In spite of several large-scale interactions throughout history, variations between Chinese societies and Western nations have resulted in dissimilar directions of development. It is interesting, nonetheless, that these different directions have led to the same dilemma waiting the right solution. The subject of this paper is an appropriate example in jurisprudence. When facing enormous spending on war against another nation, how a country optimizes profits from its economic system through its financial policy to cover the expenses relies on the choice of the economic system. However, the choice of the economic system often creates full impact on the economic life of the people and thus becomes a key issue in constitutional jurisprudence in modern nations.
Nevertheless, since the standpoints of constitutional jurisprudence and public finance
∗ Crisis(1918/1996), p.334, Note.6, in full text: „Social conditions always contain remnants of the past and seeds of the future; and it is these seeds that are especially noticeable to the researcher looking back through the spectacles of a later time. Natura non facit saltum, and it is only by way of abstraction that
are not the same after all and the underlying choice of value has to be differentiated.
What is certain is that the same old question of “whether the state exercises market intervention” has attracted concerns in both the East and the West. This paper focuses on analysis of two texts—《Discourse on Salt and Iron》and《The Crisis of the Tax State》—two major debates on financial and economic policies.
A. 《The Crisis of the Tax State》vis-à-vis《Discourse on Salt and Iron》
Undeniably, the two debates [hereinafter Crisis and Discourse] in focus all rooted deeply in their respective backgrounds. In the hope of creating an outlined sketch of understanding to accentuate the focus of discussion, an introductory as well as an interpretation of relevant materials is portrayed below.
1. Issue in Crisis – State Capitalism or Free Economy
In 1917, Rudolf A. Goldscheid1, an Austrian finance scholar, while facing the question of whether the Austrian tax system would be able to pull the country out of its financial plight after WWI, cast out a gigantic question mark – his conviction that reforming the
1 For a recent biographical work, see W. Fritz et al., Rodulf Goldscheid: finanzsoziologie und ethische sozialwissenschaft, 2007, Berlin.
order of public goods would be the right solution. In other words, in the realm of public finance the theory of public goods must be practiced to the maximum degree to become the foundation of law and order to protect as well as improve public goods and upgrade their productivity.1
Goldscheid asserted: 2「The natural social result of such a development would be a
State which gradually needs to take less and less and yet can give more and more.」 He
thought, from the view of financial sociology (Finanzsoziologie), the natural outcome of social development would be the state asking for less and less from and giving more and more to its people. As a consequence, planning a perfect public economic system would be essential for the income sources of the entire society. 3In other words, the fiscal system of a tax state could no longer meet the demand of the time.
Schumpeter, however, opposed the above assertion. For him a war-incurred financial crisis was not the crisis of the tax state. War could not expose the intrinsic, structural imperfections of the system of the tax state. At the most, it would only show the tax state was under external impact. It would be spontaneous for a tax state to handle its
1 Goldscheid, Rudolf(1925), A Sociological Approach to Problems of Public Finance, in Musgrave, Richard A. and Alan T. Peacock(ed.)(1958), p.202-213. Extracts from “Staat, öffentlicher Haushalt und Gesellschaft, Wesen und Aufgaben der Finanzwissenschaften vom Standpunkete der Soziologie”, Handbuch der Finanzwissenschaft, edited bz W. Gerloff and F. Meisel, Vol. 1, Tübingen 1925, pp.
146-185.
2 Goldscheid (1925), p.213.
crisis through taxation. Therefore, Schumpeter, in his effort to defend economic freedom, advocated that utilizing the tax state system would be enough to cope with the crisis. On the contrary, if the state intended to plunder the private economic sector for financial gains, it might damage the market mechanism and slow down economic progress.
In response to Goldscheid’s assertion, Schumpeter proposed the famous Crisis in the last year of WWI, 1918. In Crisis, apart from criticizing the political status quo, Schumpeter also applied Goldscheid’s methodology and established his own set of tax state theories from the origin, nature and boundaries of the tax state as an attempt to overcome the difficulties in the so-called “crisis of the tax state” at the time.
The attraction of Crisis is the calm, unwavering attitude exhibited in its handling of crises which made the study on Schumpeter’s tax state philosophy even more thrilling.
2. Issue in Discourse—State Monopoly or Free Economy
The work Discourse was essentially the arranged and compiled record of a court
meeting.1 It chiefly contains the debate on the advantages and disadvantages of various state monopolies promoted during the reign of the Wu Emperor of the Han Dynasty and on the question of whether these fiscal measures of revenue collection should be kept or abolished.
