Helix Network Theory: The Dynamic Structure and Evolution of Economy and Society 9811988021, 9789811988028

Table of contents :
Foreword by Yew-Kwang NG
Foreword by Gong-Meng Chen
Foreword by Chun-Xue Yang
Preface (Revised Edition)
Preface (First Edition)
Contents
About the Author
List of Figures
List of Tables
1 The Limitations of Human Understanding of the World
1.1 Blind Men and the Elephant
1.2 Not See the Forest for the Trees
1.3 All-Rounder Versus Specialist
1.4 Will the Social Sciences Eventually Move Toward Unity?
2 The Evolution of the Thinking Paradigm and Its Philosophical Basis
2.1 The Evolution of the Space–Time View and the Great Revolution in Physics
2.2 A Revolution of the Thinking Paradigm: The Birth of Systems Science
2.2.1 What Is System?
2.2.2 Systems Science
2.2.3 Reductionism Method
2.2.4 System Theory Method
2.3 The Development of the Thought of Biological Evolution and Its Influence
2.3.1 Evolutionary Thought Before Darwin
2.3.2 Darwin’s Evolutionary Thought
2.3.3 New Development of Evolutionary Thought After Darwin
2.3.4 The Infiltration and Influence of Evolutionary Thought on Other Disciplines
2.4 New Understanding and Philosophical Enlightenments Obtained from the Theory of Biological Evolution
2.4.1 The Development of Evolution Theory Also Requires the Introduction of the System Theory Method
2.4.2 The Biosphere Is a Complex and Nested System, and Each Layer of Biological Systems Has Its Own Evolutionary Law
2.4.3 Every Biological Individual Has a Two-Layer Structure of Genotype and Phenotype
2.4.4 The Evolutionary Laws of Biological Individuals at All Levels Are Interrelated, Interacted and Interinfluenced
2.4.5 The Evolutionary Process of Biological Individuals Is the Unity of Contingency and Inevitability
2.4.6 The Mechanism of Biological Evolution Is Not Only a Survival Competition But Also Contains a Wealth of Content
2.4.7 Biological Diversity Originates From the Diversity of Biological Variation and Ecological Environment Combinations
2.4.8 Some New Understandings About the Dynamic Mechanism Behind the Evolution of Biological Systems
2.4.9 Philosophical Enlightenment on the Structure and Evolution of Things From the Theory of Biological Evolution
2.5 The Three Basic Principles of the Evolution of Complex Systems
2.5.1 The Principle of System-level Emergence
2.5.2 The Coupling Principle of Positive and Negative Feedback
2.5.3 The Principle of Circular Cumulative Causation
3 A Bird’s-Eye View of the Economic Society
3.1 The Basic Hierarchy from Natural System to Social System
3.1.1 The Basic Hierarchy of the Cosmic System
3.1.2 The Basic Hierarchy and Structure of the Human Social System
3.1.3 The Basic Hierarchy of the Socioeconomic System
3.2 The Four Laws that Human Society Follows in Evolution and Development
3.2.1 The Law of Bifurcation
3.2.2 The Law of Synergy
3.2.3 The Law of Fractal
3.2.4 The Law of Periodicity
3.3 Basic Classification of Resources and Their Forms
3.4 The Components of Social Reproduction
3.5 The Long-Term Transition of Relations of Distribution in Social Production
3.5.1 The Long-Term Evolution of Relations of Distribution in Social Production
3.5.2 The Relation Between Human Cognition Level and Social Distribution Result
3.6 A Brand New Economic Paradigm for the Twenty-First Century
4 The Micro-level of the Economic System: The Dynamic Structure and Evolution of the Firm
4.1 A Brief Introduction to the Theoretical Research on Corporate Evolution and Corporate Ecology
4.2 A Metaphor: Apple Tree and Firm
4.3 The Nature of the Firm
4.4 The Environment, Elements and Structure of the Firm
4.4.1 The Internal and External Environments of the Firm
4.4.2 The Constituent Elements and Organisational Structure of the Firm
4.4.3 The Deep Structure of the Firm System
4.5 The Production and Operation of the Firm
4.6 The Exchange and the Distribution Within the Firm
4.6.1 The Meaning of Distribution and the Related Theories
4.6.2 Distribution in the Firm System
4.7 Corporate Production Efficiency
4.7.1 On the Allocation of Resources
4.7.2 On the Allocation of Income
4.8 Overall Corporate Competence
4.9 Corporate Development Dynamics
4.9.1 The Dynamic Factors in Corporate Development
4.9.2 The Role of the Entrepreneur
4.10 Corporate Evolutionary Mechanism
4.10.1 The Division of Labour and Coordination
4.10.2 The Interaction between Internal and External Factors
4.10.3 Gradual and Disruptive Changes
4.11 Corporate Life Cycle
4.11.1 The Firm That Is Growing
4.11.2 The Firm That Remains the Status Quo
4.11.3 The Firm That Is Declining
4.12 Corporate Evolutionary Trajectory
5 The Meso-Level of the Economic System: The Dynamic Structure and Evolution of the Sector
5.1 Classic Theories on Economic Growth
5.2 Industry and Sector
5.3 The Internal and External Environments of the Sector
5.3.1 The External Environment of the Sector
5.3.2 The Internal Environment of the Sector
5.4 The Constituent Elements and General Structure of the Sector
5.4.1 The Constituent Elements of the Sector
5.4.2 The General Structure of the Sector
5.5 The Taxonomies of the Sector
5.5.1 Two Class Taxonomy
5.5.2 Three Classification of Sector
5.5.3 Four Sector Taxonomy
5.5.4 Standard Sector Taxonomy
5.5.5 Factor Intensity Taxonomy
5.6 The Differentiation Process of the Sector
5.6.1 The Differentiation of the Agricultural Sector
5.6.2 The Differentiation of the Industrial Sector
5.6.3 The Differentiation of the Service Sector
5.6.4 The Differentiation of the Information Sector
5.7 Sectoral Development Dynamics
5.7.1 The Dynamic Factors in Sectoral Development
5.7.2 The Primary Dynamics in Sectoral Development
5.7.3 The Role of the Core Firm
5.8 Sectoral Evolutionary Mechanism
5.8.1 The Division of Labour and Coordination
5.8.2 The Interaction Between Internal and External Factors
5.8.3 Competition and Cooperation
5.8.4 Intersectoral Interaction
5.9 Distribution in the Sector System
5.9.1 The Input‒Output Relations in the Sector System
5.9.2 Intersectoral Correlation Effect
5.9.3 The Distribution of Elements in the Sector System
5.10 Overall Sectoral Competence
5.11 Sectoral Life Cycle
5.11.1 Sectors that Grow Up
5.11.2 Stagnant Sectors
5.11.3 Decaying and Declining Sectors
5.12 Sectoral Evolutionary Trajectory
6 The Long-Term Evolution of Agriculture in China
6.1 The Long-Term Transition of Agriculture in Ancient China
6.1.1 Historical Stages and the Main Features of Agriculture in Ancient China
6.1.2 The Relations Between Crop Cultivation and Animal Husbandry in Ancient China
6.1.3 Market Transaction Network in Ancient China
6.1.4 Agricultural Books in Ancient China
6.1.5 Agricultural Policies in Ancient China
6.1.6 The Evolution of Agricultural Tools in Ancient China
6.2 The Evolution of Modern Agriculture in China
6.2.1 China Versus Japan: The Impact of Institutional Reform on Economic Development
6.2.2 Industrialisation in Modern China
6.2.3 The Impacts of Modern Industrials on the Commercialisation of Agriculture
6.2.4 Agricultural Mechanisation in Modern China
6.3 The Development of Contemporary Agriculture in China
6.3.1 Contemporary Agricultural Industrialisation
6.3.2 Contemporary Agricultural Technologies
6.3.3 The Impact of Contemporary Industrials on Agriculture
6.3.4 The Impact of Contemporary Services on Agriculture
6.3.5 The Impact of Contemporary Information Technology on Agriculture
7 The Macro-level of the Economic System: The Dynamic Structure and Evolution of the National Economy
7.1 Representative Theories on the Sectoral Structure
7.2 The Environment, Elements and Structure of the Economic System
7.2.1 The Internal and External Environments of the Economic System
7.2.2 The Constituent Elements and General Structure of the Economic System
7.3 The Dynamic Structure of the Economic System
7.3.1 The Dynamics Behind the Development of the Economic System
7.3.2 The Transmission of Demand in the Economic System
7.3.3 The Role of the Market and the Government in the Economic System
7.4 Distribution in the Macro-economy
7.4.1 Distribution within the National Economic System
7.4.2 Distribution within the State System
7.4.3 Institutions of Resource Distribution and Historical Choices of Social Practice
7.5 Evolution Trend of the Sectoral Structure and Its Adjustment
7.5.1 The Main Factors Affecting Sectoral Structural Evolution
7.5.2 The General Trend of Sectoral Structural Evolution
7.5.3 The Relation Between the Sectoral Input Structure and Sectoral Output Structure
7.5.4 The Adjustment Direction of the Sectoral Structure
7.6 The Openness and Inclusiveness of the Book’s Theoretical Framework
7.6.1 The Openness of the Book’s Theoretical Framework
7.6.2 The Inclusiveness of the Book’s Theoretical Framework
8 The Structure, Function and Evolution of the State and the Social System
8.1 The Concept of the State
8.2 The Birth of the Primitive State
8.3 The Environment, Elements and Structure of the State System
8.3.1 The Internal and External Environments of the State System
8.3.2 The Constituent Elements and General Structure of the State System
8.4 The Human-Culture Subsystem in the State System
8.4.1 The Concept of Human-Culture
8.4.2 The Internal and External Environments of the Human-Culture System
8.4.3 The Constituent Elements and General Structure of the Human-Culture System
8.4.4 The Main Function of the Human-Culture System
8.4.5 The Production Activities in the Human-Culture System
8.4.6 The Evolutionary Mechanism of the Human Culture System
8.5 The Observation of Social Progress from the Perspective of Social Reform
8.6 The Political System in the State System
8.6.1 The Concept of the Polity/Politics
8.6.2 The Internal and External Environment of the Political System
8.6.3 The Constituent Elements and General Structure of the Political System
8.7 The Dynamic Structure of the Social System
8.8 The Main Mechanisms Behind the Development of the Social System
8.8.1 The Mechanism of Division of Labour in Social Development
8.8.2 The Mechanism of Coordination in Social Development
8.8.3 The Mechanism of Differentiation and Stratification in Social Development
8.8.4 The Mechanism of Gradual Change and Disruptive Change in Social Development
8.9 The Evolutionary Trajectory of the Social System
8.10 The Book’s Historical Philosophy and Views of Social Evolution
9 The Main Dynamics and the Features of Social Development in Ancient China
9.1 The Structural Features of the Human-Culture System in Ancient China
9.2 The Rise and Fall of Market Economy in Ancient China
9.3 The Rise and Fall of Science and Technology in Ancient China
9.4 The Main Synergistic Factors of Society in Ancient China
9.5 The Impact of the Natural Environment on Social Historical Development
9.5.1 Relevant Thoughts About the Influence of the Natural Environment on Human Society
9.5.2 The Vital Impact of Climate on Human Society
9.5.3 The Connections Between Climate Change and Human Civilisation
9.5.4 The Impact of Climate Pulsation on Human Civilisation
9.5.5 The Long-Term Features of Climate Change in Chinese History
9.5.6 The Connection Between Climate Change and the Southward Migration of Northern Ethnic Group
9.5.7 The Connection Between Climate Change and Ancient Wars
9.5.8 The Impact of Climate Change on Demographics in Ancient China
9.5.9 The Impact of Climate Change on the Social Economy in Ancient China
9.5.10 Climate Change and the Rise and Fall of China
Appendix Relations Between the Book’s Theory and Marx’s Theory
Appendix Selected Book Reviews
A New Framework for Economic Theory: Helix Network Theory
A New Theoretical Framework for the New Economy
Fractal of Economic and Social Systems?
New Explorations in Economics
The Three Breakings and Three Buildings of the New Economy
A Book That Took 10 Years to Write: After Reading Gan Run-Yuan’s New Book Helix Network Theory
Systems Thinking, Systems Construction
Mainstream Economics has Fallen into a Misunderstanding and Crisis
Should Economists Not Be Moral?
Afterword
Bibliography
Name Index

Citation preview

Runyuan Gan

Helix Network Theory The Dynamic Structure and Evolution of Economy and Society

Helix Network Theory “It is a masterpiece that systematically reveals the structure of the modern social and economic system. The theory is novel and unique. The methods are diverse and coupled. It is worthy of careful study.” —Cheng En-Fu, Chief Professor, Member of the Faculty at the Chinese Academy of Social Sciences “This book, with the analytical vision of the broad social system, discusses the overall picture of the evolution and development of human society. It embodies luxuriant new viewpoints and theoretical innovations, which are worthy of reading and discussion in academia!” —Wei Sen, Professor of Economics at Fudan University “This book explores the dynamic structure of economy and society, depicts the overall picture of the evolution of human society, and summarises the social dynamics into a multi-dimensional intertwined “helix network”. It is a work that explores the relationship between nature and humans, penetrates the context of changes from the past to the present, and initiates a school of its own. Its ideological methods are conducive to promoting the transformation of the economic research paradigm, which is definitely worthy of the attention of academia!” —Yan Peng-Fei, Senior Professor at Wuhan University “This novel monograph on social economics is a masterpiece of evolutionary economics. It is not only rich in the spirit of humanism but also possesses a broad interdisciplinary vision. This book is a must-read!” —Jia Gen-Liang, Distinguished Professor at Renmin University of China

Runyuan Gan

Helix Network Theory The Dynamic Structure and Evolution of Economy and Society Interdisciplinary Integrated Economics Creating a Brand New “Micro-Meso-Macro” Paradigm

Runyuan Gan School of Economics and Management East China Jiaotong University Nanchang, China Translated by Huizhong Yu Shenzhen University Shenzhen, China

ISBN 978-981-19-8802-8 ISBN 978-981-19-8803-5 (eBook) https://doi.org/10.1007/978-981-19-8803-5 Jointly published with Fudan University Press The print edition is not for sale in China (Mainland). Customers from China (Mainland) please order the print book from: Fudan University Press. Translation from the Chinese language edition: “Helix Network Theory—The Dynamic Structure and Evolution of Economy and Society” by Runyuan Gan, © Gan Runyuan 2021. Published by Fudan University Press. All Rights Reserved. © Fudan University Press 2023 This work is subject to copyright. All rights are reserved by the Publishers, whether the whole or part of the material is concerned, specifically the rights of reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publishers, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publishers nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publishers remain neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Foreword by Yew-Kwang NG

I have known GAN Runyuan since July 2017 when he sent me his massive manuscript on his Helix Network Theory with some very favourable book reviews. Despite working in non-academic sectors, his academic achievements have by far surpassed that of an average Ph.D. graduate. This is very remarkable and reflects very favourably on his research abilities. I commenced my recent visit to the School of Economics at Fudan University in Shanghai at the end of July 2019 as a special chair professor. Runyuan came to see me in my office and we also had lunch together and a couple more meals after. He also sat in some of my classes at Fudan University and discussed his Helix Network Theory after class with me. Thus, I got to know him and his theory quite a fair bit. In his book Helix Network Theory, he uses the basic methods of System Theory and Structural Functionalism to construct his framework of economic analysis inclusive of the ‘micro-meso-macro’ elements. Thus, his basic ideas have some similarities with the mesoeconomic analysis that I have developed since 1977. My method basically combines elements of micro (including the marginal analysis of profit maximisation at the firm level), macro (including the influence of aggregate demand, aggregate output, and the average price level), and simplified general-equilibrium analysis based on a representative firm that need not be perfectly competitive. It focuses on equilibrium analysis with comparative statics, obtaining the results that both the Monetarist (absence of real effects of a change in nominal aggregate demand) and the Keynesian (possible real effects) are special cases, with additional possible cases including that of cumulative expansions/contractions that may partly explain events such as the Great Depression. In contrast to my analysis, Gan’s framework includes additional elements, such as large organisations between the micro and macro levels and social and political factors. In contrast to my focus on equilibrium and comparative statics, Gan emphasizes nonequilibrium evolutionary processes. In particular, he uses the idea of double structures (surface and deep structures) to construct his theoretical framework. Gan points out that ‘the forces affecting the development of societies are determined by human-culture, economic, political, scientific, legal, and educational

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elements jointly’. I fully agree with this. In the present book, Gan uses ten dimensions to draw the diagram of the locus of social-systemic evolution-development: the Helix Network Diagram. This is very unique and remarkable. Gan believes that we may use these ten dimensions to evaluate different societies or countries. However, how do we tradeoff between these dimensions? What are their separate measurable indicators? In my view, ultimately speaking, we should base our analysis on the effects on long-term aggregate happiness. These issues have to be further studied in detail. Helix Network Theory is very rich in content; apart from economics, it involves many other areas of study, including management theories, sociology, political theories, cultural theories, and history. I have very limited knowledge in these areas. Thus, my comments above are only my brief impression and simple evaluation upon reading this massive book. Although this book may have some inadequacies that are waiting for the author and other economists to supplement and perfect them, it also includes many forward-looking innovations and explorations (e.g., the micromeso-macro fractal structure). These ideas merit the attention and further studies of economists. Upon the publication of the revised Chinese version and the English version of this important book, I am happy to recommend it to interested readers. If we further develop the theoretical framework advanced in this book, we may help to significantly improve economic analysis, making it more suitable to analyze the development of human societies in the future. I also hope that the analytical framework advanced in the book may provide some useful guides for the making of public policies in many countries in the world. February 2021

Yew-Kwang NG Fellow, Academy of the Social Sciences in Australia Emeritus Professor Monash University Melbourne, VIC, Australia

Foreword by Gong-Meng Chen

I first met and started working with Gan Runyuan, the author of the book, around April and May of 2002. Back then, I had just established the China Accounting and Finance Research Centre at Hong Kong Polytechnic University in Shenzhen. Because the research centre was not long established, it was necessary to introduce various talents. Gan Runyuan was one of the first groups of personnel recruited into the research centre. By 2003, with the active support of Cheng Si-Wei, I and my colleagues had founded the China Venture Capital Research Institute. During that period of time, Gan Runyuan worked as my assistant and participated in many tasks at the China Accounting and Finance Research Centre and China Venture Capital Research Institute. He was easy-going, serious in working, and I was always impressed. Later, Gan Runyuan left Shenzhen to Shanghai. However, he still kept in touch with me and participated in several forums organised by the China Venture Capital Research Institute. At the end of March this year, Gan visited Shenzhen. I learned that he had written an economics monograph, Helix Network Theory, and he invited me to write a preface to this book. He said that this is the ten-year brainchild of his toil, blood, and sweat. I did not expect him after leaving Shenzhen for more than ten years, not only reading that many books on economics and sociology but also spending quite a few years writing an economics monograph of more than 400,000 words. What a gratifying thing! This book is an academic work at the intersection of economics and sociology, a theoretical achievement of the author’s comprehensive research on traditional economics and sociology using methods such as system theory and structural functionalism. From the subject and the content, this book incorporated some prototype theories in the field of social sciences, divided the social system into human-culture, economy, polity, science, law, education, and other subsystems in terms of system and structure, and explored the connection between these subsystems and their intricate relation with social progress. The book gave a comprehensive discussion of the hierarchy, structure, function, and operating process of the economic system within the social system and expounded on the dynamic structure and the evolutionary laws

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of the economy and society. The author broke down the barriers of different disciplines, integrated the research results of economists, sociologists, historians, cultural scientists, and anthropologists, and concluded that the long-term evolutionary mechanism of the entire human social system follows two major laws: the bifurcation law and the synergy law. The most remarkable innovation of this book was mainly reflected in revealing the fractal features such as self-similarity, hierarchy, and recursiveness in the general structure of the firm, the industry, the sector, and the national economic system. The book also clarified the two-tiered structure and the basic elements that exist in the human-culture system, the economic system, the political system, and other social subsystems. The author’s exposition on the dynamic structure of the firm system, the sector system, and the national economic system was an organic integration of the economic thoughts of the major schools of western economics since Adam Smith, which also incorporated part of the basic ideas of Marxist political economy. Readers should place this book in the category of social economics. In the past, social economics works were more concerned with social and economic phenomena since the Industrial Revolution, but this book took agricultural society before the Industrial Revolution into the field of discussion. The theoretical framework proposed by the author can accommodate the basic ideas of many typical social economic theories. From this point of view, the theoretical framework proposed in this book is more inclusive and explanatory. The author fully absorbs the theoretical essence of traditional economics and distills these economic thoughts into this research of social economics at a whole new level. I personally believe that the innovative value of this monograph is mainly reflected in three aspects: One is the change in the paradigm of economic thinking; the second is the redivision of the basic framework of sociology; and the third is the organic coordination of public policies and public institutions. In economics, the static equilibrium thinking paradigm has always predominated the traditional mainstream economic research. Compared with the thinking paradigm of traditional economics, this book establishes the theoretical framework of a dynamic nonequilibrium thinking paradigm. On the basis of this thinking paradigm, the author can logically integrate micro-, meso-, and macro-economics into a unified theoretical framework, which is of great significance for the reform and development of economic theories. For a long time, the research of economics and sociology has been in a state of isolation, but in fact, these two disciplines are closely connected. The author regards the economic system as a subsystem of the social system and divides the social system into a surface structure consisting of the human-culture system, the economic system, the political system, and other subsystems and a deep structure composed of the science system, the legal system, the education system, and other subsystems. This theoretical summary of the structure of modern society is concise and realistic. The author’s division of the structure and the function of the modern social system not only helps to clarify the basic theoretical framework of sociology but is also valuable for studying the relation between sociology and other adjacent disciplines.

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The systematic, holistic, and connected concepts advocated in this book can assist Social Science theorists in eliminating disciplinary barriers and school prejudices, clarifying the interrelations among the subsystems in the social system, and eliminating or resolving the state’s policy conflicts and institutional contradictions in culture, economy, and polity, which is conducive to promoting the development and operation of the entire society. The social economic thoughts contained in this book are an important inspiration for China’s current social reforms and institutional innovations, especially in the field of policy making and institutional construction. On May 17th, Chinese President Xi Jin-Ping advocated at a symposium on philosophy and social sciences held in Beijing that the philosophical and social science community should encourage knowledge innovation, bold exploration, and the courage to construct new theories with original ideas. In this book, the author structured a brand new theory with original ideas, which is fully in line with the spirit of President Xi’s speech. Although the book had its imperfections, there is no doubt that the author’s courage to create and his spirit of exploration are worthy of our affirmation! I believe that the timely publication and distribution of this book has important theoretical value and practical significance in eliminating the one-sided understanding of economic determinism; encouraging the coordinated development of the entire society in terms of culture, economy, and polity; reshaping the human-culture system; establishing a belief and moral system; promoting the healthy functioning of society; implementing the scientific outlook on development; formulating scientific policies and institutions; and building a harmonious society. May 2016

Gong-Meng Chen President of the China Institute of Educational Innovation Professor of Finance, Doctoral Supervisor Shanghai Jiaotong University Shanghai, China

Foreword by Chun-Xue Yang

The author of this book, Gan Runyuan, discussed a difficult academic issue in this book. The social economy is an extremely complex organic system. Specific economic phenomena are the result of various factors, including polity, law, cultural traditions, and other factors. The interaction of these factors endows the social economy with a feature of systemicity, which means that the components of the social economy are organically integrated. No social scientists (including economists) will deny this fact. The interpretation of the mystery of this organism has always been the ambition of scholars. However, there are great differences among scholars on how to understand and explain this objective fact. The theoretical challenges are as follows: First, how do the components of this organism coordinate and operate? Second, how does this organism evolve in operation? How can these theoretical problems be solved? Economics can be roughly divided into two ways of thinking: methodological individualism and methodological holism. In the history of economic thought, these two methodologies began to become clear in the famous methodological debate between Menger1 and the German historical school. The key question is how to understand the relation between individual economic behaviour and the social economy. Methodological individualism holds that all true economic theories can be reduced to a theory of individual behaviour plus boundary conditions that describe the circumstances of the individual behaviour. Why is that? A typical answer from Hayek is that in the social sciences, terms such as market and society are merely theoretical concepts used to describe human action, instead of the entity that one can directly observe. The only feasible way to understand such phenomena is to comprehend the collective unity of society through the analysis of individual behaviour. In other words, economists can only understand market behaviour as a totality on the basis of individual economic behaviour.

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Carl Menger (1840–1921) was one of the representatives and main founders of the Austrian school of economics. xi

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Methodological holism considers the social economy as a collective unity in which its internal components are interrelated. There are various forms of specific analysis methods. One perspective is to use the concept of biology to compare the social economy to an organism and to explore the laws of its development and evolution. The German historical school is a typical representative in this regard. Another perspective is to view the social economy as a complex machine-like system. The typical representative is economic control theory. Although these studies have contributed to our understanding of the social economy to varying degrees, they have generally been out of the mainstream in economics. Methodological individualism is the mainstream. Neoclassical economics takes the rational economic man as the basis of analysis and gradually expands the scope to the overall analysis of the market economy. The core of the theory is to demonstrate that guided by an invisible hand (i.e., the price mechanism); every individual’s pursuit of maximising his/her interests will unconsciously lead the economy to a general equilibrium. In this equilibrium, the output and the price of all commodities form an optimal combination. Furthermore, neoclassical macroeconomics uses the general equilibrium model of random dynamics to extend this analysis to the explanation of macroeconomic phenomena, which are apparently subject to various disputes. However, it is certain that economic neo-classicalism and its mathematical tools are not able to interpret social economic organisms. As the Austrian economist Friedrich von Wieser (1851–1926) put it, “an investigation confining itself to this narrowest group of theoretical problems, a group open to extreme idealisation, may resort to mathematical expression as the most exact instrument for formulating results. However, an investigation passing by decreasing abstraction to the remaining problems of theory will find itself compelled to discard, in its further advance, the mathematical formula. None of the great truths of economic theory, none of their important moral and political applications, has been justified by mathematical means.”2 Although studies on economic phenomena are becoming more detailed and the research field is becoming increasingly specialised, the current economic interpretation of the entire social economy is still in an unsatisfactory state, no matter from which perspective. As the author described in the opening part, it is slightly like a blind person identifying an elephant. Why cannot the existing theoretical achievements be used to provide a comprehensive explanation of the social economic phenomena, since economics and other social sciences have made great progress? Most economists do not have the courage to have the ambition of comprehensively interpreting socioeconomic phenomena in their entirety but can only aim to discover a small part of them. I would not draw a rash conclusion, but it must be directly related to the academic environment where the division of labour is increasingly refined. Gan is passionate about academic studies but does not work in an academy or a research institute. Although this makes his argument seems to be not entirely in

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Weiser, F. (1927). Social Economics (Hinrichs, A. F., trans.). New York: Adelphi. p. 13.

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line with the allegedly stringent norms of neo-classicalism in modern economics, it allows him to have no scruples and the courage to explore this grand question. The most unique and impressive part of this book is the author’s attempt to discuss the fractal features such as self-similarity, hierarchy, and recursiveness in the general structure of the firm system, the sector system, and the national economic system and the clarification of the two-tiered structure and the basic elements that exist in the subsystems of human-culture, economy, and polity. On the basis of the structure model of the social system put forward by the American sociologist Parsons and the Chinese system philosopher Min Jia-Yin, the author divided the social system into a surface structure consisting of the human-culture system, the economic system, the political system, and other subsystems and a deep structure composed of the science system, the legal system, the education system and other subsystems, which is obviously a theoretical summary of the structure of modern society and is very close to the actual functional division of contemporary society. To borrow the concept of embeddedness by the British economic historian Karl Polanyi (1886–1964), the author described to the readers a panoramic view of the economic system in which a firm is embedded in the structure of an industry, an industry is embedded in the structure of a sector, a sector is embedded in the structure of an economic system, and an economic system is embedded in the structure of a social system. If the general structure of the firm system, the sector system, the economic system, the state system, and the social system pictured by the author are combined, a geometry (or a fractal geometry) similar to the Mandelbrot Set pattern3 (Fig. 3.5) will be obtained. This set of well-structured and nested geometries forms the theoretical framework of the book, which is exactly the law of fractals that exists in the social system, as revealed by the author. This group of fractal diagrams together with the evolutionary trajectory of the social system sketched by Chap. 74 (Fig. 8.14, also known as the Helix Network), reveals a geometric beauty with a unique structure. Undoubtedly the theoretical framework constructed by the author does exude the structural beauty of the social sciences, although it is only a basic outline! Almost all academics have a conception that they have basically solved their chosen problem. I could not judge whether Gan has a similar mentality. However, within my limited range of knowledge, I believe that Gan’s introduction of some concepts of the philosophical thinking of systems science and evolution theory will at least help the readers to further think about the abovementioned issues. As to the extent to which Gan’s book advances the study of this issue, it is left to the readers to

3

A typical fractal geometry, in which all its relatively independent minute unit is similar in shape to their collective unity. 4 Referring to Chap. 7 in the first edition, or Chap. 8 in the revised edition.

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judge. Nevertheless, I believe that no matter what the readers decide, they can gain something out of the book. May 2016

Chun-Xue Yang Associate Director, Researcher, Professor, Doctoral Mentor, Institute of Economics, Chinese Academy of Social Sciences Beijing, China

Preface (Revised Edition)

The first edition of Helix Network Theory was published by Fudan University Press in September 2016. It received a good response shortly after its publication. Economic experts and scholars in China soon gave high praise, and a series of reviews and recommendations were given by the publication houses, such as The China Reading Weekly, The China Economic Herald, The Hong Kong Economic Herald, The New Economy, and The Scientific Consult. In October 2017, the book was selected to participate in the Frankfurt International Book Fair in Germany. Fudan University and the Shanghai Academy of Social Sciences successively held seminars on Helix Network Theory in March and April of 2018. Its traditional Chinese version was published and distributed in Taiwan in June of that year. In December 2019, I received the winner Golden Man Award of the 2019 International Entrepreneurship, Creativity and Innovation Awards for my contribution to the innovation of economic theory. At present, the book was collected by more than 30 world-renowned universities, including Harvard, Cambridge, Oxford, Princeton, Yale, Stanford, and Columbia University, in the United States, the United Kingdom, Germany, France, Japan, and other countries. The most exciting thing was that Springer, an internationally renowned academic press house, was going to launch the English version in Europe and the United States. It’s hard to imagine that a thick theoretical book could receive such attention and treatment, which for me was completely unexpected. Whenever I recollect the joys and sorrows of writing and publishing this book, I am filled with gratitude, in addition to satisfaction and accomplishment. I am grateful to all the professors, experts, and scholars in economics, education, and academia for their affirmation that encourages me to explore and innovate. I also want to thank my friends from the publishing industry, the media, and the business community, whose support and recognition made this book successfully distributed! I am thankful to my tutors and fellows from high school and college for their help to keep me forging ahead. I want to especially thank the readers who may or may not know me. Your support gave this book a pair of flying wings, enabling it to be known by the many!

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To be worthy of the love from my friends and the readers, I want to take this special opportunity of staging this English version to make necessary additions and revisions to make it more complete. Compared with the first edition of this book, this revision has been updated and revised in three parts. First, this version added two brand new chapters (Chaps. 6 and 9) and an appendix. Second, new contents were added to some chapters of the original version. The addition includes Sects. 1.4, 2.5, 3.6, and 4.4.3. Third, errors in the first version were corrected, several sentences were polished, and a small number of comments and references were added, for instance, the revision of Sect. 3.1. Among the newly added content, Chap. 6, The Long-Term Evolution of Agriculture in China and Chap. 9, The Main Dynamics and the Features of Social Development in Ancient China, which were originally used as historical empirical facts to support the theoretical framework of this book, were not included in the first edition due to space restrictions and will show up in this edition to make up for the regret. The appendix contains two new book reviews to help readers understand the value of this book. On the occasion of unveiling this revision, I would like to express my heartfelt gratitude to the following people: Many thanks to Chen Gong-Meng, Yang Chun-Xue, and Yew-Kwang NG for writing the preface to this book; Lin Jian-Fu, Huang Chun-Xing, Wei Sen, Jia GenLiang, Cheng En-Fu, Yan Peng-Fei, Lu Ding, Xia Bin, and other professors for recommending this book to academia; Niu Long-Fei, Zhu Min, Jiang Jiang, Qiu Yang-Lin, Cao Wei, Chen Jun-Chang, Liang Jie, Sun Jian-Ling, and other scholars for their beautifully written book reviews; Zhang Hui-Ming, Wang Chao-Ke, Ju LiXin, Yu Hong-Yuan, Chen Ya-Bin, Zhou Zhen-Hua, Yang Jian-Wen, Li Chao-Min, Shen Gui-Long, Li Zheng-Tu, Deng Li-Li, Cai Jian-Na, and other professors and experts for their comments on the seminar; Xu Hui-Ping, Wang Lian-He, Lu Jun-Jie, Ma Yon-, Chen Wen, Cai Jing-Xian, Song Zheng-Kun, Zheng Yi-Ting, and the others from the publishing industry; Liu Sheng-Quan, Yan An-Sheng, Yang Jian-Min, Li Zhan-Hui, Zhang Qia-Tang, Jiang Hai-Jun, Wang Jian-Feng, Wang Huan-Xiang, Xu Ming, Duan Gang, Zha Jian-Guo, Xia Li, Wang Duo, Zhao Sang-Yu, and the others from the media; Yu Li-Fu, Zhao Zhen, Wu Yu-Hua, Han Guo-Gang, Sun Xiao-Kang, Shen Li-Juan, and Liu Fang-Sheng, and other friends for their help in promoting the book overseas and copyright consulting; Zhao Shun-Xing, Mao Ling-Yun, Ma Xiang-Jun, Ma Xin-Hong, Yan Wei, and other friends for their help in organising reading parties and publishing; Jia Li-Jun, Ge Xiao-Cheng, Xu Jiang-Ping, Quan Jun, and Chen Yuan-Zhe for their active roles in expanding the social influence of Helix Network Theory. In particular, Professor Zhang Hui-Ming from the School of Economics of Fudan University organised the Helix Network Theory-themed symposium at Fudan University on March 30, 2018; Researcher Li Zheng-Tu from the Institute of Economics of the Shanghai Academy of Social Sciences initiated the same themed symposium on April 13, 2018; Dr. Aqeel Ahmed, an international friend and vice president of the Pakistan Chamber of Commerce, sponsored the gifts for the symposium at Fudan

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University; Zhao Zhen, the director of the Marketing Department of China International Book Trade Group Export Centre, provided critical support and assistance in the copyright and the international promotion of Helix Network Theory. In the process of revising this book, Lü Jin-Hua, a physicist and cosmologist, gave me invaluable advice on the contents of Sect. 2.1, especially the parts on the history of physics and the space-time view of the universe. Zhang Ren-He, a meteorologist and a member of the Chinese Academy of Science, carefully reviewed the contents of the climate and natural environment in Sect. 9.5. Here, I would like to express my sincere appreciation to them in particular! During reading, if readers find anything mistakes or have any suggestions, please write to the executive editor so that the book can be corrected once it is reprinted. Shanghai, China December 2020

Runyuan Gan

Preface (First Edition)

After the idea of Reductionism was first introduced by the renowned French philosopher Descartes in 1637, this approach of knowing things had been widely adopted in Europe. Since then, the complete world has been sliced into increasingly small pieces. The human knowledge system was also divided into different disciplines, such as physics, chemistry, biology, psychology, economics, sociology, ecology, geology, and astronomy. Especially after the Nobel Prize in Science was awarded in 1901, scientists launched competitions for scientific studies by using the Reductionism Method, leading Reductionism to become a principal methodology in scientific studies. However, in modern science after three centuries of development, under the domination of Reductionism, scientists and scholars in different disciplines, who had long been confined to their limited professions, trapped their understanding to a one-sided, isolated, and illiberal world that they heard the part instead of the totality, considered a singular tree the one and only truth but ignored the vast forest of truth in all its totality. This cognition defect made the connected world fragmented, incomplete and chaotic. In 1937, American biologist Bertalanffy proposed General System Theory. A revolution of the thinking paradigm emerged in modern science. This paradigm revolution was characterised by interdisciplines, mutual catalysis, and grand synthesis, which not only linked different disciplines but also created a number of new interdisciplines. The impact of this revolution was unprecedentedly extensive and profound, which not only reshaped the previous knowledge system of human beings and constructed a new world picture but also greatly changed their way of thinking. The main achievement brought about by this thinking paradigm revolution was the creation of systems science, which contains new disciplines such as system theory, information theory, cybernetics, dissipative structure theory, synergetics, hypercycle theory, catastrophe theory, and chaos theory. Systems science has provided new ideas and methodologies for people to understand and transform the objective world and has played a crucial role in both scientific and technological progress and social development.

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This book is a theoretical result of a comprehensive study of traditional economics using the system theory method advocated by systems science. The book advocates viewing the whole world and human society from a systematic, holistic, and connected perspective and is committed to building a complete, comprehensive, and orderly picture of the evolution of human society. Based on the philosophical thinking of systems science and the basic paradigm of evolution theory, this book, by applying the basic method of structural functionalism, discovers through the overall study of the structure and function of the social systems that from the macroscopic scale of time and space, the long-term evolutionary mechanism of the entire human social system follows two basic laws of the bifurcation law and the synergy law, while the social system embodies the remarkable characteristics of collective complexity, operational periodicity, and structural fractality at the same time. The evolution of human society is an interweaving and spiral helix network consisting of multidimensional dynamics, which is also where the title Helix Network Theory comes from. In terms of specific content, starting from the actual production and the operation of the firm, this book systematically analyses the organic connection and complex operating process of different links of social reproduction in modern society from the micro, meso, and macro levels. It elaborates the features of the structure, function, and operation of the firm system, the sector system, the national economic system, and the state and social system and reveals the dynamic structure and evolutionary laws of the social economic system, thus depicting the historical trajectory of the long-term evolution of the human social system. Regarding the development momentum of human society, this book opposes any one-sided, linear, or simplified interpretation of the development of human society by the illiberal use of economic determinism, political determinism, technological determinism, or environmental determinism. The major viewpoint is that the development momentum of human society is determined by the joint force of human-culture, economy, polity, science, law, and education, among which the predominant factor (or force) is not fixed but is always in a dynamic change in different historical stages of social development. Two main theoretical innovations are proposed in this book. First, it reveals the fractal features such as self-similarity, hierarchy, and recursiveness in the general structure of the firm system, the sector system, and the national economic system by absorbing the basics of the economics, thereby integrating micro-, meso-, and macro-economics into a unified theoretical framework. Second, it expounds the twotiered structure and the basic elements that exist in the human-culture system, the economic system, the political system, and other social subsystems on the basis of analysing the structure and the functions of the human social system. The framework of the economic and social system proposed in this book can accommodate many traditional economic theories. To explain the dynamics of social development, this book steps out economics and extends to sociology. The structural framework of the firm system, the sector system, the national economic system, and the state and social system suggested in this book can contain some typical theoretical frameworks of dynamic economics (i.e., Marx’s theory of social reproduction, Kalecki’s theory of effective demand, Keynes’s theory of money, etc.). The author

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introduces typical economic and social theories (i.e., Adam Smith’s theory of the division of labour and market theory, Petty-Clark’s law, Leontief’s input–output model, Chenery’s theory of sectoral structure, Yang Xiao-Kai’s new classical economic framework, Malthus’s population theory, Marx, Weber, Parsons, and Luhmann’s sociological theories, etc.), and analyses the factors influencing the long-term transition of social development and their related histories. Therefore, this book is more comprehensive, inclusive, and explanatory than other economic treatises that only analysed the social economy from a micro-, meso-, or macro-part, -aspect, or -level. The author reorganises and restructures the Eastern and Western ideas of different disciplines, as well as the separate schools of one discipline in humanities and social sciences. By absorbing the ideas and theories of many thinkers, the author integrates culture theories, economics, politics, and other disciplines of humanities and social sciences into one unified theoretical framework. It is in this sense that this book can be described as a grand theoretical synthesis of the humanities and social sciences. If this book is considered innovative or contributive to the social sciences, there is no doubt that it is achieved on the basis of the previous and contemporary generations of scholars. To help readers accurately understand the ideological connotation of this book, the author specially prepares 67 figures and 12 tables to vividly illustrate the characteristics of the structure and operation of the social economic system. Graphic images are an important narration method adopted in this book. To make it easier for readers to understand the ideas discussed in this book, this book abandons the formula derivation, logical deduction, mathematical analysis, and other specialised narration methods commonly used in economics in the past and uses clear, concise, and fluent language to express various profound ideas and theories as clearly, plainly, and easily as possible. The complexity of human society, however, is similar to a sea of smoke. It is not an easy task to sort out the key factors affecting social development or to clarify and organically integrate the ideological essence of different disciplines. The author can only stand on the shoulders of many former sages and look into the distance and trek forward in the ideological forest filled with clouds and mists, thorns, and divergent paths! This book is built up by broad vision, creative ideas, rich knowledge, fluent language, clear logic, and plenty of figures and illustrations, which not only applies the basic ideas of systems science to the analysis and discussions of social sciences but also integrates the main ideas of humanities and social sciences such as economics, sociology, anthropology, culture theories, and political science. It describes the features and historical development laws of the long-term evolution of human society! The first draft of this book was completed in mid-December 2013. The author then spent nearly two years consulting relevant scholars and literature to reduce possible errors before it was finally completed. The author would like to use this opportunity to express sincere gratitude to Wang Chao-Ke, professor of political economy at Shanghai University of International Trade, Hu Xiao-Peng, researcher at the Economics Institute of Shanghai Academy of Social Sciences, Zhao Jing, professor of political economy at Shanghai Normal University, Zhao Ke, professor

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of Zhejiang University, and Dang Hai-Peng from China Financial and Economical Publishing House for their pertinent opinions during the revision. This book is recommended for readers such as economists, sociologists, and tutors at the faculty of Economics and Management, undergraduate and postgraduate students, middle and senior managers in business, industrial researchers, senior government leaders, policy researchers, and policymakers. Due to the limitation of the author’s profession and knowledge, errors may be inevitable, and any suggestions or critics are more than welcome! Shanghai, China May 2016

Runyuan Gan

Contents

1 The Limitations of Human Understanding of the World . . . . . . . . . . . . 1.1 Blind Men and the Elephant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Not See the Forest for the Trees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 All-Rounder Versus Specialist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 Will the Social Sciences Eventually Move Toward Unity? . . . . . . . 2 The Evolution of the Thinking Paradigm and Its Philosophical Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 The Evolution of the Space–Time View and the Great Revolution in Physics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 A Revolution of the Thinking Paradigm: The Birth of Systems Science . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.1 What Is System? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 Systems Science . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.3 Reductionism Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.4 System Theory Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 The Development of the Thought of Biological Evolution and Its Influence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.1 Evolutionary Thought Before Darwin . . . . . . . . . . . . . . . . . 2.3.2 Darwin’s Evolutionary Thought . . . . . . . . . . . . . . . . . . . . . . 2.3.3 New Development of Evolutionary Thought After Darwin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.4 The Infiltration and Influence of Evolutionary Thought on Other Disciplines . . . . . . . . . . . . . . . . . . . . . . . . 2.4 New Understanding and Philosophical Enlightenments Obtained from the Theory of Biological Evolution . . . . . . . . . . . . . 2.4.1 The Development of Evolution Theory Also Requires the Introduction of the System Theory Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 4 8 13 14 22 22 23 25 27 29 29 32 34 43 49

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2.4.2

2.5

The Biosphere Is a Complex and Nested System, and Each Layer of Biological Systems Has Its Own Evolutionary Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.3 Every Biological Individual Has a Two-Layer Structure of Genotype and Phenotype . . . . . . . . . . . . . . . . . 2.4.4 The Evolutionary Laws of Biological Individuals at All Levels Are Interrelated, Interacted and Interinfluenced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.5 The Evolutionary Process of Biological Individuals Is the Unity of Contingency and Inevitability . . . . . . . . . . . 2.4.6 The Mechanism of Biological Evolution Is Not Only a Survival Competition But Also Contains a Wealth of Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.7 Biological Diversity Originates From the Diversity of Biological Variation and Ecological Environment Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.8 Some New Understandings About the Dynamic Mechanism Behind the Evolution of Biological Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.9 Philosophical Enlightenment on the Structure and Evolution of Things From the Theory of Biological Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Three Basic Principles of the Evolution of Complex Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.1 The Principle of System-level Emergence . . . . . . . . . . . . . 2.5.2 The Coupling Principle of Positive and Negative Feedback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.3 The Principle of Circular Cumulative Causation . . . . . . . .

3 A Bird’s-Eye View of the Economic Society . . . . . . . . . . . . . . . . . . . . . . . 3.1 The Basic Hierarchy from Natural System to Social System . . . . . 3.1.1 The Basic Hierarchy of the Cosmic System . . . . . . . . . . . . 3.1.2 The Basic Hierarchy and Structure of the Human Social System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.3 The Basic Hierarchy of the Socioeconomic System . . . . . 3.2 The Four Laws that Human Society Follows in Evolution and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.1 The Law of Bifurcation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.2 The Law of Synergy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.3 The Law of Fractal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.4 The Law of Periodicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Basic Classification of Resources and Their Forms . . . . . . . . . . . . . 3.4 The Components of Social Reproduction . . . . . . . . . . . . . . . . . . . . . 3.5 The Long-Term Transition of Relations of Distribution in Social Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50 51

51 52

53

54

54

55 58 58 60 66 69 71 71 72 76 76 77 79 83 85 88 91 97

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3.6

The Long-Term Evolution of Relations of Distribution in Social Production . . . . . . . . . . . . . . . . . . 98 3.5.2 The Relation Between Human Cognition Level and Social Distribution Result . . . . . . . . . . . . . . . . . . . . . . . 100 A Brand New Economic Paradigm for the Twenty-First Century . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

4 The Micro-level of the Economic System: The Dynamic Structure and Evolution of the Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 A Brief Introduction to the Theoretical Research on Corporate Evolution and Corporate Ecology . . . . . . . . . . . . . . . . 4.2 A Metaphor: Apple Tree and Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 The Nature of the Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 The Environment, Elements and Structure of the Firm . . . . . . . . . . 4.4.1 The Internal and External Environments of the Firm . . . . 4.4.2 The Constituent Elements and Organisational Structure of the Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.3 The Deep Structure of the Firm System . . . . . . . . . . . . . . . 4.5 The Production and Operation of the Firm . . . . . . . . . . . . . . . . . . . . 4.6 The Exchange and the Distribution Within the Firm . . . . . . . . . . . . 4.6.1 The Meaning of Distribution and the Related Theories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6.2 Distribution in the Firm System . . . . . . . . . . . . . . . . . . . . . . 4.7 Corporate Production Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7.1 On the Allocation of Resources . . . . . . . . . . . . . . . . . . . . . . 4.7.2 On the Allocation of Income . . . . . . . . . . . . . . . . . . . . . . . . 4.8 Overall Corporate Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 Corporate Development Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9.1 The Dynamic Factors in Corporate Development . . . . . . . 4.9.2 The Role of the Entrepreneur . . . . . . . . . . . . . . . . . . . . . . . . 4.10 Corporate Evolutionary Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10.1 The Division of Labour and Coordination . . . . . . . . . . . . . 4.10.2 The Interaction between Internal and External Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10.3 Gradual and Disruptive Changes . . . . . . . . . . . . . . . . . . . . . 4.11 Corporate Life Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11.1 The Firm That Is Growing . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11.2 The Firm That Remains the Status Quo . . . . . . . . . . . . . . . 4.11.3 The Firm That Is Declining . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12 Corporate Evolutionary Trajectory . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The Meso-Level of the Economic System: The Dynamic Structure and Evolution of the Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Classic Theories on Economic Growth . . . . . . . . . . . . . . . . . . . . . . . 5.2 Industry and Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 The Internal and External Environments of the Sector . . . . . . . . . . .

113 118 124 129 131 131 141 144 148 151 152 156 163 165 166 167 171 171 178 181 182 183 187 191 192 193 195 197 203 207 210 212

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5.3.1 The External Environment of the Sector . . . . . . . . . . . . . . . 5.3.2 The Internal Environment of the Sector . . . . . . . . . . . . . . . 5.4 The Constituent Elements and General Structure of the Sector . . . 5.4.1 The Constituent Elements of the Sector . . . . . . . . . . . . . . . 5.4.2 The General Structure of the Sector . . . . . . . . . . . . . . . . . . . 5.5 The Taxonomies of the Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.1 Two Class Taxonomy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.2 Three Classification of Sector . . . . . . . . . . . . . . . . . . . . . . . . 5.5.3 Four Sector Taxonomy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.4 Standard Sector Taxonomy . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.5 Factor Intensity Taxonomy . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 The Differentiation Process of the Sector . . . . . . . . . . . . . . . . . . . . . 5.6.1 The Differentiation of the Agricultural Sector . . . . . . . . . . 5.6.2 The Differentiation of the Industrial Sector . . . . . . . . . . . . 5.6.3 The Differentiation of the Service Sector . . . . . . . . . . . . . . 5.6.4 The Differentiation of the Information Sector . . . . . . . . . . 5.7 Sectoral Development Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7.1 The Dynamic Factors in Sectoral Development . . . . . . . . . 5.7.2 The Primary Dynamics in Sectoral Development . . . . . . . 5.7.3 The Role of the Core Firm . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8 Sectoral Evolutionary Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8.1 The Division of Labour and Coordination . . . . . . . . . . . . . 5.8.2 The Interaction Between Internal and External Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8.3 Competition and Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 5.8.4 Intersectoral Interaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9 Distribution in the Sector System . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9.1 The Input–Output Relations in the Sector System . . . . . . . 5.9.2 Intersectoral Correlation Effect . . . . . . . . . . . . . . . . . . . . . . 5.9.3 The Distribution of Elements in the Sector System . . . . . . 5.10 Overall Sectoral Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11 Sectoral Life Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11.1 Sectors that Grow Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11.2 Stagnant Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11.3 Decaying and Declining Sectors . . . . . . . . . . . . . . . . . . . . . 5.12 Sectoral Evolutionary Trajectory . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

212 215 221 221 222 223 224 224 225 225 226 226 226 227 229 234 236 236 238 241 246 246

6 The Long-Term Evolution of Agriculture in China . . . . . . . . . . . . . . . . 6.1 The Long-Term Transition of Agriculture in Ancient China . . . . . . 6.1.1 Historical Stages and the Main Features of Agriculture in Ancient China . . . . . . . . . . . . . . . . . . . . . . 6.1.2 The Relations Between Crop Cultivation and Animal Husbandry in Ancient China . . . . . . . . . . . . . . 6.1.3 Market Transaction Network in Ancient China . . . . . . . . . 6.1.4 Agricultural Books in Ancient China . . . . . . . . . . . . . . . . .

289 290

255 256 259 264 266 269 272 278 280 281 282 283 284

292 298 302 304

Contents

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6.1.5 6.1.6 6.2

6.3

Agricultural Policies in Ancient China . . . . . . . . . . . . . . . . The Evolution of Agricultural Tools in Ancient China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Evolution of Modern Agriculture in China . . . . . . . . . . . . . . . . 6.2.1 China Versus Japan: The Impact of Institutional Reform on Economic Development . . . . . . . . . . . . . . . . . . . 6.2.2 Industrialisation in Modern China . . . . . . . . . . . . . . . . . . . . 6.2.3 The Impacts of Modern Industrials on the Commercialisation of Agriculture . . . . . . . . . . . . . . . . . . . . 6.2.4 Agricultural Mechanisation in Modern China . . . . . . . . . . The Development of Contemporary Agriculture in China . . . . . . . . 6.3.1 Contemporary Agricultural Industrialisation . . . . . . . . . . . 6.3.2 Contemporary Agricultural Technologies . . . . . . . . . . . . . . 6.3.3 The Impact of Contemporary Industrials on Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.4 The Impact of Contemporary Services on Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.5 The Impact of Contemporary Information Technology on Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . .

7 The Macro-level of the Economic System: The Dynamic Structure and Evolution of the National Economy . . . . . . . . . . . . . . . . . 7.1 Representative Theories on the Sectoral Structure . . . . . . . . . . . . . . 7.2 The Environment, Elements and Structure of the Economic System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.1 The Internal and External Environments of the Economic System . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2 The Constituent Elements and General Structure of the Economic System . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 The Dynamic Structure of the Economic System . . . . . . . . . . . . . . . 7.3.1 The Dynamics Behind the Development of the Economic System . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.2 The Transmission of Demand in the Economic System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.3 The Role of the Market and the Government in the Economic System . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 Distribution in the Macro-economy . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4.1 Distribution within the National Economic System . . . . . 7.4.2 Distribution within the State System . . . . . . . . . . . . . . . . . . 7.4.3 Institutions of Resource Distribution and Historical Choices of Social Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 Evolution Trend of the Sectoral Structure and Its Adjustment . . . . 7.5.1 The Main Factors Affecting Sectoral Structural Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5.2 The General Trend of Sectoral Structural Evolution . . . . .

312 316 319 321 322 328 331 333 335 337 339 340 341 347 353 365 365 371 375 376 380 383 385 386 387 390 394 394 407

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Contents

7.5.3

7.6

The Relation Between the Sectoral Input Structure and Sectoral Output Structure . . . . . . . . . . . . . . . . . . . . . . . . 7.5.4 The Adjustment Direction of the Sectoral Structure . . . . . The Openness and Inclusiveness of the Book’s Theoretical Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6.1 The Openness of the Book’s Theoretical Framework . . . . 7.6.2 The Inclusiveness of the Book’s Theoretical Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 The Structure, Function and Evolution of the State and the Social System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 The Concept of the State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 The Birth of the Primitive State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3 The Environment, Elements and Structure of the State System . . . 8.3.1 The Internal and External Environments of the State System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3.2 The Constituent Elements and General Structure of the State System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 The Human-Culture Subsystem in the State System . . . . . . . . . . . . 8.4.1 The Concept of Human-Culture . . . . . . . . . . . . . . . . . . . . . . 8.4.2 The Internal and External Environments of the Human-Culture System . . . . . . . . . . . . . . . . . . . . . . . 8.4.3 The Constituent Elements and General Structure of the Human-Culture System . . . . . . . . . . . . . . . . . . . . . . . 8.4.4 The Main Function of the Human-Culture System . . . . . . 8.4.5 The Production Activities in the Human-Culture System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4.6 The Evolutionary Mechanism of the Human Culture System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5 The Observation of Social Progress from the Perspective of Social Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6 The Political System in the State System . . . . . . . . . . . . . . . . . . . . . . 8.6.1 The Concept of the Polity/Politics . . . . . . . . . . . . . . . . . . . . 8.6.2 The Internal and External Environment of the Political System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6.3 The Constituent Elements and General Structure of the Political System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7 The Dynamic Structure of the Social System . . . . . . . . . . . . . . . . . . 8.8 The Main Mechanisms Behind the Development of the Social System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8.1 The Mechanism of Division of Labour in Social Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8.2 The Mechanism of Coordination in Social Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

413 420 424 424 425 431 439 442 453 453 457 461 461 465 470 473 479 484 493 501 501 507 510 515 519 519 530

Contents

xxix

8.8.3

The Mechanism of Differentiation and Stratification in Social Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8.4 The Mechanism of Gradual Change and Disruptive Change in Social Development . . . . . . . . . . . . . . . . . . . . . . 8.9 The Evolutionary Trajectory of the Social System . . . . . . . . . . . . . . 8.10 The Book’s Historical Philosophy and Views of Social Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 The Main Dynamics and the Features of Social Development in Ancient China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 The Structural Features of the Human-Culture System in Ancient China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 The Rise and Fall of Market Economy in Ancient China . . . . . . . . 9.3 The Rise and Fall of Science and Technology in Ancient China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4 The Main Synergistic Factors of Society in Ancient China . . . . . . . 9.5 The Impact of the Natural Environment on Social Historical Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.1 Relevant Thoughts About the Influence of the Natural Environment on Human Society . . . . . . . . . 9.5.2 The Vital Impact of Climate on Human Society . . . . . . . . 9.5.3 The Connections Between Climate Change and Human Civilisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.4 The Impact of Climate Pulsation on Human Civilisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.5 The Long-Term Features of Climate Change in Chinese History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.6 The Connection Between Climate Change and the Southward Migration of Northern Ethnic Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.7 The Connection Between Climate Change and Ancient Wars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.8 The Impact of Climate Change on Demographics in Ancient China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.9 The Impact of Climate Change on the Social Economy in Ancient China . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.10 Climate Change and the Rise and Fall of China . . . . . . . . .

537 544 550 553 559 560 570 577 589 593 594 597 602 606 608

610 614 619 621 622

Appendix: Relations Between the Book’s Theory and Marx’s Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627 Appendix: Selected Book Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639 Afterword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651

xxx

Contents

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655 Name Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665

About the Author

Runyuan Gan born in 1969, is a cultural economist and writer. He has received the winner Golden Man Award of the 2019 International Entrepreneurship, Creativity and Innovation Awards. He used to work at the China Venture Capital Research Institute, is currently a professor and graduate research supervisor of Economics and Management at East China Jiaotong University, and is a visiting professor of Economics and Management at Dalian Jiaotong University, Yingsheng Network Business School, etc. His most recent publications are Helix Network Theory: The Dynamic Structure and Evolution of Economy and Society, a monograph on social economics, The Lonely Picture of Spiritual Life: A 100-Year Map of the Nobel Laureates in Literature, a biographical commentary, and The Wings of Spring, a literary collection. He also participated in the compilation of Creative Economics, Personal Financial Planning, Operational Practices of International Academic Journal, and eight other books.

xxxi

List of Figures

Fig. 3.1 Fig. 3.2 Fig. 3.3 Fig. 3.4 Fig. 3.5 Fig. 3.6 Fig. 3.7 Fig. 3.8 Fig. 3.9 Fig. 3.10 Fig. 3.11 Fig. 4.1 Fig. 4.2 Fig. 4.3 Fig. 4.4 Fig. 4.5 Fig. 4.6 Fig. 4.7 Fig. 4.8 Fig. 4.9 Fig. 4.10 Fig. 4.11 Fig. 4.12 Fig. 4.13 Fig. 4.14

Spheres of the cosmic system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spheres of the human social system . . . . . . . . . . . . . . . . . . . . . . . Branching of trees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Synergistic phenomena when fluid bypasses a cylinder . . . . . . . . Mandelbrot Set pattern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Social reproduction in the early stage of primitive society . . . . . . Social reproduction in the middle stage of primitive society . . . . Social reproduction in the agricultural age . . . . . . . . . . . . . . . . . . Social reproduction in the industrial age . . . . . . . . . . . . . . . . . . . . Social reproduction in modern society . . . . . . . . . . . . . . . . . . . . . Interaction between human cognition level and social distribution result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Apple trees in four seasons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spheres of the corporate external environment . . . . . . . . . . . . . . . Spheres of the corporate internal environment . . . . . . . . . . . . . . . Internal structure of graphite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal structure of diamond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General operational structure of the firm system . . . . . . . . . . . . . Interaction between relations of factors of production and relations of factors of distribution . . . . . . . . . . . . . . . . . . . . . . Potential energy diagram of corporate competence . . . . . . . . . . . Theoretical model of the corporate behaviour process . . . . . . . . . Supply–demand relation inside and outside the firm . . . . . . . . . . Relations between the dynamics behind corporate development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Positive interactions between entrepreneur, organisation team and firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evolutionary trajectories of entrepreneur, organisation team, and firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interactions between factors inside and outside the firm . . . . . . .

72 75 79 81 85 92 93 94 95 96 101 128 132 140 143 143 149 163 169 172 173 175 180 181 184

xxxiii

xxxiv

Fig. 4.15 Fig. 4.16 Fig. 4.17 Fig. 4.18 Fig. 4.19 Fig. 5.1 Fig. 5.2 Fig. 5.3 Fig. 5.4 Fig. 5.5 Fig. 5.6 Fig. 5.7 Fig. 5.8 Fig. 5.9 Fig. 5.10 Fig. 5.11 Fig. 5.12 Fig. 5.13 Fig. 5.14 Fig. 5.15 Fig. 7.1 Fig. 7.2 Fig. 7.3 Fig. 7.4 Fig. 7.5 Fig. 7.6 Fig. 7.7 Fig. 8.1 Fig. 8.2

List of Figures

Process of gradual change and disruptive change in corporate development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Potential energy diagram of the growth of corporate competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Potential energy diagram of the evolution of corporate competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Potential energy diagram of the decline of corporate competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate evolutionary trajectory . . . . . . . . . . . . . . . . . . . . . . . . . Composition of the sectoral internal environment . . . . . . . . . . . . General operational structure of the sector system . . . . . . . . . . . . Relations between the dynamics behind sectoral development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interaction between social demand and its effect . . . . . . . . . . . . . Evolution of social demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Positive interaction between core firms, related firms and the entire industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evolutionary trajectories of core firms, related firms and the entire industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interactions between core firms, related firms, the industrial market and the entire industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cobweb model formed by sectoral chains . . . . . . . . . . . . . . . . . . . Coevolution of the division of labour and market synergy . . . . . . Interinfluences between leading sectors . . . . . . . . . . . . . . . . . . . . Supply–demand chain of major products between the industries in bread production . . . . . . . . . . . . . . . . . . Potential energy diagram of sectoral competence . . . . . . . . . . . . Potential energy diagram of the growth of sectoral competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Potential energy diagram of the decline of sectoral competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General operational structure of the national economic system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relations between the dynamics behind the development of the economic system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect process of human demand in the economic system . . . . . . Evolution of human demand transmission in the economic system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evolutionary trajectory of the sectoral structure . . . . . . . . . . . . . . Interaction between sectoral input relation and sectoral distribution relation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dynamic mechanism behind the evolution of the sectoral structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General operational structure of the state and social system . . . . General operational structure of the human-culture system . . . . .

190 193 194 195 200 219 222 237 239 240 243 243 244 249 252 263 270 279 282 284 373 378 381 381 411 417 418 459 471

List of Figures

Fig. 8.3 Fig. 8.4 Fig. 8.5 Fig. 8.6 Fig. 8.7 Fig. 8.8 Fig. 8.9 Fig. 8.10 Fig. 8.11 Fig. 8.12 Fig. 8.13 Fig. 8.14 Fig. 9.1 Fig. 9.2 Fig. 9.3 Fig. A1

Model of the positive–negative feedback reciprocating cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General model of the progression of the physical world . . . . . . . Evolutionary mechanism of the human-culture system . . . . . . . . Endless cycle of Tai Chi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evolution direction of the critical state system . . . . . . . . . . . . . . . Historical development trajectory drawn by Huang Ren-Yu . . . . Relations between individual right and public organisation right at all levels in the state system . . . . . . . . . . . . . . . . . . . . . . . . General operational structure of the political system . . . . . . . . . . Relation between the dynamics behind social development . . . . Self-similarity of things constantly bifurcating . . . . . . . . . . . . . . . Process of gradual change and disruptive change in the development of the social system . . . . . . . . . . . . . . . . . . . . Evolutionary trajectory of the social system (Helix Network) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net growth of ancient Chinese science and technology (in 50 years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sequence of temperature changes in the winter half-year in eastern China in A.D. 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Curve of winter temperature change in different historical periods in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Illustration of Marx’s theory model of social dynamics . . . . . . . .

xxxv

485 486 487 497 497 500 512 513 516 529 549 551 584 601 609 630

List of Tables

Table 1.1 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 5.1 Table 5.2 Table 5.3 Table 6.1 Table 6.2 Table 6.3 Table 7.1 Table 7.2 Table 7.3 Table 7.4 Table 8.1

Basic types of social science theories . . . . . . . . . . . . . . . . . . . . . . Historical evolution of the value structure of factor input and result distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rules and carriers in several domains . . . . . . . . . . . . . . . . . . . . . . Structural factors at each level of the socioeconomic system . . . Niches at each level of the socioeconomic system . . . . . . . . . . . . Sources of apple tree niche factors . . . . . . . . . . . . . . . . . . . . . . . . External influencing factors of the firms . . . . . . . . . . . . . . . . . . . . Taxonomic dimensions of knowledge assets . . . . . . . . . . . . . . . . Two typical patterns of deep corporate factors . . . . . . . . . . . . . . . Time required for each staff member to complete different tasks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic hierarchy and deep factors of the sector system . . . . . . . . . Hierarchy of the bifurcation and synergy mechanism of the economic system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Knowledge, technology and institutions corresponding to leading sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . History of China’s agricultural development . . . . . . . . . . . . . . . . Output of major agricultural products in China . . . . . . . . . . . . . . Proportional changes in the output value structure of China’s major agricultural industries . . . . . . . . . . . . . . . . . . . . Classification of factors involved in the national economic system and economic growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal mechanism behind the evolution of sectoral structure caused by demand and supply . . . . . . . . . . . . . . . . . . . . General trend of the position occupied by the three sectors in different periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General evolutionary trend of the sectoral structure within the three major sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mechanism of bifurcation and synergy . . . . . . . . . . . . . . . . . . . . .

10 103 109 111 112 126 133 136 145 165 220 254 260 291 334 334 364 396 412 413 534

xxxvii

xxxviii

Table 9.1 Table 9.2 Table 9.3 Table 9.4 Table A1

List of Tables

Proportion of theory, experiment and technology in the total score of Chinese dynasties (%) . . . . . . . . . . . . . . . . . . Scientific and technological achievements in ancient Chinese agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Quantity of scientific and technological achievements in ancient Chinese arable farming (crop cultivation) . . . . . . . . . . Latitude changes of the southern boundary of the nomadic regimes in the past dynasties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Connotation comparison of productive forces and the relations of production . . . . . . . . . . . . . . . . . . . . . . . . . . .

583 585 586 612 633

Chapter 1

The Limitations of Human Understanding of the World

This chapter begins with the story of six blind men trying to depict an elephant by touching, which reveals the limitations and the one-sidedness of human understanding of the world. Due to the overly specialised division of labour and disciplinary differentiation, most people in modern society become visually impaired in that they can only see a singular tree instead of the vast forest. The number of specialists trained in modern society is far more than that of all-rounders, which makes allrounders with interdisciplinary abilities needed more than ever. The superfluous social division of labour and specialised education in modern society has led human civilisation to a serious crisis. The solution lies in the unification of natural sciences, social sciences, and humanities to build a complete and unified world. Strong results from some scholars proved that different paradigms of the social sciences are not only compatible but also feasible for their organic synthesis. The theoretical framework constructed in the book provides a preliminary roadmap for a more organically integrated social science.

1.1 Blind Men and the Elephant It was six of men who went to see the elephant, although all of them were blind. That each by observation might satisfy his mind. The First, a chubby one, feeling of the tusk. Cried, “Ho! what have we here. To me this is mighty clear, this wonder of an Elephant is very like a spear!”. The Second, a beanpole, approached the animal and took the squirming trunk within his hands. Thus, boldly up and spake, “I see,” quoth he, “the Elephant Is very like a snake!”. The Third, quite tall, who chanced to touch the ear. So he argued, “No, no, the elephant is clearly like a thin big fan!”. The Fourth, rather short, reached out an eager hand and felt about the knee: “You are all talking nonsense, this is clear enough the Elephant is very like a tree!”. © Fudan University Press 2023 R. Gan, Helix Network Theory, https://doi.org/10.1007/978-981-19-8803-5_1

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The Fifth, average height, approached the Elephant, and happening to fall against his broad and sturdy side, at once began to bawl: “God bless me! but the Elephant is very like a wall! You were all wrong!”. The Sixth, an elderly, no sooner had begun about the beast to grope. Then, seizing on the swinging tail that fell within his scope. “I see,” quoth he, “the Elephant is very like a rope!”. So these men disputed loud and long, each in his own opinion, exceeding stiff and strong, although each was partly in the right, and all were in the wrong. This is the well-known story of Blind Man and the Elephant. After reading the story, the behaviour of blind people is often laughed at. However, such a phenomenon reflected in this story is not only common in our daily life but also exists in some academies and research institutions. Many theories often show a part or a side of the objective truth, but the professors, the scholars or the scientists who put forward these theories often get themselves into endless argument because of their blind insistence on their own perspectives. Compared to the story of Blind Men and the Elephant, how different are their behaviours from that of blind men? Why is there only one answer to the truth of a complex thing? Why cannot the colour of an item be red, yellow, blue, or even black simultaneously? Why cannot a building be both square and round? Why cannot one thing have different features at the same time? How can each of us not be a blind person if we realise that all people can only exist in one period of history and can only see one small part of the world?

