(Translated by Jiangyue Zhai)

72．On Monopolizing the Salt and Iron Industry

    Duke Huan asked Guanzi，“I am going to levy tax on real estate，what do you think of it?”Guanzi replied，“That is nothing but advocating people pull down their houses．”(The duke asked：) “I am going to levy tax on trees，what do you think of it?”Guanzi replied．“That is nothing but advocating people to hack down the trees．”(The duke asked：)“I am going to levy tax on all the six kinds of livestock，what do you think of it?”Guanzi replied．“That is nothing but advocating people kill their livestock．”(The duke asked：)“I am going to collect a head tax，what do you think of that? ”Guanzi replied，“That is nothing but advocating people to cover up the true situation of the population．”Duke Huan asked．“What kind of things can I count on to govern my state then?”Guanzi replied．“The only thing you can do is to take firm control over salt and iron．”

    Duke Huan asked，“What does taking firm control over salt and iron mean?”Guanzi replied，  “Coastal states dependent upon the resources of the ocean should cautiously and reasonably establish a tax on salt．”Duke Huan asked，“What does establishing reasonable tax system on salt mean?”Guanzi replied，“If a family has ten members，there are ten people consuming salt．If a family has one hundred members，there are one hundred people consuming salt． Averagely，an adult male can consume five and a half sheng of salt，an adult female can consume three and a half sheng，and a child can consume two and a half sheng．That is the general situation of the consumption of salt．One hundred sheng of salt equals one fu．If the price of each sheng is increased by half a qian (qian was the unit of money in ancient times in China)，the price of one fu can be increased by fifty qian．If the price of each sheng is increased by one qian，the price of one fu can be increased by one hundred qian．If the price of each sheng salt is increased by two qian，the price of one fu can be increased by two hundred qian，and the price of one zhong (zhong is an ancient Chinese unit of dry measures，which amounts to ten fu)   can be increased by two thousand，the price of ten zhong can be increased by twenty thousand，the price of one hundred zhong can be increased by two hundred thousand，and the price of one thousand zhong can be increased by two million．A state of ten thousand chariots can have tens of millions of people．Calculating this way，the income of salt tax of one single day is about two million qian，the income of ten days is twenty million and that of one month will be sixty million．And a state of ten thousand chariots can collect head money upon ten million people．Suppose that thirty qian are collected on each person monthly，the total amount should be thirty million．At present，we are not levying head money either on adults or on children directly，nevertheless，we could get the same amount of money as the combination of the sum of head money collected by two big states，sixty million qian．Given that you were going to issue an order as follows：I am going to collect head money upon all of you people，both adults and children，they would certainly remonstrate loudly and angrily against you．However，if you take firm control over the policy on salt，the people cannot manage to dodge it even though you are going to take a profit of one hundred times over．”

    (Guanzi said：) “And regarding the tax policy on iron：A woman must have at least one needle and one pair of scissors，then she can perform her work．0ne farmer must have at least one plough，one ploughshare and one hoe，then he can perform his work．One cart—maker must have at least one axe，one saw，one awl and one chisel，then he can perform his work．  All across the world，none of these above—mentioned three kinds of people could manage to do his／her work without these tools．If the price of one needle is increased by one qian，the increment of thirty needles amounts to the head money collected from one person．If the price of one pair of scissors is increased by six qian，five times six amounts to thirty，therefore，the increment of five pairs of scissors amounts to the head money of one person．If the price of one ploughshare is increased by ten qian，the increment of three ploughshares amounts to the head money of one person．And the prices of other things can also be increased according to this in a corresponding way．Thus，whoever being able to work will not manage to dodge the taxes．” 

  
    Duke Huan asked，“What about the states not having mountains or oceans? Cannot they manage to unify the world anyway?”Guanzi said．“They can take advantage of the resources of mountains and oceans of other states to benefit themselves．We can ask the states located in the coastal areas to sell salt to us．We buy it at the price of fifteen qian for one，“and then sell it at the official price of one hundred．Even though we have not produced it ourselves，we can take advantage of other states to make profits by regulating the price．That is the right method for managing money matters by using the resources of others．”

73．The Savings Policy of the State

  If the savings of a state are enough to support the nation for ten years，but the common people do not have enough food to eat，they will likely wish to acquire salaries from the sovereign for their skills．If the sovereign owns a huge amount of money collected from taxes levied on salt and iron，but the common people do not have enough money to spend，they will likely try to gain some income from him for their work．Hence，if the sovereign can take firm control over the food supply and wealth of the state，he can support people not having enough to eat or spend with the surplus of grain and money of the nation，so that people all over the state will be dependent upon him．Lives of the common people are dependent upon grain produced by all kinds of crops and also depend on gold and money to trade in the commodities they need．So，a sovereign who is good at governing his state will take control of gold and money to operate the distribution of food supply among his people，so that all of the people will devote their strength to serving him in return．

