History of Money, Banking, and Trade
A historical look at the development and evolution of money, banking, and trade. From the ancient civilizations to the present.
History of Money, Banking, and Trade
Episode 38. From Stone Age to Bronze Age: China's Economic Evolution
Dive into the fascinating economic foundations of ancient Chinese civilization through a journey spanning millions of years of human development. From the mythological giant Pangu separating yin and yang to create the world, to the sophisticated bureaucracies of the Zhou Dynasty, this episode unravels how geography, agriculture, and metallurgy shaped one of history's most influential civilizations.
We explore how China's natural barriers created an environment where unique economic systems could develop independently from other ancient civilizations. While Mesopotamia and Egypt were constructing great monuments, China was quietly revolutionizing agriculture and developing bronze-working capabilities that would eventually surpass any other ancient society. Archaeological evidence reveals bronze artifacts weighing tons, demonstrating advanced metallurgical knowledge that created a proto-industrial foundation for ancient Chinese society.
The most captivating aspects of China's economic evolution appear in their early value systems. Cowrie shells functioned similarly to how silver worked in Mesopotamia—not necessarily as direct currency but as a measurement standard. These naturally occurring shells provided a universally recognized unit of account with inherent qualities of scarcity and durability that made them ideal for valuing everything from agricultural produce to land itself.
When the Zhou Dynasty introduced their proto-feudal system in 1046 BCE, they transformed how resources were allocated throughout China. Land once distributed in large territories became commodified in smaller parcels, with government surveyors marking boundaries and official notaries recording transfers. This created one of history's earliest documented property rights systems, complete with evidence of fields being traded for horses, jade ornaments, and silk.
The dramatic collapse of Western Zhou in 771 BCE serves as a powerful illustration of how political fragmentation can spark economic innovation. As hundreds of independent city-states emerged from the fallen dynasty, competition for resources drove technological and organizational advancements that would ultimately contribute to China's imperial unification centuries later.
Join us for this illuminating exploration of how ancient China's economic foundations were established long before its imperial glory days, revealing patterns of development that would influence Eastern civilization for millennia to come.
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During China's Three Kingdom Period, which was from approximately 220 to 280 CE, a writer in China wrote how Earth was formed. According to the author, a hairy giant with horns on his head named Pangu began creating the world in two. He separated yin from yang with each strike of his giant axe, creating the earth, or the yin, that was black, and the sky, the white Yang. To keep them separated, pangu stood between them and pushed them up to the sky. With each day, the sky grew 10 feet or 3 meters high, the earth got 10 feet thicker and Pangu 10 feet taller. This task took another 18,000 years of loneliness. When he died, his body began to decay and transform into mountains, rivers, forests and other environmental and plant life features. In one version of the story, he created humans from clay before he died because he felt the universe was too empty, while in another version they came from the fleas that lived on Pangu's fur, which were spread across the earth by the wind when he died. I am Mike D. This is the History of Money, banking and Trade podcast. My goal is to expand your knowledge of the history and evolution of trade, along with money, banking and credit, from ancient civilizations to present-day market innovations. I truly hope you find these episodes to be informative and entertaining. I have an MBA and around 20 years working in various financial roles, but I'm not a historian. However, I find that if I study the history of financial changes in trade, complex modern international economies are much easier to understand.
Speaker 1:The oldest fossil remains of archaic humans were found in China, which dated to around 2 million years ago. These remains are from the Homo erectus, a common ancestor of the Homo sapiens or modern man. This means that China was settled from the early stone age, scientifically known as the Paleolithic era. In addition, skeletal remains of Neanderthals were also discovered in China. Around 300,000 years ago, pre-humans started to evolve into Homo sapiens both in East and South Africa. There is indirect evidence for Homo sapiens' presence in West Asia around 270,000 years ago. It's quite possible that there was a series of African mega droughts, beginning 130,000 years ago, which forced early human migration throughout Africa and then ultimately out of Africa. Beginning around 70,000 to 50,000 years ago, the earliest humans may have gone through Arabia and then stayed near the coast originally, before spreading into South Asia, then Oceania, between 65 and 50,000 years ago. Since we know, the Neanderthals were present in Asia and Europe for that matter, before modern humans. It's generally believed that the average human outside of Africa has between 1 and 4% Neanderthal genetic makeup, so this would also include people of European and Asian descent, but also Papua New Guinea, australian Aboriginals and even Native Americans.