1.2 Not See the Forest for the Trees After more than 240 years of development, mankind has made great achievements in the study of economic science since the British classical economist Adam Smith (1723–1790) published The Wealth of Nations in 1776 and laid the foundation of economics. After two centuries of exploration by scholars worldwide, the foliage of the economy grows lush similar to a tree that keeps forking. With the extensive and in-depth development of human social and economic activities, whether in theoretical economics or in applied economics, today’s economics has bred luxuriant branches of subdisciplines. Only classified in a less rigorous way, Economics roughly includes branches such as Political Economy, the Economics of Development, Institutional Economics, the Economics of Welfare, Demographic Economics, Resource Economics, Environmental Economics, Agricultural Economics, Industrial Economics, the Economics of Services, Information Economics, Business Economics, the Economics of Planning, Market Economics, the Economics of Distribution, Supply Economics, Investment Economics, the Economics of Consumption, Behavioural Economics, Public Economics, National Economics, Regional Economics, Urban Economics, the Economics of Sector, Financial Economics, Insurance Economics, Fiscal Economics, the Economics of Taxation, International

1.2 Not See the Forest for the Trees

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Economics, Labour Economics, Statistical Economics, Quantitative Economics, the Economics of Defence, the Economics of Security, Property Economics, the Economics of Technology, Education Economics, Cultural Economics, Creative Economics, Media Economics, Real Estate Economics, Transportation Economics, Accounting, Auditing, and Marketing. New interdisciplinary branches of economics such as Comparative Economics, Comparative Commerce, Comparative Finance, Comparative Taxation, Comparative Auditing, Finance, Innovation Economics, Managerial Economics, Legal Economics, Structural Economics, Geographical Economics, Social Economics and Family Economics. are still emerging. Their differences in focus, research methods, and academic philosophies have also divided economists around the world into different academic schools. A glance at the history of economic thought will reveal that economists have naturally formed different schools of thought, including the Physiocrats, the Mercantile, the Classical, the Historical, the Austrian, the Lausanne, the Cambridge, the Swedish, the Institutional, the Chicago, the Marxist, the Keynesian, the Currency and the Supply. This is just a rough enumeration, not including some of the more nuanced schools or genres. The birth of the subdisciplines of the social sciences (including economics) is determined by the continuous development of the social division of labour and the specialisation of human beings in the exploration of knowledge. Just as no physicist can be proficient in all fields of physics, with the expansion of the scope of human social and economic activities, it is impossible for an excellent and knowledgeable economist to conduct in-depth research on all economic disciplines. Today, the breadth of human social and economic activities and the limitations of personal energy determine that every specialised economist can only be an expert in a particular professional field or a few subdisciplines. As a result, economists often focus on knowledge exploration in one branch, which will greatly limit the vision, academic thinking, and interdisciplinary capabilities of experts and scholars over time. This is like being in a forest, where some people are only focusing on analysing one branch, some people are investigating the flowers on the branch, and some people are looking closely with a magnifying glass at a few leaves, while very few people are actually studying the complete structure and the growth mechanism of the entire tree, and even fewer people are paying attention to the operating principles of the entire forest ecosystem. In modern society, the overly specialised division of labour and disciplinary differentiation has in fact restricted people’s awareness and behaviour of constructing a complete knowledge system, causing many scientists (including natural scientists and social scientists) to unknowingly suffer from the blindness that they could only see a singular tree instead of the vast forest and their version of reality to be a limited touch of truth.

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1.3 All-Rounder Versus Specialist In the history of human culture for thousands of years, there are always all-round talents who are erudite and knowledgeable, good at humanities, arts and sciences, and who have made important contributions to the progress and development of human civilisation. For instance, the great ancient Greek thinker, scientist and educator Aristotle (384 BC–322 BC) was engaged in academic research involving philosophy, logic, rhetoric, physics, biology, psychology, politics, economics, natural history, ethics, education, law, poetry, customs, and theology. Shen Kuo (1031–1095), a Chinese scientist in the Northern Song Dynasty, was knowledgeable and versatile, proficient in astronomy, mathematics, physics, chemistry, geology, geography, meteorology, agriculture, biology and medicine, and was also an outstanding hydraulician and diplomat. Leonardo da Vinci (1452–1519), the Italian polymath, was not only a world-famous painter but also a sculptor, architect, musician, and writer, as well as a mathematician, anatomist, geologist, botanist, inventor, mechanical engineer and cartographer. Chinese thinker Wang Yang-Ming (1472–1529) in the Ming Dynasty was not only a philosopher who was proficient in Confucianism, Buddhism, and Taoism but also a famous educator, poet and calligrapher, and a military strategist who was able to lead the army. The giant of the European Renaissance, Nicolaus Copernicus (Mikołaj Kopernik, 1473–1543), an astronomer, mathematician, jurist, and doctor, changed the view of the human universe with his heliocentric theory; he was known as a Polish astronomer, but he was also an important economic thinker who expounded the Quantity Theory of Money as early as the 1620s.1 The French philosopher René Descartes (1596–1650) was a mathematician and physicist. The British scientist Isaac Newton (1643–1727) was a physicist, mathematician, astronomer, and natural philosopher. The German scientist Gottfried Wilhelm Leibniz (1646– 1716) was a mathematician, philosopher, logician and lawyer who had left plenty of writings in physics, philosophy, history, linguistics, political science, law, moral philosophy, and theology. American scientist Benjamin Franklin (1706–1790) was a renowned American politician, diplomat, philosopher, inventor, writer and publisher. Russian scientist Lomonosov (Mixail Bacilbeviq Lomonocov, 1711–1765) was a chemist, physicist, astronomer, geologist, educator, linguist, philosopher and poet. French Enlightenment thinker Jean-Jacques Rousseau (1712–1778) was a philosopher, political theorist, educator, writer, composer and botanist. Thomas Jefferson (1743–1826), the third president of the United States, was a politician, thinker, philosopher, scientist, and educator. He was also an expert in agriculture, horticulture, architecture, etymology, archaeology, mathematics, cryptography, surveying, and palaeontology, as well as a writer, lawyer and violinist. The German thinker Karl Heinrich Marx (1818–1883) was a philosopher, sociologist, economist and political scientist. American physicist Nikola Tesla (1856–1943) was an inventor and mechanical and electrical engineer. The famous British philosopher Bertrand 1

Spiegel, H. W. (1991). The Growth of Economic Thought. Duke University Press. Social Sciences Press. pp. 87–88.

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Russell (1872–1970) was a mathematician, logician, historian and writer. Liang Qi-Chao (1873–1929), a modern Chinese Enlightenment thinker, was a historian, educator, litterateur, political commentator and social activist. He was an expert in Chinese and Western studies and made great achievements in history, philosophy, literature, law, moral philosophy, religion, journalism, etc. Norbert Wiener (1894– 1964), an American mathematician and founder of control theory, was not only fluent in ten languages but also involved in scientific research in philosophy, mathematics, physics, electrical engineering and biology. American scientist John von Neumann (1903–1957) mastered seven languages in his life and was a mathematician, physicist, computer scientist, economist, and engineer. American economist Herbert Alexander Simon (1916–2001) was a political scientist, management scientist, psychologist, and computer scientist. His research achievements included scientific theory, applied mathematics, statistics, operations research, economics and business management. In reality, the question of whether education should cultivate all-rounders or specialists has always been an important topic of debate. An all-rounder usually refers to talent with a variety of abilities and extensive multidisciplinary knowledge. A specialist refers to a professional with in-depth knowledge and abilities in a particular discipline. Throughout world history, well-known scholars of ancient times were usually all-rounders who were good at both arts and sciences, whose knowledge and expertise were often beyond the reach of people today. The division of the disciplines in modern education has become more detailed due to the in-depth development of the social division of labour and specialisation in today’s society. The accumulation of human knowledge made it very difficult for a person to master the knowledge of several subjects. Therefore, almost every talent in modern society is a specialist in a particular field. However, for humans to explore the unknown world, both specialists and all-rounders are needed. However, modern society has produced far more specialists than all-rounders, making all-rounders so scarce in our time. The world needs knowledgeable and interdisciplinary all-rounders. In the 1980s, the United States analysed the papers published by some scholars and their research results and found that most of the scholars who have achieved great achievements have extensive knowledge, and their knowledge structure often has the features of all-rounders. This discovery shifted higher education in the United States from the original education model focusing on the cultivation of specialists to the model targeting the training of all-rounders, thereby advocating the implementation of broad liberal arts education.2 The all-rounder education model gives more attention to broadening students’ knowledge scope and the cultivation of versatile talent. In human society, scientists explore and discover new knowledge and new laws and lay a foundation for humans to reconstruct the world to promote the continuous progress and development of human civilisation. The famous physicist Wu Da-You (1907–2000) issued an article in 1976 and pointed out that the essence of science is the pursuit of truth. The content of science includes not only knowledge but also 2

Cheng, X. G., Liu, D. C. (eds). (2008). A Study on the Development Path of Higher Education with Chinese Characteristics. Jiangxi: Jiangxi People’s Publishing House. pp. 62–63. 程样国., 刘 德才. (eds). (2008). 中国特色高等教育发展道路研究. 江西人民出版社. pp. 62–63.

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wisdom. Science is “an inseparable unit of ‘knowledge and wisdom’. Fragmental pieces of knowledge do not constitute science if they lack the ability to integrate various kinds of knowledge.” In response to the existing gap between the natural sciences and the humanities, he put forward three points. First, the development of human society to this day must “have a civilisation that integrates the humanities and the sciences”; Second, there must be frequent exchanges of ideas between the scientific and nonscientific communities; Third, the most important way to achieve such kind of communication and exchange is education.3 Therefore, whether a natural scientist or a social scientist, it is necessary for them to combine humanistic and cultural knowledge and scientific knowledge together or at least establish some connections between the two, instead of remaining in isolation or strictly staying within bounds. For any ordinary person, if his/her education is too specialised or the scope of knowledge is too narrow, that he/she can only master some fragments of knowledge, this flat knowledge structure will not only affect the formation of a complete worldview but will also limit the growth of his/her wisdom. As economist Meng Yang (1923–1997) pointed out, “a scientist, if he/she is unable to conduct cross-disciplinary study and is often trapped in a small world, must have a narrow vision. Only those who have the ability to conduct research across disciplines can become ideological giants”.4 The excessive social division of labour and specialised education have damaged and alienated the cultivation of talent with a complete personality. It is found that the knowledge structure of many specialists in modern society is often narrow and onesided, and their comprehensive ability is not strong. They are proficient in technology but do not master culture and possess knowledge but lack wisdom. In the face of complex real-world problems, they can make analyses but do not have the ability to make associations or even synthesise. They are excelled at piling up materials for empirical studies but are unable to think critically. They do not have the humanistic spirit and the vision of a better society. Apart from their professional dedication, they did not pay the necessary attention and thought to the essential issues of life and the overall issues of the entire human society, similar to groups of modern robots that have no soul, no thoughts and only mechanical actions. When facing the adverse consequences of the social division of labour and specialised education, some insightful scholars have realised that human civilisation has fallen into a serious crisis. As early as 1945, for example, professors at Harvard University put forward a report entitled General Education in a Free Society on the basis of reflecting on the two world wars and the lessons of human history. This report pointed out that overemphasising the social division of labour and specialised education may offset human cooperation and increase social conflict, resulting in class struggles and even fascist wars, which would not only bring great damage to human society Zhi, X. M. Wu Da-You on All-round Education. 智效民. 吴大猷谈通才教育.; Xia, Z. Y., Ding, D. (eds). (2004). University Humanities (I). Guangxi: Guangxi Normal University Press. 夏中义., 丁东主. (eds). (2004). 大学人文(第1辑). 广西师范大学出版社. 4 Meng, Y. (1999). The Theory of Economic Social Field. China Renmin University Press. p. 137. 孟氧. (1999). 经济学社会场论. 中国人民大学出版社. p. 137. 3

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but would also pose a great threat to democracy and freedom.5 In 1982, as a natural scientist, Wu Da-You also pointed out that sciences and humanities are two aspects of human civilisation. In response to the social status quo of the distinctive boundaries between professional disciplines, the zero interaction between the disciplines, and the isolation between science and humanities, he believed that human civilisation has experienced serious problems. He stressed that human society has come to an era where it is necessary to connect the humanities with the natural sciences.6 At present, the humanities and social sciences have not structured a progressive knowledge hierarchy from low to high, nor have they formed a unified system similar to the natural sciences. As the famous American sociobiologist Edward O. Wilson pointed out, the main reason for the current fragmentation of humanities and social sciences is that “social scientists are divided into small independent groups. They define their professional vocabulary meticulously but cannot use these terms to make cross-discipline communication.” He also criticised that the current social science research is “everything learned to the age of eighteen” “and only slightly advanced over ideas employed by the Greek philosophers.”7 How can these problems be eliminated? Wilson believed, “the only way forward is to study human nature as part of natural sciences, in an attempt to integrate the natural sciences with the social sciences and humanities.8 ” With the development of society, mankind has accumulated various forms of knowledge. Our finite life determines that one can only grasp or understand a part of the entire world. It is precisely because everyone has limited knowledge or can only be a specialist in a certain field, it is more necessary for us to break through our professional barriers and understand the world from an all-rounder perspective. Only with a broad mind to cross disciplinary boundaries and breakdown the portal prejudice of different schools can we possibly paint a whole and unified world. From this point of view, this book advocates a holistic, systematic and connected perspective to examine the human knowledge system, which integrates humanistic knowledge, cultural knowledge, social knowledge and natural knowledge, to build a complete, harmonious, and orderly world picture.

Zhi, X. M. Wu Da-You on All-round Education. 智效民. 吴大猷谈通才教育.; Xia, Z. Y., Ding, D. (eds). (2004). University Humanities (I). Guangxi: Guangxi Normal University Press. 夏中义., 丁东主. (eds). (2004). 大学人文(第1辑). 广西师范大学出版社. 6 Zhi, X. M. Wu Da-You on All-round Education. 智效民. 吴大猷谈通才教育.; Xia, Z. Y., Ding, D. (eds). (2004). University Humanities (I). Guangxi: Guangxi Normal University Press. 夏中义., 丁东主. (eds). (2004). 大学人文(第1辑). 广西师范大学出版社. 7 Wilson, E. O. (1999). Consilience: The Unity of Knowledge. New York: Random House. p. 199. 8 Wilson, E. O. (1978). On Human Nature. Harvard University Press. p. 6. 5

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1.4 Will the Social Sciences Eventually Move Toward Unity? To solve the deep crisis facing the current human civilisation, it is necessary to unify the natural sciences, social sciences and humanities. Doing this first requires unifying the fragmented social sciences. However, can the social sciences eventually move toward unity? Valuable research has been done on this issue by visionary, knowledgeable and insightful social science scholars. For example, Tang Shi-Ping, a Chinese social scientist, pointed out that if social science is reduced to the extreme, it will be found that the entire social science actually has only a limited variety of basic paradigms. These basic paradigms illuminate different aspects or areas of human society like a flashlight. In addition to the evolutionary social paradigm, each basic paradigm can only light up a limited part of human society. Many schools of social science are the result of different but often incomplete combinations of these basic paradigms, and their varying combinations of the basic paradigms determine the disparities between these schools. Because of the limited number of basic paradigms integrated by different schools of social science, these schools are doomed to fail to understand human society comprehensively. Although fewer combinations of paradigms can fully understand more specific social facts, to thoroughly understand human society, all basic paradigms must be organically synthesised. The strong demonstration in his research proved that different paradigms of social science theories are indeed compatible: “the organic integration is positively feasible, not only worthy of looking forward to.” He believed that “ontology precedes epistemology, and epistemology precedes methodology. The view that the most critical divisions in the social sciences are epistemological, or even methodological, is wrong”;He stressed that “only by starting from various basic paradigms and linking their ontological and epistemological assumptions is it possible to synthesise different schools of thought”.9 Generally, a complete theoretical system usually includes three parts, namely, ontology, epistemology, and methodology, which are distinctive but interrelated. Ontology refers to the theory that describes the fundamental basis and essence of the generation, existence, development and change of research objects, which generally includes basic elements such as concept, category, feature, relation, and restriction. Epistemology refers to the theory concerned with the occurrence, the process, the nature and the laws of knowledge, which generally includes basic elements such as subject, object, belief, information, and knowledge. Methodology is a knowledge system that provides guidance for practical activities for the purpose of understanding and transforming the world. Its content is the subjective application of objective laws, which are generally expressed in theoretical doctrines, universal principles, and primitive models, thinking methods and reasoning tools. It can be divided into 9

Tang, S. P. (2010). Basic Paradigms of Social Science. International Social Science Journal (Chinese Edition) 27(01):5, 84, 86, 98–99. 唐世平. (2010). 社会科学的基础范式. 国际社会科 学(中文版), 27(01):5, 84, 86, 98–99.

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philosophical methodology, methodology of general science, and methodology of specific scientific. The relation between the three is that ontology is the basis of epistemology, epistemology provides evidence for ontology, ontology and epistemology guide methodology to go deep into practice, practice results perfect epistemology, and epistemology further enhances ontology. For human society, this is an infinite process that never ends and repeats. According to the discrepancy between different theoretical ontologies and epistemologies, Tang Shi-Ping divided the theories of different schools of social science into two major categories and eleven basic paradigms. The two major categories are Bedrock Paradigms and Integrative Paradigms; Among them, there are nine Bedrock Paradigms, which are the Materialism, the Ideationalism, the Individualism, the Collectivism, the Biological Determinism, the Socialisation, the Anti-socialisation, the Conflict Paradigm, and the Harmony Paradigm; And Integrative Paradigms have two types, which are Social System Paradigm and Social Evolution Paradigm. He pointed out that when the Social System Paradigm is in its most complete state, it can integrate nine Bedrock Paradigms, providing us with a way to understand changes within the social system, while the Social Evolution Paradigm adds a time dimension to the Social System Paradigm, offering us an approach to comprehend the great transformation of the social system.10 For the convenience of readers’ understanding, Tang Shi-Ping’s classification of various social science theories is listed below (Table 1.111 ). In Table 1.1, according to Tang Shi-Ping’s interpretation, paradigms refer to basic paradigms, and school or theory refers to the result of the combination of basic paradigms. Ontological priority refers to the importance of power in the grand sense; that is, if power B cannot function without power A, then power A has ontological priority over power B.12 The first group of bedrock paradigms, materialism and ideationalism,13 is a dichotomy that is classified from the perspective of philosophical thinking. For example, the Historical Materialism created by Marx is a typical Materialism, while Hegel’s (Georg Wilhelm Friedrich Hegel, 1770–1831) Philosophy of History is a typical Ideationalism. The second group of Bedrock Paradigms, Individualism and 10

Tang, S. P. (2010). Basic Paradigms of Social Science. International Social Science Journal (Chinese Edition) 27(01):87, 95. 唐世平. (2010). 社会科学的基础范式. 国际社会科学(中文版) 27(01):87, 95. 11 The table was reorganised by the author basing on Tang Shi-Ping’s relevant discussions and Table 1.1 in his paper. The text in the table was adjusted or modified accordingly. See Table 1.1 in Tang, S. P. (2010). Basic Paradigms of Social Science. International Social Science Journal (Chinese Edition) 27(01):99, Table 1. 唐世平. (2010). 社会科学的基础范式. 国际社会科学(中 文版) 27(01):99, Table 1. 12 Tang, S. P. (2010). Basic Paradigms of Social Science. International Social Science Journal (Chinese Edition) 27(01):85, 100. 唐世平. (2010). 社会科学的基础范式. 国际社会科学(中文 版) 27(01):85, 100. 13 The Chinese academics has long translated the terms materialism and ideationalism into 唯物主 义 (doctrine solely based on material) and 唯心主义 (doctrine solely based on ideology), which are biased. See Min Jia-Yin. (2013). On the Chinese Translation of Materialism and Idealism. World Philosophy, (01). See 闵家胤. (2013). 浅议Materialism和Idealism的汉译. 世界哲学, (01).

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Table 1.1 Basic types of social science theories Theory type

Bedrock paradigms

Dimension

Paradigms with more ontological priority

Paradigms with less ontological priority

1. Philosophical thinking

Materialism

Ideationalism

2. Human existence

Individualism

Collectivism

3. Human evolution

Biological Determinism Socialisation Theory, Anti-socialisation Theory

4. Interest relationship

Conflict Theory

5. Integrated system

Integrative paradigms Paradigms with most synthesis theories

Harmony Theory Social system paradigm Social evolution paradigm

Collectivism, is labelled from the perspective of how (i.e., individual and collective) humans exist. For example, neoclassical economics is a typical individualism, while institutional economics is a typical collectivism. The third group of bedrock paradigms, biological determinism, socialisation and anti-socialisation, is a triad that is categorised from the perspective of human evolution and behavioural dynamics. Each person’s biological characteristics are inherited from his/her parents, and many components of his/her human nature are obviously related to biological evolution. When a person accepts the language, beliefs, values, and institutional norms of a social group through learning, the process of gradually adapting to society and integrating into the public life of society is socialisation. When a society has rigid institutional norms, solidified social strata, serious polarisation between rich and poor, and lack of fairness and justice, it often leads to the suppression or encroachment of individual rights and freedoms by the social collective, which in turn leads to individual anti-socialisation behaviour. Anti-socialisation refers to the behaviour and process of individuals resisting social constraints, getting rid of social control, violating social norms, and even destroying the normal social order. Correspondingly, socialisation theory refers to the theory that takes the origin, process, content, method and mechanism of individual socialisation as the research object. Anti-socialisation Theory refers to the theory that takes the origin, process, content, method and mechanism of individual anti-socialisation as the research object. For example, sociobiology and evolutionary psychology are typical paradigms of biological determinism; structural functionalism in sociology is a typical socialisation paradigm; and Marxism is a typical anti-socialisation paradigm. The fourth group of bedrock paradigms, conflict paradigm and harmony paradigm, is a dichotomy that is divided from the perspective of social interest relations (i.e., conflict or harmony). For example, Marx’s class

1.4 Will the Social Sciences Eventually Move Toward Unity?

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antagonism theory is a typical antagonism paradigm, while the theory of symbiosis14 is a typical harmony paradigm. The fifth group is the two Integrative Paradigms (i.e., Social System Paradigm and Social Evolution Paradigm), which are distinguished from the perspective of social totality and theoretical synthesis. For example, the social systems theory constructed by Niklas Luhmann (1927–1998) is a typical social system paradigm, while evolutionary economics is a typical social evolution paradigm. Regarding the question of whether the social sciences can finally be unified, scholars had different views. Although Tang Shi-Ping held that it is impossible to create a unified social science, a more organically integrated social science is possible; he emphasised that “we are dealing with different sides of a complex system, so a systems approach (especially the social system paradigm) is required”. In addition, “a social evolutionary approach that uses social evolution paradigm should be applied to understand social change”.15 Nevertheless, there are other views on this issue. For example, some advocates of complexity theory believe that there are universal principles that apply to all complex systems, which should ultimately prove it possible to construct a unified complexity theory. This is the core idea behind the Applied Complexity Research Project at the Santa Fe Institute in the United States. The purpose of the Santa Fe Institute is to explore a normative theory of complexity that applies equally to natural and social systems.16 Regarding the prospects of Complexity Science, George A. Cowan (1920–2012), the first director of the Santa Fe Institute said, “…if it works, something very important has happened. It represents, to me, a reintegration of a scientific enterprise that has become almost totally fragmented over the past few centuries—a recombining of the analysis and rigor of the physical sciences with the vision of the social scientists and the humanists.”17 Here, it needs to be emphasised that the ontology of the theory in this book adheres to the evolutionary pluralism initiated by Lao Tzu (approximately 571 B.C.–471 B.C.) in Chinese philosophical thought that “The Tao produced One; One produced Two; Two produced Three; Three produced All things” (Lao Tzu’s Tao Te Ching). The One, Two and Three here are not natural numbers, but philosophical terms, that is to say, the universe is begot from Tao, the unity to duality, then to trinity, then to all things. The theoretical framework constructed in the book belongs to the Social System Paradigm, which organically integrates the Social Evolution Paradigm and widely applies the philosophical concepts of complexity theory. Therefore, from the vision Hu, S. J. (2006). The Theory of Symbiosis. Fudan University Press. 胡守钧. (2006/2012). 社会 共生论. 复旦大学出版社. 15 Tang, S. P. (2010). Basic Paradigms of Social Science. International Social Science Journal (Chinese Edition) 27(01):84, 99. 唐世平. (2010). 社会科学的基础范式. 国际社会科学(中文版) 27(01):84, 99. 16 Boschma, R., Martin, R. (eds). (2010). The Handbook of Evolutionary Economic Geography. Edward Elgar Publishing, Inc. p. 95. 17 Waldrop, M. M. (1992). Complexity: The Emerging Science at the Edge of Order and Chaos. New York: Simon & Schuster. p. 357. 14

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and potential of theoretical synthesis, it has the widest inclusiveness and the greatest possibility to integrate various social science theories, and it at least provides a preliminary roadmap for a more organically integrated social science. In the theoretical framework of this book, a social system includes at least human-culture, economy, polity, science, law and education. Although this book focuses on the hierarchy, structure and function of the economic system, at least some kind of organic link is established between the subsystems of the social system and is essential for realising the integration of the natural sciences, the social sciences, and the humanities. Therefore, if scientists and scholars continue to explore along the path provided in this book, then George Cowan’s predictions may become a reality.

Chapter 2

The Evolution of the Thinking Paradigm and Its Philosophical Basis

Keywords Evolution · Darwin · Theory · Paradigm The motion and variation of things is somehow related to space–time, and human cognition to space–time determines the depth, breadth and level of human knowledge of things. Human socioeconomic activities are carried out in a specific space–time step by step, so the study of economic phenomena cannot be separated from the two corresponding factors of space and time. This chapter reviews the history of human understanding to space–time, introduces the basic concepts of the System and the Systems Science, compares the main differences of methodology between Reductionism and System Theory, demonstrates the development of evolutionary thoughts and their influences, summarises the new understandings and the philosophical enlightenments gained from the theory of biological evolution, and elaborates the three basic principles for understanding the evolution of complex systems (i.e., the Principle of System-level Emergence, the Coupling Principle of Positive and Negative Feedback, and the Principle of Circular Cumulative Causation). The discussion in this chapter shows that the thinking paradigm of modern biological evolution theory can be not only the paradigm of modern biology but also the basic paradigm of philosophy and social sciences. The understanding method proposed by system theory and the thinking paradigms of evolution theory described in this chapter, especially the new knowledge, the new ideas and the three principles obtained from biological evolution, pile up the epistemological basis of this book, and their basic ideas will run through all subsequent chapters. Therefore, understanding these new ideas is the key to understanding the whole book.

© Fudan University Press 2023 R. Gan, Helix Network Theory, https://doi.org/10.1007/978-981-19-8803-5_2

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2.1 The Evolution of the Space–Time View and the Great Revolution in Physics Throughout the ages, mankind has never stopped exploring space–time. The space– time views that have appeared in human history can be roughly divided into three periods: the age of geometry, the age of mechanics, and the age of relativity. Among them, the most influential and representative figures are Aristotle, Newton, and Einstein. The thoughts and views of these three giants basically reflect the evolution of the human space–time view.1 The space–time view refers to people’s understanding of the physical nature of space and time. All things are moving in a specific space–time, which means that the human space–time view is closely related to the development of natural science. Major scientific reforms are often accompanied by the emergence of new space–time views. It can be concluded that the change in the space–time view is the basic sign of the great reform in science. Aristotle regarded time as the numeration of continuous movement. He assumed that although time is not motion, it still cannot be separated from motion. He defined the place of a body as the limit of that which surrounds it and then redefined it as the first (i.e., innermost) motionless boundary of a body that contains it. He stressed that in regard to motion, it is important to state where when and what it is in motion, which in fact is the inseparability of motion, space and time that Aristotle proposed.2 Regarding the question of the infinity of time, he held that the time in the universe is infinite, while the time of specific things is finite. He advocated the use of motion to measure time, that is, to apply uniform circular motion to measure time length. Regarding the existence of space, he believed that space is not an independent entity, and the existence of space needs to depend on specific things and their motions, and he denied the existence of voids in the universe.3 In Aristotle’s cosmology, the Earth lies at the centre of the entire universe, and the centre of the Earth is the centre of the universe. The entire universe is composed of seven concentric spherical shells orbiting the Earth. The Moon, the Sun, the planets and stars are located on different spherical shells, and they all make perfect circular motions.4 Aristotle divided space into two completely unalike regions, Superlunar and Sublunar, and proposed that the natural positions of Superlunar bodies (i.e., stars, suns, etc.) are on the celestial sphere, and they make circular motions with the celestial 1

Wang, Y. F. (2005). Man’ s Endless Exploration of Time and Space. Journal of Jiangsu University of Science and Technology (Social Sciences Edition) (03):8. 王玉峰. (2005). 时间、空间: 永无止 境的探索. 江苏科技大学学报(社会科学版) (03):8. 2 Wang, Y. F. (2005). Man’ s Endless Exploration of Time and Space. Journal of Jiangsu University of Science and Technology (Social Sciences Edition) (03):8. 王玉峰. (2005). 时间、空间: 永无止 境的探索. 江苏科技大学学报(社会科学版) (03):8. 3 Du, H. (2011). Study on Aristotle’s Philosophy of Physics: By the Theory of Time and Space. Dissertation, Chongqing University. 杜红. (2011). 亚里士多德的物理学哲学思想研究. 硕士学 位论文, 重庆大学. 4 Zhou, Y. (2007). From Newton’s Absolute Space–time View to Einstein’s Theory of Relativity. Science and Technology Consulting Herald, (18). 周妍. (2007). 从牛顿的绝对时空观到爱因斯 坦相对论时空观. 科技咨询导报, (18).

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sphere, while objects on the Earth’s surface have their natural positions at the centre of the Earth, and they make rectilinear motions.5 From this point of view, Aristotle’s space features isotropy and heterogeneity because the positions of various points in space are not equivalent (i.e., there are special points such as the centre of the earth). Later, the ancient Greek astronomer and geographer Ptolemy (approximately 90– 168) developed Aristotle’s cosmology and put forward the famous Ptolemy Geocentrism. He arranged the order of the Sun, the Moon and other planets according to their distance to the Earth and created the geocentric model.6 Aristotle’s view of space–time and Ptolemy’s geocentrism dominated Europe until the mid-sixteenth century. In 1543, the Polish astronomer and mathematician Kopernik published De Revolutionibus Orbium Coelestium (On the Revolutions of the Heavenly Spheres). In the book, Kopernik proved that the Earth is not at the centre of the universe but one of the planets based on astronomical observations and stated that the Earth rotates on its own axis, the Moon revolves around the Earth, and the Earth and all other planets orbit the Sun. Kopernik’s discovery denied the conclusion that the Earth is at the centre of the universe, thereby overturning the Geocentric Theory that had ruled the West for more than 1,300 years. It not only changed the understanding of the universe at that time but also shook the ideological foundation of European medieval theology. From then on, natural sciences in Europe were liberated from theological constraints. In 1687, Isaac Newton published the great work in the history of science, Philosophiae Naturalis Principia Mathematica (Mathematical Principles of Natural Philosophy). In this book, Newton started from the basic concepts of mechanics and used mathematical reasoning as a tool to establish a complete and rigorous mechanical system, thus unifying the mechanics of objects on Earth and the mechanics of celestial bodies in space, realising the first giant theoretical synthesis in the history of physics. In the book, he also proposed the concepts of absolute time and absolute space, which had an everlasting influence on the subsequent development of science and philosophy. Newton believed that absolute time and absolute space are independent of each other, and they have nothing to do with the external things and the motion of matter. In Newton’s view, time is similar to an endless river. Regardless of whether there is an event, the river flows continuously, evenly, and invariably in one direction, while space is similar to a boundless container in which objects and events occur. The space itself does not change whether objects are put in or removed. The absolute time and the absolute space put forward by Newton are independent of the motion of matter and are unaffected by the motion of matter. The mechanical movement of specific objects is carried out in this absolute space–time. 5

Leng, H. J. (1995). Newton’s Space–time and Einstein’s Theory of Relativity. Science, Technology and Dialectics (Studies in Philosophy of Science and Technology) (03):59. 冷护基. (1995). 牛顿 时空观与爱因斯坦相对论. 科学技术与辩证法 (03):59. 6 Xu, Y., Fan, X. Q. (1999). The Evolution of Space–time Views in the Development of Physics. Journal of Baoshan Teachers’ College (04):33. 许艳.,樊兴桥. (1999). 时空观在物理学发展过程 中的演变. 保山师专学报 (04):33.

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From Newton’s absolute space–time view, the entire universe has no beginning or end in time and is boundless in space. Space and time are separated. Therefore, there is no specific model for the entire universe, and the natural world is also infinite and eternal. If one wants to find the root, one can only rely on God. Under the guidance of this cosmic picture, people’s observation of things often easily falls into the quagmire of mechanical determinism, mistakenly thinking that as long as the initial conditions of the motion of objects are known, the future of things can be accurately predicted. Based on his absolute space–time view, Newton systematically summarised the scientific achievements of Galileo, Kepler and Huygens and concluded the famous three laws of motion and the law of universal gravity, thereby constructing classical mechanics. Newton’s mechanics explained not only the motion of planets and comets in space but also the motion of tides and other objects on Earth and successfully discovered the existence of Neptune. This theoretical system has made remarkable achievements in various fields of physics in the two hundred years after Newton created the classical mechanics system and has long been recognised as the unified foundation of all physics and even the entire natural sciences. Newton’s classical mechanics, which is flawless and powerful, convinced most physicists that all motions that have occurred in the world from ancient times to the present, regardless of space and time, can be described by mechanics. They believed that as long as the initial conditions of things are given, the causality of the motion of things can be grasped with certainty. Therefore, until the end of the nineteenth century, the thinking paradigm of Newton’s classical mechanics had always acted as the guiding ideology of physicists in varying fields, and classical mechanics had also been used in physical research fields such as acoustics, thermodynamics, electromagnetics, and optics. By the end of the nineteenth century, on the one hand, classical physics had developed to a rather complete level, while on the other hand, the deepening of experimental and theoretical research had led to the discovery of a series of new phenomena, such as electrons, X-rays, and radioactivity, which cannot be reasonably explained by classical physics theory, thus plunging classical physics into an unprecedented crisis. In the mid-nineteenth century, British physicist James Clerk Maxwell (1831– 1879) inherited and developed Faraday’s concept of a continuous electromagnetic field, summarised the laws of electromagnetic phenomena discovered at that time, and derived a set of electromagnetic field equations (i.e., Maxwell’s Equations), thus establishing the electromagnetic field theory that replaces Newton’s action-ata-distance with field interaction. Maxwell’s electromagnetic field theory not only predicts the existence of electromagnetic waves but also proves that light is electromagnetic waves of different wavelengths. It unified the phenomena of light, electricity, and magnetism that were originally considered to be independent into one unified theoretical framework. The establishment was a giant leap for humans to understand light and electromagnetics. In 1888, the electromagnetic wave discovered by the German physicist Heinrich Rudolf Hertz (1857–1894) in the experiment not only provided reliable experimental evidence for electromagnetic field theory, thus making Maxwell’s electromagnetic field theory generally accepted by the scientific

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community but also opened up a new world for the study of optical and electromagnetic phenomena and their wide-ranging technical applications. The establishment of Maxwell’s electromagnetic field theory is a profound scientific revolution on the axiomatic basis and the conceptual structure of classical physics since Newton, and it is also the first serious impact and challenge of new scientific ideas on Newton’s absolute space–time view.7 At the beginning of the twentieth century, three great theoretical revolutions occurred in physics, the special theory of relativity, the general theory of relativity and quantum theory. These three revolutions changed the axiomatic basis and the nature of physics, opened up a new era of modern physics, and laid a theoretical foundation for the development of modern high technology. The special theory of relativity discovered the relativity structure of time and space and established a new theory of relative space–time structure and the new laws of motion that change the human understanding of time and space. The General Theory of Relativity revealed the relationship between the four-dimensional curved space–time geometry and gravity, established a new gravitational field theory, and built up modern cosmology that scientifically studies the origin, evolution and structure of the universe. Quantum theory deepened people’s understanding of the microscopic structure of matter, constructed quantum mechanics to study the laws of motion of microscopic particles, and effectively promoted the rapid development of molecular and atomic physics, solid-state physics, nuclear physics, elementary particle physics, and chemistry.8 In 1905, at the age of 26, Albert Einstein published a 30-page article, On the Electrodynamics of Moving Bodies, on Annalen der Physik (Annals of Physics) in Germany, which announced the birth of the Special Theory of Relativity. The special theory of relativity uncovered a new relation between time, space, matter and motion. It showed the closeness between time, space and the motion of matter that space and time are interrelated and interrestricted as a unified totality (i.e., four-dimensional space–time continuum), revealed the intrinsic connection between mass and energy of a body, and discovered the law of mutual transformation between mass and energy (the famous mass–energy formula E = mc2 ). The special theory of relativity not only provided a powerful guide for physicists to explore the new dynamics of fields and particles but also opened a new page for philosophers to study the nature of time and space. In classical physics, mass and energy are independent and obey the law of mass conservation and the law of energy conservation, respectively. The special theory of relativity not only connects mass and energy but also unifies these two independent laws of conservation into one inseparable law of mass–energy conservation. Now, the law of mass–energy conversion has become the theoretical basis for human beings to utilise nuclear power, and it is also the internal mechanism behind the mystery of the Sun and other stars burning day and night and constantly releasing light and heat. 7

This paragraph is compiled from: Zhou, Q. (2008). Time, Space and Motion: On the Special Theory of Relativity and Its Far-reaching Scientific Significance. College Physics (03):49. 周奇. (2008). 时间、空间与运动——狭义相对论及其伟大科学意义. 大学物理 (03):49. 8 This paragraph is quoted from: Zhou, Q. (2008). Time, Space and Motion: On the Special Theory of Relativity and Its Far-reaching Scientific Significance. College Physics (03):47. 周奇. (2008). 时间、空间与运动——狭义相对论及其伟大科学意义. 大学物理 (03):47.

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In 1915, Einstein extended his principle of relativity to the general theory of relativity for all motion. In the General Theory of Relativity, Einstein extended the principle of relativity from uniform motion to uniformly accelerated motion and discovered the relation between the four-dimensional curved space–time geometry and gravity, further unveiled the relation between space–time and matter, and established a new gravitational field theory that gave people a new understanding of the nature of gravity.9 In the General Theory of Relativity, space–time is affected by the distribution and movement of matter and energy in the universe and in turn influences the distribution and movement of matter and energy. Space–time and matter together create an indivisible and unified totality. Without matter, there is no space or time, and vice versa. As Einstein pointed out,10 in the classical view of space–time, the space– time itself, as a stage on which all physical phenomena occur, can still exist even if all the matter disappears from reality. However, the General Theory of Relativity proved that when matter disappears, a space–time without any matter cannot exist. The General Theory of Relativity revealed the unified relation between space–time and matter. The structure and properties of space and time depend on the distribution of matter; the denser the distribution of matter is, the greater the curvature of space–time; time, space, and the motion of matter interact, which deeply discloses the unified relation between the four-dimensional space–time and the motion of matter.11 In 1917, Einstein proposed a static universe model based on the General Theory of Relativity. This model indicated that the universe is a closed statically curved body with a finite volume, thus laying the foundation for modern cosmology. In 1922, Russian physicist and cosmologist Alexander Friedmann (1888–1925) established a dynamic universe model based on Einstein’s model. This model pointed out that the entire universe is pulsating, that is, expanding and contracting alternately, and currently the universe is in the process of expansion, which will stop one day as he demonstrated and will initiate a contraction process until all the matters of the universe are squeezed back to a singularity. In 1929, American astronomer Edwin Powell Hubble (1889–1953) confirmed that the universe was expanding by analysing the spectra of 24 galaxies. In 1948, American physicist and cosmologist George Gamow (1904–1968) and others brought forward the Big Bang Theory based on General Theory of Relativity and Friedman cosmological models. The theory asserted that the universe originated from the Big Bang more than 15 billion years ago. The universe was initially in a state of high temperature and high density with a temperature exceeding several billion degrees. With the Big Bang and the continuous expansion of the universe, the temperature of the universe slowly decreased and formed the present galaxy and other celestial bodies bit by bit. They also predicted the existence of the cosmic microwave background radiation and the 9 Complied by Fan, D. N., Zhao, Z. L., Xu, L. Y. (eds). (1977). The Collected Works of Einstein (II). Commercial Press. pp. 278–334. 范岱年., 赵中立., 许良英. (eds). (1977). 爱因斯坦文集: 第 二卷. 商务印书馆. pp. 278–334. 10 Einstein, F. P. (1974). Sein Leben und sein Zeit. Briaunschweig: Vieweg. pp. 296–297. 11 Wang, Y. F. (2005). Man’ s Endless Exploration of Time and Space. Journal of Jiangsu University of Science and Technology (Social Sciences Edition) (03):12. 王玉峰. (2005). 时间、空间: 永无 止境的探索. 江苏科技大学学报(社会科学版) (03):12.

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elemental abundance12 based on calculations. These two predictions were verified by subsequent astronomical observations and scientific explorations, and the Big Bang theory was therefore widely accepted by the public. The Dynamic Universe Model, the Big Bang Cosmology, and the later Cosmic Inflation constituted modern cosmology. The establishment of this discipline paved the way for scientific research on the origin, evolution and structure of the universe. It was under the guidance of modern cosmology that astronomers discovered various new celestial bodies and new astronomical phenomena that were previously unknown, thereby greatly advancing mankind’s in-depth understanding of the structure of the universe. The space–time view contained in the General Theory of Relativity and modern Cosmology painted a whole new picture for the evolution of the universe. In the past, it was generally accepted that the universe is inherently immutable, but modern astronomical observations and cosmological studies clearly indicated that the universe is not static but has its birth and evolution. The universe originated in the Big Bang, constantly expanding and contracting. The celestial bodies in the universe, like living organisms, have both the beginning of their birth and the day of their end. In 1986, the American thinker Ervin Laszlo proposed the General Evolutionary Systems Theory. The theory revealed the evolution law of the universe from elementary particles such as quarks, photons, and electrons to atoms of various elements, from the combination of atoms to molecules, from inorganic micromolecules to organic macromolecules, from organic macromolecules to primitive cells, from primitive cells to biological systems, from biological systems to ecological systems, and further to social systems and human cultural systems; it blended material evolution, biological evolution, and social-cultural evolution into a unified evolutionary system, demonstrating a broad panoramic picture of the evolution of the universe.13 From the space–time view of Einstein’s General Theory of Relativity, the entire universe is a closed finite universe that is heterogeneous and has a beginning and an end. For example, in the universe, the space–time inside the black hole is inconsistent with the space–time outside the black hole, which is the heterogeneity of space–time in the General Theory of Relativity. The boundary formed by matter in the Big Bang is the boundary of space–time in the General Theory of Relativity, which is the finiteness of space–time. The singularity of the Big Bang is the beginning of space–time, while the singularity created by the black hole is the end of space–time. In October 2006, NASA announced that, according to the detection data of the background radiation anisotropy of the universe, astrophysicists in the United States and Italy concluded through computer simulation that our universe is an ellipsoid. According to the estimation of Chinese cosmologist Lü Jin-Hua, if the age of the universe is calculated as 20 billion years, the specific scale of our universe is approximately 13.859–15 billion light-years, while American astronomers computed that it is approximately 13.7 billion light-years based on the space photos taken by space telescopes.14 12

The relative proportions of hydrogen and helium in space. Laszlo, E. (1988). Evolution: The Grand Synthesis. New Science Library. pp. 44–56. 14 Lü, J. H. (2008). The theoretical Development of Physical Sciences. In: The 17th National Symposium on Atomic and Nuclear Physics and the 10th Annual Proceedings of the National 13

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Classical physics suggests that space–time is absolute, time is characterised by eternity, homogeneity and isotropy, space is characterised by infinity, homogeneity and stillness, time and space are independent and unrelated, and time, space and matter are disconnected, while the special theory of relativity assumes that space– time is not absolute but relative, both space and time are characterised by infinity, homogeneity and isotropy, space and time are interrelated, and both are closely connected to the motion of objects.15 However, in the space–time view of the special theory of relativity, space–time acts on matter, but matter does not react to space– time. The space–time view of the General Theory of Relativity is a step further than the space–time view of the Special Theory of Relativity. In the General Theory of Relativity, space–time features physicality, finiteness and heterogeneity; space–time acts on matter, and matter in turn acts on space–time. The properties of space–time are more closely related to matter, and time and space cannot be separated from the material world and exist independently.16 Mankind’s exploration of the natural world is endless. With the in-depth development of scientific research and practical activities, even scientific theories that have made brilliant achievements such as Einstein’s Theory of Relativity are now facing new challenges. For instance, people questioned the important premise and foundation of the special theory of relativity that the speed of light is constant 17 and proved that the speed of light is not only variable but also not the limit of speed, and the relative motion of objects will not cause length contraction. In fact, some scientists have already developed superluminal and subluminal photons in the laboratory and can even stop photons from moving. These experimental results challenged Einstein’s Theory of Relativity.18 In addition, astronomical observations also found that two galaxies are separated at a speed far exceeding 300,000 kms per second, which indicated that some cosmological phenomena also contradict the Theory of Relativity. In view of this, the scientific community’s trust in Einstein’s Theory of Relativity has also begun to waver, and even the United States National Research Society of Modern Physics, July 2008, pp. 97–98. 吕锦华. (2008). 物理科学理论的发展. In: 第 十七届全国原子、原子核物理研讨会暨全国近代物理研究会第十届年会论文集, 2008年7月, pp. 97–98. 15 Zhang, T. R. (1999). Newton’s Absolute Space–time View and Relativity’s Space–Time View. Journal of Liupanshui Normal University, (02). 张太荣. (1999). 牛顿的绝对时空观与相对论的 时空观. 六盘水师范高等专科学校学报, (02). 16 Xu, Y., Fan, X. Q. (1999). The Evolution of Space–time Views in the Development of Physics. Journal of Baoshan Teachers’ College (04):40. 许艳.,樊兴桥. (1999). 时空观在物理学发展过程 中的演变. 保山师专学报 (04):40. 17 The Chinese cosmologist Lü Jin-Hua pointed out that Einstein’s original intent in the Theory of Relativity was the speed of light in a vacuum is a constant, instead of the speed of light is constant as assumed. He also indicated that the speed of light of 300,000,000 m/s currently measured by the scientific community is not the speed of light in a vacuum, but theoretically it should be 800,000,000 m/s in vacuum. See Lü, J. H. (2006). The Big Bang Forms Multi-Cosmic Space–time. Xuelin Verlag. 吕锦华. (2006). 大爆炸形成多宇宙时空. 学林出版社. 18 Hua, Di. (2009). Fundamental Revision of Einstein’s Theory of Relativity: Relativistic Mechanics Based on Variable Speed of Light. Frontier Science, 3(04), pp. 43, 62. 华棣. (2009). 爱因斯坦相 对论的根本性修正——光速可变的相对论力学(上). 前沿科学, 3(04), pp. 43, 62.

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Council made a proposal that the question of whether Einstein’s Theory of Relativity is correct should be listed as one of the key scientific research topics that need to be solved in the twenty-first century in the United States.19 Quantum theories created by physicists such as Niels Henrik David Bohr (1885–1962), Erwin Schrödinger (1887–1961), and Werner Karl Heisenberg (1901–1976) all faced similar new challenges and predicaments. In the early 1970s, for example, the British cosmologist Stephen William Hawking (1942–2018) proposed the famous Hawking Radiation Theory when he studied the celestial black hole predicted by the General Theory of Relativity. Hawking confirmed through theoretical calculations that black holes have temperature and pointed out that black holes can emit thermal radiation to the outside world in the form of energy. Following Hawking’s theoretical thinking, it was discovered that black holes cannot shed physical information in the process of radiation, which violates many core precepts of both classical and quantum physics, such as the conservation of lepton numbers and the conservation of baryon numbers. The paradox of black hole information brought about by Hawking’s radiation theory has brought quantum field theory into a crisis.20 At present, physicists are trying to establish a unified field theory that integrates classical mechanics, relativity and quantum theory. From the evolution of the human time–space view, every major reform in the time–space view is a huge leap in human understanding of nature, and every leap is a challenge to traditional thinking and a huge breakthrough of new ideas to old ones! Today, in the twenty-first century, the entire human society has developed into an era of great transformation, in which, whether it is natural science, social science or humanities, theoretical thinking has undergone profound changes. The essence of these transitions, no matter whether it is from Reductionism to System Theory, from Mechanism to Organism, from Determinism to Non-Determinism, from simplicity to complexity, from a factor perspective to a relational perspective, from linear relation to nonlinear relation, from Existentialism to Evolutionism, from closed system to open system, or from analysis to new synthesis, is to establish a new relationship between human beings and nature and then build a new world picture of harmonious coexistence and coordinated development among nature, society and individuals!

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Lü, J. H. (2008). The theoretical Development of Physical Sciences. In: The 17th National Symposium on Atomic and Nuclear Physics and the 10th Annual Proceedings of the National Society of Modern Physics, July 2008, p. 96. 吕锦华. (2008). 物理科学理论的发展. In: 第十七届 全国原子、原子核物理研讨会暨全国近代物理研究会第十届年会论文集, 2008年7月, p. 96. 20 Zhao, Z. (2006). Puzzles and Major Enlightenment in Black Hole Theory. Chinese Journal of Nature (04):212–213. 赵峥. (2006). 黑洞理论的疑难与重要启示. 自然杂志 (04):212–213.

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2.2 A Revolution of the Thinking Paradigm: The Birth of Systems Science Beginning in the 1940s and 1950s, there was a revolution of the thinking paradigm in the field of modern science. This revolution first originated in the field of biology, expanded to physics, mathematics, chemistry, and life sciences, and then infiltrated almost all scientific disciplines, including economy, management, sociology, ecology, environment, meteorology, medicine, philosophy, etc. This paradigm revolution was characterised by interdisciplines, mutual catalysis and grand synthesis, which not only linked different disciplines but also created a number of new interdisciplines. Scientists worldwide who had experienced the huge waves of this revolution were excited or shocked by the new landscape it had opened up! The impact of this revolution was unprecedentedly extensive and profound, which not only reshaped the previous knowledge system of human beings and constructed a new world picture but also greatly changed their way of thinking. The main theoretical result of this revolution was systems science. Systems science has provided new ideas and methodologies for people to understand and transform the objective world. Its birth has played a crucial role in both scientific and technological progress and social development.

2.2.1 What Is System? The term system is derived from the ancient Greek and means a whole made of parts. An organic functional totality structured by a group of elements is called a system. In other words, a system is a group of interrelated, interinfluenced and interacting components comprising a unified functional whole. The function of the system is greater than the sum of the functions of each part, which has the collective function that a single component does not equip. Systems are always connected and related to the environment. The integrity and function of systems are the result of the meta-synthesis of the systems’ internal structure and external environment. In the real world, systems are ubiquitous, ranging from the vast universe to the smallest elementary particles. The world is a collection of systems, and a system can be cosmically the galactic system, the solar system, the Earth, macroscopically the atmosphere, the hydrosphere, the pedosphere, microscopically a cell, a molecule, an atom, or a forest, a lake, a tree, a swarm of bees in the natural world, or a state, a city, a firm, a household in a social system. There are many types of systems. According to different principles and standards, systems can be divided into different types. For example, according to the size of the space–time scale, a system can be divided into Micro-system, Meso-system, and Macro-system; or Biotic System and Abiotic System if according to the existence of living phenomena; or Natural System and Manual System if according to whether there are human beings involved; or Static System and Dynamic System if according to the state of motion; or Closed System and Open System if according

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to the exchange relationship with the environment; or Equilibrium System, Nonequilibrium System, Near-equilibrium System and Far-from-equilibrium System, etc. if according to the different equilibrium relationships between the elements of the system; or Simple System and Complex System if according to the complexity of the system structure; or Deterministic System and Random System if according to the characteristics of the system evolution law; or Natural System, Social System, Thinking System, etc. if according to the different fields of discipline. Among all the systems above, the most complex system is the social system composed of humans, which is known as the specially complex giant system.

2.2.2 Systems Science Systems science is a discipline whose research object is system phenomena or system issues.21 It is a scientific knowledge system established by observing the objective world through a system perspective, principles and methods. Systems science studies the objective world from the relation between the part and the whole and the hierarchical relationship of things.22 In real life and theoretical discussions, all issues that focus on the interrelation between part and whole, difference and unity, structure and function, object and environment, order and disorder, cooperation and competition, behaviour and purpose, stage and process are all system issues.23 It is generally believed that the basic principles of systems science include integrity, comprehensiveness, hierarchy, and relevance. The basic methods of systems science include holistic methods, synthetic methods, hierarchical methods, structural methods, functional methods, and environmental association methods.24 In the overall system of the modern science, systems science is a major discipline that is juxtaposed with natural sciences, social sciences, and thinking science. According to the well-known scientist Qian Xue-Sen’s disciplinary division system (1911–2009), systems science also has a hierarchy from theory to application, which is constituted by the basic theory represented by systems theory, the technical science represented by applied mathematics such as operations research, and the

Miao, D. S. (1998). The Theory of System Science. Journal of Systems Science (04):7. 苗东升. (1998). 系统科学论. 系统辩证学学报 (04):7. 22 Qian, X. S. (2001). Creating Systems Science. Shanxi Science and Technology Publishing House. p. 134. 钱学森. (2001). 创建系统学. 山西科学技术出版社. p. 134. 23 Miao, D. S. (1998). The Theory of System Science. Journal of Systems Science (04):7. 苗东升. (1998). 系统科学论. 系统辩证学学报 (04):7. 24 Chang, S. S. (2013). Discussion on the Similarities and Dissimilarities of System Method and System Engineering Method. Chinese Journal of Systems Science (01):23–24. 常绍舜. (2013). 浅 谈系统方法与系统工程方法的异同. 系统科学学报 (01):23–24. 21

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engineering practice technology systems engineering, which directly transforms the objective world using systems thinking.25 From the disciplinary development, the initial theories of systems science, namely, general system theory, cybernetics and information theory, were established around the 1940s, while the subsequent self-organization theory, in terms of dissipative structure theory, synergetics, catastrophe theory and hypercycle theory, was established between the 1970s and 1980s, and research on fractal theory, chaos theory, and complexity science began to develop in the 1990s.26 In 1937, the Austrian American biologist Ludwig von Bertalanffy (1901–1972) first proposed general system principles, which marked the beginning of the scientific community to explicitly regard systems as the research object. General System Theory: Foundation, Development and Application, another monograph he published in 1968, laid the initial theoretical basis of this science. In 1982, Qian Xue-Sen put forward the structural framework of three layers and one bridge,27 which clarified the disciplinary system of systems science, symbolising that systems science has since become a veritable modern science department. The founding of the Santa Fe Institute in 1984 marked that the human exploration of the essence of life entered a new era of self-organising structures and autocatalytic networks of complex systems. In 1994, American scientist John Henry Holland put forward the theory of complex adaptive systems, which changed the composition of the systems from inanimate elements to living organisms that can actively adapt to the environment, which confirmed the status of biotic systems in the study of systems science. Since the 1950s, systems thinking and methods have begun to enter research circles worldwide and have taken an important position. At present, systems science has developed into a relatively complete system including philosophy, theory, technology and application of systems science. In the establishment of Systems Science, a number of scholars have contributed in their own ways, for instance, Bertalanffy, Anatol Rapoport, George J. Klir and others who proposed General System Theory, Claude Elwood Shannon (1916–2001) who brought forward Information Theory, Wiener, W. R. Asbby and S. Beer, who laid the foundation of Cybernetics, and Ervin Laszlo, Mario Bunge, Min Jia-Yin, Jin Guan-Tao, Wei Hong-Sen, Zeng Guo-Ping and Wu Jie all contributed to the construction of systems philosophy. Many other scholars have also made pioneering contributions at different levels and branches of systems science. Ilya Prigogine (1917–2003) proposed dissipative structure theory, Hermann Haken suggested the synergetics, Manfred Eigen put forward 25

Qiao, F., Shen, R. F., Wu, Q. D. (1996). System Theory, System Means, System Engineering: Development and Prospect. Systems Engineering (05):5. 乔非., 沈荣芳., 吴启迪. (1996). 系统理 论., 系统方法., 系统工程——发展与展望. 系统工程 (05):5. 26 Wu, T. (2010). Review and Prospect: the Thirty Years of Studies About Philosophy of System Science in China. Studies in Philosophy of Science and Technology (02):2. 吴彤. (2010). 中国系 统科学哲学三十年: 回顾与展望. 科学技术哲学研究 (02):2. 27 Qian, X. S. (1984). Systems Thinking, Systems Science and System Theory. Scientific Methods and Philosophical Issues in Systems Theory. Tsinghua University Press. pp. 16–17. 钱学森. (1984). 系统思想、系统科学和系统论. 系统理论中的科学方法与哲学问题. 清华大学出版社. pp. 16– 17.

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hypercycle theory, James Grier Miller brought up general biotic systems theory, René Thom (1923–2002) proposed catastrophe theory, Jules Henri Poincaré (1854–1912) pioneered chaos theory, and Benoit B. Mandelbrot (1924–2010) proposed fractal theory, Uyomov (A.I.YeMOB) put forward the Parametric General System Theory, John Holland advanced the Complex Adaptive Systems, Niklas Luhmann constructed modern Social Systems Theory, Deng Ju-Long created the Gray System Theory, Wu Xue-Mou established the Pan-Systems Theory, Qian Xue-Sen proposed the MetaSynthesis Method, Gu Ji-Fa and Zhu Zhi-Chang formulated the WSR Theory (the abbreviation of physics, affairs and human science methodology), etc. They have all endeavoured to establish and perfect systems science. The thoughts, theories and methods of systems science were distilled from the common laws in different disciplines of classical science by scholars worldwide. The feedback effect coming from the thoughts, theories and methods of systems science on various disciplines has spawned a number of systematised classical scientific disciplines (i.e., systems biology, systems economics, systems sociology, systems ecology, etc.), and their birth and growth have further promoted the development and improvement of systems science, which is a dynamic reciprocating process of motion. The result of this systematisation will eventually connect the knowledge system of human society’s understanding of the world into a huge, complex and three-dimensional network. If the disciplines are regarded as the nodes of this giant network, then systems science is a thread linking different nodes together. It is evident that this network has been continuously deriving and expanding since Bertalanffy put forward the System Theory Thinking.

2.2.3 Reductionism Method Human beings generally have two basic approaches to understand the objective world: the Reductionism Method and the Holism Method. The Reductionism Method is used to understand things by decomposing things and digesting them with logical thinking and reasoning. The Holism Method is used to understand things by observing the different sides of things and connecting them with imagery thinking. In ancient society, due to the limitations of knowledge and technological means, it was difficult for people to conduct in-depth analysis and detailed observation of things. Therefore, people usually adopt the holistic method to observe and understand things. In Western society, it was not until the European Renaissance that the Reductionism Method was valued and respected by the public, especially after the French philosopher René Descartes explicitly introduced Reductionism in 1637. The reductionism method decomposes one thing into several components, then distills the simplest factors in the analysis of the components and analyses these components or factors to grasp the properties of things, and finally uses the properties of these components or factors to define the nature of things as a totality. This method focuses on the analysis of the parts or elements that make up a thing, following a simple,

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linear, and one-way causal determinism thinking paradigm. Classical science represented by Newton’s mechanics is based on this thinking paradigm. The Reductionism Method has long been predominant in the development of modern natural sciences since the mid-seventeenth century. Although the Reductionism Method has played an important role, its way of thinking cannot truly reveal the complete nature of things, nor can it fully reflect the connections and interactions between things. It is only suitable for understanding simple things and is not competent in the study of complex issues, especially the integrity of complex systems and complex giant systems. According to the Reductionism Method, in the field of physics, research on the structure of matter has gone deep to the quark level, while in the field of biology, the study of life phenomena has gone deep into the genetic level. However, although the basic particles that make up matter are known, the complete nature of matter cannot be fully explained; even if the genes of organisms are known, the fundamental mechanism of how life works still cannot be answered. In knowing the world, these facts increasingly reveal the limitations and shortcomings of the Reductionism Method. It is like a single neuron has no consciousness, and a single amino acid has no life. The vitality of biological organisms cannot be explained by the concepts of division, reduction, and movement used in classical physics. In modern society, the development of science and technology presents two obvious trends that are both highly differentiated and highly integrated. According to statistics, there are currently more than 1,000 research fields and more than 4,000 disciplines in the scientific community,28 and new disciplines are still emerging. On the one hand, the existing disciplines are constantly differentiated and divided, resulting in the continuous discovery of new fields and new sciences; on the other hand, varying disciplines in different fields intersect, combine and even merge with each other, which leads to the integration and synthesis of the disciplines. These two trends have formed a complementary and mutually reinforcing pattern. In the integration and comprehensive development of disciplines, there is not only the intersection and combination of different disciplines in the same field but also the mutual merging and integration of different disciplines in different fields (i.e., natural sciences, social sciences, and humanities), which forms a new landscape for the development of modern scientific knowledge systems. Under this trend, the emergence of systems science has caused profound changes in the way of thinking of mankind to understand the world.

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Jing, S. R. (2001). The Age of Complex Science: The Development and Current Status of Systems Science and Systems Engineering. Science & Technology Progress and Policy (02):18. 经士仁. (2001). 复杂科学时代: 系统科学与系统工程的发展和现况. 科技进步与对策 (02):18.

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2.2.4 System Theory Method System Theory Method refers to the method of examining the relationship and interaction between structure and function, part and part, part and whole, thing and environment from the perspective and principles of the systems, thereby revealing the nature and laws of things. This method requires people to comprehensively analyse the relations between elements and elements, elements and systems, systems and environments, this system and that system from a holistic point of view to grasp the complete nature of things. The establishment and development of System Theory gave birth to the corresponding System Theory Method, which was continuously improved. Compared with the Reductionism Method, the System Theory Method shifts the focus from the constituent elements to the relations inside and outside of things, making the comprehensive analysis of the whole thing instead of the isolated analysis of the parts. At the end of the 1970s, Qian Xue-Sen proposed a research method combining the reductionism method and the holism method,29 which is a modern system theory method suitable for studying complex problems. When using the system theory method to study the system, it is still necessary to decompose the system and perform the meta-synthesis after decomposition to reveal the overall 1 + 1 > 2 effect of the system function and to achieve the purpose of researching and solving issues as a unified whole. From the late 1980s to the early 1990s, Qian Xue-Sen put forward the meta-synthesis method from a qualitative approach to a quantitative approach30 and established a set of concrete and operable system theory methods. Qian Xue-Sen’s meta-synthesis method is a set of methodologies for the issues of open complex giant systems, which is characterised by its comprehensiveness. The specific manifestation of this comprehensiveness is that its theoretical base is Thinking Science, and its methodological bedrock is Systems Science and Mathematical Science. Its technical basis is computer-based modern information technology, its practical premise is the application of systems engineering, and its philosophical foundation is the practice and epistemology of dialectic materialist theory.31 In scientific research work, Qian Xue-Sen’s Meta-Synthesis Method is worthy of reference and promotion, whether it is for natural science researchers or social science researchers. System Theory Method absorbs the respective strengths of Reductionism Method and Holism Method, and makes up for their limitations; It surpasses Reductionism Method and develops Holism Method, which is the advantage of System Theory Method. The Reductionism Method, Holism Method and System Theory Method are all methodologies, but their perspectives and approaches of studying problems are different. The Reductionism Method takes a research approach from the top to 29

Qian, X. S. (2001). Creating Systems Science. Shanxi Science and Technology Publishing House. p. 134. 钱学森. (2001). 创建系统学. 山西科学技术出版社. p. 134. 30 Qian, X. S. (2001). Creating Systems Science. Shanxi Science and Technology Publishing House. p. 134. 钱学森. (2001). 创建系统学. 山西科学技术出版社. p. 134. 31 Yu, J. Y., Liu, Y. (2002). Complexity Research and System Science. Studies in Science of Science (05):452. 于景元., 刘毅. (2002). 复杂性研究与系统科学. 科学学研究 (05):452.

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the bottom, from the whole to the part, while the Holism Method does not decompose and is from the whole to the whole. The systems theory approach is both from the whole to the part from the top to the bottom and from the bottom to the top from the part to the whole.32 The objective world is interrelational, interinfluential and interactional. Therefore, the natural sciences, social sciences, and humanities that reflect the laws of different parts of the objective world are also interrelated, interinfluenced and interacted. The inner connection between these disciplines should not be separated on purpose but should be organically linked to study and solve issues. The famous German physicist Max Planck (1858–1947) pointed out as early as the 1930s that “…die Wissenschaft bildet nun einmal sachlich genommen eine innerlich geschlossene Einheit. Ihre Trennung nach verschiedenen Fächern ist ja nicht in der Natur der Sache begründet, sondern entspringt nur der Begrenztheit des menschlichen Fassungsvermögens, welche zwangsläufig zu einer Arbeitsteilung fuhrt. In der Tat zieht sich ein kontinuierliches Band von der Physik und Chemie über die Biologie und Anthropologie bis zu den sozialen und Geisteswissenschaften, ein Band, das sich an keiner Stelle ohne Willkür durchschneiden läßt… (…science…is an internally closed unit. Their separation according to different subjects is not based on the nature of things but only arises from the limitations of human comprehension, which inevitably leads to a division of labour. Indeed, there is a continuous bond runs from physics and chemistry through biology and anthropology to the social sciences and humanities, a bond that cannot be arbitrarily cut at any point…)”33 Planck’s understanding and assertion of the inner integrity of science has been confirmed by the general trend of meta-synthesis in modern scientific development. It is known that the social system is an extremely intricate complex giant system that not only has natural attributes but also social attributes and humanistic attributes. Therefore, the research and analysis of social systems requires not only the natural sciences but also the social sciences and humanities, especially their organic metasynthesis, by which only social systems issues can be studied and solved comprehensively and deeply. The method adopted in this book is in fact a meta-synthesis method. However, its thoughts, principles and methods are mainly from systems science theory, biological evolution theory, structural functionalism and network theory. Apparently, this book runs through the ideas and methods of structural functionalism while also emphasising the importance of network thinking in the social sciences. From the perspective of network thinking, the structure of the system can be abstracted into the structure of the network. Undeniably, a complex system can be 32

Yu, J. Y., Zhou, X. J. (2004). Evolution of System Science and System Engineering. Complex Systems and Complexity Science (03):7. 于景元., 周晓纪. (2004). 系统科学与系统工程的发展. 复杂系统与复杂性科学 (03):7. 33 Yu, J. Y., Zhou, X. J. (2004). Evolution of System Science and System Engineering. Complex Systems and Complexity Science (03):5. 于景元., 周晓纪. (2004). 系统科学与系统工程的发 展. 复杂系统与复杂性科学 (03):5.; Planck, M. (1973). Vorträge und Erinnerungen. Darmstadt Wissenschaftliche Buchgesellschaft. p. 270. Ursprung und Auswirkung wissenschaftlicher Ideen. Planck, M. (1973). Lectures and Memories. Darmstadt Scientific Book Society. p. 270. Origin and Impact of Scientific Ideas.

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simplified into a network for research, and the subsystems (or elements) of the system can be regarded as the nodes of the network. Accordingly, the relations between them can be viewed as the connecting lines between the nodes. In this way, the study of the system evolution is the analysis of the dynamic changes of the network structure, and the study of the relationship between the whole system and the part is the analysis of the relationship between the whole network and the nodes and the connecting lines. When a system is regarded as a network, the indicators describing the state of the network can be used to reflect the overall state of the system. This is more convenient and effective for studying complex systems (especially complex giant systems such as social systems).

2.3 The Development of the Thought of Biological Evolution and Its Influence In today’s world, in regard to evolution theory, people will naturally think of the evolution theory proposed by Charles Robert Darwin (1809–1882) and his epochmaking book The Origin of Species. Darwin’s theory of biological evolution was once praised by the German thinker Friedrich von Engels (1820–1895) as one of the three discoveries of natural sciences in the nineteenth century. For the first time, this theory scientifically outlined life from simple to complex and from low-level to highlevel. It “eliminates the existence of God, breaks through the shackles of teleology and determinism, opens up a new direction in the laws of human knowledge, and provides a new way of thinking.”34 It not only helped the public establish a progressive view of history but also provided an important ideological basis for the development of biology and many other disciplines. The Theory of Biological Evolution, together with the theory of relativity and quantum mechanics, constitutes an important pillar of modern science. To enable readers to understand the philosophical basis and logical method of this book more clearly, it is necessary to sort out and introduce the thought of biological evolution because the basic idea of evolution theory is one of the important thinking paradigms of the book.

2.3.1 Evolutionary Thought Before Darwin In human society, ideas about the evolution of nature were created very early and have been developing.

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Wang, Z. L. (2008). The Development of the Theory of Biological Evolution and Its Philosophical Thinking. Popular Science & Technology (03):184. 王泽榔. (2008). 生物进化论的发展及其哲学 思考. 大众科技 (03):184.

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The ancient Greek philosopher Anaximander (approximately 610–545 B.C.) believed that all living things are created from the water elements evaporated by the Sun, primitive organisms were bred in the soil of the Earth, and primitive organisms gradually developed into animals and plants and finally evolved into humans after a long period of time. The ancestor of humans is fish, and humans are derived from fish because they are alike in embryos. His idea embodied a primitive thought of biological evolution. The great ancient Greek thinker and scientist Aristotle assumed that nature is a continuum and inorganic materials are its inferiority, inorganic materials are transformed into organic materials and organic materials are transformed into life, life evolves upward from a soft matter to an impeccable form and even develops into a more advanced life form. The evolution of nature from inanimate organisms to living animals follows in proper sequence and advances gradually. There is a continuous hierarchy in kingdom Plantae, which makes its evolution converge toward the kingdom Animalia. His ideas embodied an evolutionary view of early Gradualism Theory.35 Since the eighteenth century, some pioneers of evolutionary thought have appeared in Europe, such as French naturalist Buffon (Georges-Louis Leclerc de Buffon, 1707– 1788) and Lamarck (Jean-Baptiste Lamarck, 1744–1829). They successively put forward some remarks on the variation and evolution of species, but due to the limitations of the times, these opinions have not yet reached the theoretical level. It was not until Darwin published The Origin of Species in 1859 that the theory of biological evolution was widely recognised by the public. French naturalist Buffon published a set of 36 volumes of Natural History between 1749 and 1788, which described the evolution of the universe, the solar system and the Earth, put forward the assumption of the origin of the Earth and the evolution of life, and denied the idea of Creationism. Buffon is the first person to explore biological evolution in a truly scientific spirit. He believed that the Earth is separated and evolved from the Sun, and organisms are not created in a ready-made state all at once, nor have they always been in this appearance, but they are shaped in the historical development of the Earth and variated with the changes of the environment. The material evolution on the Earth produces plants and animals, then human beings. Life first arises in the ocean and then develops on land. Species are constantly changing under the influence of the environment. Some similar species may have originated from one common ancestor; one species can be transformed into another under the influence of environmental conditions such as climate, soil, nutrition, cultivation and domestication. In 1809, French naturalist Lamarck published Zoological Philosophy, in which he put forward the Theory of Biological Evolution on the direct influence of the environment on the shape and structure of organisms, the natural occurrence of organisms and the upward development of organisms. This created an evolutionary natural classification method, established the first comparatively systematic theory 35

Wang, Q. A. (2012). A Study of Naturalistic Evolution Theory and Darwin’s Theory of Biological Evolution. Hubei Social Sciences (09):91. 王秋安. (2012). 自然进化论与达尔文的生物进化论 探析. 湖北社会科学 (09):91.