    According to the nature of human beings，they all trust their parents and will die for the sake of wealth．In this respect，people all over the world are the same．The common people will be happy when benefits are bestowed upon them and they will be angry if they are deprived of their wealth．That is the natural character of human beings．Ancient kings knew this so that they would do it apparently as they rendered benefits to their people；oppositely，the former would do it secretly and unwittingly when they deprived the latter of things．Thus，the common people would feel close to their sovereign．“Zu Ji’’is a kind of tax imposed upon people by force．And“Zu Shui’’is a kind of tax，which should be pondered out of serious consideration before it is imposed upon the common people．Sovereigns being able to unify the who1e world or establish the most powerful states would remove taxes imposed by force but only collect after serious consideration，so that people all over the world would be happy with them and submit to their authorities．

    When the sovereign takes control of the power over the wealth of the state exclusively，the state is invincible．When the power over the wealth of the state is shared between two departments，the army of the state can still manage not to be defeated be other states．When the power over the wealth of the state is shared among three departments，its troops cannot be dispatched…for any military action．When the power over the wealth of the state is shared among four departments，the state will definitely be ruined．Ancient kings knew this so that they would take firm control over the food supply of their states and block off the paths for seeking profits among their people．Thus，it is dependent upon sovereign exclusively to make decision on whether to render the people something or to deprive them of something，whether to impoverish them or to enrich them，so that the common people would love him as if he were the sun and the moon，and they would treat him as if he were their parent．

    Regarding governing the state，if the sovereign does not know the degrees of seriousness of things，he cannot manage to control and administer the common people by managing the national macroeconomy．If he does not know how to regulate profits among his people，the state can never be regarded as in great order．Thus，a state of ten thousand chariots would have extremely wealthy businessmen with tens of thousands jin of gold，and a state of one thousand chariots would have extremely wealthy businessmen with one thousand jin of gold．Why could things develop this way? A lot of national wealth is lost．As a result，officials will not serve the sovereign loyally，and intellectuals will not devote their lives to the state．Sometimes the yearly harvest is good，but other times it is bad，so that the price of grain can be either low or high correspondingly．  Some edicts are urgent but others are not，so that things can be either expensive or cheap．And if the sovereign cannot manage to maintain a balance in the price of grain and prices of other goods，merchants will monopolize the supply and marketing of things to take advantage of the deficiency of food and tools of the common people by charging prices a hundred times higher than the original costs．If the territory of the state were divided equally among the people，the mighty ones would manage to maintain their shares．If the wealth of the state were divided equally among the people，the wise ones would manage to maintain their shares．Moreover，the wise ones can enjoy profits of tens of times higher in comparison with the amount they invested．In the opposite case，the frivolous ones cannot manage to recover their costs．  And if the sovereign cannot administer the situation efficiently，the gap between the rich and the poor will be enlarged so strongly that the wealthy people might be hundreds of times more affluent than the destitute ones．Thus，high salaries are no longer inviting enough to attract the wealthy people and penalties are no longer formidable enough to threaten the poor．If the law is not complied with and the orders cannot be carried out，the common people cannot be well administered while the gap between the rich and the poor is extremely large．However，according to the records on the total amount of lands cultivated，according to the grain these fields produced and the amount the people needed，everyone should have an average number of fields．And if both the harvest and the store of grain are taken into consideration，there should be enough foodstuffs to support people all over the state．However，there are some people suffering from hunger．What is the cause for it? Because some grain is hoarded for speculation．And according to the amount of money coined for circulation，everyone should have hundreds or even thousands of qian．However，there are some people not having enough to spend or do things they wished．What is the cause for it? Because some money is cornered by certain people on purpose．And if the sovereign cannot manage to disperse money and grain garnered by redistributing wealth and rearranging work reasonably among his people to support those who are short of means，people all over the state will enthrall each other even though he might focus on farming and urging the people to work hard to cultivate their fields，and even though he might mint money endlessly．Could the state really be put in order this way?

