Late Yuan Dynasty: I am the true emperor

Chapter 394 Public Transport Economics (Part )
In Lu Jin's economics class, new words popped up one after another, and they all sounded very reasonable. These "great scholars of the time" in the Marshal's Mansion had never thought that the word "economics" could contain so many subjects to explore.

What impact will the exchange rate between paper money and gold and silver have on the domestic economy? If Lu Jin hadn't deliberately asked this question, who would think about this kind of question?
However, the people who can appear here are naturally not the kind of pedantic Confucian scholars who can only recite from books. It is okay to say "the gentleman is concerned with righteousness, the villain is concerned with profit" in the Analects of Confucius, but governing a country is different. Governing a country is all about money and food, and it is about having enough soldiers and food. How can they not talk about money? After all, they still live in a material world.

"My lord, I would like to say a few words." After everyone thought for a moment, the first person who wanted to answer was Yang Xian.

"You said."

Yang Xian then said, "Let's look at the title first. I think the term 'exchange rate' is not quite accurate. It should be said that it refers to the appreciation or depreciation of the domestic currency relative to foreign gold and silver."

Lu Jin nodded and said, "You understand it correctly. This is what the exchange rate means. What about the impact on the domestic economy?"

Yang Xian immediately said, "Let's clarify the topic first, then this question will be simple. If the domestic currency depreciates against gold and silver, and the domestic commodity prices do not change, then the foreign countries can buy more of our goods with the same amount of gold and silver as before. They can't ignore such an obvious bargain, and will definitely increase their purchases from our country, which means that our country's export trade will increase, and the domestic industrial and commercial sectors will become more prosperous.

"But there are also disadvantages to doing this, which is that it is more difficult for us to earn gold and silver from foreign countries. If we could sell seven pieces of cloth for one tael of silver before, now we may have to sell ten pieces to exchange for one tael.

"On the contrary, if the domestic currency appreciates against gold and silver, then it will be more expensive for foreign countries to buy our goods, and the domestic export trade will decrease accordingly. Then the industrial and commercial industries that specialize in producing foreign trade goods but have no market in China will be depressed."

The other people present nodded frequently as they listened, but after Yang Xian finished speaking, Lu Jin's comments caused everyone to reflect.

"You are right. The depreciation of the local currency will benefit export trade and make industries and businesses engaged in export production more prosperous. On the contrary, it will reduce exports and related industries will be depressed. But it is not comprehensive enough."

"Not comprehensive enough?" Yang Xian frowned, wondering what he had missed.

Lu Jin said directly, "I just said that traditional Confucian scholars believe that China is the Celestial Empire, with a vast territory and abundant resources. We only want gold and silver from foreign countries, and do not need to buy foreign things. This concept is wrong. But you only talked about the impact on exports, but did not mention the impact on imports. This shows that you subconsciously did not think of buying foreign things."

Everyone suddenly realized, and then realized that they themselves were not aware of this problem.

Lu Jin continued, "As the local currency depreciates against foreign currencies, domestic export-related industries will indeed prosper in the short term, but correspondingly, the goods we buy from foreign countries will also be more expensive, which is also disadvantageous to us.

"Don't say you don't need to buy things from abroad. China has everything. Let's talk about one thing, war horses. Does China have good war horses? No, should we buy them from abroad? If we can buy them, we will definitely buy them.

"Today is not a geography class, so I won't tell you about overseas countries, but you must remember that no matter at home or abroad, every place has its own unique products, which the ancients called "Fangwu".

"From small grain seeds that have never been seen before, such as the early-maturing rice of Champa promoted in my country by the former Song Dynasty, to the kapok that spread from the Western Regions and India, how great is the impact of these crops on China? There are also crops such as cucumbers, walnuts, and cumin brought back from the Western Regions by Zhang Qian, to large livestock breeds such as cattle, horses, and sheep of excellent quality. There are even more, minerals. Isn't China itself short of gold and silver? Copper mines are also scarce, but some foreign countries overseas have a lot of these minerals. I call them resource endowments.

"Resource endowments vary from place to place around the world. Even if China doesn't need to buy their finished products, what about these mineral raw materials? Don't you want to buy them?"

Everyone nodded in agreement when they heard this. They didn't know about the rare minerals that Lu Jin mentioned, but Champa rice and cotton were real and visible benefits that had already been widely promoted in China. Now, they couldn't leave without them.

This is even more true for war horses. China has not had good war horses since ancient times. Horse breeding is even more difficult to describe. The Han Dynasty had clearly introduced Dayuan horses, but failed to cultivate a localized breed, which led to the degeneration of the breed.

The Song Dynasty was even more outrageous. Because the military virtues were too weak, they could only desperately pursue cultural victory. Song poetry and Neo-Confucianism were greatly developed, but Neo-Confucianism backfired on itself. These Confucian scholars actually applied the ethical principles of human beings to horse politics, saying that livestock should not be inbred, and refusing to use techniques such as inbreeding. In this way, even if you introduce excellent breeds, you cannot maintain the advantages of the breeds. After long-term hybridization, degeneration is almost certain.
Seeing everyone nodding, Lu Jin then said, "I am solemnly telling you one thing today. You must keep it firmly in mind. Officials in previous dynasties may not need to care about the affairs of overseas countries. They only need to close the door and manage the country well, but this will not be possible in the future.

