King of Commerce, Yeonsan-gun ch.14
The Ministry of Taxation's Never-Ending Grind
A perplexing event had occurred for the officials of the Ministry of Taxation (Hojo).
Yun Eun-ro had been executed, yet it was their department that was now overwhelmed with work.
"From now on, the Office of Market Supervision (Pyeongsi-seo) will be abolished," declared the king.
For the Ministry of Taxation, the connection between Yun Eun-ro’s demise and the decision to dismantle the Office of Market Supervision was utterly incomprehensible.
At this rate, they felt like they might get buried under an avalanche of work for no apparent reason.
The Office of Market Supervision was a bureau under the Ministry of Taxation responsible for managing the central markets (si-jeon) of Hanyang (Seoul). In theory, it had numerous duties.
It regulated the types of goods sold in the markets according to the market registry (si-an) and set standard government prices in consultation with market representatives through a system known as Si-jun Law.
They also collected stall fees from market vendors. Originally, these fees were collected in Jeohwa (the previous currency), but with the shift to the Ji-pye system, these fees were abolished. Unlike certain officials who got beaten for collecting Jeohwa at exorbitant rates, the Office of Market Supervision had no such incidents.
Another crucial role was to crack down on unauthorized markets (nan-jeon) not registered in the si-an.
In the history books, this crackdown on unauthorized markets and related privileges of licensed merchants often appear in the later parts of the Joseon Dynasty narrative, such as during the prohibition of unauthorized markets and the Free Trade Decree (Shinhae Tonggong). Even Kyung-sik, who knew little about Joseon history relative to his education, was aware of these topics. The difference was that Kyung-sik discovered the exclusive rights to trade were not held by the licensed merchants as he had thought (*1).
However, the Office of Market Supervision had long lost its ability to enforce these rules effectively. People reported violations to the capital administration (Han-seong-bu) instead of relying on the Office of Market Supervision.
If the office had been functioning properly, there would have been no need for the king to personally venture to Yongsan to crush the illegal traders.
Kyung-sik observed that Joseon was witnessing the emergence of a new class of merchants operating outside the state's controlled commercial system. His direct observations at the port made this undeniable.
A critical insight from his visit was the rapidly growing logistics network of river merchants (gang-sang) at the ports, which the government had failed to address administratively.
There were minimal regulations regarding commercial shipping in the Grand Code of State Administration Supplement (* an additional legal codex complementing the Gyeongguk Daejeon). But these regulations were so insignificant that they barely mattered.
The taxes on commercial ships were based on their size rather than the value or volume of goods they carried. This typified the broader taxation structure in Joseon, which generally involved head taxes or taxes on capital assets, not on sales or trade volumes. In essence, it was a flat tax system.
Such a taxation structure was neither equitable nor effective in increasing tax revenue.
Kyung-sik’s solution was to introduce commercial taxes based on the value of goods.
This is what he explained to Deputy Minister Yi Geuk-gyu of the Ministry of Taxation.
"Your Majesty's idea is noble, but who can manage such an undertaking?"
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"It’s an excellent idea. But who will implement it?"
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Even the seemingly impossible tasks are done by people. Once you start working on it, you can find a way to do it.
That’s why Kyung-sik decided to dismantle the Office of Market Supervision. It only had four officials, which was far too few to accomplish anything substantial. To Kyung-sik, they seemed to do nothing but occasionally stroll through the markets (though if the officials of the Office of Market Supervision heard this, they would protest, "Your Majesty, is that truly how you’ve seen us all this time?!").
But now they wouldn't be able to slack off. Their workload would increase a hundredfold.
Officials repeatedly questioned the king, "Your Majesty! How can we accurately assess and tax the prices of goods when merchants are constantly on the move and prices fluctuate?"
The king responded with his characteristic nonchalance, "Can’t do it? Why not?" and issued another directive.
The solution was simple. The government would establish administrative wards (bang) at three key ports on the Han River where commercial villages had formed: Yongsan, Mapo, and Seogang. These ports were originally informal settlements created by smugglers and would now be directly managed as government-run towns.
This was where Kyung-sik’s knowledge from the future came into play.