Speaker 1:China, like every other place that has had any sort of population, was initially inhabited by nomadic hunter-gatherers. However, around 8,000 to 10,000 years ago, agriculture developed in China created their own version of a cradle of civilization, as it's quite possible that farming had developed independently of the farming that was developed in West Asia. In other words, it appears that it wasn't some people from the Levant or Anatolia making their way there and teaching them how to farm. It appears that they just kind of developed it on their own. The main crops of these settlements were rice and millet. One of the interesting facts regarding the inhabitants of East Asian peoples is the fact that scientists have extracted DNA from ancient East Asian bones and compared it to the DNA of the people that are there today. It turns out that modern people in East Asia, unlike the Europeans, are very similar genetically to their ancestors. It tells us that Europeans were very much nomadic in nature, whereas the East Asian population generally stayed put, and this probably has to do with their origins of farming.
Speaker 1:The main area of the early settlements of the Chinese was around the Yellow River and its largest tributary, the Wei River, which is in the vicinity of modern-day Beijing. Later on, people spread further south to the Yangtze River, which is also the longest river in Asia. The reason why the area is important is because in the middle of the Yellow and Yangtze Rivers draws the line where rice cultivation stops due to the change. In the middle of the Yellow and Yangtze Rivers draws the line where rice cultivation stops due to the change in the climates. Whereas in the more southern regions the climate is warmer and rainier, which allows for rice to be grown, the more northern regions are cooler and, as a result, rice can't be cultivated, so instead the region relied on millet as their main crop. Also, the land between the Yellow and Yangtze River is generally quite fertile and therefore attracted people for settlements. Even to this day, the region is the most densely populated area of China.
Speaker 1:Like most regions of the world, the lands of the early Chinese were surrounded by natural barriers between settlements and cultures. For example, far to the south were thick jungles, to the west, high mountains cut off populations. In the north, deserts dominated the landscape and, of course, china is bordered by the Pacific Ocean to the east. These natural barriers meant that early Chinese societies grew independently from each other and cultures around them, which meant unique and specific developments of Chinese civilizations. By the early third millennium BCE, various local cultures that developed between the Yellow and the Yangtze Rivers started to slowly unify into a unique culture through trade, warfare and other contexts. This would have been a logical conclusion to trade, as trade not only delivers goods between settlements, but also information and ideas are passed on to each other.
Speaker 1:Unfortunately for historians, the third millennium BCE is cloaked in mystery because an abundant number of stories, myths and legends were written down hundreds and even thousands of years later after the fact. Like a lot of stories that were either told orally or written well after the fact, there are few archaeological findings to verify any of the information from this time period. One of the stories during this early time period were that of the five emperors, starting with the Yellow Emperor. Traditionally, the Yellow Emperor's rule was dated to somewhere between 27 and 2600 BCE, and he was often seen as the father of the Chinese people. They make for great stories, but the fact is they are most likely purely mythological, so they don't really add much value in discussing historical events. It's kind of not unlike the legend of King Arthur. Generations is that there have been no records, or tombs have not been excavated, or even some monuments of some sort dating from the era that they were told about that has been uncovered. Now it's possible this information may have been lost to time, or maybe it hasn't yet been discovered.
Speaker 1:Unlike in Mesopotamia and Egypt, formal writing hadn't developed in China during the five emperors' time period. However, we do know that the third millennium did see quite a transformation in China. Many cultures started its social stratification, whereas a ruling class emerged. Shamans and other locals' religions formed, and they show early signs of writing, though they had not yet fully developed a writing system. Villages built irrigation systems and developed farming techniques which allowed for better crop yields, which could tolerate a larger population, which then led to a surge in the population growth. These farming techniques led to efficiencies, which also meant less farmers would be needed. Therefore, it is in the third millennium BC that we start to see a natural division of labor, which meant people that would have normally been destined for the farm could now be artisans focused solely on their crafts. Yet despite all these developments, the Chinese population still relied heavily on the clan system. It appears that this all started to change around 2770 BCE, when Emperor Yu left his throne to his son, qi. This leads historians to conclude that around the era, there was a clear separation between the tribal elites, whereas now hereditary rules start to become the norm.
