2 Administration and army. Inflation
The Sung emperor, like the rulers of the transition period, had gained the throne by his personal abilities as military leader; in fact, he had been made emperor by his soldiers as had happened to so many emperors in later Imperial Rome. For the next 300 years we observe a change in the position of the emperor. On the one hand, if he was active and intelligent enough, he exercised much more personal influence than the rulers of the Middle Ages. On the other hand, at the same time, the emperors were much closer to their ministers as before. We hear of ministers who patted the ruler on the shoulders when they retired from an audience; another one fell asleep on the emperor's knee and was not punished for this familiarity. The emperor was called "kuan-chia" (Administrator) and even called himself so. And in the early twelfth century an emperor stated "I do not regard the empire as my personal property; my job is to guide the people". Financially-minded as the Sung dynasty was, the cost of the operation of the palace was calculated, so that the emperor had a budget: in 1068 the salaries of all officials in the capital amounted to 40,000 strings of money per month, the armies 100,000, and the emperor's ordinary monthly budget was 70,000 strings. For festivals, imperial birthdays, weddings and burials extra allowances were made. Thus, the Sung rulers may be called "moderate absolutists" and not despots.
One of the first acts of the new Sung emperor, in 963, was a fundamental reorganization of the administration of the country. The old system of a civil administration and a military administration independent of it was brought to an end and the whole administration of the country placed in the hands of civil officials. The gentry welcomed this measure and gave it full support, because it enabled the influence of the gentry to grow and removed the fear of competition from the military, some of whom did not belong by birth to the gentry. The generals by whose aid the empire had been created were put on pension, or transferred to civil employment, as quickly as possible. The army was demobilized,
and this measure was bound up with the settlement of peasants in the regions which war had depopulated, or on new land. Soon after this the revenue noticeably increased. Above all, the army was placed directly under the central administration, and the system of military governors was thus brought to an end. The soldiers became mercenaries of the state, whereas in the past there had been conscription. In 975 the army had numbered only 378,000, and its cost had not been insupportable. Although the numbers increased greatly, reaching 912,000 in 1017 and 1,259,000 in 1045, this implied no increase in military strength; for men who had once been soldiers remained with the army even when they were too old for service. Moreover, the soldiers grew more and more exacting; when detachments were transferred to another region, for instance, the soldiers would not carry their baggage; an army of porters had to be assembled. The soldiers also refused to go to regions remote from their homes until they were given extra pay. Such allowances gradually became customary, and so the military expenditure grew by leaps and bounds without any corresponding increase in the striking power of the army.
The government was unable to meet the whole cost of the army out of taxation revenue. The attempt was made to cover the expenditure by coining fresh money. In connection with the increase in commercial capital described above, and the consequent beginning of an industry, China's metal production had greatly increased. In 1050 thirteen times as much silver, eight times as much copper, and fourteen times as much iron was produced as in 800. Thus the circulation of the copper currency was increased. The cost of minting, however, amounted in China to about 75 per cent and often over 100 per cent of the value of the money coined. In addition to this, the metal was produced in the south, while the capital was in the north. The coin had therefore to be carried a long distance to reach the capital and to be sent on to the soldiers in the north.
To meet the increasing expenditure, an unexampled quantity of new money was put into circulation. The state budget increased from 22,200,000 in A.D. 1000 to 150,800,000 in 1021. The Kitan state coined a great deal of silver, and some of the tribute was paid to it in silver. The greatly increased production of silver led to its being put into circulation in China itself. And this provided a new field of speculation, through the variations in the rates for silver and for copper. Speculation was also possible with the deposit certificates, which were issued in quantities by the state from the beginning of the eleventh century, and to which the first true paper money was soon added. The paper money and the certificates were
redeemable at a definite date, but at a reduction of at least 3 per cent of their value; this, too, yielded a certain revenue to the state.
The inflation that resulted from all these measures brought profit to the big merchants in spite of the fact that they had to supply directly or indirectly all non-agricultural taxes (in 1160 some 40,000,000 strings annually), especially the salt tax (50 per cent), wine tax (36 per cent), tea tax (7 per cent) and customs (7 per cent). Although the official economic thinking remained Confucian, i.e. anti-business and pro-agrarian, we find in this time insight in price laws, for instance, that peace times and/or decrease of population induce deflation. The government had always attempted to manipulate the prices by interference. Already in much earlier times, again and again, attempts had been made to lower the prices by the so-called "ever-normal granaries" of the government which threw grain on the market when prices were too high and bought grain when prices were low. But now, in addition to such measures, we also find others which exhibit a deeper insight: in a period of starvation, the scholar and official Fan Chung-yen instead of officially reducing grain prices, raised the prices in his district considerably. Although the population got angry, merchants started to import large amounts of grain; as soon as this happened, Fan (himself a big landowner) reduced the price again. Similar results were achieved by others by just stimulating merchants to import grain into deficit areas.
With the social structure of medieval Europe, similar financial and fiscal developments which gave new chances to merchants, eventually led to industrial capitalism and industrial society. In China, however, the gentry in their capacity of officials hindered the growth of independent trade, and permitted its existence only in association with themselves. As they also represented landed property, it was in land that the newly-formed capital was invested. Thus we see in the Sung period, and especially in the eleventh century, the greatest accumulation of estates that there had ever been up to then in China.
Many of these estates came into origin as gifts of the emperor to individuals or to temples, others were created on hillsides on land which belonged to the villages. From this time on, the rest of the village commons in China proper disappeared. Villagers could no longer use the top-soil of the hills as fertilizer, or the trees as firewood and building material. In addition, the hillside estates diverted the water of springs and creeks, thus damaging severely the irrigation works of the villagers in the plains. The estates (chuang) were controlled by appointed managers who often became