He decided to introduce Antoine Lavoisier’s ingenuity to Joseon.
Wait, what does chemistry have to do with this?
It’s not about chemistry. Kyung-sik, being a humanities major, didn’t know much about Lavoisier’s contributions to chemistry.
Lavoisier was not just a chemist but also an exceptionally skilled tax farmer (a person who pays the government a fixed sum for the right to collect taxes in a region).
He proposed and implemented a brilliant idea: building a wall around Paris and installing customs gates at each entrance to tax all goods and people entering the city. The revenue from this project funded experiments, like burning diamonds, leading to his eventual execution during the French Revolution (*2). While Kyung-sik couldn’t remember what Lavoisier discovered in chemistry, he vividly remembered this episode.
Joseon still lacked funds and, more urgently, required immediate action. So, the "Three Wards of Gyeonggang" would initially be surrounded by simple earthen walls with wooden barricades (referred to as mokjaekdoniseong). The primary goal was to control and monitor the movement of people and goods.
These three wards were vital ports through which all goods entering the capital had to pass. By regulating these entry points, the government could control and monitor the inflow of goods, addressing officials' concerns about tracking merchandise.
Naturally, there would be attempts to smuggle goods outside these designated areas. But that’s what the authorities were for—to crack down on such activities.
Applying this system nationwide would be beyond Joseon’s current economic and administrative capabilities, but controlling the logistics in Hanyang alone would significantly increase tax revenue.
The logistics control was straightforward enough, but determining prices was a separate challenge. Deputy Minister Yi Geuk-gyu suggested a solution based on historical precedent.
"It seems appropriate to follow the Si-jun Law, setting fixed prices in consultation with market representatives."
"The wrong answer," declared the king with a chuckle, suddenly shifting his tone, causing the officials to glance up in surprise.
They knew from experience that when the king's demeanor shifted, it often preceded another unconventional directive.
Kyung-sik's solution was to introduce auctions.
He had discovered that Joseon lacked a formal auction system (*3). As previously mentioned, transactions in the markets were restricted to government-sanctioned prices.
From an economic standpoint, such fixed pricing inevitably leads to black markets, where supply shortages create opportunities for selling goods at higher prices. Essentially, people are willing to pay more than the official rates, creating a parallel market.
The current system of exchanging Ji-pye for rice operated similarly to a fixed exchange rate, which led to black markets at places like Yongsan, where rice and Ji-pye were hoarded.
Kyung-sik attempted to explain this with complex graphs showing how excess demand leads to shortages under price ceilings. Yet, none of the officials grasped his explanation, making Kyung-sik feel the loneliness of being a modern hero in a pre-modern world once again.
Instead, he received puzzled looks from officials, who wondered, "Where does His Majesty get such knowledge?"
Kyung-sik ignored these suspicious glances and continued, seeking a way to explain in simpler terms suitable for Joseon.
"Think of the people who buy goods in the Hanyang markets and sell them at higher prices in the provinces. That's the essence of it."
Now, the officials began to understand.
"But, Your Majesty, implementing auctions for goods will surely cause prices to soar," an official from the Ministry of Taxation pointed out.
Correct. They understood well. In reality, prices are determined by the forces of supply and demand. Removing price ceilings to eliminate black markets would indeed cause prices to rise.
However, the current policy aimed precisely to raise prices in Seoul to attract more goods from the provinces. What could be done about it?
While merchants might currently hoard Ji-pye because they don’t urgently need cash, as tax deadlines approached, they would flock to Seoul to sell their goods.
"But only the well-informed will benefit from such measures, exploiting the situation for profit, causing distress for the common people of Hanyang," Yi Geuk-gyu continued.
"Precisely why auctions are needed. Auction prices are visible to all, and if we print and distribute these prices nationwide, more merchants will be drawn to Seoul quickly. It's the same principle as when I offered generous terms to draw rice into Gyeonggi, Chungcheong, and Hwanghae provinces."
The power of the printing press.
While the Gutenberg printing press is famously associated with the Reformation, it also significantly benefited the merchant class.
It wasn't just about making money by selling books.