Speaker 1:Once again, emperor Yu is most likely a myth. Once again, emperor Yu is most likely a myth, but the point is not so much that he probably didn't exist, but instead it marks a time when the idea of hereditary transition of power becomes much more acceptable for the culture Also. Just like every other ancient society at the time, they also had their own mythological Great Flood story that would have taken place around the time of Yu China. As they become extremely wealthy and powerful enough to command the commoners to build palaces, temples and other types of public works projects. Let us not forget that in 2000 BCE, china was firmly in the Bronze Age, which meant that there was a great leap in crafts technology, which meant that there was a great leap in craft's technology. In addition, bronze weapons discovered throughout China indicate that warfare had become more common among the ancient Chinese. Warfare would mean that social structures and norms would be standardized when conquerors implemented their culture on the conquered. This would also include introducing their standards of weights and measures, which would make trade within the newly formed region of rule much more efficient. And, of course, war meant plunder, especially for the ruling class, further enhancing the wealth gap between the ruling class and the farmers and the craftsmen.
Speaker 1:For years, up to this point, it was believed that much of China was ruled by the Xia dynasty. However, their rule ended around 1600 BCE when one of the Xia vassals rebelled and overthrew the last Shia ruler, who was often depicted as cruel and a poor ruler. That rebellious subject was Tang, the founder of the second Chinese dynasty, called the Shang. It is important to note that the Xia Dynasty was a controversial topic in Chinese history, as some historians still believe it is pure myth. Some historians believe that the Xia did exist, but they didn't actually rule over the entirety of China. However, the Shang and the Zhou Dynasties that came after the Shia did in fact exist. Therefore, the Shang dynasty is the first historically confirmed dynasty that historians can clearly identify.
Speaker 1:This dynasty sprang up around the Yellow River. By then, the writing system had become fully functional and an organized system. The early rulers, especially its founder, tang, funded the government through a tax of 10% of the yield of the land. Apparently, it sounds like this 10% tax may have been part of a tax reduction plan, and the rulers reduced conscription requirements for the royal army, making Tang popular among the people. From there, tang was able to widen the Shang state by absorbing local tribes in and around the middle and lower river basin and lower river basin. From 1250 to 1192 BCE, wudang ruled. Many believe that this rule was the height of the Shang dynasty. Wudang pacified certain tribes and conquered others through war.
Speaker 1:Through this expansion, the Shang flourished economically as it expanded its trade, in part due to the rise in quantity and quality of its goods that were produced locally. The one thing archaeologists point to is the fact that large quantities of bronze were found in tombs from this time period. When I say large, I'm saying that some were measuring in the tons, which shows you how developed Chinese metallurgy had become. In fact, no other ancient civilization has produced as much bronze as Shang China did. In essence, they had created almost a proto-industry. Agriculture was expanding as well, as they had drained lowland, swampy fields and cleared wild vegetation from fertile lands. Economic life centered on the patrimonial ruling lineages who commanded the labor of farmers and artisans. However, china still hadn't developed any working markets per se. Instead, various members of the ruling class would have set up complex exchanges that would have consisted of goods and even people.
Speaker 1:Around the 13th century BCE, horses and chariots were introduced into the region. I don't think anyone really knows for certain how this happened, but it was most likely through nomadic tribes that lived in the Central Asian steppes around 2200 BCE. From there, the use of horses spread across Eurasia for transportation, trade, communication, agricultural work and warfare. It's also probably not a surprise as to why many people around the world speak a language that would have been derived from this particular region. So when the horses had become the dominant means of transportation and warfare, people from the Indo-European region would have brought their languages with them, and hence the reason why many people in Europe, including English speakers, have a language that was derived from the people of the region that had developed the use of horses and domesticated horses.