    When the harvest of the year happens to be good, the common people cannot manage to sell grain on the market，even dogs and pigs will share the same food with human beings．When the harvest of the year happens to be bad，grain will be sold out at a price of ten ji for one fu and there are still some people starving to death on the roads．What is the reason? Are the fields really not fertile enough to grow crops，or are there really not enough foodstuffs to support the common people? That happens while the price of grain of the previous year was extremely low，and dogs，pigs had shared the same food with human beings；of course there will not be enough food for the next year．When prices of things happen to be cheap，goods cannot be sold out even though they are sold at half price compared with the costs．Thus the people cannot recover the amount they invested．When prices of things happen to be expensive，the people cannot manage to purchase utensils they needed even though they offer prices ten times higher than the costs．Thus，the people cannot obtain things they needed badly．However，is it true that there are not enough things to meet the needs of people? That happens while the right time for regulating prices has been missed，so that prices are fluctuating and cannot be kept balanced any more．Hence，a sovereign who is good at governing his state will sell off things he hoarded when goods are lacking in the markets and the common people cannot get enough utensils or food．He will buy in things when they are oversupplied on the markets and the people are having more than enough to support themselves．When the people are overly supplied，prices of things will be cheap，so that the sovereign can acquire them at low prices．And when supply is not enough to meet demand，prices of things will be high，so that the sovereign can sell things he hoarded at high prices．This means buying in at lower prices and selling at much higher ones，so that the sovereign can take advantage of profits tens of times higher．Accordingly，the finance of the state can be kept balanced．

    The greatest benefit provided by evaluating and acting according to the degrees of seriousness of the situation is to purchase and accumulate things at prices that are a bit higher compared with the market prices when things are cheap，and then dump them at prices a bit lower than the market prices when things are expensive．Lack or plethora of goods is ever changing，so that suitable measures should be taken to regulate the prices to balance supply and demand．Otherwise，if the balance is destroyed，the prices of some things in shortage will be driven up．A sovereign who realizes that will take measures to adjust supply and demand to maintain balance．Make sure that a city of ten thousand families will store ten thousand zhong of grain and one thousand ji of money and that a city of one thousand families will store one thousand zhong of grain and one hundred ji of money．Thus，both the spring ploughing and summer weeding can all be facilitated．And tools such as ploughs，ploughshares and other things like seeds，foodstuffs are all supported by the state，so that even the influential merchants and powerful families who have cornered things on purpose will not have any opportunity to take huge advantage of the common people．Why? The sovereign knows how to focus on farming and to take cautious action to facilitate it．In order to acquire silk and other clothing，loans can be rendered to the common people during the spring season and then ask them to pay back in terms of fabric．And in order to collect grain harvested during the autumn season，loans can be rendered to the common people during the summer season and then ask them to pay back in terms of grain．Thus，farm work will not be missed and the wealth of the state will not be lost．

    Grain should be of first importance among the tens of thousands of things of the world．When grain is expensive，all other goods must be cheap；when grain is cheap，all other goods must be expensive．The price of grain and those of other goods are opposite to each other，and they also follow different courses of fluctuation．Hence，if the sovereign can take advantage of the fluctuation of prices of both the grain and other goods to adjust the supply and demand of things，he will benefit from a huge amount of profits and it will be no longer necessary for him to rely on taxes levied upon the common people．And levying tax on real estate means nothing but advocating people to destroy their houses；levying tax according to the quantity of livestock means nothing but advocating people kill their livestock；levying tax according to the size of the fields means  nothing  but impeding  farming；collecting head money means nothing but restraining effort：and collecting money on taxing families means nothing but supporting the wealthy people who have more than enough to spend and consume．All these five measures cannot be taken at the same time，so that sovereigns have taken  them separately but not collectively．So，the Son of Heaven gains profits by taking measures to control the money and sovereigns of all other feudatories conferred by the Son of Heaven gain profits by taking measures to control the grain of their states．At time when the harvest is mediocre，the price of one dan of grain can be increased by ten qian．An adult male consumes four dan of grain every month，therefore，the amount of tax collected from one adult male should be forty qian．An adult female consumes three dan，therefore，the  amount of tax collected from one adult female should be thirty  qian．A child consumes two dan，therefore，the amount of tax collected from one child should be twenty qian．At a time when the harvest is bad，grain is expensive．Increase the price of one dan sold to people by twenty qian，thus，the amount of tax collected from one adult male should be eighty  qian，that collected from one adult female should be sixty and that from one child should be forty．Thus，head money is collected this way even though the sovereign has not issued an order to levy it directly．If he masters the condition of both the harvest of the year and the state’s store of grain，no one，adult male，adult female or child，can manage to evade the tax． When one person buys grain from the national granary，the amount of money earned by the state will be more than the head money collected from ten people．When ten people buy grain from the national granary，the amount of money  earned by the state will be more than the head money collected from one hundred people．When one thousand people buy grain from the national granary，the amount of money earned by the state will be more than the head money collected from ten thousand people．When things are over supplied，their prices will be low．When supply cannot meet demand，prices of goods will be high．When goods are  dumped，their prices will fall．When goods are hoarded，their prices will go up．A sovereign who realizes that will take control over the circulation of grain and other goods of the state．He will invest in foodstuffs when the price of grain is low and purchase clothing when fabrics are cheap．And then he will dispose of these things when the right time comes to maintain balance of circulation．Thus，the prices of goods can be regulated and the sovereign himself can benefit from it as well．