Although Gutenberg's Bible is the most famous product of his press, the real advantage of the printing press lay in producing repetitive administrative documents, such as the pricing lists Kyung-sik now proposed.
In history, such price lists circulated as internal guild information in Europe but would now be publicly available across Joseon.
Creating a perfectly competitive market, where information is fully transparent and accessible to all, is an economic ideal that has never been fully realized. However, through auctions and nationwide dissemination of price lists, Kyung-sik aimed to create a system far more efficient than the previous price controls and black markets.
"To attract merchants by raising prices in Seoul, we need to increase the money supply.
With sufficient printing presses now in place, we will significantly expand the issuance of Ji-pye.
The Ministry of Taxation will calculate officials’ and servants' salaries and allowances in Ji-pye.
Government offices will pay wages to craftsmen in Ji-pye and collect taxes in Ji-pye; further instructions will follow.
From now on, the sale of rice at the trading offices will follow the auction regulations I have issued.
The Office of Market Supervision will be replaced, and the Ministry of Personnel will recommend new officials and decide on the new bureau's name.
Detailed regulations for the Three Wards of Gyeonggang should be discussed and submitted within this month, with progress reports every five days."
What? The officials collectively felt a chill. This king had an unparalleled knack for driving his subordinates mad.
After the registration of the residents in the Three Wards of Gyeonggang, the makeshift wooden barricades were erected, and the former sajuin houses were converted into the new Office of Trade Supervision (the successor to the Office of Market Supervision).
A rare sight unfolded on the Han River—a chase between ships.
In pre-modern battles, it was common for civilians to gather and watch since such conflicts rarely devastated the surroundings. A river battle, in particular, provided a safe spectacle.
People along the Han River, bored with their routine lives, came out to watch what looked like a live-action scene from Pirates of the Caribbean.
"Stop right there! Stop, I say!"
"You misunderstand! We are not pirates!"
The chased merchants, who had come down from Pyeongan Province, were indeed innocent.
Even considering that merchants often doubled as bandits in pre-modern times, these were honest traders.
They were so honest that they had been fleeced by officials many times, leading them to instinctively flee at the sight of any authorities.
"Look, we aren’t here to rob you! Just dock at Yongsan and sell your goods!"
The assurance from the Joseon officials, "Do not fear, citizens," was as reliable as the future Korean government’s "Trust us, fellow citizens." An odd coincidence was that both were surnamed Lee.
Besides, wasn’t Yongsan the place recently ravaged by government forces?
Rumor had it that a traitor had hidden there, prompting the king's intervention. But what mattered more to the merchants was that the intermediary traders (sajuin) had disappeared from Yongsan.
The merchants suspected that the government was once again trying to extort something from them.
Given that the sajuin had been illegal traders to begin with, dealing with them could easily be used as a pretext for government fleecing.
They hesitated near the port, contemplating whether to sell their rice at the warehouse in exchange for Ji-pye, but the sight of numerous officials doing construction made them too anxious to dock. So, when naval forces appeared, they panicked and fled (*4).
In truth, until last year, bringing rice from Pyeongan and Hamgyeong to the south had been illegal, so the merchants felt guilty and ran when confronted.
"His Majesty has issued new laws to protect merchants from exploitation by the sajuin! If you’ve come to sell rice at the warehouse, turn back!"
"...?"
The pursued merchants finally halted. Surely, even officials wouldn't invoke the king's name to play tricks.
"Is that true?"
"It is! But you must dock at one of the government-established ports in Mapo, Seogang, or Yongsan. If you trade outside these designated areas, you will be punished. In these ports, you’ll receive certificates of deposit for your goods, and the government will protect them. You can even use these certificates as collateral to borrow Ji-pye from the trading offices."
Having no other place to sell their rice, they decided to follow the official’s advice and dock at the port.
The only disappointed ones were the onlookers who had hoped for more excitement.
"What, no pirates were caught?"
"It ended so anticlimactically."
"What about our bet?"
"Doesn’t that count as being caught? I win."
"How is that caught? Look, the chased ship is turning back while the officials’ ship is standing down."
"So what? The officials’ ship must have scared them into surrendering!"
"That’s nonsense!"
"Hey, are you trying to cheat me?"