Speaker 1:This increased efficiency in communications through the horse may have also affected the way the new kings of the Shang Dynasty had ruled. They eventually became less involved with the everyday management of the Shang dynasty had ruled. They eventually became less involved with the everyday management of the kingdom, as they often delegated more and more to their officers. They were no longer generals leading their troops and they no longer worried about the general well-being of their subjects, leaving their representatives in the region to deal with droughts and famine.
Speaker 1:With that being said, one could say that maybe the kings of the Shang were no longer strong rulers and were possibly even weak. As such, a rogue vassal from a family known as the Zhou family, which ruled in the western borders of the Shang state, became stronger and more powerful. They were nearly an independent state. This apparently freaked out the Shang king, and he decided to imprison a man by the name of Wen who was the head of the family, because he feared Wen's strength and influence. Keep in mind it wasn't like the Zhou surpassed the Shang in any technological sense either. However, the Western Zhou ruling class derived its wealth from the various contributions of gifts, land revenue, craft making and the exchange with other aristocratic houses. Unfortunately, we lack any dependable substantiation to estimate the relative value of these forms of income in the household economy as a whole. The foundations of the Zhou state rested on redistributing gifts from the king to its subordinates. Each of these subordinates would have established their own independent economic base and in this part of China, cowlery shells played a crucial part in the measure of value in the exchange of goods. In Western Zhou.
Speaker 1:Calorie shells were nothing new or unusual, as they had been used as a form of money in several pre-modern Asian and African societies. Calorie shells shared many of the qualities of metallic currency they had scarcity, durability, uniformity in size and shape and they had countability. Most importantly, they were nearly impossible to duplicate, so there wouldn't be any forgeries. This may be confusing, but they weren't used as a medium of exchange per se. The cowrie shell's value derived from their ritual uses and sacrifice and mortuary goods rather than a notion of monetary value as such. The importance of cowries in gift-giving declined quite a bit over the course of the Western Joe, so, in other words, it had a kind of similar feel to that of ancient Mesopotamia when ancient Mesopotamia turned to silver as the preferred medium of exchange. Now silver was passed more likely in Mesopotamia than, say, cowrie shells were in China, but they both served a crucial function in that when you're going to have some sort of trade, you need to measure the value of the goods that you're trading. So calorie shells may not have been used in the trade per se, but we could say that the amount of wheat that you have that you're willing to sell me is worth a certain amount of calorie shells. And then you exchange that wheat with me and maybe we have a credit system where I pay you back in the near future with another good, whether it's another commodity, or maybe even silk. It could be anything, but the fact of the matter is the underlying value of the traded goods would have been measured in cowrie shells.
Speaker 1:In 1046 BCE, wu became the new king of the Zhou dynasty. We have quite a bit of information starting in this period, as he employed a large staff of scribes and secretaries that acted as his spokespersons of the king, issuing royal orders and composing the king's speeches. However, the real power often rested in the hands of high-ranking royal princes From there. The Zhou ruling class thus was split into two groups the archer lords and the royal officers. They would have a significant influence over the micro and macro management of the economy, including agriculture and trade. Wheat was an import from West Asia, while rice was still rare in the north of China at this time and their consumption, most likely, was confined to the ruling classes. So the average person would have consumed millet in this region. So the North China region Irrigation in western Zhou was achieved primarily by diverting streams into adjoining farmlands, as large-scale irrigation works did not appear until much later.
Speaker 1:While this region was firmly in the Bronze Age, the adoption of bronze farming tools was slow to develop, because bronze was often viewed as too precious to be widely used for practical purposes, such as agricultural tools. So instead, joe farmers continued to rely on tools made from stone, bone and shells that consisted primarily of digging implements, one and two-pronged digging sticks and spades and harvesting sickles. But it is ironic because China had a wide-scale bronze production mechanism. To give you an idea of their bronze manufacturing capabilities, a large bronze foundry excavated near Chengzhou, dating from the early Zhou period, was certainly a royal workshop. A few smaller bronze workshops also have been found near the Fenghou capitals, including one that specialized in the manufacture of chariot fixtures. This time and region also reflected a large wealth gap between the farmers and the landowners. This wealth inequality is particularly noticeable in clothing and foods consumed, as the large landowner elites wore fine silks and had access to foods outside of the millet that was consumed by the farmer.