One side of the debating parties, Wen Xue(文學) and Xian Liang(賢良) (hereafter referred to as Literati et al) claiming their identity as public opinions2 that the fiscal policy of the time was vying with private citizens for profits and therefore should be repealed. The opposing side, the court officials led by Sang Hong-yang (hereinafter
Sang et al) represented state interests and retorted the assertion of Literati et al by
claiming that state monopoly has its own justification paralleling the justification of agriculture, and shall not be neglected.3
In the debate on Chinese financial and economic policies in Discourse, the Literati regarded the economic policy the Wu Emperor of the Han Dynasty promoted was
“vying with people for profits” which limited agricultural development. Instead, they
1 Some people believe that Huan-kuan was touched by the words of Zhu Zi-bo(朱子伯) of Ru-nan so he collected the record that had been passed down, arranged the order, polished the language, added some clauses and produced the version available today. Please refer to History of Thoughts in the East Han and West Han Dynasties by [Hsu](1979), P.125. For verifications of whether “Discourse on Salt and Iron”
was a fabrication, see [Lai](1996/1998).
2 See Discourse, §1.[鹽鐵論本議第一]
advocated, “restraining from trivial gains to cultivate righteousness” and “valuing the essential part and suppressing the insignificant elements.” In contrast, the court officials believed Wu Emperor’s policy was not only to reinforce national defense but also to curtail private businesses from growing out of control and endangering the central regime. Therefore, they were convinced that the economic measures were in fact advantageous for private citizens and beneficial to agricultural development.1
Some suggests, on the surface, the Confucian Literati et al seem to have won the debate, yet in reality the victory of Literati et al was a result of the convergence of Confucianism and Legalism and therefore it should have been a victory of the Legalists as well.”2 However, as we investigate further: In which basic ideas did Confucianism and the Legalism converge and in which ones did they vary? Whether this can be associated with issues such as the argument of “big government v. small government” is already enough for contemporary researchers to ponder upon.
In reality, however, the argument over the policies of price control and even allocation of salt and iron reappeared itself from the Chin-Han period to the Ming and Ching Dynasties, but in different forms and to various degrees. These policies were adopted
1 [Qiao](2002), Discourse on Salt and Iron, annotation edition, Huaxia Publishing, pp.1-3
2 [Tang & Chen](2004), History of Economical Ethics of Ancient China, Renmin Chu Ban She, p.276
for the same causes and failed for similar reasons. It was a consistent phenomenon in Chinese economic history. 1 Various Chinese dynasties being similar in scale and structure, frontier defense was nearly always a heavy burden on state finances; in consequence, the government was unable to extend its economic power externally and, being incapable of overcoming its existent economic boundaries, which had to turn inward and squeeze out all possible civilian resources without mercy, fighting for profits with the people with it political power.2 This feature of state fiscal authority seeking financial resources internally began with the “Discourse on Salt and Iron” and had its significance in the transformation of economic social structure.
On the other hand, however, Hsu offers an insightful comment that “Under imperial
authoritarian rule, intellectuals have the opportunity to reflect political realities only
when they are caught in a contradicting standoff and this is where the true value of
Discourse on Salt and Iron lies.” 3 Regardless of the complexity of the conflicts of interests between both sides of the debate i.e., Literati et al vs. Sang et al., the fact that this dialogue content reflected the life of the people at the time, which reached the ears of the emperor, already has its referential value.
1 See [Lai] (1996/1998), p.29.
2 See [Lai] (1996/1998), p.29.
3 [Hsu] (1979), History of Thoughts in the East Han and West Han Dynasties, p.124
3. Taxation as Defined in Both Debates –Standpoints of Dissimilar Foundations of Taxation Ethics
The argument in both debates was concentrated on the relation between the state and economy. To be specific, both debates were intended to do nothing more than drawing the line between the state and the people based on their respective historic backgrounds and cultural contexts in order to secure their positions and continue with their lives. On the surface, the two debates could not have possibly had any association in the space-time continuum and therefore can never be compared. In reality, however, exactly because of the absence of intersection between these two debates, identification of the ethic foundation in the separate development of tax regulations in China and in the West this paper has initially set to define becomes a possibility.
Illustration 2 Schematic for Comparison between the Two Written Works
《Discourse on Salt and Iron》 vis-à-vis 《The Crisis of the Tax State》
1 and 2: There are commonality and practical benefits in comparison between “Discourse on Salt and Iron” and “The Crisis of the Tax State”.
1 and 3: The contradicting views in the financial and economic debate in Discourse on Salt and Iron are explained through the conflict between Legalism and Confucianism.
2 and 4: The standpoint of The Crisis of the Tax State is made conspicuous through Entrepreneur State and Tax State.
3 and 4: Through the focuses of debates in China and the West, it is made clear that the pivotal question lies in the choice of value of the fiscal system.
3 and 5: The Legalist and Confucianist theories are adopted as an attempt to explain the type of market economy in system transformation.
4 and 5: The state fiscal system is used as an attempt to explain the type of market economy in system transformation.
1. Sang et al vs. Literati et al
(Should state control monopoly businesses?)
3. Legalism vs. Confucianism (an ideological conflict)
4. Entrepreneur State vs. Tax State
( choice of value of the state fiscal system)
2. State Capitalism vs. State Socialism
(Does the state exercise market intervention systematically?)
5. Possibility of legislation on system transformation
( fiscal sociology )
（fiscal sociology）
(fiscal constitution)