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of biological evolution, and described the picture of biological evolution from many aspects. He held that the climatic conditions on Earth are changing in a gradual way, life is continuous, and the fossils of animals and plants underground are the ancestors of modern organisms. He brought forward the two famous evolutionary principles of use and disuse and acquisitive inheritance; that is, the organs frequently used by animals will become more developed, and the organs that are not frequently used will become more degraded. The new traits acquired by organisms may be inherited, and the newly acquired structural changes will be further strengthened through inheritance. The change in species has its own definite direction. Animal individuals undergo physical changes to adapt to environmental changes. These new characteristics can be passed on to offspring so that after generations of genetic changes, new species are created. He reclassified animals according to the order of biological development from low-level to high-level, thus correcting the previous order of taxonomy from high-level to low-level. Lamarck divided biological evolution into two aspects: vertical evolution and horizontal evolution. He used the slow self-progress of organisms to illustrate vertical evolution and the impact of the environment on biological changes to demonstrate horizontal evolution. He suggested that the evolutionary power of the lowest animal comes from the influence of the environment. In evolution, organisms will have autonomy. This is the mechanism of use and disuse and acquisitive inheritance.36 At that time, in the era when European theocracy was in absolute dominance, Lamarck’s theory of evolution was undoubtedly a major ideological breakthrough and laid the foundation for the formation of Darwin’s theory of evolution. However, Lamarck’s evolutionary theory was strongly inclined to Mechanical Determinism and Teleology. He believed that the environment directly determines the changes in functions and traits of organisms, and the isotropic evolution of organisms from low-level to high-level is controlled by the innate desire of organisms to improve themselves and evolve upward.37 In the nineteenth century, the British geologist Charles Lyell (1797–1875) introduced the idea of Gradualism into geology, emphasising that the Earth’s topography and landforms were formed by slow changes over a long period of time. He suggested that small forces such as wind, raindrops, ice and snow can change the topography of the surface after tens of thousands of years. His masterpiece Principles of Geology depicted a vivid picture of the changes in crustal movement, which inspired and influenced the formation of Darwin’s theory of biological evolution. In the process of understanding geological changes, he only acknowledged the gradual change and denied the existence of qualitative changes and leaps. Therefore, the theory he put forward was also called Uniformitarianism or Gradualism. Between 1838 and 1839, German biologists Matthias Jacob Schleiden (1804– 1881) and Theodor Schwann (1810–1882) proposed Cell Theory. They pointed 36

Wang, Q. A. (2012). A Study of Naturalistic Evolution Theory and Darwin’s Theory of Biological Evolution. Hubei Social Sciences (09):92. 王秋安. (2012). 自然进化论与达尔文的生物进化论 探析. 湖北社会科学 (09):92. 37 Wu, X. J. (1981). A Preliminary Study of the Non-Darwinian Theory of Evolution. Philosophical Research (06):31. 吴晓江. (1981). 初探非达尔文主义进化论. 哲学研究 (06):31.

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out that both plants and animals are composed of cells, and cells are the common constituent units and developmental basis of all organisms. Animal and plant cells generally contain three parts: the cell membrane, cell contents and cell nucleus. The proposal of Cell Theory built a bridge between the kingdom Plantae and the kingdom Animalia, thus establishing the universal conception of nature that the biological world originated from the universal connection of cells. Cell theory contains a distinct thought of biological evolution and provides evidence for the theory of biological evolution from the unity of biological origin. The introduction of the Cell Theory prompted biological research to enter the cellular level, which directly led to the establishment of Cell Physiology and Cytogenetics. In 1850, the British sociologist Herbert Spencer (1820–1903) published Social Statics, in which he put forward the ideas of social organism and social evolution theory and established a universal framework of social evolution. He assumed that evolution is a general law; human society is a social organism that does not differ in essential principles from a biological organism. Different parts of society are interrelated and interdependent, forming a unified complex system. Similar to the organs of biological organisms, the organisations of society have their own complex functions and are served by different organisational structures to maintain the operation of the whole social organism. The development of human society, accompanied by the complication of the division of labour and social organisation, is an evolutionary process similar to that of biological organisms. In the process of human society progressing from an undifferentiated nomadic tribe to a sophisticated civilised society, the continuous differentiation of labour pushes the evolution of human society. Social development follows the natural law of survival of the fittest. The direction of social evolution is from a low-level society with a simple structure and a single function to a high-level society with a complex structure and diverse functions. Although Spencer introduced the concept of survival of the fittest and the thought of social evolution before Darwin’s The Origin of Species, he simplified the relation between human society and nature and ignored the real causal mechanism and process of human society and social changes.

2.3.2 Darwin’s Evolutionary Thought In 1859, The Origin of Species published by the British naturalist Charles Darwin laid the scientific foundation for the theory of biological evolution. In the book, Darwin presented two closely related theories, the theory of evolution and the theory of natural selection, highlighting the ideas of species evolution and common origin, survival competition and natural selection, and gradual evolution of organisms. The main argument of evolution theory is that the world is not static but is in constant evolution. Biological types are not unchanged but gradually transform in the continuity of life, and new species emerge when old species disappear. Evolution is a process of continuous bifurcation. All life originates from the same primitive cell and gradually evolves into fish, amphibians, mammals, etc. Some of these mammals

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evolved into man-apes through natural selection and then into today’s humans. The main point of the theory of natural selection is that organisms in nature realise natural selection through survival competition, and survival competition is the only way to achieve biological evolution. The development and change of organisms is a process of natural selection, in which those who adapt to the environment survive, and those who do not adapt to the environment are eliminated by nature. There are only gradual changes but no leaps in biological evolution, and the adaptations that organisms show to the environment are the products of natural selection. Natural selection is the main driving force of biological evolution, and the variation caused by environmental influences and the use and disuse of organs and their inheritance are auxiliary factors of evolution. Darwin pointed out that all kinds of biological species on Earth have close or distant kinship, all existing biological species originated from simple primitive ancestors, and the biological world is a historically continuous whole. The process of evolution has gradually evolved into various organisms through the three mechanisms of inheritance, variation and selection. From Darwin’s point of view, natural selection, taking variation as raw material and environment as condition, works through survival competition. The result of selection determines the direction of species evolution and results in the development of biological adaptability (also survival of the fittest). The competition for existence includes the competition between the members of the same species and the competition between species and environment, which are the two manifestations of the same kind of competition. Under the effect of natural selection, the evolutionary pattern of organisms has no predetermined direction, and biological evolution presents a process of dendritic and continuous bifurcation rather than a linear evolution with a predetermined direction from low-level to high-level, as previously understood by the pioneers of evolution theory. Darwin suggested that there are competitions in which individuals of different species compete for limited resources, and the members of the same species compete for the same resources in an ecosystem. In the competition, those who adapt to the environment survive and obtain the opportunity to reproduce, while those who do not adapt are eliminated. This is natural selection; the fierce competition for existence among organisms stems from the contradiction between excessive biological reproduction and limited living conditions. If biological reproduction increases geometrically, the resulting excess reproduction will inevitably lead to competition among the species for space and food. In these competitions, biologically beneficial variations are preserved and passed on to future generations, while harmful variations are eliminated. Through the historical process of natural selection, small variation gradually accumulates into significant variation, which changes biological traits and ultimately forms new species or subspecies. It is through inheritance, variation and selection that organisms develop from low-level to high-level and from simple to complex. In the process of evolution, biological traits diverge, intermediate types become extinct, new species continuously arise from existing species, biological species also increase from few to many, and biological evolution presents a tree-like bifurcation process. As Wu Xiao-Jiang pointed out, “in the history of evolutionary thinking, people’s research on biological evolution is mainly carried out from two aspects, History

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of Evolution and Mechanisms of Evolution. On the former question, evolutionary pioneers such as Buffon, Lamarck and others have already clarified that organisms are evolving rather than being static. Darwin’s outstanding achievements above his predecessors are mainly due to two reasons: in the study of the History of Evolution, he proposed that all living things are related and originated from a common ancestor; in the study of the Mechanisms of Evolution, which was the first scientific explanation of the reasons and driving forces of biological evolution.38 The theory of biological evolution is a pivotal summary of human’s understanding of the biological world and even the whole nature, which not only drives the progress of modern biology but also has a huge impact on philosophy. The epoch-making significance of Darwin’s theory of biological evolution is that he not only pointed out that biological species are changeable but also scientifically explained the evolutionary history of biological adaptability and diversity, thus giving a heavy blow to idealistic theories such as species immutability, creationism and teleology. However, Darwin’s theory of biological evolution has shortcomings due to the limitations of the times. Darwin affirmed that biological evolution is a continuous and gradual process and that natural selection is slow, which cannot explain the increase in complexity of organisms due to random mutations or the sudden changes or sudden leaps that organisms take in successive evolution. For example, in the more than 3 billion years of life evolution history, there have been many large-scale mass extinctions and species explosions in the Earth’s biosphere, which are difficult to explain with Darwin’s theory of gradual evolution. Darwin did not correctly understand the genetic mechanism of biological evolution. Modern molecular genetics have proven that some genetic factors or genetic structures inherent in organisms can push their self-evolution. Darwin’s theory of evolution over-emphasises the interspecific competition between organisms but ignores various other connections. In fact, the relationship between the creatures in nature is not merely opposite but is a combination of conflict and harmony, confrontation and cooperation. Furthermore, it is inappropriate for Darwin to treat the survival competition caused by excess reproduction as the main driving force of biological evolution. In fact, even if there is no over reproduction, genetic variation, extinction of old species and replacement by more developed new species will still happen sooner or later.

2.3.3 New Development of Evolutionary Thought After Darwin Similar to the evolutionary thought expounded by Darwin’s theory of evolution, the theory of biological evolution is also evolving and developing. After Darwin published The Origin of Species, scientists worldwide have conducted extensive and in-depth research from different aspects, and the theory of biological evolution has 38

Wu, X. J. (1981). A Preliminary Study of the Non-Darwinian Theory of Evolution. Philosophical Research (06):27. 吴晓江. (1981). 初探非达尔文主义进化论. 哲学研究 (06):27.

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been further revised, supplemented and developed, mainly in the creation of new disciplines or new theories such as genetics, gene theory, mutation theory, synthetic theory, molecular biology, the neutral theory of molecular evolution, systematics, and sociobiology. The following is a brief overview of the progress of biological evolution theory in various aspects, using these new disciplines or new theories as clues.

2.3.3.1

Genetics

In 1865, Austrian botanist Gregor Johann Mendel (1822–1884) discovered on the basis of pea hybridization experiments that the genetic material that controls biological traits exists in the form of a self-contained unit of factors, from which he proposed the concept of genetic factors (the concept of genes later); he concluded two laws of inheritance (i.e., the law of segregation and the law of independent assortment) through statistical analysis of hybridization experiments. His basic idea is that the genetic factors that control different traits of plants cannot be mixed but enter into different gametes independently, and they are either expressed as dominant factors in the next generation of gametes or as recessive factors in the next generation of gametes. Mendel’s hybrid experiments showed that the traits of plants are particlelike when analysed from genetic factors, and they can be used as raw materials for natural selection to develop directionally through selection, indicating that it is genetic factors rather than the environment that dominate the genetic traits of organisms. Mendel’s hybrid experiments and discoveries made up for the deficiencies of Darwin’s theory of evolution in terms of quality, enabled later generations to discover the correspondence between genetic factors, variations and traits, laid a scientific foundation for modern genetics, and led to the rise of the Theory of Particulate Inheritance. Mendel’s discovery was ignored by the scientific community for more than three decades until it was discovered again in 1900. German biologist Ernst Haeckel (1834–1919) introduced the concept of adaptation and genetic interaction into the theory of evolution, assuming that both artificial selection and natural selection are only based on the interaction between the adaptation and genetics of organisms, and species variation is the result of adaptation and genetic interaction, thereby expanding the idea of natural selection and taking Darwin’s theory of evolution a step forward.39

2.3.3.2

Gene Theory

In 1910, Thomas Hunt Morgan (1866–1946), an American cytologist, proposed gene theory on the basis of genetic testing of the fruit fly (Drosophila) and published The Theory of the Gene in 1926. He pointed out that genes are the discrete units of 39

Zhong, A. H. (1979). The Development and Scientific Practice of Evolutionary Theories. Teaching and Research (01):55. 钟安环. (1979). 进化论的发展与科学实践. 教学与研究 (01):55.

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chromosomes in an organism’s cells, and the material basis for the genetic variation of an individual, genes are arranged in a straight line on the chromosome, thus establishing the corresponding relationship between different genes and traits, so that the changes of traits can be judged according to the changes of genes. The genetic recombination of organisms inevitably occurs at a certain frequency, and such occurrence has no necessary connection with the external environment. Once this genetic variation occurs, it stabilises in a new state. Therefore, the acquired traits are not inherited. Thomas Morgan examined evolution from the perspective of genetic mutation and believed that natural selection is only the external force of biological evolution, and random genetic mutations are the real cause of new species. Gene theory unifies the external selection force and the internal adaptive force in biological evolution, thus making necessary amendments to the previous directional thinking of biological evolution.

2.3.3.3

Mutation Theory

In 1901, the Dutch botanist Hugo de Vries (1848–1935) introduced mutation theory by studying the variation of evening primrose (Oenothera lamarckiana) and published the book Mutation Theory. He suggested that biological evolution is not necessarily formed by small continuous variations, as Darwin proposed; biological variation can be a discontinuous disruptive change that directly creates new species. In de Vries’s view, the role of natural selection in evolution is not pivotal, and selection only plays a role in screening disruptive changes. The German-American geneticist Richard Goldschmidt (1878–1958) published The Material Basis of Evolution in 1940. In the book, he termed the mutation of the entire chromosome system caused by chromosome remodelling in biological cells the macromutation and believed that every major evolution and every emergence of new species in the biological world originates from leaps and changes, the macromutations that have a significant impact on biological development have created some promising monsters, and the further evolution of these monsters has given birth to new species and taxa. In 1953, Theodosius Dobzhansky (1900–1975), Simpson, Matsumura and others further proposed that biological mutation includes two forms of gene mutation and chromosome mutation, and chromosome mutation can be divided into chromosome number mutation and chromosome structure mutation.40 In 1972, American palaeontologists Niles Eldredge and Stephen Jay Gould (1941– 2002) discovered that there have been many explosions and extinctions of species in the history of palaeontology. From there, they proposed the Punctuated Equilibria to explain the obvious discontinuities and jumps in the evolution of palaeontology. They held that biological evolution is a punctuated balancing process, and biological leaping evolution and speciation occur simultaneously. Species evolution is giant 40

Mi, J. J. (1960). Comments on the Mutation Theory of Modern Neo-Darwinism. Bulletin of Biology(01):20. 米景九. (1960). 评论现代新达尔文主义的突变进化论. 生物学通报 (01):20.

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and discontinuous, while gradual evolution based on natural selection is a linear gradual pattern, which cannot explain the origin of the taxa above species. So they opposed modern Darwinism’s view of only gradualism.41 Punctuated Equilibria is based on the dialectical unity of disruptive change and gradual change, holding that42 : Biological evolution has two processes, disruptive change and gradual change. Most species are formed in a short period of time that is negligible geologically (i.e., disruptive change). After speciation, it will go through a long-term relatively stable stage. At this stage, organisms undergo very slow variation through natural selection (i.e., gradual change); disruptive change is the main force of biological evolution. Although gradual change can also produce new species, the amount of variation (or evolution) it creates is rather small. For speciation, the theory emphasises that disruptive change is the motive power, the way of mutation is initially random, geographic isolation is a necessary factor for speciation, and the final appearance of new species is also the result of natural selection. From the research results of palaeontology and geology, the historical change in biological evolution on Earth over the past 3.8 billion years is not uniform and gradual, as Darwin assumed, but is gradual and disruptive at the same time. The long-term evolution of biological species presents a periodic combination of gradual change and disruptive change, and each disruptive change makes the evolution level of organisms leap to a new level. For example, in the last 570 million years, there have been five large explosions of biological species in the Earth’s biosphere: the Cambrian explosion, which was characterised by the appearance of fish animals (i.e., myllokunmingia, haikouichthys, etc.) and the leap of organisms from invertebrates to vertebrates; Devonian explosion, which was marked by the emergence of amphibians (i.e., ichthyostega, sinostega, etc.) and the leap of organisms from fish animals to amphibians; Carboniferous explosion in the Late Paleozoic, which was identified by the leap of kingdom Animalia from amphibians to reptiles; Triassic explosion, which was distinguished by the rise of mammals (i.e., tritylodont, morganucodon, etc.), and the leap of kingdom Animalia from reptiles to mammals; Paleogene explosion, which was denoted by the coming of primates (i.e., decoredon, eosimias sinensis, etc.), and the leap of kingdom Animalia from primitive mammals to advanced primates (including humans). These events reflected the evolution of the biological world from fish animals to Homo sapiens and the evolutionary process of life systems from zero to one, from low-level to high-level, and from simplicity to complexity.43 The explosion of species in the five geological periods of the Cambrian, Devonian, Carboniferous, Triassic, and Paleogene in the evolution of the crust was well explained by punctuated equilibria, while no clear explanation could be given by Darwin’s gradual evolution model. 41

Eldredge, N., Gould, S. J. (1972). Punctuated Equilibria: An Alternative to Phyletic Gradualism. In: Schopf, T. J. M. (ed). Models In Paleobiology. pp. 82–115. 42 Hu, A. N., Jin, X. Z. (2005). Darwinism is not a Culminate Evolution Theory. Soft Science of Health (06):379. 胡安娜., 金新政. (2005). 达尔文主义不是终极的进化理论. 卫生软科学 (06):379. 43 Xu, Q. Q. (2007). Zhou Yi and Darwin’s Theory of Biological Evolution. Fossils (03):17. 徐钦 琦. (2007).《周易》 与达尔文的生物进化论. 化石 (03):17.

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2.3.3.4

2 The Evolution of the Thinking Paradigm and Its Philosophical Basis

Synthetic Theory

As early as the beginning of the twentieth century, Hardy (1908) and Weinberg (1909) successfully combined Darwin’s theory of natural selection with Mendel’s genetics and proposed the Hardy–Weinberg equilibrium principle, also described as genetic equilibrium. R. A. Fisher (1929), B.S. Haldane (1931) and S. Wright (1932) established Population Genetics by using mathematical models to study gene frequency changes in biological populations and the role of natural selection affecting such frequency changes.On this basis, Dobzhansky (1937) and Julian Huxley (1942) established the Synthetic Theory of Evolution. They began to use quantitative methods to study biological evolution at the population level and further developed Darwin’s theory of evolution. Synthetic theory emphasises that population is the unit of biological evolution; under the pressure of selection, the interaction of various factors, such as mutation, recombination, and isolation, pushes the gradual differentiation of biological populations and the development of new species.44 In 1937, the American geneticist Dobzhansky published Genetics and the Origin of Species, which marked the birth of modern Darwinism; he revised and refined his theory by publishing Genetics of the Evolutionary Process in 1970. Dobzhansky merged Darwin’s theory of natural selection with Mendel and Thomas Morgan’s genetic theory and introduced the principles of population genetics to clarify the evolution of species from comprehensive factors such as selection, isolation and genetic mutation. He used the principles and methods of Molecular Biology and Population Genetics to clarify the dialectical relations between internal cause (biological genetic variation) and external cause (environmental selection), contingency (genetic variation) and inevitability (selection) in the process of biological evolution. His main points include the following: Population is the basic unit of biological evolution; The research of evolutionary mechanisms belongs to the scope of Population Genetics; Mutation, selection and isolation are the three basic links in speciation and biological evolution; Speciation must be achieved through isolation; In most organisms, natural selection does not simply play the role of screening; it retains many harmful and even lethal genes in the heterozygous state of species due to the existence of various selection mechanisms in nature.45 Dobzhansky not only enriched and developed Darwin’s theory of natural selection but also made up for the deficiency of Gene Theory, so that the study of biological evolution was advanced from the external morphological level of biological individuals to the chromosomal level of biological cells. Modern Darwinian Theory is also known as modern synthesis, which combines Darwin’s theory of natural selection, modern genetics, palaeontology and other disciplines to comprehensively explain the process and mechanism of biological 44

Cai, D. Q. (1986). A New Theory of Molecular Evolution: Neutral Theory. Journal of Biology (04):1. 蔡德全. (1986). 一种新的分子进化学说——中性学说. 生物学杂志 (04):1. 45 Ma, T. S., Hao, G. L. (2002). Darwinism, New Darwinism, Modern Darwinism. Teaching of Middle School Biology (04):39–40. 马铁山., 郝改莲. (2002). 达尔文主义·新达尔文主义·现代达 尔文主义. 中学生物教学 (04):39–40.

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evolution. The theory posits that the mutation of genetic material and genetic recombination through sexual hybridisation are the raw materials for biological evolution. The basic unit of biological evolution is the population rather than the individual, and evolution comes from the change in gene frequency in the population. Natural selection is the decisive force in the direction of biological evolution, and biological adaptability is the result of long-term selection. Isolation leads to speciation in which continued geographic isolation often differentiates populations into subspecies, and on this basis, the accumulation of variation due to different environmental conditions may trigger reproductive isolation, which in turn promotes the formation of new species. Modern Synthesis denied acquired inheritance, emphasised the gradualness of evolution, and reaffirmed the leading role of natural selection in biological evolution at the population level.46 The new progress of modern synthesis pointed out that there is both contingency and inevitability in biological evolution. For instance, genetic mutation is random and accidental, while selection is nonrandom and directional. The formation of new biological species includes two types: gradual and explosive.47 Discontinuous intense disruptive change and continuous subtle gradual change can be demonstrated by the same genetic mechanism, emphasising the important role of geographical environmental factors in speciation.48 The new research of this school also pointed out that the biological population has its specific structural composition and heredity; it interinfluences and interacts with the environment as a whole, and like all biological individuals, it has a life cycle (i.e., its survival activities are expressed as the historical process of growth, differentiation and division of labor, survival, ageing and death).49

2.3.3.5

Molecular Biology

In 1952, the famous experiment of Bacteriophage Infecting Bacteria chaired by A. Hershey and M. Chase proved that the material carrier of biological genes is the deoxyribonucleic acid (DNA) molecule in the nucleus.50 In 1953, American biologist James Dewey Watson and British physicist Francis Compton Crick (1916–2004) applied X-ray to study nucleic acids and discovered the double helical structure of 46

Liang, Q. J. (2009). Matching the Perfect, Pursuing the Ultimate: The Theory of Biological Evolution is Developed in Controversy. Life World, (11):12. 梁前进. (2009). 望衡对宇, 追求极 致——生物进化论在争鸣中发展. 生命世界 (11):12. 47 Lu, H. R., Ye, Y. Z. (1982). The Evolution of Evolution Theory: Darwinism, Neo-darwinism and Non-darwinism. Journal of Fujian Agricultural College (04):72. 卢浩然., 叶永在. (1982). 进化论 的进化——达尔文主义、现代达尔文主义和非达尔文主义. 福建农学院学报 (04):72. 48 Zhang, L. N. (2005). The Development of Genetics and the Emergence of Modern Darwinism. Fossils (02):32. 张丽娜. (2005). 遗传学的发展与现代达尔文主义的产生. 化石 (02):32. 49 Sun, Y. (1993). The Present Comprehensive Development of the Theory of Evolution. Journal of Xinyang Normal University (Natural Science Edition) (04):437–438. 孙毅. (1993). 综合进化论 的发展现状. 信阳师范学院学报(自然科学版) (04):437–438. 50 Min, J. Y. (2012). Evolutionary Pluralism. China Social Sciences Press. p. 336. 闵家胤. (2012). 进化的多元论. 中国社会科学出版社. p. 336.

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DNA, which marked the birth of Molecular Genetics. Their research results indicated that the DNA molecule is a double helix composed of two long chains, and the chains are connected by pairs of bases. The pairing of bases is fixed, but the order and ratio of the arrangement are variable. The double strands of DNA replicate themselves through the principle of complementarity. During cell division and reproduction, the two strands of the DNA molecule are separated, and each strand can serve as a template and form a new complementary strand. In the course of sexual propagation of life, a DNA strand of a sperm cell combines with a DNA strand of an egg cell to form a DNA double-strand in the fertilised egg cell. It is through such a replication mechanism of DNA molecules that biological cells can accurately transfer genetic information from parents to offspring. This discovery of the double helical structure of the DNA explained the self-replication, relative stability and variability of genetic material, as well as the storage and transmission of genetic information, which not only clarified the replication mechanism of genetic information from the molecular level but also innovated the concept of genetics and developed the research of genetic evolution to a new stage. The breakthrough in Molecular Biology laid a scientific foundation for future generations to study the internal mechanism of biological evolution at the molecular level. The discovery of the double helical structure of the DNA pushed the study of Biogenetics from the chromosomal level to the molecular level and gave birth to Molecular Genetics. Since then, scientists have begun to use the techniques and methods of Molecular Biology to conduct in-depth research on the internal mechanisms of biological evolution. It was found that the amino acids in all biological proteins are left-handed, and the biological genetic code uses the same triple codon,51 thus confirming the common origin of species at the molecular level. By comparing the sequence of similar proteins and nucleic acids in different organisms, the relative positions of different species on the evolutionary sequence and the kinship between them can be quantitatively detected, and the phylogenetic tree of biological divergence from low-level to high-level can also be outlined. The advancement of Molecular Biology transformed the research of biological evolution from the longformed qualitative research model into a new model that combined qualitative and quantitative research, which pushed the rapid development of biological evolution.

2.3.3.6

Neutral Theory of Molecular Evolution

In 1968, Japanese molecular biologist Kimura Motoo (1924–1994) proposed the Neutral Theory of Molecular Evolution, which he systematically expounded in his book The Neutral Theory of Molecular Evolution published in 1983. The main point

51

Zhang, Y. P., Shi, L. M. (1992). Modern Evolutionary Theory and the Controversy. Discovery of Nature (03):41. 张亚平., 施立明. (1992). 现代生物进化论及其面临的挑战. 大自然探索 (03):41.

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of this theory is52 that most mutations in organisms at the molecular level are neutral or near-neutral (i.e., these mutations are neither positive nor negative for biological individuals). The reservation or disappearance of neutral mutations in biological inheritance is a random process, which is called genetic drift. Biological evolution at the molecular level is the result of random genetic drift and is not affected by natural selection. Genetic drift is the basic motive force for the evolution of biological molecules. The rate of neutral mutation (i.e., the substitution rate of nucleotides or amino acids in biological molecules) determines the rate of biological evolution. The predominant factor in biological evolution is neutral mutation, and the direction of molecular evolution is random and accidental. Kimura pointed out that in biological organisms, different types of protein molecules evolve at different rates; in different types of biological organisms, the evolution rate of similar protein molecules is roughly constant. The evolution speed of molecules with important functions is slow, and the evolution speed of those with unimportant functions is fast. In the process of biological evolution, neutral mutations that do not change the molecular structure and functions are prone to occur. When genes with new functions appear, biological organisms often increase the copies of the original genes first; the neutral mutations of biological organism molecules are not restricted by natural selection. Through the random combination of male and female individuals in the population, some neutral mutant genes disappear, while some are retained, resulting in polytypism of biological genes and polymorphism of traits. At the molecular level, most evolutionary changes in organisms and variations within species are not dominated by natural selection but are caused by random drift of mutant genes that are neutral in selection. In 1969, American scholars J. L. King and Thomas Jukes also cited evidence of molecular biology to support the neutral theory of molecular evolution and called the theory a non-Darwinian theory of evolution.53 The neutral theory of molecular evolution was an important supplement to Darwin’s theory of evolution at the micro-level and the molecular level. It further disclosed that most of the evolution at the molecular level is not triggered by natural selection but by neutral mutant genes through random genetic drift, revealing that the path and direction of molecular evolution are not mainly determined by nonrandomness and inevitability, such as phenotypic evolution, but to a large extent by randomness and contingency. The introduction of the Neutral Theory of Molecular Evolution expanded people’s understanding of the role of contingency in biological evolution and had a special significance for overthrowing the teleology of Idealism and metaphysical Mechanical Determinism in the history of evolutionary thought.54

52

Liu, H. L., Liu, Q. (2006). The Impact and Perfection of the Neutral Theory of Molecular Evolution on Darwin’s Theory of Evolution. Social Sciences in Guangxi (04):14–15. 刘鹤玲., 刘 奇. (2006). 分子进化中性学说对达尔文进化论的冲击和完善. 广西社会科学 (04):14–15. 53 King, J. L., Jukes, T. H. (1969). Non-Darwinian Evolution. Science, 164(881). pp. 788–798. 54 Wu, X. J. (1981). A Preliminary Study of the Non-Darwinian Theory of Evolution. Philosophical Research (06):31. 吴晓江. (1981). 初探非达尔文主义进化论. 哲学研究 (06):31.

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Systematics

In 1968, the American Austrian biologist and the founder of System Theory Bertalanffy published General System Theory: Foundations, Development, Applications, which examined the evolution of biology from the relation between organisms and the environment. Bertalanffy proposed that an organism is an open system that continuously exchanges material and energy with the external environment, and only such an open system can ensure that an organism continues to develop in a highly ordered direction. The Belgian physicist Prigogine developed the idea of system evolution, arguing that an organism is a dissipative structural system with a high degree of selforganising ability, which achieves a higher order state by forming a new ordering state through fluctuations (i.e., dynamic expansion or contraction) away from the equilibrium state, and this fluctuation occurs in the unstable stage of biological evolution. In the process of biological evolution, this kind of fluctuation is manifested as the biological adjustment ability. The origin of life and the evolution of organisms pass through the unstable stage through this fluctuating ability so that organisms can temporarily evolve from a disordered structure to a newly ordered structure, and new species and ecological types are naturally produced in this process.55 In 1973, the American biologist L. van Valen proposed coevolution theory when studying biological evolution. The main idea was that the biological individuals and their environment are evolving together, and each organism must keep up with the pace of environmental changes to ensure the stability of its relative competitive position. Coevolution theory expands the dynamic range of natural selection, emphasising the evolutionary mechanisms of the interstimulation between organisms due to competition, thereby explaining the long-term and inextinguishability of survival competition in the environment. Coevolution is an important driving force for the continuous evolution of organisms, which normalises the competition for survival in the environment, thus making biological evolution a long-term continuous process.56

2.3.3.8

Sociobiology

In 1975, the American social biologist Edward Wilson published Sociobiology: The New Synthesis, which integrated the achievements of evolutionary theories from Ethology, Microevolution Gene Theory, Ecology, and Population Genetics to various fields, established the theoretical models of sociobiology, and culminated decades

55

Zhang, M. S., Jin, Z. H. (1987). Interdisciplinary Interaction is the Driving Force for the Development of Biological Evolution. Journal of Liaoning Educational Administration Institute 03:9. 张 美生., 金正浩. (1987). 学科间的相互作用是生物进化论发展的推动力. 辽宁教育学院学报(社 会科学版) 03:9. 56 Qian, H., Xiang, B. H. (2006). The Theory Bases and Research Assumptions of Organization Evolution. Journal of Dialectics of Nature, (03). 钱辉., 项保华. (2006). 企业演化观的理论基础 与研究假设. 自然辩证法通讯, (03).

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of biologist research on animal social behaviour. Wilson stated in the book57 that natural selection not only determines the physiological structure of animals but is also a necessary condition for the formation of animal behaviour patterns. Animal behaviour and social structure can be inherited like biological organs. The fixed behaviour patterns of animals and the function of social organisation maximise the reproduction of a social population. These behaviour patterns can be interpreted as phenotypes of genes at the genetic level, and these phenotypes are passed on from one generation to another through gene duplication. The peculiar behaviour of a population is the maximisation of adaptation in the living environment on which it depends. The social characteristics of animals are manifested as a universal evolutionary advantage. The social evolution of organisms has gone through four typical stages, and their landmark achievements are corals, invertebrates such as pipe jellyfish, social insects as well as social vertebrates and humans. The social characteristics of populations such as animal gathering, sexual behaviour and territory result from the behaviour of individual animals and the interaction between the population and the ecological environment. Wilson attempted to use sociobiology to combine the humanities and social sciences. In the last chapter of this book, he argued that “human behaviour can be explained by the theory of evolutionary biology”, which aroused much controversy. Prior to his publication, the research on animal social behaviour was strictly limited to the field of biology. Wilson extended the research object of sociobiology from the kingdom Animalia to human society and built up a bridge connecting animal social behaviour and human social behaviour. It is precisely his pioneering historical achievements that transformed Darwin’s evolutionary paradigm into a fundamental research paradigm in the field of social sciences.

2.3.4 The Infiltration and Influence of Evolutionary Thought on Other Disciplines Since the development, changes and interconnected thoughts of things contained in the theory of biological evolution are conducive to promoting the mutual penetration and overall synthesis between different disciplines, after the theory of biological evolution founded by Darwin has been widely spread, it has had a huge impact on the public’s ideas and ways of thinking. Just as Wiener, the founder of cybernetics, put it that even as early as the nineteenth century, Darwin’s progressive view was not limited to the field of biology, and all philosophers and sociologists drew their scientific ideas from the valuable sources of their time.58 57

Zhao, D. H. (2004). Are There Any Relations between Culture and Gene? - The Ideological Track of Modern Darwinism Penetrating into Social Fields. Literature, History and Philosophy (04):18–19. 赵敦华. (2004). 文化与基因有无联系?——现代达尔文主义进军社会领域的思想 轨迹. 文史哲 (04):18–19. 58 Wang, Z. L. (2008). The Development of the Theory of Biological Evolution and Its Philosophical Thinking. Popular Science & Technology (03):172, 184. 王泽榔. (2008). 生物进化论的发展及其 哲学思考. 大众科技 (03):172, 184.

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Since the establishment of the theory of biological evolution, it has not only led to the emergence of many interdisciplinary and marginal disciplines, such as biochemistry, biophysics, photobiology, bionics, cybernetics, and general system theory, but it has also penetrated into some other disciplines that have an important impact on social development and directly promoted the rapid development of these disciplines. From a rough literature review, the disciplines infiltrated by the theory of biological evolution generally include Philosophy, Psychology, Eugenics, Anthropology, Economics, Sociology, Political Science, Law, and Artificial Intelligence. Here is a brief introduction to the infiltration and influence of evolution theory on these disciplines.

2.3.4.1

Philosophy

The Theory of Evolution has penetrated into the field of philosophy since its birth, mainly in the three fields of evolutionary epistemology, evolutionary ethics and evolutionary aesthetics. Evolutionary epistemology holds that the knowledge or cognitive results possessed by human beings are an important evolutionary mechanism for human survival and reproduction, and its representatives include philosophers such as SirKarl Raimund Popper (1902–1994), Donald T. Campbell (1918–1996) and Gehard Vollmer. Evolutionary ethics, represented by Spencer, Thomas Henry Huxley (1825–1895), and Kropotkin (1842–1921), explained the origin, nature and function of morality from an evolutionary point of view, arguing that ethical values such as goodness, justice or fairness are developed from the biological nature of human beings and their evolution, and all biological structures, psychological mechanisms, and cultural traditions related to the survival and reproduction of species have their ethical significance. The appearance of austere evolutionary aesthetics should be attributed to Darwin, who wrote in the final chapter of The Origin of Species that “we can to a certain extent understand how it is that there is so much beauty throughout nature, for this may be largely attributed to the agency of selection”.59

2.3.4.2

Psychology

Modern psychology was built on the foundation laid by Darwin’s evolution theory and dialectical materialism. Jean Piaget’s (1896–1980) genetic epistemology, praised by the international psychology community, was derived from Darwin’s theory of evolution. Darwin discussed in his theory of evolution that humans and animals are psychologically continuous and emphasised that the mental abilities of humans and animals only differ in degree but not in essence. He cited evidence that animals also have mental abilities such as emotion, curiosity, imitation, attention, memory, imagination, and sensibility. He also put forward the psychological concept of instinct 59 Liu, C. X. The Influence of Evolution Theory on the Humanities and Social Sciences. Chinese Social Sciences Today, Mar. 4, 2013, A08.

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and pointed out that the origin of all instincts cannot be explained without natural selection. He explored the origin and development of human psychology from the way of germ-line evolution and individual development and made contributions to the study of child psychology. The Expression of the Emotions in Man and Animals published by Darwin in 1872 applied historical methods and psychological analysis methods to compare the expressions and emotions of humans and animals. Based on the three basic principles: (1) the principle of serviceable associated habits, (2) the principle of antithesis, and (3) the principle of direct action of the nervous system, he verified that the expression of the emotions in animals and humans have a common origin. Darwin put the evolutionary theory of biology into psychology, especially the application of developmental viewpoints and historical methods, which gradually broadened the scope of psychological research, thereby prompting profound changes in psychology.60 Evolutionary psychology assumes that the human psychological mechanism is the product of evolution, and the past of humans is the key to understanding the current psychological mechanism of humans. Currently, the evolutionary paradigm in psychology has attempted to integrate various branches of psychology, such as cognitive psychology, social psychology, personality psychology, and developmental psychology, with the theory of evolution.61

2.3.4.3

Eugenics

Francis Galton (1822–1911), Darwin’s cousin, began to study psychological inheritance and individual differences due to the influence of evolutionary theory. He discovered that human intelligence is genetic based on statistical analysis of the genetic factors of human intelligence and created Eugenics in 1883.62 The establishment of Eugenics is of great significance to reducing human genetic diseases and protecting the health of newborn babies. During World War II, Eugenics was abused by racists and became the theoretical basis for Adolf Hitler (1889–1945) to launch the war of aggression and the massacre of the Jews63 and thus gained notoriety.

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Ma, W. J. (1983). The Historical Contribution of Darwin’s Theory of Evolution to Psychological Science: Commemorating the Centenary of Darwin’s Death. Acta Psychologica Sinica, (03). 马 文驹. (1983). 达尔文进化论对心理科学的历史贡献——纪念达尔文逝世一百周年. 心理学报, (03). 61 Liu, C. X. The Influence of Evolution Theory on the Humanities and Social Sciences. Chinese Social Sciences Today, Mar. 4, 2013, A08. 62 Ma, W. J. (1983). The Historical Contribution of Darwin’s Theory of Evolution to Psychological Science: Commemorating the Centenary of Darwin’s Death. Acta Psychologica Sinica (03):297– 298. 马文驹. (1983). 达尔文进化论对心理科学的历史贡献——纪念达尔文逝世一百周年. 心 理学报 (03):297–298. 63 Jiang, H. P. (1998). Replicator. Taiwan: Hanyu Publishing Co., Ltd. pp. 26–28. 江海平. (1998). 复制人. 台湾汉宇出版有限公司. pp. 26–28.

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Anthropology

Anthropology, as an independent discipline, has been closely linked to the theory of evolution as soon as it emerged. Anthropologists such as Edward Burnett Tylor (1832–1917) and Lewis Henry Morgan (1818–1881) are all staunch cultural evolutionists. Shortly after the end of World War II, anthropologists such as Leslie Whirt and Elman Rogers Service revived the evolutionary paradigm in anthropology.64

2.3.4.5

Economics

When Darwin created the theory of evolution, he was influenced by the contemporary Thomas Malthus’s (1766–1834) theory of population and the invisible hand principle in economics,65 while his thoughts and principles in turn influenced the development of Economics after his establishment of the theory of evolution. The originator of introducing Darwin’s evolutionary mechanism and principles into economics was American economist Thorstein B. Veblen (1857–1929), who established a paradigm of economic system evolution based on cumulative causation; institutional economics is in the same line with Darwin’s evolutionary thought in its theoretical origin. Veblen’s inheritance mechanism of institutional change was developed by contemporary economist Douglass C. North (1920–2015) into the path dependence thought in institutional economics.66 Well-known winners of the Nobel Prize for Economics Milton Friedman (1912–2006) and Gary Stanley Becker (1930–2014) applied the principle of survival of the fittest of natural selection to prove the existence and rationality of the invisible hand in the economic order.67 The competition mechanism of natural selection is similar to an invisible hand, which regulates the evolution of the entire biosphere through a series of environmental changes, while the competition mechanism in the market economy also has an equally powerful coordination effect. There is indeed a great similarity between the two. At present, evolutionary economics has gradually become the mainstream of western economics. For example, one can often see economics papers involving the evolutionary paradigm in top American economics journals such as the American Economic Review.

64 Liu, C. X. The Influence of Evolution Theory on the Humanities and Social Sciences. Chinese Social Sciences Today, Mar. 4, 2013, A08. 65 Huang, Y. Q (ed). (1989). Genetics. Higher Education Press. p. 376. 黄裕泉 (ed). (1989). 遗传 学. 高等教育出版社. p. 376. 66 Xu, W. B. (2004). Darwinism in Economics: Deviation and Regression. Nankai Economic Studies (04):4–5. 许文彬. (2004). 经济学中的达尔文主义: 背离与复归. 南开经济研究 (04):4–5. 67 Cui, Z. Y. (2002). The Paradigm of the Invisible Hand-Metaphor, Argument and Dilemma. Shiba Consulting Network. 看不见手的范式——比喻、论证和困境. 士柏咨询网. http://www.pen123. net.cn.html. Accessed 19 Mar 2002.

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Sociology

Long before the publication of The Origin of Species, the idea of social evolution already existed in the field of sociology in the West, mainly represented by the British sociologist Spencer. After Darwin published The Origin of Species, the idea of biological evolution not only penetrated into the field of sociology but also gave birth to the theory of social Darwinism. In 1871, Darwin published The Descent of Man, in which he confirmed the applicability of the laws of biological evolution in human society and pointed out that rapid population growth would induce severe competition for survival and the result is survival of the fittest and genocide. Spencer subsequently published The Study of Sociology in 1874, in which he transplanted the principles of survival competition and natural selection in Darwin’s theory of biological evolution into his sociological theory. He assumed that the evolutionary process of society is similar to biological evolution, and it is also a history of survival competition, survival of the fittest, and natural selection, and the principle of survival competition in the biological world also plays a dominant role in society. Spencer believed that driven by survival competition, society is a supraorganism that has undergone the same development process of diversification, specialisation, and functional differentiation through the mechanism of natural selection.68 Spencer’s ideological views on social function pioneered Structural Functionalism in sociology and directly influenced the functionalist sociological thoughts of French sociologist Emile Durkheim (1858–1917), British sociologist Alfred Radcliffe-Brown (1881–1955), and Bronislaw Malinowski (1884–1942), etc. However, Spencer simply compares social evolution to biological evolution, which oversimplifies the complex process of social evolution and overemphasises the role of survival competition, erroneously considering that war is the driving force of social evolution. Some of his more extreme social thoughts evolved into the so-called Social Darwinism after being developed by German biologist Haeckel and others. At the end of the nineteenth century and the beginning of the twentieth century, Social Darwinism, as a worldview and ideology, not only had an extremely extensive influence in European and American intellectual circles but also played a crucial role in the social and political practice at that time.69 During World War II, Social Darwinism was abused by Nazi Germany, became the theoretical basis for Nazis’ crazy aggression and massacre and was disgraced worldwide after World War II.

68

Pan, D. Z. (2004). Theoretical Support for the Rationality of Modern Industrial Society: A Study of Spencer’s Social Evolutionary Thought. Dissertation, East China Normal University. pp. 69–70. 潘德重. (2004). 近代工业社会合理性的理论支撑: 斯宾塞社会进化思想研究. 博士学位论文, 华东师范大学. pp. 69–70. 69 Zhou, B. W. (2011). A Review of “Social Darwinism”. History Research and Teaching, (05). 周 保巍. (2011). “社会达尔文主义”述评. 历史教学问题, (05).

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Political Science

The influence of the theory of evolution on politics is mainly reflected at the level of international politics. The origin of war between states, the formation of international order and the evolutionary process of the concentration of international power are all research hotspots in evolutionary politics.70

2.3.4.8

Law

Since the end of the nineteenth century, the evolutionary paradigm in legal research has been mainly reflected in various legal evolutionary theories. At present, attention has been given to the application of evolutionary paradigms in the study of specific legal issues. Although the influence of evolutionary theory on jurisprudence cannot be ignored, a school of evolutionary law that can be compared with Natural Law, Positive Law or Sociological Law has not yet been formed.71

2.3.4.9

AI Mathematics

In artificial intelligence mathematics, there is a calculation method called genetic algorithms. Inspired by Darwin’s theory of natural evolution and Mendelian genetics, this algorithm is commonly used to generate high-quality solutions to optimisation by formulating the search problems as a population’s evolution problems, which applies the principle of survival of the fittest to select the fittest individuals for reproduction and produces through the two basic biologically inspired operators of crossover and mutation a new generation more adapted to the environment and converges that population to an optimal individual. In 1975, American scientist John Holland published Adaptation in Natural and Artificial Systems, in which he developed a set of theories for simulating biological adaptive systems, expounded the principles and methods of Genetic Algorithms, and laid the mathematical foundation for Genetic Algorithms. Genetic algorithms are not merely optimisation algorithms but a brandnew general methodology based on evolutionary thinking, which is an important tool for solving complex problems; they have been widely applied to solve optimisation problems in engineering due to their many outstanding advantages.72 Although Darwin’s theory of biological evolution influenced many scientific disciplines and greatly promoted human understanding of nature, self and society, the 70 Liu, C. X. The Influence of Evolution Theory on the Humanities and Social Sciences. Chinese Social Sciences Today, Mar. 4, 2013, A08. 71 Liu, C. X. The Influence of Evolution Theory on the Humanities and Social Sciences. Chinese Social Sciences Today, Mar. 4, 2013, A08. 72 Liu, S. G., Fei, P. Y., Hou, Z. M. (1999). Biological Evolution Theory and Genetic Algorithms in Artificial Intelligence. Studies in Dialectics of Nature, (12). 刘曙光., 费佩燕., 侯志敏. (1999). 生物进化论与人工智能中的遗传算法. 自然辩证法研究, (12).

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theory of biological evolution is mainly the theory of species evolution. A comprehensive understanding of human activities requires a systematic study of human society at least at the three levels of biology, society and culture. Since the end of the nineteenth century and the beginning of the twentieth century, the establishment and development of disciplines such as genetics, animal behaviour, behaviour ecology, sociobiology, and evolutionary anthropology have conducted research on broad biological topics such as the social structure, social behaviour, behaviour evolution, and cultural phenomena of animals (including humans), thereby bridging the cognitive gap between humans and other animals and laying a solid foundation for the wide application of the evolutionary paradigm in the humanities and social sciences. Therefore, more than 160 years after Darwin published his theory of evolution, the modern biological evolution theory developed and synthesised by many researchers not only constitutes a paradigm of modern biology but can also become a paradigm of natural science, as well as a paradigm of philosophy and social sciences. It is also based on the foundation laid by the modern theory of biological evolution that this book can comprehensively explain human society from the perspective of economy, society, polity and even a broad cultural perspective.

2.4 New Understanding and Philosophical Enlightenments Obtained from the Theory of Biological Evolution By analysing the development of biological evolution theories and combining the thinking of systems science and synthesising the new achievements of biological evolution studies, the following new understandings and philosophical inspirations can be obtained:

2.4.1 The Development of Evolution Theory Also Requires the Introduction of the System Theory Method In terms of the level and method of studying organisms, Darwinism generally examined the laws of biological evolution from the macro and higher levels of biological individuals, groups or environments, that is, to study biological evolution from phenotypic characteristics such as morphology, taxonomy and ecology outside the organism, which gave birth to the disciplines of bioanatomy, population taxonomy, and eco-environment. Modern Darwinism looked into the laws of biological evolution from the meso-level and meso-micro level of biological individuals, that is, to explore biological evolution from the levels of cells, chromosomes, and genes within the biological individual, which produced the disciplines of Cytology, Genetics and Genomics. Non-Darwinism inspected the laws of biological evolution from the microscopic perspective and subtle levels of biological individuals, that is, to

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investigate biological evolution from the level of macromolecules such as nucleic acids and proteins in individual cells of organisms, which created the disciplines of biochemistry, molecular biology, and molecular genetics. From this point of view, the research method from Darwinism, modern Darwinism to non-Darwinism is actually a deepening process of the Reductionism Method. Judging from the abovementioned new achievements in biological evolution research, the natural environment exerts a selection effect on organisms from the outside to the inside, from ecology, population to individual, while biological individuals vary and inherit at different levels from the inside to the outside, from micro, meso to macro. Biological evolution is a coevolution process that occurs at all levels from ecology and population to individual, which is actually the combined result of the factors inside and outside the biological system. Therefore, it is impossible to give a scientific and satisfactory explanation of biological evolution when examining the phenomenon of biological evolution from any single level of macro, meso or micro. The real way out is to introduce the system theory method and downplay the reductionism method and apply the perspective and thinking of systems science to resynthesise research results from different levelsto construct a more inclusive and explanatory theory of biological system evolution that organically integrates theories such as mutation theory, synthetic theory, neutral theory of molecular evolution, and sociobiology.

2.4.2 The Biosphere Is a Complex and Nested System, and Each Layer of Biological Systems Has Its Own Evolutionary Law Observed from the perspective of systems science, the Earth’s biosphere is a set of interrelated and nested complex systems that exist in the form of different layers or levels, in which each layer or level constitutes a relatively independent biological system and has its own special structure and function, as well as evolutionary laws that are different from other layers or levels. For example, the mammalian system can be divided into three basic hierarchies of individual, family, and population, each of which constitute a relatively independent biological system and have its own structure, function, and evolutionary laws. The evolutionary laws of animal families are different from those of individual animals, and the evolutionary laws of animal populations are not exactly the same as those of animal families. The evolutionary laws that exist at the three levels of individual, family, and population have their own particularities and cannot be substituted for each other or mixed up, although they are related to each other. From the perspective of systems science, for a comprehensive and complete understanding of the evolutionary laws of the kingdom Animalia, it is obviously not sufficient to only study the evolutionary laws of individual animals (i.e., body shape, tissues and organs, cells, chromosomes, genes and molecules, etc.), it is also necessary to study the relationship between the members of the animal family (i.e., the genetic relationship between parents and offspring, the relationship

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between offspring and offspring, etc.), the relationship between the elements within the population (i.e., competition, cooperation between different subspecies, etc.), and even the relationship between species and the ecological environment. In this way, the research scope in fact involves social organisations at different levels and social behaviour in the kingdom Animalia, which are precisely the research topics of sociobiological theory. Darwin’s theory of evolution is a theory of species evolution, which does not focus on the study of the social behaviour of animals, so it cannot replace the research in biological social organisation and social behaviour. Therefore, to fully and completely explain the evolutionary laws of the biological world, it is necessary to examine the problem from a sociobiological perspective. It is precisely because of the objective need to explore the laws of biological evolution that urges people to put forward and create the emerging discipline of Sociobiology.

2.4.3 Every Biological Individual Has a Two-Layer Structure of Genotype and Phenotype Starting from gene theory, some important insights about the structure of biological individuals can be obtained. Every biological individual has a unique duality, which is manifested in the fact that each biological individual is composed of two aspects of genotype and phenotype. Genotype can determine phenotype, but not any genotype can appear as phenotype. From a system perspective, the phenotype of an individual is not completely determined by its inherent genotype but is the result of the combined action of the individual’s genotype and environmental factors. At the phenotype level, because the traits and functions of biological individuals are obviously constrained and influenced by the external environment, the evolutionary pace of biological individuals at the phenotype level will be accelerated or delayed due to survival competition and natural selection, which is often manifested as the inconsistency and nonconstancy of its evolutionary rate. At the genotype level, although a large number of nucleic acid molecules in biological individuals are constantly mutating, they generally do not significantly change the phenotype of biological individuals. These molecules are not directly affected by the external environment, so their evolutionary pace does not depend on natural selection, which is manifested as the consistency and constancy of the evolutionary rate of biological individuals at the genotype level.

2.4.4 The Evolutionary Laws of Biological Individuals at All Levels Are Interrelated, Interacted and Interinfluenced From all levels of biological individuals, there are three different biological variations, namely, beneficial, harmful and neutral. However, the relation between these

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three variations is neither absolute nor fixed, and their properties can be transformed under certain conditions. The nature of a certain variation form, whether it is beneficial or harmful to a biological individual, is in fact related to environmental conditions. Variations that are beneficial under one environmental condition may turn into detrimental ones under another, just as a variation that is neutral under one environmental condition may become beneficial under another. For this reason, the law of molecular evolution revealed by the neutral theory of molecular evolution cannot be interpreted absolutely. In addition, all levels of biological individuals are interconnected, interact and influence each other, so neither the selection theory based on the survival of the fittest nor the neutral theory can fully reflect the fundamental mechanism of biological evolution. In fact, the evolution of biological individuals is the result of the combined action of two mechanisms, internal structural change (i.e., gene mutations, molecular variations, etc.) and the natural selection of the external environment. At the phenotype and genetic level of biological individuals, natural selection plays a role in screening the nonneutral (i.e., beneficial or harmful) variations of organisms, thus leading the evolution direction of individual phenotypes, while genetic drift plays an important leading role in the neutral variation of organisms at the phenotype, gene and molecular levels of biological individuals. Because the various levels of biological individuals, from the external morphology, body structure, tissues and organs at the macro-level, the cells, chromosomes and genes at the meso-level to the nucleotides, amino acids, proteins and other macromolecules in cells at the micro-level, are closely related and cooperate with each other, they together form an organic unified whole. Therefore, only by organically integrating the evolutionary laws that reflect all levels of individual organisms and forming a new synthesis can one have a more comprehensive and complete understanding of the causes, dynamics, methods and nature of the evolution of biological individuals, as well as scientifically explain the dialectical relationships between variation and adaptation, contingency and necessity, balance and imbalance, and internal causes and external causes in the evolution of biological individuals, thereby advancing the study of biological evolution to a new and higher level.

2.4.5 The Evolutionary Process of Biological Individuals Is the Unity of Contingency and Inevitability In the process of evolution of biological individuals, there are morphological evolution at the macro level, cell and chromosome evolution at the meso level, and molecular evolution at the micro level, which are organically connected and should not be clearly separated. At the molecular level, the evolution caused by beneficial and harmful mutations will eventually be reflected in the phenotype of biological individuals, and natural selection still plays a dominant role in this nonneutral type of molecular evolution. The evolution caused by molecular neutral mutations, whether neutral mutant genes can be inherited, is initially determined by the mechanism of

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genetic drift. However, when the mutant genes are fixed in the biological population, from the adaptation process of biological individuals, the natural selection mechanism of the external environment begins to play a screening role. Therefore, the biological evolution caused by the molecular neutral mutation is actually the result of the combined effect of genetic drift and natural selection. In the process of the variation, inheritance and adaptation of biological individuals, meso in fact makes an important pivotal function in connecting and conducting the interaction between micro and macro. In the process of evolution of biological individuals, whether it is macro-level morphological evolution, meso-level cell and chromosome evolution, or micro-level molecular evolution, they will all be constrained by natural selection, although the degree of impact varies, with the macro-level impact being the most direct and significant and the micro-level impact being more indirect and subtle. Overall, the evolution of biological individuals is the result of the combined action of the internal variation-inheritance mechanism and the external adaptation-selection mechanism, and the adaptation-selection effect ultimately determines the direction of biological evolution. The variation-inheritance effect reflects the contingency in the evolution of biological individuals, while the adaptation-selection effect demonstrates its inevitability. Therefore, the evolution process of biological individuals is neither a purely contingent phenomenon nor a simple inevitable phenomenon but the unity of contingency and inevitability.

2.4.6 The Mechanism of Biological Evolution Is Not Only a Survival Competition But Also Contains a Wealth of Content From the Systematics, some important understandings of the mechanism of biological evolution can be obtained. From the perspective of systems science, the relation between organisms and the environment is not simply a relation between survival competition and natural selection, as described by Darwin, but a very complex interactive relationship. This intricate relationship is manifested in the selection, isolation, and mutagenesis imposed by the environment on biological species, which become the restrictive conditions for their survival and evolution, and the dynamic adaptation of the organisms to the environment and the reverse influence of survival activities. In addition, there are not only competitive relationships between organisms (intraspecies, interspecies) and between organisms and abiotic environments but also symbiotic relationships of coordination and harmonious coexistence. In the competitions among organisms, there are fierce and gentle competitions; there are direct competitions, such as wolves and sheep, and indirect competitions, such as rabbits and sheep, as well as cats and clover; and there are long-term continuous competitions and intermittent discontinuous competitions.

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2.4.7 Biological Diversity Originates From the Diversity of Biological Variation and Ecological Environment Combinations From the organisational level of biological systems, a biological system can be divided into three basic levels of individual, family, and population. At the individual level, there are variations such as molecular variation, chromosomal variation and morphological variation; at the family and population levels, there are genetic phenomena such as gene combination and generational inheritance. The infinite combinations and changes of the variations and genetic factors result in the infinite potential of biological variation and inheritance, which is the internal reason for the evolution of a biological system to diversification and complexity. From the perspective of the external environment of the biological system, there are many ecological factors in the ecological environment, which naturally form their own distinctive differences in long-term evolution. The infinite combination and changes in the differentiated ecological factors result in a variety of ecological environments. The selection, isolation, and mutagenesis exerted by these diverse ecological environments on biological systems are the external reasons for the evolution of a biological system to diversification and complexity. In the evolution of biological systems, the coincidentia oppositorum (unity of opposites) of internal causes and external causes is actually the combined action mechanism of variation-inheritance and adaptationselection revealed by Modern Synthesis, which is the fundamental driving force behind the evolution of biological systems. Different combinations of internal causes of the biological system and external causes of the ecological environment make the same species differentiate and evolve in different directions. After a long-term accumulation of variation, populations that evolve in different directions eventually form species with greater differences. In summary, biological diversity originates from the varying combinations of biological variation and ecological environment, and the infinite change of these combinations is the inexhaustible source of biological evolution.

2.4.8 Some New Understandings About the Dynamic Mechanism Behind the Evolution of Biological Systems According to the basic principles of system theory, the process of system evolution is the process of interrelation, interaction and interinfluence between internal causes and external causes, and the state of system evolution is the result of the unity of opposites between internal causes and external causes. In the evolution of biological systems, biological variation and inheritance are internal causes, while selection, isolation, and mutagenesis of the ecological environment are external causes. It is the unity of opposites of internal causes and external causes that pushes biological systems to evolve to diversification and complexity. When the internal causes of the

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biological system and the external causes of the ecological environment are coordinated, the biological system will appear in a temporary stable state (at this time, the biological evolution is in a stage of gradual change). However, with the occurrence of new variation, inheritance, and the change in the ecological environment in the biological system, new antagonisms will be formed between internal causes and external causes, and the biological system will appear in a temporary unstable state (at this time, the biological evolution is in a stage of abrupt change), followed by the selection of the new mutation by the new environment. When the organisms adapt to the new environment, the two sides tend to be temporarily unified, which is actually a dynamic cyclical process that goes back and forth. This process is a discontinuous equilibrium process in which stability-instability and gradation change-abrupt change are constantly intertwined in the evolution of biological systems.

2.4.9 Philosophical Enlightenment on the Structure and Evolution of Things From the Theory of Biological Evolution 2.4.9.1

The Two-Tiered Information Structure

From the performance of information, a thing generally has a unique two-tiered information structure, which means that the information inside a thing can be divided into two levels: one is the visible explicit level (surface structure), and the other is the hidden implicit level (deep structure). The surface structure determines the generality of a thing; the visible information it contains is commonly open to the external environment, and it interacts with the external environment to form a part of the environment in which the thing is located. The deep structure of things determines the particularity of things, and the hidden information it contains is generally closed to the external environment, which is the source of the diversity of things. The information contained in the same type of things at the same level has both the same components and varied components. The visible information contained in the surface structure is normally more discrepant than consistent, while the hidden information contained in the deep structure is mostly more consistent than discrepant. It can be summarised from the perspective of information that there is always a certain degree of similarity between things, which means that there are more similarities than dissimilarities between the same type of things and more dissimilarities than similarities between different types of things.

2.4.9.2

The Development Trend of the Evolution of Things

Evolution refers to the movements and changes that occur with the continuation of time and the expansion of space. It generally includes three developmental trends:

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progression, regression and stagnation. Progression refers to the forward, progressive, and expanded evolution of the structure, function, and external connection of a thing from simplicity to complexity, from disorder to order and from low-level to high-level. Regression refers to the backward, regressive, and shrunken evolution of the structure, function, and external connection of a thing from complex to simple, from order to disorder and from high-level to low-level. Stagnation means that things are in a neutral and relatively static development trend in the process of change, which is a chaotic state between progression and regression. At different stages or different levels in the evolution process of things, the development state of things may present as one of the three trends of progression, regression, stagnation, or may show some kind of mixed state of the three trends (i.e., partially progressive, partially regressive, or partially stagnant).

2.4.9.3

The Essence of the Evolution of Things

The evolution of anything is a historical process closely related to time and space, which is the unity of progression, regression and stagnation that occur in a specific spacetime. During progression, some internal structures or functions may decline or stagnate to some extent, while during regression, some internal structures or functions may also undergo a certain degree of progression or stagnation. From the perspective of time, the evolution of things does not proceed at a uniform speed but tends to happen in fits and starts, sometimes moving very fast, sometimes moving very slowly. In terms of space, the evolution process of things is not carried out homogeneously but is manifested as differences in density, with some aspects expanding and some shrinking. Therefore, the overall evolution of things is the unity of gradual change and disruptive change, quantitative change and qualitative change, order and disorder, and progression and regression. In the biological evolution of nature, it is not difficult to find such cases of the unity of progression and regression. For example, palaeontological studies showed that the ancestors of modern cetaceans and other aquatic mammals were animals that ran on land with limbs 50 to 60 million years ago, which returned to rivers and seas approximately 45 million years ago to adapt to the changes in the Earth’s natural environment and degenerated their overall body structure from complex to simple during the long process of adaptation to the aquatic environment. By comparing the body structure of ancient whales and modern whales, it was discovered that their bodies were adjusted to streamlined shapes, forelimbs shortened and progressed into flat fins, hind limbs greatly degraded (as seen from the remains of the pelvis and femur), and tails broadened at the tip in horizontal flukes to create a hydrofoil to fit in their exclusively aquatic lifestyle.73 Seals, another aquatic mammal, also experienced

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Mueller, T. Valley of the Whales. National Geographic, 2010, (8).

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regression similar to that of ancient whales in their long-term evolution.74 Comparing the body structure of ancient seals and modern seals, it was discovered that the outer ears of the seals were greatly degenerated (into two small holes), while their limbs progressed into flippers (webbed toes). This idea can also be proven by the physiological structure of the human body that the general trend of human evolution is progressive, but human tissues and organs such as the cecum and coccyx were significantly degraded. In nature, the evolution of organisms is manifested not only in the progression or regression of their morphological structure but also in the changes in species diversity and adaptability of biological populations.

2.4.9.4

The Dynamic Mechanism Behind the Evolution of Things

The dynamic mechanism of the evolution of things is the unity of opposites between internal causes and external causes, and the direction of the bifurcation of the evolution of things depends on the relative status of the internal causes and the external causes, which is a dynamic process of repeated games between internal causes and external causes. At one stage or level of the evolution of things, internal causes may be in a dominant position, while external causes may be in a subordinate position, and the internal causes determine the direction of the evolution of things. At another stage or level of the evolution of things, the positions of internal causes and external causes may be interchanged, that is, external causes may be in a dominant position, while internal causes may be in a subordinate position, and external causes determine the direction of the evolution of things.

2.4.9.5

The Relation Between Systems Structure and Function

Generally, the internal structure of the system determines the nature of its external output function. On the one hand, systems with different internal structures generally have different external output functions. On the other hand, when the external environment of a system changes, the environment will put forward new function requirements for the system, and the internal structure of the system will also change accordingly to adapt to the changed new environment. Such cases of adapting to the external environment by changing the internal structure also exist in biological evolution. For example, the Bajau people living in Indonesia mainly collect sea cucumbers from the sea and sell them for a living. Researchers discovered that long-term diving to collect sea cucumbers led to a mutation in the genes of the Baggio people who their spleens are five times larger than ordinary people and can secrete a hormone

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Yan, X. H., Cao, J. Y. (1995). A Research on Some Basic Concepts of Evolution. Journal of Yan’an University (Natural Science Edition) (04):84. 阎锡海., 曹娟云. (1995). 生物进化论中的 若干基本概念探究. 延安大学学报(自然科学版) (04):84.

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when they dive to increase the content of oxygen molecules in the blood, allowing their bodies to adapt to diving operations in the sea for a long time.75

2.5 The Three Basic Principles of the Evolution of Complex Systems Of the three basic principles introduced in this section, some have been applied as philosophical ideas to the analysis of economic systems, some have been specifically discussed in relevant chapters, and some have been expressed in other ways in the first edition of the book. To make it easier for readers to understand the ideas contained in these basic principles, this revised edition extracts them specifically to elaborate.

2.5.1 The Principle of System-level Emergence The ontology of this book adheres to the idea of evolutionary pluralism. Using this idea to understand the hierarchy of the system means that the system gradually evolves from nonhierarchical to hierarchical, from single-layer to multilayer, and from simple structure to complex structure, and a complex system is a multilayered entity, each layer has a unique structure that is different from other levels. Based on the layered ontology and emergence ideas of philosophers such as Roy Bhaskar (1944–2014), Alfred North Whitehead (1861–1947) and Arthur Koestler (1905–1983), British evolutionary economist Geoffrey M. Hodgson extended the ontological layered view to the analysis of the evolution of social institutions.76 The layered ontology and emergence thought are of great value for understanding the complexity of the socioeconomic system. From the relation between the whole and the part, each layer of the system has duality, which is not only the constituent element (or subsystem) of the upper layer but also the whole of the next layer, containing all elements (or subsystems) of the next layer. For a complex system in which there are people involved, although the upper layer of the system is composed of the elements of the lower layer, logically, each layer of the system has new features that cannot be restored to the properties of its constituent parts, let alone reducing all layers to a single layer of atomic individuals. In other words, in a complex system, no layer can be simplified or restored to another layer, and the explanation of one layer cannot be completely

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Stewart, J. (2018, May 7). Rare Genetic Mutation Allows Bajau People to Stay Underwater for Extended Periods. Cell. http://mymodernmet.com/bajau-freediving-genetic. 76 Hodgson, G. M. (1999); and Hodgson, G. M. (1999). Evolution and Institutions: On Evolutionary Economics and the Evolution of Econmics. Edward Elgar. Chapt. 6 Meanings of Evolutionary Economics.

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reduced to the phenomena of its lower layers. A higher-layer system includes a lowlayer system and is based on a lower-layer system, but a lower-layer system cannot determine the function and property of a higher-layer system; that is, a lower-layer system is necessary rather than sufficient conditions for a higher-layer system. For example, in the economic system of modern society, in the sequence from the firm system, industry system, and sector system to national economic system, the lowerlayer system cannot determine the function and property of the higher-layer system, but they can generate a higher-layer system by communicating with relevant social and natural environments and by interacting with other lower-layer systems. It is precisely because of the existence of higher and lower layers in the complex system that these levels can be divided and categorised by terms such as micro, meso and macro. In a complex system, how are the layers connected? Emergence is the key. The philosophical concept of emergence that appeared in the 1920s has regained the attention of the scientific community in recent years after a period of silence with the development of systems science. In systems science, the interaction between the low-layer elements of a system will produce novelty at new layers, but its property cannot be explained by the properties of the low-layer elements. The novelty here is a new structure produced by the interaction of the elements of the system, which has completely new properties and characteristics. For example, firm organisation is formed through the interaction between individuals, and the firm system is created by the combination of firm organisation and various resources. The firm system is composed of elements such as individuals, organisations, and resources. The interaction between these elements will produce a new structure in the firm system, but the property of this new structure cannot be explained by individual properties of any single element of the firm system. When one element is added to another, purely from mathematics, the result should be 1 + 1 = 2, but from the emergence’s philosophy of creating novelty, the result should be 1 + 1 > 2, which is the essential meaning of emergence. In chemistry, for instance, hydrogen (H) and oxygen (O) combine to form a new substance, water (H2 O), whose structure and properties are obviously different from hydrogen and oxygen alone. Looking at society as a totality, the production activities of human society include at least three aspects of population production, material production and information production, which are inseparable and organically connected. From the production activities of material products, the economic system of modern society can at least be divided into different layers of firm system, industry system, sector system and national economic system. By comprehensively examining the behaviour of the economic system, it can be discovered that there are emergence phenomena among the various layers of the economic system. It is the interrelation, interinfluence and interaction between the elements inside and outside these systems that lead to the emergence of a new structure of the higher-layer system from the lower-layer system of the economic system.

