Mises Wire

The War on Cash is Ancient

The war on cash is now a global phenomenon: under the pretext of tracing criminal activity, governments everywhere are cracking down on commerce that isn’t monitored or controlled.

However, the results of this war reveal its true purpose: tracking citizens and their taxable income.

The war on cash is actually a war on commerce, or rather, on any commerce that can’t be monitored and controlled by government. Governments survive and grow based on the productivity of the rest of society, and as a result they try to restrict wealth creation to only those areas where it can be recorded and redistributed.

This war on cash is attracting widespread attention. What people may not know, however, is that the current war is only the most recent version of government policies that have been around for a long time. Similar programs have appeared throughout history, some even dating to antiquity.

One notable example occurred in China during the “Warring States” period, roughly 475–221 BCE. This era produced some of China’s greatest contributions to philosophy and technology, but unfortunately, was also a time of unrelenting warfare and political centralization, leading eventually to the Qin unification of China in 221 BCE.

Throughout this era, “Legalist” ideas were increasingly prominent, and inspired a number of “innovations” in public policy, including laws and regulations similar to the modern war on cash.

Legalists like Shang Yang (in the state of Qin) were primarily concerned with enhancing the power of the state, especially through the rigid organization and control of citizens. They were especially hostile to the merchant class, which they oppressed. As Professor Mark Lewis of Stanford explains,

Shang Yang … initiated a series of reforms to encourage agriculture, which provisioned the army and provided the economic foundations of the state, and to discourage trade, which proved less amenable to taxation. … [The Book of Lord Shang] also records antimerchant measures, including registration of merchants’ servants for corvée labor, high market taxes and taxes on goods in transit, and the registration of merchant households as “inferior people.” As such they were not permitted to wear silk or ride horses, and were subject to extended terms of garrison duty at the frontier. (Lewis, 1999, p. 613)

Faced with commercial growth that didn’t directly contribute to the growth of the state, Shang Yang and others sought to punish and stigmatize the merchant class while ensuring that as many transactions as possible were recorded and taxed.

Interestingly, the Legalists were also largely responsible for instituting the private ownership of land in parts of China. But this seemingly laissez-faire reform was actually a ploy: owning land required public registration, which in turn allowed governments to monitor the population and register the people for military service. Private ownership was therefore a price the states were willing to pay. Likewise, a lost chapter of Sunzi’s Art of War indicates that in this period land ownership was exchanged for taxes, thus bringing landowners under state control (Sawyer, 1994, pp. 248–256).

There’s a lot more that could be said about this era or about the politics of the war on cash throughout history. But the underlying problem tends to be the same: states can’t survive or grow without the ability to systematically tax their citizens. For that reason, they always keep a careful eye on the financial history of as many people as possible. Importantly, this also means that protecting such information from prying eyes can be a powerful check on state power.

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