King of Commerce, Yeonsan-gun Ch.46
The Deal Maker
While the king was preparing diplomatic relations with the Muromachi Shogunate and setting up textile factories in Seoul, and while Yun Pil-sang was exploiting the Jurchens in the north, changes were also occurring within Joseon itself.
The spread of the currency economy was gradually reaching beyond Seoul to other regions. Though Seoul, Pyongyang, and Kaesong were the most commercially advanced areas, Naju was also a significant commercial center that developed organically.
Long before Kyung-sik arrived in Joseon, Naju was renowned as a large town. By the early reign of King Seongjong, a market had naturally formed there, establishing a regular marketplace.
Even now, as Kyung-sik's reforms were transforming Joseon into a market economy, Naju served as a hub, transmitting knowledge of how to establish markets to other districts across the country.
Naju, a crucial part of Joseon's "organic market economy," had been further commercialized with the establishment of commodity warehouses and market offices.
As one of the primary districts, Naju’s Hyanggyo (Confucian academy) was not downgraded during Kyung-sik's reforms but instead saw its functions enhanced.
In this Naju Hyanggyo, a scholar from Haenam named Yun Hyo-jung was studying. In the original history, he would have had to learn from Choi Bu, who was exiled by Yeonsangun. However, Choi Bu was now busy making water wheels at the Ministry of Military Affairs, making that unlikely.
"Master! It's Maksoi! I've brought a letter from the lady!"
"Oh! Maksoi! It's been a long time. How is our Gu (*referring to Yun Gu, Yun Hyo-jung's first son, born in 1495)?"
"Sir, you just spent the last winter vacation at home with him. What do you mean by a long time? The young master is doing well."
"You fool, you don't understand the heart of a husband and father because you are neither married nor have children. A parent's heart worries if they don’t see their child for even a day, and I am forced to be apart from mine. How do you think I feel?"
In Joseon, studying for the state examination (Gwageo) didn’t require attending a Hyanggyo in a distant place. Most students studied in their hometowns, which was why state-run academies declined during the Joseon era.
Kyung-sik intended to change this by requiring that only those who studied at state academies could take the examination, but the system was still in transition. Thus, Yun Hyo-jung also had no particular reason to study at a Hyanggyo far from home, away from his family.
He intended to study while staying at his in-laws' house, enjoying his new marriage. However, seeing Yun Hyo-jung dawdling, the Haenam magistrate forcibly sent him to Naju Hyanggyo.
"How dare this student not enter the Hyanggyo despite having the talent for it! This is a clear act of evading duty!"
The real reason was that the magistrate's evaluation included the number of students sent to the Hyanggyo.
Despite his lack of talent for letters, Yun Hyo-jung had completed the basic curriculum at the local academy, making him eligible for the Hyanggyo.
Traditionally, Joseon’s Hyanggyo didn't have a concept of vacation. Winter vacations were introduced not through any modern educational reform but because the Board of Taxation suggested saving on firewood costs in winter, a very Joseon-like reason.
Thus, Yun Hyo-jung only had the chance to return to his in-laws' house during winter.
Once at the Hyanggyo, he found the curriculum more challenging than expected. Though the first two years were slow, the seven subjects eventually covered were demanding.
After a year of study, it became apparent that Yun Hyo-jung lacked talent in Confucian studies. Instead, he showed promise in agriculture, mathematics, and law.
To sit for the civil examination, one needed high scores in Confucian studies. Good scores in military studies could lead to a military career, and the rest could lead to clerical positions. Yun Hyo-jung was at risk of becoming a clerk.
He desperately wanted an escape and unknowingly spent more time studying agriculture and mathematics, showing a knack for these subjects.
Had the king known, he might have kidnapped Yun Hyo-jung to work for the Board of Taxation, but fortunately, the scholar's plight didn't reach the ears of the officials.