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2.5.2 The Coupling Principle of Positive and Negative Feedback Feedback is a fundamental concept in cybernetics.77 It refers to the process of regulating the function of a system by returning some or all of the system’s output information to the system’s input in the process of system–environment interaction. Feedback can be divided into positive and negative feedback. On the one hand, positive feedback is the process when regulating the directions of the feedback and the input are the same, thereby promoting and enhancing the system’s function. On the other hand, negative feedback is a process wherein the feedback information is regulated in the opposite direction of the input information, thereby inhibiting and weakening the system’s function. The meaning of positive feedback is to promote the changes in the system’s internal environment, which in turn causes structural instability of the system and thus drives it away from equilibrium. Alternatively, negative feedback means maintaining a stable environment within the system, which keeps the system structure settled and consequently contributes to the system’s balance. The terms positive and negative here do not convey their literal meanings. For social systems, positive feedback can be either a revolutionary or destructive factor. For instance, positive feedback can lead to system innovation and collapse or annihilation. Again, negative feedback may be a conservative or constructive factor. For example, negative feedback can drive a system to maintain a steady state or cause the system to stagnate or to decay. The virtuous and vicious cycles of a system are both positive feedback mechanisms at work, whereas the system’s steady state and equilibrium state are both negative feedback mechanisms in operation. First-generation cybernetics focused on the issues of the system’s negative feedback. At that point, cybernetics emphasised that an open system could maintain its steady state only when a circular negative feedback loop is formed in its internal environment. Meanwhile, second-generation cybernetics dealt with both negative and positive feedback issues and combined the two to study their interaction mechanisms. Moreover, the cybernetics at that time indicated that under the combined actions of positive and negative feedback, the system could operate in three states: dynamic equilibrium (steady state), deviation from equilibrium (unstable state), and abrupt bifurcation (in multiple steady states). For a system, positive feedback amplifies the input. Additionally, the positive feedback effect of the system occurs when the negative feedback effect decays.78 77

The main content of this section was first given a speech on the afternoon of November 21, 2020 in the panel discussion of the 12th Annual Conference of China Evolutionary Economics held in Guilin, Guangxi, then published with the title of A Brief Discussion on the Coupling Principle of Positive and Negative Feedback in the Economic System in the second issue of 2021 of Review of Evolutionary Economics and Economics of Innovation sponsored by Tsinghua University in Beijing. 78 Pang, Y. Z., Li, J. H. (eds). (1989). Selected Classical Literature on Systems Theory, Cybernetics, and Information Theory. Qiushi Press. pp. 284–285. 庞元正., 李建华. (eds). (1989). 系统论、控 制论、信息论经典文献选编. 求实出版社. pp. 284–285.

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Niu Long-Fei, a cultural philosopher, summarised the philosophical idea of positive feedback, self-generation and negative feedback, the self-stabilisation coupling principle based on the outcomes of systems science in combination with the classical Chinese philosophy in Zhou Yi (the Earliest Book on Systems Science in the World and among the oldest of the Chinese classics) and Taoism’s idea of Tai Chi (a Chinese cosmological term for the Supreme Ultimate).79 The evolution of a system contains both positive and negative feedback effects. Moreover, it is an organic coupling of positive and negative feedback. As Niu LongFei noted, “The former is to change, the latter is to not change; The former is the proliferation of information, and the latter is the maintenance of information; The former is positive feedback, self-generation, and the latter is negative feedback, selfstability.” He further stated, “Neither positive feedback self-generation alone, nor negative feedback self-stabilisation alone, is sufficient condition for the evolution of things. However, the reciprocal cycle of the two is what ensures the occurrence and existence of heterogeneous new things.”80 A system in a stable state will be destabilised and self-organised due to a positive feedback mechanism. The result of self-organisation is to create a new structured system on a new level, which will maintain a relatively stable state due to a negative feedback mechanism. This cyclical process will continue to produce new structured systems from the old ones. Both positive and negative feedback phenomena exist in real economic activities. By way of illustration, “the rich get richer, and the poor get poorer” is a positive feedback phenomenon in wealth distribution; Simultaneously, the balance of supply and demand is a negative feedback appearance in market exchange. Moreover, positive and negative feedback precepts exist among the economic laws that people have concluded. As proof, the laws of increasing returns and diminishing returns are postulated, where the former corresponds to a positive feedback mechanism and the latter corresponds to a negative feedback mechanism. The law of increasing returns means that as the input elements continue to grow in an economic system, the output will increase accordingly, that is, the marginal revenue is on the rise. Meanwhile, the law of diminishing returns refers to the fact that as input elements continue to increase in an economic system, the system’s output will first increase and then decrease, that is, the marginal revenue shows a downward trend. These laws are two basic propositions in economic theory. From a superficial point of view, they are contradictory and opposed to each other, which have led to a long dispute in the economics community. Can they be organically integrated and unified? In terms of premises, period, and method of observation of propositions, the law of diminishing returns is the result of a static study of local, short-term phenomena in the 79

Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. pp. 109–110. 牛龙菲. (1989). 人文进化学. 甘肃科学技术 出版社. pp. 109–110. Niu, L. F. (1990). Human-Culture-Civilization Evolutionology and General Evolution Theory. World Futures—The Journal of General Evolution. Gordon and Breach Science Publishers S. A. (30). pp. 85–94. 80 Long, F. (2017). Historical Evolution and System Structure. New Economy (04):34, 35. 陇菲. (2017). 历史演化与系统结构. 新经济 (04):34, 35.

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economic field. Alternatively, the law of increasing returns is the insight derived from dynamic research of overall, long-term events in the economic area. Arguments in the economic community are more reflected in the differences between the understanding of these two aspects. To essentially identify the differences, the histories of economic thought and socioeconomic formations can be examined.

2.5.2.1

An Investigation into the History of Economic Thought

If tracing economic thought back to the initiation of classical economic theory, it will be noticed that there is no such disagreement in Adam Smith’s The Wealth of Nations. Since the 1930s, the static equilibrium framework has been continuously refined in the mainstream economics community, dominated by neoclassical economic thought, whereas dynamic economic development has long been neglected. It was not until the 1980s that economic theories emphasising disequilibrium and the law of increasing returns attracted attention. In The Wealth of Nations, Adam Smith proposed two different theories of economic equilibrium and economic evolution. His idea of equilibrium was mainly reflected in the section “On the natural and market prices of commodities.” Since Adam Smith proposed the theory of economic equilibrium, from Léon Walras (1834– 1910) and Alfred Marshall (1842–1924) to Kenneth J. Arrow (1921–2017) and Gérard Debreu (1921–2004), the general equilibrium theories were in the same vein. The core of general equilibrium theory was the analysis of the conditions for reaching various equilibria in an economic system. To build mathematical models, economists had to make extremely strict assumptions about the theory’s premises, from which increasing returns and the nature of technological and institutional changes were excluded.81 In 1890, Alfred Marshall applied partial equilibrium analysis in his masterpiece Principles of Economics82 to detail the existence of increasing and diminishing returns in the economic system and the interrelationship between them. From the characteristics of diminishing returns in agriculture and mining sections, he inferred that the universal law governing the economic system was the law of diminishing returns. Moreover, he attributed the cause of increasing returns to the expansion of firms or industries’ size. When the size of the representative firms increased, individual firms experienced increasing returns to scale, which he termed the internal economy. Meanwhile, when the size of the representative firms remained the same but the size of the industry increased, individual firms also experienced increasing returns to scale, which he termed the external economy.

81

Jia, G. L. (1998). Economics of Increasing Returns: Retrospect and Prospect (I). Nankai Economic Studies (06):30–32. 贾根良. (1998). 报酬递增经济学: 回顾与展望(一). 南开经济研究 (06):30– 32. 82 Marshall, A. (1930). Principles of Economics. The Macmillan and Co. Limited. Chaps. 8–13.

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In 1928, Allyn Abbott Young (1876–1929) expounded Adam Smith’s economic thoughts. He attributed the cause for increasing returns to the interaction and interstimulation between the division of labour among industries and the extent of the market. Simultaneously, he highlighted the conditions of departure from equilibrium in economic operations.83 The ideas of Alfred Marshall and Allyn Young have a significant influence on later economists. Since then, two significantly different thought lines have been formed in the development of economic theories: the neoclassical and structuralist economic theories. The neoclassical economic theory incorporates the external economy into the equilibrium framework. Meanwhile, a structuralist economic theory initiated by economist Allyn Young and refined by Karl Gunnar Myrdal (1898–1987) and Nicholas Kaldor (1908–1986) emphasises the importance of imbalanced characteristics of the economic operating process and the importance of historical conditions. Its most recent representative is W. Brian Arthur. Rethinking the basic assumptions and research paradigms of neoclassical economic theory, Brian Arthur constructed a new framework of complexity economics by applying the positive feedback thought in cybernetics and the probability theory method in mathematics to analyse the disequilibrium process and increasing returns in the economic system.84 His series of papers published since the 1980s (1987, 1988, 1989, 1990, etc.) have advanced the theory of increasing returns to a new stage and made significant contributions to the development of economic theory. Brian Arthur stressed that the law governing the modern economic system was the law of increasing rather than diminishing returns. Moreover, the evolution of the economic system was characterised by positive feedback and path dependence. He highlighted that, under the premise of increasing returns, multiple equilibria would occur in the operation of the economic system. That is, increasing returns could lead to a variety of possible outcomes, and the exact outcome bound to happen was not certain but mediated by a series of random events in history. A result selected by random events might be inefficient; in other words, it might not be necessarily optimal but suboptimal or inferior. However, once the economic system determined such an outcome, the economic operator would step into that specific path and be locked in it. The result of the positive feedback effect of increasing returns would magnify this outcome, eventually leading to the “the superior gets better, and the inferior gets worse” result. From this, he precisely explained the “vicious circle of poverty” phenomenon in underdeveloped countries and the economic growth differences of “poor countries get poorer, and rich countries get richer.” Brian Arthur focused more on studying the evolution of technologies, and his framework needs to be considered in a broader domain. If neoclassical economic theory is representative of emphasising the law of diminishing returns, structuralist economic theory is the representative of underlining the law of increasing returns. The former emphasises the equilibrium characteristics of 83 Young, A. A. (1928). Increasing Returns and Economic Progress. The Economic Journal 38(152), pp. 533–539, 541. 84 Arthur, W. B. (2014). Complexity and the Economy. New York: Oxford University Press.

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the economic operating process and the law of diminishing returns. It is based on the concept of the optimal, unique outcome, predictable, and history-independent equilibrium. Conversely, the latter underlines the nonequilibrium characteristics of the economic operating process and the law of increasing returns. It is founded on the concept of nonoptimal, multiresults, unpredictable, and history-dependent evolution. Obviously, these are two very different economic theories. In the economic field, neoclassical economic theory emphasises statics, negative feedback, and equilibrium more but ignores long-run unbalanced growth. It even tries to integrate long-term economic improvement into the equilibrium framework. Meanwhile, structuralist economic theory emphasises the dynamics, positive feedback, and disequilibrium while ignoring the partial short-term economic equilibrium in the economic domain. The long-standing debate in the economics circle about economic equilibrium and disequilibrium actually reflects the divergence of understanding of the relationship between positive and negative feedback. This disagreement may be settled by unifying the local static equilibrium idea and the overall dynamic nonequilibrium idea in epistemology. The two ideas cannot be separated or opposed to each other, nor can either of them be abandoned.

2.5.2.2

A Study in the History of Socioeconomic Formations

In the history of socioeconomic formations, human society has experienced the eras of the gathering and hunting economy, agricultural economy, industrial economy, service economy, and information economy. In the long historical process, on one hand, more factors of production have been involved in the economic system, and the connotation of the economic system has been enriched; on the other hand, among the total factors of production, the relative weight and revenue contribution of tangible factors have tended to decrease gradually, whereas the relative weight and revenue contribution of intangible factors have tended to increase progressively. In the era of the gathering and hunting economy, the geographical distribution and abundance of natural resources on the land, for example, water, plants, and animals, directly influenced the economic life of different ethnic groups in human society. Meanwhile, in the age of the agricultural economy, production factors, such as land and labour, had a leading role in the development of social productivity. In the industrial economy era, factorssuch as land, labour, and monetary capital played a leading role in the development of social productivity. Since the twentieth century, human society has entered the era of the service economy. In terms of improving social productivity, the role played by tangible factors of production (i.e., land, labour, and monetary capital) has been reaching its limit. Alternatively, the role played by intangible factors (i.e., human capital, management knowledge, and production technology) has become increasingly important. Since the 1950s, human society has entered the era of the information economy. In this era, the proportion of tangible production factors in the economic system, such as natural resources, land, labour,

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and monetary capital, has declined. Meanwhile, the proportion of intangible production factors in the economic system (i.e., human capital, education and training, knowledge, technology, institution, and information) is increasing daily. For a specific society or country, the quantity of tangible factors, for instance, natural resources, land, labour, and monetary capital, is limited in the short term (less than a year). These factors generally have characteristics and properties such as scarcity, slow regeneration, and difficulty in sharing, which determine the features of diminishing returns in an economic system led by tangible factors of production. Moreover, the quantity and quality of intangible factors are growing and improving in the long term (more than one year). These factors usually have characteristics and properties opposite to the aforementioned ones, such as nonscarcity, faster regeneration, and the ability to be shared, which determine the features of an economic system led by intangible factors of production with increasing returns. At present, human society has entered the era of the knowledge economy. Various kinds of knowledge and technologies are nonexpendable and can be easily spread and shared as factors of production. Furthermore, they can be integrated with other knowledge and technologies to derive new ones, that is, creating new knowledge through the existing knowledge and inventing new technologies through existing technologies, thus enabling continuous innovation and value appreciation of the economic system. Therefore, it is apparent that equilibrium theory and disequilibrium theory are not in absolute opposition and contradiction but can be compatible and unified. That is, the analysis of economic systems lends itself to the application of equilibrium theory in the short term and disequilibrium theory in the long term. Regarding the relationship and compatibility between the law of diminishing returns and that of increasing returns, Tao Shi and Aiping Tao (2007) gave a better explanation85 : changes in the relative weight of tangible and intangible factors of production in total factors directly determine the direction of changes in returns. Increasing returns may appear in a certain industry or a certain section of an industry in a traditional economy. However, under the predominance of tangible factors, the increasing returns as particularity are often submerged in the generality of decreasing returns in many economic fields; with the continuous enrichment of the economy, the proportion of intangible factors in the total increases. Thus, the increasing trend of total marginal returns becomes more apparent, and the law of increasing returns extends from one or a few fields to many other fields and thus becomes increasingly general. From the above discussion, the understanding of the theory of equilibrium and the theory of disequilibrium, and that of law of diminishing returns and the law of increasing returns, are in fact compatible with each other and can be unified, despite the long-standing disputes between them in economics. The human social system is a super complex giant system. It is easy to fall into misunderstandings and draw one-sided conclusions from partial and short-term 85

Shi, T., Tao, A. P. (2007). Increasing returns: Analysis on the Conversion from the Particularity to the Universality. China’s Industrial Economics (04):10. 石涛., 陶爱萍. (2007). 报酬递增: 特殊 性向普遍性转化的分析. 中国工业经济 (04):10.

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observations. Only observation and thinking from the overall and long-term historical process can help us witness the trend of social development clearly and truly grasp its essence. In the long evolution of the social system, both positive and negative feedback effects alternate in predominance, thereby making the system both relatively stable and in a constant state of evolutionary change. From a long-term historical perspective, after a social system has accumulated abundant practices, some individuals will generate innovations in knowledge, technology, institutions, and so on. When these innovations are disseminated and diffused through social selection, the positive feedback mechanism of evolution in the social system is activated. Furthermore, when the positive feedback effect develops to a critical point, the social system will suddenly bifurcate. It may either jump to a higher or fall to a lower level. The leap or fall of the social system depends on the influence of contingent factors at that point; once the social system enters a certain level, it will remain relatively stable for a certain period due to the effect of the negative feedback mechanism. The long-term evolution of the social system is actually a process of organic coupling, alternating dominance, and reciprocating cycles of the effects of positive and negative feedback. Applying the coupling principle of positive and negative feedback can clarify the essential relationship and compatibility between the law of diminishing returns and the law of increasing returns. This can bridge the fundamental differences between the theories of equilibrium and disequilibrium in economics in a philosophical and epistemological sense and thus help effectuate the creative synthesis of economic theories.

2.5.3 The Principle of Circular Cumulative Causation The concept of cumulative causation has two meanings. One is that all phenomena can be traced back to the origin of their occurrence, that is, the occurrence of things is the cumulative result of a series of causes. The second refers to the interinfluence between the cause and the result, that is, the dynamic process of action and reaction, and interactive influence between the cause and the result. Inspired by Darwin’s theory of evolution, the concept of cumulative causation was first proposed in 1898 by the American economist Veblen.86 Unlike Veblen, the concept commonly used by economists such as Myrdal and Kaldor is Circular Cumulative Causation. From the literal expression, Veblen’s concept is close to the first meaning, while Myrdal and Kaldor’s concept is the second meaning. Adam Smith systematically discussed the idea that the division of labour leads to the expansion of the extent of the market in his theory of division of labour, which contains the one-way causality that the division of labour leads to the expansion of the extent of the market. Allyn Young developed Adam Smith’s one-way causality 86

Veblen, T. B. (1898). Review of Mallock, William H. Aristocracy and Evolution: A Study of the Rights, the Origins and the Social Functions of the Wealthier Classes. Journal of Political Economy.

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into a two-way reciprocal relation. He emphasised that “the securing of increasing returns depends upon the progressive division of labour” and “the division of labour depends upon the extent of the market, but the extent of the market also depends upon the division of labour”,87 revealing the mutual causal relationship between the division of labour and the extent of the market in the course of time. In fact, Allyn Young organically combined the three aspects of the division of labour, the extent of the market and the increasing returns and comprehensively discussed the dynamic operating process of the economic system. This dynamic process of the division of labour → the expansion of the extent of the market → the increasing returns → the further division of labour → the further expansion of the extent of the market is actually the core essence of the classical theory of economic growth, which profoundly reflects the circular cumulative causation existing in the economic system. If the three axes (i.e., A, B, C) are used to represent the growth degree of the three dimensions of the extent of the market, the increasing returns and the division of labour (Figs. 5.9), it can be clearly seen that the process of economic development is an expanding spiral (Fig. 5.9 is a helix diagram in a three-dimensional coordinate system). In 1931, Myrdal introduced the concept of the cumulative process of Swedish economist Knut Wicksell (1851–1926) into his book Monetary Equilibrium.88 The concept of circular cumulative causation was explicitly proposed by Myrdal in 1944, who recognised the triggers and underlying mechanisms of the causal interaction in the self-enhancing effect of the system.89 Myrdal advocated a holistic approach to comprehensive research on economy, society, institutional phenomena, social equality, population, race, and poverty, focusing on the links between economic and noneconomic factors and emphasising the interdependence between the factors in social operation, and put forward the important idea that the factors in the dynamic operation of social economy are interrelated, interacted and are changing in a circular way. He believed that “in a dynamic social process, there is a causal relation between social factors. A change in one socioeconomic factor will cause a change in another social factor, which in turn strengthens the previous change in the first factor. Therefore, the relation between the socioeconomic factors does not tend to be a stable equilibrium, but a circular movement”. He distinguished the movement of the Circular Cumulative Causation into two forms of the ascending circular cumulative motion and the descending circular cumulative motion.90

87

Young, A. A. (1928). Increasing Returns and Economic Progress. The Economic Journal, 38(152), p. 539. 88 Barber, W. J. (2008). Gunnar Myrdal. New York: Palgrave Macmillan. p. 73. 89 Yang, H. T., Xu, H. M. (2014). The Circular Cumulative Causation of Evolutionary Economics: Veblen, Myrdal, and Kaldor. Fujian Tribune (04):29–30. 杨虎涛., 徐慧敏. (2014). 演化经济学的 循环累积因果理论——凡勃伦、缪尔达尔和卡尔多. 福建论坛 (04):29–30. 90 Ma, T. (ed). (2018). A Tutorial on the History of Economic Thoughts. Fudan University Press. pp. 316–317. 马涛 (ed). (2018). 经济思想史教程. 复旦大学出版社. pp. 316–317.

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Kaldor, as a student of Allyn Younger and a colleague of Myrdal,91 inherited the abovementioned thoughts of Allyn Young and may also absorb Myrdal’s related ideas, further enriching and developing the idea of circular cumulative causation on their basis. Kaldor incorporated factors such as demand, investment, productivity, net exports, and real income into the analysis of circular cumulative causation and studied the virtuous circular mechanism of the economic system. Kaldor analysed demand and assumed that strong domestic demand can form stable and optimistic market expectations, stable and optimistic market expectations will stimulate investment, and investment in new technologies will improve productivity and yield economies of scale. The increase in productivity promotes the growth of net exports and further increases the level of demand by raising real income, while the Circular Cumulative Causation between investment, productivity, net exports, real income and domestic demand drives continuous economic growth.92 It is obvious that the idea of circular cumulative causation can clearly reflect the trajectory of the complex system evolving over time. When a multidimensional coordinate system is applied to describe the evolutionary trajectory of a complex system, the images displayed by these trajectories are shown as various spiral diagrams. For instance, the virtuous circular evolution of a firm system is shown as an expanding helix, the vicious circular evolution of a firm system is shown as a shrinking helix, and the rigid and stagnant firm system is shown as a circular cycle. At present, the principle of circular cumulative causation is regarded as a common principle that embodies the methodology of holism, evolutionary processes, and disequilibrium analysis in evolutionary economics,93 which is in fact not unique to the field of evolutionary economics but has long existed in the field of history with similar ideas. For example, the philosopher of history Giovanni Battista Vico (1668– 1744), in his New Science published in 1725, regarded human history as a cyclical process, revealing that historical evolution is like an upward spiral, which contained the idea of Circular Cumulative Causation. In addition, the idea of circular cumulative causation was also absorbed by contemporary thought of complexity. For example, the French philosopher Edgar Morin, famous for his thoughts on complexity, clearly pointed out that there are three types of causation: linear causality, feedback loop causality and recursive causality.94 The helix diagrams in Chaps. 4, 5, 7 and 8 are visual representations of the principle of circular cumulative causation. 91

Kaldor worked with Myrdal at the UNECE (United Nations Economic Commission for Europe). See Principle of Circular and Cumulative Causation: Fusing Myrdalian and Kaldorian Growth and Development Dynamics. requoted from: Yang, H. T., Xu, H. M. (2014). The Circular Cumulative Causation of Evolutionary Economics: Veblen, Myrdal, and Kaldor. Fujian Tribune (04):29. 杨虎 涛., 徐慧敏. (2014). 演化经济学的循环累积因果理论——凡勃伦、缪尔达尔和卡尔多. 福建 论坛 (04):29. 92 Kaldor, N. (1978). Further Essays on Economic Theory. New York: Holmes and Meier Publishers. pp.100–139. 93 Yang, H. T., Xu, H. M. (2014). The Circular Cumulative Causation of Evolutionary Economics: Veblen, Myrdal, and Kaldor. Fujian Tribune (04):31. 杨虎涛., 徐慧敏. (2014). 演化经济学的循 环累积因果理论——凡勃伦、缪尔达尔和卡尔多. 福建论坛 (04):31. 94 Morin, E. (2008). On Complexity. Hampton Press. pp. 60–61.

Chapter 3

A Bird’s-Eye View of the Economic Society

This chapter is the outline of the whole book, which basically reflects the overall appearance and core idea of the book. This chapter introduces the basic hierarchy from the natural system to the social system; concludes the four major laws (i.e., bifurcation, synergy, fractal and periodicity) followed by the evolution and development of human society; summarises the basic classification of resources and their forms; describes the evolution of the components of social reproduction; analyses the features of the long-term transition of relations of distribution in social production by means of historical investigation; and finally demonstrates the differences and similarities between the theoretical framework of this book and the micro-mesomacro theoretical framework proposed by Kurt Dopfer and others by comparing the connotation of the surface structure and the deep structure and lists the niches of the systems in different domains. The theoretical framework of this book will help to establish a new economic paradigm for the twenty-first century. The main discussions of this chapter are as follows: 1. In modern society, a complete state system includes at least six subsystems: the human-culture system, economic system, political system, science system, legal system and education system. A state’s internal economic system can be divided into five basic levels of firm (micro), industry (meso), sector (meso-macro), national economy (sub-macro), and state and society (macro). 2. The evolution and development of human society generally follow the four laws of bifurcation, synergy, fractal and periodicity. Scholars (especially economists) worldwide have already conducted a great deal of research and discussion on bifurcation and periodicity, so this book focuses on synergy and fractal. An important theoretical achievement of the book is its revelation of the general structural similarity between the firm system, the sector system and the national economic system and its disclosure of the two-tiered structure of the subsystems in the social system in terms of human-culture, economy, and polity. 3. The resources of human society can generally be categorised into natural resources and social resources; social resources can be divided into human resources, material resources and knowledge resources. Among them, human © Fudan University Press 2023 R. Gan, Helix Network Theory, https://doi.org/10.1007/978-981-19-8803-5_3

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resources are important renewable resources and the most productive resources among all available resources. Knowledge resources are economic resources with original attributes. 4. The four parts of production, distribution, exchange and consumption have been regarded as the components of social reproduction since they were separated from Economics by French scholar Jean Baptiste Say (1767–1832). This chapter graphically describes the long-term changes in social reproduction from primitive society, agricultural society, and industrial society to modern society. It is discernible that with the continuous development of human society, the process of social reproduction has become more complicated. From the long-term history of human society, socioeconomic systems are similar to biological organisms in that they also have a history of birth, growth, and evolution. Therefore, human socioeconomic activities are more suitable for observation and research from the perspective of biology rather than from the mechanical view of physics. 5. As far as the entire socioeconomic life of mankind is concerned, the link of distribution is of special importance. From the historical development of the entire human society, the relations of distribution have generally evolved from basic fairness and equality in the primitive society to extreme unfairness and inequality in the slave society, then to general unfairness and inequality in the feudal and capital society, and finally to comparative fairness and equality in modern society. From the perspective of long-term historical changes, there is a dynamic relationship of action-reaction and feedback-adjustment between the human cognition level of social production and the social distribution result. On the one hand, the lower level of human cognition determines their unreasonable value orientation, resulting in an unfair social distribution result. On the other hand, the unfair social distribution result will lead to the resistance or revolution of the exploited class, forcing them to challenge the unreasonable distribution institutions and gradually improve the public’s cognition level of social production. In a social economic system, there is also a dynamic relationship of action-reaction and feedback-adjustment between the ratio structure of factors of production and the ratio structure of factors of distribution, which is similar to the interactive relationship between human cognition level and social distribution result. In the development of human society, the relative position of production factors such as manpower (labour), land, capital, technology and knowledge is always changing. It is the constant changes in the relative positions of the factors of production that push the long-term evolution of the structure of social factors of production, which in turn encourages changes in the structure of factors of distribution. In a certain period of time, the decisive effect of the relations of production factors on the relations of distribution factors is determined by the level of social production, which is, in essence, determined by the human cognition level, while the reactive force of relations of distribution factors to relations of production factors is mainly manifested in the continuous adjustment and transformation of the distribution institutions. 6. Different from Adam Smith, Karl Marx and Vilfredo Pareto (1848–1923), who selected three core concepts of value, commodity and economic man, respectively,

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as the origin of the study of Economics, this book chooses system as the core concept and uses firm system as the starting point of research to analyse the organic connection and complex operation process of different links of social reproduction in modern society from micro, meso and macro. 7. A pair of important categories for understanding the theoretical ideas of this book are surface structure and deep structure. From the comparison of the connotation of the categories, it can be discovered that the theoretical framework of this book further deepens, refines and improves the micro-meso-macro theoretical framework proposed by Kurt Dopfie et al. Continuing research and synthesis along the theoretical framework proposed in this book will help to establish a new economic paradigm that meets the needs of social development in the twenty-first century. 8. Another key concept to understand the theoretical ideas of this book is the niche. The book interprets a niche as the specific resource space in which the economic system survives and the part in which the internal environment of the economic system communicates with the external environment. From the point of view of systems theory, there is a synergistic symbiosis between a system and its niche. There are corresponding niches at all levels of the socioeconomic system.

3.1 The Basic Hierarchy from Natural System to Social System Humans are a species in the biological world, and human society is the result of the long-term evolution of nature. A clear overview of the basic hierarchy from the natural system to the social system will help humans truly recognise their place in the entire world rather than continuously arrogantly surpassing nature.

3.1.1 The Basic Hierarchy of the Cosmic System Observing from the universe and space, if it starts from Earth and extends to the outer layers, then the celestial system of the universe can be divided into the Earth-Moon System, the Solar System, the Galactic System, the Extragalactic System, and the Macro-Cosmic System. From this, the spheres of the cosmic system can be drawn (Fig. 3.1). From the main factors affecting the life of the Earth, the natural system can be divided into five levels: the Pedosphere, Hydrosphere, Biosphere, Atmosphere, and Heliosphere. Humans are one species among many creatures in the Earth’s biosphere, so the human social system should be a subsystem of the biosphere system. Humans are part of nature.

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Fig. 3.1 Spheres of the cosmic system

3.1.2 The Basic Hierarchy and Structure of the Human Social System Social structure refers to the basic elements that make up society, the functions of the elements and the general state of the interconnection between these elements. Social structure is people’s abstract understanding of the basic features and essential attributes of society and the static generalisation compared to the dynamic process of social operation. From the long-term history of social development, the social structure of any open social system is constantly evolving, generally from nonhierarchical to hierarchical, from single-layer to multilayer, from monism to pluralism, and from simplicity to complexity. The famous American sociologist Talcott Parsons (1902–1979) conducted systematic research on the social system and the social structures and divided the social system into four subsystems of economy, polity, societal community, and fiduciary system, which perform four basic functions of adaptation, goal attainment, integration and latent pattern maintenance. Among them, the economic system performs the function of adaptation, which involves all the production and circulation activities of consumer goods needed for human life. The political system performs the function of goal attainment by selecting the common goals of society, setting the priorities for the realisation of goals, and mobilising social forces to achieve the goals. The societal community performs the function of integration by making social members act according to certain norms to avoid conflicts and to maintain the sustainable social solidarity, which includes all functional institutions such as the judiciary, the military, and the community organisations that aim to establish and sustain social unity. The fiduciary system performs the function of latent pattern maintenance by keeping the basic value model recognised by the society through the kinship system and education system and cultivating and bringing up various individuals who conform

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to social norms through the process of socialisation. Parsons believed that under the premise that these four subsystems are coordinated and their respective functions are fully exerted, the entire social system can maintain an orderly operation, and the key to the full functioning of these four subsystems lies in the shared value system among members of society.1 The Chinese system philosopher Min Jia-Yin (1999, 2004, 2006, 2012, and 2016) proposed a new Social System Model2 based on the shortcomings of Marx’s Historical Materialism Model3 and the advantages of the American thinker Ervin Laszlo’s Systems Model and the Chinese scientist Qian Xue-Sen’s Systems Model. This social system model included five subsystems of the human and cultural information database, human production system, material production system, cultural information production system and management system, in which the human and cultural information database is at the core and surrounded by four other systems. The external environment includes the social environment and natural environment. The five subsystems of the social system have their own independent functions, but they adapt, influence, determine, change, and co-evolve with each other; There are two-way exchanges of labour, resources, information and capital between every two subsystems, and there are also exchanges of resources, energy and information between the social system and the environment. Min Jia-Yin believed that the social system is a self-replicating-autopoietic dynamic system, a complex system with great randomness and indeterminism. The dominant culture in the cultural information database determines the structure, traits and function of the social system. He emphasised that humans are the starting point and the destination of all activities in the social system; humans are the subjects of cognition, creation, production and entertainment in the social system; and society should be human-oriented, treating humans as an end instead of a mean.4 In 2000, the Chinese economist Jia Gen-Liang, by absorbing the research results of Marx’s philosophy of science, institutional and evolutionary economics, put forward a social structural framework composed of a political structural system, economic structural system, cultural cognitive model (ideological) system, technological system and ecological geographic system.5 In fact, he constructed a social 1

Wang, H. J. (1992). Social System Analysis Model: A Comparison between Marx and Parsons. Sociological Study (01):54–57. 汪和建. (1992). 社会系统分析模型: 马克思与帕森斯的比较. 社 会学研究 (01):54–57. 2 Min, J. Y. (2012). Evolutionary Pluralism: A New System of Systems Philosophy. China Social Sciences Press. p. 370. 闵家胤. (2012). 进化的多元论——系统哲学的新体系. 中国社会科学出 版社. p. 370. 3 Min, J. Y. (2016). A New Model of Social Systems with Three Kinds of Production and Synthetic Evaluation Standard. Chinese Journal of Systems Science (01):6. 闵家胤. (2016). 社会系统的新 模型、三种生产和综合评价标准. 系统科学学报 (01):6. 4 Min, J. Y. (2016). New Model of Social Systems, Three Types of Production and Comprehensive Evaluation Standards. Chinese Journal of Systems Science (01):31–34. 闵家胤. (2016). 社会系统 的新模型、三种生产和综合评价标准. 系统科学学报 (01):31–34. 5 Jia, G. L. (2000). The Research Tradition of Marxist Economics and the Research Program of “Chinese Economics”. Tianjin Social Sciences (04). 贾根良. (2000). 马克思经济学研究传统与 “ 中国经济学”的研究纲领. 天津社会科学, (04).

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structure model, but the exposition of this structural framework was very brief, and he did not expound on the constituent elements and interrelationships of each system. The British scholar Christopher Freeman (1921–2010) and the Portuguese scholar Francisco Louçã constructed an organic social system constituting five subsystems of polity, economy, culture, science and technology,6 which is also a model of social structure. Learning from the advantages of Parsons’ and Min Jia-Yin’s social system models and combined with the author’s understandings of human history and society, the author divides the modern social system into the surface structure consisting of the human-culture system, economic system, political system, etc., and the deep structure composed of the science system, legal system, education system, etc.7 From the long-term history of social development, the first social subsystem formed in human society is the human-culture system, followed by the economic system and political system, which are all differentiated gradually from primitive social organisations.8 From the evolution of ancient Chinese society, the legal system was born when the primitive state was conceived and born, and it was not until the time of Emperor Wu of Han (Liu Che, 156–87 B.C.) that a systematic education system appeared,9 whereas the science system was not created until modern times due to the influence of Western society.10 In terms of system, the human social system is a super complex giant system, a composite system of nature, society, polity, economy, and culture. The complexity of the human social system is mainly reflected in its sophisticated internal structure, the complexity of the variety, quantity and hierarchy of subsystems, and the strong coupling between subsystems. From the historical development process, the emergence of human society precedes the birth of the state (Sect. 8.2). From the hierarchy of the system, the 6

Freeman, C., Louçã, F. (2001). As Time Goes By: From the Industrial Revolutions to the Information Revolution. Oxford University Press. 7 Gan, R. Y. (2016). Helix Network Theory-The Dynamic Structure and Evolution of Economy and Society. Fudan University Press. p. 236. 甘润远. (2016). 螺网理论——经济与社会的动力结构 及演化图景. 复旦大学出版社. p. 236. 8 The content about the formation of primitive countries and the evolution of national structure is more complicated. For detailed explanation, please refer to Chap. 8. 9 China’s ancient education system began in the Western Zhou ancient (eleventh century B.C. to 771 B.C.), grew in the Spring and Autumn Period (The Book of Rites—Record on the Subject of Education and The Rites of the Zhou—Offices of Earth, etc.), and became relatively prosperous in Qi and Lu, in which there was an emergence of privately-run schools represented by Kong Tzu. However, the systematic and standardised education system did not basically take shape until the Han Dynasty. In the fifth year of Yuan Shuo (124 B.C.), the Han Dynasty established the highest rank of educational institution Tai Xue (or Imperial Academy), and the government school system was thus established in ancient Chinese; At the time of Emperor Wu of Han, the imperial court also “ordered all counties to set up school officials” (Book of Han—Upright Officials), and all counties established government-run schools and officials responsible for education. Since then, the Han Dynasty established the first nationwide education system from the central to the local. 10 In 1906, the earliest scientific research institution in modern China, the Capital Agricultural Experiment Station was established in Beijing. It was not until June 1928 that the Academia Sinica, the highest scientific research institution in modern China, was established in Nanjing.

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Fig. 3.2 Spheres of the human social system

State System should be included in the human social system. At the current stage of human social development, almost all human populations are included in different states. Therefore, the entire human society on Earth is a collection of states. In this sense, the human social system is also an international system. Vertically, the external environment of the State System includes the Global Social System (International System) and the Natural System, and the internal environment of the State System includes the subsystems of human-culture, economy, polity, science, law and education. To facilitate readers’ understanding, the spheres of the human social system can be drawn (Fig. 3.2). The social structure and hierarchy shown in Fig. 3.2 are a brand-new social system model put forward by the author. It is a theoretical generalisation of the modern social structure, which is very close to the real functional division of contemporary society. From the system perspective, the elements that make up the State System are also the subsystems of the State System, each of which is relatively independent and has its own unique function. Among them, the main function of the human-culture system is to bear and cultivate human beings and to produce and create humanistic and cultural knowledge. The term human-culture is a compound word that includes both the meanings of humans and the culture11 created by humans. The main function of the economic system is to produce, exchange, distribute, and consume material products. The main function of the political system is to provide public services and public goods and to organise, exchange, distribute, and use public rights. The main function of the science system is to explore, discover, innovate and improve the scientific knowledge system relating to the natural environment, human society and 11

Please refer to Sect. 8.4 for the discussion of the connotation and definition of the term humanculture.

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human beings. The main function of the legal system is to regulate the relations inside and outside the state system; to eliminate contradictions, conflicts and confrontations; to maintain basic fairness, justice and order; and to promote the orderly, harmonious, healthy, and sustainable development of human society. The main function of the education system is to accumulate, inherit, copy and spread all kinds of knowledge and to cultivate talent of all kinds that meet the needs of society. Figure 3.2 can be viewed as a simple sketch of the structure of the current human social system. Even if it looks simple, the interrelations, interactions, and interinfluences among the subsystems of human society can be clearly recognised, which is helpful for understanding the complex operating process of the human social system as a totality.

3.1.3 The Basic Hierarchy of the Socioeconomic System The production activities in human society include at least three aspects: population production, material production and mental production. The production of material products is the most basic economic activity that human society depends on for survival, which is completed by human beings, the microeconomic subject. In human society, people engaged in production activities are usually formed into certain social populations, carried out in the form of division of labour and cooperation. In ancient society, the basic unit engaged in the production of material products is generally the household, while in modern society, the basic unit is the firm. The organisation of a firm is not inherent but gradually differentiated from the household with the development of human social and economic activities. In modern society, the firms that produce similar products form an industry, the industries connected by the supply–demand relationship become a sector, the interrelated sectors compose a sector system in a region, and the interconnected economic organisations (including sector organisations, exchange organisations, and distribution organisations, etc.) constitute a state’s economic system. In a modern society, a state’s internal economic system can be divided into five basic levels of firm (micro), industry (meso), sector (meso-macro), national economy (sub-macro), and state and society (macro). If the economic system transcends national borders, it can be vertically divided into three basic levels of national economy, international economy, and natural ecology.

3.2 The Four Laws that Human Society Follows in Evolution and Development By applying the method of systems science and the paradigm of biological evolution, the book expounds the dynamics and the basic features of the evolution and development of human society through the structural analysis of the social system,

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especially the structure and function of the subsystems within the state system in terms of the firm system, the sector system and the national economic system, and provides an overview of the evolution and development of human society. From the macro scale, the entire human society has evolved and developed under the combined action of the two basic laws of the bifurcation law and the synergy law. The development of human society also reflects two significant features of fractal law and periodicity law, which generally feature a gradually unfolding helix from simplicity to complexity, from disorder to order, and from low-level to highlevel. The evolution of a social system is a historical process closely related to time and environment, which will not only be affected by the natural environment and other social systems but will also react against the natural environment and other social systems. The evolution of human society includes stages or components of progression, regression and stagnation. During a certain historical stage in the progression of the social system, some internal structures or functions may degenerate or stagnate to some extent, while during the regression stage of a social system, some internal structures or functions may also undergo some degree of progression or stagnation. From the time dimension, the evolution of society does not proceed at a uniform speed but is sometimes characterised by gradual changes and disruptive changes, sometimes slow and sometimes fast. From the internal structure of the social system, social evolution and development present a certain degree of differentiation and imbalance, which is mainly manifested in the unsynchronised development of social subsystems such as human-culture, economy, and polity and changes in their relative positions such that some progress faster, while some progress more slowly. In some stages, the economic subsystem dominates the progress of society, while in other stages, the political subsystem prevails. In short, the overall evolution of human society is the unity of gradual change and disruptive change, quantitative change and qualitative change, order and disorder, and progression and regression. The analysis and discussion in this book show that the evolution of human society is an interweaving and spiral helix network consisting of multidimensional dynamics (Fig. 8.14). The book, after comprehensive research, concludes the four laws the social evolution and development generally follow, namely, bifurcation, synergy, fractal and periodicity, which will be briefly elaborated as follows.

3.2.1 The Law of Bifurcation Bifurcation means that a thing grows from one branch into two or more branches, differentiates from a whole into two or more parts, splits from a stable state into two or more stable states, and diverges from one evolution direction into two or more directions. Bifurcation is an important mechanism for the evolution and growth of things. Under the effect of the bifurcation mechanism, things evolve in the direction from simplicity to complexity, single-layer to multilayer, and from low-level to highlevel, thus showing a development trend that is increasingly subdivided, specialised,

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hierarchical and diversified. Whether it is in the inorganic natural world, the organic biological world, or human society, there is a bifurcated evolutionary law, which is summarised as the law of bifurcation in the book. Although some documents regard bifurcation as forking, their essential meanings are basically the same. Bifurcation exists extensively in nature. The most common phenomena are the forking of branches, the diversion of rivers, the division of mountains, and the intersection of roads. In the biological world, the cases of bifurcation are plenty and diverse, and their existence provides an intuitive image for people to study the law of bifurcation. Trees, for example, grow through constant branching (Fig. 3.3). The evolutionary divergence of biological species also conforms to the bifurcation law. According to Darwin’s theory of biological evolution, the evolutionary course of biological species presents a tree-like bifurcated evolutionary image. Modern Molecular Biology’s study of the features of molecular evolution has confirmed that Darwin’s description of species evolution through bifurcation is relatively accurate. For example, by comparing the molecular structures of humans and sharks, scientists discovered that humans and sharks shared a common ancestor of primitive fish approximately 400 million years ago. For 400 million years, the appearance of one species has still maintained the shape of a fish, while another species has evolved from fish to amphibians, from amphibians to reptiles, to mammals, and finally to humans, which are highly intelligent. The difference between the two species has reached an extraordinary degree of disparity.12 Bifurcation is also an important mechanism behind the evolution of human society. According to anthropological studies, the process of human society’s gradual evolution from a primitive population to a primitive state is accompanied by the differentiation of social organisations and the refined social division of labour, exhibiting the characteristics of tree-like bifurcation (Sect. 8.2). It is under the bifurcation mechanism that human society has evolved from the primitive nomadic group to clan society, from clan society to tribal society, then from tribal society to chiefdom society, and finally from chiefdom society to primitive state. This book divides the human social system into the subsystems of human-culture, economy, and polity, etc., according to the structure and function of the social system, and proves by integrating the research results of predecessors that the human-culture system, the economic system and the political system of a society were gradually differentiated from the primitive social system; in other words, the structure and function of the social system also show the characteristics of tree-like bifurcation in the evolution process. This book also demonstrates through the structural analysis of the economic system within the state system whether it is the constituent elements of the economic system (i.e., organisation, resources, products, knowledge, technology, institutions, etc.), or the hierarchy of the economic system (i.e., firm, industry, sector, etc.), or the operational links of the economic system (i.e., production, exchange, distribution, and consumption), their evolution and development all show the characteristics of 12

Yang, J. F. (1995). Neutral Selection Theory of Molecular Evolution. Biology Teaching (02):41– 42. 杨娟芬. (1995). 分子进化的中性选择学说. 生物学教学 (02):41–42.

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Fig. 3.3 Branching of trees

gradual bifurcation. An important discovery of this book is that the social division of labour, which is an important phenomenon in economics research, has a similar mechanism to the forking in nature, which is in other words the bifurcation law (Sect. 8.8).

3.2.2 The Law of Synergy Synergy means that different parts, elements, links, stages, or levels of a thing are interconnected and coordinated to form an orderly structure, thereby forming its unified function. Synergy is another important mechanism behind the evolution and growth of things. Under the action of the synergy mechanism, one thing can link its parts or elements together and organise its links, stages and levels into an orderly structure to maintain the coordination, consistency, integrity and unity of its overall function during evolution. In vastly different natural or social systems, there are various forms of synergy. The material world is universally connected, which is mainly reflected in the systemicity and synergy of the material world. Synergetics, which originated in the 1970s, pointed out that in a complex open system, under certain inputs of external material flow, energy flow, and information flow, the system will form a new ordered structure in terms of time, space and

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function through the interaction between the subsystems. When the external input comes to a critical value, there will be a synergy between the subsystems, which can make the system change qualitatively at the critical point, changing the operating state of the system from disorder to order and transforming the overall structure from an unstable structure to a stable one. Depending on the strength of synergy or the degree of coordination, things show different ordered structures and different functional effects, which are synergistic effects. The synergistic effect refers to the overall effect or collective effect produced by the interaction of a large number of subsystems in a complex open system. Synergistic effects are generally divided into potentiate effects, additive effects and antagonistic effects. When the overall function of the system is greater than the sum of the functions of the individual components (or elements), the synergistic effect of the system is a potent effect, which is often expressed as 1 + 1 > 2. When the overall function of the system is equal to the sum of the functions of the individual components (or elements), the synergistic effect of the system is an additive effect, which is often expressed as 1 + 1 = 2. When the overall function of the system is less than the sum of the functions of the individual components (or elements), the synergistic effect of the system is an antagonistic effect, which is often expressed as 1 + 1 < 2. Whether in the inorganic natural world, organic biological world, or human society, synergistic effects exist extensively. In the inorganic natural world, some synergistic phenomena existing in the material world were first discovered and understood by physicists with their in-depth study of physical phenomena. For example, synergistic effects exist in the process of liquid bypassing the cylinder (Fig. 3.4). When the flow rate of the liquid is lower than a critical value, this section of fluid is in a uniform laminar flow state. However, when the flow velocity is higher than this critical value, a pair of static vortices will form on the back side of the cylinder. When the flow rate is further increased and reaches the second critical value, dynamic oscillating vortices will be formed on the back side of the cylinder (these vortices are generated intermittently and move with the fluid). The static vortex generated by the fluid here is a spatially ordered structure, while the dynamic vortex is a spatiotemporally ordered structure, which can also be regarded as a more complex ordered structure, both of which are due to the synergistic effect of a part of the fluid molecules resulting in a qualitative change in tissue morphology, thereby transforming its overall structure from an unstable structure to a stable one. Another typical example is the lasing phenomenon of crystalline substances. Physicists discovered that when a crystal material is hit by high-energy photons, it triggers electrons outside the crystal’s nucleus to jump from high-energy levels to low-energy levels and radiate photons. In this process, there are also synergistic phenomena between the microparticles: When the energy of the emitted photons is lower than a critical value, the photons radiated by the crystal will move in a chaotic direction, and the light emitted by the crystal will show a disordered divergence state. However, when the emission energy is higher than the critical value, the photons radiated by the crystal will move in a unified direction, the light emitted by the crystal will be the monochromatic light with the same frequency, phase and direction, and the crystal will exhibit a stable state of emitting continuous laser light. When the

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Fig. 3.4 Synergistic phenomena when fluid bypasses a cylinder

emission energy is further increased and reaches the second critical value, the crystal will emit intermittent pulsed laser light, presenting a regular sequence of ultrashort pulses. In this example, the continuous laser generated by the excitation of the crystal is a spatially ordered structure, while the pulsed laser is a spatially and temporally ordered structure, which are both microparticles such as electrons and photons in the crystal, resulting in a qualitative change in tissue morphology due to the synergistic effect so that the overall structure changes from a disordered structure to an ordered one. In the biological world, there are universal synergistic phenomena and synergistic effects of individual organisms at all levels and stages of development and growth. For example, in the process of plant germination from seeds to mature plants, the external environment always provides it with light, water and nutrients. However, when the temperature and humidity reach a certain value, the cells in the seed begin to divide and differentiate. The tissue morphology changed qualitatively with the germination of the seeds and underwent qualitative changes again with the further differentiation of the germ cell group in which the young shoots developed roots, stems, and leaves. It is apparent from this example that from the micro-level, the synergistic effects at the micro-level between plant seed cells maintain the order of cell division. For example, in the seed cells of plants, some cells divide into root cells, some divide into stem cells, and some divide into leaf cells, and the splitting direction between them is orderly, not chaotic. From a meso level, the synergy between cell groups of plant embryos maintains the difference and coordination of tissues. For example, the different self-organisation methods of the root cell group, stem cell group and leaf cell group of plant embryos allow them to form different ordered structures and promote them to grow into tissues with different structures and functions, while the interconnectedness and coordination between the cell groups maintain the integrity of plant embryos and the orderliness of differentiated growth. The synergy between plant tissues maintains the integrity and unity of the overall structure and function of plants at the macro-level. Although the structure and function of the tissues of plants

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are different, for example, the main function of the root is to absorb water and various elements, the stem is to transport and distribute water and various elements, and the leaves are to carry out respiration and photosynthesis, yet they function in harmony and support each other, thereby maintaining the integrity and unity of the whole plant. There are always synergistic effects in all parts and levels of animal bodies in different stages of their growth, which is more connected, advanced and complex than the synergistic mechanism of plants. The process of biological development is not only a historical process that progresses with the continuation of time and space but also a process of gradual growth and perfection of organisation, structure and function. There are also various synergistic phenomena and effects in different forms and hierarchies in human society. In the period of primitive society, on the one hand, due to the needs of survival, different primitive humans cooperated and formed a certain social population to hunt and defend against beasts together; on the other hand, due to the need for racial continuity, different humans in the same social group form clan communes because of marriage. The close connection between the clan communes due to mutual intermarriage led to the emergence of phratry or tribes, the alliance or annexation of the tribes due to wars led to the birth of chiefdom society, and the further complex evolution of chiefdom society finally gave rise to primitive states. Human society has evolved from clan society to tribal society to chiefdom society to national society, and its organisational form and internal structure have undergone many qualitative changes. In this process, the two factors of marriage and war played an important driving role. The enhancement of synergy in terms of scope and level among social groups to improve the overall ordering degree of the social system is a historical process from simplicity to complexity, from low-level to high-level, and from single-level to multi-level, in which social organisations, social structures and social functions gradually differentiate and grow. In modern society, from firms, industries, sectors to national economic systems and state systems, there are different degrees of synergistic effects, which will be discussed more systematically in later chapters of the book. Social evolution is similar to the development and growth of biological organisms, which is also a historical process that progresses with the continuation of time and the unfolding of space. At each stage of social growth and evolution, each internal subsystem needs to be coordinated and cooperated, and the healthy and orderly development of the entire social system will be affected once there is structural misalignment, proportional imbalance, and speed imbalance between the subsystems. When the subsystems of a social system can cooperate and coordinate with each other in terms of organisation, structure and function, the synergistic effect they produce is a potent effect (or additive effect), which will promote the healthy development, virtuous circle and continuous progress of the whole society. Conversely, when the subsystems conflict and confront each other in terms of organisation, structure and function, the synergistic effect they produce is an antagonistic effect, which in severe cases will lead to the abnormal development, vicious circle and stagnation of the whole society and may even, if the conflicts and confrontations are not eliminated and resolved in time, intensify social contradictions

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into violent social revolutions, resulting in the destruction or collapse of the orderly structure of society.

3.2.3 The Law of Fractal Fractal phenomenon is the phenomenon that the parts of things and the whole have similarities in some aspects. Similarity in fractal phenomenon refers to the differential, approximate similarity between things, or similarity in a statistical sense. These specific aspects of similarity are called fractal dimensions. Fractal dimensions include time, space, mass, speed, energy, information, structure, function, cycle and motion. Fractal phenomena exist not only in the inorganic natural world and organic biological world but also in human society. Typical fractal things feature self-similarity, hierarchy, recursive nesting, infinite fine structure, etc. Self-similarity here means that the parts of things are similar to the whole in some respects, or the parts separated from the whole can reflect the basic characteristics of the whole. Hierarchy refers to the hierarchy of things that can be divided into many different scales, levels or sequences from the part to the whole. Recursive nesting means that there are structures within the structure of things, small structures are nested within large structures, and smaller structures are nested within small structures. Infinite fine structure means that things have infinite fine structure, which can show more fine details at any small scale. To characterise and describe the complex shapes in nature, in the 1960s and 1970s, mathematicians created fractal geometry, which depicted natural shapes as parts that have certain similar properties to the whole and are logically infinitely nested and have a certain hierarchical structure. Fractal geometry supplements and expands the limitations of traditional Euclidean geometry and is a geometry that is closer to the true face of nature and can better reveal the inner structure of things. Fractal theory, an important branch of systems science, is a set of ideas, methods and theories developed on the basis of fractal geometry, mainly to study those complex things or phenomena in nature or society that are irregular in shape, rough in appearance, and self-similar in structure. Fractal theory is a theory that can span many disciplines, which can reveal the deep connections between natural sciences, social sciences and the humanities. At present, the thinking method of fractal theory has been applied to the research fields of natural science, social science and even some humanities to analyse and understand the nature and features of many complex phenomena. The core content of fractal theory research is self-similarity. In fractal theory, the whole thing with fractal features is called a fractal body, and any relatively independent component or element inside the fractal body is called a fractal element. A fractal element is similar to a fractal body; it contains and reflects the properties and information of the fractal body, although its complexity is much smaller than that of a fractal. In some fractal dimensions, the fractal element is the reproduction and miniature nature of the fractal body to a certain extent. This regularity revealed

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by fractal theory is essentially consistent with the holographic principle revealed by physics and the bioholographic law suggested by biology. The law of bioholography pointed out that there is similarity and correspondence between the whole and parts of a living organism, and each relatively independent part (i.e., holographic element) of the organism that has life functions is a microcosm of the whole of the organism and stores all the information of the whole. The holographic element of an organism is hierarchical, and the large holographic element contains small holographic elements: the higher the level of the holographic element, the closer it is to the whole. For example, from the perspective of genetic information, a biological individual is a fractal body, the cell inside it is a fractal element, and the cell contains all the genetic information of the biological individual. Fractal theory applies the principle of self-similarity to gain insight into the new hierarchy, structure and order hidden in complex phenomena and offers a brand-new methodology for understanding the whole from the part, the infinite from the finite, and the order from the disorder. If the relevant concepts and thoughts in fractal theory are further abstracted and sublimated into a methodology, it can form a thinking method for understanding things in philosophy, the fractal theory method. From a methodical point of view, the fractal theory method is different from the system theory method. The system theory method is used to understand the properties of each part from the whole of things and generally examine the correlation between the whole and the parts along the direction from macro to micro. The fractal theory method, however, is used to understand the properties of the whole from the parts and generally examines the similarity between the parts and the whole along the direction from micro to macro. “System Theory emphasises the dependence of the parts on the whole, which embodies the method of understanding the parts from the whole, while Fractal Theory stresses the reliance of the whole on the parts, and reflects the way of comprehending the whole from the parts”.13 Therefore, the fractal theory method and the system theory method constitute a complementary relationship, and their comprehensive application will greatly improve the ability of human beings to understand the world. Starting with the basic economic unit of the firm, the book systematically analyses the structure, function and operating laws of the firm, industry, sector, and national economic system and reveals the dynamic structure and evolutionary laws of the socioeconomic system, thus depicting the development trajectory of the State System and the entire human society. An important theoretical achievement of the book is its revelation of fractal features such as self-similarity, hierarchy and recursiveness in the general structure of the firm system, industry system, sector system, and national economic system and its disclosure of the two-tiered structure of the subsystems in the social system in terms of human-culture, economy, and polity. Combining the general structural diagrams drawn in the book from the firm system, the sector system to the national economic system, the state system, and the social system (Figs. 4.6, 5.2, 7.1, 8.1, 8.2, 8.10), a set of symmetrical and nested geometries similar to the 13

Zhang, Y. C., Zhang, G. Q. (2005). Science and Philosophy of Fractal Theory. Social Science Research (05):86. 张越川., 张国祺. (2005). 分形理论的科学和哲学底蕴. 社会科学研究 (05):86.

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Fig. 3.5 Mandelbrot Set pattern

Mandelbrot Set 14 pattern (Fig. 3.5) can be obtained, which is the fractal law that exists in the social system revealed in this book, vividly reflecting the similarity in the internal structure between the social system and the subsystems and between the subsystems.

3.2.4 The Law of Periodicity The movement of the material world generally reflects a certain periodicity, which is the periodicity law of things. Periodic motion is the universal law of the movement of things in the objective world. Whether it is the biological world, human society, inorganic natural world, or the broader universe and space, there are periodic motions in the entire universe, from organisms, humans, social organisations to human society, from the Earth, the Earth-Moon System, and the Solar System to the Galactic System. There are periodic motions of different durations in the material world at different levels from cosmoscopic, macroscopic to microscopic. At present, the matter that mankind has observed, from cosmoscopic celestial bodies to microscopic particles, is in periodic motion. For instance, the Sun and its eight planets orbit periodically around the Galactic Centre, the Earth and other planets revolve periodically around the Sun, the Moon revolves periodically around the Earth, and the electrons revolve periodically around the nucleus, while the Sun, planets (including the Earth), planetary satellites (including the Moon), and particles such as electrons all turn on their own axes periodically. There are also periodic motions in the running process of biological organisms and human society, but this periodic motion is different from the intuitive periodic motion of celestial bodies, electrons, etc., and it manifests as 14

A geometry drawn by computer operation using an iterative formula, discovered by American mathematician Mandelbrot in the 1970s, is now regarded as a typical fractal geometry. The salient feature of this picture is that no matter how many times the pattern is magnified, it shows more complex parts, whose shapes are both similar and different from the overall pattern.

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rhythmic periodic motion and metabolic activity. As far as biological organisms are concerned, biological individuals always carry out cell metabolism activities at the micro-level and carry out periodic life activities at the meso-level. For example, there is a 23-day physical boom/bust cycle and a 28-day mood swing cycle in the human body. The tissues in the human body also carry out periodic metabolic activities: the renewal cycle of taste bud cells is 10 days, the skin surface cells are 2 weeks, the red blood cells in the human blood are 4 months, the liver cells are approximately 300–500 days, the bone cells are approximately 300–500 days, and the bone cells are 10 years.15 In fact, the rhythmic periodic motion of biological organisms is related to the periodic motion of the Earth orbiting the Sun. This correlation is mainly manifested in the periodic changes in the climate and environment of the Earth’s biosphere in terms of light, temperature, air pressure, humidity, monsoons, precipitation and magnetic fields caused by the periodic rotation of the Earth around the sun, which leads to rhythmic changes such as the withering and prosperity of plant growth, the abundance of crops, the dormancy and migration of animals, and changes in physiological parameters of the human body. Changes in crop yields will influence human society’s agricultural harvests, which in turn will affect human social life. In the past half century, much research has been conducted on the influence of the Earth’s climate and environment on social development, which has shown that long-term changes in the Earth’s climate have many important impacts on social development and that periodic changes in the Earth’s climate have even indirectly led to the historical cycle of ancient Chinese society.16 From a system perspective, systems at different levels have different operating cycles, and different systems at the same level have different operating cycles. For example, from the celestial body system of the solar system, Jupiter’s orbital period around the sun is 11.86 years, and its rotation period is 9.84 h (equatorial part), while the Earth’s revolution period around the sun is 1 year, and its rotation period is 24 h. For the Earth-Moon system, the period of the Moon’s revolution around the earth is 27.32 days, and its rotation period is also 27.32 days. Modern astronomical research has shown that the distance between the centre of the Moon and the centre of the Earth is gradually increasing, which means that if the origin of the coordinate system is observed at the centre of the earth, the movement of the moon around the earth is actually a gradually expanding spiral. However, when the distance between the centre of the Moon and the centre of the Earth increases to a certain extent, the distance between them begins to gradually shrink again, and the movement of the Moon around the Earth presents a gradually shrinking spiral. Interestingly, there is also a similar spiral motion between the Earth and the Sun, which reflects the fractal feature of the motion process between the celestial bodies. From the operating laws of these celestial bodies in the solar system, philosophical inspirations can be obtained as follows: the periodic motion of things is not simply a mechanical circular motion but a spiral motion that never repeats in space and time. Every week, things do not 15

Kong, H. F. (2012, June 1). Reader Magazine Reveals the Timeline of Body Renewal. Life Times. 孔会芬. (2012, 6.1). 美国 《读者》 杂志揭示——身体更新时间表. 生命时报. 16 See Sect. 9.5, The Impacts of Natural Environment on Social Historical Development.

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return to the original starting point but rise (or fall) to a newer level or evolve into a new structure. The overall running process of things is cyclical but different from time to time, from day to day, from the point of view of the irreversibility of the passage of time and the change of spatial position. According to the difference in structure and function, the book further divides the human social system into different subsystems, such as the human-culture system, the economic system, and the political system. Among the various categories of social sciences, economics is the social science with the highest degree of mathematics, physics and quantification. It is the discipline with the most applied mathematical analysis and the most mature at present, and it is also a discipline with rich empirical research. Since the mid-nineteenth century, economic systems have seen cycles of varying lengths and types, namely, the short cycle of 3–4 years (also known as the Kitchin Cycle), the mid-long cycle of 9–10 years (also known as the Juglar Cycle), the mid-long cycle of 15–25 years, averaged at 20 years (also known as the Kuznets Cycle and Building Cycle), and the long cycle of 50–60 years (also known as the Kondratiev Cycle). From the point of view of the book, these economic cycles actually reflect the cyclical movements of different economic systems at different levels in different historical stages under different social conditions and actually manifest themselves as never-repeated spiral movements. The economic cycle of a society is the result of the joint action and interaction of many factors. The interconnection, interaction and interinfluence of the operating cycles of different sizes at various levels of the economic system form a complex hypercycle structure with fractal features such as self-similarity, hierarchy, and structural recursiveness. In a social system, apart from the economic system, the other subsystems, such as the human-culture system and the political system, also have their own inherent periodicity. For example, the famous British historian Arnold Joseph Toynbee (1889– 1975) discovered that world history has a cycle of approximately 600 years.17 The literature on the economic cycle in economics research is overwhelming, while the research on the periodicity of other social subsystems, such as the human-culture system and the political system, is relatively inadequate. The visual description of the periodicity of the economic system in the book is intended to inspire in-depth research of the periodic features of other social subsystems, such as the human-culture system and the political system. Because in actual social operations, different subsystems, such as the human-culture system, the economic system and the political system, are interconnected, interacted and interinfluenced, only by fully studying the structure, function and cycle of each social subsystem can the complex relationship between them be truly clarified, and a more comprehensive and in-depth understanding of the regularity of human social development can be achieved.

17

See Sect. 9.5, The Impacts of Climate Pulsation on Human Civilisation.

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3.3 Basic Classification of Resources and Their Forms The economic activities of human society are inseparable from the development and utilisation of resources. Resources can generally be categorised into natural resources and social resources; social resources can be divided into human resources, material resources and knowledge resources. Natural resources refer to substances that already exist in nature and are available for human use. Sunlight, air, water, land, minerals, plants, animals, etc., that exist in nature are all natural resources. Humans, for example, use sunlight and wind to generate electricity, water to breed fish and shrimp, and land to cultivate food. In the development history of human society, the usage of natural resources is from small amounts to large amounts, from direct employment to indirect employment (transformation), and from primary processing to deep processing. Whether humans incorporate a natural resource into production mainly depends on their cognition level of this natural resource and the development level of social production technology at that time under certain historical conditions. Generally, people’s understanding of the value of natural resources is continuously enriched with the improvement of the human cognition level of the nature of things, such as the process of understanding sunlight. At first, humans only regarded sunlight as a common phenomenon existing in nature, which seemed to have no special value other than the lighting function of dispelling darkness for humans at the time. However, it turned out that sunlight also has the practical value of being a heat source, when humans discovered that concave mirrors can be used to gather sunlight to boil water and cook rice. Later, it was found that the use of P-type and N-type semiconductors can convert sunlight into electricity, proving that sunlight also has the practical value of being a power source that can be used to generate electricity. Since 2000, solar technology has matured; between 2000 and 2006, global solar cell production has increased rapidly, with an average annual growth of more than 40%.18 At present, countries worldwide place great emphasis on the development and utilisation of solar energy, and the photovoltaic sector has therefore become a rapidly growing new industry. Social resources generally refer to the products of human inventions and creations, specifically including elements from social systems, including political systems, economic systems, human-culture systems, science systems, education systems, legal systems, etc. Commodities, currency, capital, machineries, factories, etc., that exist in human society are all social resources. When the products manufactured by humans are put into society again, they will become new forms of social resources after circulation or transformation. Therefore, the social resources created by human society are constantly enriched with the development of human social production activities. In the process of social production, social resources generally have multiple attributes and functions, mainly manifested in the diverse functions and values that the same resources often have in different social production links. For example, when one uses furniture made by oneself for one’s own consumption, the furniture at this Lang, X. P. (2008). Industrial Chain Conspiracy I. Oriental Press. pp. 52–54. 郎咸平. (2008). 产业链阴谋I. 东方出版社. pp. 52–54. 18

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time is only an ordinary product. However, when one transports the same furniture to the market for sale, the furniture becomes a commodity, and the furniture is converted from a common commodity into a special commodity currency when it is sold. Currency is a great invention of mankind. As we all know, currency as a social resource has five functions, namely, value metrics, circulation means, storage means, payment means and world currency. When one uses a sum of money accumulated by oneself to purchase a car for one’s own use, the money is only ordinary currency, whose function is to serve as a means of payment for general merchandise. However, when one uses the same amount of money to start a business, the money becomes the capital of the business. When one takes out a part of the capital of the firm to purchase production tools (machineries), this part of the capital is converted into the means of production. It is clear in these examples that the form and function of social resources actually change continuously along with its movement. Treating human resources as a production input element can also be put into the category of social resources, but it is a special social resource that is different from other material resources because people have subjective consciousness and can actively create materials. Human resources are important renewable resources that are the most dynamic and initiative part of production factors and have the potential for continuous development. The famous American management scientist Peter F. Drucker (1909–2005) pointed out in his book The Practice of Management published in 1954 that “the human resource—the whole man—is, of all resources entrusted to man, the most productive, the most versatile, the most resourceful.” “… the human being has one of set of qualities possessed by no other resource: it has the ability to coordinate, to integrate, to judge and to imagine.” Talent resource refers to those people in a state or region who have more scientific knowledge/professional technology and stronger labour skills and play a key or important role in the process of value creation. Talent resources are a part of human resources, that is, high-quality human resources. In modern society, with the widespread application of science and technology in production, high-quality talent resources who master modern knowledge and technology are playing an increasingly important role in social and economic development. In the survival and development of a firm, talent has an important role that cannot be replaced by other resources. Among all the talent in a firm, the most critical is the entrepreneur. If a human’s own understanding of the world—the knowledge and the symbols (i.e., words, numbers, letters, and calculations) invented to record and express knowledge—are also regarded as a social resource, then the entire analytical framework proposed in this book can be applied to explain the cultural production of human society. In fact, as long as the evolution of human beings from hominoidea, hominidae, homininae, hominini, homo, ancient humans to modern humans are examined, and the characteristics of each important stage of human evolution are analysed, it is obvious that with the continuous evolution of human beings, the level of human understanding of the world is constantly improving, and the production activities of human beings are also progressing simultaneously from simple to complex, from lowlevel to high-level. After the invention of language and writing, human beings also

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carry out knowledge production along with material production activities. As long as the history of scientific and technological progress in human society is analysed, it can be found that every stage of the leap in the process of human development is an upgrade of human cognition level that occurs after knowledge has accumulated to a certain extent. Today, when entering any major bookstore or public library in the city, it is easy to be dazzled when walking through the rows of shelves filled with books of all kinds. Even if each of us spends a lifetime reading these books, only a few of them can be read. Then, imagine that in the era when human beings first invented writing, the ancients recorded books on clay tablets, tortoise shells, bamboo slips, wood chips, plant leaves, etc., which were very rare, and one person could read them all in a short time. Today, human society produces such a large amount of knowledge that it is clearly not created by a generation or two in a short period of time. In fact, every writer (including philosopher, thinker, economist, sociologist, mathematician, physicist, chemist, biologist, professor, writer, poet, etc.) in every era of human society has learned or referred to the knowledge created by their predecessors or contemporaries when writing their own works. The knowledge system of human society is gradually being enriched by people of different eras, different nationalities, and different disciplines. Therefore, from the perspective of knowledge production, knowledge itself can also be regarded as a unique resource. As a resource, knowledge resources and material resources have different forms and functions, and their production processes also have special laws that are different from material products. In the early twentieth century, American economist Veblen suggested that human knowledge and ability are the most important asset capital of a society. Decades later, Wesley C. Mitchell (1874–1948) combined dissenting opinions with mainstream Economics, asserting that knowledge is the “mother of other resources” and the incomparably greatest among all human resources.19 The book fully agrees with this view. Knowledge is a reflection of the understanding of the laws of movement of objective things formed by human beings in social practice to a height of rationality,20 and it is a grasp of the essence of universal inevitability.21 Knowledge and information are both distinct and related. Knowledge is the transformation of the information in the objective world after receiving, processing, sorting, and synthesising by subjective consciousness, and it is “the crystallisation of the reflection and understanding of the objective world from the subjective world of human beings”.22 Information is

19

Magill, F. N. (eds). (2009). International Encyclopedia of Economics (Wu, Y. F., trans.). Beijing: China Renmin University Press. p. 1386. 弗兰克·N·马吉尔. (eds). (2009). 经济学百科全书. (吴 易风, trans.). 中国人民大学出版社. p. 1386. 20 Yang, L. (2001). On the Relationship between Knowledge and Economy. Journal of Zhengzhou Textile Institute (S1):25–26. 杨岚. 浅谈知识与经济的关系. 郑州纺织工学院学报 (S1):25–26. 21 Plato. (1963). Theaetetus: Teacher of the Wisdom. (Yan, Q., trans.). Commercial Press. p. 159. 柏拉图. (1963). 泰阿泰德智术之师 (严群, trans.). 商务印书馆. p. 159. 22 Zhuang, S. J. (2005). On the Application of Knowledge Mapping from the Perspective of Information Science. Journal of Modern Information (08):198–200. 庄善洁. (2005). 从情报学角度谈 知识地图的应用. 现代情报 (08):198–200.