    A state is designated “Di Guo’’ if there is a state of ten thousand chariots in front of it and another of one thousand chariots behind it．A state is designated“Ju Guo”if there is a state of one thousand chariots in front of it and another one of ten thousand chariots behind it．And a state of square territory which is surrounded by enemy states on all the four sides is designated“Qu Guo”．If a“Qu Guo”has only one hundred chariots，the throne can be regarded as being suspended．The territory of a“Qu Guo”with one thousand chariots will have to cede one half of its territory to its neighboring states．And the territory of a“Qu Guo’’with ten thousand chariots will lose more than half its territory．Why did I say that if a “Qu Guo” has only one hundred chariots，the throne is suspended? If a state of one hundred chariots is a“Qu Guo”．it is surrounded by big states of thousands or tens of thousands of chariots on all the four sides．If sovereigns of these big states are at odds with each other，they will dispatch troops and launch attacks against their enemies，and they will definitely use this small state as a fort for military actions．Nevertheless，it will not gain any advantages even though the state launching the war and using it as a tool wins．Moreover，if high—ranking officials have sacrificed their lives for the sake of the state abroad，some lands should be conferred on their offspring to honor their contributions．And if soldiers and generals have seized some enemies，they should be rewarded and be conferred with salaries．Thus，all lands of the state will be used up for rewarding people for achievements，and the amount of money collected by taxes will be used up in supporting the orphans of the deceased people with contributions to the state．Therefore，the throne exists only nominally and the sovereign does not own any land in reality．Even though he appears to have one hundred chariots for defense，he cannot operate even one chi of land at a11．so that the throne is seen as being in suspension．And if the big states do not have enough to spend and the small states have used up all savings，is there anything they can do as a remedy? The answer is：for states of one hundred chariots，sovereigns can issue some bonds and then take the opportunity provided by the fluctuation of prices during all the four seasons to adjust the circulation of grain and other goods to keep financial balance．Thus，the expenditure of a state of one hundred chariots can be replenished．For states of one thousand chariots，they can monopolize the natural resources and they can use them to make all kinds of utensils and thus，money and profits can be made as well．And then they can adjust the salaries of their officials and troops according to the situation of the harvest every year，thus，the states of one thousand chariots will have enough to spend．For states of ten thousand chariots，they should adopt suitable policies and issue reasonable orders according to the harvest of each year and the situation of the supply and demand of grain and other goods to adjust the circulation．And then all kinds of expenditure of the states of ten thousands chariots can be covered without any problem．

    Jade is produced in Yu Shi．Gold is produced in areas along the Ru River and the Han River．And pearls are produced in Chi Ye．The provenances of these treasures are seven thousand eight hundred li away from the capital of the Zhou Dynasty in all four points of the compass．Paths to these places are often blocked by mountains and waters．Therefore，they cannot be reached with carts and boats．Since the provenances of these things were so far away and the transport was so difficult，ancient kings had made good use of their value，so that they appointed pearls and jade as first-rate currency，appointed gold to be secondary and coins to be third-grade．Regarding these three kinds of currencies，people cannot keep themselves warm by simply holding them in the hands；nor can they quench their hunger by eating them．However，ancient kings used them to keep control over the wealth of their states，to manage the common people and to put the world in order．Contemporary sovereigns never stop levying taxes upon the common people．When they order the people to pay their taxes within ten days，prices of things will be reduced by one tenth．When they order the people to pay within eight days，prices of things will be reduced by two tenths．When they order the people to pay within five days，prices of things will be reduced to one half． And when they order the people to pay their taxes within one day，prices of things will be reduced by nine tenths．Ancient kings knew this，so that they would not levy taxes upon the people directly but take suitable measures to control circulation and gain profits．