"During the Han Dynasty, Zhang Qian opened up the Western Regions, but he only reached the west of Congling, including Khwarezm, which had been destroyed by the Mongols. During the Tang Dynasty, the Tang Dynasty's control over the Western Regions had extended to Persia and the Arabs. Wang Xuance went on a diplomatic mission to India and even borrowed the Tubo vassal troops to destroy India. However, the Mongol expedition to the West went further west than the Han and Tang Dynasties.

"Not only did they fight further west, they also brought back many Semu barbarians. After seeing China's prosperity, these Semu barbarians went back and spread the news everywhere. This attracted so many Semu merchants who coveted China's wealth. I can now predict that there will be a war between China and the West in the future.

"As the saying goes, knowing yourself and the enemy ensures victory in a hundred battles. If you know nothing about the enemy, how can you protect our country? Even if you close the country to the outside world, it will not work. It's like trying to steal a bell by covering your ears. The sea is there. Even if you don't go there, the Semites will find you along the route.

“So I ask you to broaden your horizons. The world is much bigger than you think, and China is just a small part of it.

"Mr. Zhonghang is now compiling a general history of China, which will be included in the imperial examination textbooks in the future. After this general history of China is completed, I will compile a general history of the world to let you know the history of overseas countries, as well as the geography of China and the world. Students in the future must learn these books. I don't want the officials who pass the imperial examinations in the future, from the prime minister to the county magistrate, to not know about the overseas countries.

"Although you are already officials, you cannot fall behind. After these books are compiled, you must also organize a study session."

Some people present were surprised, some were used to it, and many people did not expect that Lu Jin not only knew Chinese history well, but also understood the history of overseas countries. His knowledge was truly unfathomable.

Everyone hurriedly bowed and responded, "Yes."

"Okay, let's go back to the exchange rate issue. The impact of exchange rates on import and export trade and domestic production is just the most basic concept. I'm going to give you another homework today. You can think about it after you go back, or you can discuss it with each other. Then we'll talk about it in the next class.

"It is known that China is the only country in the world that uses paper money. There are two reasons for this. One is that commodity trade is developed and gold, silver and copper coins are insufficient. The other is that my country originally lacks gold, silver and copper, so we have to use paper money, while overseas countries are still using physical currencies such as gold, silver and copper." However, with the development of time, the advancement of technology, and the improvement of productivity, when the commodity trade of overseas countries develops in the future, they will inevitably face a situation where gold, silver and copper are insufficient. At that time, they will definitely embark on the path of using credit currency like us.

"Then by that time, regardless of what the paper money of each country is called, the price of their respective paper money in exchange for gold and silver will definitely be different, which will result in many different exchange rates, while gold and silver will always be the hard currency recognized by countries around the world.

"If this happens, gold and silver will become a kind of 'commodity', or 'foreign exchange reserves'. If foreign countries want to use their own printed paper money to buy Chinese goods, will you sell them? Do you want to accept their paper money? Correspondingly, can China use its own printed paper money to buy goods from other countries?

"What impact will the exchange rate have on the two trading countries?
"If you agree to trade with Fanbang using each other's paper money, and Fanbang also agrees that both parties can use each other's paper money to buy goods from each other's country, then what should we do if Fanbang privately makes counterfeit Chinese money and buys goods from my country, disrupting our economic order?
"If we agree to accept the other party's paper money for the transaction, once we have a lot of foreign currency in our hands, and the other party suddenly 'devalues ​​its currency', causing the foreign currency in our hands to become waste paper, what should we do?"

Everyone looked at each other in surprise when they heard this. Wow, how come things are getting more and more complicated? They didn't expect that there is so much to learn in economics.

Lu Jin looked at their bewildered expressions and emphasized, "Don't think that the questions I raised are all fanciful. Maybe we won't encounter them now, but maybe the monarch and his subjects in the future will encounter these problems.

"If you don't think about the future, you will have immediate worries. It's not a bad thing to think about it now. When you really encounter these things, at least future generations can take out this economic book and refer to your current theories."

"Yes!" everyone answered in unison.

Lu Jin wiped the words on the blackboard, then wrote a few lines and spoke again.

"Okay, let's skip the exchange rate issue and talk about the division of industries. Traditional Confucianism believes that agriculture should be emphasized and commerce should be suppressed. Although I do not advocate suppressing commerce, agriculture should still be given importance. However, it would be too narrow to only regard farming as agriculture. The book "Economy" we wrote covers all production activities in society and must be summarized so that it can be called a classic.

“Therefore, I divide all production activities into three categories of industries.

“The primary industry is mainly agricultural production, but it should also include forestry, animal husbandry, and aquatic products, that is, fisheries, collectively known as agriculture, forestry, animal husbandry, and fishery.”