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the objective basis of knowledge, and knowledge is the subjective synthesis of information. It is the combination of objective information and human cognitive ability that creates knowledge. After knowledge is generated, its content can be expressed in language, text, numbers, graphics, sign language, semaphore or other symbols to obtain an objective form of existence. Knowledge is useful and scarce. Knowledge is the precursor, guide and guidance for the economic system to input other economic resources, and to acquire, input, use and deploy a certain resource, one must be aware of, familiar with and understand the natural functional attributes and socioeconomic characteristics of this resource and have relevant natural and social knowledge. In fact, knowledge has always been the inner core of human social production activities, rather than an exogenous variable. Knowledge production is the source of production activities in human society. Not only does the production of material goods ultimately depend on knowledge innovation, but the production of mental and cultural products also needs to rely on knowledge growth. Knowledge is the cause of the economy, and the economy is the fruit of knowledge.23 Knowledge is an economic resource with original attributes.24

3.4 The Components of Social Reproduction25 In 1803, French scholar Jean Baptiste Say expounded the economic thinking of British economist Adam Smith in his book Traité d’économie politique (A Treatise on Political Economy), in which he divided Economics into the three parts of production, distribution and consumption, plus the later addition of circulation or exchange,26 an arrangement that was generally accepted by the public because of the wide circulation of his writings.27 Influenced by this division, economist Karl Marx also assumed that social reproduction consists of production, distribution, exchange and consumption. Marx said in TheIntroduction to A Contribution to the Critique of Political Economy that “production creates articles corresponding to requirements; Distribution allocates them according to social laws; Exchange, in its turn, distributes 23

Li, Z. H. (1999). Development and Utilisation of New Resources and Economic Development. Guihai Tribune (03):35–37. 李宗华. (1999). 新资源的开发利用与经济发展. 桂海论丛 (03):35– 37. 24 This paragraph is compiled from: Dai, T. Y. (2008). Economics: Paradigm Revolution. Tsinghua University Press. pp. 198–199. 戴天宇. (2008). 经济学: 范式革命. 清华大学出版社. pp. 198–199. 25 The content of this section was first published in the 16th issue of Guangzhou New Economy magazine 2015 with the title of To Take a Longer View: A Brief Discussion on the Long-term Transition of the Components of the Social Reproduction Process. 26 British economist James Mill (1773–1836) first further divided the content of Economics into four categories, namely, production, exchange, distribution, and consumption, on the basis of Say’s trichotomy. See: Ma, T. (ed). (2018). A Tutorial on the History of Economic Thoughts. Fudan University Press. p. 135. 马涛 (ed). (2018). 经济思想史教程. 复旦大学出版社. p. 135. 27 Spiegel, H. W. (1991). The Growth of Economic Thought. Duke University Press. Social Sciences Press. p. 258.

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Fig. 3.6 Social reproduction in the early stage of primitive society

the goods, which have already been allocated, in conformity with individual needs; Finally, in consumption, the product leaves this social movement and it becomes the direct object and servant of an individual need, which use it satisfies. Production thus appears as the point of departure, consumption as the goal, distribution and exchange as the middle—which has a dual form since, according to the definition, distribution is actuated by society and exchange is actuated by individuals. Distribution determines the proportion (the quantity) of the products accruing to the individual… Production is determined by general laws of nature; distribution by random social factors, it may therefore exert a more-or-less beneficial influence on production.”28 Marx looked at the general process of social reproduction and defined distribution and exchange as the middle links between production and consumption, but he did not deeply analyse the specific connection form of distribution and exchange in depth. According to Say and Marx, the complete process of social production consists of four links, that is, production, distribution, exchange, and consumption, which is actually their analysis and description of the production activities of capitalist society in the nineteenth century. If the process of social production is examined from the perspective of social evolution, it is not difficult to find that the components of the reproduction of human society are constantly evolving. The following will briefly discuss the long-term transition of the components of social reproduction in combination with the different historical stages of human social development. In the early days of primitive society, humans lived in primitive forests, gathering wild fruits, young leaves or catching fish and hunting beasts for food, and they formed clan groups based on blood relations. The social structure at that time was extremely simple in that humans took clan groups as production and living units to participate in labour and share the fruits of their labour together. Due to the small scale of society at that time, there was no significant division of labour in social production, and the level of social productivity was extremely low, so there were basically no surplus products available for exchange at that time. Therefore, the social reproduction process in the early stage of primitive society should consist of the following three links (Fig. 3.6). In the middle stage of a primitive society, the merger of clan groups led to the emergence of some tribes scattered in various places in human society, and the division of labour appeared in social production activities with the gradual expansion of the social scale. The first agricultural activities, such as crop cultivation, animal husbandry, and fishery, in human society were born and gradually developed with the emergence of the social division of labour. The initial division of labour in subdivided industries such as crop cultivation, animal husbandry, and fishery in human society is likely due to the different geographical environments in different places. For example, 28

Marx, K., Engels, F. (1970). The German Ideology. International Publishers. pp. 129–130.

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Fig. 3.7 Social reproduction in the middle stage of primitive society

the plain area near the river basin has soft soil and convenient irrigation, which is suitable for planting foxtail millet (粟), proso millet (黍), rice (稻) and other plants, so the tribes living in the area started planting activities. The temperate grassland has lush green grass and a vast area, which is suitable for grazing cattle, sheep and other animals, so the tribes living in the area started animal husbandry activities. For the areas near the seas or lakes, where all kinds of fish can be easily caught and the locals can fish for a living, the tribes living here began to build boats and weave nets. With the continuous development of the social division of labour, when social productivity developed to a certain level, a small amount of surplus was created in production, so the tribes engaged in different industries began to exchange surplus products. Therefore, in the middle stage of primitive society, after the further differentiation of agriculture, the social reproduction process consists of the following four links (Fig. 3.7). In Fig. 3.7, the two links of distribution and exchange should coexist. When there are few surplus products in social production, the types and quantities of products exchanged between tribes are relatively small, but they will continue to expand as the surplus products in social production increase with the continuous development of social productivity. With the growing demand for people to exchange products, the places and locations where people exchanged were gradually fixed, and the initial market was born naturally. When human society developed to the end of primitive society, class and private ownership were born with the differentiation of society, and human society developed from tribal society to chiefdom society to primitive state. During this period, with the further development of the social division of labour and social productivity, handicrafts and commerce gradually diverged from agriculture. The increase in the variety and quantity of commodities directly led to the prosperity of commodity exchanges, which was followed by the expansion of the extent of the market. More subindustries were born and grew up with the further development of the social division of labour and social productivity when society developed into a feudal society. The variety and quantity of the market increased with the continuous increase in the variety and quantity of commodities exchanged in various regions. With the development of commercial circulation in different regions, the originally independent markets began to gradually connect, thus interweaving into a market transaction network ranging from village and town markets to urban markets to regional markets to national markets. Judging from the market economy of ancient Chinese society, social production activities were often destroyed due to the serious influence of dynasties, wars and turmoil. Therefore, the distribution and exchange network of the entire social production is sometimes continuous and sometimes discontinuous, sometimes expanding and sometimes contracting.

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Fig. 3.8 Social reproduction in the agricultural age

During the period of slave society (or primitive state), the social land system began to be gradually privatised, and the land rent collected by the landlord from the serfs mainly took the form of labour rent and rent in kind. For example, the jingtian zhi 井田制 Well-field System29 that prevailed in ancient China during the Shang and Zhou dynasties was a typical labour rent. In the early and middle stages of feudal society, the landlord generally collected land rent from the serfs in the form of rent in kind. Whether it is labour rent or rent in kind, the agricultural products produced by farmers were first distributed to the landlords, and then the surplus was shipped to the market for sale in exchange for other means of production or subsistence (i.e., farm tools and clothes), and the last part was used for household consumption. It was not until the later period of feudal society, with the gradual prosperity of the commodity economy, that the land rent levied by the landlord from the serfs changed was transformed from physical objects into currency. In the period of slave society and feudal society, agriculture was dominant in all sectors of the socioeconomic system; therefore, this period can also be called the agricultural age. In general, the overall social reproduction of human society in the agricultural age can be represented by Fig. 3.8. After the Industrial Revolution in the eighteenth century, the social production mode of major European capitalist countries such as the United Kingdom gradually changed from handicrafts to large-scale machinery industrials. The advancement of science and technology and the in-depth development of the social division of labour led to the emergence and rapid growth of more industries in the sectors of these countries. The large-scale mechanised production introduced more and richer commodities to the market, coupled with the great geographical discovery that connected all continents of the world, and the ever-expanding capitalist market subsequently jumped out of national borders to form the world market. Since then, the production activities of human society have connected people and resources in different regions and countries and established a complex network of distribution and exchange in a broader scope. Since the beginning of capitalist society, social production was first carried out for market exchange, and commodities were finally consumed by people in different regions after market exchange and multiple distributions and exchanges. In the early and middle stages of capitalist society, industrials were dominant in all

The term jingtian 井田 well-field comes from Chinese character jing 井 well, which looks like the # symbol. The ruling class at that time divided a square area of land into nine identically-sized sections just like the # symbol. The eight outer sections were privately cultivated by serfs and the centre section was communally cultivated on behalf of the landowning aristocrats. Eight outer sections shared one well for cultivation, and the serfs needed to cultivate on the public communal land in the centre before they were allowed to cultivate on their private lands. The Well-field System was formed in the Shang Dynasty, prevailed in the Western Zhou Dynasty, and became strained in the Spring and Autumn period, and was abolished during the Warring States period.

29

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sectors of the socioeconomic system; therefore, this period can also be called the industrial age. Examples of factory production are used to explore the specific situation of the components of social reproduction in the industrial age. For example, a factory owner who produces cotton cloth first needs to use monetary capital to purchase machinery, raw materials and other means of production and employ a certain number of workers before the factory starts production. Then, he needs to sell the cotton products manufactured by the factory through the market, uses part of the funds from the recovered costs and profits to purchase the raw materials in the next production cycle, and finally can initiate the profit distribution among himself, shareholders and employees. The behaviour of the factory owner to distribute profits within the firm is actually the first distribution activity in income distribution. After the factory owner, shareholders, and workers are allocated a certain amount of profit or salary, they need to pay tax to the tax department, part of which will be allocated to the public workers in the government as their salary income. In this process, tax collection and distribution activities are actually redistribution activities in income distribution. After the initial distribution and redistribution, whether it is factory owners, shareholders, workers, or public workers, etc., they all can use their distribution income to exchange daily necessities (i.e., cars, food and clothing, etc., and consume the goods purchased by themselves. Through this example, it is evident that the social reproduction process in the industrial age is obviously much more complicated than that in the agricultural age, especially between production and consumption, and the connection between distribution and exchange is more complex and diverse. Therefore, the overall social reproduction process of human society in the industrial age can be simply represented by Fig. 3.9. In modern society, due to the highly developed science and technology and the unprecedented development of social productivity, sectors in the socioeconomic system have been deepening in the division of labour and specialisation, which has led to the birth and development of new industries, and the distribution and exchange activities between production and consumption have become complicated in social production. Compared with the initial stage of capitalist society, in addition to the production of ordinary commodities for private consumption, modern society pays more attention to the production of public goods for collective consumption. In the economic system of modern countries, all links from production, distribution, and exchange to consumption have evolved into a huge network system with a complex structure that is criss-crossed, interrelated, and influenced. Therefore, the overall social reproduction process in modern society can be simply represented by Fig. 3.10.

Fig. 3.9 Social reproduction in the industrial age

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Fig. 3.10 Social reproduction in modern society

In Fig. 3.10, public goods refer to products or services that are collectively consumed by society rather than individually consumed by members of society. Public goods are generally provided by public departments such as the government, and it is difficult to sell them separately and recover capital through market transactions. For instance, roads, ports, airports, national defences, public security, health and epidemic prevention, and beautiful environments are typical public goods. A private good refers to an ordinary product or service that can be consumed by members of society alone. Private goods are generally provided by production departments such as firms, and it is usual to sell them separately and recover capital through market transactions. In the economic system of modern countries, the production of public goods and the production of private goods have formed two basic systems that are closely interrelated, interinfluenced and interrestricted in the field of social production. From the above figures, it is conspicuous that with the continuous development of human society, the social division of labour and sectoral classification have prompted more subdivided industries to join the social production system, resulting in the entire social reproduction becoming more complicated. From the long-term development of human society, the evolution trend of social reproduction is from unity to plurality, from closeness to openness, and from simplicity to complexity. For a long time, the thinking mode of static equilibrium mechanical dynamics has been dominating the mainstream economic circles of various countries, which has severely hindered the further development of economic theory, and it is also the ideological source of the rigidity of thinking, the prevalence of dogma, and the separation of theory from practice in economics. Compared with the static equilibrium thinking model of traditional Economics, this book establishes a theoretical framework of the dynamic nonequilibrium thinking mode. From the long-term history of human society, human socioeconomic activities are more suitable for observation and research from the perspective of biology rather than from the mechanical view of physics. As the famous British economist Marshall said, “The Mecca of the economist lies in economic biology rather than in economic dynamics. Biological conceptions are more complex than those of mechanics, but there should be a biological concept in the minds of economists”.30 The economic significance revealed from Figs. 3.6 to 3.10 is that the socioeconomic system is similar to biological organisms, which also have a history of birth, growth and evolution, and the study of economic phenomena cannot 30

Requoted from: Chen, P. (2004). Civilisation Bifurcation, Economic Chaos, and Evolutionary Economic Dynamics. Peking University Press. p. 458. 陈平. (2004).文明分岔、经济混沌和演化 经济动力学. 北京大学出版社. p. 458.

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be separated from specific time and space. Therefore, in essence, Economics is a historical discipline. Regarding the history of Economics, the famous American economist Paul A. Samuelson (1915–2009) once pointed out, “Economics is, by its nature, an evolutionary science. It alters itself to reflect the changes in social and economic trends”.31 To analyse the complicated economic relations in the reproduction process of modern society, comprehensive research on the entire socioeconomic system will be carried out by applying methods such as systems theory and structural functionalism. Chapters 4, 5, and 7 will explain the interrelations, interactions and interinfluences between the links of the entire process of social reproduction from the three levels of the firm system at the micro-level, the industry and sector systems at the meso-level, and the national economic system at the macro-level.

3.5 The Long-Term Transition of Relations of Distribution in Social Production32 As far as the entire economic life of human society is concerned, the link of distribution is of special importance. However, for a long time, Western economists have devoted much energy to the analysis of output growth and market exchange but paid little attention to the distribution link in the socioeconomic system, so the economic theories put forward by them have led to the abnormal development of Western society to some extent. The fundamental goal of human society’s economic activities is to improve the quality of human life and promote the full development of individuals, and economists who ignore the distribution link have obviously forgotten this. The British economist John Stuart Mill (1806–1873) criticised people’s blind pursuit of economic growth without considering the quality of life as early as the mid-nineteenth century. He pointed out that “it is only in the backward countries of the world that increased production is still an important object: in those most advanced, what is economically needed is a better distribution.”33 As far as a specific social group is concerned, whether the result of the distribution of labour results is reasonable and fair will directly affect the quality of life and living conditions of each individual in the social group. When the distribution of labour results (i.e., income distribution) in a society is seriously unreasonable or unfair, the continuous accumulation of this distribution method will lead to the inevitable 31

Samuelson, P., Nordhaus, W. (1992). Economics (Gao, H. Y., trans.). China Development Press. 保罗·萨缪尔森., 威廉·诺德豪斯. (1992). 经济学 (高鸿业, trans.). 中国发展出版社. Requoted from: Ma, T. (2017). The Evolution of the Economic Paradigm. Higher Education Press. p. 128. 马 涛. (2017). 经济学范式的演变. 高等教育出版社. p. 128. 32 The main content of this section was first published on the 25th issue of New Economy magazine in 2015 at Guangzhou with the title “Relationship Changes of Social Distribution and Reform of Distribution Institutions”. 33 Spiegel, H. W. (1991). The Growth of Economic Thought. Duke University Press. Social Sciences Press. p. 389.

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disparity and polarisation between the rich and the poor in different strata of society. Such a society is bound to be full of exploitation, confrontation and conflict, and it is often prone to violent revolutions under extreme circumstances, and social order often collapses and disintegrates under the impact of revolution. This point has been repeatedly proven by the countless social revolutions and national downfalls in human history. Starting from these basic facts, it can be found that economics and sociology are in fact closely connected, and they cannot be absolutely separated. For this reason, this book extends the discussion of economics to the field of sociology in the last two chapters. As Brian Arthur, an economist at the Santa Fe Institute in the United States, pointed out, “Economics, as any historian or anthropologist could have told him instantly, hopelessly intertwined with politics and culture”.34 In the process of human society’s reproduction, not only does the connection mode between the links undergo long-term changes, but each link also evolves. Only from the distribution link in social production has it experienced a long-term historical change.

3.5.1 The Long-Term Evolution of Relations of Distribution in Social Production From the historical development of the entire human society, the relations of distribution have generally evolved from basic fairness and equality in the primitive society to extreme unfairness and inequality in the slave society, then to general unfairness and inequality in the feudal and capital society,35 and finally to comparative fairness and equality in modern society. In the period of primitive society, the clans or tribes formed by primitive humans practiced the primitive communist production method that they collectively collected wild fruits, hunted beasts, and shared labour fruits. Due to the extremely low level of social production in human society, there was no class differentiation for the time being, the labour results that can be distributed by clans or tribes are very limited, and social production reflects a mutually equal production and distribution relationship. Even at the end of primitive society, some primitive tribes still evenly allocate public land for households and evenly distribute collective labour gains under the auspices of tribal leaders, village heads, or clan leaders. For example, the Dulong people living in Yunnan, China, who remained in the primitive stage in the early twentieth century, spent approximately 200 days a year gathering food. Under the leadership of the

34

Waldrop, M. M. (1992). Complexity: The Emerging Science at the Edge of Order and Chaos. New York: Simon & Schuster. p. 27. 35 Capital society refers to the social stage in which the element capital is in predominance in social production activities. The concept of capital society and capitalist society are different in connotation.

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older women in the family, the food collected by the group is equally distributed according to the head, including those who did not collect food.36 In the period of slave society, due to the mutual plunder and frequent wars between tribal groups, the defeated captives became the objects of enslavement by the victors, and human society was thus divided into two major classes of slave-owners and slaves. The enslavement of the ruling class to the ruled class resulted in serious discrimination against people themselves. The supreme leaders of the ruling group were often deified, while the slave class at the bottom was dehumanised that slaves were often treated as nonfree animals possessed by slave owners. At this time, there was an economic relationship of oppression and exploitation between slave owners and slaves, the fruits of social labour were mainly divided up by the slave-owner class, and social production reflected an extremely unequal production distribution relationship. In ancient Greece, in Athens at its heyday, 60,000 free male citizens were served by 600,000 slaves. In ancient Rome, in the city of Rome in the first century B.C., slaves accounted for 900,000 of the population of 1.5 million. These slaves did not have the rights of free people; they were the property of the slave owners. For example, the ancient Greek historian Xenophon (440 B.C.–355 B.C.) advocated strict management of slaves and even suggested mastering slaves by the approach of taming wild beasts. Aristotle believed that a slave is not a human but “a living property” and a tool that can talk, which belongs to its master.37 In the period of feudal society, the social class was divided into serfs, landlords, handicraftsmen, merchants, soldiers, and feudal officials. Due to the dominant role of agriculture in the whole social production at this time, the land lease and contract relationship between serfs and landlords was the main economic relations in the field of production. In the social background where the landlords’ land value had long been overestimated and the serfs’ labour value had long been underestimated, there had been an economic relationship of exploitation between landlords and serfs for a long time, and the rent, including labour rent, product rent and monetary rent, paid by the serfs to the landlords was the main form of the distribution of labour results between the two. In the distribution of labour results, although serfs obtained part of the labour results, due to the absolute dominance of land ownership in the entire distribution relationship, social production still reflected many unfair and unequal production distribution relations. In the period of capital society, the social class was further divided into serfs, landlords, workers, merchants, capitalists, soldiers, and officials. As industrials gradually occupied a leading position in the entire social production, the employment relationship between workers and capitalists and the contractual relationship between serfs and landlords were the main economic relations in the field of production. In the social background where the value of capital and land was overestimated and the labour 36

Yao, S. Z. (1997). The History and Development of Yunnan Minority Values. Yunnan Fine Arts Publishing House. pp. 1–33. 姚顺增. (1997). 云南少数民族价值观的历史和发展. 云南美术出 版社. pp. 1–33. 37 Wu, Y. H., Zhang, J. X. (eds). (2014). History of Foreign Economic Thoughts. Higher Education Press. p. 17. 吴宇晖., 张嘉昕. (eds). (2014). 外国经济思想史. 高等教育出版社. p. 17.

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value of workers and farmers was underestimated, there was still an economic relationship of exploitation between capitalists and workers, between landlords and serfs, and most of the main social wealth created by workers and peasants was occupied by capitalists and landlords. In the distribution of labour results, although workers and serfs obtained part of the labour results, due to the absolute dominance of capital in the entire distribution relationship, social production still reflected some unfair and unequal production distribution relations. In modern society, modern technology has greatly improved the level of social production in various countries since the Industrial Revolution, making the public realise that technology is an important factor in promoting the development of social productivity so that the stratum holding invention patents or new technologies has a higher status in the distribution of social production. Since the mid-nineteenth century, with the expansion of the corporate scale and the increasing complexity of production and operation, corporate management has been separated from the production process and has become an important factor in the production and management of firms, which has led to the rise of professional corporate managers, represented by entrepreneurs. With the strengthening of the power of the corporate management class, the value of the management knowledge of the corporate management class has been gradually recognised by the public in repeated games with capitalists. Continuous in-depth research on the laws of corporate management has gradually cleared the fog shrouded in human resources and discovered the unique value and multiple functions of human resources. Through the understanding of the evolution process of the distribution relationship in social production, it is apparent that a human’s understanding of its own value has also undergone an evolution process from unconsciousness (i.e., enslaving people as animals) to consciousness, from low value (i.e., labour value is lower than land value) to high value, from tool value (i.e., treating people as a tool to create surplus value) to resource value. This process reflects not only the progress and development of human social civilisation but also the continuous improvement of human beings’ awareness of their own values.

3.5.2 The Relation Between Human Cognition Level and Social Distribution Result In the reproduction process of human society, the human cognition level of social production and social distribution result are interrelated, interacted and interinfluenced, and there is a dynamic relationship of action-reaction and feedbackadjustment between them from the perspective of long-term historical changes. On the one hand, the lower level of human cognition determines their unreasonable value orientation, resulting in an unfair social distribution result, which reflects the decisive effect of the human cognition level on the social distribution result. On the other hand, the unfair social distribution result will lead to the resistance or revolution of

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the exploited class, forcing them to challenge the unreasonable distribution institutions and gradually improve the public’s cognition level of social production, which reflects the reactive force of the social distribution result on the human cognition level. In the process of social reproduction, the relationship between human cognition level and social distribution result can be shown in Fig. 3.11. In Fig. 3.11, the black arrow indicates the decisive effect of the human cognition level on the social distribution result. The white arrow indicates the reactive force of the social distribution result on the human cognition level. The arc arrow below represents the feedback of the social distribution result to the human cognition level. The upper arc arrow indicates the adjustment of the human cognition level to the social distribution result. In terms of system, a society’s economic system can be viewed as a complex system that inputs resources and outputs functions. To explain the abovementioned interactive process clearly, the input–output relations of the economic system in primitive society, slave society, feudal society, capital society and modern society will be compared vertically. Among the input–output relations of the socioeconomic system, the most important relations are the relations of production factors and the relations of distribution factors, and the relations of distribution of production resulting in the relations of distribution factors are particularly important. The production factor here refers to the basic factor that must be possessed when conducting social production and operation. Relations of production factors refer to the interrelationship between the factors of production (or inputs) and the ratio structure of the inputs before the start of social production. Relations of distribution factors refer to the interrelationship between the distribution factors and the ratio structure of distribution in the process of social

Fig. 3.11 Interaction between human cognition level and social distribution result

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production and operation. In a specific society, the distribution relation of production results is embodied as a series of interrelated social distribution institutions. The rationality of the distribution institutions of social production results (i.e., income distribution) directly affects the fairness and justice of social distribution. In a social economic system, in terms of its long-term historical changes, there is also a dynamic relationship of action-reaction and feedback-adjustment between the ratio structure of factors of production and the ratio structure of factors of distribution, which is similar to the interactive relationship between human cognition level and social distribution result. In actual economic analysis, generally only the relative value of input factors and distribution results can be compared. Therefore, the long-term historical evolution of the value structure of factor input and the value structure of the result distribution in social reproduction will be briefly described in Table 3.1. In the development of human society, the relative position of production factors such as manpower (labour), land, capital, technology and knowledge is always changing. For example, in the era of the agricultural economy, land was predominant, and labour was dominant. In the preindustrial economy era, the position of land gradually declined, and the status of capital began to rise. Capital replaced land and became predominant after the Industrial Revolution, and the status of professional technology and management knowledge began to gradually rise, but capital had always been the superior in the entire industrial economy era. In the postindustrial economy era (or the service economy era), as the value of human resources was generally recognised and valued, the standing of intellectual workers with technologies and knowledge was further upgraded. In the era of information economy (or the era of knowledge economy), knowledge and technological factors became crucial in production; thereby, the status of intellectual workers with knowledge and technologies rose and started to lead, and the relative status of capital began to decline. It is the constant changes in the relative positions of the factors of production that push the long-term evolution of the structure of social factors of production, which in turn encourages changes in the structure of factors of distribution. In the process of social production, if the distribution result is considered fair and reasonable, the input structure and distribution structure will be determined in the form of institutions and will be further strengthened in subsequent production and distribution activities. If the distribution result is considered unfair and unreasonable, the input structure and distribution structure will be adjusted or changed through various channels, and the distribution relationship will be continuously improved in subsequent production and distribution activities. Judging from the development history of human society, in a certain period of time, the decisive effect of the relations of production factors on the relations of distribution factors is determined by the level of social production, which is, in essence, determined by the human cognition level, while the reactive force of the relations of distribution factors to the relations of production factors is mainly manifested in the continuous adjustment and transformation of the distribution institutions. The cause of this kind of institutional reform usually comes from the dissatisfaction of the exploited class with the income distribution result, which prompts the

Modern society

capitalist

entrepreneur manager

inventor technician

professional knowledge (S)

professional technology (Y)

capitalist

machinery (P)

capital (M)

capitalist

capital (M)

industrial labour worker (G)

landlord

land (T)

land (T)

serf

landlord

simple machinery (P)

agricultural labour (L)

serf

labour (L)

Feudal society

Capital society

serf

labour (L) land (T) more complex tools (J)

Slave society

slave owner

collective ownership

land (T)

simple tools (J)

labourer

labour (L)

Primitive society

Factor owner

Factor of production

Social times

Industrials: M+P> S+Y+L M↓; P↓ S↑; Y↑ L↓

T>L M>T M+P>G L and G are undervalued (humans are undervalued) M+P> S+Y+L getting more reasonable

M>T>L M+P>G (unequal)

entrepreneur (Q)

capitalist (B)

government (Z)

worker (R)

capitalist (B)

serf (N)

landlord (D)

government (Z)

serf (N)

landlord (D)

government (Z)

T>L+P (unequal)

T>L>P L is undervalued

slave owner

extremely unequal

L ≈ animal T>J

all members of a clan or tribe

Distribution subject

early-phase: more equal; late-phase: differential treatment

Factor value ratio structure

L>T L>J

Factor value comparison

Table 3.1 Historical evolution of the value structure of factor input and result distribution

early-phase: more fair; late-phase: unfair

Fairness of distribution result

Z+B>Q+F+ R; Q ≥ F + R; F > R; more equal

Z+D>N unequal Z+B>R unequal

Z+D>N unequal

(continued)

getting more fair

inadequate fairness

lack of fairness

extremely unequal; extremely unfair slave owner possesses all products

early-phase: more equal; late-phase: differential treatment

Distribution value ratio structure

3.5 The Long-Term Transition of Relations of Distribution in Social Production 103

Factor owner

government, firm, or societal community

landlord (state)

worker, serf

capitalist or serf

Factor of production

(natural or social) resources

land (T)

labour (L)

machinery (P)

Agriculture: M+P> L+T M↓; P↓ L↑; T↓

Factor value comparison

M+P> L+T getting more reasonable

Factor value ratio structure

serf (N)

landlord (D)

capitalist (B)

worker (R)

inventor (F)

Distribution subject

Z+B≥ N+D N≥D more equal

Distribution value ratio structure

Fairness of distribution result

Notes ➀ To make the expression more concise, production factors and distribution subjects are represented by different letters; ➁ “ > ”, “ ≥ ” and “≈” in the table indicate the comparison of relative value, which, respectively indicate greater than, greater than or equal to, and approximately equal to; “↑” indicates that the appraised value is rising gradually, while “↓” Indicates that the appraised value is declining; ➂ Factor value and distribution value in the above table both refer to relative value in a comparative sense, which is different from the meaning of labour value in traditional economics

Social times

Table 3.1 (continued)

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society to constantly readjust and reform the unreasonable and unfair factors in the distribution institutions and reassess the relative value of production factors such as manpower (labour), land, and capital. On the basis of the revaluation of the factor value, through the readjustment of the value ratio structure of input factors, the value ratio structure of the production result distribution is very much optimised, thereby gradually rationalising the social distribution institutions. The adjustment process mainly passively took place by means of class conflict, social revolution, or power reconstruction in the traditional agricultural age and was generally carried out in the form of periodic economic crises or the reconstruction of international market patterns in the capital-dominated industrial age. In the history of human society, in different regions of the world, there have been tens of thousands of times that slaves rebelled against slave owners, peasants’ riots against landlords, and workers’ struggles against capitalists. These class conflicts or social revolutions have continuously changed the disagreements in human society. Unfair and unequal distribution institutions promote the continuous progress of human society and gradually move toward modern civilisation. In modern society, with the improvement of human civilisation and the gradual deepening of humans’ understanding of the economic principles in social production, they take the initiative to reform institutions to improve the unfair and unequal factors in society, thus making distribution institutions more reasonable, fair and perfect. For example, in the early days of the industrial economy, the production input elements were mainly capital and manual labour. Because manual labour occupied an important position in corporate production, the income distribution institutions of distribution according to work were put forward so that income distribution was inclined to manual labour. In the middle of the industrial economy, in addition to capital and manual labour, production input elements also included management knowledge and professional technology. With the broadening of the market and the expansion of corporate scale, the role of management and professional technology became more important. Therefore, the income distribution institutions of distribution according to factors were put forward so that income distribution began to tilt toward management and professional technology. In the later industrial economy, the production input elements were mainly capital and intellectual labour. The innovation, creativity, knowledge and skills of intellectual workers played an increasingly crucial role in corporate production and operation. There were more intangible assets created by intellectual labour, and their value was growing. The intangible assets of some high-tech firms even exceeded the value of the tangible assets of the firm. It was obviously unreasonable and unfair if the income distribution was still inclined toward capital investors. Therefore, people put forward the income distribution institutions of distribution according to contribution so that income distribution began to tilt toward intellectual workers. In 1960, the American economist Theodore W. Schultz (1902–1998) pointed out that human capital is the main source of contemporary national wealth growth. He believed that the quality of the population and investment in knowledge determine

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the future prospects of mankind to a large extent.38 In 1993, American management master Peter Drucker pointed out in his book Post Capitalist Society39 that in Western society, from 1750 to 1880, knowledge was used to improve production tools, processes and products, resulting in the Industrial Revolution; From 1880 to 1945, knowledge was used in labour, resulting in the Productivity Revolution; From 1945 to the present, knowledge was used in knowledge itself , which led to the Management Revolution. After that, in addition to capital and labour, knowledge soon became a factor of production and one of the most important factors of production. In the second half of the twentieth century, scientific knowledge became the basic force to promote social and economic development in human society. As the American futurist John Naisbitt pointed out, “knowledge is the driving force of our economy”.40 After entering the twenty-first century, human society has entered the era of the knowledge economy. With the gradual predominance of knowledge elements in social production, the social wealth created by intellectual workers will increase. Sun Bo-Liang analysed and pointed out that “in the era of knowledge economy, the contribution rate of capital to social wealth will gradually decrease, and social production will be characterised by the large-scale use of knowledge. Correspondingly, in the distribution of social wealth, the proportion of capital will gradually decrease, while the proportion of technology and knowledge will gradually increase. The knowledge economy means that knowledge labour becomes the main source of economic value, knowledge becomes the production resource with the highest added value, and the added value of operating labour will continue to decrease in the production process. For example, more than 85% of the cost of a car in 1920 was paid to workers and investors engaged in conventional production; By 1990, these two categories received less than 60 percent of the share, with the rest going to designers, engineers, managers, etc.”41 The American futurist writer Alvin Toffler also pointed out that “at every step from today on, it is knowledge, not cheap labour. Symbols, not raw materials, that embody and add value.”42 Just as knowledge has created the world’s wealthiest like Bill Gates, innovative intellectuals in the era of the knowledge economy will gradually replace traditional capitalists and become the richest in society. ∗ ∗ ∗ 38

Tang, Z. R. (2014). An Analytic History of Western Economic Evolution. China Economic Publishing House. p. 165. 汤正仁. (2014). 西方经济演化分析史. 中国经济出版社. p. 165. 39 Liu, D. C., Liu, W. R. (1998). Knowledge Economy: China Must Respond. China Economic Publishing House. pp. 137–162. 刘大椿., 刘蔚然. (1998). 知识经济——中国必须回应. 中国经 济出版社. pp. 137–162. 40 Naisbitt, J. (1984). Megatrends: Ten New Directions Transforming Our Lives. New York: Warner Books. p. 7. 41 Sun, B. L. (2008). Value Distribution and Economic Operation in a Knowledge Economy Society. Shanghai Joint Publishing Press. p. 60. 孙伯良. (2008). 知识经济社会中的价值、分配和经济运 行. 上海三联书店. p. 60. 42 Toffler, A. (1991). Powershift: Knowledge, Wealth, and Violence at the Edge of the 21st Century. Bantam Books. p. 82.

3.5 The Long-Term Transition of Relations of Distribution in Social Production

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The above simple analysis of the long-term transition of the links and the relations of distribution in social reproduction adopts the historical investigation method, which is the basic method of Marx’s historical materialism. Some Chinese scholars who studied production relations did not analyse the changing process of social production from rich and colourful historical facts but limited their research vision to a specific historical fault. Instead of examining the production activities in social reality, they ruminated on the posthumous manuscripts left by Marx more than 100 years ago. How could the bookworm-style research that was thus far away from history and reality truly understand the connotation of Marx’s discourse? Similar to some Christians, who respectfully recite passages from the Bible repeatedly, neither knowing the origin of this classic nor what the whole classic is about. They often searched for chapters and excerpts to discuss reality but dared not go beyond the prescribed limit to put forward new ideas. Even if they published some academic papers, they did not have their own independent observation and thinking, let alone any innovative ideas! How can such self-proclaimed academic research achieve conceptual progress and theoretical breakthroughs? Logically, since the birth of Economics, three distinct research perspectives have appeared in the course of its evolution and development, and three core concepts in terms of value, commodity and economic man were selected by these three perspectives as the origin of the study of Economics. These three research perspectives were put forward by Adam Smith, Karl Marx and Vifredo Pareto in different development stages of Economics and became the research origins of Classical Economics, Marxist Political Economy, Neoclassical Economics and modern Western mainstream Economics.43 As far as its essence is concerned, value has both its subjective side and objective side, which is constantly evolving with the development of human social practice and the improvement of the human cognition level, as briefly analysed earlier in the book. Therefore, there is only a relative value and no absolute value. Commodity is the product of human social development to a certain historical stage, which is only the object of production activities in its essence. Therefore, taking the object of production activities as the core of economic activities to analyse human economic life obviously has its limitations. Man, however, is the main body of production activities, so it is obviously reasonable to take man as the core of economic activities to analyse the economic life of human beings. Nevertheless, the real man is a man of society, a man of history, and a multidimensional man with complex human nature. It is obviously one-sided to straightforwardly simplify and abstract the complex man into the profit-maximising economic man. In terms of system, whether it is man or commodity (or product), they are actually the constituent elements of a specific economic system. To thoroughly examine the operating laws of the economic system, apart from analysing the interrelationships of constituent factors such as man and commodity, it is also necessary to analyse the interrelationships between the economic system and its external environment at the same time. Dai, T. Y. (2008). Economics: Paradigm Revolution. Tsinghua University Press. p. 24. 戴天宇. (2008). 经济学: 范式革命. 清华大学出版社. p. 24.

43

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In 2008, the young economist Dai Tianyu published the book Economics: Paradigm Revolution, in which he put forward the core concept of economic unit 44 as the origin of research on economics on the basis of criticising Western mainstream economics and analysing the shortcomings of Marxist political economy and created the economic analytical framework of economic unit—economic flow— economic field. Regarding the economic thinking paradigm, the analytical framework proposed by Dai Tian-Yu is undoubtedly pioneering! The main shortcoming of the analytical framework is that it neither put the economic system in a broader social environment for historical investigation, nor made a vertical hierarchical division of the economic system, nor distinguished different economic units in terms of structure and function. This book has made some positive explorations in these areas. To analyse the social reproduction process of the capitalist society, Marx chose the most ordinary, common and basic economic element of commodity as the research origin in Das Kapital, which deeply analysed the contradiction between productive forces and the relations of production in capitalist society and revealed the development law of capitalist society and the entire human society. The book chooses the economic unit of firm as the research origin, starts from the actual corporate production and operation, analyses the organic connection and complex operation of the links of social reproduction in modern society from micro, meso to macro, reveals the structure, function and dynamic mechanism of firms, industries, sectors and national economy, and reinterprets the development law of the whole human society on this basis.

3.6 A Brand New Economic Paradigm for the Twenty-First Century In 2001, Swiss economist Kurt Dopfer proposed the evolutionary ontology of economics and the analytical framework of evolutionary economics. In 2004, together with Australian economists John Foster and Jason Potts, he proposed the meso concept and the micro-meso-macro analytical framework for the evolution of socioeconomic systems, together with Australian economists John Foster and Jason Potts45 Different from the traditional micro–macro dichotomy of economics, they newly added a new meso-analysis, forming two analysis levels of micro-meso and meso-macro. There is an aggregate relationship between micro and meso, and a structural relationship between meso and macro, and the macro can be obtained through the emergence and self-organisation of meso groups and structures. They also introduced two methodologies of individualism methodology and groupism methodology, which corresponded to the two analysis fields of micro-meso and meso-macro, respectively, Dai, T. Y. (2008). Economics: Paradigm Revolution. Tsinghua University Press. pp. 20–21. 戴 天宇. (2008). 经济学: 范式革命. 清华大学出版社. pp. 20–21. 45 Dopfer, K., Foster, J., Potts, J. Micro-meso-macro. Journal of Evolutionary Economics, 2004, (14), pp. 263–279. 44

3.6 A Brand New Economic Paradigm for the Twenty-First Century Table 3.2 Rules and carriers in several domains

Domains

109

Generic categories Rule(s) ‘Deep’

Carrier(s) ‘Surface’

Micro

Rule

Micro-unit*

Meso

Rule pool

Population

Macro

Many rule pools

Many populations

Notes ➀ Source Dopfer, K. (ed). (2005). The Evolutionary Foundations of Economics. Cambridge University Press. p. 41, Fig. 1.4. The letters and mathematical set formulas in the original table are omitted from this table for the sake of simplicity ➁ *Micro-unit is based on the contextual meaning of the book The Evolutionary Foundation of Economics edited by Dopfer. The original text is “ai = ai (gi j )”, which refers to an individual, a firm or a household

which can better explain the evolution of emergence and self-organisation.46 They believed that meso is the key and basic unit of evolution, and the genetic changes at the micro level lead to the changes of the entire system at the macro level through the structural changes at the meso level. The trajectory of the meso-evolution of the economic system includes three stages of origin, adoption, and retention.47 In particular, Kurt Dopfer et al. introduced the idea of a two-tiered structure in the macro domain of the micro-meso-macro analytical framework, that is, the pair of surface structures and deep structures. Surface structure refers to the visible interconnected populations of an economic system, which have quantitative attributes of an economic structure. Deep structure refers to the invisible interrelated rules of an economic system, which embody qualitative attributes of an economic structure. A Population is an ensemble of entities, and it is in the nature of such a collection to have members assigned to it on the basis of specific principles of inclusion. Regarding the notion of rule, Dopfer specified that “…like a gene, as in biology, or like technical, cognitive and behavioural rules, as in economics. Analogies, such as the term ‘economic genes’, are permissible, since the notion of ‘rule’ is ontologically warranted”.48 The idea of two-tiered structure actually permeates their elaboration on micro and meso, even if the specific expression is not clear enough. For example, they listed the rules and carriers in the micro-meso-macro framework of the economic system (Table 3.2). In this book, I proposed a set of theoretical frameworks, including firm system, industry and sector system, national economic system, and state and the system, covering the micro-, meso-,macro-level of the economic system, and is created with 46

Feng, Y. (2010). K. Dopfer & J. Potts: The General Theory of Economic Evolution. China Public Administration Review (00):213–217. 冯垚. (2010). 库尔特·多普菲、杰森·波特:《经济演化的一 般理论》 . 公共管理评论 (00):213–217. 47 Tang, Z. R. (2014). An Analytic History of Western Economic Evolution. China Economic Publishing House. p. 139. 汤正仁. (2014). 西方经济演化分析史. 中国经济出版社. p. 139. 48 Dopfer, K. (ed). (2005). The Evolutionary Foundations of Economics. Cambridge University Press. pp. 42, 47, 398.

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the idea of two-tiered structure, that is, the category of surface structure and deep structure is adopted at all levels of the economic system from micro, meso to macro. It should be noted that the inspiration for this two-tiered structure did not originate from the theoretical ideas proposed by Kurt Dopfer et al.49 but from the philosophical generalisation of the concept of phenotype and genotype of organisms in the theory of biological evolution (Sect. 2.4). Based on the philosophy of systems science and the law of evolution theory, the book, by applying the methods of structural functionalism, divides the modern social system into human-culture, economy, polity, science, law, education and other subsystems through the systematic synthesis of disciplines such as economics, sociology, management, politics, culture theories, history and philosophy and explores the connection between these subsystems and their intricate relation with social progress, thus depicting the historical trajectory of the long-term evolution of the human social system. The book summarises the basic laws of the evolution and development of human society into the four laws of bifurcation, synergy, fractal and periodicity. Among them, the two laws of bifurcation and periodicity have been discussed by a large number of scholars, and the author mainly discusses the two laws of synergy and fractal, especially the discussion of fractal law, which almost constitutes the book’s basic theoretical framework. The main theoretical innovation of this book is that it reveals fractal features such as self-similarity, hierarchy, and recursiveness in the general structure of the firm system, the industry system, the sector system, the national economic system, and the state and social system, thereby integrating micro-, meso- and macro-economics into a unified theoretical framework. From the categories of surface structure and deep structure, it can be discovered that the theoretical framework of the book further deepens, refines and improves the micro-meso-macro theoretical framework proposed by Kurt Dopfie et al., goes beyond the scope of pure Economics50 and extends to the field of sociology and political science. For a simple comparison, the following table regarding surface structure and deep structure will list the similar concepts used in the theoretical framework of this book (Table 3.3). If the surface structure factors and the deep structure factors listed in Tables 3.2 and 3.3 are compared one by one, it will not be difficult to find that the theoretical

49

On April 20, 2019, when I visited Professor Jia Gen-Liang in Beijing, I asked him specifically about the origin of the surface structure and deep structure. I did not read up on the book The Evolutionary Foundation of Economics edited by Dopfer until May 18, 2019 when I participated in the 11th Annual Conference of China’s Evolutionary Economics in Guangzhou, and then I learned with Dopfer’s relevant theories. 50 At the end of 2012, when I completed the theoretical framework of the economic system from micro, meso to macro in Helix Network Theory, I found that only considering economic factors was not enough to explain the dynamics for social development, so I spent another year supplementing the theoretical framework of the state and social system, and spent another two years carefully revising and perfecting the whole theoretical framework.

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Table 3.3 Structural factors at each level of the socioeconomic system Domains

Structural factors Deep structure (implicit factors)

Surface structure (explicit factors)

Micro (firm)

corporate knowledge, corporate institutions, corporate technology

entrepreneur, corporate organisation, corporate resources

Meso (industry)

industrial knowledge, industrial institutions, industrial technology

corporate clusters, industrial resources, industrial markets

Meso-macro (sector)

sectoral knowledge, sectoral institutions, sectoral technology

industrial clusters, sectoral resources, sectoral markets

Sub-macro (national economic system)

science and technology, economic institutions, cultural education

sector system, exchange system, distribution system

Macro (state and society)

science system, legal system, education system

human-culture system, economic system, political system

framework of this book is basically compatible with the micro-meso-macro theoretical framework by Kurt Dopfer and others.51 The concepts used in this book have practical counterparts in real society. The most important thing is that these concepts have established a clearer relationship with traditional economics, sociology, and political science. Therefore, continuing research and synthesis along the theoretical framework proposed in this book will help to establish a new economic paradigm that meets the needs of social development in the twenty-first century. Another key concept to understand the theoretical ideas of this book is the niche. The concept of niche came from environmental ecology and was later introduced into economic research. Baum (1994, 1996) put forward the concept of organisational niche, and he researched corporate evolution from the perspective of organisational niche; Qian Hui (2004) summarised the basic components of organisational niche. He defined organisational niche as a concept related to space and time. Based on the concept of Qian Hui, this book interprets the niche as the specific resource space in which the economic system survives and the part in which the internal environment of the economic system communicates with the external environment. From the point of view of systems theory, there is a synergistic symbiosis between a system and its niche. The niche of the system is born and grows with the system. It expands with the expansion of the system, shrinks with the shrinkage of the system and disappears with the disappearance of the system. Here, we embody a thorough dynamic view

51

For a succinct comparison, see Gan, R. Y. (2020). The Fractal Structure in the Micro-Meso-Macro Domain of Economic System. Review of Evolutionary Economics and Economics of Innovation (1):45–64.

112 Table 3.4 Niches at each level of the socioeconomic system

3 A Bird’s-Eye View of the Economic Society Hierarchy

Corresponding systems Actor (system)

Niche (system)

Micro-level

Firm

Corporate niche

Meso-level

Industry

Industrial niche

Meso-macro-level Sector

Sectoral niche

Sub-macro-level

National economy

Domestic economic ecosystem

Macro-level

State system

National ecosystem

International-level International society Earth natural ecosystem

of space–time. There are corresponding niches at all levels of the socioeconomic system (Table 3.4). In Table 3.4, the higher the level of the actor is, the easier its niche is to be observed empirically. For example, at the state level, the national ecosystem is easily observed, and the territory in it is one of the most important components of a modern sovereign state. At the level of the international community, the observed niche is the Earth’s natural ecosystem. William Hardy McNeill, a famous American historian, used the ecumene in his famous book The Rise of the West in 1917–2016 to refer to a similar concept that the “geographical space connected by the interaction of human civilisations, which extends not only to land but also to the vast oceans.”52 Economists or scholars who study economic issues by reading the book will find that this book integrates the basic ideas of micro-, meso-, and macro-economics into a unified analytical framework (logically unified economic framework at least), thus laying an ideological foundation for ending the long-term fragmented, chaotic, and contradictory situation of economic theory. However, apparently, the book only creates a preliminary framework for the formation of a unified economic theory. Similar to an initial blueprint drawn by an architect, the author sketched the basic outline of the entire economic building. The details and the subsequent construction still need the continued hard work of economists and sociologists worldwide to be finally completed. After the three economic syntheses by John Stuart Mill, Alfred Marshall and Paul A. Samuelson, I believe that the time for another economic synthesis has arrived! The accompanying period of rapid development and major progress in various fields of social science is not far away!

52

Liu, Z. L. An Analysis of William McNeill’s Theory of Ecumene. In: Proceedings of the 22nd National Seminar on Theory of History (II), 18–20 October 2019, p. 298. 刘志来. 威廉·麦克尼尔生 存圈理论探析. In: 第二十二届全国史学理论研讨会会议文集(下), 2019年10月18-20日, p. 298.

Chapter 4

The Micro-level of the Economic System: The Dynamic Structure and Evolution of the Firm

As the basis of this book, this chapter briefly introduces the research of corporate evolution and corporate ecology; takes the apple tree as a metaphor to elaborate the complexity of corporate growth, which leads to the concept of niche; puts forward a two-tiered corporate structural model, and expounds the features of the deep structure of the firm on the basis of analysing the essential characteristics, and the internal and external environment and constituent elements of the firm; reveals the relation between exchange and distribution within the firm by studying the process of corporate production and operation; explores the approaches to improve the production efficiency of firms from the perspective of the combination structure of production factors. This chapter redefines the concept of overall corporate competence; explores the dynamic factors affecting the development of the firm and the role of entrepreneurs from the perspective of structure; briefly outlines the basic mechanisms behind corporate evolution from the three aspects of division of labour and coordination, interaction between internal factors and external factors, and gradual change and disruptive change; and describes the corporate life cycle and its development trajectory from the perspective of multifactor correlation and interaction. The main discussions of this chapter are as follows: 1.

Achievements in the research of corporate evolution: The theoretical basis of corporate evolution mainly includes Lamarack’s theory of use and disuse and acquisitive inheritance, Darwin’s theory of biological evolution and Leigh van Valen’s coevolution theory. Organisational ecology developed after the 1970s is the application of natural ecology in corporate operations, mainly studying the two aspects of corporate ecology and corporate evolution. In terms of the external factors of corporate evolution, many scholars have emphasised factors such as resources and technology, while others have stressed factors such as competition, regulations, and politics. In terms of the internal factors of corporate evolution, the more representative result is the corporate competency theory. Corporate competency theories focus on factors such

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3.

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4 The Micro-level of the Economic System: The Dynamic Structure …

as internal competency, resources, knowledge and technology, and organisational learning. Darwinism tends to believe that the driving force for corporate or populational evolution is natural selection from the external environment, while Lamarckism tends to promote the variation of the firm, and the subsequent competence improvements lead to evolution. Regarding the process of corporate evolution, scholars seemed to prefer the punctuated equilibrium, i.e., long-term gradual changes accompanied by short-term disruptive changes. In summary, corporate evolution, similar to the evolution of species, presents three characteristics: diversity, heredity and natural selectivity. From the perspective of the internal and external environment and factor interaction, there were few results of systematic research on corporate evolution, among which the most representative were the innovative research done by Qian Hui and Li Xiao-Ming. This chapter comprehensively absorbs the research results of the abovementioned scholars, especially Qian Hui and Li Xiao-Ming, applies the basic methods of system theory and structural functionalism, elaborates the internal and external environment and key factors of the firm, discovers that the general structure of the firm, which is a two-tiered structure composed of a surface factor chain and a deep factor chain, is very similar to the phenotype and genotype of the organism, and analyses the dynamic structure and the evolutionary law of the firm on this basis. The specific resource space that a firm occupies in the socioeconomic environment to support its survival and development forms the niche of the firm. Along with the growth and expansion of a firm, its niche is also enlarging. Different niches indicate different living spaces. The nature of the firm, as Peter Drucker put it, lies in its difference from other organisations that produce goods and provide services, and any organisation that reflects its functions by operating goods (including selling services) is a firm. In this book, a firm is defined as an organisation composed of humans that process resources into products to meet the normal needs of society. A firm is an artificial and complex adaptive system with a value creation function from a system perspective. From the external environment of the firm system, the external factors that corporate the development can be divided into the two categories of demand factors and supply factors, and these factors include humans, resources, products, knowledge, institutions, and technology. In terms of the internal environment of the firm system, a firm is composed of the basic factors of humans, resources, products, knowledge, institutions, and technology. Among the humans in the corporate organisation, the entrepreneur is at the core. Firms are artificial intelligence systems that are able to continuously learn and constantly adjust their organisational hierarchy and functional structure as they develop. To better adapt to the external environment, firms should keep pace with the times and constantly adjust their internal organisational structure. The organic connection of the deep factors of the firm forms the deep structure of the firm system, which reflects the step-by-step enhancement of the

4 The Micro-level of the Economic System: The Dynamic Structure …

5.

6.

7.

8.

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practicality of the firm system in the process of creating value from cognition to rules to skills. This feature of the deep structure of the firm system can be seen from the comparison of the two typical forms of the intangible (implicit) and the tangible (explicit) deep factors of the firm. An in-depth study along the key elements in the deep structure of the firm system will establish the necessary connections to cognitive science and psychology. Corporate production and operation is a cyclical process starting from production and ending with providing products to customers. The internal production activities of the firm are actually divided into the two chains of production → entrepreneur → organisations → resources → products and production → knowledge → institutions → technology → product, from which the relation between the internal production links of the firm can be obtained. From the relation between the system and the environment, the complete production relations of a firm should be composed of its internal production relations network and its external social relations network. Corporate growth and evolution are essentially the dynamic entanglement, interaction and interinfluence of the two relationship networks inside and outside the firm, constituting a multidimensional and complex dynamic picture. In actual corporate production and operation, the two links of distribution and exchange between the starting point of production and the ending point of consumption are not simply connected before and after, but there are often small distributions and exchanges within a large exchange, or a large distribution, while there are even smaller distributions and exchanges within each small distribution or exchange. The entire corporate production and operation is actually a complex network formed by intertwined and nested internal and external links of distribution and exchange at different levels. In the distribution and exchange activities within the firm, this book focuses on the discussion of the relations of distribution. In the book, distribution is defined as a means and tool used to regulate the interest relationship between people, promote social justice and achieve social harmony. As a link in social reproduction, its function is mainly to segment social production results. As a reflection of the will of the distribution subject, its role is mainly to adjust the rational allocation of resources at different levels of social departments, sectors, and classes. The distribution of material products in the production results can be divided into primary distribution and redistribution according to the hierarchy. Distribution is generally composed of distribution subject, distribution object, distribution institutions, and distribution standards. In corporate production and operation, in terms of surface factors, the internal distribution activities mainly include the entrepreneur’s distribution of the three types of explicit factors of manpower, resources and products; in terms of surface factors, this is actually the distribution of knowledge, technology and value within the firm, and the specific distribution relations form the corresponding corporate institutional systems. In terms of system, a firm is an artificial system that inputs resources and outputs functions. In terms of the inputs, the inputs of the firm include manpower,

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resources, and the relations of production factors, while in terms of the outputs, the outputs of the firm mainly include the function of organisational synergy, the function of value creation and the relations of distribution factors. In the reproduction process of the firm, the relations of factors of production and the relations of factors of distribution are interrelated, interacted and interinfluenced, and there is a dynamic relationship of action-reaction and feedback-adjustment between them from a long-term perspective. On the one hand, the difference in the structure of factors of production determines the difference in the structure of factors of distribution. On the other hand, the unfair distribution result will lead to all levels within the firm and external stakeholders requesting adjustments to the unreasonable distribution institutions. It is this dynamic mechanism between them that promotes the long-term evolution of the income distribution relations of firms from unfairness and inequality to comparative fairness and equality. 9. Traditional production theory examined corporate production efficiency only from the two aspects of cost and technology. While the book believes it is necessary to consider the six aspects of entrepreneur, organisation, resources, knowledge, institutions and technology when looking into corporate production efficiency, according to the general corporate structural framework proposed in the book. In addition, the improvement of corporate production efficiency should also include the improvement of its distribution efficiency and exchange efficiency. This chapter briefly discusses distribution efficiency only. 10. This book does not adopt the concept of corporate competence proposed by corporate competency theories but redefines a more general concept. Overall corporate competence refers to the comprehensive competence of the firm to effectively integrate different resource elements, produce goods or provide services, and meet the needs of social consumption. Overall corporate competence is generally composed of the eight abilities of production and supply, entrepreneur, organisation, resources, knowledge, institutions, technology, and product. The stronger a firm’s abilities in these eight dimensions, the stronger its overall competence, and the stronger its market competitiveness. The book then draws the potential energy diagram of corporate competence, which vividly describes corporate growth and competence. The stronger the overall competence of a firm and the higher its potential energy position, the more vigorous its market competitiveness and the greater its ability to supply the market. 11. Demand factors from the external environment are the primary driving force for corporate development, and supply factors from the external environment are the necessary conditions for restricting the development of the firm. Cooperative factors and competitive factors in the external environment are the secondary dynamics that affect corporate development. The key internal dynamics that drive corporate development come from the six factors of humans, resources, products, knowledge, institutions, and technology within the firm. Among them, the most important dynamic factor is humans, and among all the humans, entrepreneurs are at the core. This book then draws the relation between the dynamics behind corporate development.

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12. Entrepreneurs are business managers with entrepreneurial spirit. Corporate culture plays an important role in corporate operations, which has a profound impact on the long-term business performance of firms. The core of corporate culture is the entrepreneurial spirit, which is mainly shaped by the entrepreneur. In the process of promoting corporate growth and development, entrepreneurs play their role through the two chains of entrepreneur → team organisation → firm and entrepreneurship → enterprise spirit → corporate culture. These six factors are closely connected and coordinated in corporate growth and development, and together they grow into a gradually expanding spiral. In the external environment of the firm, the factor of human-culture is also an important factor that cannot be ignored in corporate development, which has a profound impact on entrepreneurship, enterprise spirit and corporate culture. 13. In corporate growth and development, division of labour and coordination, interaction between internal factors and external factors, and gradual change and disruptive change are important mechanisms behind corporate evolution. (1) The division of labour enables the firm to specialise and refine; coordination encourages the departments within the firm to cooperate and coordinate. The division of labour is actually a concrete manifestation of the bifurcation law in corporate production and operation, while coordination is the exhibition of the synergy law. (2) The interaction between the corporate niche factor and key corporate internal factors is not only a pivotal bridge for the external environment and the internal environment to communicate supply and demand but also a general mechanism behind the cooperation, competition, learning and innovation among firms. It is the interactions of the factors inside and outside the firm that promote its growth and development. (3) Corporate evolution is a continuous process that alternates between gradual change and disruptive change, which promotes corporate transition from one stage, or state, to another. The disruptive change in corporate evolution is achieved through the interaction between the factors inside and outside the firm. The factors that cause disruptive change may come from the external environment or the internal environment. If the disruptive change causes the firm to progress, then the result is the improvement of overall corporate competence and the expansion of niche; if the disruptive change causes the firm to regress, then the result is the deterioration of overall corporate competence and the shrinkage of niche. 14. This book holds that the firm also has a life cycle, but the corporate life cycle discussed in the book is different from the stage division of corporate lifecycles discussed by Ichak Adizes. From the direction and state of corporate evolution, this book divides the corporate lifecycle into three stages of growth and progression, retaining the status quo, and regression and decline. The ultimate determinant of corporate progression is not from the outside but from the inside. Regardless of whether the external pressure is large or small, as long as the internal momentum is strong, the firm will progress continuously. The

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evolutionary trajectory of corporate competence is a gradually expanding spiral in continuous corporate progression. Regardless of whether the external pressure is large or small, as long as the internal momentum is weak, the firm will regress continuously. The evolutionary trajectory of corporate competence is a gradually shrinking spiral in the continuous corporate regression. 15. From corporate growth and development, corporate evolution can be described by the two chains of resource absorption → organisational growth → exchange efficiency improvement → distribution level improvement → production capacity enhancement and information absorption → knowledge accumulation → institutional innovation → technological innovation → customer value growth, from which a corporate evolutionary trajectory can be drawn. The trajectories of the two chains along which the firm develops and evolves are two gradually expanding spirals with the same starting point. The evolution of the corporate niche and the evolution of the firm proceed are carried out simultaneously through the interaction of the factors inside and outside the firm, forming a two-tiered (i.e., surface and deep) network, which constitutes a multidimensional complex dynamic picture.

4.1 A Brief Introduction to the Theoretical Research on Corporate Evolution and Corporate Ecology1 Almost all important innovations of mankind are carried out on the basis of predecessors, and the theoretical innovations in this book are no exception. Therefore, it is necessary to account for the research results of corporate evolution. The theoretical basis of corporate evolution mainly includes Lamarack’s theory of use and disuse and acquisitive inheritance, Darwin’s theory of biological evolution and Leigh van Valen’s coevolution theory (also known as the Red Queen hypothesis).2 Influenced by Darwin’s theory, evolutionary ideas were introduced into the study of economic theory in the early days. Marx, Marshall and Van Buren were generally considered to be pioneers of economic evolution (Zhaohan and Jiang 2002). After that, evolutionary ideas were widely adopted by economic and management scholars such as Milton Friedman, Burns and Stalker. Burns and Stalker (1961) argued that organisational structures should match environmental characteristics, emphasising 1

This section synthesises the related content of Chap. 2 of Qian Hui’s doctoral dissertation and the introduction of Li Xiao-Ming’s doctoral dissertation. Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. pp. 17–26. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. pp. 17–26. Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. pp. 7–13. 李晓明. (2006). 企业环境、环境因子互动与企业演 化研究. 博士学位论文, 天津大学. pp. 7–13. 2 Qian, H., Xiang, B. H. (2006). The Theory Bases and Research Assumptions of Organization Evolution. Journal of Dialectics of Nature (03). 钱辉., 项保华. (2006). 企业演化观的理论基础 与研究假设. 自然辩证法通讯 (03).

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that organic corporate structures are better suited to the changing external environment, while mechanically inflexible structures are better suited to a more stable environment. Subsequently, Thompson, Lawrence and Lorsch in 1967 followed the principle of survival of the fittest and proposed that the design of corporate structure should be adapted to the changing external environment and demonstrated the central role of environmental forces in the formation of corporate structure through case studies. After the 1970s, Western academics developed an organisational ecology from sociology, a theory studying corporate ecology. This theory is the application of natural ecology in corporate operations, mainly studying the two aspects of corporate ecology and corporate evolution. The research on corporate ecology mainly focused on the evolution conditions, the causes of evolution, the process of evolution and the results of evolution. First, the external conditions and motivations of corporate evolution. Darwinists believe that adapting to the external environment is the condition and driving force for corporate evolution, which achieves corporate evolution through natural selection. Most scholars hold that resource acquisition is the key to the survival and development of firms, and the key factor affecting the ability of firms to acquire resources in the external environment is technology. Scholars such as Richard Nelson, Sidney G. Winter and Tushman saw technology as the key force affecting environmental changes. Changes in technology (especially technical standards) and technological innovation have a decisive impact on the survival of a firm. If a firm wants to keep adapting to the external environment and its own continuous development, it is necessary to carry out technological searches to maintain its ability to innovate. Technological innovation is divided into two categories: gradual innovation and disruptive innovation. Gradual innovations affect the competitive landscape, while disruptive innovations change the industrial status and the evolution path. Other scholars (Horwitch, 1982; Starbuck, 1983; Nobel, 1984) believe that the influence of the external environment is a combined result of competition, regulations, politics, and technology and study their interrelations and interactions. However, compared with the sufficient research of the theory of environmental technology, the environmental theory did not clarify how these factors change with time and how they determine the external environmental conditions. Barnett and Hansen (1996) introduced the Red Queen hypothesis into the study of competitions in organisational evolution, arguing that competition is an important factor driving organisational evolution, and if a firm wants to maintain good long-term development, it must actively participate in competitions. Due to the Red Queen effect, competitors and the environment are constantly improving, and every firm must keep moving forward to ensure its relative competitive position. Although firms can avoid competition through specialisation and resource monopoly, they will lose the opportunity to participate in the Red Queen evolution, which is detrimental to the firm in the long run. Competition will promote better evolution and development, and firms should choose and confront competitions bravely rather than avoid competitions.

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The second is the internal conditions and motivations of corporate evolution. Different from Darwinism’s view of natural selection, Lamarckism put forward the corporate evolution ideas of use and disuse and acquisitive inheritance, believing that corporate evolution depends on the firm’s own adaptability. Firms will consciously change themselves to adapt to environmental changes; therefore, organisational variation is not directionless and random. Corporate evolution depends on its own capabilities, and the functions acquired after corporate mutation can be inherited. In terms of the internal conditions and motivations of corporate evolution, the more representative result is the theory of corporate competency. Corporate competency theory includes resource theory (Wernerfelt, 1984), knowledge theory (Conner, 1991, 1996; Kogut and Zander, 1992, 1996; Spender, Prahalad, 1996), and core competency theory (Prahalad and Hamel, 1990; Langlois, 1992; Teece, Pisano, Shuen and Fosse, 1997). These theories took the internal factors as the focus, believing that the accumulation of internal capabilities, resources and knowledge is the key factor for organisations to survive, develop and maintain competitive advantages. Resource theory is the study of organisational investments. It took internal resources as the fundamental reason for corporate competitive advantages, and the establishment of organisational competence is the optimal allocation and use of resources. Knowledge theory regards knowledge as the source of corporate competence and believes that the differences in performance between firms are due to the asymmetry of knowledge and corporate competence. It emphasises that corporate competence is knowledge-specific, and the purpose of accumulating corporate capabilities is to obtain economic rent from proprietary knowledge (Liebeskind, 1996). In contrast, Core Competence Theory was more conceptual and abstract. Its research carrier was basically the same as that of Resource Theory and Knowledge Theory, but the scope of concern was more comprehensive and in-depth. In 1990, The Core Competence of the Corporation published by Prahalad and Hamel was regarded as the starting point for further research on Corporate Competency Theory. Corporate competency theory holds that the development process of organisational adaptation is evolutionary, and corporate competitiveness relies more on gradual innovations to make more effective use of existing corporate capabilities rather than giant leaps and adjustments (Nelson and Winter, 1982). Dynamic corporate competence reflects the ability of the firm to strive for innovative competitive advantage under path dependence3 and the existing market environment (LeonardBarton, 1992). Only based on continuous constructive learning can corporate competence avoid creative destruction (Schumpeter, 1934) and achieve a dynamic balance of organisational consistency and corporate dynamic development. Corporate competency theory assumes that organisational learning is the fundamental way to establish and continuously strengthen corporate competence. Corporate competence came from corporate collective learning and the transfer of empirical norms and values. The formation of capabilities requires the accumulation and integration of unique resources, knowledge and technology within the firm. Through a 3

Path dependence refers to the dependence corporate evolution has on the choice of development path and applicable rules. Once a firm chooses a certain development path, it is difficult to change.

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series of effective accumulations and integrations, the organization will have unique and lasting competitiveness. What hides behind and determines the core competence is knowledge. Therefore, core corporate competence is represented by knowledge and experience, which are obtained and updated through continuous organisational learning. The sharing of knowledge, empirical skills and failure lessons is the main content of corporate learning. Through knowledge sharing, individual capabilities and knowledge can be transformed into corporate collective competence and knowledge. Combining the view of external causes and internal causes, the evolution of a firm is determined by two basic factors, its external environment and its variation, which act through the following four basic rules: 1. Variation: Changes in the firm’s own competence and adaptability; 2. Selection: The external environment is favourable for some firms to evolve but unfavourable for others; 3. Inheritance: Some healthy variations are inherited and passed on by the corporate population; 4. Competition: All firms face competition for survival, and the firms or groups that can better adapt to the external environment have the upper hand in the competition. Darwinism tends to believe that the driving force for corporate or populational evolution is natural selection from the external environment, while Lamarckism tends to promote the variation of a firm, and the subsequent competence improvements lead to evolution. The above two views are not contradictory but complementary, each focusing on one aspect of corporate evolution: Darwinists focused on external conditions and motivations, while Lamarckists focused on internal conditions and motivations. The third is the process and results of corporate evolution. Regarding the process, scholars seemed to prefer the Punctuated Equilibrium, i.e., long-term gradual changes accompanied by short-term disruptive changes. In the 1930s, Joseph Alois Schumpeter (1883–1950) studied the process of economic evolution from the perspective of innovation. In his opinion, innovation is the essence of economic changes, and economic development is essentially a process of dynamic evolution. He put forward the concept of industrial mutation and believed that the qualitative change of economic development can be either incremental or discontinuous, and the process of creative destruction is a basic fact of capitalism. In 1950, Armen Alchian published his classic paper Uncertainty, Evolution and Economic Theory. By applying the biological theory of natural selection, he proved that economic evolution can create the results of neoclassical economics, emphasised the important impact of environmental uncertainty on corporate development, and reinterprets the profit-maximising behaviour of firms in terms of evolutionary competitive forces. Milton Friedman (1953) believed that in the process of economic evolution, only those who tried to maximise returns could survive in market selection. Therefore,

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the behaviour of firms to maximise benefits is the result of market selection (as-if methodology). In 1977, Hannan and Freeman put forward a complete organisational ecology concept and research framework on the basis of comprehensive discussion on organisational ecology and established a mathematic model that can measure the individual development, change and succession of a firm. They believed that corporate changes (adaptations) and environmental choices are the main paths of evolution, regarded population density as a key factor affecting the survival of firms, and suggested that the level of population density has a direct positive or negative relation with corporate mortality. The key factors that affect firm classifications and population density are technology and institutions. At the same time, technological innovations and changes in environmental institutions are the main ways for firms to change. Other organisational population ecologists (Mckelvey, 1978, 1982; Mckelvey and Aldrich, 1983) also regarded technological factors as an important element in the formation of organisational populations, and assumed that firms with similar technology and knowledge gradually form one population. Ichak Adizes (1979), inspired by life phenomena, argued that like all biological and social systems, organisations also have their own processes of producing, growing, maturing, declining and dying. In his book Managing Corporate Lifecycles, which was published in 1988, he subdivided these five stages into ten stages of courtship, infancy, Go-Go, adolescence, prime, stability, aristocracy, recrimination, bureaucracy and death. An evolutionary theory of economic change published by Nelson and Winter in 1982 was considered an important symbol of the formation of evolutionary economics. In this work, they proposed a comprehensive analytical framework that absorbed natural selection theory and corporate behaviour, and systematically applied the ideas of evolution to the study of corporate management. They constructed a corporate evolution model including corporate routines, strategic search, technological innovation and environmental choices and, for the first time, established a more systematic theoretical analytical framework of corporate evolution. They believed that firms should accept the natural selection of the market environment, and firms compete with each other in the market, with profitable firms expanding and unprofitable firms shrinking and weakening until they are eliminated. Since then, the idea of corporate evolution has been supported and discussed in depth by many scholars. Hannan and Freeman continued to develop the corporate ecology model. Burgelman and Bower, based on the ecological interaction within the organisation, designed a strategic decision-making B-B model; Tushman and Romanelli proposed a theoretical punctuated equilibrium model that organisations evolve with the unbalanced development of technology; Baum verified corporate evolution from the perspective of niche; Ken Baskin and others studied the composition of corporate DNA and their operating mechanism; and James F. Moore proposed business ecosystem coevolution theory. The Resource-Based Theory (Wernerfelt, 1984), Core Competency Theory (Prahalad and Hamel, 1990), and Organisational Learning Theory (Peter M. Senge, 1990) are referred to as the main sources of corporate evolutionary competence and have been fully studied and demonstrated.