Speaker 1:The biggest reason why the Zhou Dynasty was in control was due to their mandate of heaven. This was a doctrine that was used to legitimize the overthrowing of the Shang Dynasty and the formation of the new Zhou Dynasty. It was the document that basically said that every dynasty and its current ruler had been given a mandate by heaven to rule the natural order. In reality, this isn't much different than the divine right of kings that we see throughout history. The reason this happened was the Shang situation had deteriorated so much that the Zhou felt that they had no choice but to rebel, as the mandate from heaven had shifted and was on their side, which confirmed their victory. The Zhou rulers realized that relying on religion could only carry them so far, so instead, what they needed was a system that could institute power and protection. They confiscated and divided much of the lands among their family members, including brothers and sons of King Wu and Chang, as well as Guangdan. This essentially fragmented the kingdom and therefore created dozens of smaller city-states, which were closely united to the central dynasty by blood. The best way to look at this is this created a system that resembles the feudalism in medieval Europe, whereas you have a system of decentralized rule where local lords govern over their own estates with partial subordination to the central government. Unlike medieval Europe, this system was based more on familial ties than feudal code. As such, it has been described as a proto-feudalism system. This ultimately becomes a long-term problem, the reason being as generations pass, this blood relation between the king and his vassals will thin down. In other words, they no longer were connected as uncles and brothers. Eventually, they become distant cousins, twice or even three times removed. This meant that it would be just a matter of time before the Zhou proto-feudalism system would start to crack.
Speaker 1:King Mu came to the throne after his father, king Zhou's death during the Zhou-Chu War. King Mu reigned for nearly 55 years, from around 976 BCE to about 922 BCE. However, recent evidence seems to indicate that it had been 40, not 55 years on the throne, as archaeologists may have interpreted the evidence incorrectly, because they originally thought that he lived to be 105 years old, but it may have been the case that he came on the throne 105 years after the founding of the Western dynasty. King Mu may have seen the potential problems with this proto-feudal system, so he decided to implement various reforms to the state. One of the first things he did was he created a more professional standing army, and he also reformed his courts. He implemented a meritocracy by appointing capable people around him to act as ministers and advisors. He then implemented a more efficient bureaucratic apparatus that started to separate the king from his people and even the nobles.
Speaker 1:The great thing for us people who enjoy reading about history was King Mu started the practice of writing down every court decision. He also wrote down rulings, maps, investments maps, investments laws and other royal actions. By doing that, he created the first true legal code in China. As such, his early reign was characterized by implementing reforms, not so much military conquest. However, king Mu may have gotten concerned about his legacy and decided that he wanted to expand the kingdom to the north. His advisor warned him that previous kings only used war as a last resort, but Mu didn't want to hear any of that, even though the people of the north had always provided assistance and defended the realm against the Western Zhou. So he reverted back to the previous Chinese king's operations, whereas he spent most of his rule in campaigns with his army, especially when his vassals were late with their tributes. As such, he managed to conquer numerous tribes.
Speaker 1:Despite his military success and important reforms, he was not seen as a great ruler by his people. Why? Because he was criticized for being away from the capital too often. Many thought his reforms were needed because he wasn't a capable ruler and therefore he needed these reforms because he didn't have the capabilities to handle these issues himself. Eventually, the Zhou dynasty would weaken. Surrounding tribes were also using the weakened state as a reason to attack it.
Speaker 1:By 957 BCE, the Zhou suffered a disastrous military defeat inflicted by the rival state of the Chu in the south. The result was the Zhou were essentially split, as now the king only had control over the royal dominion in the west and the region around Zhengzhou, the west and the region around Zhengzhou. This meant that the eastern domains became more independent. The issue for the Zhou kings was they were seeing their revenues diminish quite a bit over the years because they had allocated so much land and resources to the relatives and royal officers that may not have had a close connection to them by the 900s BCE. The fact is, the lack of revenues possibly made their hold on the throne less secure. So to remedy this, the Joe Kings no longer gave away entire territories to other royals, but instead parceled them out as small farms to laborers who worked them as such by 900 BCE.
