Chapter 1756 - Meng Xian
The confiscation ledgers compiled by the Enterprise Institute's Special Requisition Team alone contained over forty subcategories of items from the prefectural and county storehouses. If you added the seizure records from officials, clerks, and other private assets, the categories ran into the hundreds. Simply skimming through them was enough to exhaust Liu Xiang.
Hainan had always been a frontier backwater—a place of exile, a "remote and pestilent military prefecture." Metallic currency circulated only in small quantities, and commercial activity was rudimentary. Once the various counties there had been taken over, they were simply absorbed directly into Lingao's voucher-and-industrial economy. Guangzhou Prefecture, by contrast, was one of the wealthiest regions in all of southern China; its public and private reserves were immense, its systems labyrinthine, and its incompatibility with modern government and industrial economics left every Senator who had come to Guangzhou utterly overwhelmed.
"What really gives me a headache," Liu Xiang said, circling back to the main point after his litany of complaints, "is how to pay the cadres." More than two weeks had passed since the landing, and thus far all of their incidental administrative spending had been drawn from the "fiscal return" of miscellaneous goods: meals from warehouse grain, clothing from warehouse cloth, office furniture from confiscated furniture. Whatever they could find in storage, they used rather than buying it. Only when something absolutely had to be purchased on the market did they dip into a modest reserve of scrap silver and copper cash.
Until the new currency was issued, anything involving money had to be handled with extreme caution. Liu Xiang knew that the Senatorial Council attached the utmost importance to the new-currency launch—he had already received notice from the Administrative Office that several Senators from the Finance Department would soon arrive in Guangzhou "on official business." A Finance delegation descending en masse on Guangzhou could have only one purpose: the introduction of the Ao-Yang.
When Liu Xiang had grumbled himself dry and paused to drink some water, Meng Xian finally spoke, unhurried: "The treasury silver and miscellaneous silver have nearly all been counted and recorded. They'll be shipped to the Hong Kong Mint shortly—Director Cheng has already said that coins struck from this batch will be deposited into a dedicated fiscal account, to be called the 'Guangdong Special Expenses Account.' This money is earmarked and restricted, to be used exclusively for Guangdong province-wide fiscal outlay. As for the copper cash, it can only be recycled as industrial raw material—naturally, the Enterprise Institute can't give you any compensation..."
Liu Xiang nodded. "I know. The Enterprise Institute? They'll scrape the meat off a mosquito's leg."
Meng Xian smiled and continued, "As for the other goods, the Enterprise Institute has communicated with us. The consensus is to liquidate them on the spot. The proceeds will go into the Special Expenses Account, primarily to fund Guangzhou. Of course, as the most economically developed city in Guangdong, the Guangzhou municipal government will still be expected to look after the smaller cities elsewhere in the province."
Liu Xiang hastily signaled his agreement: "I have no objection to that." He added, "It's just that the on-the-spot liquidation should ideally be handled by the Enterprise Institute. There's so much junk in there—according to the ledgers, it's a mountain of gold and silver; pull it out and it's garbage. A considerable portion will have to be written off and scrapped. If we at the municipal government do it ourselves, there'll be no end of explaining to do later."
"Of course. The Finance Department will participate as well. It will be a three-party affair. The actual work still falls to the municipality—after all, you're the local landlord; every merchant in Guangzhou great and small must answer to you." Meng Xian lifted the Venetian cut-glass goblet before him and sipped the "Xue Ziliang" brand mixed-fruit brandy—a Senator-only special provision. "Paying cadres' salaries? You needn't worry about that. This is a golden opportunity for rolling out the new currency. The payroll is the perfect vehicle for pushing it into circulation."
"My main concern is the credibility of the banknotes." At last Liu Xiang voiced his underlying worry. "Guangzhou is a purely Silver Zone. We're now issuing a new currency—in theory, banknotes and silver dollars are to coexist, circulate at par, and be freely interchangeable. I'm worried the people won't trust the paper money, and there'll be a run on silver dollars."
Guangzhou was the place in all of southern China where silver was used most intensively; the volume of silver in circulation was enormous. Because copper cash was in short supply, merchants had even privately minted tiny silver pellets as fractional currency. Paper money, thanks to the Ming's bizarre monetary policy, had an abysmal reputation. Even Hainan's widely circulating Food Circulation Vouchers were scarcely seen in the Guangzhou marketplace; they passed mainly among the "bald merchants" in limited transactions. Guo Yi and Meng Xian had several times tried to broaden the vouchers' acceptance in Guangzhou, but the city's merchants and commoners simply wouldn't buy in.
"Finance has appropriated one million in banknotes and only two hundred thousand in silver coins. I can't simply hoard those two hundred thousand coins and refuse to release them. I have no idea how fast the silver coins will recycle. What I do know is that the public won't trust paper money at first—they'll cash it out for silver dollars or goods the moment they get it. We've promised free convertibility. What if our silver-dollar reserves run short? That would deal a devastating blow to confidence in the banknotes!"
Meng Xian set down his glass. "Old Liu, your concerns are well-founded. Currency reform is extremely difficult. The scenarios you're worried about—we in the Finance Department have specific financial countermeasures, and the Enterprise Institute has drawn up economic contingency plans. But market and financial operations alone cannot replace silver's monetary status with paper. That's simply impossible."