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Tushman and Romanelli (1985, 1994) further studied the evolutionary law of firms and believed that the law of corporate change is intermittently balanced, that long-term gradual growth is accompanied by the interruptions of short-term disruptive changes, and that the survival of firms depends on their ability to successfully complete the repositioning and business convergence cycle. Burgelman (1983, 1986, 1987, 1988, 1991) investigated corporate strategy from the perspective of internal ecological evolution, assuming that strategic decisionmaking is the result of the interaction and evolution of different managements within the firm. He put forward the concept of intra-organisation ecology, believing that the organisation’s strategy formulation is closely related to the interaction of ecological units within the organisation, there is a specific connection between the ecology inside the organisation and different organisational adaptation patterns, and strategy formulation and survival adaptation are internal processes of variation-selectionretention. Tushman suggested in 1996 that there are three modes of organisational evolution: continuous growth, discontinuous disruptive change, and fundamental reform. For managers, the organisational culture and strategy should not only adapt to the current environment but also ensure that the organisation has the ability to respond to disruptive environmental changes in the future. In 2000, Eisenhardt and others studied the process of corporate coevolution and concluded that coevolution is a crucial strategy that firms should adopt in the new economic era. Coevolution is more likely to occur within an alliance’s firm network. In 2001, he put forward the concept of edge competition, arguing that the strategic model of firms under traditional stable conditions often fails, and firms should form a set of internal mechanisms to adapt to chaos to maintain a competitive advantage in a high-speed changing environment. The overall goal of edge competition is to make chaos and order coexist within the firm to ensure the space for innovation and variation and to build up competitive power in different directions to completely transform the firm to achieve a combination of advantages. In summary, corporate evolution, similar to the evolution of species, presents three characteristics: diversity, heredity and natural selectivity. Diversity means that when a firm organisation enters the process of evolutionary innovation, it will have at least one important trait that can trigger its innovation, and this feature will be significantly different from other firm organisations; Heredity refers to the existence of some kind of organisational replication mechanism similar to biological genes in the firm organisation. In the process of replication, it will perform genetic optimisation simultaneously to ensure that the organisation can evolve unidirectionally from a low-level to a high-level; natural selectivity emphasises the effectiveness of the adaptive system in the evolutionary competition of the firm organisation. The survival of some organisations and the demise of others is the result of the natural selection of different organisational forms by the environment. Natural selection drives organisational variation and encourages evolutionary changes. In the process of mutual selection, a new balance and harmony is established between the organisation and the environment. Once this balance is broken, a new selection process begins anew. Corporate organisational evolution is not a partial adaptive change but a substitution

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of one organisational form for another, sometimes manifested as forced evolution, sometimes manifested as gradual evolution. However, no matter which way of evolution is adopted, it is the result of the changing requirements of the environment on the organisation. From the perspective of the internal and external environment and factor interaction, there were few results of systematic research on corporate evolution, among which the most representative were the innovative research done by Qian Hui and Li Xiao-Ming. In 2004, Qian Hui explained the strategic interaction between organisation and environment from the perspective of niche and factor interaction, summarised and demonstrated the basic elements of organisational niche, systematically expounded the characteristics and the concept of organisational niche, constructed the Organisation-Niche Diamond Matching Model, put forward the assessment method of organisational niche based on catastrophe theory, summed up the characteristics of corporate evolution path from the angle of corporate ecological interaction, and carried out an empirical analysis in combination with cases. In 2006, Li Xiaoming sorted out the research results on the nature of firms in economics and management, proposed the corporate behaviour process model based on the corporate environment, constructed a relatively complete theoretical framework of the corporate environment, performed an in-depth analysis of the internal and external factors of the firm and their interaction mechanism, suggested the mutation model of the corporate niche factor, and studied corporate evolution with the interaction of corporate environmental factors.

4.2 A Metaphor: Apple Tree and Firm 350 years ago, one day in 1666, when the famous British scientist Newton was walking one day in his garden and saw some fruits (apples) falling from a tree, he fell into a profound meditation on that gravity.4 The law of gravity unified the movement laws of ground objects and celestial bodies, which had a profound impact on the subsequent development of physics and astronomy and greatly promoted the process of human understanding of the natural world. The apple tree opened up human wisdom and brought mankind into a new era. Here, the book also uses the growth of an apple tree as a metaphor for the growth process of a firm. If an apple seed is planted in the soil, as long as the light, temperature, moisture and nutrients are appropriate, the apple seed will germinate and gradually grow into an apple sapling. In a couple of days, this sapling will grow into an apple tree, and the apple tree can blossom and bear fruits after a few years.

4

Voltaire. (1894). Letters on England. Cassell. p. 108.

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The ability of an apple seed to grow into an apple tree should give credit to both the internal and external factors. Both internal and external factors are important and indispensable. When an apple seed is planted, the reason it does not grow into a pear tree or a peach tree is because the apple seed is planted. The apple seed determines that it can only grow into an apple tree. The apple genes contained in the apple seed are internal factors. On the other hand, if there is no proper light, temperature, moisture, or nutrients, the apple seed cannot germinate normally or grow into a tree, blossom or bear fruits. Appropriate light, temperature, moisture and nutrients are external factors. It is known that the Earth’s biosphere is the living environment of all earth creatures. Every species has its own living space and land for activities. The external environment that constitutes the living space of organisms is regarded as the ecological environment. The part of the ecological environment (or habitat) occupied by biological individuals is called the niche.5 For an apple tree, its niche is the small plot of land it occupies, the space covered by the canopy, and all the substances contained within it. The energy and substances (i.e., light, moisture, nutrients, etc.) absorbed by the seed in the process of germination and growth come from the niche it occupies. In other words, all the external factors of growth are included in its niche. What are the factors that make up an apple tree’s niche? Ordinary plants need proper light, temperature, air, moisture, inorganic materials, organic nutrients, etc., for healthy growth, and similarly, these contents also constitute the factors of the apple tree niche. Where do these niche factors come from? The sources are analysed through the following table (Table 4.1): From the above table, it is discernible that the light required by apple trees comes from the sun in the solar system, and the water that is indispensable for its growth comes from multiple environments at different levels, such as soil, surface, and atmosphere. This is instructive for us to analyse the external environment of the firm. Trees, including apple trees, grow through absorption, transpiration, photosynthesis, respiration, and metabolism. In addition to the lifespan of birth, growth, ageing and death, fruit trees also have phenomenal periods, such as the temperature period6 and harvest period.7 5 The concept of niche was first proposed by natural ecologist Johnson in 1910. In addition, ecologist J. Grinnel first made a specific definition of niche in 1917. He pointed out that “the niche is the sum of the habitat requirements and behaviours that allow a species to persist and produce offspring, which can be called space niche or habitat” (Chen, T. Y. (ed). (1995). Basics of Ecology. Nankai University Press. 陈天乙. (1995). 生态学基础教程. 南开大学出版社.) Since then, the definition of niche has been in a state of controversy in the field of natural ecology, and has not yet formed a unified result. 6 Additionally, known as the thermoperiod, referring to the periodic impact the cyclical changes of temperature in natural conditions have on the growth of plants, which can be divided into daily thermoperiod and annual thermoperiod. 7 Additionally, known as on-and-off year period or fruit period, which refers to the obvious fluctuations in the quantity of fruits picked in different years, resulting in the alternation of harvest

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Table 4.1 Sources of apple tree niche factors System hierarchy

Environment

Sources

Factors

Compositions

High-level

Solar system

Sun

Light

Photon

Mid-level

Atmosphere

Clouds

Rains

H2 O

Air

Vapor → Dew

H2 O

Gas (Oxygen, etc.)

O2 , CO2

Rivers

Surface water

H2 O

Soil

Ground water

H2 O

Inorganic materials

K, Ca, Mg, Na, etc

Organic materials

Organic fertilisers, etc

Low-level

Earth

Similar to an apple tree, a firm also has its life period of birth, growth, ageing and death, as well as phenomenal periods such as the production period and capital operation period. When an entrepreneur with passion and dreams puts his or her thoughtful business plan into practice, the seed of a firm is born! A market opportunity, a new technology, a new invention, a novel idea… The seeds of these firms will sprout and grow in the soil of the market once they meet the right partners and investors. In Silicon Valley in the United States, in Zhongguancun in Beijing, in Zhangjiang in Shanghai, in the university town of Guangzhou, in the science park in Shenzhen, and in the entrepreneurial parks of many cities, all kinds of corporate seeds are born almost every day. Some germinate, grow and bear fruit, some die before they grow, many more seeds die soon after germinating, and thousands of seeds fail to germinate due to a lack of suitable temperature, water and nutrients. When a firm is created, to survive and adapt to the environment, it must constantly acquire knowledge and technology from the social environment for survival, similar to an apple tree, which continuously absorbs water and minerals from the natural environment. Firms also deliver knowledge and technologies to society through their products and services, such as an apple tree, continuously discharging water from its body into the surroundings. The learning and spreading behaviour of firms are similar to the absorption and transpiration of apple trees. In the process of growth, a firm needs to recruit all kinds of personnel from society and make them a part of its own after training. A firm also needs to absorb various resource elements in the social environment, convert them into products and services through production and processing, and then return them to the social environment for consumption. Similar to the apple tree, it needs to convert the light energy absorbed in the natural environment into organic energy through photosynthesis and store it in its own body, as well as to convert and decompose carbon dioxide and water absorbed

years (i.e., on years) and low-yielding years (i.e., off years). Different types of fruit tree species vary greatly in the severity in on-and-off year period. On-and-off year period of fruit trees has great impacts on fruit production and economic income.

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from the outside environment into organic matter and oxygen and return them to the outside environment. In development, when creating new departments and expanding organisational scale, a firm needs to invest capital, allocate corresponding sites and equipment, and eliminate obsolete equipment and facilities. This is similar to the growth of an apple tree; in the process of cell division and growth, it needs to consume energy and oxygen and discharge carbon dioxide and water through respiration. During the growth process, the metabolism of matter and energy is always carried out between the apple tree and the external environment; a similar metabolic process also takes place between a firm and its environment during growth. Just as an apple tree has its own niche, so does a firm. Different niches indicate different living spaces. In general, firms with similar environmental resource conditions and production capacity have similar niches. Different scholars have different understandings of corporate niches. Hannan and Freeman (1989) discussed the niche of organisational population and believed that organisational niche is a multidimensional space determined by environmental resources, one population constitutes one niche, and organisational population can be regarded as composed of firm clusters occupying the same niche in the multidimensional resource space. Baum (1994, 1996) put forward the concept of an individual organisational niche. He believed that one organisation occupies one niche, and the organisational niche describes the demand and production capacity of individual firms in the community for different resources. Qian suggested that the organisational niche is a vector superposition of multidimensional resources and demand spaces formed by firms in the environment, which is a function related to space and time.8 This book believes that the specific resource space that a firm occupies in the socioeconomic environment to support its survival and development forms the niche of the firm. When an apple tree grows from a seed to a tree, its niche space is also expanding. Similarly, along with the growth and expansion of a firm, its niche is also enlarging. When an organisation grows to a certain scale, it will begin to derive new departments and set up new branches to obtain more market share. It is the same as an apple tree; when the tree grows to a certain level, the trunk begins to fork. After so many times of forking, the tree can have enough branches and leaves to obtain more sunlight, rain and space. This process of continuous branching is actually the bifurcation law that prevails in nature and human society. In nature, the growth of plants shows cyclical changes of prosperity and withering in the four seasons (Fig. 4.1). When spring comes, the apple trees begin to produce tender leaves and fragrant flowers, full of vitality. Then, summer sees the apple trees absorbing much sunlight, water and nutrients and growing so fast that they become lush in just a few months. By

8

Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. pp. 22, 47. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. pp. 22, 47.

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Fig. 4.1 Apple trees in four seasons

autumn, the harvest season, the trees are full of apples. Winter, with sparse branches swaying and a layer of dead leaves under the trees, is a bleak scene. In human society, the economic system also has a regular cycle of expansion and contraction. Every economic cycle contains prosperity and depression. The transition stage of the economic system from depression to prosperity is similar to the temperature in spring changing gradually from cold to hot. The transition stage of the economic system from prosperity to depression is similar to the temperature in autumn changing gradually from hot to cold. The peaks of prosperity and the bottoms of depression are similar to boiling summers and freezing winters. In prosperity, countless firms are created, and a large number of firms begin rapid expansion, recruiting troops and buying horses, very much like the wildly growing apple trees in midsummer, which become thick and leafy in a very short time! In depression, countless firms go bankrupt and die, and a large number of firms start to lay off employees to overcome the difficulties, very much like the apple trees with falling yellow leaves in the chilling winter! In the economic system of real society, there is a type of corporate organisation that is a chain firm. All chain units of this type of firm have a unified name, logo and image. The most representative chain firms are McDonald’s and the KFC. Such organisations set up batches of new firms in different cities every year according to a certain pattern, which is also very similar to the mass propagation of apple trees. The annual batch of apples produced by the apple trees contains apple seeds. After being planted in the soil and regularly watered and fertilised, they will sprout, grow and eventually grow into a new batch of apple trees.

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4.3 The Nature of the Firm In a state’s economic system, an economic entity (or actor) at the micro-level is generally the firm system. Firms are the most basic economic unit in modern society. What is the nature of the firm? Many economists have studied the nature of the firm from different perspectives, but thus far, there has been no standard answer. Peter Drucker, an American management scientist, argued that the difference between a firm and any other organisations is that it produces goods and provides services, and any organisation that reflects its functions by operating goods (including selling services) is a firm. He pointed out that “firms are just a tool, and every firm is a social organisation used to perform a certain social function.”9 Peter Drucker’s point of view speaks out the true nature of the firm. Generally, a firm is an organisation composed of humans that processes resources into products to meet the normal needs of society. In this context, products refer to products in a broad sense, including tangible materialised products and intangible nonmaterialised services. Organisation refers to a group of interrelated humans combined in accordance with certain rules. Resources refer to various necessary elements from natural and social systems, including natural resources and social resources, in corporate production and operation. Many theories regard humans in firms’ human resources and include them in the category of corporate resources, which is not impossible from a theoretical analysis perspective. However, among all animals in nature, humans are the only ones that have self-awareness and can actively create tools, and humans have an important initiative role in corporate development. Therefore, to highlight the role of humans, this book puts humans as a separate constituent element of a firm. A firm is a historical category, and it has different connotations and denotations at different development stages of human society. In human history, in the early days when the market just appeared, individuals and households were the basic units of the social economy. At that time, the individuals and households engaged in production and operation were the original forms of firms. According to classical economic theory, under the condition of sufficient market information, commodity transactions between individuals and households can be completed smoothly. At that time, the firm is just a production unit, not much different from the individual if only from the perspective of economic entity. However, because the market has become more diversified and complex due to the continuous progress and development of society and because individuals and households are unable to undertake the tasks of social production and operation due to circumstances such as the failure of market adjustment, the continuous increase in transaction costs, and the complexity of business information, corporate organisations have replaced individuals and households and become the basic unit of the Requoted from: Cai, W. Y., Na G. Y. (2002). What is a firm?. Manager (04). 蔡文燕., 那国毅. (2002). 企业是什么? 经理人 (04).

9

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social economy, and the individual becomes the basic constituent element of corporate organisation. Once a corporate organisation is formed, it will gradually evolve and develop with the continuous progress of human society. For example, in corporate evolution, different organisational types such as hierarchical organisation, flat organisation, virtual organisation, and network organisation have been formed. Alfred DuPont Chandler Jr. (1918–2007) sketched out the process of corporate development through his research on the history of American firms. Before 1840, American firms were usually small-scale firms that only managed a single product by their owners. Many transactions were coordinated by the market due to its small scale. After 1840, the appearance of new transportation and communication technologies made long-distance large-scale commodity transactions possible, and various new technologies greatly improved production capacity, so modern industrial and commercial firms emerged and flourished. With the continuous development of society, some transaction activities that were originally regulated by the market have been transferred to the inside of the firm, and the firm has gradually evolved into a huge economic organisation that can perform multiple economic functions.10 The evolution of modern firms is still ongoing in all countries of the world. Firms have different definitions under different analytical perspectives. For example, scholars such as Edith T. Penrose (1959, 1995), Wernerfelt (1984), and Barney (1986) examined firms from the perspective of organisational resources and focused on resource endowment and factor markets. They believed that a firm is a unique collection of resources. Penrose defined a firm as a collection of resources coordinated and bounded by an administrative management framework, while Kogut and Zander (1992, 1996), Spender (1996) and other scholars held the opinion that a firm is a unique aggregate of knowledge, and the core of firms is knowledge.11 Li Xiao-Ming, from a system perspective, put forward the following: “Firm is essentially an artificial system with value creation function. The external environment provides resources, opportunities and regulations for the firm. The firm transforms the inputs and provides products (or services) to the external environment, while the external environment evaluates the outputs and determines the future inputs accordingly.” “The firm system is a complicated and adaptive system for human labour. In addition to the features of integrity, relevance, intentionality, and environmental adaptability of general systems, the firm system also has complex structures, complex relationships, and complex behaviours, and is a dynamic and open system”.12 Judging from the actual corporate operation, whether it is regarded as a collection of resources or a collection of knowledge is one-sided. Therefore, this book adopts the definition 10

Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. p. 61. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. p. 61. 11 Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. pp. 63–64. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. pp. 63–64. 12 Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. pp. 24, 44. 李晓明. (2006). 企业环境、环 境因子互动与企业演化研究. 博士学位论文, 天津大学. pp. 24, 44.

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given by Dr. Li Xiao-Ming, which states that in terms of system, a firm is an artificial and complex adaptive system with a value creation function.

4.4 The Environment, Elements and Structure of the Firm 4.4.1 The Internal and External Environments of the Firm A firm that exists in a specific socioeconomic environment has both an external environment and an internal environment, all of which have their own hierarchies. At present, scholars’ research on the corporate environment focuses on the external environment of the firm but lacks research on the internal environment. Therefore, the academic circle has not yet formed a complete theoretical system of the corporate environment. According to Li Xiao-Ming’s research review, scholars’ analysis of the internal and external environment and factors of the firm is messy, neither reasonable nor systematic.13 To make an exploratory attempt on this issue, a brand-new framework is proposed for the environment inside and outside the firm through the following graph, but the book only conducts a simple analysis and does not make a more in-depth and detailed discussion because the focus of the discussion is not here.

4.4.1.1

The External Environment of the Firm

The external environment of the firm refers to the collection of the factors that exist beyond the boundaries of corporate organisation and have an impact on corporate production and operation. The external environment of the firm includes the natural environment and the social environment. The social environment also includes the political, economic, humanistic and cultural, scientific, educational, legal and other environments. From the hierarchy and function of the system, firms belong to the category of the sector system and the national economic system. The external system that contains the firm is vertically composed of the three basic levels of the industry and sector system, the national economic system, and the state system. The two outer systems are the social system (international system) and the natural system. The social system (international system) is contained within the natural system. The hierarchical relationship of each system in the external environment of the firm is shown in Fig. 4.2. What are the external factors that affect corporate development? It is clear in Fig. 4.2 that there are many external factors that affect corporate development, 13

Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. pp. 14–15. 李晓明. (2006). 企业环境、环 境因子互动与企业演化研究. 博士学位论文, 天津大学. pp. 14–15.

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Fig. 4.2 Spheres of the corporate external environment

including the factors from the social environment and the factors from the natural environment. However, most of them come from the social environment, including economy, polity, human-culture, science, education, and law. Among them, the most direct external factors are the factors within the economic system. The sources and categories of these factors are analysed through the following table (Table 4.2): It is obvious in Table 4.2 that there are many external factors that affect corporate development, including the factors from the economic system, the state system, the social system (international system), and the natural system. Although there are many factors, they can be grouped into the six categories of humans, resources, products, knowledge, institutions, and technology. The way in which these factors affect the firm can be divided into demand and supply according to the direction of the flow of factors. Therefore, the general external factors that affect corporate development can be divided into the two categories of demand factors and supply factors, and these factors include humans, resources, products, knowledge, institutions, and technology. Demand is the direct driving force for corporate development. If there is no specific demand for the firm’s products in the external environment, the firm will lose its basis for existence. Demand stems from the public’s increasing need to improve material and cultural life, and it is an inevitable result of socioeconomic development. Demand runs through the movement process of the socioeconomic system and changes with the development of the socioeconomic system. The higher the level of socioeconomic development is, the greater the number of demands and the richer the types of demands. Demand is an extremely active and transformative factor in the socioeconomic system. Engels once pointed out that “if society has a technical need, that

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Table 4.2 External influencing factors of the firms Hierarchy

Name

Outermost sphere

Sources

Main influence factors

Factor category

Influence mode

Natural System Sun, Earth

Sunlight, air, water, land, minerals, organisms, etc

Resources

Supply

Outer sphere

Social System International system

Worldwide governments, firms, households, scientific research institutions, universities, international organisations, etc

Humans, procurement, supply, investment, loan, management knowledge, expertise, international convention, trade agreement, international standard, patented technology

Humans, products, resources, knowledge, institutions, technology

Demand, supply

Middle sphere

State System

Political System Public service, investment, procurement, taxation, etc

Resources, products

Demand, supply

Legal System

National laws, economic institutions, sectoral policies

Institutions

Supply

Human-culture System

Family life, population reproduction, community organisations

Humans

Demand, supply

Humanistic spirit, values, ethical morals

Knowledge (human-culture)

Supply

Knowledge, technology

Supply

Science System Scientific research, basic knowledge, technology research and development

(continued)

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Table 4.2 (continued) Hierarchy

Inner sphere

Name

Economic System Sector

Sources

Main influence factors

Factor category

Influence mode

Education System

Talent training, Humans, knowledge knowledge application, knowledge transfer

Supply

Other firms

Personnel exchange (enter, depart)

Humans

Demand, supply

Information exchange (inflow, outflow)

Resources

Demand, supply

Capital exchange (financing, investment)

Resources

Demand, supply

Procurement, supply

Resources, products

Demand, supply

Expertise, management knowledge, cultural knowledge

Knowledge

Demand, supply

Organisational form, institutional norms, process standards

Institutions

Demand, supply

Production technology, production process, operating methods

Technology

Demand, supply

Note This table lists only some of the major factors that affect the external factors of the firm. In addition to these factors, there are obviously other influencing factors (i.e., wars between countries, climate change, geographic conditions, natural disasters, etc.) To facilitate the analysis of the problem, these factors will be discussed in Chaps. 8 and 9

helps science forward more than ten universities”.14 Demand plays a leading role in corporate production and operation. Demands in the external environment are constantly changing, and firms must keep track of these changes at any time, adjust 14

Marx, K., Engels, F. (1972). Selected Works of Marx and Engels (IV). People’s Publishing House. p. 484. 马克思., 恩格斯. (1972). 马克思恩格斯选集(第四卷). 人民出版社. p. 484.

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production and management strategies in time, and develop marketable products to develop smoothly. To provide the products or services required by society, a firm inevitably needs the external environment to supply resource elements. Resource elements are necessary conditions for corporate survival and development and are also a prerequisite for firms to successfully create value. The supply of resource elements is a necessary link and prerequisite for the operation of the socioeconomic system, and it also runs through the movement process of the socioeconomic system and changes with the development of the socioeconomic system. The higher the level of socioeconomic development is, the greater the number of demands and the richer the types of demands. The supply of resource elements is also an extremely active and transformative factor in the socioeconomic system. The supply of resource elements dominates the constituent elements inside the firm. If the external environment does not supply resource elements to the firm, the firm will not be able to carry out normal production and operation, let alone growth and development. The supply of resource elements dominates the level, speed and direction of the evolution of the firm’s ecological environment and its internal components. To facilitate the analysis, some necessary definitions and explanations of the concepts of the factors such as knowledge, technology, and institutions that affect corporate development are made below. ➀ Knowledge Knowledge is the result or crystallisation of human understanding of nature and society, including empirical knowledge and theoretical knowledge. The primary form of knowledge is empirical knowledge, and the advanced form of knowledge is systematic scientific theory. Knowledge can be divided into natural science knowledge, social science knowledge and thinking science knowledge according to its content. Apparently, knowledge has different classifications and definitions under different analytical perspectives. For example, the scientific philosopher Michael Polanyi divided knowledge into two types: explicit knowledge and tacit knowledge.15 Economist Dai Tian-Yu categorised knowledge into inactive knowledge and active knowledge, pointing out that knowledge is “a broad system that includes the both: the former includes the knowledge that is printed on books, recorded on CDs, concreted on buildings, and frozen on machines, etc.; The latter is active in the human brain and its auxiliary or extension, the automatic control system or computer memory.” “Knowledge, especially active knowledge, as the main source of productivity growth and improvement, is the base and ultimate support for the survival and development of the microeconomic meta-system and macroeconomic system”.16 Davenport and Prusak believed that knowledge consists of elements such as experience, values, situational information, and professional insight. Knowledge is dynamic and updated at any time with the learning of the subject. In an organisation, knowledge resides 15

Polanyi, M. (1957). The Study of Man. London:Routledge & Kegan Paul. p. 12. Dai, T. Y. (2008). Economics: Paradigm Revolution. Tsinghua University Press. p. 199. 戴天宇. (2008). 经济学: 范式革命. 清华大学出版社. p. 199.

16

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Table 4.3 Taxonomic dimensions of knowledge assets18

Tacit Not teachable Not articulated

Articulable Teachable Articulated

Not observable in use

Observable in use

Complex

Simple

An element of a system

Independent

not only in documents and knowledge bases but also in routine work, processes, practices, and culture.17 American economist Winter (1987) proposed taxonomic dimensions for classifying different types of knowledge, which is more helpful for understanding knowledge (Table 4.3). ➁ Technology The concept of technology can be classified into the two types of broad sense and narrow sense. Technology in a broad sense refers to the means or activities of human beings to change or control their surroundings and is the sum of the means, methods and skills created by human beings to realise the needs of society. As the overall technical force of social productivity, technology generally includes craftsmanship, labour experience, information knowledge and physical tools and equipment, as well as technical talents, technical equipment and technical materials covering the entire society. Technology in a narrow sense refers to various process operation methods and skills developed by human society based on practical production experience and natural science principles and is the sum of all tools, facilities, equipment, digital data, and information records in human daily life and production and operation. The concept adopted here is technology in the narrow sense. The history of technological application in human society is as long as the history of mankind. The iconic technologies of each human era represent the height of the development level of human productivity. For instance, the development stages of human history can be roughly listed into the Stone Age, the Bronze Age, the Iron Age, the Steam Engine Age, the Electric Age, and the Information Age according to the impact of technology. Technology originates from and is higher than practical activities and continues to develop with the deepening of public awareness. With the development of society, modern technology has begun to evolve into complex, diversified and all-around multidisciplinary technical engineering. Technology can be grouped into production technology and nonproduction technology according to the functions. Production technology is the most basic part of technology; nonproduction technology includes scientific experiment technology, cultural and educational technology, public technology, military technology, medical technology, etc., and is 17

Davenport, T. H., Prusak, L. (1998). Working Knowledge: How Organizations Manage What They Know. Boston: Havard Business School Press. 18 Dosi, G., Marengo, L., Fagiolo, G. Learning in Evolutionary Environments. from: Dopfer, K. (ed). (2005). The Evolutionary Foundations of Economics. Cambridge University Press. p. 278.

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a technology developed to meet the various needs of social life. Modern technology can be expressed as hardware such as tangible tools and equipment, machinery and facilities, and physical substances, etc., and software such as intangible processes, methods, techniques, and programs, etc., as well as information materials, design drawings, etc., that are not physical substances but having material carriers. In modern society, due to the increasingly close connection between science and technology, they are often used together (i.e., science and technology). In fact, science and technology are fundamentally distinctive, albeit closely connected. Science is the approach and means for mankind to understand the world, while technology is the approach and means for mankind to transform the world. Technology is the intermediate link from science to production and a bridge that transforms scientific theory into productive forces. Technology comes from the summary of practical experience and the guidance of scientific principles. Generally, technological inventions are the materialisation of scientific knowledge and empirical knowledge, making applicable theories and knowledge reality. On the one hand, the development of modern technology is inseparable from the guidance of scientific theories, and modern technology has become a scientific application to a large extent. On the other hand, the development of modern science is also inseparable from technology, and the practical needs of technology are often the purpose of scientific research, while the development of technology provides necessary technical means for scientific research. The relationship between science and technology is a relationship of mutual connection, mutual promotion and mutual restriction. Science and technology differ significantly in terms of mission, purpose and form. In terms of mission and purpose, the main differences between science and technology are as follows: the basic mission of science is to understand the world and to make discoveries in scientific research to increase the intellectual wealth of mankind, while the basic task of technology is to transform the world and to make inventions in technological research to create the material wealth of mankind. The results of science and technology also differ in form: scientific achievements are generally expressed in the form of concepts, laws, theories, papers, etc.; technical achievements generally appear in the form of technological processes, design drawings, operating methods, etc. Scientific achievements are generally not commercial, while technological achievements are highly commercial and can often be directly transformed into real commodities. ➂ Institutions The concept of institutions can also be classified into the two types of broad sense and narrow sense. Institutions in a broad sense generally refer to the sum of behavioural norms such as conventions, laws, regulations, policies, and rules established by human society in a specific historical stage and within a specific scope to regulate the political, economic, social, cultural, scientific and educational relations between individuals and organisations, which generally consists of the three parts of the informal constraints recognised by society, the formal constraints stipulated by the state, and implementation mechanisms. Institutions in a narrow sense refer to a code of conduct, rules, or guidelines that an organisation formulates and requires members of the organisation to abide by to maintain a normal operating order. Institutions are

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normative, procedural, instructive, and restrictive, and their content must be able to provide a basis for the behaviour of members of the organisation to follow. The broad concept of institutions is applicable to macro levels, such as society and country, while the narrow concept of institutions is applicable to micro-levels, such as societal communities and firms. Generally, the institutions at the micro level are constrained by the institutions at the macro level. For example, the labour system, wage system, insurance system and other rules formulated by firms must comply with the laws and regulations of the state where the firms are located; otherwise, they will be subject to certain sanctions. Institutions have different definitions under different analytical perspectives. The American institutional economist Veblen pointed out that institutions are the solidified form of social relations and are mapped to the public’s subjective consciousness, which are, in substance, “prevalent habits of thought with respect to particular relations and particular functions of the individual and of the community”,19 North (1990), a contemporary institutional economist, suggested that “institutions are the rules of the game in a society or, more formally are the humanly devised constraints that shape human interaction” and divided the institutions into the three dimensions of formal constraints and informal constraints and enforcement. Formal constraints, also known as formal rules, include political (and judicial) rules, economic rules, and contracts consciously designed by the government, the states or the rulers in accordance with certain purposes and procedures. The hierarchy of such rules, from constitutions, to statute and common laws, to specific by laws, and finally to individual contracts defines constraints, from general rules to particular specifications. Informal constraints are unconsciously formed by people in long-run practices, have lasting vitality, and become part of the culture passed on from generation to generation, including values, beliefs, ethics, moral concepts, customs, ideologies and other factors. Enforcement ensures the implementation of the relevant institutional arrangements for the above constraints, and it is a key link in the institutional arrangements. These three parts constitute a complete connotation of institutions and are an indivisible whole.20 Chinese evolutionary economist Jia Gen-Liang regarded the institutions as “the constraints governing the public’s economic behaviour”, and divided the institutions into the two categories of tangible institutions and intangible institutions. Tangible institutions include “the formal rules such as property rights and financial institutions”, while intangible institutions refer to “the informal rules such as ideologies, values, customs and habits as the external form of culture”. In the institutional structure, the two types of institutional arrangements are complementary, that the tangible institutions can change immediately, while the intangible institutions alter slowly.21 19

Veblen, T. (1934). The Theory of the Leisure Class: An Economic Study of Institutions. New York: The Modern Library. p. 190. 20 North, D. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press. pp. 3, 4, 36–60. 21 Jia, G. L. (2000). Cultural Tradition in Economic Transition. Comparative Economic & Social Systems (02):70. 贾根良. (2000). 经济转轨中的文化传统. 经济社会体制比较 (02):70.

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North’s definition of institutions is relatively strict and complete, but its connotation is somewhat broad. For example, the content covered by informal constraints actually belongs to the sociocultural category. If the connotation of a concept is too broad, it is often not conducive to in-depth study of the problem described by the concept. For example, using the concept of institutions defined by North to examine the production and operation of microsubjects such as firms often brings confusion to researchers. Generally, it is the corporate culture of a firm that contains the corporate institutions, not the corporate institutions that contain the corporate culture. However, if one looks at the concept of institutions as defined by North, one would draw the opposite conclusion. Corporate culture refers to the sum of enterprise spirit, values, business philosophy, moral code, and a code of conduct with its own characteristics created by a firm in its production and operation. Among them, enterprise spirit is the core of corporate culture and has a dominant position in the entire corporate culture. Enterprise spirit refers to the spiritual outlook of the firm members formed by deliberate shaping based on its own unique nature, goal, positioning and direction. Enterprise spirit is based on values and driven by corporate goals. It plays a decisive role in the business philosophy, management system, moral trend, group awareness and corporate image. Enterprise spirit is the soul of the firm and the externalisation of the conception and group psychology of firm members. Corporate culture is a relatively broad concept that not only includes the elements of humanistic-cultural knowledge (i.e., humanistic spirit, values, ethical morals, etc., but also the components of institutional norms (i.e., code of conduct, management institutions, etc.), as well as ideological content. Therefore, corporate culture is actually a composite concept that is suitable for describing the overall situation of the firm but not for analysing the constituent elements of the firm. This is also the reason this book does not include it as an independent factor that affects corporate development.

4.4.1.2

The Internal Environment of the Firm

The internal environment of the firm is an organic system composed of humans, resources, products and other factors. The factors within the system are interrelated, interacted, and interinfluenced, forming a complex network. The internal environment of the firm has a unique hierarchy and functional structure, which changes continuously with the dynamic changes of the firm. It is known that a complete firm generally includes at least the three elements of humans, resources and products; otherwise, it is not a complete firm. In addition, a firm must also have basic knowledge, institutions and technology to carry out normal production and operation; otherwise, it will be difficult for the firm to successfully complete its production and operation. In addition to these most basic elements, some other important factors that constitute a firm can be listed from different perspectives, such as entrepreneurs, corporate teams, corporate culture, corporate strategy, corporate management, organisational structure, and customer value. After careful analysis, it is not difficult to find that the elements that constitute

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a firm are not at the same level. Some of them are in the core position of the firm (i.e., entrepreneurs), while some are in the outer position of the firm (i.e., products). The core elements and noncore elements of a firm have different characteristics and functions. The core elements stipulate the value orientation and development direction of the firm and provide the stability and internal consistency of the firm. The noncore elements become the necessary basis for the profit orientation of the firm, providing the variability and diversity of the firm. The spheres of the corporate internal environment can be drawn according to the hierarchy of the factors in the firm, as shown in Fig. 4.3. The spheres of the corporate internal environment discussed here are only a rough division, which can be further subdivided and classified according to the different needs of the analysis. For instance, the specific level of corporate culture can be subdivided into three levels: entrepreneurship, enterprise spirit and corporate culture. Some of the factors can also be reclassified according to their nature. For example, the institutional norms and organisational structure are classified into the category of institutional system; Resource elements, technology, equipment, products and hardware sites are grouped into the category of physical environment. Because a firm is an organisation formed by humans, humans must be the core factor of a firm. Nevertheless, among the humans in the corporate organisation, the entrepreneur is at

Fig. 4.3 Spheres of the corporate internal environment

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the core. At the periphery of entrepreneurs are the corporate team, corporate culture, institutional system, and material environment. In daily corporate production and operation, the interaction between the entrepreneur and the team, along with the interaction between entrepreneurship and enterprise spirit, shapes corporate culture. In the process of corporate growth and evolution, the entrepreneur and the team are growing together, while entrepreneurship, enterprise spirit and corporate culture are also growing together. It should be noted that the hierarchy in Fig. 4.3 is only a rough division for the convenience of analysis. In fact, entrepreneur and entrepreneurship are one, corporate team and enterprise spirit are one, corporate totality and corporate culture are one, and the three are highly coupled; Corporate culture and institutional systems are also highly coupled, material environment is the carrier of corporate culture and institutional systems, and these three evolve from low-level to high-level and from simplicity to complexity as the firm grows and evolves. Firms are artificial intelligence systems where humans inside are able to learn from experience to continuously adapt to the external environment. Therefore, with the passage of time, the structure, function and behaviour of the internal environment of the firm can continuously improve itself and evolve toward a higher order. The features of corporate internal environment evolution are coordination in discordance, self-organisation in organisation, and coupling in adaptation. Just as organisms must adapt to the external environment to survive, a firm also needs to constantly adapt to the external environment in the process of growth and development. When the external environment changes, the internal environment of the firm must be adjusted accordingly until the internal and external environments are coupled. The higher the degree of coupling between the internal and external environments of the firm, the better the survival and development environment of the firm. The coupling process of the internal and external environments of the firm is the process of corporate growth and evolution.

4.4.2 The Constituent Elements and Organisational Structure of the Firm 4.4.2.1

The Constituent Elements of the Firm

Generally, in addition to the three basic elements of humans, resources, and products, a complete firm must also have knowledge, institutions, and technology, and these six categories of factors are the most basic key elements that make up a firm. These six key factors can be divided into two categories: A: Explicit factors (surface factors): humans, resources, and products B: Implicit factors (deep factors): knowledge, institutions, and technology

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In the previous analysis, it is concluded that the above six factors also exist in the external environment of the firm. The humans in the firm possess certain knowledge. To carry out production and operation, the humans in the firm must be organised according to certain production and operation rules, which are the corporate institutions. At the same time, to produce specific products, firms also need to use some technical means to process relevant resources into corresponding products. Firms need to continuously absorb factors such as humans, resources, knowledge, institutions, and technology from the external environment, internalise them into their constituent factors in the process of growth, and continuously disseminate their internal knowledge and technology to the external environment by providing products and services to the markets.

4.4.2.2

The Organisational Structure of the Firm

Firm is a collective made up of many humans. Every human is an individual with thoughts and can act independently. If the humans in the firm do not form a structured organisation according to certain institutions and rules, the firm will not be able to successfully complete its production and operation. Therefore, before a normal firm starts production and operation, its personnel must form an organic organisation according to a certain division of labour. The organisational structure of the firm refers to the order and form of interrelation, intercoordination and interrestriction determined by the constituent elements within the firm in accordance with particular institutional rules. The organisational structure of corporate organisation is a concrete manifestation of corporate institutions and the basis for the formation, establishment and normal operation of corporate institutions. A firm is an artificial intelligence system with self-learning, self-adaptating, and self-organising characteristics and abilities that is able to continuously learn, constantly adjust, reorganise and improve its organisational hierarchy and functional structure as it develops. To adapt to the increasingly complex and dynamic external environment, firms need to constantly adjust their organisational structure to coordinate with the external environment. When studying corporate ecology and evolution, the theory of organisational ecology emphasises that a firm must adapt to the external environment. The structure of corporate organisation should be adapted to the external environmental conditions. It also stressed that only when the organisational structure meets the requirements of the external environment can the firm achieve sustainable development. The relatively stable external environment requires the internal organisational structure to apply a formal organisational form; the turbulent and changeable external environment requires the internal organisational structure to apply a flexible organisational form. The complexity of the external environment requires the firm to have a more complicated organisational structure, while the relatively simple external environment requires the firm to have a relatively simple organisational structure.

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How to construct a reasonable organisational structure scientifically is crucial to the future development of a firm because the nature and function of an organisation mainly depends on its internal structure. Regarding the relationship between structure and function, let us look at two more typical examples. ➀ Diamond and Graphite In nature, both graphite and diamond are substances composed of carbon elements, but their properties are very different. From the appearance, graphite is black and opaque, while diamond is colourless and transparent. In terms of hardness, graphite is very soft and is often used as a lubricant and pencil lead, while diamond is rather hard and is often used as a drill bit and glass cutter. Studies have shown that the underlying reason for the different properties of graphite and diamond lies in their internal structure, that is, the spatial arrangement of carbon atoms is different (Figs. 4.4 and Fig. 4.5). The carbon atoms inside the graphite are arranged in regular hexagons in a flat layered structure, and the layers can move freely, making the graphite very soft. The carbon atoms inside the diamond are arranged in regular tetrahedrons in a pyramid-shaped network structure, which is highly stable and makes the diamond very hard. Fig. 4.4 Internal structure of graphite

Fig. 4.5 Internal structure of diamond

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This is an example of things being different in nature due to the different spatial arrangements of their constituent units. ➁ Tian Ji’s Horse Racing Strategy Volume LXV of Records of the Grand Historian documented an incident involving Tian Ji and the ruler of Qi State on horse race. During the Warring States period, King Wei of Qi and his general Tian Ji frequently bet heavily on horse race. One day, they selected three horses with different speed classes, fast, medium and slow to race. In the races, Tian Ji pitted his fast, medium and slow horses against the King’s fast, medium and slow horses. Since the horse of each level that the king’s was better than Tian Ji’s, Tian Ji loses all the time. Later, strategist Sun Bin advised him to pit his slow horse against the King’s fast horse, his fast horse against the King’s medium horse, and his medium horse against the King’s slow horse. Taking Sun Bin at his word, when all three horse races were finished, although Tian Ji lost the first race, his horses prevailed in the next two, in the end winning the race. In the race, Tian Ji and the King pitted the same horses as before, but Tian Ji turned defeat into victory by changing the order of the horses. This story vividly demonstrates that different time arrangements and structures of the internal components of things often cause changes in the forces of contradictions within things and ultimately lead to changes in the overall nature of things. Different firms have different organisational structures. The organisational structure of the same firm also has different characteristics at different stages of development. The organisational structure of a firm is relatively stable in the short term, but it is constantly developing and changing in the long term (for example, in ten years). To better adapt to the external environment, firms should keep pace with the times and constantly adjust their internal organisational structure.

4.4.3 The Deep Structure of the Firm System According to the previous definitions and descriptions of knowledge, institutions and technology, the organic connection of the deep factors of the firm forms the deep structure of the firm system, which reflects the step-by-step enhancement of the practicality of the firm system in the process of creating value from cognition to rules to skills. This feature of the deep structure of the firm system can be seen from the comparison of the two typical forms of the intangible (implicit) and the tangible (explicit) deep factors of the firm (Table 4.4). An in-depth study along the key elements in the deep structure of the firm system will establish the necessary connections to cognitive science and psychology. In Table 4.4, the necessary explanation and clarification of the terms habit and routine are needed. The main difference between habit and routine is that habit presents an individual’s behaviour pattern, while routine presents the interaction

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Table 4.4 Two typical patterns of deep corporate factors Deep factors

Types Intangible (implicit)

Tangible (explicit)

Notes

Corporate knowledge Intangible knowledge Tangible knowledge Reflecting the features of cognition from silence to clarity, and from perception to speech Corporate institutions Intangible institutions Tangible institutions Reflecting the features of rules from habit to routine, from accident to norm Corporate technology Intangible technology Tangible technology Reflecting the features of skills from conception to practice, from potentiality to reality

pattern among members of an organisation. Habits are regarded as the microfoundations of routines, and their interlinks constitute routines.22 Institutions are a broader concept than routines, including formal rules based on explicit knowledge and informal rules based on tacit knowledge; routines usually belong to the part of informal rules.23 Habits refer to a person’s stable and automatic tendency to behave over a long period of time or a person’s repetitive behaviours that occur under specific stimuli or hints in psychology. Huang Kai-Nan defined habit as “an individual’s internal response mechanism that can automatically produce repetitive behaviours under specific stimuli and cues.” He pointed out that “repetitive behaviour includes both explicit and observable behavioural activities, as well as implicit and unobservable cognitive and psychological activities. Habits have the following characteristics: (1) Habits are an adaptive response mechanism of individuals to repeated scenes, which contain knowledge of how to deal with corresponding scenes or environments and are relatively stable. (2) In chronological order, instinct precedes habit, and habit precedes reason. Rational choice is not the starting point of human behaviour. Reasons and beliefs on which rational behaviour relies depend upon habits of thought.24 (3) Unlike instincts given by nature, habits will change. The speed and

22

Cohen, M. D., Levinthal, D. A., Warglien, M. (2014). Collective Performance: Modeling the Interaction of Habit-based Actions. Industrial and Corporate Change, 23(2). pp. 329–360. 23 Huang, K. N. (2016). Theoretical Development and Construction of Institutional Evolutionary Economics. Social Sciences in China (05):70. 黄凯南. (2016). 制度演化经济学的理论发展与建 构. 中国社会科学 (05):70. 24 Wegner, D. M. (2002). The Illusion of Conscious Will. Cambridge: Massachusetts Institute of Technology Press. pp. 121–137; Hodgson, G. M. Choice, Habit and Evolution. Journal of Evolutionary Economics, 2010, 20(1), pp. 1–18.

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direction of the evolution of habits depend on their adaptability to the environment in which they are located and the selection pressure from the environment”.25 Routine was a concept first introduced by Nelson and Winter in the analysis of organisational and economic evolution. Here, combining the research results of some scholars (Hodgson and Knudsen, 2004; Cacciatori, 2012; Winter, 2013; Huang KaiNan, 2016), gives a clearer summary of this concept. Routines refer to the relatively stable tendency of organisational behaviour that can be repeated under environmental stimulation. They are informal rules for coordinating the interaction between members of the organisation. They contain the relevant knowledge and memory accumulated by the organisation to adapt to the environment. Routines generally have the following characteristics26 : ➀ Routines are reaction rules at the level of organisations or groups, with a certain degree of inertia and stability; ➁ Routines are usually implemented automatically and do not require careful consideration, which can save the cognitive resources of members within the organisation; ➂ Compared with other formal, standardised or general rules, the formation and implementation of routines are more context-dependent and specific and are often tacit knowledge stored in the organisation; and➃ The formation and evolution of routines is a multilevel and multisubject interaction process, including the interaction between the organisation and the environment, as well as the interaction between members within the organisation. The change of routines is endogenous in the learning process of the organisation. Regarding the two typical forms of deep factors of firms, how can their gradually increasing practicality be understood? Here, institutions and technology are used as examples to illustrate. First, take the formation of the decision-making institutions of start-ups as an example. When an entrepreneurial opportunity (i.e., a new technology) is just born, its future prospects are very uncertain. It may have a large number of social needs, which can enable start-ups to grow rapidly and even give birth to a new industry, or may only have a small number of short-lived social needs, or just a transitional technology may soon be replaced by other technologies. Facing the same entrepreneurial opportunity in reality, different entrepreneurs often make different attitudes and decisions. Risk-loving entrepreneurs may quickly seize it as a good opportunity. Risk-averse entrepreneurs may take a wait-and-see attitude. These two different attitudes and decisions to seize opportunities are obviously closely related to the personal experience, knowledge structure and thinking habits of different entrepreneurs. Some dare to take risks, often make decisions and act quickly, and thus seize some business opportunities and achieve entrepreneurial success. While some are slow in decisionmaking and action, they miss some business opportunities when they are pondering, which in turn leads to entrepreneurial failure. Entrepreneurs of start-up firms often introduce personal decision-making habits into their corporate organisations, thereby 25

Huang, K. N. (2016). Theoretical Development and Construction of Institutional Evolutionary Economics. Social Sciences in China (05):68–69. 黄凯南. (2016). 制度演化经济学的理论发展 与建构. 中国社会科学 (05):68–69. 26 Huang, K. N. (2016). Theoretical Development and Construction of Institutional Evolutionary Economics. Social Sciences in China (05):69. 黄凯南. (2016). 制度演化经济学的理论发展与建 构. 中国社会科学 (05):69.

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forming the decision-making routines of corporate organisations; The formation of such organisational routines is often sporadic and unconventional in the early stages of corporate development. If the continuous application of these routines results in the firm being able to seize business opportunities and to grow and develop in a timely manner, these routines will be selected by the corporate organisation and become the regular and relatively normative rules of corporate organisation. Once these rules are written and included in corporate management norms, they in fact constitute the corporate decision-making institutions. Since 1978, some founders of private firms in China have been able to seize certain business opportunities and make fortunes by bribing local officials to obtain social resources (i.e., land or mineral resources). As a result, the habit of bribing was introduced into corporate organisations, thus forming their corporate routines and further evolving into corporate rules (i.e., invite government officials to the firm’s year-end gala, specifically including public relations, entertainment, and gift expenses, etc., in the firm’s annual budget). To date, the lasting impact of this behaviour can still be seen in the operation and corporate rules of some private entrepreneurs in China. It is apparent in these examples that corporate institutions have two typical types of intangible form and tangible form, which also reflects the evolutionary characteristics of corporate rules from personal habits to organisational routines, from sporadic to regular. Take the long-term evolution of vehicle technology as another example. The first vehicle invented by humans was the wheelbarrow, which used human power to propel it forward. Then, the two-wheeled vehicle used large animals such as cattle and horses to pull forward. Later, the two-axle four-wheeled carriage was invented, and the carriage could shelter passengers from wind and rain. In 1769, French army engineer Nicolas-Joseph Cugnot (1725–1804) created the world’s first three-wheeled vehicle driven by a steam engine, but it was not until 1803 that steam engine vehicles began to be practically used in France. Since then, various technologies related to automobiles, such as internal combustion engine ignition devices, rubber tires, ceramic electric ignition devices, lead-acid batteries, electric spark ignition gas generators, and reciprocating piston gas engines, have been developed. In 1885, German inventor Karl Friedrich Benz (1844–1929) developed the world’s first petrol-powered threewheeled automobile. In 1886, the German inventor Gottlieb Daimler (1834–1900) installed the petrol engine he designed on a four-wheeled carriage to make the world’s first four-wheeled car.27 The basic form of modern automobiles is the petrol-powered four-wheeled vehicle, which uses the mechanical energy generated by oil combustion to propel it forward. It is discernible that in the process of vehicle form transformation from carriage to automobile, major innovations have occurred in vehicle technology, mainly due to the disruptive changes in its driving force. When the automobile was invented, in addition to inheriting old technologies such as the wheels, axles, frames, and carriages, new technologies such as petrol engines, steering mechanisms, and power transmission devices were added. Before drawing specific design drawings,

27

A Hundred Years of the World’s Automobiles (世界汽车百年历史). Baidu Baike. https://baike. baidu.com.html. Accessed 10 Apr 2020.

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car inventors first came up with the idea of combining horse-drawn carriage technology with petrol engine technology, then manufactured various parts of the car according to the design drawings, and finally assembled the parts into a car. In this process, the inventor’s ideas and design are conceptual and do not have the actual transportation capacity, but when the inventor manufactures the car and drives it normally on the road, the car has the actual transportation capacity. Conspicuously, there are two typical types of intangible forms and tangible forms in the process of automotive technology from conception, design, to manufacture, which also reflects the characteristics of human transportation skills from conception to practice and from potentiality to reality. In the history of the invention of automobile technology, the technology of steampowered automobiles was earlier than that of petrol-powered automobiles. Steampowered cars were equipped with bulky steam boilers, fueled by coal, and were slow and difficult to operate, while petrol-powered cars overcame these deficiencies. Therefore, when Carl Benz founded the world’s first automobile manufacturing company in 1887, petrol-engine four-wheeled vehicles were widely accepted, and petrol-engine-powered automobile technology became the dominant technology in the world’s automobile industry, which fully reflects the obvious path-dependence in the process of technological evolution.

4.5 The Production and Operation of the Firm The daily operation of a firm is a cyclical process starting from production and ending with providing customers with products to meet their needs. In the firm, a simple process of production and operation is as follows: social demand → firm production → product sales → customer consumption

Among them, the process of the firm selling products is actually the process of exchanging the customer’s currency with the products of the firm, and its essence is exchange. Therefore, the above process of corporate production and operation can be simply expressed as follows: demand → production (factor combinations → products) → exchange → consumption

Above, the process in brackets is the internal corporate production process. If the internal production process is further decomposed in combination with the constituent elements of the firm, it is not difficult to obtain the relationship diagram of the production links within the firm (Fig. 4.6), which actually reflects the general structure of the operation of the firm system from the perspective of the system. The general structure of the firm system refers to the general order and form of interrelation, interaction, interinfluence and interrestriction formed among the subsystems within the firm system in its dynamic evolution. The general structure of the firm system reflects the structural features of the internal elements of the firm system supporting each other in terms of function and is the basis for the coevolution

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Fig. 4.6 General operational structure of the firm system

of the external environment system and the firm system, as well as the firm system and its internal elements. As seen from Fig. 4.6, the actual production process of the firm system can be divided into two chains (the solid arrow in the figure): Chain A (surface factor production chain): production → entrepreneur → organisation → resources → product Chain B (deep factor production chain): production → knowledge → institutions → technology → product Through the production process of Chain A, the firm produces the tangible value, that is, the physical value, of the product for customers. Through the production process of Chain B, the firm produces the intangible value, that is, the abstract value, of the product for customers. These two values are combined into one, and they together constitute the commercial value, that is, the customer value, of the product. In corporate production and operation, the process reflected by Chain A is the production of the physical value of the product and the internalisation, integration, and processing of the explicit elements of the firm. The process reflected in Chain B is the production of the abstract value of the product and internalisation, integration, and application of the implicit elements of the firm. These two production processes are performed simultaneously, and together they manufacture products with complete customer value. In the entire process of corporate production and operation, the humans in the firm (i.e., entrepreneur and organisation) are the main actors, and the entrepreneur plays a vital leading role. Humans here mainly refer to the organised person formed in accordance with certain institutional rules. Corporate institutions play a key role in uniting individuals into organisations. Corporate technology is crucial in integrating and processing different factors of production into products. Only when all factors of production are coordinated and cooperated can the firm successfully realise the manufacture of products. Under modern social and economic conditions, the process of a firm organising production and operation activities is quite complicated. To facilitate the analysis of the issue, a brief summary of the complete production and operation process of the firm can be made. The entrepreneur first determines the nature, goals, orientation and development direction of the firm according to his/her own knowledge of the

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market, firms, and products. Subsequently, the entrepreneur determines the organisational structure and management methods of the firm according to the management knowledge he/she has mastered and creates a firm organisation accordingly. Then, the firm begins to recruit various types of personnel and select suitable raw material suppliers. At the same time, the corporate organisation selects specific technology from the external environment as the leading technology of the firm based on its professional knowledge, and this technology is absorbed and internalised by the firm as a corporate technology that the firm can freely use. Under the promotion of the entrepreneur and the coordination of the institutional rules, the corporate organisation deeply combines corporate technology and resource elements and manufactures corporate products through certain integration and processing. Finally, the firm sells the products it manufactures to customers. At this point, the firm completes the whole process of production and operation. Afterwards, under the stimulation of new customer demand, the firm will start a new process of production and sales. In reproduction, the production capacity of the firm is gradually improved with the continuous improvement and innovation of the leading technology used, but when the potential of the technology is exhausted, the firm will start to search for new technologies in the external environment. In corporate growth and development, corporate production and operation are dynamic processes that are repeated, cyclical, and continuous. In the entire process of corporate production and operation, factors such as entrepreneurs, organisations, resources, knowledge, institutions, technology, and products do not work individually or separately but coordinately and cooperatively. That is, every two factors are interrelated, interacted and interinfluenced, and they together form the network of production relations within the firm. In Fig. 4.6, the dashed double arrow is used to indicate this relationship between them. In economics, different scholars have paid attention to and emphasised the importance of different factors of the firm system. Schumpeter, for example, highlighted the important role of entrepreneurs, North signified the importance of institutional rules, and Brian Arthur focused on the analysis of technological evolution. Since the firm system is an artificial system, the factor of humans is obviously the most important one, just as North pointed out that “as a part of an organisation, individuals can make decisions to change the rules of the game; The change of knowledge is the key to economic evolution, and the learning of individuals and organisations is the main driving force for institutional evolution”.28 In the process of growth and development, in addition to the need to deal with the production relations network inside the firm, a firm also needs to deal with its social relations network outside. The relationships formed by the natural and social environmental factors in the firm system and its external environment (i.e., states, governments, laws, firms, markets, households, scientific research institutions, educational organisations, etc., especially suppliers, distributors, customers, partners, 28

Tang, Z. R. (2014). An Analytic History of Western Economic Evolution. China Economic Publishing House. p. 114. 汤正仁. (2014). 西方经济演化分析史. 中国经济出版社. p. 114.

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competitors and other stakeholders) constitute the external social relations network of the firm. In terms of socioeconomic relations, the complete production relation of a firm should be composed of its internal production relations network and its external social relations network. Corporate growth and evolution are essentially the dynamic entanglement, interaction and interinfluence of the two relationship networks inside and outside the firm, constituting a multidimensional and complex dynamic picture. In the field of Economics, when studying production relations, some scholars only paid attention to the production relations inside the firm but ignored the social relations outside the firm, thus cutting off the inevitable connection between the firm and the external environment, which is clearly biased from a system perspective.

4.6 The Exchange and the Distribution Within the Firm The internal organisation of small and medium-sized firms generally includes the departments of Management, Human Resources, Finance, Market Insight, Product Planning, Procurement, Production, and Sales. In the process of corporate growth, different departments need to coordinate and cooperate so that the firm can carry out normal production and operation. In the process of corporate production and operation, there are extensive exchange activities within the firm. In small firms, due to the division of labour between departments, each department is often only responsible for completing a part of a complex task, so different departments need to exchange work results with each other, and finally, the entire firm can cooperate to complete this complex task. For example, Human Resources recruits suitable personnel for the departments of the firm; Finance handles financial and accounting affairs for the firm; Market Insight collects and analyses customer demands; Product Planning designs products according to the demand report provided by Market Insight and submits the design to Production for processing and manufacturing; Procurement purchases raw materials according to the production needs; Production uses the raw materials purchased by Procurement to process and manufacture products according to the design drawings of Product Planning and hands over the products to Sales for sale; In this process, Management is responsible for the coordination, communication, management and monitoring of the entire process to improve the operating efficiency of the entire organisation. Some larger firms are themselves composed of smaller firms that have a division of labour and need to exchange products or services with each other. For example, in an automobile factory, some of its subordinate units are responsible for the production of engines, while some are responsible for the production of vehicle frames, etc., and they need to exchange labour results to finally complete the manufacture of automobiles. In corporate production and operation, there is also a widespread process of allocating manpower, resources and products. In a real-world economic environment, to adapt to the rapidly changing environment and gain more competitive advantages over peers, some large firms even

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constructed complex distribution and exchange systems within the firm. For example, the Haier Group in China replaced the traditional pyramid-type bureaucratic mechanism with a parallel market mechanism at the operational level and replaced the traditional authority relationship and administrative relationship with market relationships, thus building a market chain within the entire firm. They decomposed external market orders into a series of internal market orders, down to each individual; turned the relationship between superiors and subordinates and departments into a market exchange relationship, so that units, departments and individuals can form a market contractual relationship with interests as the link; changed the corporate mission from maximising profit to prioritising user satisfaction, so that units or individuals in adjacent processes can directly face customers; adjusted low-energy incentives into high-energy incentives, and gave different rewards according to the individual’s daily order completion and performance; abolished the original post wages and implemented the market wage system for all employees in 1999, which means that their income distribution system is not based on labour or capital but based on market results. After the implementation of this system, the firm has not only enhanced its vitality, improved its efficiency, and reduced its costs but also accelerated its response to the market.29 Obviously, in actual corporate production and operation, the two links of distribution and exchange between the starting point of production and the ending point of consumption are not simply connected before and after, but there are often small distributions and exchanges within a large exchange, or a large distribution, while there are even smaller distributions and exchanges within each small distribution or exchange. The entire corporate production and operation is actually a complex network formed by intertwined and nested internal and external links of distribution and exchange at different levels. Since the birth of Economics, scholars have paid full attention to the exchange relationship based on the market and have carried out extensive and in-depth analysis and research on the exchange relationship in the economic system, so the distribution relationship in the economic system has not been sufficiently and fully studied. For this reason, this book makes some more systematic discussions on the distribution relationship.

4.6.1 The Meaning of Distribution and the Related Theories As one of the important contents in human social relations, distribution plays a crucial role in the social economy. Since the birth of Economics, the issue of distribution has been an important topic in economics studies. In Economics, the term distribution is generally understood as the division of labour results, the assignment of products, or the allocation of income. Similar to 29

Su, H. W. (2001). Haier’s Managerial Innovation: Market Chain and Business Process Reengineering. Nankai Management Review (01). 苏慧文. (2001). 海尔管理变革: 市场链与流程 再造. 南开管理评论 (01).

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the understanding of anything, people’s understanding of distribution is constantly developing and gradually deepening. Adam Smith, David Ricardo (1772–1823), up to Marx, basically studied and analysed distribution problems along the line of value determination. In Adam Smith’s distribution theory, he revealed the relationship between labour (employed labourers), capital (capital owners), and land (land owners), assuming that the price and exchange value of commodities are composed of the value of labour-wages, the value of capital-profit, and the value of land-rent, which are the sources of all national income and national tax revenue. In a certain period of time, the income of a state is distributed among the three classes of labourers, capitalists and landlords. He pointed out that “all the commodities which compose the whole annual produce of the labour of every country, taken complexly, must resolve itself into the same three parts, and be parcelled out among different inhabitants of the country, whether as the wages of their labour, the profits of their stock, or the rent of their land… Wages, profit, and rent are the three original sources of all revenue as well as of all exchangeable value. All other revenue is ultimately derived from some one or other of these.”30 In explaining distribution, Adam Smith argued that the economy only plays an important role in the short run and that the long-term influences are mainly history and culture. Inheriting Adam Smith’s distribution thought, David Ricardo proposed that distribution should follow the two principles of residual principle and marginal principle. He revealed that the three classes of labourers, capitalists, and landlords have different dominant forces behind the distribution of total social products and suggested that the wages of labour are determined by the minimum subsistence wage level, the profits of stock are determined by the average profit rate, and the rent of land is determined by the supply and demand of land and the marginal productivity of different lands.31 Marx inherited the rational elements of the distribution thought of Adam Smith and David Ricardo, connected the distribution with the production process, and clarified the nature, source and internal relationship of wages, profits, interest, and rent. He regarded distribution as a link in social reproduction consisting of production, distribution, exchange and consumption and assumed that distribution is not only the distribution of the products of labour results but also the distribution of social resources such as production tools and labour. He pointed out that “in the most shallow conception of distribution, the latter appears as a distribution of products and to that extent as further removed from and quasi-independent of production. However, before distribution means distribution of products, it is first a distribution of the means of production, and second, what is practically another wording of the same fact, it is a distribution of the members of society among the various kinds of production (the subjection of individuals to certain conditions of production). The distribution of products is manifestly a result of this distribution, which is bound up with the process of production and determines the very organisation of 30

Smith, A. (1937). The Wealth of Nations. Random House. p. 52. Ricardo, D. (1821). On the Principles of Political Economy and Taxation. John Murray. pp. 53– 129. 31

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the latter. To treat production apart from the distribution which is comprised in it, is plainly an idle abstraction; Conversely, we know the character of the distribution of products the moment we are given the nature of that other distribution which forms originally a factor of production.”32 Marx’s distribution thought embodied the systems thinking of the comprehensive investigation on the movement of things, which is very enlightening for the comprehensive analysis of distribution issues. For example, he stated that “with such distribution of a factor that originally constitutes production, the distribution of products is naturally determined.” This statement reminds us that distribution constitutes a factor of production, which means that there are distribution issues before production starts, during production, and after production is completed; “The distribution of production tools” and “the distribution of social members among different types of production” he demonstrated alerts us that the distribution of economic resources among departments, sectors, and industries cannot be ignored. Although the meaning of Marx’s expression is somewhat inexplicable, the thoughts revealed in his words are quite clear. The distribution theory of neoclassical economics is the most representative of the marginal productivity theory of distribution and the general equilibrium theory of distribution. Marginal productivity theory of distribution holds that total social income is jointly created by production factors such as labour, capital, and land, and the share of each factor in the distribution is determined by their marginal contribution to total social income; that is, wages are equal to the marginal productivity of labour, interests are equal to the marginal productivity of capital, rent is equal to the marginal productivity of land, and profits are equal to the wages of entrepreneurial labour, thus turning the problem of income distribution into a price decision of factors of production. Marshall established his distribution theory on the basis of equilibrium price theory. He believed that total social income is created by the four factors of labour, capital, land, and organisation (capitalists’ management and supervision of firms), and the total social income is correspondingly divided into labour-wages, capital-interests, land-rent, organisation-profits, and their respective metrics are the prices of factors. Among them, wages are determined by the supply price and the demand price of labour, and interests are determined by the supply price and the demand price of capital. He assumed that land has no production cost and therefore no supply price, and land rent is only affected by demand and thus determined by its marginal productivity. He suggested that the profits obtained by entrepreneurs are the labour remuneration that they should receive for managing the firms, while the profits obtained by capitalists are the return of their talents.33 How can the economic welfare of society be improved through income distribution? This is the subject of the Economics of Welfare. Through the study of such topics, the Economics of Welfare greatly expanded the research space of distribution theory. Welfare economists, represented by British economist Arthur Cecil Pigou

32

Marx, K. (1904). A Contribution to the Critique of Political Economy. International Library Publishing Co. p. 286. 33 Marshall, A. (1930). Principles of Economics. The Macmillan and Co. Limited. pp. 476–609.

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(1877–1959), shifted the function of distribution from the previous income distribution to the field of social equity and social justice. They believed that the increase or decrease in socioeconomic welfare is directly related to the amount of national income and the reasonableness of income distribution activities: if the activities of distribution and redistribution increase the overall economic welfare of the society, then this distribution is reasonable; otherwise, it is unreasonable. The total economic welfare of the society can be expressed by the national income for a certain period of time. When national income increases, if there is no unfair income distribution, then the total economic welfare of society will increase. If there is an unfair distribution of income, the state can transfer the currency of the high-income class to the low-income class through taxation, payment transfer, etc., which can also improve the overall economic welfare of society. To increase the total economic welfare of society, on the one hand, it is necessary to increase the total social product (national income) and on the other hand, to make the income distribution more reasonable.34 Polish economist Michal Kalecki (1899–1970) put forward distribution theory and the existence of class struggle, divided the capitalist society into the capitalist class and working class, and suggested that the antagonism between the two major classes affects the distribution of national income and the determination of commodity prices, while the antagonism within the capitalist class affects the competition mode of capitalism and the law of movement of social reproduction. He believed that the factors that determine income distribution include class differences, monopoly degree, sectoral structure, product cost and price determination.35 In addition to the aforementioned Adam Smith, David Ricardo, Marx, Marshall, Pigou, and Kalecki, there were many other scholars who carried out special research on distribution, including John Bates Clark (1847–1938, author of The Distribution of Wealth), John Atkinson Hobson (1858–1940, author of The Economics of Distribution), and Chinese scholar Sun Luo-Ping (author of Principles of Income Distribution), He Chuan-Qi (author of Distribution Revolution: Distribution According to Contribution), Yu Guo-An and Qu Yong-Yi (authors of A Study on Income Distribution Issues), which will not be discussed here. Most scholars have basically investigated the distribution problem from the perspective of product distribution or income distribution and have rarely analysed the distribution issue from the comprehensive perspective of system theory. Wang Chao-Ke and Cheng En-Fu applied the analysis method of system theory to analyse the distribution problem from the four levels in terms of economic category, social reproduction links, economic policy tools and economic institutions, endowed distribution with a broader connotation, highlighted the characteristics of economic policy tools and economic institutions, and analysed

34

The literature on distribution in the above three paragraphs is compiled from: Wang, C. K. Cheng, E. F. (2011). A Study on Economic Power System. Shanghai University of Finance and Economics Press. pp. 205–212, 236–239. 王朝科. 程恩富. (2011). 经济力系统研究. 上海财经大学出版社. pp. 205–212, 236–239. 35 Source: Michal Kaleski. MBA Think Tank Encyclopaedia. http://wiki.mbalib.com/wiki.html.

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the effectiveness of distribution in allocating economic resources, dividing production results, adjusting social relations, and achieving social justice and harmony.36 Their research results provided a valuable reference for this book’s elaboration of distribution. Combining the relevant points above, a general definition of distribution can be made. Distribution is formed by human society on the basis of certain social productive forces to regulate the interest relationship between people, promote social justice and achieve social harmony. As a link in social reproduction, its function is mainly to segment social production results. As a reflection of the will of the distribution subject, its role is mainly to adjust the rational allocation of resources at different levels of social departments, sectors, and classes. The distribution of material products in the production results can be divided into primary distribution and redistribution according to the hierarchy. Distribution is generally composed of distribution subject, distribution object, distribution institutions, and distribution standards. Here, distribution subject refers to the individual or organisation that conducts distribution activities (including firm, societal community, and government, etc.). Distribution object refers to the resource or product (including material product, mental product or service) used by distribution subject for distribution. Distribution institutions refer to a series of rules formulated to achieve the goal of regulating the behaviour of distribution subjects, dividing the rights of distribution subjects, managing the relations of social distribution, adjusting the flow of resources and evaluating the effectiveness of distribution, with the purpose of balancing interest relationships, promoting social justice, and realising social harmony, in accordance with the inherent laws of economic operation and the realistic requirements of social development. Distribution standards refer to the specific metrics applied to measure the number of distribution objects or the measurement of distribution effectiveness, including value standards, time standards, fairness standards, and efficiency standards, while efficiency standards can be divided into political efficiency standards, social efficiency standards, and economic efficiency standards. Different distribution standards usually need to be adopted for different distribution subjects or distribution objects. For example, for ordinary workers in a firm, the amount of labour is generally measured and paid according to time standards, while the redistribution of social production results is generally based on fairness standards for the most basic distribution.