Speaker 1:High-born land holdings that were given to them by the king were diminished considerably as they were no longer entire territories but rather fields or individual tracts of land. A field was defined as the amount of land that a single farmer could cultivate, and this was said to be about 100 mu or about 4.5 acres. These smaller tracts of land also became bodies of exchanges among aristocratic households. So, for example, we have evidence of the legal testimony of an exchange of four fine horses for 30 fields. In another case, lands were exchanged for an assortment of goods, including jade ornaments, ritual vessels, carriages and silks. The government surveyed and marked down the lands with official notaries to record all the transfers of the property. As part of this, they ensured that they were accurately surveying boundaries of the land holdings, as they were crucial procedures for establishing land claims. But this was still monarchy, so such transactions did not confirm absolute rights over the land. The king still retained rights to appropriate and reassign land holdings within his royal domain and reassign land holdings within his royal domain.
Speaker 1:The Zhou not only had issues in the east now they had even more concerns with the southern highway as they launched several offensives against the Zhou in the late 10th century BCE. The King Li reign, who ruled from 877 to 841 BCE, and he was locked in a prolonged war with the Shia, which severely weakened the kingdom. By all accounts, king Li was a terrible king whose poor management probably did as much as any enemy could do. He was known to be very cruel, severely punishing anyone who dared to speak out against him. Eventually, things came to a head and the nobles started to perform an open insurrection against the Zhou king, forcing King Li into exile in 841 BCE.
Speaker 1:In 781 BCE, a major earthquake caused massive damage throughout the kingdom. Then, on top of that, the king angered his court as he chased off his queen and heir, who came from an important noble family, in favor of a concubine and a son that he had with her. The king must have had some sort of maturity issues or mental incapacities because he wanted to impress his concubine queen by messing with the royals by lighting alarm beacons. It became a boy who cried wolf, type of thing, because soon no one answered the call of the alarm. So in 771 BCE, the former queen's family colluded with the western barbarian tribes, which were a constant threat for decades, and then they attacked the royals, tired of the king's nonsense, abandoned him, as no one came to help out the king. As a result, he was murdered and the capital was ransacked and devastated.
Speaker 1:With the death of the king, the main branch of the Zhou dynasty was now extinguished and Ping, the son of the banished queen, became the new king. Eventually, they would have had a catastrophic defeat in 771 BCE at the hands of the Xi'an. The Xi'an sacked the capitals of Fang and Hao and killed the Zhou king. Surviving members of the royal clan fled to Chengzhou in the east, where a new king was installed. With the Zhou in deep trouble, the capital was moved to the east, which essentially meant the official fall of the Western Zhou and the start of the Eastern Zhou dynasty had begun. A new royal line and a new capital was established. This void left by the Western Zhou meant that new people would move into the former Zhou homeland and settled in the central plain as well.
Speaker 1:Eventually, this would become known as the Spring and Autumn Period, spanning from 720 to 481 BCE. This was a period of intense conflicts, which led to a period of chronic warfare between the Zhou peoples and their neighbors. We also see the emergence of pastoral nomads in the steppe grasslands along the northern frontiers, but they weren't the only threats to the Zhou. China was fragmented as several hundred newly independent agrarian city-states emerged, but also larger cultures emerged as well. The Jin in the north, the Qi in the east, the Qin to the west and the Chu were stretching across the southern perimeter of the Zhou. Therefore, this leads us into the spring and autumn period. As such, this period was known to have intense conflicts, which led to a period of chronic warfare between the Zhou peoples and their neighbors. China will become fragmented as several hundred newly independent agrarian city-states emerge. All this fragmentation, along with population increases, will result in cultures struggling to acquire and defend resources for their survival, and this is just the start. China will go through many periods of reshuffling, certain groups vying for control, and eventually China will become unified, but that's not for hundreds of years.
Speaker 1:I want to thank you for taking your time to listen or watch this episode. This is the first episode that I'm recording on a camera. The next episode we will get into the spring and autumn period, as this will further lay the groundwork for the development of ancient China trade, if you like what you hear and want to donate to the show, you can visit us at patreoncom slash history of money banking trade or you can visit our website at moneybankingtradecom. Thank you very much. Talk to you soon.
