Chapter 52

On October 25, 1894, Lin Yuan, as a special guest, accompanied Shang Tai to the tug-of-war competition. After the event, Shang Tai convened a meeting with his ministers and specially invited Lin Yuan to attend.

The political system of the Ryukyu Kingdom was modeled after the Ming and Qing dynasties, with the king holding supreme military and political power. The administrative institutions were the six departments of War, Justice, Works, Personnel, Revenue, and Rites, supplemented by the Censorate and the Supreme Court for oversight and judicial functions. The heads of these institutions were all former officials of the Ryukyu Kingdom.

The kneeling ceremony was abolished, and Shang Tai and the former officials sat around a table. The former officials were still somewhat unaccustomed to this. At the beginning of the meeting, Shang Tai said, "Our national treasury is empty. Does anyone have any good ideas?"

An old minister said, "Xunzi said: A wise ruler must carefully maintain harmony, regulate the flow, and open the source. Therefore, our primary goal should be to increase revenue and reduce expenditure to充实 the national treasury."

Shang Tai said, "Reducing expenditure is easy, but increasing revenue is more difficult. Our country has only 380,000 people, and with such a small population, the market is inevitably small, making it even harder to open up foreign markets."

The old minister said, "Our country used to benefit greatly from trade from various regions. Due to the maritime restrictions of the Ming and Qing dynasties, merchants used our kingdom as a trade hub. They bought goods from China and sold them in Southeast Asia, and on their return, they brought goods from Southeast Asia back to China. However, after the Japanese arrived, these merchants no longer dared to trade. Now, we don't know how to bring them back."

Everyone fell silent. These people, educated in the Four Books and Five Classics, were not particularly adept at economics.

Lin Yuan said, "I have some thoughts."

Everyone turned to look at him. He said, "Our small population is a disadvantage, but in a certain sense, it is also an advantage. When our government has more income, our welfare will be better."

The word "welfare" made everyone frown slightly. In the 19th century, they had never heard of this term. Lin Yuan smiled and said, "You may not fully understand this term, but I will explain it later."

"The previous senior official mentioned that due to our geographical location, we have a significant advantage in trade between China and Southeast Asia. I believe that to bring them back, we can allow free trade and not collect taxes."

Everyone was taken aback. No taxes, how could we make money?

Lin Yuan continued, "We can open our ports for free to attract them to use our ports as a trade hub. Our kingdom is surrounded by the sea, and many places are suitable for ports. Of course, due to different geographical conditions, the capacity of these ports will vary. Some ports are suitable for large ships, while others are suitable for small ships, so we can attract many merchants."

"Even though our ports do not collect taxes, when the merchants come, will they not eat? Will they not rest? Will they not spend money on entertainment? Some first-time merchants will also buy souvenirs to take back. Where will they eat, rest, and buy things? It will be in our ports. This way, we can earn money."

Shang Tai thought for a moment and said, "Your idea is to build restaurants, hotels, and recreational facilities in the ports?"

Lin Yuan said, "We will build the facilities, but we will leave it to the locals to decide what to do with them. They can rent our buildings to run businesses. If the state runs these businesses, there will be no competition, and the people running them will not be motivated to do a good job."

Shang Tai thought for a moment and said, "This is certainly good, but the money earned will go to the people, and the state's revenue will not increase much. If we impose taxes on the people, wouldn't I become a tyrant like Jie and Zhou?"

Lin Yuan said, "What do our merchants and Southeast Asian countries need for trade? They need gold, silver, and copper coins as currency. These are heavy. If you were a merchant, wouldn't you want your ship to carry more goods and less gold and silver?"

The displacement of ships is fixed. To maximize profit, merchants naturally want to carry more goods. Everyone understood this and nodded.

Lin Yuan continued, "Our solution is to build a bank! Let the merchants deposit their gold, silver, and copper coins in our bank. We will issue them bills, which they can use to freely exchange for gold and silver. We can charge a certain management fee, which is just a small part of the profit. Since not everyone will withdraw their gold and silver at the same time, we can lend out a portion of the gold and silver and earn interest, which will be the main source of our profit."

Shang Tai thought for a moment and said, "What you say makes sense, but how can we make them trust us to deposit their gold and silver here?"

Lin Yuan said, "Modern economics is ultimately about trust. You need to give them confidence! Make them believe that the political situation in the Ryukyu Kingdom is stable, and the government will not collapse overnight. Their gold and silver will be safe in our bank."

Shang Tai thought for a moment and said, "What should we do?"

Lin Yuan said, "First, we drove out the Japanese, which will undoubtedly win the favor of many overseas Chinese in Southeast Asia. Second, we declared independence, which means we are no longer a vassal state of the Qing dynasty. The overseas Chinese are Han people who view the Manchu nobility as foreigners, so we will also win their favor. This way, people will come to trade with us. We need to organize various events to win their hearts and show them that this country has a bright future."

Seeing everyone nod in agreement, Lin Yuan continued, "Building a bank is one solution. Another solution is to consider the old Chinese saying: 'Deceive the mountains, but not the water.' Navigating the sea is extremely dangerous, and a slight mistake can lead to shipwreck and loss of life. A ship's cargo is often a merchant's entire fortune, and they fear the risks of navigation. If we say, 'Give us a certain amount of money, and if your ship has an accident, we will provide a large compensation,' do you think they would be willing to pay this money?"

"In reality, only a few ships have accidents, so most of the money will go into our pockets."

Shang Tai asked, "Your methods are good, but these methods will only enrich the people near the ports. The Analects of Confucius says, 'Do not worry about scarcity, but about inequality.' This could lead to internal unrest."

Lin Yuan said, "When the people near the ports become wealthy, they will buy more goods. Things they couldn't afford before, they can now buy. This will drive the people far from the ports. We can provide advanced production technology to the people, increasing agricultural output. This will naturally lead to the development of livestock and textile industries."

"Doing this might seem to harm the farmers, so we need to address the 'welfare' issue. With our small population, the state can allocate more money to the people. When the ports are built, some people will want to work in the service industry, while others will prefer to stay in the countryside and continue farming. We need to provide subsidies to those who farm to make them feel that growing crops is also a profitable job. With our small population, the per capita land area is large, and we can provide agricultural automation technology, allowing one person to farm a large area of land. This way, both those in the service industry and those in agriculture will earn money, and the wealth gap will not be too large."

Many of the terms in this speech were unfamiliar to the people present, and they were impressed by Lin Yuan.

Shang Tai said, "The Japanese will not give up easily. Once they recover, they will come to cause trouble. We must build a strong army!"

Lin Yuan smiled and said, "You don't need to worry about that. We are here to help."

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