Shang Yang, a reformist of the State of Qin, argues with his conservative counterparts in a painting. The reforms proposed by Shang generated huge effects on the development of the state.

In Chinese history, Legalism was one of the main philosophical currents during the Warring States Period (475-221 BC). The early thought behind Legalism was first formulated by Shang Yang (390-338 BC) and further developed by Han Fei (280-233 BC), who synthesized the methods of his predecessors as described in his eponymous work, the Han Feizi.
 

 The salient feature of the economic ideas put forth by Shang and Han was that the government should strictly regulate private industry and commerce, which were regarded as “incidental,” while recognizing agriculture as “fundamental” to the state.
 

In order to safeguard the bureaucratic political apparatus of the State of Qin and supporting military system of rankings based on battlefield achievements, Shang and Han strongly advocated government intervention in the economy and opposed development of private enterprise. They envisioned that a prosperous country with a powerful army could be created through the government’s overall control and monopoly of economic resources.
 

 
Private industry problematic
Starting with Shang, Legalists tried to magnify the contradiction between the state and the public, arguing that “if the people are weak, the state will be strong and vice versa, so a wise government should emphasize weakening the power of the people.”

Shang argued: “Only when the people are humble will they have esteem for the nobility. Only when they are weak can they respect officials, and only when they are poor will they value rewards.” Otherwise, they will look down upon the rank of nobility, officials and rewards from the court, and distract themselves from agriculture and war.
 

Amid the cruel wars of annexation, the State of Qin heeded Shang’s advice and separated the army into 20 military ranks based on battlefield achievements. Social wealth was mainly distributed according to military exploits within the system.

As private industry and commerce boomed and businessmen accumulated wealth, another means of wealth distribution gradually took shape that challenged the military ranking system.

Shang and his followers contended that businessmen did not engage in farming or war while making higher profits than peasants and soldiers. Moreover, they possessed a large amount of money and led a comfortable life. The phenomenon would inevitably bring two social ills, he argued.
 

First, it would degrade social conduct, discouraging peasants and soldiers from making agricultural endeavors and fighting dauntlessly in war. Furthermore, it would enable businessmen to buy their way into power. “If the people have private honors, they will disdain military ranks and official titles. If they are rich, they will despise court rewards,” Shang said, noting that political stability would be undermined.
 

 Second, the phenomenon could disrupt the political hierarchy and social order. Shang said that rich businessmen would do as they pleased. Some of them collided with disloyal bigwigs, bullying the populace. Consequently, it would be difficult to organize and govern grassroots communities.
 

Therefore, Shang advised the ruler to give all benefits of guarding the frontier to soldiers and all trade profits to peasants. Only in this way could the soldiers and peasants be reassured, and thus the state be powerful and affluent, he said.
 

 
Strict economic control
Han further developed Shang’s economic philosophy. He said the state and the people would always have conflicting interests. If the people became strong and rich, they would not devote themselves to farming and war. Therefore, only when the people were in absolute poverty and allowed to become rich only through the state political hierarchy and the military ranking system would they wholeheartedly pursue rewards from the central court and strive for state interests.

Han also thought that if wealth was owned privately, state strength would be weakened and national stability threatened.
 

Shang and Han contended that the state should vigorously intervene in economic development for two reasons. First, after establishing themselves in the economic sphere,  businessmen would build up power with enormous capital, constituting an opposing force to the monarchical political system.
 

It was thus imperative to stop it from happening to ensure the stability of the state’s political hierarchy and military ranking system.

Second, in the vast yet sparsely populated State of Qin, frequent wars required all natural resources and manpower to be invested in agriculture and warfare to make the state rich and its military force efficient, ultimately securing victory in the annexation wars.
 

Shang and Han strongly urged overall state control over the economic domain as well as monopoly of national natural and human resources, which should be poured into agriculture and war, they argued.
Specifically, the government controlled important forest and mineral resources as well as benefits from mountains and rivers.

Shang considered businessmen to be a source of social disorder that must be effectively contained. Only by stifling private economic activities could the state prosper and military power be increased.
 

Nonetheless, Legalists actually did not turn a blind eye to the social and economic functions of private businesses. They held that peasants were responsible for cultivating land, businessmen provided materials and officials managed the people by law, so businesses were essential to people’s lives and state needs. However, they believed businesses were such a danger that once they gained ground, the army would be significantly weakened.

Hence, it was a necessary move for monarchical states to restrain private businesses and make private economy subordinate to state politics.

Going to extremes
Legalists tried every means to subjugate and attack businesses. They maintained that in the war-ridden State of Qin, private businessmen were simply a redundant consumption population, doing no good to political and military development, so the state should impose restrictions on merchants, reject idlers and discourage artists.

In terms of concrete measures, Shang proposed increasing taxes on private businessmen, tightening price control on private luxuries, reinforcing the management of hostels across the state to restrict the flow of businessmen and levying taxes on servants of businessmen to degrade the merchant class.
 

Han advocated even tougher policies on private economy, discrediting businessmen, lowering their status and burdening their businesses with heavy taxation. Also, he voiced objections to providing aid or relief measures for the impoverished or disaster-stricken people, arguing that the poor were poor because of their laziness.

Denying the diversity of social economy and social wealth distribution, Han inherited Shang’s economic thought and gradually went to the extreme of maintaining despotic political rule in the economic field.
 

 
Commodity economy stifled
Designed to eliminate political cliques and discourage extravagance, Shang and Han’s proposition to encourage agriculture and restrain commerce was fundamental to maintaining the monarchical political system of the State of Qin.
 

Their economic thought was not only a product of warfare but also a result of monarchical political development in the state, ushering in a historic ruling system based on agriculture and military. Starting with the Western Han Dynasty (206 BC-AD 25), Chinese dynasties had carried out pro-agriculture and anti-business policies, including the long-standing monopolization of salt and iron.
 

Legalists’ economic ideas incorporated national economy into social control and political stability. Its political manipulation and social control implications were greater than economic development. In essence, it was to maintain the stability of the autocratic regime at the cost of diversified development of social economy and the speed of economic growth.
 

The ideology posed great hurdles to the development of commodity economy in ancient China, causing an insurmountable policy gulf between private businesses and despotic politics.
 

 
Li Yujie is a professor from the History and Social Work College at Chongqing Normal University.