4.6.2 Distribution in the Firm System The following examines the distribution at the microeconomic level of firms. To make the investigation more intuitive, the general operational structure of the firm system (Fig. 4.6) in the previous article is combined for analysis. 36

Wang, C. K. Cheng, E. F. (2011). A Study on Economic Power System. Shanghai University of Finance and Economics Press. pp. 204–222. 王朝科. 程恩富. (2011). 经济力系统研究. 上海财经 大学出版社. pp. 204–222.

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Three Types of Distribution Activities in the Firm System

Humans, resources and products are the basic factors that make up a firm. In the process of corporate production and operation, the distribution of these three factors always exists. When an entrepreneur starts a business, he/she first needs to consider the distribution of these three types of factors. If the entrepreneur has sufficient start-up capital, he can set up a sole proprietorship invested by himself, and at this moment, the manpower and equipment required by the firm can be purchased through the labour market and the commodity market, respectively. When manpower, equipment and other factors enter the firm, the entrepreneur needs to make a specific division of labour among the personnel within the firm, arranging some people to do accounting, some to do procurement, some to do technical work, some to do production, and some to engage in sales, etc., which is actually an allocation of human resources. Meanwhile, the entrepreneur also needs to make the necessary distribution of material resources such as various production equipment, allocating some material resources for public use (i.e., photocopiers), and some material resources for exclusive use (i.e., computers used by each employee), which is actually an allocation of material resources. Here, human resources refer to the sum of the physical and mental power that a person possesses within a certain time and space that can be utilised by the organisation to contribute to creating value. When an enterprise produces a specific product, the enterprise first needs to sell the product and collect cash before the entrepreneur can distribute the realised value (i.e., sales revenue) of the product. In actual production and operation, the entrepreneur generally uses part of the sales income to pay wages to employees, part for taxation, part for reproduction (i.e., purchasing raw materials, etc.), and part (salary or profit) for themselves. This distribution activity is generally understood as product distribution (or income distribution), which is the initial distribution of products (or income). If the firm’s sales revenue after deducting the fixed investment and various expenditures invested in the firm has surplus, it means that the firm has created a profit. However, if the business is operating at a loss, then the firm has no residual value to distribute. As an investor in a firm, the real income the entrepreneur shares can only come from the profits generated by the firm. If the business does not generate profits, then the entrepreneur has no income. Comparing Fig. 4.6, the distribution activities within the firm described above reflect the distribution of the three explicit factors of humans, resources and products by the entrepreneur. These three types of distribution activities are not only relatively independent but also combined into a closely connected totality, which is jointly included in corporate production and operation. In the distribution of human resources, the entrepreneur is the distribution subject, the employees are the distribution object, the distribution institutions are the organisational rules related to human resources formulated within the firm, and the distribution standard is the professional ability of employees and the needs of the division of labour within the firm. In the distribution of the material resources of the firm, the entrepreneur or its agent (i.e., the manager in charge of production equipment in the firm) is the distribution subject, the material resources of the firm (i.e., computers) are the distribution object, the

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distribution institutions are the management rules for material resources formulated within the firm, and the distribution standard is the exclusive function of material resources and the needs of the division of labour within the firm. Compared with the first two types of distribution activities, the distribution of products within the firm is more complicated. When the entrepreneur is the sole investor of the firm, the subjects involved in the distribution of the firm’s products are the entrepreneur, the employees, and the government (the tax department is a specialised agency that collects taxes on behalf of the government); if a part of corporate profits is to be extracted as corporate accumulation, the distribution subject should also include the firm itself. When the entrepreneur is not the only investor of the firm, the subjects at this time include not only the entrepreneur, the employees, and the government but also other investors (i.e., corporate shareholders) who will distribute the profits together with the entrepreneur. When the entrepreneur is not an investor but only the manager employed by the firm, the actual role of the entrepreneur at this moment is the manager of the firm (i.e., the agent of the owner of the firm), and the way the entrepreneur participates in the distribution of corporate products (whether to participate in profit distribution) is generally regulated by the corporate distribution institutions. The distribution object is all the products of the firm within a certain period, and in fact, only the value of those products sold by the firm is involved in the distribution. Distribution institutions refer to the internal remuneration rules, reward rules, financial rules, articles of incorporation and other corporate institutions, as well as the relevant employment agreements signed by the firm and individual employees. Here, although the internal salary rules, reward rules, financial rules and other income distribution institutions of the firm are formulated by the internal personnel of the firm, their content is not designed at will and is based on the firm’s own development needs and actual payment capabilities, as well as the relevant laws and regulations of the government and factors such as market wage level. The income distribution standard of the firm is obviously a diversified system, and there are different distribution standards for different distribution subjects. Investors (shareholders), generally before the formal establishment of the firm, negotiate the proportion of shares occupied by each person and sign the corresponding investment agreement. When business operations generate profits, they will distribute corporate profits in accordance with the proportion of shares agreed upon in the contract. For the entrepreneur, if he/she is not an investor but merely an employed manager, whether he/she may participate in the profit distribution or he/she may not participate in the profit distribution (only salary) depends on the agreement reached between the entrepreneur and the business owner, which is actually the result of negotiations between the two parties. Excellent managers are scarce resources in the market. Whether their management abilities can be fully utilised is very important for the survival and development of a firm. If the agreement reached between the business owner and the entrepreneur and the distribution institutions designed by the firm not only maintain the benefit rights of the business owner but also maximise the enthusiasm of the entrepreneur, it will effectively motivate the entrepreneur to work hard, thereby driving the rapid growth of the entire firm. In contrast, it may inhibit

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the rapid growth of the firm. Therefore, the incentive for entrepreneurial ability and management enthusiasm in distribution institutions will be very important content. To mobilise entrepreneurs’ abilities and business enthusiasm, the distribution institutions of modern firms often link the business performance of the firm to the income of the entrepreneur and give the entrepreneur a certain percentage of shares as an incentive. For ordinary employees of a firm, when they sign an employment agreement with the firm, their salary, bonus and other income distribution contents are determined; their specific income distribution standards are generally determined by factors such as the corporate distribution institutions, individual professional abilities, and the supply and demand status of the labour market. In modern firms, to retain personnel with special expertise, in addition to normal wages, some firms often allocate a certain percentage of corporate shares to them to mobilise their enthusiasm for work. In addition, the government, as the distribution subject, collects taxes from firms, which is a concrete manifestation of the will of the state. The specific tax collection approaches, proportions, and methods are clearly stipulated in each state’s corresponding tax laws and regulations. Here, whether it is investors (shareholders), entrepreneurs, or ordinary employees, before they start or enter a business, or before the business initiates tax registration, the distribution standards such as the approaches, proportions and methods for these distribution subjects to participate in the distribution of corporate products (income distribution) have been determined. When the firm manufactures products and sells them for profits, the distribution subject of these products is only implementing specific distribution behaviours. In the entire process of production and operation, the firm also has the distribution activities among human resources, material resources and corporate products, which can be discovered from the investigation of the surface factors of the firm. If we examine the deep factors of the firm, what is the situation like? When the entrepreneur distributes human resources, what he actually allocates is the professional knowledge, professional skill, and labour capacity embedded in the individual human resource. Each employee has different professional knowledge, professional technology and labour ability, which means that different employees have different labour skills. When allocating human resources, the role of the entrepreneur is mainly manifested in two aspects: first, assign employees to the departments and positions that can best exert their personal strengths according to the needs of the division of labour within the firm and their professional abilities to give full play to each individual’s profession. Second, deploy, combine, and aggregate various professional capabilities of the firm into a competence structure according to the needs of the overall corporate development and the characteristics of the professional abilities of the departments of the firm, thereby forming the comprehensive capabilities of the firm to exert the synergistic effect of the whole organisation. When the entrepreneur allocates material resources, what he actually allocates is the technical means, proprietary functions, and use values contained in the material resources. Similar to the employees of the firm, different material resources have different forms, properties, functions and values. For example, sunlight, land, and lakes are also natural resources, but the three have significant differences in form, nature, function, and value. If the basic principle for the entrepreneurs to allocate

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human resources is to make the best use of their talents, then the basic principle for the entrepreneur to allocate material resources is to make the best use of resources. The distribution of production tools is mainly to combine technical means with human labour to improve labour production efficiency. In the production activities of the firm, the professional knowledge, professional technology and labour capacity contained in human resources together create the labour value of the product. In other words, the value of human resources can be divided into the three parts of professional knowledge value, professional skill value and general labour value, which are usually transferred to the final product in stages during the production process of the firm. The material resources of the firm can be divided into natural resources and social resources. Natural resources are usually incorporated into corporate production as raw materials. In production, people generally process natural resources into a certain form and transfer the value it contains to the final product. The social resources of the firm generally include capital, technology, production tools (machines), factories and other forms. Among them, the capital of the firm as a means of purchasing factors of production is of value in itself. The production tools (machines), plants and other assets of the firm are generally purchased through capital, and they are corporate property with a certain value. Production tools (machines), as the technical means for firms to carry out production activities, also contain corresponding knowledge and technology. These social resources of the firm, despite their varied forms, properties, and functions, can be divided into the three factors of knowledge, technology, and value. In the production activities of the firm, the material resources of the firm are combined with a certain organisational form to create the functional value of the corporate product. The labour value created by human resources and the functional value created by material resources together constitute the tangible value (i.e., physical value) of corporate products. After analysis, it can be found that, from the deep factors of the firms, the entrepreneur’s distribution of human resources and material resources is actually the distribution of knowledge, technology and value within the firm, and the specific distribution relations form the corresponding corporate institutional systems (i.e., organisational rules for human resources, management rules for material resources, etc.). From the firm’s deep factor production chain, these two types of distribution activities are actually the process of decomposing, combining and applying the internal knowledge and technology of the firm and the process of establishing, improving and adjusting the internal production relations of the firm, which produces the intangible value (i.e., abstract value) of the final product of the firm. Combining Fig. 4.6, the complex processes involved in these two types of distribution activities will be more clearly seen. It is known that the tangible value (physical value) and intangible value (abstract value) of a corporate product are combined into one and constitute the commercial value (i.e., customer value) of the product. The distribution of products within the firm is actually a dual division of the tangible value and the intangible value of the product by the distribution subject.

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Within the firm, what are the essential differences between the three types of distribution activities: the distribution of human resources, the distribution of material resources, and the distribution of corporate products? It is clear from the above analysis that the most essential difference between them lies in whether the ownership (or property rights) of the distribution object is transferred. In the allocation of human resources and material resources, the ownership (or property rights) of the distribution object is not transferred, while in the distribution of corporate products, the ownership (or property rights) of the distribution object is eventually transferred. In the distribution of products within a firm, the distribution object is the products manufactured by the firm in a certain period of time, and their ownership (or property right) belongs to the company. When these products are distributed, their ownership is transferred to the government, corporate shareholders, entrepreneurs, and corporate employees according to a certain proportion. Therefore, among the three types of distribution activities, only the distribution of products (income distribution) is a true distribution. In modern firms, the distribution of human resources, material resources and corporate products have been independent and become three important aspects of corporate management. As the content of modern corporate management is becoming more complex, the functions of the entrepreneur have also been decomposed into relatively independent parts and transferred to different levels of management personnel within the firm. For example, the management of human resources is divided into human resources strategy and planning, organisational design and functional division of labour, recruitment and deployment of personnel, training and career planning, performance appraisal and evaluation, compensation and benefits management, employee relations management, personnel file management and other parts that are relatively independent but closely connected.

4.6.2.2

The Input–Output Relations in the Firm System

In terms of the firm system, a firm can be regarded as a system that inputs resources and outputs functions. In terms of the inputs of the firm system, the inputs of the firm include the three aspects of manpower, resources, and the relations of production factors, while in terms of the outputs of the firm system, the outputs of the firm system also include the three aspects of the function of organisational synergy, the function of value creation and the relations of distribution factors. Here, the function of organisational synergy refers to the function of the firm system to combine the scattered and disorderly individual manpower into an organic totality according to the inherent requirements of production and operation. The function of value creation refers to the function of the firm system to absorb resources, produce products and create value. Relations of production factors refer to the interrelationship between the factors of production (or inputs) and the ratio structure of the inputs before the start of corporate production. Relations of distribution factors refer to the interrelationship between the distribution

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factors and the ratio structure of distribution in the process of corporate production and operation. From the corporate reproduction cycle, what is the law between the input and output of the firm system? From the inputs and outputs of the firm system, the relations of inputs in the firm system are the relations of factors of production, and the relations of outputs in the firm system are the relations of factors of distribution. Chapter 3 conducts a simple analysis of the long-term transition of the relations of social production and distribution, from which it is apparent that there is an inherent connection between the relations of factors of production and the relations of factors of distribution, and the difference in the structure of factors of production determines the difference in the structure of factors of distribution. In the process of social reproduction, different combinations of production factors, such as manpower (labour), land, capital, technology, and knowledge, form different input value ratio structures, and different input value ratio structures determine different production distribution value ratio structures, which in turn determine the final distribution of social production results. In the process of total social production, such distribution relations are fixed in a certain institutional form and regulate the relations of economic interest of social strata within a certain period of time. This involves the evaluation of the value of various resource elements, and the judgment of the relative value of a certain resource is obviously determined by the overall level of understanding of this resource. In various firms in reality, the adoption of different distribution institutions is determined dynamically by the level of cognition and practical activities. When a firm introduces a new series of distribution institutions, if these rules can mobilise the factors inside and outside the firm to promote the rapid growth and development of the firm, then the firm will further strengthen these institutions in production and operation activities; otherwise, the firm will adjust, modify or abandon these institutions. In the process of promoting the improvement and perfection of corporate institutions, in addition to corporate investors (shareholders), entrepreneurs, managers, and employees at all levels and other internal personnel that are playing a direct role, stakeholders such as suppliers, distributors, customers, partners, and competitors are also critical. If the distribution result are considered unfair or unreasonable, they will require adjustment or change through various channels, thereby promoting the evolution of the relations of corporate production and distribution. In the process of corporate production and operation, the relationship between the relations of factors of production and the relations of factors of distribution can be shown in Fig. 4.7. In Fig. 4.7, the black arrow indicates the decisive effect of the relations of production factors on the relations of distribution factors, the white arrow indicates the reactive force of the relations of distribution factors to the relations of production factors, the arc arrow at the bottom indicates the feedback of the ratio structure of distribution factors to the ratio structure of production factors, and the arc arrow above indicates the adjustment of the ratio structure of production factors to the ratio structure of distribution factors.

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Fig. 4.7 Interaction between relations of factors of production and relations of factors of distribution

In the reproduction process of the firm system, the relations of factors of production and the relations of factors of distribution are interrelated, interacted and interinfluenced, and there is a dynamic relationship of action-reaction and feedbackadjustment between them from the perspective of long-term historical changes. On the one hand, the difference in the structure of production factors determines the difference in the structure of distribution factors, which reflects the decisive effect of the relations of production factors on the relations of distribution factors. On the other hand, the unfair distribution result will lead to all levels of the firm and external stakeholders requesting adjustments to the unreasonable distribution institutions, which reflects the reactive force of relations of factors of distribution on relations of factors of production. The interactive process between relations of factors of production and relations of factors of distribution is a long-term historical evolution. It is this dynamic mechanism of action-reaction and feedback-adjustment that promotes the income distribution relations between various strata within the firm system and external stakeholders to evolve from extreme unfairness and inequality to general unfairness and inequality and then to comparative fairness and equality.

4.7 Corporate Production Efficiency Firms need to invest corresponding factors and expenses in the production of goods. These expenses are the costs of production for firms. The remaining part of the firm’s sales revenue after deducting costs is the firm’s profits. Firms can obtain profits in production and operation, which is a necessary condition for firms to expand reproduction. In a certain period of time and under certain conditions, if a firm wants to accumulate more profits, the firm needs to carry out more efficient production and

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operation. If the production efficiency of a firm is higher than that of another firm, this firm is more competitive in the market. According to traditional production theory, corporate production efficiency is generally defined as the maximum output of the firm when the cost level is constant or the realisation of cost minimisation when the output level is constant. There are usually many ways for a firm to achieve a certain level of output. For example, the cost of producing a certain quantity of agricultural products can be different, either by investing more in labour and less in agricultural machinery (labour-intensive methods) or by investing less in labour and more in agricultural machinery (capital-intensive methods). When the output is constant, if the company wants to improve production efficiency, it is necessary to choose the lowest cost input portfolio. Traditional production theory takes into account the role of technological factors in improving corporate production efficiency, and technical efficiency is reflected in the production function, which is the basic composition of production theory. The production function is a precise quantitative or mathematical expression of the input–output relation in the production of a firm, which reflects the maximum output of a firm under a certain input portfolio. Referring to Fig. 4.6 above, it is obvious that from the perspective of the surface factors of the firm, to successfully complete the production process of a product, a firm needs the joint participation and coordination of three types of factors of entrepreneur, organisations and resources, while from the deep factors of the firm, a firm needs to participate in and cooperate with the three factors of knowledge, institutions and technology. In actual production and operation, these six factors will obviously affect the production efficiency of a firm to varying degrees. Traditional production theory examined corporate production efficiency only from the two aspects of cost and technology. While the book believes when looking into corporate production efficiency, it is necessary to consider these six types of factors at the same time according to the analytical framework proposed in the book in terms of entrepreneur, organisation, resources, knowledge, institutions and technology. From the perspective of the social reproduction process, production activities generally include the four links of production, distribution, exchange and consumption. It is clear that these links also affect the production efficiency of a firm to varying degrees. Because the two links of distribution and exchange are generally included in corporate production and operation, the improvement of corporate production efficiency actually includes the improvement of its distribution efficiency and exchange efficiency. The efficiency of these two links is also a problem that was ignored by traditional production theories. However, in the specific business practice, some entrepreneurs did not ignore these two problems. For example, the abovementioned behaviour of Haier Group to construct a market chain within the firm is the proof. Here is a brief discussion on the topic of distribution efficiency within the firm.

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4.7.1 On the Allocation of Resources In corporate production and operation, the entrepreneur often needs to assign tasks to the employees. Here, we take the work distribution of employees within the firm as an example to analyse the distribution efficiency within the firm. Suppose there are three tasks that need to be assigned to three employees at the same time to complete. Different employees have different professional knowledge, professional technology and labour abilities, so the time spent by different employees to complete the same task is different. Suppose three employees are represented by A, B, and C, the three tasks are represented by 1, 2, and 3, respectively, and the specific task combination is represented by these two. The time spent by each employee to complete different tasks is listed as follows (Table 4.5): According to the permutation and combination, there are six options for assigning tasks: Scheme I: A1 = 5, B2 = 4, C3 = 5; the total time is 14 h; Scheme II: A2 = 6, B1 = 4, C3 = 5; the total time is 15 h; Scheme III A3 = 7, B1 = 4, C2 = 2; the total time is 13 h; Scheme IV: A1 = 5, B3 = 8, C2 = 2; the total time is 15 h; Scheme V: A2 = 6, B3 = 8, C1 = 3; the total time is 17 h; Scheme VI: A3 = 7, B2 = 4, C1 = 3; the total time is 14 h Among the above six schemes, Scheme III takes the least total time (only 13 h). For a firm, the use of limited resources (i.e., employees) to spend the least time completing the same tasks is efficient production and operation. Therefore, among the above six schemes, the optimal scheme that the entrepreneur should choose is Scheme III. For a specific firm, if A, B, and C are three factors of production (i.e., manpower, technology, and capital), the combination of these three factors in different proportions forms the production structure of the firm’s input. From the above analysis, different ratios of factor combinations represent different production structures, and different production structures have different productivities. Similarly, if A, B, and C represent three different departments within the firm, then the combination of these three in different proportions represents different organisational structures, different organisational structures can be aggregated into different capacity structures of the firm, and different capacity structures of the firm can also form different production efficiencies. Therefore, when the entrepreneur allocates the internal and external Table 4.5 Time required for each staff member to complete different tasks

Staffs

Tasks Task 1

Task 2

Task 3

Staff A

5h

6h

7h

Staff B

4h

4h

8h

Staff C

3h

2h

5h

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resources of the firm, the most important thing is to reflect this distribution efficiency and synergy function to realise corporate comprehensive production efficiency. In fact, this type of decision-making and selection work of the entrepreneur has become one of the important contents of modern management science.

4.7.2 On the Allocation of Income In corporate production and operation, the distribution of labour results (i.e., income distribution) is obviously a very important issue. The income distribution of a firm is directly related to the interests of stakeholders such as government departments, investors, entrepreneurs, managers, technicians, ordinary employees, suppliers and distributors. From the perspective of the external environment of the firm, if a firm wants to achieve smooth production and operation, it needs to adjust the distribution of interests with upstream and downstream suppliers and distributors. If a firm only cares about its own interests without considering the interests of suppliers and distributors, then these suppliers and distributors will not maintain a good cooperative relationship with the firm, which is clearly unfavourable to the long-term development of the firm. However, if a firm over satisfies the interests of suppliers and distributors, it will reduce its own profit margin, which is also detrimental to the survival and development of the firm. Therefore, firms need to maintain a reasonable distribution relation between their own interests and the interests of suppliers and distributors. From the perspective of the internal environment of the firm, if a firm wants to achieve efficient production and operation, it needs to adjust the distribution of interests between corporate development and the investors, entrepreneurs, managers, technicians, ordinary employees and corporate development. Income distribution within the firm can be roughly divided into four parts: government taxation, investor profit sharing, entrepreneur compensation, and employee wages. Government taxation is determined by a state’s taxation policy, which is a relatively stable distribution factor for firms. In corporate profit distribution, if investors only consider maximising their own interests and take away most of their corporate profits, which is what capitalists did in the early days of the Industrial Revolution, then entrepreneurs and employees will lack the enthusiasm to work hard for corporate development, and the firm will suffer from a lack of inner dynamics and decline. Therefore, the distribution institutions determined by such an income distribution structure are obviously inefficient. A similar situation exists in the income distribution of entrepreneurs and employees. However, on the other hand, in the distribution of corporate profits, if the remuneration of entrepreneurs and the wages of employees are too high, the cost of the enterprise will increase and the profit of the enterprise will decrease, thereby reducing the return on investment of investors. In the long run, it will affect the enthusiasm of investors to reinvest and expand the production scale, which is also detrimental to corporate growth and development. Therefore, the distribution institutions determined by such an income distribution structure are also inefficient. From this point

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of view, the distribution of income by the firm will affect the subsequent production efficiency and corporate growth and development. o enable firms to continue to grow and develop continuously, it is necessary to design an income distribution system that can effectively motivate investors, entrepreneurs, managers, technicians, ordinary employees, and other distribution subjects and can balance the interests between corporate development and distribution subjects on the basis of efficiency and fairness. From the dynamic relationship between the relations of factors of production and the relations of factors of distribution analysed in the previous article, the distribution institutions need to be dynamically adjusted according to the changes in the internal and external environment of the firm, rather than remaining unchanged for a long time once it is formulated. From the actual social practice, this is also the internal reason for breaking through the old system of distribution according to capital and successively putting forward income distribution institutions such as distribution according to labour, distribution according to factor, and distribution according to contribution. From long-term corporate development, the continuous adjustment and reform of the institutional system, including the distribution institutions by the entrepreneur, is also one of the internal driving forces for the firm to achieve continuous progress and a long-lasting foundation!

4.8 Overall Corporate Competence With the cyclical process of production → consumption → reproduction → reconsumption, entrepreneurs and teams are constantly learning and making progress to improve management abilities, absorb new resources, introduce new technologies, adjust organisational structure, update institutional norms to coordinate departments with factors of production, and cooperate with stakeholders outside the firm to enhance overall corporate competence and realise growth. The idea of corporate competence can be traced back to Adam Smith’s theory of division of labour. Adam Smith’s implicit conclusion in the division of labour is that through division of labour, firms can better cultivate and improve production capabilities. Marshall proposed corporate internal growth theory in 1925, suggesting that the division of labour varies in different functional departments of the firm, and such division of labour produces disparate knowledge and skills. Perceivable evolution occurs within the firm as knowledge and skills are accumulated in the production process. George Richardson further pointed out that competence reflects the knowledge, skills, and experience accumulated by the firm and is embedded in specific activities such as production, marketing, research and development.37

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Xu, F. (2007). Corporate Development Theory - X: Core Competency Theory. China Management Communication Network. 徐飞. (2007). 企业发展理论之十: 核心能力理论. 中国管理传播网. http://manage.org.cn/Article/200701/42845.html. Accessed 29 Jan 2007.

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Geoffrey Hodgson pointed out38 that competency-based corporate theory places a strategic focus on the growth and learning of corporate internal knowledge, which is essentially different from the contract-based approach developed by Ronald Harry Coase (1910–2013) and others. The abilities of an individual or a team in a firm are acquired through learning. Within an organisation, learning contains changes to the cognitive framework and mental model of the world, which is a process that includes both construction and deconstruction. Developed by Penrose (1959) and expanded by Nelson and Winter (1982), Wernerfelt (1984), Prahalad and Hamel (1990), Langlois (1992), Foss (1993), Hamel and Heene (1994) and other scholars, corporate competency theory believes that a firm is essentially a collection of capabilities. On the surface, firms are composed of tangible material resources and intangible rules, but from a deep perspective, the significance and value of the existence of material resources and rule resources lie behind their respective capabilities.39 The views of these scholars are worth learning, but this book does not adopt the specific concept of corporate competence they put forward but redefines a more general concept. Overall corporate competence refers to the comprehensive competence of the firm to effectively integrate different resource elements, produce goods or provide services, and meet the needs of social consumption. Overall corporate competence is generally composed of the eight abilities of production and supply, entrepreneur, organisation, resources, knowledge, institutions, technology, and product. The stronger a firm’s abilities in these eight dimensions, the stronger its overall competence, and the stronger its market competitiveness. If the eight dimensions of production and supply, entrepreneur, organisation, resources, knowledge, institutions, technology, and product are used to describe the overall corporate competence, the potential energy diagram of corporate competence can be drawn, as shown in Fig. 4.8. In Fig. 4.8, the eight dimensions are: ➀ production and supply; ➁ entrepreneur; ➂ knowledge; ➃ organisation; ➄ institutions; ➅ resources; ➆ technology; ➇ product. In the ➀ dimension, the firm changes from oa → oA, indicating that the firm’s overall competence to produce and supply increases from point a to point A; In the ➁ dimension, the firm changes from ob → oB, indicating that the entrepreneur’s ability to manage increases from point b to point B; In the ➂ dimension, the firm changes from oc → oC, indicating that the firm’s ability to learn and innovate increases from point c to point C; In the ➃ dimension, the firm changes from od → oD, indicating that the firm’s ability to manage and coordinate increases from point d to point D;

38

Hodgson, G. M. (1999). Evolution and Institutions: On Evolutionary Economics and the Evolution of Economics. Cheltenham, U.K.: Edward Elgar, ch. 11. 39 Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. p. 22. 李晓明. (2006). 企业环境、环境因 子互动与企业演化研究. 博士学位论文, 天津大学. p. 22.

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Fig. 4.8 Potential energy diagram of corporate competence

In the ➄ dimension, the firm changes from oe → oE, indicating that the firm’s ability to construct and improve corporate institutions increases from point e to point E; In the ➅ dimension, the firm changes from of → oF, indicating that the firm’s ability to absorb and integrate resources increases from point f to point F; In the ➆ dimension, the firm changes from og → oG, indicating that the firm’s ability to innovate and apply technology increases from point g to point G; In the ➇ dimension, the firm changes from oh → oH, indicating that the firm’s ability to research, develop and update products increases from point h to point H. The above eight dimensions are a rough competence division based on the investigation of the entire corporate production and operating process. In fact, each corporate ability can be further subdivided. For example, the management abilities of entrepreneurs can be subdivided into strategy formulation, team motivation, management innovation, asset operations, and capital operations. In addition to the learning, accumulation and innovation capabilities of the organisation in terms of professional knowledge, management knowledge, and cultural knowledge, the firm’s abilities in knowledge also include the building of intellectual property rights such as brands, trademarks and patents, as well as corporate culture. The firm’s abilities in resources include the ability to discover, absorb, internalise, integrate, schedule and optimise resources. The firm’s abilities in technology include the ability to discover, absorb, internalise, and apply new technologies in the sector environment, as well as the

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ability to continuously improve, perfect, and innovate the existing production technologies of the firm. The firm’s abilities in product include the ability to continuously improve, perfect, and innovate in all links closely related to products, such as product R&D, design, manufacturing, packaging, marketing, and delivery. In Fig. 4.8, the small circle enclosed by a, b, c, d, e, f, g, h and a represents that the firm is in a lower position of potential energy, where the overall corporate competence is relatively low, indicating that its market competitiveness is relatively weak. The large circle enclosed by A, B, C, D, E, F, G, H, and A represents that the firm is in a higher position of potential energy, where the overall corporate competence is relatively high, indicating that its market competitiveness is relatively strong. The development of the firm from a, b, c, d, e, f, g, h and a to A, B, C, D, E, F, G, H and A is the process of the firm growing from small to large, from weak to strong. Through the potential energy diagram of corporate competence, corporate growth and competence can be vividly described. The supply of the firm to the market is the act of a firm providing products or services to the market to meet social needs. It is through production and operation that firms realise the act of supplying products to society. The type, quantity and quality of products provided by the firm to the market must be able to meet the real demand from the market. Only when the actual demand from the market is met can the firm realise profits. The overall competence of a firm is mainly reflected by the timely supply of the market, and the metrics are the market share. The stronger the overall competence of a firm and the higher its potential energy position, the more vigorous its market competitiveness and the greater its ability to supply the market. Qian mentioned when discussing the issue of sustainable corporate operation that “with regard to the issue of sustainable competitive advantage of firms, a lot of research has been done on the corporate theory. The core is to build a long-term competitive advantage around the four dimensions of demand, resources, technology, and institutions. Practice also shows that demand, resources, technology, and institutional factors can bring long-term or short-term competitive advantages to firms.”40 From the perspective of the potential energy diagram of firms, researchers of the sustainable competitiveness of the firm only emphasised these four factors while ignoring the impact of other factors. Apparently, in actual corporate growth, it is generally impossible for the firm to increase its abilities in the above eight aspects evenly in proportion, but with some abilities enhancing rapidly, some slowly, and some fluctuate. Therefore, the actual potential energy diagram of the firm generally does not form a regular circle. In fact, some scholars have noticed that corporate competence is dynamically changing. For example, in 1992, David J. Teece, Gary Pisano and Amy Shuen jointly published the book Dynamic Capabilities and Strategic Management, which proposed a corporate development strategy based on dynamic capabilities. Dynamic competency theory emphasises that firms with limited dynamic capabilities cannot 40

Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. p. 104. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. p. 104.

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develop a lasting competitive advantage, and over time, their advantages will disappear and eventually be replaced by competitors. Firms with strong dynamic capabilities can accumulate and enhance their resources and capabilities over time and can effectively exploit new opportunities in the market to create a competitive advantage.41 Modern core competency theory and dynamic competency theory regard corporate competence as the source and foundation of corporate competitiveness, but these theories have not been systematically analysed from the entire process of corporate production and operation, so it is inevitable to fall into the misunderstanding of partial generalisation, which is a major defect and deficiency in corporate competency theory.

4.9 Corporate Development Dynamics Generally, the evolutionary power of a system mainly comes from two aspects: one is the internal structure of the system itself, and the other is the interaction between the system and its environment. From the perspective of dialectical materialism, the development of things is determined by the joint action of internal and external factors. External factors are conditions, internal factors are root causes, and external factors act through internal factors. In terms of the system, internal factors refer to the interactions between various factors within the system, and external factors refer to the interactions between the system and the factors in its environment. What are the internal and external factors that affect corporate development?

4.9.1 The Dynamic Factors in Corporate Development In terms of the external environment, consumer demand is the external driving force that stimulates the development of the firm; if there is no consumer demand in the market, the firm will lose the basis for existence. Resource elements are the necessary condition for corporate survival and development and the prerequisite for the smooth value creation of the firm. If the external environment does not provide the firm with resource elements, the firm will not be able to carry out normal production and operation, let alone corporate development. Here, we use the theoretical model of the corporate behaviour process proposed by Dr. Li Xiao-Ming (Fig. 4.9) to analyse the dynamics behind corporate development. The process of corporate production and operation is to obtain resource elements from the external environment, integrate them into products, and then sell the products to the external environment. 41

Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. p. 6. 李晓明. (2006). 企业环境、环境因子 互动与企业演化研究. 博士学位论文, 天津大学. p. 6.

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Fig. 4.9 Theoretical model of the corporate behaviour process42

From the outside of the firm, the process of the external environment providing resource elements to the firm is the external supply; the process of the external environment purchasing products from the firm is the external demand. From the inside of the firm, the process of the firm absorbing resource elements from the external environment is the corporate demand; the process of the firm selling products to the external environment is the corporate supply. The supply and demand inside and outside the firm correspond to each other, and the correspondence between them is as follows: external supply ← → corporate demand external demand ← → corporate supply

Therefore, the actual process of corporate production and operation can be expressed as follows: external supply → corporate demand → (factor combinations → products) → corporate supply → external demand

What is shown in brackets above is the internal production process of the firm, that is, the process of corporate value creation. The above process can be described in the supply–demand relation diagram inside and outside the firm (Fig. 4.10), in which the solid ellipse represents the organisational boundaries of the firm. In Fig. 4.10, the solid white arrow indicates the movement direction of resource elements, the solid black arrow indicates the movement direction of products, and the dashed arrow indicates the transmission process of the supply–demand information inside and outside the firm. The transmission process of supply and demand information is as follows: in the interaction between the firm and the external market, the demand information in the market (i.e., the variety, quantity and quality of the required products, etc.) is transmitted from the outside to the inside of the firm (i.e., Market Insight, Sales) 42

Source: Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. p. 24. 李晓明. (2006). 企业环境 、环境因子互动与企业演化研究. 博士学位论文, 天津大学. p. 24.

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Fig. 4.10 Supply–demand relation inside and outside the firm

and then to the decision makers, who determine the demand quantity of resource elements according to the market demand information (i.e., number of recruits and raw materials), thus forming the demand information within the firm and allowing the relevant departments (i.e., Human Resources, Procurement) to follow the internal demand information to introduce the required resource elements from the external environment. Here, the actual demand from the external market directly drives the demand inside the firm. In general, the resource elements required by the firm may not be fully satisfied. For example, firms can only recruit some of the required personnel from the labour market and can only purchase raw materials at higher prices than expected. After the actual supply information of resource elements (i.e., price, quantity and quality of raw materials) in the external market is transmitted to the firm (i.e., procurement department, etc.), the firm can only introduce the corresponding quantity and quality of resource elements according to the existing capabilities, thus forming the internal supply information within the firm, and the production department can only manufacture products based on the resource elements actually obtained. Here, the actual supply of the external environment directly restricts the internal supply of the firm. Therefore, demand factors from the external environment are the primary driving force for corporate development, while supply factors from the external environment are the necessary conditions for restricting the development of the firm. In addition, in the external environment, the joint action of suppliers, distributors, partners, competitors and other stakeholders directly affects the supply–demand relationship between the market and the firm. Competition is formed between the firm and other firms operating similar products, and cooperation is formed between upstream suppliers and downstream distributors. Cooperation is conducive for firms to obtain more demand and supply opportunities in the market, while competition often reduces the opportunities for firms to acquire demand and supply in the market. Therefore, cooperative factors and competitive factors in the market are another pair of contradictions that affect corporate development. Because cooperative and competitive

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factors play a role by influencing the demand and supply opportunities in the market, they can also be regarded as external secondary drivers of corporate development. It is concluded in the previous analysis of the external environment of the firm that the factors of humans, resources, products, knowledge, institutions, and technology extensively exist in the external socioeconomic environment. From the internal environment of the firm system, the firm system contains six factors: humans, resources, products, knowledge, institutions, and technology. In fact, the most basic key elements that make up the firm system basically correspond to the specific factors in the external niche that affect the development of the firm system, but the external environmental factors are more complex and diverse. Cooperation and competition between firms can also be roughly classified into these six categories of factors. However, the actual resource elements that can be directly used and allocated by the firm are generally these six factors within the firm. In the long run, the process of growth and evolution of a firm system is actually a continuous search, absorption, internalisation, and integration of these elements from the external niche. Therefore, the internal dynamics that can affect the production and operation of the firm system can only come from these six elements within the firm system. Therefore, it can be concluded that the key internal inputs that drive corporate development come from the six factors of humans, resources, products, knowledge, institutions, and technology within the firm. Among them, the most important dynamic factor is humans, and among all the humans, entrepreneurs are at the core. Through the above analysis, it is concluded that the key driving factors affecting the development of the firm mainly include the following eight categories: External factors: demand and supply; Internal factors: talents, resources, products, knowledge, institutions and technology. For the convenience of analysis, the key internal drivers that affect corporate development are divided into two categories: A. Explicit factors (surface factors): talents, resources, and products. B. Implicit factors (deep factors): knowledge, institutions, and technology. If the external and internal factors that promote corporate development and the process of corporate production and operation are combined, the relation between the dynamics behind corporate development can be drawn (Fig. 4.11). From the socioeconomic environment, except for extreme conditions (i.e., wars, political turmoil, natural disasters, etc.), the demand and supply factors in the external environment of the firm are relatively stable, but they are constantly changing in the long run. To have an ordinary life, it is necessary to have food, clothing, habitation, and transportation. The purchasing behaviour of a person buying food, clothes, houses, and vehicles is the act consumption, and his actual need for these items (or commodities) is consumption demand. Therefore, the consumption demand here refers to the consumption demand from individuals, that is, the consumption demand from society for the final products. Personal consumption demand is a person’s innate desire and need. When the original consumption demand is satisfied, as time passes,

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Fig. 4.11 Relations between the dynamics behind corporate development

people will have more new desires and needs. The endless human desire determines the infinity of human consumption demand. Therefore, personal consumption demand is inexhaustible and constantly changing. Driven by demand, firms provide the market with more types and levels of products and services. The more goods and services in the market, the richer resource elements the external environment can provide for corporate production and operation. This is actually a dynamic process in which production and consumption and demand and supply are interrelated, interacted and interinfluenced. It is a repetitive cycle of production and consumption, demand and supply that promotes the growth and evolution of firms. On the other hand, to produce the final personal consumption product, intermediate goods need to be produced. For example, to produce clothes, textile machines need to be produced, and to produce textile machines, steel needs to be produced, where textile machines and steel are both intermediate products. For the firm that produces intermediate products, the consumer it faces is the firm that needs its products. For example, for the firm that produces a textile machine, the spinning mill is the consumer of its products. The behaviour of the spinning mill to purchase the textile machine is the consumption behaviour, and the actual demand of the spinning mill for the textile machine forms the consumption demand of the spinning mill for the textile machine manufacturer. The consumption demand here refers to the consumption demand from the firm, that is, the consumption demand from society for the intermediate product. The consumption demand for the final product drives the consumption demand for the intermediate product. Therefore, corporate consumption demand is also inexhaustible and constantly changing. From the above analysis process, for the firms that produce intermediate products, their growth and evolution

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principles are also in line with the diagram of the relation between the dynamics behind corporate development. In growth and evolution, under the joint promotion of demand factors and supply factors in the external environment, the firm has always carried out the production cycle of production → consumption → reproduction → reconsumption. From the internal point of view of the firm, the firm is constantly searching, absorbing, internalising, and integrating in the six aspects of talents, resources, products, knowledge, institutions, and technology. In this process, the corporate niche and the six factors within the firm have jointly promoted the growth and development of the firm under the coordination and disposition of the entrepreneur. In the process of corporate growth and evolution, these six factors within the firm do not work individually or separately but coordinately and cooperatively. That is, every two factors are interrelated, interacted, and interinfluenced, and they together form the network of dynamic relations within the firm. This interrelationship is represented by a dashed double arrow in Fig. 4.11. Firm is an organisation composed of humans. As a human in a firm, it is inevitable to apply the knowledge one has mastered to daily corporate operations in the process of production and operation. Therefore, knowledge must have important value and function for corporate growth and development. Scholars such as Kogut and Zander (1992, 1996) and Spender (1996) put forward that a firm is a unique collection of knowledge, and social knowledge and collective knowledge at the firm or organisational level constitute the key elements for the success of a firm. The core of the firm is knowledge, not only because the tacit knowledge possessed by the firm is unique to the firm but also because the knowledge structure formed by the firm’s current knowledge stock determines how the firm discovers future opportunities and allocates resources. The difference in the effectiveness of resources is also determined by the existing knowledge of the firm; the acquisition of knowledge requires more professionalism than its use, so the key task of corporate production is the coordination of many individual experts with different types of knowledge.43 From a macro perspective, corporate growth and development will inevitably be affected by changes in the entire economic environment. Most scholars currently regard technological change and institutional change as the fundamental force behind many economic phenomena and treat technological change and institutional change as the main form of environmental mutation. For example, Liu Han-Min (2003) believed that economic changes include technological changes and institutional changes.44 Changes in the institutional environment not only affect the operation of the social economy but also determine the path characteristics of corporate evolution. Zheng Jiang-Sui and He Lian-Cheng (2003) held that socioeconomic evolution can be viewed as a process of selection by multiple institutions; Nelson suggested 43

Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. p. 64. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. p. 64. 44 Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. p. 140. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. pp. 140.

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that in developed industrial countries, it is the institutions that promote technological evolution and organisational evolution in a direction that is conducive to sustainable economic development.45 The institutions within the firm stipulate the decision-making form and operation mode of the firm, thus standardising the daily behaviour of the firm and guiding the development path of the firm. When the firm establishes a set of institutions and operates normally, the firm will accept and pass on the institutions in an inertial way. In the process of corporate production and operation, when these institutions can effectively promote corporate growth, departments within the firm will generally recognise and anticipate these institutions, which will lead to the locking of particular institutions within a certain period of time. As external conditions change, the firm needs to adjust and revise these institutions accordingly. The perfection of corporate institutions directly affects the speed and evolution path of corporate growth. In terms of the external environment of the firm, institutional factors in the industrial economic system are often beneficial to some institutional models of the firm but not to others. Institutional models that adapt to the environment will be widely adopted by the firm community and continue to spread, while those that are not adapted to the environment will gradually disappear. Corporate production and operation are bound to be closely linked to certain technical conditions. Technology plays an important role in corporate production and operation, and the degree to which the firm masters the predominant technology in a specific industry determines the production level and production efficiency of the firm to a large extent. Once the firm chooses a particular predominant technology, it basically determines its predominant value creation mode. The establishment of the firm’s dominant value creation model determines the demand type, quantity, and quality of the firm’s resource elements so that the firm, upstream suppliers and downstream distributors can jointly build a value chain with closely linked interests and then evolve into a mutually supporting, reinforcing and restricting coevolutionary ecosystem. Therefore, how the firm chooses leading technology is directly related to the survival and development prospects of the firm. In terms of the external environment of the firm, the factor of technology in the industrial economic system is often the object of the firm’s imitation and learning and the premise and foundation of the technological innovation of the firm. On a broader scale, the degree of technological development of a society also determines the depth and breadth of the division of labour and coordination in the entire society.

45

Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. p. 145. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. p. 145.

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4.9.2 The Role of the Entrepreneur A firm is an economic organisation composed of humans, and the core of the firm is a human. Among all the internal factors that drive corporate development, talents are undoubtedly the most important. Among all the talent in a firm, the most critical is the entrepreneur. Accenture, a world-renowned management consulting company, after talking with thousands of entrepreneurs in 26 countries and regions, with 79% of business leaders, suggested that entrepreneurship is crucial to the success of firms; Accenture’s research report also pointed out that, in the minds of senior executives around the world, entrepreneurship is the gene and key of the organisation’s health and longevity.46 The carrier of entrepreneurship is the entrepreneur. Entrepreneurs are pivotal in the growth, development and expansion of firms. What kind of human can be regarded as an entrepreneur? What characteristics do they generally have? Entrepreneurs are those managers who are innovators, adventurers, cooperators, hard workers, learners, men of integrity, doers, men with a strong sense of mission and responsibility, and those who are active for excellence and success. The spirit of innovation, adventure, cooperation, dedication, intellectual curiosity, integrity, action, a strong sense of mission and responsibility and the active pursuit of excellence and success are the entrepreneurial spirit emphasised by many scholars. Therefore, not all managers are entrepreneurs, and only those with entrepreneurial spirit are qualified to be called entrepreneurs. Entrepreneurs with innovative spirit and managerial ability are scarce resources of the social economy. In the economic realm, it is more common to see ordinary business owners, managers, and wealthy businessmen who have made a fortune. True entrepreneurs with entrepreneurial spirit, such as Bill Gates of Microsoft, Jack Welch of GM, Andy Grove (1936–2016) of Intel, Konosuke Matsushita (1894–1989) of Panasonic, Akio Morita (1921–1999) of Sony, Shi Zhen-Rong of Acer, and Zhang Rui-Min of Haier, are rarer. In the real economic field, every successful firm has an excellent entrepreneur, and behind every excellent entrepreneur is a hard-working team. Successful firms often have an excellent corporate culture. Excellent corporate culture originates from the unique enterprise spirit, which is the organisational embodiment of entrepreneurial spirit. Corporate culture plays an important role in corporate operations. It is critical to the survival and development of the firm, as well as to the formation of its long-term competitiveness. After nearly 20 years of research, John P. Kotter and James Heskett concluded that corporate culture can have a significant impact on a firm’s long-term economic performance, and it determines the success or failure of the firm in the

46

Xu, F. (2007). Corporate Development Theory - IX: Core Competence Theory. China Management Communication Network. 徐飞. (2007). 企业发展理论(九): 企业家理论. 中国管理传播网. http://manage.org.cn/Article/ShowArticle.asp?ArticleID=42258.html. Accessed 12 Jan 2007.

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next decade.47 A good corporate culture can promote close coordination between the departments and the factors of production of the firm so that the firm can smoothly achieve the predetermined goals. The core of corporate culture is the entrepreneurial spirit, which is mainly shaped by the entrepreneur. The orientation of core values in corporate culture determines the formulation of corporate development strategies. The development strategy of the firm has a direct and important impact on the firm’s market positioning, internal institutional construction, professional knowledge learning, and leading technology choices and ultimately determines the development direction and path of the firm together with these factors. In the real economic field, the growth and development of a firm is accompanied by the common growth and development of the entrepreneur and the team. The growth and development of the entrepreneur, in addition to his/her personal accumulation of knowledge, experience, and management abilities, mainly lies in the improvement of his/her vision and responsibility, or entrepreneurship. The improvement of entrepreneurial spirit reshapes the enterprise spirit, and the renewal of enterprise spirit promotes the development of corporate culture. Therefore, in promoting the growth and development of the firm, the entrepreneur plays a role through the following two chains: A: Surface factor chain: entrepreneur → organisational team → firm B: Deep factor chain: entrepreneurship → enterprise spirit → corporate culture In corporate growth and development, these factors are closely linked and coordinated to promote corporate development. If the above six factors are used as six dimensions to describe the process of corporate growth, then the trajectory of corporate growth can be drawn (Fig. 4.12). In Fig. 4.12, the six dimensions are ➀ entrepreneur; ➁ entrepreneurship; ➂ organisational team; ➃ enterprise spirit; ➄ firm; and ➅ corporate culture. From a static point of view, the factors in Chain A form a virtuous circle of mutual promotion, that is, the solid circle in Fig. 4.12. This process can be described as follows: the growth of the entrepreneur → the growth of the organisational team → the growth of the firm, and then the growth of the firm promotes the growth of the entrepreneur. At the same time, the factors in Chain B also form a virtuous circle of mutual promotion, that is, the small solid circle in Fig. 4.12. This process can be described as follows: the development of entrepreneurship → the development of enterprise spirit → the development of corporate culture, and then the developed corporate culture promotes the development of entrepreneurship. In corporate growth and development, the above six factors are closely linked and coordinated. Therefore, Chain A and Chain B are in fact twining and developing together.

47

Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. p. 41. 李晓明. (2006). 企业环境、环境因 子互动与企业演化研究. 博士学位论文, 天津大学. p. 41.

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Fig. 4.12 Positive interactions between entrepreneur, organisation team and firm

From a dynamic point of view, a normally developing firm is continuously growing in these six aspects, that is, consistently expanding outward in these six dimensions. It is not difficult to find that in the corporate evolution from small to large, from weak to strong, the cogrowth trajectory of the entrepreneur, the organisational team, and the firm is actually a gradually expanding spiral. At the same time, the cogrowth trajectory of entrepreneurship, enterprise spirit, and corporate culture is also gradually expanding. In the development of corporate evolution, these two spirals are in fact intertwined (Fig. 4.13). In reality, the behaviour of the entrepreneur is regulated by the entrepreneur’s humanistic spirit, values, and ethical morals. The humanistic and cultural knowledge of the entrepreneur predominates the value orientation of entrepreneurship, and entrepreneurship shapes the enterprise spirit, which in turn predominates the core values of corporate culture. The 2008 Chinese milk scandal48 showed that the imperfection or lack of humanistic and cultural knowledge of the entrepreneur, such as humanistic spirit, values, and ethical morals, will greatly restrict the development of a firm. If a modern firm is obsessed with pursuing profits and ignores ethical morals and social responsibility, then the firm is bound to fall into the predicament of development. From this, it is also discernible that the humanistic and cultural knowledge 48

The scandal in 2008 involved milk and infant formula along with other food materials and components being adulterated with melamine, which is known to cause kidney failure and kidney stones in humans and animals when it reacts with cyanuric acid inside the body. The exposure directly led to the bankruptcy of Sanlu, and seriously damaged the reputation of China’s food exports that at least 11 foreign countries halted all imports of Chinese dairy products. The root cause of this incident, apart from the government’s absent supervision of food safety, is that the firm’s leadership and management team are profiteering and morally corrupt.

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Fig. 4.13 Evolutionary trajectories of entrepreneur, organisation team, and firm

of the entrepreneur is closely related to the enterprise spirit and corporate culture, which are pivotal to the development of a firm! Therefore, where does an entrepreneur’s humanistic and cultural knowledge come from? One might say that it comes from the education received by the entrepreneur, but where does the humanistic and cultural knowledge in the education system come from? Tracing back to the source, humanistic and cultural knowledge can only come from the human-culture system of society (Sect. 8.4). Therefore, in the external environment of the firm, the factor of human-culture is also an important factor that cannot be ignored in corporate development, which has a profound impact on entrepreneurship, enterprise spirit and corporate culture. The importance of the factor of human-culture lies mainly in that it shapes the spirit and ideology of human beings and plays a guiding role in social values and ethical morals. Education courses of business administration (MBA or EMBA) for managers all over the world often focus on the education of management knowledge rather than humanistic and cultural knowledge, which is obviously a major oversight and deficiency in cultivating sound entrepreneurship.

4.10 Corporate Evolutionary Mechanism The growth and development of the firm from small to large, from weak to strong, is a process of continuous evolution of the firm over time. In this process, division of labour and coordination, interaction between internal factors and external factors,

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gradual change and disruptive change are important mechanisms behind corporate evolution.

4.10.1 The Division of Labour and Coordination In corporate production and operation, the division of labour and coordination are the two most basic and necessary mechanisms. The division of labour enables the firm to specialise and refine; coordination encourages the departments within the firm to cooperate and coordinate. If there is no division of labour and coordination, no firm can successfully realise the manufacture of products and normal business activities. The division of labour is actually a concrete manifestation of the bifurcation law in corporate production and operation, while coordination is the exhibition of the synergy law. From a long-term perspective, the organisation, resources, products, knowledge, technology, institutions, etc., of the firm are constantly evolving from unity to plurality, from low-level to high-level, and from simplicity to complexity under the combined effect of the bifurcation law and the synergy law. In economic research, the role of division of labour has been noticed for a long time. Since Adam Smith, classical economics and later neoclassical economic theories have always taken the phenomenon of division of labour as the focus of research and analysis. In contrast, the understanding of the coordination mechanism appears to be undervalued. The fact that many microeconomic theories of the firm tend to be paranoid is a concrete reflection of this reality. In the operation of the firm, the organisation, resources, products, knowledge, technology, institutions and other factors of the firm are interrelated, interacted, interinfluenced and interrestricted. Each factor plays a role in the influence and restriction of other factors, and the change of any one of them will cause the change of other factors to varying degrees. For instance, changes in technology will inevitably lead to varying degrees of changes in organisation, resources, product, and institutions, and vice versa. Apparently, at different stages of corporate development, the relative positions of these factors are not fixed but are often in alternation. For example, in a particular period of time, technology plays a leading role in corporate development, while in another period, institutions become dominant. Therefore, in the practice of corporate operation and management, from the internal factors of the firm, it is necessary to pay attention to the dynamic collaborative management of the six aspects at the same time, instead of only focusing on one of them.

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4.10.2 The Interaction between Internal and External Factors A corporate niche is the specific resource space that a firm occupies in the socioeconomic environment to support its survival and development. The corporate niche is the junction point between the firm and the socioeconomic system. The formation, change and expansion of a corporate niche are the result of the interaction between the firm and the external environment, as well as the result of the competition and cooperation between firms. The corporate niche is composed of many factors. However, which factors are the key elements that affect the survival and evolution of the firm? In the previous analysis of the factors affecting the internal and external environment of the firm, it is concluded that the general external factors are demand and supply, while the specific factors include the six factors of humans, resources, products, knowledge, institutions and technology. These six factors are also the most basic key elements that constitute a firm. It is known that corporate growth and development is actually a process of constantly searching, absorbing, internalising and integrating these six factors. Therefore, it can be judged that the six factors of humans, resources, products, knowledge, institutions and technology in the corporate niche are important factors that affect the survival and evolution of the firm, while the demand factor and supply factor are the other two important factors. Qian demonstrated and proposed that the organisational niche is described and decided by the four factors of demand, resources, technology and institutions.49 This book believes that he only noticed four of the eight factors, which is clearly not complete and sufficient for corporate growth and evolution. How do these corporate niche factors affect corporate survival and evolution? The book argues that the interaction between the corporate niche factor and key corporate internal elements (factors) is not only a pivotal bridge for the external environment and the internal environment to communicate supply and demand but also a general mechanism behind the cooperation, competition, learning and innovation among firms. It is the interactions of the factors inside and outside the firm that promote its growth and development. The six factors of humans, resources, products, knowledge, institutions, and technology, plus the two factors of demand and supply, are used to describe the interaction process of factors inside and outside the firm. To be more intuitive, the eight dimensions are still applied to reflect the changing state of the eight factors to draw the diagram of the interaction between factors inside and outside the firm (Fig. 4.14). In the figure, the eight dimensions are ➀ demand; ➁ humans; ➂ knowledge; ➃ resources; ➄ institutions; ➅ products; ➆ technology; and ➇ supply. 49

Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. pp. 72–87. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. pp. 72–87.

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Fig. 4.14 Interactions between factors inside and outside the firm

The large solid circle represents the niche boundary of the firm, and the small solid circle indicates the organisational boundary of the firm; The larger dotted circle demonstrates the current niche of the firm. Among them, the intersection points of the larger dotted circle and eight axes, A, B, C, D, E, F, G, and H, represent demand, humans, knowledge, resources, institutions, products, technology, and supply, the eight niche factors outside the firm; The smaller dotted circle indicates the current organisational boundary of the firm. Among them, the intersection points of the smaller dotted circle and eight axes, a, b, c, d, e, f, g, and h, represent supply, humans, knowledge, resources, institutions, products, technology, and demand,50 the eight key factors inside the firm. In the previous analysis of the process of corporate production and operation, it is concluded that when the external environment transmits the demand (A) to the firm, the firm will quickly respond to the supply (a), which forms the interaction of demand (A) and supply (a) between the external environment and the firm. This interactive process is marked as A ← → a in Fig. 4.14. On the other hand, in production and operation, the firm also needs resource elements provided by the external environment. At this time, the firm will have a demand for the external environment (h). When the firm transmits demand (h) to the external environment, the external environment will quickly respond to supply 50

Here, the external demand corresponds to corporate internal supply, and the external supply corresponds to corporate internal demand. For the internal connection between them, please refer to Fig. 4.10, Supply–demand relation inside and outside the firm.

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(H), which forms the interaction of supply (H) and demand (h) between the external environment and the firm. This interactive process is marked as H ← → h in Fig. 4.14. When the firm interacts with the external environment between external demand and internal supply (A ← → a) or external supply and internal demand (H ← → h), it is necessary to communicate and interact with people inside and outside the firm first, such as inquiry, negotiation, signing, and placing orders. Apparently, the human interaction between the firm and the external environment also includes the mutual exchange and mutual learning of ideas, culture, and knowledge between people, as well as the exchange of talents. These interactions are marked as B ← → b in the figure. Similarly, the interaction between the firm and the external environment in terms of capital, raw materials and other resource elements is marked as D ← → d in the figure. The interaction between the firm and the external environment in terms of products or services is marked as F ← → f in the figure. When the firm interacts with the external environment in terms of humans, resources and products, it will inevitably be accompanied by the interaction of knowledge, institutions and technology. These interaction processes are marked as C ← → c, E ← → e and G ← → g in the figure. It is known that the process of corporate production and operation is a cyclical process of demand–supply and production-consumption. In this process, the firm and the external environment always interact in the eight aspects of demand, humans, knowledge, resources, institutions, products, technology, and supply. It is the constant interaction of these internal and external factors that promote the growth and evolution of the firm from small to large and from weak to strong. At different stages of corporate growth, the intensity and relative positions of these factors affecting corporate development are not fixed but are in dynamic and cyclical alternation. For example, in a particular period of time, demand plays a leading role in corporate development, while in another period, technology becomes dominant. The change in the predominant factor will exert a major influence on the survival and evolution of the firm and have a significant effect on the other factors, which is a synergistic process. The most basic function of a firm is to provide products or services to society to meet its consumption demand. Consumption demand is the direct driving force for corporate development, so if there is no consumer demand from society, the firm will lose the dynamics for development. At the same time, if a firm wants to provide the products or services required by society, it needs the external environment to supply resource elements. Therefore, among the many factors of the corporate niche, the demand factor of products and services and the supply factor of resource elements are obviously the two key factors that affect corporate survival and development. Every firm exists in a particular economic system, and it must have various relationships with other firms in the external environment. Of the many intercorporate relationships, the most common ones are competition and cooperation. In the sector system, firms that provide similar products compete with each other in terms of talents, resources, and customers and are often in competition with each

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other. Firms that provide different types of products rarely compete in terms of talents, resources, and customers and are often in complementary cooperation with each other. Intercorporate competition and cooperation are not absolute but can be transformed into one another under certain conditions. For example, Firm N produces flour, and Firm M produces bread, so when Firm N provides flour to Firm M, a cooperative relationship is formed between them. However, if Firm N also starts producing and selling bread to the market or Firm M also starts producing and selling flour to the market, the relationship between them becomes a competitive relationship. In the real economy, in addition to competition and cooperation, firms sometimes have a competition + cooperation relationship, that is, coopetition. For example, two firms that produce similar products are originally in a competitive relationship. However, when they jointly develop a new product and share the market, the relationship between them becomes coopetition. As a firm grows and develops, it will often compete with other firms in the market in terms of talents, resources, and products. For example, similar firms often offer high salaries and favourable treatment to compete for outstanding management talents, technical talents, and marketing talents in the industry. To gain an advantage in the competition, firms will also compete in knowledge, institutions, and technology. One of the means of competition among firms is innovation. To innovate, the firm needs to learn from other outstanding firms in the external environment. Intercorporate cooperation, competition, learning and innovation are carried out through the interactions of the factors inside and outside the firm. The interaction of the factors inside and outside the firm promotes corporate evolution. Corporate innovation generally includes innovation in culture, organisation, resources, products, knowledge, institutions, and technology. An important aspect of intercorporate competition is product competition. The competition among firms in terms of products is generally carried out through product innovation. Innovation in products is often intertwined with innovation in resources, technology, knowledge, institutions and other aspects of the industry. For example, in the market, when a firm introduces a new product f1 and obtains substantial profit from the market, other competing firms will soon develop an upgraded product F1 that is more functional or of better quality than product f1 . At this time, the product advantages of the firm that introduces product f1 are replaced, and its competitive advantages are weakened accordingly. However, to regain new competitive advantages, the firm will carry out product innovation again and develop and launch an upgraded product f2 with stronger functions and better quality than f1 . Other competing firms in the market will soon develop a new product F2 that is more functional or of better quality than product f2 . The innovation process of this product will continue through repeated interactions of factors inside and outside the firm. The innovation of corporate products is an important reason for the increasing variety of products in the market. The innovation of corporate products is also accompanied by the continuous progress of various knowledge and technologies in the industry. The advancement of knowledge and technologies spawns the birth of various new inventions, which in turn promote the innovation of corporate products.

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Similar to the above process, different firms in the sector system realise innovation in culture, organisation, resources, products, technology, knowledge, and institutions through the interaction of internal and external factors. A firm is an organisation composed of humans, and humans are the most dynamic factors of all the elements of the firm. Whether a firm can stand out in market competition, talents are the key, especially innovative talents, the innovation of a firm in all aspects is ultimately completed by talents. Therefore, intercorporate competition is ultimately the competition of talents. In corporate growth, entrepreneurs and organisational teams are also making progress, which is mainly reflected in the increasing enrichment and improvement of corporate knowledge, spiritual culture, management level and business skills. In the previous analysis of the dynamics behind corporate development, it is concluded that the entrepreneur is pivotal in the growth and development of a firm. The factor of human-culture in the corporate niche system has a great influence on entrepreneurship, enterprise spirit and corporate culture. Therefore, among the many factors of the corporate niche, human-culture is also an important factor that cannot be ignored, which affects corporate survival and development. Through the above analysis, it is clear that it is through the interaction mechanism of internal and external factors that enables firms to absorb and integrate the supply of resources from the external environment, to respond to and meet the product demand from the external environment in time, and to realise intercorporate cooperation, competition, learning and innovation to promote the progress and growth of firms in terms of culture, organisation, resources, products, knowledge, institutions, and technology. Through this process, the overall corporate competence is improved, and the organisational boundaries and niche boundaries of the firm are expanded accordingly.

4.10.3 Gradual and Disruptive Changes The firm has been constantly evolving since humans created the firm as an organisation. Corporate evolution has gone through a process from unity to plurality, from low-level to high-level, and from simplicity to complexity. The process can be divided into a gradual change stage and a disruptive change stage. Gradual change is the basis of disruptive change, while disruptive change is the result of gradual change. Corporate evolution is manifested in the alternation between gradual changes and disruptive changes. This mechanism promotes the transition of a firm from one stage to another and from one state to another. As a result, the firm has realised the evolution from unity to plurality, from low-level to high-level, and from simplicity to complexity. The factors that cause the disruptive change in the firm may come from both the external environment and the internal environment of the firm. The disruptive change in corporate evolution is achieved through the interaction between the factors inside and outside the firm.

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In corporate evolution, in addition to the interaction between its internal elements, there is also communication between the elements inside the firm and the factors outside the firm. These interactions lead to slow changes in the firm in terms of organisation, resources, products, technology, knowledge, institutions, etc. These slow changes are the gradual changes in corporate evolution; when slow changes accumulate to a certain extent, the nature of each factor within the firm will undergo qualitative changes, leading to significant changes in the structure, function, and behaviour of the firm. These significant changes are the disruptive changes. In the previous analysis of the interaction mechanism between the internal and external factors of the firm, it is concluded that it is the innovative factors inside and outside the firm that play an important role in the corporate reform. The firm realizes innovation in culture, organisation, resources, products, technology, knowledge, and institutions through the interaction of internal and external factors. The innovation of the firm in these aspects leads to the gradual change of various elements within the firm, and when the amount of change accumulates to a certain extent, qualitative change will occur, resulting in the disruptive change in the process of corporate evolution. Disruptive changes will lead to significant changes in overall corporate competence and the status of the corporate niche. If the disruptive change causes the firm to progress, then the result is the improvement of overall corporate competence and the expansion of niche; Otherwise, if it causes the firm to regress, then the overall corporate competence will deteriorate and the niche will shrink. Corporate growth and development are directly related to a firm’s ability to innovate. Abernathy and Utterback (1978), Suarez (1993), Tushman (1996) and others pointed out from the perspective of innovation that the process of corporate evolution is a discontinuous equilibrium process, that is, a relatively long incremental innovation process interrupted by short-term disruptive change, which is often a fundamental technological innovation.51 Schumpeter divided the forms of corporate innovation into five types: (1) the introduction of new products or the provision of new qualities of products; (2) the adoption of new production processes; (3) the opening of new markets; (4) the acquisition of new sources of resource supply; and (5) the application of new organisational forms.52 The five forms of innovation he mentioned can be classified as corporate innovations in products, technology, markets, resources, and organisation. Among them, the process of firms opening up new markets can be understood as the result of the expansion of the firm’s external niche. Judging from the internal factors of the firm, Schumpeter may have overlooked the firm’s innovation in other aspects, such as corporate culture, knowledge, and institutions. For the external environment of the firm, the socioeconomic environment is relatively stable in a certain period of time, but it has been changing in the long run. Changes in the external environment of the firm are divided into gradual changes 51

Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Tianjin University. p. 88. 李晓明. (2006). 企业环境、环境因子互动与企 业演化研究. 博士学位论文, 天津大学. p. 88. 52 Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. p. 65. 李晓明. (2006). 企业环境、环境因 子互动与企业演化研究. 博士学位论文, 天津大学. p. 65.

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and disruptive changes, which determine that the changes in corporate niche are also classified into gradual changes and disruptive changes. Disrupted changes in the corporate niche are often caused by sudden changes in a factor in the corporate niche. When the external environment undergoes gradual changes, the corporate niche is relatively stable, and the firm can adapt to the changes in the external environment through its partial adjustments. When the external environment undergoes disruptive changes, the corporate niche alters rapidly due to severe impacts, and the firm often needs to make quick responses or make global adjustments to adapt to the changes in the external environment. If the adjustment is slow or the response is improper, its development or even survival will be seriously threatened. In the previous analysis, it is concluded that among the many factors of corporate niche, the demand factor of products and services and the supply factor of resource elements are the two key factors that affect corporate survival and development. When the customer’s demand for the firm’s products abruptly changes or the supply of a particular resource element required by the firm is unexpectedly short, it will cause a disruptive change in the corporate niche. For example, when colour televisions appeared, the demand for black-and-white televisions decreased sharply; when digital signal phones emerged, the demand for analog signal phones dropped greatly. Those firms that manufactured black-and-white televisions and analog-signal mobile phones were facing the serious threat of a sharp shrinkage of their niches, and if they did not make adjustments in time, bankrupcy would be their sole destiny. Catastrophe Theory, which was formally proposed by the French mathematician René Thom in 1972 and perfected by the British mathematician E.C. Zeeman, can be used to explain the discontinuity or catastrophe of things. The core idea of catastrophe theory is53 : Stability is a common characteristic of things. The stable state and unstable state are the two basic states of the movement of things and are the two aspects of the unity of opposites. Both gradual change and disruptive change are ways for things to achieve qualitative change, and the intermediate transition state experienced by qualitative change is the approach to judge the qualitative change of things. The gradual change and disruptive change of things are closely related to the state of things. The distinction between gradual change and disruptive change is based on whether the intermediate state in the transformation is stable; if the intermediate transition state experienced by the qualitative change is unstable, it is a disruptive change; if the intermediate transition state is stable, it is a gradual change; the change of things in one structurally stable state is a quantitative change, and the change between two structurally stable or unstable states is a qualitative change. The following uses the core idea of catastrophe theory to explain the process of gradual change and disruptive change in corporate growth. Through the above analysis, the important factors affecting corporate development are mainly as follows:

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Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. p. 69. 李晓明. (2006). 企业环境、环境因 子互动与企业演化研究. 博士学位论文, 天津大学. p. 69.

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Fig. 4.15 Process of gradual change and disruptive change in corporate development

Internal factors: humans, resources, products, knowledge, institutions and technology; External factors: general factors include supply and demand; specific factors include humans, resources, products, knowledge, institutions, and technology. The six factors of humans, resources, products, knowledge, institutions, and technology, plus the two factors of demand and supply, are used to describe the gradual change and the disruptive change of the firm. The eight dimensions are used to reflect the changing states of the eight factors, and the process diagram of the gradual change and the disruptive change in the development of the firm is drawn (Fig. 4.15). In Fig. 4.15, the eight dimensions are ➀ demand; ➁ humans; ➂ knowledge; ➃ resources; ➄ institutions; ➅ products; ➆ technology; and ➇ supply. The dotted concentric circles in the figure indicate the corporate niche, the small circle indicates that the firm is in a lower potential niche, and the larger circle indicates that the firm is in a higher potential niche. With the continuous growth and development of the firm, the organisational boundaries and niche boundaries of the firm are gradually expanding from small to large. In this process, the eight factors affecting corporate development also change from small to large. From the dynamics of corporate growth and development, in the evolution of the firm from small to large, from weak to strong, its trajectory in eight dimensions is actually a gradually expanding spiral (as the solid spiral lines show in Fig. 4.15). A complete process of the firm evolving from axis ➀ to axis ➇ and back to axis ➀ is called a cycle of corporate evolution. In a cycle of corporate evolution, the intersection of spiral lines and eight axes is represented by a, b, c, d, e, f, g, and h. In a cycle of corporate evolution, driven by external demand, when the firm evolves from state a to state b, the management level of the entrepreneur and the team in the firm is enhanced; from state b to state c, the degree of learning and application

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of knowledge (management knowledge, professional knowledge, etc.) of the firm is improved; from state c to state d, the degree of integration and utilisation of resources by the firm is boosted; from state d to state e, the degree of innovation in corporate institutional construction is upgraded; from state e to state f, the degree of corporate product R&D innovation is advanced; from state f to state g, the degree of corporate technological R&D innovation progresses; and from state g to state h, the extent of the corporate niche’s supply of resource elements is developed. From catastrophe theory, the firm is in a stable state in the intermediate stage of the evolution from a → b, b → c, c → d, d → e, e → f , f → g, and g → h, and the transitional state in the middle is stable, so the changes are gradual changes. When the firm is at or near the eight points of a, b, c, d, e, f, g, and h, the firm is in an unstable state, and the transitional state in the middle is unstable, so the changes are disruptive changes. When the firm completes a cycle of evolution, pushed by new external demands, the firm will begin to enter the next cycle of evolution, and corporate evolution will prepare for another round of alternation between gradual changes and disruptive changes. As the cycle continues, the overall corporate competence is improved, and the organisational and niche boundaries are expanded accordingly. In short, corporate evolution is a continuous process that alternates between gradual change and disruptive change, which promotes corporate transition from one state to another. The disruptive change in corporate evolution is achieved through the interaction between the factors inside and outside the firm. The factors that cause disruptive change may come from the external environment (i.e., changes in market demands or sectoral policies) or the internal environment (i.e., reform in corporate management systems, major innovations in corporate technology or products, etc.). If the disruptive change causes the firm to progress, then the result is the improvement of overall corporate competence and the expansion of niche; if the disruptive change causes the firm to regress, then the result is the deterioration of overall corporate competence and the shrinkage of niche.