"The barley harvest is poor this year, and the people are wandering, causing great concern for the country. Shouldn’t I return to my in-laws' house to help with the farming?"
Yun Hyo-jung’s excuse to escape the Hyanggyo was met with a skeptical response from Maksoi.
"What can you, a scholar, do to help with farming? You just don't want to study."
"You fool, do you think I mean to plow the fields myself? I mean to use my head to guide the farming."
"Using your head for farming..."
Yun Hyo-jung recognized the tone of disrespect from Maksoi and tried to strike him, but Maksoi dodged quickly.
Yun Hyo-jung learned more than just agriculture at Naju. He observed the economic phenomena of the rapidly commercializing town and gained insights.
He knew that Naju’s marketplace emerged due to a great famine during King Seongjong’s reign. Now, with the addition of commodity warehouses, market offices, and trade associations, Naju's markets grew even more.
The current famine drove more people to Naju’s market offices and trade associations to make a living.
Some scholars still lamented that people were abandoning farming for commerce, claiming it led to food shortages. However, Yun Hyo-jung saw the opposite in Naju.
To prevent people from starving, commerce was essential, not farming. One didn't need to grow grains to avoid starvation. The government collected taxes in currency, making it more profitable to grow cotton and weave cloth than to grow rice or barley.
Currently, barley brought from Gyeongsang Province was traded in Naju, with people selling cotton cloth to buy barley.
No one taught this from the government, but Naju’s people had understood this since the marketplace emerged during King Seongjong's reign.
Similar to what he saw in Asan, people in Naju borrowed money from trade associations and commodity warehouses to buy rice, avoiding starvation.
Repaying the loans would be a future problem, but finding a stable source of income could mitigate this.
Therefore, clinging to farming was unnecessary. People should pursue what brought them money.
Though it was considered shameful for a scholar to seek money, providing stable livelihoods for the people was a scholar's duty.
Even in farming, the same principle applied. Yun Hyo-jung observed something intriguing at the commodity warehouse.
"Buy and sell cotton now with a future contract?"
"It's not a simple contract but a registered one. The terms are registered with the government to ensure compliance."
"Isn’t that similar? It’s bothersome to go to the government for registration."
The officials explaining the new policy to Naju's trade association members received skeptical responses.
The concept of futures trading was ancient, but such a system only entered Joseon with Japanese influence after opening the country. Futures contracts and trading evolved into modern forms much later globally.
However, Joseon already had a concept of private contracts guaranteed by the government.
While futures trading for goods other than land or slaves wasn't common in historical Joseon, Kyung-sik's reforms mandated documentation for all transactions at commodity warehouses and market offices, making it less unfamiliar.
Thus, futures contracts and trading, though new, were not incomprehensible to Joseon people.
The Naju trade association members, understanding the concept, began evaluating whether these contracts would be beneficial or detrimental.
The government's offer for cotton wasn't low but hard to gauge against market prices.
Previously, cotton was grown and woven into cloth for sale, with only one instance of selling raw cotton to the government last autumn.
While regional division of labor was developing in Joseon, it was mainly between production and consumption areas, not separating raw materials from finished goods production.
Thus, trade association members had to decide whether selling raw cotton now or weaving and selling cloth later was more profitable.
Hearing the news, Yun Hyo-jung thought,
"Now is the perfect time to plant cotton. We could plant more cotton, sell some to the government, and weave the rest into cloth."
He considered his idea quite good and sent a letter to his in-laws through Maksoi.
His father-in-law, Jeong Gwi-young, laughed heartily upon reading the letter.
"Hahaha! My young son-in-law is trying to use his head!"
Known for his skill in making profits without losing the people's favor, Jeong Gwi-young wasn’t someone who needed Yun Hyo-jung's advice.
Even the incident in Asan, where Yun Hyo-jung first realized his knack for business, was made possible by Jeong Gwi-young’s help.
Jeong Gwi-young prided himself on his ability to judge people.