His expression turned grave. "Establishing a fiat-currency system requires the coercive power of the state. Bayonets and cannon must be involved. At bottom, modern currency circulates on the strength of government credibility—that is, on the strength of government violence. The 'free convertibility' we're offering is really just a placebo—a way to soften resistance to the paper-money rollout. We need to keep our promises, yes—but we mustn't let ourselves be deceived by our own rhetoric."
Liu Xiang was taken aback by his bluntness. He struggled to respond: "You mean to say..."
"How much money do ordinary people actually have?" Meng Xian smiled. "I've been in Guangzhou for years now. The vast majority of the populace under Ming rule just barely scrape by. 'Not a grain of rice set aside for the morrow' is the most accurate description of their financial condition. A senior clerk in a large shop earns perhaps one or two taels of silver a month—and that's already among the more prosperous strata of the urban population. The so-called 'conversion pressure' will be concentrated mainly among the merchants and the gentry-landlord class, who hold large quantities of silver. Bring them into line, and everything else will fall into place."
"What are the specific measures?" Liu Xiang asked.
"The implementation plan isn't finalized yet. But Chen Ce will be arriving in Guangzhou soon; he'll bring the complete package. One thing I can say: executing it will definitely involve the tax bureau—I don't want to meddle in your administrative work, but it would be best if the tax apparatus can be brought up to full strength as soon as possible."
"I have indeed been thinking about that. Taxation is, after all, the proper wellspring of fiscal revenue. We can't live forever on confiscations and appropriations."
"Confiscation—we will certainly make full use of that windfall. When to strike is your call. But taxation is truly urgent," Meng Xian said. "Agricultural taxes involve complex issues; we might start with commercial taxes first. Upon entering the city, you abolished all manner of irregular fees; merchants are now paying only the nominal official tax—the amounts are laughable. We need to raise the rates and introduce new tax categories quickly. If they grow accustomed to low taxes, pushing reforms later will be far less... harmonious."
Zeng Juan had slept late that morning—he had stayed up until the fourth watch helping his family make incense and candles. Ever since the Australians entered the city, the once-tepid candle trade had suddenly boomed. Amid the upheaval and uncertainty, the constant changing of banners overhead drove many to seek the protection of gods and Buddhas. People rushed out to buy incense and candles for prayers, and upon returning home they inevitably lit incense before their ancestral tablets, imploring the spirits to protect their descendants.
Thanks to the Australian invasion, the Zeng family had at last been able to pay off part of their debts to the spice shop and the wax-and-oil shop. These days, when Zeng Juan went to collect supplies, the shopkeeper's expression was noticeably less sour. Even the new cap Zeng Juan had been longing for—his mother had finally promised to buy it for him.
Yet the dark clouds around the Zeng household had not entirely dispersed. Also because of the Australians' arrival, the spice-shop owner claimed that foreign ships were no longer coming; aromatic resins were in short supply, and prices on all the spices and scented materials they used would have to rise.
The Zengs knew it was merely an excuse, but as a tiny workshop, they had zero bargaining power.
Zeng Juan's father added and subtracted: the extra profit this month's boom had brought would be entirely swallowed next month by higher material costs. And so Zeng Juan's new cap was postponed once again.
"For small craftsmen like us, there's no climbing out of the pit—ever." Coming down from the loft by the rickety wooden ladder, Zeng Juan saw his father—who had stayed up even later than he had—already at the stove, dipping wicks. The process involved submerging a peeled core of rush-pith into melted wax-and-oil, pulling it out, letting it cool, and repeating—over and over, until the candle reached the right thickness and length.
It was grueling work, and standing all day beside a vat of molten wax was stifling. Even in winter, workers wore only a thin undershirt; in summer, the mere approach to that corner of the room brought an unbearable wave of heat. His father could endure it only by keeping his feet soaking in a pail of cold water.
Beyond the heat, there was the stench. The tallow used to make cheap candles often came from beef and mutton trimmings; when it rendered, it gave off a reek that even Zeng Juan, born and raised here, could hardly stand.
Gazing at his father's toiling back and the finished candles stacked beside him, Zeng Juan reflected that the man must have been at it for hours already. How have mother and father endured all these years?
Zeng Juan had an older sister who had married the owner of a small tea-house on the street in front. The tea-house did well, and his sister, with a bit of spare cash, had paid for Zeng Juan's schooling. So Zeng Juan had been spared much hardship in his youth. But last year his sister died in childbirth, and her widowed husband soon remarried; naturally, the money for schooling dried up. Zeng Juan knew that now it was his parents clenching their teeth to keep him in school, hoping he would make good one day—not necessarily to become a great man, but at least to live a little more decently and comfortably.
Now that the Australians had come, the community school had closed. And even if it hadn't, what was the point of slaving away over eight-legged essays and polishing one's prose? He already knew that the Australians didn't hold civil-service examinations.
Besides, Zeng Juan was well aware that, even if the Australians had never come, his own essays—so often savaged by his teachers—stood almost no chance of earning him even a xiucai degree!
(End of Chapter)