Discourses on Salt and Iron
The Discourses on Salt and Iron (Chinese: 鹽鐵論; pinyin: Yán Tiě Lùn) was a debate held at the imperial court in 81 BCE on state policy during the Han dynasty in China. The previous emperor, Emperor Wu, had reversed the laissez-faire policies of his predecessors and imposed a wide variety of state interventions, such as monopolies on China's salt and iron enterprises, price stabilization schemes, and taxes on capital, which had sparked fierce debate. After his death, during the reign of Emperor Zhao of Han, the regent Huo Guang called on all the scholars of the empire to come to the capital, Chang'an, to debate the government's economic policies.
The debate was characterized by two opposing factions, the reformists and the modernists. The reformists were largely Confucian scholars who were opposed to the policies of Emperor Wu, and who demanded abolition of the monopolies on salt and iron, an end to the state price stabilization schemes, and huge cuts in government expenditures to reduce the burden of the citizenry. The Modernists supported the continuation of Emperor Wu's policies in order to appropriate the profits of private merchants into state coffers to fund the government's military and colonization campaigns in the north and west.
The results of these debates were mixed. Although the Modernist were largely successful and their policies were followed through most of the Western Han after Emperor Wu, the Reformists repealed these policies in Eastern Han, save for the government monopoly on minting coins.
The discourses on salt and iron took place behind a tumultuous background. The previous ruler, Emperor Wu of Han, had undertaken a drastic change in policy compared to his predecessors. Reversing their laissez-faire policy at home and policy of appeasement of the Xiongnu abroad, he nationalized the coinage, salt, and iron in order to pay for his massive campaigns against the Xiongnu tribes which posed a threat to the empire. Although Wu was successful in his campaigns, his policies bankrupted many merchants and industrialists and led to widespread dissatisfaction and even revolts; after his death, the regent, Huo Guang, called a court conference to discuss whether to continue Wu's policies.
Policies in the early Han
Policies in the early Han were marked by laissez-faire, due to the adoption by the early emperors of the Taoist principle of Wu wei (無為), literally meaning "do nothing". As part of their laissez-faire policy, agricultural taxes were reduced from 1/15 of agricultural output to 1/30 and for a brief period, abolished entirely. In addition, the labor corvée required of peasants was reduced from one month every year to one month every three years. The minting of coins was privatized, while Qin taxes on salt and other commodities were removed.
Later opponents of taxation described the early Han as a prosperous period. Under Emperor Jing,
... the ropes used to hang the bags of coins were breaking apart due to the weight, and bags of grain which had been stored for several years were rotting because they had been neglected and not eaten.
Severe criminal punishments, such as cutting off the nose of an offender, were abolished.
Merchants and industrialists particularly prospered in this period. In the early Western Han, the wealthiest men in the empire were merchants who produced and distributed salt and iron  and gained wealth that rivalled the annual tax revenues collected by the imperial court. These merchants invested in land, becoming great landowners and employing large numbers of peasants. A salt or iron industrialist could employ over one thousand peasants to extract either liquid brine, sea salt, rock salt, or iron ore.
Emperor Wu's policies
Emperor Wu of Han (r. 141–87 BCE) viewed such large-scale private industries as a threat to the state, as they drew the peasants' loyalties away from farming and towards the industrialists. Nationalizing the salt and iron trades eliminated this threat and produced large profits for the state. This policy was successful in financing Emperor Wu's campaigns of challenging the nomadic Xiongnu Confederation while colonizing the Hexi Corridor and what is now Xinjiang of Central Asia, Northern Vietnam, Yunnan, and North Korea. Other policies included a price stabilization scheme, and a tax of 10 percent on the capital of merchants and industrialists who had not yet been expropriated. However, these policies imposed great hardships on the people; banditry and even revolts were occurring by Emperor Wu's death.
As complaints surfaced more and more about the government's policies, the regent Huo Guang, which was the de facto ruler of China after Emperor Wu of Han, called a court conference to debate whether the policies of Emperor Wu should be continued. The resulting debate was divided into two groups, the reformists and the modernists. The reformists, largely provincial confucian scholars, backed privatization and a return to the laissez-faire policies of old. The modernists, on the other hand, largely represented the interests of the central government and were more in tune with legalist philosophy, as well as being admirers of the previous Qin dynasty whose harsh and numerous laws had been based on legalist principles.
The reformist view was based on the Confucian ideal which sought to bring about the betterment of man by conformity with fundamental moral principles. To achieve this, they wished to reduce controls, demands for service, and taxation to a minimum. The reformists' criticism of the monopolies largely centered on the idea that the state "should not compete with the people for profit", as it would tend to oppress the citizenry while doing so; mercantile activity were not "proper activities for the state". They pointed out that the monopolies had placed an immense burden on the citizenry. In addition, the reformists complained that the state monopolies oppressed the people by producing low-quality and impractical iron tools that were useless and made only to meet quotas, but which the peasants had to pay for regardless of their quality. The reformers believed former private smelting by small-scale family enterprises made better implements "because of pride of workmanship and because they were closer to the users", in contrast to the state monopoly. In addition, the reformists complained that the state monopolies could not coordinate their production in accordance with the needs of all the provinces of the empire, with some areas overproducing and actually forcing the peasants to buy the surplus. The reformists also criticized the aggressive foreign policy of Emperor Wu, which they believed had weakened instead of strengthening China, and whose costs did not justify the benefits involved.
The modernists were headed by Sang Hongyang, an ex-merchant who had been selected by Emperor Wu to administer to his new interventionist policies. They justified the imposition of controls on the grounds that they would thus wrest profits from wealthy private merchants that could pose a threat to the state and bring them into state coffers; particularly, modernists claimed that industrialists in salt and iron were "brutal and tyrannical", and who employed thousands of workers that could potentially become rebels. The modernists took the view that with its iron monopoly the state could effectively distribute tools of good quality for the use of the peasant, as well as stabilizing the price of many essential goods. They also claimed that private workshops were too small, unspecialized and poorly equipped. Modernists claimed the government workshops offered better working conditions and materials than private workshops. In addition, the modernists claimed that the expansionist campaigns were necessary to defend China from barbarian incursions, and that by nationalizing the salt and iron industries the state could obtain the funds needed without imposing additional burdens on the peasantry.
The modernists survived this debate with most of their policies intact, with only the monopoly on liquor abolished, although Sang was later executed in 80 BCE for treason. Reformists gradually gained more power through the rest of Former Han, due to the growing unsustainability of the Modernists' policies. They briefly succeeded in getting the central government monopolies on salt and iron abolished from 44 to 41 BCE, though this was unsuccessful and the monopolies resumed until the end of Wang Mang's (r. 9–23 CE) regime, which imposed ultra-modernist policies. After his overthrow, the government of Later Han resumed earlier laissez faire policies and relinquished control of these industries to private businessmen.
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