gathered in droves in the two capitals and the markets flourished. But Nanjing's population was so large that housing was in short supply, and merchants had no warehouses for their goods. To guarantee the supply of materials, Zhu Yuanzhang had warehouses built in Nanjing and forcibly decreed that outside merchants must reside and store their goods in the court-built warehouses.

Because of Zhu Yuanzhang's authority, the merchants naturally dared not utter a single word of protest. Once the warehouses were established, the court began collecting the so-called "warehouse tax" with perfect legitimacy.

As the name implies, merchants who lodged and stored goods in the warehouses had to pay a certain amount of tax, levied at a rate of one part in thirty, and this became one of the main sources of "commercial tax" from the early Ming through the mid-Ming period.

However, the Chongzhen Emperor also learned from Feng Quan that the warehouse tax, due to protests from certain great households in the final years of the Wanli reign, backed by the voices of Grand Secretariat ministers at the time, was now collected only in Nanjing and Beijing. Moreover, since the merchants in these two places were mostly plutocrats with many eyes and ears in the court, the results were negligible.

Besides the warehouse tax, the other main source of the court's former "commercial tax" was the "market stall and shopfront tax," first levied in the first year of the Hongxi reign of Emperor Renzong. Emperor Renzong of the Ming believed that the reason paper currency was not circulating smoothly was because merchants who stored goods were not taxed, compounded by obstruction from shops and storefronts.

Thereupon, Emperor Renzong of the Ming issued an edict taxing all official and private establishments engaged primarily in commerce in the two capitals.

During the Hongxi reign, the court decreed that all tax payments must be made in paper currency. In the fourth year of the Xuande reign of Emperor Xuanzong, Emperor Xuanzong of the Ming continued to intensify the collection of "commercial taxes," extending this tax to all major towns across the realm.

In addition, Emperor Xuanzong of the Ming issued an edict increasing the tax rate fivefold, stipulating that all vegetable gardens primarily engaged in commerce—whether in planting, transport, storage, or sale—were uniformly subject to this tax.

After the twenty-sixth year of the Wanli reign, with the court dispatching eunuch tax commissioners, the market stall and shopfront tax began to expand without limit. But because local officials later levied it indiscriminately while failing to remit the proceeds to the court, the people were driven to destitution, and it repeatedly sparked popular uprisings.

During the Tianqi reign, when the eunuch faction—called "ruinous to the state and the people" by the Donglin Faction—was in power, the silver collected from the market stall and shopfront tax increased year by year, and all sorts of commercial taxes that had long lost their effectiveness began once again supplying money to the court.

After the eunuch faction fell from power, during the first sixteen years of Donglin governance—an era people called "all worthy men filling the court"—the market stall and shopfront tax, though not abolished, reverted to a state where no silver could be collected. Like the warehouse tax, it could not be relied upon at all, and the court grew poorer and poorer.

It was not until last year, when the Chongzhen Emperor crossed over and discovered he had no other means of obtaining silver, that he was forced to rely on confiscating estates and executing heads to survive. Yet amusingly, the more "clean and upright" the Donglin Faction was rumored to be, the greater the wealth found in their households.

It was precisely the property of these clean and upright ministers that had allowed the present Chongzhen Emperor to stumble along and hold on until now.

The method of collecting the market stall and shopfront tax was that each shop paid monthly to the Capital Tax Supervisory Office or the Tax Collection Office or Bureau, and the government issued a license. The authorities checked once a month, and anyone found to have missed payment or concealed income was punished according to law and fined thousands of strings of paper currency.

Besides the two main commercial taxes mentioned above, the court also levied additional taxes on wine and vinegar, fishing, deed contracts, brokerage, portage over dams, bridge crossings, carts and horses, incense, and so forth.

Thus the Chongzhen Emperor came to recognize that the problem at present was not whether the court levied commercial taxes, but that since the founding of the Ming, nearly every reign had intensified the collection of commercial taxes, yet after the fifteenth year of the Wanli reign, the money the court could obtain grew less and less, until now it had reached a point of almost nothing at all.

Searching for the cause, the Chongzhen Emperor, with his knowledge from later generations, was exceptionally clear-headed at such a moment.

The "commercial tax" fundamentally could not be collected from the merchants and landowners. No matter how it was instituted, those merchants had countless methods to evade payment, and with their own people in the court, they could also avoid punishment.

In the end, these so-called "commercial taxes," without exception, were all shifted onto the backs of the common people. And the historical Chongzhen Emperor, though he had some awareness of this, ultimately could not put his ideas into practice due to his lack of political skill and the weaknesses of his character.

The present Chongzhen was not burdened by such mental constraints. After two days of deliberation with the Grand Secretariat, he had already gained a clear understanding of the composition of commercial taxes in this era and the fundamental crux of the fiscal problem.

Hearing Wei Zaode request retirement, the Chongzhen Emperor actually understood his thinking. After a moment's consideration, he nodded and said:

"My minister has labored with great merit, and your request for retirement is granted. The Directorate of Ceremonial shall draft the edict: confer the title of Junior Tutor to the Heir Apparent, with a monthly allowance of four shi of rice and six servants, for life. Due to the ongoing war, you shall remain in the capital in idle residence, reporting your movements daily, and shall not return to your native place, awaiting my further command."