Though his son-in-law lacked literary talent, he was at least someone who wouldn’t squander the family fortune and could increase it.
Worrying about his own son's lack of literary talent, he hoped his son-in-law could maintain the family’s wealth until someone in the family could rise to a higher position.
"Future contracts, huh..."
Considering the latest system, Jeong Gwi-young pondered its implications.
The future contract system allowed the sale of crops before they were harvested, providing a hedge against market fluctuations.
Savvy traders in Joseon knew that grain prices dropped in good harvests and rose in poor ones, though most farmers, living self-sufficiently, were less exposed to market dynamics.
Now, with the government's efforts to connect markets and stockpiling grains since Kyung-sik's arrival, it was easier to see and benefit from these facts.
Jeong Gwi-young had not suffered much from this year's barley crop failure. He made a profit by selling his stored rice during the famine.
He had almost abandoned his trading ship due to consecutive good harvests but found a use for it during this famine.
The new future trading system fixed prices at the time of contract, reversing the usual profit-loss dynamics tied to harvests.
A guaranteed future price could offset losses from falling prices in good years but also limit gains in bad years.
Since no one could predict harvests, this system offered mixed benefits.
Jeong Gwi-young pondered how to utilize this new law.
That year, the autumn harvest also failed, particularly in Jeolla and Chungcheong provinces, with Chungcheong being worse.
Kyung-sik's efforts to connect grain markets and stockpile food prevented mass starvation or government paralysis, unlike previous famines.
However, consecutive crop failures in key regions caused rice prices to rise.
Seoul's increased purchasing power, fueled by the king's public employment policies, exacerbated the price hikes, as the city absorbed more rice.
Formerly impoverished individuals now praised the peaceful era due to their newfound employment, but the provinces didn't share their sentiments.
Naju, focused on weaving cotton cloth, was hit hard.
Seoul's demand for raw cotton drove up its price, while the cost of food rose, and the sudden increase in cloth production in Seoul lowered its price, creating a crisis.
Despite low-interest loans from the commodity warehouse and trade associations, Naju's debt burden continued to grow.
The Naju Hyanggyo nearly ceased operations but was ordered to continue with government funding.
Yun Hyo-jung awaited winter break to escape the Hyanggyo.
"Maksoi, why are you the only servant sent from my in-laws’ house?"
"Who knows? The lady must have her reasons."
Yun Hyo-jung suspected his father-in-law might be teasing him by always sending Maksoi.
"How did the farming go? It would have been disastrous if the typhoon had hit just before the harvest."
"Yes, the farming was ruined. But they say a rich family can survive three generations of misfortune. The lady isn’t someone to be troubled by a bad harvest."
"That's true, but what about my suggestion to plant more cotton? The last letter only said they had their plans."
"We planted more cotton than usual, possibly due to your advice. But much of it was ruined by the wind."
Yun Hyo-jung felt disappointed. His agricultural advice seemed useless. It was unrealistic to expect significant results from a year's study.
"Even so, the lady made a profit."
"What? How?"
It was simple. In similar farming methods, the success or failure of a harvest affected entire villages collectively.
Expecting one village’s crops to fail while another’s succeeded was unrealistic, especially during the same typhoon.
However, the newly introduced futures trading system allowed remote transactions.
With established systems for bills of lading, transaction conditions, and credit issuance through commodity warehouses, Kyung-sik prepared for potential international trade with Japan, creating a well-structured system.
Despite high fees, the wealthy no longer had to wait anxiously for goods to arrive. They could pre-purchase crops, like cotton from Jinju, using future contracts and receive a bill of lading upon shipment.
Recipients, upon receiving the bill of lading by express courier, presented it and the contract to the commodity warehouse to claim their goods.
With local trade associations guaranteeing the contracts and government-run warehouses certifying them, the risk of non-delivery was low unless the ship sank.
Jeong Gwi-young decided to utilize this system for "diversified investment."