After Lu Jin wrote down the key points on the blackboard, he turned around and said to everyone again, "I plan to incorporate the grassland into the territory in the future to ensure long-term peace and stability in the North. The farming in the Central Plains and the nomadic herding in the grassland have been fighting for thousands of years, and it's time to end it.

"During the Han Dynasty, the two generals Wei and Huo conquered the Wolf's Lair and drank from the vast sea, which resulted in the absence of a royal court in the south of the desert, but they were never able to bring long-term peace to the grassland; during the Tang Dynasty, Li Weigong defeated the Turks in one battle, and Emperor Taizong of Tang even relocated the Turkic tribes south to the Yinshan Hetao area, but they were still unable to bring long-term peace. On the contrary, the migration of the Di and Rong tribes led to the subsequent Five Dynasties and Ten Kingdoms, and the Tuoba, Xianbei and Rouran took turns to appear, resulting in the division of China for nearly a hundred years.

"When it came to the Liao Dynasty, the Liao Dynasty had grasslands in the north and Youyan in the south. So the Liao Dynasty implemented the two courts in the north and south, one country with two systems, and adopted the rule according to local customs. The grasslands in the northern court used grassland laws, and Youyan and other places in the southern court used Han systems. So when we rule the grasslands in the future, what system should we use to ensure long-term peace and stability in the grasslands?

"Let's not talk about the method for now, but one thing is, from today on, if you want to rule the grassland, you must place animal husbandry on the same level of importance as farming. The herdsmen of the grassland are also Chinese people. Since you want to rule them, you can't just ignore their lives, but you can't continue the current practice of the violent Yuan Dynasty, which is to make the south of the Yangtze River poor and the north of the Great Wall rich. This will only lead to hatred between the north and the south and will not be conducive to the unification of the north and the south.

“So these four, agriculture, forestry, animal husbandry and fishery, must be given equal attention in the future.”

Everyone nodded in agreement upon hearing this. It also surprised the newcomers like Zhan Ding. They did not expect Lu Jin to be so ambitious. He not only wanted to pacify "China", but he also wanted to try to bring long-term peace and stability to the grassland, something that the Han and Tang dynasties had not been able to do.

Moreover, this attitude shows that Lu Jin did not take the unification of the Central Plains seriously at all. From the economic knowledge that Lu Jin just talked about, he has been talking about how to govern the country in the future. The problem is that you have not yet unified the country. This shows that you do not take Liu Futong, Xu Shouhui and the Yuan court seriously at all.
“If the primary industry of agriculture, forestry, animal husbandry and fishery is to obtain the most basic raw materials from the nature in which we live, then the secondary industry is the processing of these raw materials, that is, manufacturing, mining, energy, construction, and some special supply industries.

"The tertiary industry is all the remaining industries after the first and second industries, including retail, entertainment, services, catering, transportation, postal services, finance and banking, such as lending and other activities, as well as education, private schools, academies, and medical and clinic industries.

"How should these three industries be treated and managed? I think that first of all, the primary industry must be stable, that is, agriculture should be emphasized. If the primary industry is not stable, the secondary industry will not flourish, and if the secondary industry is not prosperous, the tertiary industry will not be prosperous.

"If the primary industry is not developed well, the people will go hungry. Who will have the energy to engage in manufacturing? If the secondary industry is not prosperous, the craftsmen and workers cannot make money. Who will have money to consume the tertiary industry? There is no money to send children to education, no money to eat and drink, and no money to entertain and watch operas. Naturally, the tertiary industry cannot prosper.

"What do you think of these three divisions?"

Everyone nodded immediately after hearing this, and Qin Conglong stroked his beard and praised, "This division of industries is novel, but from the perspective of production relations, it is also very appropriate. The primary industry obtains raw materials, the secondary industry processes the raw materials into commodities, and the tertiary industry is the final sales.

"According to this classification, farmers growing grain is the primary industry, grain merchants collect the grain, grind it into flour and pound it into rice, and turn the rice and wheat into edible grain, which is processing, or the secondary industry, and the final sale is the tertiary industry. But now it seems that the secondary and tertiary industries are integrated.

"Perhaps the catering industry should also be included. Restaurants and restaurants buy grain from grain merchants and make sesame cakes and wontons. This becomes the tertiary industry. Am I right in understanding this, old minister?"

Lu Jin nodded and said, "Yes, some industries are indeed mixed now, but with the changes in production relations in the future, they will inevitably be gradually separated. For example, the grain processing that you just mentioned, the flour milling and rice pounding processing industry will definitely become more and more concentrated in the future. Only in this way can we reduce costs and improve production efficiency, and then send the processed grain to various places for sale.

"It's easier to understand if we use the oil pressing industry as an analogy. Farmers growing rapeseed is the primary industry, oil mills pressing oil is the secondary industry, and oil sellers carrying rapeseed oil to sell is the tertiary industry."

Everyone nodded again after hearing this, and Tao An raised his hand and asked, "Then what industries are the energy and supply in the secondary industry that the lord just mentioned? Supply is easy to understand, but energy seems to be a newly coined word?"

(End of this chapter)