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The Formation of the Modern East Asian Economy
     My story today begins with eleventh century China. During this century, the Chinese economy achieved several breakthroughs. Its population surpassed 100 million for the first time. It economic center shifter decisively from the north to the south. Its surge in commercial development created thousands of new market towns. Its urban population in certain southern prefectures rose close to 15%. And, most germane to my talk, its mintage of copper coins reached unprecedented levels. Since the fourth century BC, copper had been the basic metal of China's currency, and by the time of Christ it had acquired widespread acceptance in its characteristic shape as a round coin with a hole in the middle. A millennium later saw the mintage of these copper coins reach an annual average figure of 2 million strings over the 168 years of the Northern Sung dynasty, from 960 to 1126. To grasp the significance of this production, one need only compare this figure with corresponding figures from the major preceding and succeeding Chinese dynasties, the Tang and the Ming. From 621 to 907, the Tang dynasty had minted its celebrated Kaiyuan standard copper coins almost without break. Yet, its average annual mintage was only about 150 strings of copper cash. In some years of the mid-eighth century, the mintage reached as high as 327 thousand strings of copper cash. But that highest Tang figure pales in comparison with the 5.06 million strings of cash minted in 1080 alone. Thirty-four times greater than any annual figure from the Tang, it also was 15 times greater than all the copper cash minted during the 248 years of the Ming dynasty from 1368 to 1644. And, this 1080 figure of 5.06 million strings of copper cash-probably an accumulative figure for several years of production-represents just a third of the total copper cash minted during the Northern Song (*).

     After this dynasty's loss of its north China homeland to Jurchen invaders in 1127, no other Chinese dynasty would ever regain its levels of coin production and the favorable conditions that had made this production possible. Its truncated survivor the Southern Sung government, was based in the remaining two-thirds of the country in middle and south China, and quickly saw its average annual production of copper coins plummet to a mere 5% of the Northern Sung average. The exhaustion of copper resources within the limits of the available technology forced this and subsequent governments to seek other solutions to the recurrent shortage of copper coinage.

     Thus, over the next nine centuries, Chinese governments often acted like most governments: they preferred to ignore or bluff their way around the problem, under the assumption that market forces, like any good subject, would bow to their dictates.

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