Increasing cotton farming had value. His son-in-law's advice was reasonable.
Cotton cloth was indeed more profitable than simple farming.
However, the unpredictable nature of harvests was problematic.
Thus, Jeong Gwi-young decided to pre-purchase cotton from Jinju.
If Jinju had a good harvest, the futures contracts would incur some loss, but weaving the cotton into cloth would compensate.
If Jinju had a poor harvest, the futures contracts would yield profits, and weaving the cotton would increase them.
Simultaneously growing cotton in Haenam would further diversify the risk.
The worst scenario, a poor harvest in Haenam and a good one in Jinju, would still be manageable by weaving or selling the cotton in Naju.
Jeong Gwi-young’s early action mitigated potential losses, as cotton prices in Jeolla soared threefold due to consecutive poor harvests and Seoul's increased demand.
Jeong Gwi-young's foresight in pre-purchasing Jinju cotton avoided this risk, ensuring profit even by selling the cotton in Naju.
Though Haenam's farming suffered, residents earned a living by weaving cotton into cloth, thanks to Jeong Gwi-young's distributed cotton.
The woven cotton sold in markets like Liaodong, with Jeong Gwi-young providing stored grain to feed Haenam's people, securing both his wealth and their loyalty.
Maksoi couldn't fully grasp these complex details, so he couldn’t explain them to Yun Hyo-jung.
Yun Hyo-jung learned the full story from his father-in-law and wife after the winter break.
Realizing his inexperience compared to his father-in-law’s wisdom, Yun Hyo-jung acknowledged his growth was still lacking.
After all, his only notable achievement was spreading rumors in Asan to sell rice at a higher price.
"Father-in-law, what classic text teaches such skills?"
"Hahaha! You won’t find this in the classics! Focus on your studies and pass the state examination. If you’re not inclined towards letters, learn to manage the estate here."
Ironically, a crude book by the king contained similar content. Though not yet formally published, Joseon people were gradually learning economic principles through experience.
Footnotes:
*1: In episode 15, "Hojo, Do You Think Only You're Having a Hard Time? Everyone's Having a Hard Time," there's a scene where Kyungsik reforms the educational system. He demolishes most of the Confucian academies (hyanggyo) and only keeps them in certain cities, enhancing their functions. They now teach Confucian studies (Gyeonghak), official document writing (Jesul), arithmetic and formal writing (Seosan), law (Yulhak), military studies (Muhak), music (Akhak), and agriculture (Nonghak). Although, as depicted in the series, it is still possible to take the higher civil service exam (daegwa) without graduating from Sungkyunkwan (the national Confucian academy). Kyungsik plans to eventually make it so that one must pass the Confucian studies exam at a hyanggyo and enter Sungkyunkwan to qualify for the civil service exam. This is intended to block the entrance of private scholars and Sarim (Confucian scholars of the Joseon dynasty) into government positions. As mentioned in episode 15, this is also to ensure that those who are not suited for civil service can be placed into military or clerical positions.
*2: The legal concept of ownership in Joseon was significantly strengthened during the reigns of Kings Sejo and Seongjong. In the original history, at this point, documents of ownership (mungu) were only written for land and slave transactions. As commercial activities increased, the legal concept of ownership and the importance of contracts naturally grew, leading to a variety of goods being traded with written contracts by the mid and late Joseon period. However, civil law defining property rights and contracts remained sparse and disorganized. Unlike Western law, where property rights are categorized under civil law, East Asian legal codes were heavily administrative, divided into six ministries: Personnel (I), Revenue (Ho), Rites (Ye), Military (Byeong), Punishments (Hyeong), and Public Works (Gong). Thus, property rights were scattered across various sections. Still, until the mid-18th century, Joseon's concept of property rights was not significantly behind that of the West, except for regions like England, the Netherlands, and northern Italy. Of course, Kyungsik plans to elevate the concept of ownership in Joseon to the level of England and the Netherlands.
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