Oblivious to the squabbling spectators, the merchant ship docked at Yongsan port was greeted by an official who looked like a low-level bureaucrat.
"Are you here to sell rice at the warehouse? It's your first time docking at our port?"
"It's our first time hearing about a warehouse that exchanges Ji-pye for rice."
"Then you’ll need to register your ship in the vessel registry."
The official inspected the ship’s size, noted the owner, the crew, their origin, and the goods they were trading.
"Is there a fee?"
"Not much, just one Jeon. Present this registration at the government office, and you’ll receive various benefits."
"What kind of benefits?"
"Will you pay the one Jeon or not? Without this registration, you can't trade here."
Reassured by the familiar extortion tactics of the officials, the merchant felt relieved. Although the registration fee was officially two Mun, the official pocketed an additional eight Mun as a "consultation fee," which the merchant was unaware of. Nonetheless, one Jeon wasn't too steep.
Upon paying the fee, the official continued his explanation.
"Good. Let me explain quickly. This registration grants the following privileges: Your goods won’t be seized arbitrarily by the government."
This was astonishing news.
"You can trade freely within the government-designated wards, paying taxes only on transactions. You’re also eligible to participate in auctions held within the wards.
To sell rice at the warehouse and exchange for Ji-pye, your name must be in the vessel registry, and you need this registration certificate.
The government will also protect your goods stored in the ward’s government warehouses. You can even use stored goods as collateral to borrow Ji-pye from the trading offices.
Additionally, you can stay at the government inns within the wards by paying in Ji-pye.
All this is available for the one Jeon you paid."
"...Are you telling the truth?"
"Why would I lie? If I intended to rob you, I would’ve done so already. If you don’t believe me, go ask at the military supply office, the warehouse, the inns, or the auction house. Show them your registration certificate, and they’ll assist you."
"I’ve never heard of such laws in Joseon. Has the country turned upside down?"
"No, you fool. It’s the grace of the king who cares for merchants. Now, stop babbling nonsense and start unloading."
With another mention of the king, the merchant finally felt reassured and relaxed.
"We’ve been blessed with a wise king, and we didn’t even know it!"
He was so overwhelmed that he collapsed to the ground, tears streaming down his face.
If modern-day warrior Kyung-sik saw this, he might be puzzled, wondering, "Why cry over this?" But pre-modern sensibilities were vastly different from those of modern people.
Furthermore, the treatment merchants had endured in Joseon was far harsher than Kyung-sik’s superficial understanding from the future.
The declaration in the French Revolution's Rights of Man and Citizen to "guarantee property rights" wasn’t added out of boredom. Under the previous absolutist regimes, the concept of property rights was virtually non-existent in the face of power.
Although "the government will not arbitrarily seize your goods" was a vague statement compared to property rights, it was sufficient for the merchant now.
For these merchants who had never received such consideration from their government, the current king was indeed a wise and just ruler.
Footnotes:
*1: The historical origins of the exclusive trading rights of licensed merchants related to the prohibition of unauthorized markets (Shinhae Tonggong) are unclear. They are generally assumed to date back to the 17th century following the wars with Japan and Manchu invasions.
*2: The anecdote about Lavoisier implementing a tax system around Paris is more of a meme on the Korean internet. City walls and toll gates for tax collection were common in the Mediterranean since ancient times. Lavoisier's execution was largely due to his strict reforms in tobacco quality control and tax systems, which greatly angered small tobacco retailers who eventually denounced him during the French Revolution.
*3: During King Gojong’s reign, Joseon referred to auctions as gongbak (public sale). This term first appeared in the annals after treaties were signed with Japan and the Incheon concession zone was established. The concept of auctions in Joseon seems to have been introduced through contact with Western trade practices rather than organically developed.
*4: This incident is inspired by a historical event recorded in December of the 7th year of King Taejo’s reign. Government officials from the Office of the Grain Transport forcibly expelled commercial vessels from the ports, claiming they obstructed the transport of state grain. This action led to soaring prices in the capital, highlighting the critical role of merchants in maintaining city supplies, even in the early Joseon period, which is often seen as a time of commercial decline.
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