4.11 Corporate Life Cycle Any organic matter in the world has a life cycle. The firm composed of humans is an organic organisation, so it also has a life cycle. To be more vividly, a firm also has its cycle of birth, growth, ageing, and death. From the direction and state of corporate evolution, the corporate lifecycle can be divided into three stages: growth and progression, remaining the status quo, and regression and decline. There are generally two directions of corporate evolution, namely, progression and regression. Corporate progression refers to the evolution of the firm’s intrinsic quality, management level, organisational scale, overall competence, and niche quality in a direction beneficial to corporate development, which is embodied in the better internal quality of the firm, specifically shown in the increased intrinsic corporate quality, upgraded management level, larger corporate scale, stronger overall corporate competence, and better quality of corporate niche. Regression is the opposite of

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progression. Corporate regression refers to the evolution of the firm’s intrinsic quality, management level, organisational scale, overall competence, and niche quality in a direction unfavourable to corporate development, specifically shown in the declined intrinsic corporate quality, degraded management level, smaller corporate scale, weaker overall corporate competence, and worse quality of corporate niche. Under the reciprocal action of external pressures and internal motivations, there are only three possible outcomes of the firm’s ultimate evolution, namely, continuous progression, remaining the status quo, and regression and decline. In the actual economic system, the states of the firm corresponding to these three evolutionary results are as follows:

4.11.1 The Firm That Is Growing The ultimate determinant of corporate progression is not from the outside but from the inside. Regardless of whether the external pressure is large or small, as long as the internal momentum is strong, the firm will progress continuously. When the external environment changes rapidly and the internal dynamics is very strong, driven by the entrepreneur’s endeavour and unremitting pursuit of self-renewal, the firm will respond to the challenges of the external environment through learning and innovation. As time goes by, the quality and abilities of the firm will be improved, and the result of corporate evolution will be demonstrated in market competitiveness, the corresponding expansion of corporate scale and corporate niche. The potential energy diagram of corporate competence clearly describes how a firm grows and progresses. In the potential energy diagram (Fig. 4.16) of corporate competence growth, the eight dimensions are ➀ production and supply; ➁ entrepreneur; ➂ knowledge; ➃ organisations; ➄ institutions; ➅ resources; ➆ technology; and ➇ products. Figure 4.16 shows that at first, the production and supply capacity of the firm was relatively weak, but driven by the internal momentum for growth, the firm’s capabilities are constantly improving. From the surface factors of corporate production and operation, the entrepreneur is active and enterprising, constantly overcoming the pressure from the external environment and the entrepreneur’s ability to manage, and the organisation’s ability to coordinate is gradually improved, which in turn enhances the firm’s ability to absorb and integrate resources. From the deep factors of corporate production and operation, the enhancement in the abilities of the entrepreneur, organisation and resources also boosts corporate competence in terms of knowledge learning and innovation, institutional construction and perfection, as well as technological innovation and application, which in turn encourages the firm’s ability to develop products and make innovations. The improvement of the firm’s ability to develop products and make innovations also strengthens the firm’s production and supply capacity. As the production cycle progresses, the overall corporate competence continues to grow; as a result, the competitiveness of the firm in the market

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Fig. 4.16 Potential energy diagram of the growth of corporate competence

increases, the corporate scale keeps expanding, and the corporate niche expands accordingly. It is not difficult to find that in the process of corporate growth and progress, corporate competence undergoes a process from weak to strong, and the evolutionary trajectory of corporate competence is actually a gradually expanding spiral.

4.11.2 The Firm That Remains the Status Quo When the external environment is less competitive and the firm’s internal momentum is weak, the firm will maintain a relatively stable state for a certain period of time. When the external environment changes slowly, the firm will face a relatively stable external environment. At this time, even if the firm has no motivation for further development, the firm can still maintain and continue its original business until the external environment changes drastically. During this period, the firm is characterised by relatively solid market competitiveness, unchanged corporate scale and steady corporate niche. However, in today’s globalising economy, accelerating technological innovation and fast-changing customer needs, such a stable external environment has become less common, and firms are often faced with a rapidly changing environment and increasingly fierce competition. Therefore, remaining in the status quo is only a relatively short-term phenomenon in the process of corporate development. From the perspective of the potential energy diagram of corporate competence evolution, the corporate competence of a relatively stable firm will basically retain its status quo in all aspects for a certain period of time. At this point, the evolutionary trajectory of corporate competence is actually a closed circle (Fig. 4.17).

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Fig. 4.17 Potential energy diagram of the evolution of corporate competence

In the potential energy diagram (Fig. 4.17) of corporate competence evolution, the eight dimensions are ➀ production and supply; ➁ entrepreneur; ➂ knowledge; ➃ organisations; ➄ institutions; ➅ resources; ➆ technology; and ➇ products. In this case, due to the lack of motivation for further development, from the surface factors of corporate production and operation, the entrepreneur’s ability to manage, the organisation’s ability to coordinate, and the firm’s ability to absorb and integrate resources basically remain in their original states. From the deep factors of corporate production and operation, corporate competence in terms of knowledge learning and innovation, institutional construction and perfection, and technological innovation and application basically remain at the original level. In a particular period of time, the firm’s ability to develop products and make innovations and the firm’s production and supply capacity basically remain at their original levels. On the whole, the firm remains at its original level in terms of overall competence, organisational scale, and corporate niche. In the real economic system, managers who pursue stability by retaining the status quo are generally those with rigid thinking and a lack of initiative. They disregard reality and respond to the fast-changing environment with outdated business ideas and strategies. In fact, corporate development is like sailing against the current, either forward or backward. Unpredictable changes in the external environment make it impossible for firms to continue to maintain the status quo. If the managers continue to be inactive, the firm will eventually evolve along the direction of regression.

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4.11.3 The Firm That Is Declining Regardless of whether the external pressure is large or small, as long as the internal momentum is weak, the firm will regress continuously. When the external environment changes rapidly and the internal dynamics is insufficient, the firm will not be able to actively adapt to the changing environment. With the passage of time, the quality and abilities of the firm will be gradually degraded, and the result of corporate evolution will be demonstrated in the decline of market competitiveness, the forced reduction of corporate scale and the shrinkage of corporate niche. If the manager cannot effectively curb such regression, the destiny of the firm will be bankruptcy or breakup. From the perspective of the potential energy diagram of corporate competence, with the passage of time, the corporate competence of a stagnant and declining firm is constantly weakening, and the evolutionary trajectory of corporate competence is actually a gradually shrinking spiral (Fig. 4.18). In the potential energy diagram (Fig. 4.18) of corporate competence decline, the eight dimensions are ➀ production and supply; ➁ entrepreneur; ➂ knowledge; ➃ organisations; ➄ institutions; ➅ resources; ➆ technology; and ➇ products. Figure 4.18 shows that at first, the production and supply capacity of the firm was relatively strong, but due to the weak internal momentum for development and the pressure of the external environment, the firm’s capabilities are continuously decreasing. From the surface factors of corporate production and operation, the entrepreneur’s ability to manage and the organisation’s ability to coordinate are also gradually reduced, which in turn declines the firm’s ability to absorb and integrate resources. From the deep factors of corporate production and operation, the diminution in the abilities of the entrepreneur, organisation and resources also impedes corporate competence in terms of knowledge learning and innovation, institutional Fig. 4.18 Potential energy diagram of the decline of corporate competence

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construction and perfection, as well as technological innovation and application, which in turn impairs the firm’s ability to develop products and make innovations. The decline in the firm’s ability to develop products and make innovations also weakens the firm’s production and supply capacity. As the production cycle progresses, the overall corporate competence continues to decline; as a result, the competitiveness of the firm in the market decreases, the sectoral scale keeps shrinking, and the corporate niche shrinks accordingly. Dr. Li Xiao-Ming examined the life cycle of the organisation based on the specific sector in which the organisation is engaged and divided the organisation into three types: the firm that ends young, the firm that ends naturally, and the firm that lasts forever. He pointed out that firms engaged in different sectors have different life cycles. Some sectors have very long life cycles, and the firms engaged in these sectors have naturally long life cycles. Some sectors have rather short life cycles, and the firms engaged in these sectors usually have short life cycles. It is less rigorous to compare the length of the life cycle of firms regardless of the type of sector they are engaged in. In reality, most firms have a very short lifespan. According to statistics, over a decade, nearly 40% of the Fortune 500 list of companies have disappeared; over three decades, 60% have been acquired or bankrupted. Of the 12 firms shortlisted for the DJI (Dow Jones Indexes) in 1900, only one remains, the General Electric. For firms in Europe and Japan, the average lifespan is only 12.5 years. According to the survey report of the U.S. Department of Commerce, 500,000 firms are born in the United States every year, 40% of them fail within one year, and 96% of them fail within 10 years. China’s data also indicated that the average life expectancy of Chinese SMEs is only 3.5 years, and the average lifespan of group corporations is 7–8 years. It is evident that most firms cannot achieve sustainable development. The reason is that in fierce market competition, most firms cannot survive the critical period of infancy, some can die at a ripe old age, and only a very few can achieve immortality. The fundamental reason why a firm can become immortal is that the firm has achieved continuous progression.54 In the real economic environment, all firms that can achieve continuous progression are firms with a long-term foundation. For example, century-old firms such as Rémy Cointreau in France, Steinway Piano in Germany, General Electric, Coca-Cola, and Geely Safety Razor in the U.S. all famously belong to this category.

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Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. pp. 91–92. 李晓明. (2006). 企业环境、环 境因子互动与企业演化研究. 博士学位论文, 天津大学. pp. 91–92.

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4.12 Corporate Evolutionary Trajectory With the advancement of time, the morphological characteristics of the firm will continue to change, and the historical process of these changes is the corporate evolutionary trajectory. Corporate evolution is a combined result of external pressure and internal dynamics. When the external pressure is greater than the internal dynamics, the firm will not be able to actively adapt to the changes in the external environment, the relative corporate competitiveness will decline, the corporate scale will be forced to reduce, and the corporate niche will shrink. When the external pressure is less than the internal dynamics, the firm will be able to actively adapt to changes in the external environment, the relative corporate competitiveness will be improved, the corporate scale will increase accordingly, and the corporate niche will gradually expand. Among the influences of the two on corporate evolution, the influence of internal dynamics is greater than that of external pressure, and the final evolution result of the firm is progression or regression, which ultimately depends on the internal dynamics of the firm. The direct external pressure faced by the firm comes from the firm’s niche system, mainly including the pressure on the demand for products and services and the pressure on the supply of resource elements. If the firm properly handles these two pressures, the firm will be able to turn the external pressure into a driving force, the corporate competency will be improved, and the firm will gain continuous competitive advantage. In contrast, if the firm cannot properly handle these two pressures, the normal production and operation of the firm will be seriously affected, the competence of the firm will be reduced, and ultimately the competitiveness of the firm will be weakened. In addition, the factor of human-culture in the corporate niche is also an important factor that affects corporate evolution, which mainly lies in its profound impact on entrepreneurship, enterprise spirit and corporate culture. The internal dynamics of corporate evolution come from the six factors of talents, resources, products, knowledge, institutions, and technology within the firm. Among them, the most important dynamic factor is humans, and among all the humans, entrepreneurs play a leading role. As previously analysed, the entrepreneur plays a crucial role in the growth and development of a firm. The entrepreneur shapes the enterprise spirit and corporate culture and affects the growth of the organisation team through his/her entrepreneurship. The entrepreneur’s learning and innovation spirit will motivate the learning and innovation of the organisation team. Continuous learning and innovation is an important means for internal talents to improve their own ability, and it is an important way for the organisation to continuously improve its quality and overall competence and to gain competitive advantages. Through continuous learning, the organisation can keep pace with the times and adapt to the changes in the external environment. Continuous innovation can optimise the internal environment of the firm and promote the progress and growth of the firm in terms of talents, culture, organisation, resources, products, knowledge, institutions, and technology.

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From the relation between the dynamics behind corporate development (Fig. 4.11), it is evident that corporate production and operations start with production and end with consumption. In this process, the dynamics for corporate development are formed by the two chains of: Chain A (surface factor chain): production → humans → resources → products → consumption Chain B (deep factor chain): production → knowledge → institutions → technology → consumption From the start point and the end point of the firm’s production activity, on the one hand, it is the demand of consumers in the niche that induces the firm to start the production of a particular product; on the other hand, a complete production process ends when the firm produces a product and sells it to customers for their consumption. Therefore, the process of corporate production is actually the response of the firm to the consumption demand in the niche, and it is also the process of the firm’s production supply to the niche. From the actual process of corporate operation, the process of corporate reproduction is a cyclical process that continuously meets the consumption demand of consumers in the niche and creates production supply for them. In terms of the deep factors of corporate operation, this is actually a cyclical process of continuously absorbing consumers’ consumption demand information and creating customer value for them. From the exchange link, there are ceaseless exchanges of information and work between the departments within the firm, and there are also exchanges of personnel, information, materials and energy between the firm and its niche. The information mentioned here includes production and operation information such as demand information, supply information, technical information, and product information inside and outside the firm. The materials mentioned here include the resources provided by the external environment to the firm and the products manufactured by the firm to the external environment. Among them, the supply of products to the external environment by the firm is actually the corporate behaviour of selling products. Whether the firm can smoothly sell its products directly determines whether the firm can successfully realise customer value and obtain corresponding profits; whether the firm can make profits determines the survival of the firm. In addition, whether a firm realises profits in the short-term or in the long-term has different meanings for the reproduction cycle and expansion of the firm. If a firm can realise profits in a short period of time, the entrepreneur can use the profits to expand the scale of production as soon as possible, which enables the firm to gain a favourable position in the competition and win more niche space. The term energy was originally a concept in physics. In the economic system, the corresponding term of energy is currency, which can be expressed as a certain amount of financial capital or a certain amount of circulating funds. In modern society, if a firm can successfully raise the required monetary capital, it is extremely beneficial for its growth. The more money a firm accumulates through production and operation, the more investment opportunities it has, thus giving it more space for development. Therefore, the improvement of

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the exchange level and efficiency between the firm and the external environment has important value and effects on corporate survival and development. From the perspective of distribution, the efficiency of the distribution process and the reasonability of the distribution result determine the potency of the firm’s operation, which directly affects the firm’s efficiency in production and operation and is also related to the competitiveness of the firm. Obviously, highly competitive firms can gain more niche space than firms with weak competitiveness, and they can grow rapidly in a relatively short period of time. Judging from the results of income distribution, income distribution regulates the interest relationship between investors, entrepreneurs and employees, and the reasonability of distribution result affects the subsequent production and operation efficiency and development process of the firm. On the one hand, whether the distribution results can motivate entrepreneurs and employees is directly related to the reasonableness of their income; on the other hand, whether investors can obtain sufficient investment incentives (or capital accumulation) will in turn affect the firm’s ability to reinvest and expand its scale of production. In the income distribution of the firm, if its profit distribution is too much biased toward investors, then entrepreneurs and employees will receive relatively less income, which is not conducive to mobilising the innovation of entrepreneurs and the enthusiasm of employees. Similarly, if the profit distribution of the firm is too much in favour of entrepreneurs and employees, then the returns to investors will be relatively small, which is also unfavourable to motivate investors to reinvest and expand the production scale. Therefore, the improvement of distribution efficiency and rationalisation of distribution in the firm also have important value and effect in the survival and development of the firm. Therefore, from the two links of exchange and distribution, exchange and distribution constitute the two key links in corporate development and evolution. From the internal environment, the firm must obtain resource elements from its niche before production. Whether the firm can obtain the required resource elements depends on the firm’s own resource absorption capacity; incorporating resource elements from the niche into the firm is actually a necessary prerequisite for the smooth development of production and operation. From corporate development, the absorption, cultivation and growth in humans by the firm is mainly reflected in the growth of its organisation team. Based on the above analysis, the two operating chains of dynamics behind corporate development shown in Fig. 4.11 can be described as follows: Chain A: resource absorption → organisational growth → exchange efficiency improvement → distribution level improvement → production and supply capacity enhancement Chain B: information absorption → knowledge accumulation → institutional innovation → technological innovation → customer value growth Chain A reflects the growth of the surface features of the firm, while Chain B reflects the growth process of the essential features of the firm.

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Fig. 4.19 Corporate evolutionary trajectory

In corporate evolution, the above ten aspects are closely linked to jointly promoting corporate growth. If these ten factors are used as ten dimensions to reflect the development and evolution of the firm, the corporate evolutionary trajectory can be drawn (Fig. 4.19). In Fig. 4.19, the 10 dimensions are ➀ resource absorption; ➁ information absorption; ➂ organisational growth; ➃ knowledge accumulation; ➄ exchange efficiency; ➅ institutional innovation; ➆ distribution level; ➇ technological innovation; ➈ production supply; and ➉ customer value. In the process of development and evolution, the firm is growing in these ten aspects, that is, expanding outwards in the ten dimensions. It is not difficult to find that with the continuation of time, the running trajectories of the firm in Chain A and Chain B are two gradually expanding spirals with the same starting point (in Fig. 4.19, the trajectories of Chain A and Chain B are merged). In corporate production and operation, these ten aspects are closely linked and coordinated, so chain A and chain B are developing and evolving in an intertwined spiral shape, which is similar to the double helix structure of biological DNA. The growth and development of the firm is a history of continuous evolution throughout time. From birth, growth to maturity, the firm experiences a process from unity to plurality, from low-level to high-level, and from simplicity to complexity. With the continuous expansion of corporate scale and the growth of the corporate age, the number of departments within the firm is rising, the organisational structure is becoming increasingly complex, and the interrelation and interaction between the components within the firm are becoming cumulatively sophisticated; as a result, the difficulty of management and control is escalating. In the actual economic system, the development of the firm in these ten dimensions is not always synchronised evenly but fluctuates frequently such that some factors

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(i.e., technology) may change quickly, while some (i.e., institutions) may change slowly. Therefore, in fact, the trajectory of corporate development and evolution is not necessarily a smooth and regular spiral. Figure 4.19 also shows the change in corporate niche factors. If “the line segment formed by connecting the points on the spiral with the origin of coordinates, and the area swept by the rotation around the origin of coordinates over time” are used to represent the changes in the corporate niche, then in the growth of the firm from small to large, from weak to strong, its niche also experiences a process from unity to plurality, from low-level to high-level, and from simplicity to complexity. The evolution of the corporate niche and the evolution of the firm proceed are carried out simultaneously through the interaction of the factors inside and outside the firm, forming a two-tiered (i.e., surface and deep) network, which constitutes a multidimensional complex dynamic picture. Figure 4.19 shows that the evolutionary trajectory of the corporate niche is actually a gradually expanding spiral. The firm exists in a particular economic system, and the evolution of the corporate niche is only part of the evolution of its external environment. In fact, the external environment of the firm is also in continuous evolution. The internal evolution of the firm and the evolution of the external environment are carried out at the same time. The two are interrelated, interacted and interinfluenced. External evolution is the condition and prerequisite of internal evolution, and internal evolution is the embodiment and carrier of external evolution. Therefore, the essence of corporate evolution is a process in which the internal factors of the firm and the external niche factors of the firm are continuously coupled over time in the interaction.

Chapter 5

The Meso-Level of the Economic System: The Dynamic Structure and Evolution of the Sector

This chapter briefly describes the core ideas of economic growth theory; distinguishes the basic concepts of industry and sector; puts forward a two-tiered sectoral structural model on the basis of analysing the internal and external environment and constituent elements of the sector; introduces the basic taxonomies of the sector; briefly analyses the differentiation process of the sector; explores the dynamic factors affecting the development of the sector from the angle of structure, and expounds the effect process of human demand on the sector, the long-term evolutionary trend of demand and the important role of core firms in sectoral development; briefly outlines the basic mechanisms behind sectoral evolution from the four aspects of division of labour and coordination, interaction between internal factors and external factors, competition and cooperation, as well as intersectoral interaction; discusses the intersectoral correlation effect and the factor distribution within the sector with the examples of actual sectoral chain; puts forward the concept of overall sectoral competence; describes sectoral life cycle and its development trajectory from the perspective of multifactor correlation and interaction. The main discussions of this chapter are as follows: 1.

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The classical theory of economic growth first expounded the relationship between division of labour, market transactions and economic growth. Classical economic growth theory pointed out that the deepening of the division of labour and specialised coordination is the continuous source of long-term economic growth. This book inherits this important idea. Industry refers to a group of firms that produce similar goods or provide similar services within a certain space-time. The sector refers to a system of firm groups composed of different interrelated industries within a particular temporal and geographical range. Industry and sector are the concepts used to describe firm groups, both of which have temporal and geographical stipulations, but the extension of sector is greater than that of industry. From the external environment of the sector system, the general external factors that affect sectoral development are demand and supply, and the specific factors include firms, resources, markets, knowledge, institutions, and technology. In

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terms of the internal environment of the sector system, sector is composed of the basic factors of firms, resources, markets, knowledge, institutions, and technology. Market is the sum of all commodity transaction (exchange) activities and relationships in commodity circulation and is generally composed of transaction subjects, transaction objects, transaction media, transaction venues, and transaction rules. The book’s view that market is an indispensable factor for forming industry and sector is significantly different from other sectoral economics’ interpretation of sector, and an appreciation of this is helpful in understanding the discussion in this chapter logic. From sectoral operation, the process of sectoral growth and evolution is a cycle of input and output. The actual operating process within the sector can be divided into two chains of input → firm → resources → market → output and input → knowledge → institutions → technology → output, from which the book obtains the general operational structure of the sector. In terms of socioeconomic relations, the complete production relation of a sector system should be composed of its internal production relations network and its external social relations network. Sectors can be classified differently according to different criteria. The main methods include two-class taxonomy, three-sector taxonomy, four-sector taxonomy, standard sector taxonomy, and factor intensity taxonomy. This book adopts four-sector taxonomy. Sectoral differentiation in human society is actually a gradual bifurcation, which is first the differentiation of handicrafts from agriculture, followed by the differentiation of services from handicrafts and agriculture, and then the differentiation of information from services. Sectoral differentiation in human society is in full compliance with the law of bifurcation, which is also a concrete manifestation of the bifurcation law in sectoral evolution. From the external environment of the sector system, the demand of the external environment is the primary force for sectoral development, while the supply of resource elements by the external environment to the sector is a necessary condition for sectorak evolution. The general external factors that affect sectoral development are demand and supply, and the specific factors include firms, resources, markets, knowledge, institutions, and technology. The internal dynamics that drive sectoral development come from the six factors of firms, resources, markets, knowledge, institutions, and technology within the sector. Among them, the most important dynamic factor is the firms inside the sector, and among all the firms inside the sector, core firms play a crucial demonstration and leading role in sectoral growth and evolution. This book then draws the relation between the dynamics for sectoral development. The effect of human demand on the economic system is a dynamic process, which is achieved through the two chains of material demand—agricultural sector- industrial sector- service sector- information sector and mental demand→ knowledge→ technology→ institutions→ cultural education. The book then draws the interaction between social demand and its effect and the evolution of social demand. The evolutionary trajectories of human society’s

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material demand and mental demand are two gradually expanding spirals in the long period of history; in the development of human society, these two spirals are in fact intertwined. 9. A core firm in the industry refers to a firm whose market share is at the forefront of its peers, and at the same time, it is in a predominant and dominant position in terms of price, technology, and institutions. The core firms in each industry lead the development of this industry. In the process of leading industrial growth and evolution, core firms mainly play their role through the two chains of core firms → related firms → entire industry and industrial knowledge → industrial institutions → industrial technology. These six factors are interrelated, interacted, and interinfluenced in industrial growth and evolution, and together they grow into a gradually expanding spiral. 10. In sectoral growth and development, division of labour and coordination, interaction between internal factors and external factors, competition and cooperation, and intersectoral interaction are important mechanisms behind sectoral evolution. (1) The division of labour enables the industries within the sector to specialise, deepen, and refine; coordination can encourage the industries within the sector to connect, complement and coordinate. Sectoral division of labour is actually the concrete manifestation of the bifurcation law in sectoral operation, while sectoral coordination is the exhibition of the synergy law. From a long-term perspective, firms, resources, markets, knowledge, technology, institutions, etc., of the sector are constantly evolving from unity to plurality, from low-level to high-level, and from simplicity to complexity under the combined effect of the bifurcation law and the synergy law. From the economic system as a whole, the exchange (or transaction) network is actually the basic form of the coevolution among the subsystems within the economic system. (2) The interaction and exchange between sectoral niche factors and key sectoral internal factors is not only a pivotal bridge for the external environment and the internal environment to communicate supply and demand but also a general mechanism behind the cooperation, competition, learning and innovation among the firms inside and outside the sector. It is the interactions and exchanges of the factors inside and outside the sector that promote its growth and evolution. (3) In the socioeconomic system, intersectoral competition and cooperation lead to the intersectoral exchange and interaction of humans, firms, resources, markets, knowledge, institutions, and technology, which in turn leads to intersectoral ebbs and flows. Within the sector system, interindustrial competition and cooperation also lead to interindustrial ebbs and flows. (4) From the occurrence sequence of the leading sectors in human society, the leading sectors are agriculture, industrials, services and information. The

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intersectoral interaction, on the one hand, is manifested in the penetration, transformation and promotion of the new leading sector to the original sector, thereby promoting the development of the original sector to a higher level; on the other hand, the original sector also plays a necessary supporting role for the new leading sector in terms of resources, products, and markets. 11. In terms of system, a sector is a complex system that inputs resources and outputs functions. From the input perspective, sectoral input includes resources, firms, markets, and sectoral input relations. From the output perspective, sectoral output includes synergy functions, value-added functions, exchange functions, and sectoral output relations. 12. Sectoral correlation refers to the objective intersectoral linkage formed in production, exchange, and distribution, and its essence is the intersectoral supply-demand relationship. The objective intersectoral correlation effect reflects the synergy function in sectoral development. The actual intersectoral correlation effects require the products (or services) provided by related sectors to perform a dynamic balance in quantity and proportion and to achieve mutual adaptation and matching in terms of technology and quality. 13. Within the economic system, the distribution activities at the meso level are divided into the two levels of the distribution within the industry system and the distribution within the sector system. The distribution within the industry system mainly includes the distribution of industrial elements such as resources, firms and markets; the distribution within the sector system mainly includes the distribution of sectoral elements such as industrial resources, related industries and market systems. In the operation of the sector system, in terms of surface factors, the distribution activities in the sector system are reflected in the interindustrial supply and allocation of the three factors of resources, firms and markets by the external environment, while in terms of deep factors, it is actually a dynamic process of interindustrial absorption, integration, application and innovation within the sector in the three aspects of knowledge, institutions and technology. Within the sector system, the distribution activities of sectoral elements are generally coordinated with government departments through market mechanisms to jointly allocate resources. The distribution organisations of government departments generally include tax organisations, fiscal organisations, and financial regulatory organisations. 14. This book puts forward the concept of overall sectoral competence. Overall sectoral competence refers to the comprehensive competence of firms within a sector to effectively integrate resources, provide products or services, and meet the needs of society. Overall sectoral competence is generally composed of the eight aspects of input, firms, resources, markets, knowledge, institutions, technology, and output. The stronger a sector’s abilities in these eight dimensions, the stronger its overall competence, and the stronger its comprehensive competitiveness. This book then draws the potential energy diagram of sectoral competence, which vividly describes sectoral growth and development.

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15. This book believes that sector also has a life cycle. From the direction and state of sectoral evolution, the sectoral lifecycle can be divided into three stages of growth and progression, stability maintenance, and regression and decline. The decisive force of sectoral progress mainly comes from the social needs of the external environment. As long as human needs exist, the sector will progress continuously. The evolutionary trajectory of sectoral competence is a gradually expanding spiral in the continuous sectoral progression. When the needs of the external environment continue to weaken or even disappear, the sector will regress continuously. The evolutionary trajectory of sectoral competence is a gradually shrinking spiral in the continuous sectoral regression. 16. From sectoral growth and development, sectoral evolution can be described by the two chains of resource absorption → sectoral organisational growth → market exchange efficiency improvement → sectoral distribution level improvement → sectoral competence enhancement and information absorption → industrial knowledge accumulation → industrial institutional innovation → industrial technological innovation → sectoral chain value growth, from which a sectoral evolutionary trajectory can be drawn. The trajectories of the two chains along which the sector develops and evolves are two gradually expanding spirals with the same starting point. The evolution of the sectoral niche and the evolution of the sector are carried out simultaneously through the interaction of factors such as firms, resources and markets inside and outside the sector system, forming a two-tiered (i.e., surface and deep) network, which constitutes a multidimensional complex dynamic picture.

5.1 Classic Theories on Economic Growth In the eighteenth century, the classical theory of economic growth in Adam Smith’s era first expounded the relationship between the division of labour, market transactions and economic growth. Classical economic growth theory pointed out that the deepening of the division of labour and specialised coordination promotes not only the innovation of production institutions but also the standardisation and perfection of transaction institutions, which brings about increasing returns and constitutes a continuous source of long-term economic growth. In 1776, Adam Smith published his masterpiece The Wealth of Nations. In this classic work, he proposed a systematic theory of the division of labour, demonstrated the effect of the division of labour on improving labour productivity, and revealed the role of the division of labour in promoting invention and creation, expanding the scale of transactions and market scope, and improving social welfare. Marx and Engels coauthored a more systematic theory of social division of labour in Die Deutsche Ideologie (The German Ideology) completed in 1846 and further developed the theory in Misère de la Philosophie (The Poverty of Philosophy) and Das Kapital (The Capital). From the perspective of productive labour, Marx examined the social division of labour and expounded

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its beneficial influence on productivity, its restriction on the formation and development of social relations, and its dual impact on human development. By analyzing the contradiction between the division of labour within the capitalist society and the division of labour within the factory, it deeply revealed the basic contradictions in the capitalist society and criticises the capitalist mode of production.1 In his 1928 paper, Increasing Returns and Economic Progress, Allyn Young summed up Adam Smith’s idea of “the division of labour depends upon the extent of the market” as Smith Theorem and suggested that this is “one of the most illuminating and fruitful generalisations which can be found anywhere in the whole literature of economics”; he believed that the division of labour is a cumulative self-expansion, from which he deduced the increasing returns.2 Allyn Young’s mentality of research has become one of the most important sources of ideas inspiring contemporary theories of economic growth. In 1937, Coase analysed the relationship between the choice of individual firms’ specialisation direction and economic growth based on the operating costs of corporate institutions and market institutions. In 1951, George J. Stigler integrated firm theory, theory of competitive advantage and Coase’s theory of the nature of the firm to further discuss the mechanism of increasing returns and revealed that increasing income is a dynamic process that is accompanied by sectoral growth, market expansion, and the continuous deepening of specialisation.3 In 1986, Paul M. Romer combined the three factors of externalities, the production of consumption goods, and the production of new knowledge to explain the relationship between the accumulation of specialised knowledge, corporate technological progress and longterm economic growth.4 In 1988, Robert E. Lucas examined the relationship between specialised human capital accumulation mechanism and economic growth.5 In 1991, Yang Xiao-Kai (1948–2004) and Jeff Borland studied the relationship between the division of labour and economic growth from the micro level of production and consumption. They pointed out that, on the one hand, in the production process, the finer the division of labour, the higher the degree of professional coordination and the higher the labour productivity. On the other hand, in the consumption process, with the deepening of the division of labour, the greater the labour’s dependence on market transactions, and the greater the scope of market transactions, the higher the transaction costs. The negative utility of the division of labour in transactions will offset the positive utility of the division of labour in production, so that economic

1 Yang, F. (2010). Marx’s Theory of Social Division of Labor and Contemporary Values. Dissertation, Wuhan University. pp. 49–65. 杨芳. (2010). 马克思的社会分工理论及其当代意义. 博士学 位论文, 武汉大学. pp. 49–65. 2 Young, A. A. Increasing Returns and Economic Progress. The Economic Journal, 1928, 38(152):527–542. 3 Stigler, G. J. (1983). The Organization of Industry. The University of Chicago Press. pp. 131–144. 4 Romer, P. M. (1986). Increasing Returns and Long-Run Growth. Journal of Political Economy (05). 5 Lucas, R. E. (1988). On the Mechanism of Economic Growth. Journal of Monetary Economics (22).

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growth can reach a stable equilibrium.6,7 In 1993, by discussing the relationship between endogenous transaction costs and the Walrasian price mechanism, Yang Xiao-Kai and Yew-Kwang Ng used the Sequential Equilibrium Model8 to clarify the true connotation of the division of labour transmission mechanism, that is, division of labour—dispersion of information—coordination of price (Walras mechanism)— reduction of endogenous transaction costs—improvement of productivity—evolution of the division of labour.9 They used a mathematical method to describe a microeconomic mechanism of the division of labour and specialisation for economic growth, proved that the extent of the market (per capita trade volume) will increase as the division of labour evolves, and established a formal basis for the extension of Smith’s famous proposition that not only does the division of labour depend on the extent of the market, “but the extent of the market also depends on the division of labor”; The market not only efficiently allocates resources but also sorts out the efficient level of the division of labour, efficient contractual arrangements, efficient number of goods, efficient degree of competition, efficient structure of residual rights, efficient degree of roundaboutness, efficient hierarchical structure of transactions, etc. They also revealed that “the level of social division of labour determines the accumulation speed of specialised knowledge and the ability of human society to acquire technological knowledge, and people’s knowledge of the optimal level of the division of labour determines the equilibrium level of the divison of labour”, “human’s knowledge of the division of labour determines the level of the division of labour, the level of the division of labour determines the ability and productivity of humans to acquire technological knowledge” and other economic principles.10 These classical theories about economic growth were the result of economists’ observation and analysis of economic systems at different times, which revealed some truths about the operation of the human socioeconomic system in different aspects. From the dynamic point of view of social development and the evolution of the economic system, these economists’ findings only reflected the laws of economic growth in a particular region during the time period they observed. The differences in time and space of the research objects make the knowledge they acquired have a certain relativity and particularity. Because of their different basic assumptions and preconditions, their conclusions cannot be simply superimposed and integrated. Nonetheless, the objects studied by these economists are the economic activities of 6

Yang, X. K., Borland, J. (1991). A Microeconomic Mechanism for Economic Growth. Journal of Political Economy (03). 7 The literature in this paragraph is compiled from: Zou, W., Zhuang, Z. Y. (1996). Division of Labour, Transaction and Economic Growth. Social Sciences in China (03):4–12. 邹薇., 庄子银. (1996). 分工、交易与经济增长. 中国社会科学 (03):4–12. 8 A dynamic model created by Wilson and Kreps that allows both parties to choose strategies in chronological order under the condition of information asymmetry. 9 Requoted from: Hu, X. P. (2004). From Division of Labor to Modulization: The Reflection on Economic System Evolvement. China Industrial Economics (09):7. 胡晓鹏. (2004). 从分工到模 块化: 经济系统演进的思考. 中国工业经济 (09):7. 10 Yang, X. K., Ng, Y.-K. (2015). Specialization and Economic Organization: A New Classical Microeconomic Framework. Elsevier. pp. 143, 196–197, 340–341, 362, 471.

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human society after all, which determines that these special cognitions must contain the elements of general laws. To summarise the general laws of human socioeconomic development, it is necessary to carry out a higher-level synthesis and generalisation of the truths they discovered from a system point of view.

5.2 Industry and Sector In a state’s economic system, the meso-level and the meso-macro level are two closely related but distinct levels. The actor at the meso-level is the industry system, while the actor at the meso-macro-level is the sector system. Industry refers to a group of firms that produce similar goods or provide similar services within a certain space–time. The sector refers to a system of firm groups composed of different interrelated industries within a particular temporal and geographical range. Industry and sector are the concepts used to describe firm groups, both of which have temporal and geographical stipulations, but the extension of sector is greater than that of industry. In many economics treatises, the two concepts of industry and sector are mixed, which can easily cause confusion in people’s understanding. Here, it is necessary to distinguish these two concepts. If the analogy of similar concepts in biology is applied, then industry is the population of firms, and sector is the community of firms. For ease of understanding, a sector system can be metaphorised as an orchard, in which different fruit trees grow, each fruit tree represents a firm, and different fruit trees represent firms in different industries. In this orchard, the same type of fruit trees form a fruit tree population, and different fruit tree populations together form a fruit tree community. For example, the apple tree population formed by the apple trees in the orchard can be regarded as an industry. Similarly, the peach tree population formed by the peach trees in the orchard can also be seen as another industry. In this way, different fruit tree populations, such as apple trees, peach trees, pear trees, apricot trees and plum trees, form a fruit tree community. Therefore, a sector system is actually a community of firms composed of different firm populations in a specific geographical area. In fact, some scholars have already introduced related concepts in biology into the research of firms and industries. Firm population is a cluster of firms or products with similar functions in the same geographic region (Hannan and Freeman, 1977; McKelvey, 1978, 1982; McKelvey and Aldrich, 1983). The concept of firm population includes two characteristics: ➀ being in one geographical area; ➁ firm groups with the same or similar product functions. A firm population can also be composed of a group of similar niches, and each niche has one or more firms (Baum and Singh, 1994). There is a relationship of cooperation and competition among the firms within the population. Firm community refers to a group of firms formed by a number of different types of firms or firm populations under particular habitat conditions and interacting with the environment in an unbroken geographical space (Lu Ling, 2001). The concept of firm community

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includes three characteristics: ➀ in a continuous geographical area; ➁ more than two different types of firms or firm populations; ➂ a strong connection between firms or firm populations. The members of the firm community generally include firms in the same region and different industries or firm clusters whose products have alternative, complementary and independent functions.11 From the extension of the concept, industry is a subset of sector. The division between industry and sector is relative, which can also be subdivided according to the needs of research. For example, a state’s sector can be divided into agriculture, industrials and services, of which agriculture can be divided into crop cultivation, animal husbandry, aquaculture, and forestry. Industry and sector are economic organisations between macroeconomics and microeconomics, which are distinctive but interrelated. The sector describes firm populations more in terms of the way of production and organisation, while industry mainly describes firm populations in terms of the types and functions of the products. A sector can utilise products (middleware) of multiple industries to rationally organise production activities in accordance with the principles of economies of scale and scope.12 For example, the automobile manufacturing process consists of the production of engine, chassis, body, steering mechanism, electronic equipment and instrumentation, tires and other components. In the production process of automobiles, it is necessary to use products from many related industries and organise production in a certain way to form the automobile sector. The automobile sector is closely connected with many industries, such as steel, rubber, glass, and electronics. Sector is a historical category. It is produced and expanded with the progress of social productivity and the deepening of the social division of labour. People’s understanding of the sector is also deepening with the development of the social economy. In the different stages of human society, with the deepening of the social division of labour, sectors have gradually formed an interrelated, multilevel, and complex economic system. The social division of labour is usually divided into the general division of labour, the special division of labour and the individual division of labour. General division of labour refers to the division of labour that divides social production into major categories of sectors such as agriculture, industrials, and commerce according to its nature. Special division of labour refers to the division of labour that further divides each sector category into several small industries according to its nature. Individual division of labour is the division of labour within the firm. Historically, the first sectors of human society were formed through the general division of labour, while new sectors are now formed mainly through the special division of labour.13 11

Qian, H. (2004). Niche, Factos Interacting and Organization Evolution. Dissertation, Zhejiang University. p. 7. 钱辉. (2004). 生态位、因子互动与企业演化. 博士学位论文, 浙江大学. p. 7. 12 Zhang, F. (2010). The Division of Labour and Coordination Network and Evolution of Sectoral Organisation. Science Press. p. 7. 章帆. (2010). 分工协同网络与产业组织演进. 科学出版社. p. 7. 13 Chen, X. T. (2007). The Industrial Evolution Theory. Dissertation, Sichuan University. p. 11. 陈 晓涛. (2007). 产业演进论. 博士学位论文, 四川大学. p. 11.

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5.3 The Internal and External Environments of the Sector The sector that exists in a specific socioeconomic environment has both an external environment and an internal environment, all of which have their own hierarchies.

5.3.1 The External Environment of the Sector The external environment of the sector refers to the collection of the factors that exist beyond the boundaries of the sectoral organisation and have an impact on sectoral input and output. The external environment of the sector includes the natural environment and the social environment. The social environment also includes the political, economic, humanistic & cultural, scientific, educational, legal and other environments. In terms of system, sector belongs to the category of the economic system. The external system that contains the sector is vertically composed of the four levels of the economic system, the state system, the social system (international system), and the natural system. Details of the hierarchical relationship of each system in the external environment of the sector are shown in Fig. 4.2 in Chap. 4. The sector is a firm community composed of firms, and the growth and evolution of the sector is manifested in the growth and evolution of the specific firm community. Therefore, sectoral activities can be analysed by studying the economic behaviour of the firm community. In the analysis of the firm system in Chap. 4, it is concluded that the external factors that affect corporate development include the factors from the economic system, the state system, the social system (international system), and the natural system. Among the external factors affecting the development of the firm system, the most direct influence comes from the factors in a state’s economic system, especially from other firms within the sector system. Specific factors include the six categories of humans, resources, products, knowledge, institutions, and technology. From an industry point of view, these six types of factors, whether intraindustrial or interindustrial flow, are realised through the specific interaction (cooperation or competition) of firms. The intercorporate exchange of resources or products is generally realised through market transactions. The influence factors from the state system mainly come from the six systems of a state’s internal political system, economic system, human-culture system, legal system, science system, and education system. These factors are intertwined, interrelated, interacted, and interinfluenced, forming a complex giant system with a threedimensional network structure. The main function of a state’s political system is to provide public services and public goods and to organise, exchange, distribute, and use public rights. The main function of a state’s economic system is to produce, exchange, distribute, and consume material products. The economic system can be divided into different levels in terms of firm, industry, and sector. The main function of

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a state’s human-culture system is the cultivation of human beings and the creation of spiritual culture. The human-culture system not only provides labour and consumption demands for firms but also provides the original core of humanistic-cultural knowledge such as humanistic spirit, values, and ethical morals for entrepreneurship. The main function of a state’s legal system is to regulate the relationships between individuals, individuals and organisations, and organisations and organisations within the state and to maintain the basic social order, fairness and justice. Economic laws and sectoral policies in the legal system have an important impact on corporate development. Scientific studies, scientific experiments and other activities carried out by the science system have an increasingly important role for mankind to understand the world and explore new knowledge. The basic knowledge from the science system lays a scientific foundation for the production and operation as well as technological innovation of firms. The education system plays an irreplaceable role in the cultivation and delivery of talents of all kinds needed by firms; the applied knowledge from the education system constitutes an important factor in corporate production and operation. Specific factors of the state system can also be divided into the six factors of humans, resources, products, knowledge, institutions, and technology, which are all external factors of the firm. Among them, the human resources needed by the firm are generally obtained through recruitment in the human market, and human resources have all kinds of knowledge needed by the firm. Public services and investments provided by government departments can be classified into the external public resources of firms, and the taxes paid by firms to government departments can be regarded as necessary costs paid by firms for consuming public resources. Government departments and households’ demand for corporate products is generally realised through market transactions. Legal institutions, industrial policies, and local regulations from the legal system can all be included in the institutions. Practical technical achievements and technical patents from the Science System can be classified into the technology. The influencing factors of the social system (international system) come from other states and international organisations worldwide, in terms of the six aspects of each state’s internal political system, economic system, human-culture system, legal system, science system, and education system. The influencing factors from an international system are far more complex than those from a state system. These factors are intertwined, interrelated, interacted, and interinfluenced, forming a super complex giant system with a three-dimensional network structure. Although the influences from the international system are quite diverse, when studying the sector, the six aspects at the level of the state system can be examined, generally focusing only on the impact of governments, policies, firms, households, scientific research institutions, universities, and international organisations on firms. For example, the analysis of multinational corporations can focus on the state systems in which they have established branches and then conduct a comprehensive study of all the state systems that have been stationed there. In this way, the key influencing factors from the international system can also be divided into the six factors of humans, resources, products, knowledge, institutions, and technology. For a multinational firm, these

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factors are distributed worldwide. In the current era of globalisation, multinational conglomerates allocate resources on a global scale, employing talents from different states worldwide, integrating resources globally, and selling their products to markets in different regions of the world. Among these factors, the procurement of corporate products by governments, firms, and households in different states and the supply from firms are generally realised through commodity market transactions (i.e., initially international trade, then domestic trade, then wholesale and retail); factors such as investments and loans made by governments, firms and international organisations around the world to firms can be included in the scope of external resources of firms; international conventions, trade agreements, international standards, etc., from the international system can all be included in the scope of the institutions. In addition, the exchanges between a firm and foreign firms, scientific research institutions, universities and other organisations are mainly reflected in the cooperation and competition in knowledge and technology. The influencing factors from the natural system mainly come from the Sun and the Earth. Specific influencing factors are mainly natural resources such as sunlight, air, water, land, minerals, and organisms. The natural environment is the basis for the survival of human society, which restricts the living space and scope of human activities. The abundance of natural resources and the exploitation, utilisation and protection of natural resources directly affect the economic activities of human society. Since the Industrial Revolution, the unrestrained exploitation and utilisation of natural resources by human society has caused many natural resources to face the danger of exhaustion, and waste materials discharged by human production activities have seriously polluted the natural ecological environment. Modern astronomical research confirmed that the Earth is the only planet suitable for human survival in the entire solar system. Studies from the earth sciences also made it clear that waste gas emitted by human production activities has caused atmospheric pollution, acid rain, lake pollution, soil desertification, forest reduction, and the disappearance of certain species. The combination of many factors has deteriorated the planet’s ecosystem. The direct result of the deterioration is first the reduction of clean air, clean water and pollution-free food and then the major changes in the Earth’s climate. The reduction of clean air, clean water and pollution-free food directly threatens the health and survival of human beings. Changes in the Earth’s climate affect the growth of surface organisms, which will directly influence the agricultural production income (mainly food production) of human society. If there is no food such as grain, how can human beings survive? Humans cannot feed their hunger with gold, silver, or coins, can they?! Therefore, human economic activities must consider the influencing factors of natural systems and must limit human production and operation within the range that the natural ecological environment can bear and reproduce. If human society continues to exploit natural resources in a predatory manner without restraint and allows the Earth’s ecological environment to deteriorate, then the fate of the Jurassic dinosaur extinction will also be the future of human society! Based on the above analysis, although there are many external factors that affect sectoral development, they can be grouped into the six categories of firms, resources, markets, knowledge, institutions, and technology. The way in which these factors

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affect the sector can be divided into demand and supply according to the direction of the flow of factors. It is known that the general external factors that affect the development of the firm system are demand and supply. The sum of the external environment’s demand for all firms within an industry (or sector) forms the aggregate external demand for the industry (or sector). The sum of the conditions and resources provided by the external environment to all firms within an industry (or sector) is the aggregate external supply to the industry (or sector). The demand from the external environment is the ultimate driving force for corporate development, while its supply of resource elements required by firms is a necessary condition for firms to carry out normal production and operation. Since an industry or a sector is a group of firms, the demand from the external environment is also the driving force behind the development of the industry (or sector), while the supply of resources required by the industry (or sector) from the external environment is also a necessary condition for the growth and evolution of the industry (or sector). Therefore, the general external factors that affect sectoral development are demand and supply, and the specific factors include firms, resources, markets, knowledge, institutions, and technology.

5.3.2 The Internal Environment of the Sector The internal environment of the sector is an organic system composed of firms, resources, markets and other factors. The factors within the system are interrelated, interacted, and interinfluenced, forming a complex network. The internal environment of the sector has a unique hierarchy and functional structure, which changes continuously with the dynamic changes of the sector. Market is the sum of all commodity transaction (exchange) activities and relationships in commodity circulation and is generally composed of transaction subjects, transaction objects, transaction media, transaction venues, and transaction rules. The market system is a transaction (exchange) system consisting of various professional markets (i.e., commodity market, labour market, capital market, technology market, information market, property rights market, etc.). Each professional market in the market system has its own special function. They are interrelated, interdependent and interrestricted, jointly promoting the evolution and development of the industrial system. Here, transaction subject refers to the individual or organisation that conducts transaction activities (including firm, societal community, and government, etc.). The transaction object refers to the commodity used by the transaction subject to exchange, including products, labour services, capital, technology, information, property rights, etc. The transaction media of human society are initially shells, metals, and common commodities, which gradually evolved into precious metals such as gold and silver. The transaction media of modern society includes currency and credit. Transaction rules refer to the formal or informal rules and regulations that transaction subjects abide by together when conducting trading activities. In

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the formation of the market, the market grew from nothing, the transaction venues developed gradually from mobile venues to immobile venues, the transaction scale continued to expand, and the transaction types became increasingly diversified. With the advent of the information age, markets are becoming more networked and visualised. Today, the buying and selling of commodities can be realised through the Internet. Therefore, many modern markets do not necessarily need to possess tangible transaction venues. China’s e-commerce such as Tmall and JD.com are real cases that provide virtual markets for commodity transactions. Market can be classified separately according to different taxonomies of the market. For instance, in terms of the end-use of the transaction object, the market can be categorised into a productive property market and subsistence market. Regarding whether the transaction object has a physical entity, the market can be divided into a tangible product market and an intangible product market. According to the time attributes of the transaction object, the market can be classified into a commodity spot market and a commodity futures market. It should be emphasised that the market is an indispensable factor for forming industry and sector. This is an important insight I obtained from system theory, and it is also a major difference between this book and traditional economics’ understanding of the sector. On this point, the American economist Allyn Young made a similar view in 1928. “In an inclusive view, considering the market not as an outlet for the products of a particular industry, and therefore external to that industry, but as the outlet for goods in general, the extent of the market is determined and defined by the volume of production”,14 Young said. Young’s expression has long been ignored by the economics community due to its briefness. The main function of the firm is to manufacture products, while the main function of the market is to exchange products. From the historical development process of human society, the birth time of the market is earlier than that of the firm. Before the emergence of modern corporate organisations, the function of material production in human society was mainly undertaken by households (i.e., the men farming and women weaving activities of ordinary households in ancient society). From the basic point of view of this book, the emergence of corporate organisations is the inevitable result of the social division of labour, which is a natural historical process. Since the British economist Coase published The Nature of the Firm in 1937, in which he discovered that, in a market economy, firms not only have a production function but also have an exchange transaction function; Market transactions have costs, that is, transaction cost, so that a group of institutional economists who inherited the mantle of Coase insisted that “the emergence of the firm is a substitute for the market”,15 seeing firm and market are two economic organisations that can replace each other, which is absurd! They comprehended the relationship between the firm and the

14

Young, A. A. (1928). Increasing Returns and Economic Progress. The Economic Journal 38(152):533. 15 Yang, R. L., Hu, Q. (2000). Rethinking the Reasons for the Existence of Firms. Jiangsu Social Sciences (01):1–7. 杨瑞龙., 胡琴. (2000). 企业存在原因的重新思考. 江苏社会科学 (01):1–7.

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market solely from the firm’s transaction cost but ignored its production function, which is the firm’s main function and is irreplaceable by the market. A complete industry generally includes at least the three elements of firms, resources and markets; otherwise, it is not a complete industry. In addition, a firm in the industry must also have basic knowledge, institutions and technology to carry out normal production and operation; otherwise, it will be difficult for the firm in the industry to successfully complete its production and operation. In an industry, the collection of the professional knowledge owned by its internal firms creates the industrial knowledge of the industry. Similarly, in an industry, the collection of the professional technology owned by its internal firms creates the industrial technology of the industry. In the sector system of a state, to regulate the production and operation of the firms in the industry, an industry will often formulate industrial norms or industrial standards (i.e., the hygiene standards formulated by the beverage industry) that have a certain binding force in the industry. The industrial norms or industrial standards here are actually institutional factors at the meso level, which can be regarded as industrial institutions. Therefore, industrial knowledge, industrial technology and industrial institutions are also important factors that constitute the industry. For example, in China’s publishing industry, publishing firms are publishing houses or press companies. The knowledge of communication, editing, publishing and other disciplines mastered by the employees of publishing firms is the industrial knowledge of the industry. The Copyright Law, Publication Management Regulations and other laws and regulations are the basic industrial institutions of the industry. Support technologies such as microcomputers, text editing software (WORD, WPS, etc.), typesetting design software (InDesign, CorelDRAW, PageMaker, etc.), proofreading software (Dark Horse, Woodpecker, Grammarly, etc.) is the industrial technology of the industry. Collecting and selling books, the products of publishers, forms the book market; different types of books form different market segments, i.e., the children’s book market, the novel market and the architectural book market. The term market here refers to the market within the same industry system. The resources of the industry come from the natural system (i.e., land, water, etc.), also the factors from the social system (i.e., personnel, funds, etc., as well as the factors from the state system (i.e., public services, infrastructure, etc.), but more from the economic system (i.e., products and technologies from other industries). Within the economic system, firms in different industries form an interrelational, interactional, and interinfluential network, and the products of one industry often form the resource elements of other industries. For example, bread industrials belong to the scope of light industrials. The factory buildings used in this industry are the products of the construction industry. The processing machinery and equipment employed here are the products of the machinery industry. Wheat, its main raw material, is the product of the agricultural industry. The breads produced from the factory need to be sold through commercial firms such as shopping malls and supermarkets. The machinery industry’s main raw material, steel, requires products from the metallurgical industry. The metallurgical industry’s raw material, ore, requires products from the mining industry.

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During the growth of an industry, among the resources it needs, in addition to services, investment, and franchising from the government, other resources are generally obtained through market transactions. For example, the processing machinery and equipment, the main raw material wheat and other resource elements required by the bread industry can all be purchased from related firms in other industries in the commodity market. The monetary funds used by the bread industry to purchase these resource elements can come from the accumulation of the industry inside or from the financial industry outside. For example, borrowing loans from financial firms (banks) or financing from other firms through a variety of ways (firms can sell part of their equity through the property rights exchange market to obtain the funds they need). Whether it is bank loans or financing from other firms, these behaviours are essentially market transaction behaviour. The difference is only in the transaction approach, the transaction efficiency and the transaction cost. Therefore, market transactions are also an essential element of the sector system. In a state’s economic system, the market has formed a multilevel, diversified market system including the commodity market, labour market, capital market, technology market, information market, property rights market, etc. The term market discussed above refers to the exchange market between different industries. The example of the book publishing industry can still be used to illustrate this point. In the book publishing industry, a paper book usually goes through the following links from the author to the reader: ➀ author → ➁ publication (copyright) → ➂ copyright company → ➃ copyright market → ➄ publisher → ➅ printing factory → ➆ bookstore → ➇ reader. Among them, in link ➂, copyright firms also appear in the form of independent copyright brokers, mainly acting as copyright agents, copyright middlemen and copyright traders, and they often play an important role in international copyright trade. Here, copyright firms, copyright resources, and copyright markets together form the copyright industry. In link ➄, the publishers are mainly engaged in the selection, editing, typesetting, proofreading, printing and distribution of books. The microcomputers they employ are (purchased through the computer market) from the computer industry, the basic software (i.e., Windows, Linux, Netware, etc.) and professional software (i.e., editing software, typesetting software, proofreading software, etc.) and other software they install are purchased through the software market from the software industry. In link ➅, the manuscripts edited and typeset by the publishers are printed with ink on paper by the printing plants. After cutting, folding, gluing and other processes, the manuscripts are finally bound into books. Here, printing firms, printing resources (paper, ink, etc.), and the printing markets together form the printing industry. In link ➆, the publisher’s books are published, displayed and distributed by the bookstore system. Here, bookstore firms, bookstore resources (books, sales venues, etc.) and book markets together form the bookstore industry. Throughout the book publishing industry, with publishers at the centre, from its upstream of copyright to its downstream of printing and bookstore, the copyright market, printing market and book market involved belong to the market within the book publishing industry. However, the computer market and the software market, where microcomputers and basic software are purchased to employ in the book publishing industry, are difficult to include in this industry. From the sector

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Fig. 5.1 Composition of the sectoral internal environment

category, the book publishing industry, computer industry and software industry are all in the information industry. Therefore, the computer market and software market involved here should be included in the exchange market between different industries, and they all belong to the market within the information industry. Through the above analysis, the composition of the sectoral internal environment within a state’s economic system can be drawn (Fig. 5.1). The economic system of a state is an organic system composed of many different sectors. Industries are interrelated, interacted, and interinfluenced, forming a sector system with a complex network structure. Each sector system can be vertically divided into the three basic levels of firm, industry and sector. From the historical development process, the growth and evolution of a state’s economic system is realised through the coevolution of the firm system, the industry system, and the sector system. It is a historical process from unity to plurality, from low-level to high-level, and from simplicity to complexity. In modern society, the basic elements that make up the sector system are industrial clusters, industrial resources and industrial markets. The basic elements that make up an industry system are firm clusters, industrial resources, and industrial markets, while the basic elements that make up the firm system are entrepreneurs, corporate organisations, and corporate resources. In the actual economic system, these factors are all factors that can be observed from experience, so they can be included in the surface structure (explicit factors) of the sector system. Correspondingly, the knowledge, technology and institutions corresponding to these three levels can be included in the deep structure (implicit factors) (Table 5.1). Just as a biological population or community in an ecological environment must adapt to the external environment to survive and develop, an industry or sector also needs to constantly adapt to the external environment in the process of growth and development. When the external environment changes, the internal environment of the industry or sector must be adjusted accordingly until the internal and external

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Table 5.1 Basic hierarchy and deep factors of the sector system Factors

Notes

Basic hierarchy

Knowledge

Technology

Institutions

Sector

Sectoral knowledge

Sectoral technology

Sectoral institutions

Contains common knowledge, technology and institutions of different industries in the same sector

Industry

Industrial knowledge

Industrial technology

Industrial institutions

Contains common knowledge, technology and institutions of different firms in the same industry

Firm

Corporate knowledge

Corporate technology

Corporate institutions

Contains a variety of tangible and intangible knowledge, technology and institutions

environments are coupled. The higher the degree of coupling between the internal and external environments of the industry or sector, the better the survival and development environment of the industry or sector. The coupling process of the internal and external environments of the industry or sector is the process of the growth and evolution of the industry or sector. With the continuous advancement of science and technology, human society will continue giving birth to new industries. In the early days of their birth, the number of firms engaged in the new industry is extremely small, and its production scale is not able to form an industry. However, as the market matures, with more firms joining, when the total output of these firms reaches a certain scale, a new industry is thereby formed. Therefore, innovative firms are the mother of creating new industries. When a new industry is born, the coevolution of all firms in the industry promotes the evolution of the industry. In the growth and development of an industry, the core firms within the industry have an important demonstration and driving role in the evolution speed and evolution direction of the industry.

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5.4 The Constituent Elements and General Structure of the Sector 5.4.1 The Constituent Elements of the Sector Generally, in addition to the three basic elements of firms, resources, and markets, a complete sector must also have knowledge, institutions, and technology, and these six categories of factors are the most basic key elements that make up a sector. These six key factors can be divided into two categories: A. Explicit factors (surface factors): firms, resources, and markets B. Implicit factors (deep factors): knowledge, institutions, and technology. In the previous analysis, it is concluded that the above six factors also exist in the external environment of the sector. An industry (or sector) needs to constantly absorb resource elements from the external environment and internalise them into its own components as part of its growth and evolution. If the external environment does not supply resource elements to the industry (or sector), then the industry (or sector) cannot grow and develop. In a sector system, whether within an industry or between different industries, resource elements are generally realised through business-specific interaction (cooperation or competition), and the exchange of resources or products between firms generally needs to be achieved through market transactions. Without the market, the middleman, it will be difficult for firms to successfully realise the transaction of resource elements, which will also hinder the growth and development of the industry (or sector). Therefore, resources and markets are two necessary factors for the formation of the sector. The normal production and operation of the firm is carried out on the basis of a certain knowledge, institutions and technology, which also determines that the growth and development of an industry (or sector) is also carried out on the basis of a certain knowledge, institutions, and technology. Here, industrial institutions are one level higher than corporate institutions and one level lower than the economic laws and sectoral policies formulated by the state. Its content must not only promote the development of the firms in the industry but also be restricted by national laws and sectoral policies. For example, the industrial institutions of a state’s food industry must comply with the provisions of the national food sanitation law. Douglas North was best known for his work on the important influence of institutions on economic development. In an important paper published in 1968, North noted that,16 there had been no major technological advances, such as flutes replacing sailboats, from 1600 to 1860 that were responsible for the sharp increase in productivity in ocean shipping. The root cause was the changes in institutions and markets, which greatly reduced 16

Xu, J. L. (2001). Thoughts on Dynamic System of Social Development on the Condition of Science and Technology Revolution. Journal of System Dialectics (02). 徐建龙. (2001). 科技革命 条件下社会发展动力系统的思考. 系统辩证学学报 (02).

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the sailing costs. He pointed out that without technological changes, institutional innovations can also improve production efficiency and achieve economic growth.

5.4.2 The General Structure of the Sector The general structure of the sector system refers to the general order and form of interrelation, interaction, interinfluence and interrestriction formed among the subsystems within the sector system in its dynamic evolution. The general structure of the sector system reflects the structural features of the internal elements of the sector system supporting each other in terms of function and is the basis for the coevolution of the external environment system and the sector system, as well as the sector system and its internal elements. The sector is the firm community composed of firms. A firm is an artificial intelligence system with self-learning, self-adapting, and self-organising features and abilities that can constantly adapt its own organisation to changes in the external environment. Sectoral growth and evolution is achieved through the interaction between firms within the sector and between the firms inside and outside the sector, which determines that the sector itself is also an adaptive and self-organising system. From the operation of the sector system, the growth and evolution of a sector is actually a continuous cycle of inputs and outputs. Combining the components of the sector system, the general operational structure of the sector system can be drawn (Fig. 5.2). As shown in Fig. 5.2, the actual operating process of the sector system can be divided into two chains (the solid arrow in the figure): Chain A (surface factor operating chain): input → firm → resources → market → output Chain B (deep factor operating chain): input → knowledge → institutions → technology → output During the operation of the sector system, Chain A reflects the process in which firms in the sector continue to absorb, internalise, and integrate resources through

Fig. 5.2 General operational structure of the sector system

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market transactions. It is also a process in which the number of firms continues to increase and the market system continues to improve; Chain B reflects the process of continuous learning, internalisation, and integration of industrial knowledge and industrial technology by firms in the sector. It is also a process of continuous adjustment of corporate institutions and continuous improvement of industrial institutions. The two processes of Chain A and Chain B are combined into one and jointly realise the input–output process of industrial operation. In the operation of sector systems, core firms within are important role models and leaders. In the actual operation of the sector system, all the factors in the above two chains do not work individually or separately but coordinately and cooperatively. That is, every two factors are interrelated, interacted, and interinfluenced and together form a network of production relations within the sector system. This relationship is represented by a dashed double arrow in Fig. 5.2. In its growth and evolution, a sector has always been communicating personnel, materials, currencies, commodities, knowledge, institutions, technology, and information with its external environment. The relation established between a sector system and its external environment in terms of the natural system and the social system (including the subsystems of human-culture, economy, polity, science, law, education and other systems in the state system) form the social network outside this sector system. In terms of socioeconomic relations, the complete production relation of a sector system should be composed of its internal production relations network and its external social relations network. The process of a sector system’s growth and evolution is essentially a dynamic process of the entanglement, interaction and influence of the two relationship networks inside and outside the sector system. The dual relation networks inside and outside the sector system constitute a multidimensional and complex dynamic picture.

5.5 The Taxonomies of the Sector In a state’s economic system, there are various sectors, and the intersectoral relationships are complex. With the continuous development of human society and the continuous progress of science and technology, a variety of new sectors and industries will continue to emerge. To analyse and study different sectors, the sector must first be classified. It is necessary to introduce the taxonomies of the sector. At present, there are many classification approaches for the sector in Economics, and different states have their own domestic methods for classification. Sectors can be classified differently according to different criteria. The following introduces some of the main taxonomies of the sector.17

17

The sectoral classification methods quoted part of the content of Chen Xiao-Tao’s doctoral dissertation, see: Chen, X. T. (2007). The Industrial Evolution Theory. Dissertation, Sichuan University. pp. 12–14. 陈晓涛. (2007). 产业演进论. 博士学位论文, 四川大学. pp. 12–14.

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5.5.1 Two Class Taxonomy Two Class Taxonomy was proposed by Marx. He divided the material production of society into two great sections: means of production (i.e., Department I) and means of consumption (i.e., Department II). Department I refers to the commodities having a form in which they must, or at least may, pass over into productive consumption, including production tools, equipment, raw materials, and materials; Department II refers to the commodities having a form in which they pass into the individual consumption of the capitalist and working classes, including personal consumer goods.18 Marx’s Two Class Taxonomy is concise and easy to understand. However, this classification did not include all areas of material production and only focused on the production of material products, not the production of mental and cultural products. It is difficult to classify some production departments in reality if this taxonomy is solely applied.

5.5.2 Three Classification of Sector Three-sector taxonomy was originally proposed by A. G. D. Fisher and was widely known after being improved and developed by Colin G. Clark (1905–1989). Threesector taxonomy divides all economic activities of human society into three sectors according to the time sequence of occurrence and the characteristics of labour objects. In 1935, British economist Fisher divided the history of human economic activity into three stages in the book The Clash of Progress and Security. The first stage is the primary production stage dominated by agriculture and animal husbandry, and the corresponding production department (activity) is the primary sector. The second stage is the production stage marked by large-scale industrial development, and the corresponding production department (activity) is the secondary sector. The third stage is a production stage led by services, and the corresponding production department (activity) is the tertiary sector. In 1940, the British economist Colin Clark made it clear in his book The Conditions of Economic Progress that the first sector refers to agriculture in a broad sense, including agriculture, animal husbandry, nomadic husbandry, fishery and forestry. The secondary sector refers to industrials in a broad sense, including manufacturing, construction, communications, coal mining, etc. The tertiary sector refers to services in a broad sense, mainly including commerce, finance, catering and other services, as well as science, education, health care, and other public administrations such as the government. After that, American economist Simon Smith Kuznets (1901–1985) supplemented and improved the Three Sector Taxonomy. In his book Economic Growth of Nations published in 1971, he clearly divided the national economy into three major sectors: agriculture, industrials, and services. Three-sector taxonomy is suitable for analysis and research on the internal 18

Marx, K. Capital (Vol. II). Charles H. Kerr & Company. p. 457.

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relations of the three sector-related changes in economic development and can better reflect the level of a state’s sectoral development in a certain period of time. The taxonomy adopted by China basically belongs to the Three Sector Taxonomy, but it also has some features that are not exactly the same as those of other states. In 1985, China’s National Bureau of Statistics clarified China’s three sectors as follows: First sector: agriculture (including crop cultivation, forestry, livestock and fishery, etc.); Secondary sector: industrials (including extractive, manufacturing, water, electricity, steam, hot water, gas) and construction; Tertiary sector: all sectors except the abovementioned first and secondary sectors, which can be divided into four levels: the first is the services for circulation; the second is the services for production and living; the third is the services that improve the quality of residents in terms of cultural and scientific knowledge level; and the fourth is the services for society and the public.

5.5.3 Four Sector Taxonomy Four Sector Taxonomy is based on Three Sector Taxonomy, proposed by Fritz Machlup (1902–1983) and developed by Mac Uri Porat. In 1962, the American economist Fritz Machlup introduced the concept of the knowledge industry in his book The Production and Distribution of Knowledge in the United States, adding knowledge sector to the three sectors. On this basis, in 1977, the American economist Mac Uri Porat proposed in his book The Information Economy to classify sectors by agriculture, industrials, services, and information. Four-sector taxonomy highlights the importance of information in human economic activities and more accurately describes the increasing degree of informatisation in current human society.

5.5.4 Standard Sector Taxonomy Standard sector taxonomy is the sectoral classification method promulgated by the United Nations to unify the sectoral classification standards of all nations worldwide. In 1971, the United Nations promulgated The International Standard Industrial Classification of All Economic Activities (ISIC), dividing all economic activities of human society into ten sections, each consisting of a purely numerical system at the section (1-digit), division (2-digit), group (3-digit) and class (4-digit) levels. There is a close relationship between the Standard Sector Taxonomy and the Three Sector Taxonomy. The major sectors of the Standard Sector Taxonomy can be easily combined into three parts and correspond to the three sectors. The three parts of the Three Sector Taxonomy can also be subdivided into different sector branches to correspond to the Standard Sector Taxonomy. Standard Sector Taxonomy is relatively complete and has a wide range of adaptability.

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5.5.5 Factor Intensity Taxonomy Factor Intensity Taxonomy is a method of classifying sectors according to the difference in the degree of dependence of sectors on different resource elements in the production process. According to this classification, sectors can be divided into labour-intensive sectors, capital-intensive sectors and technology-intensive sectors. In labour-intensive sectors, the proportion of firms’ dependence on labour is relatively high, while the organic composition of money capital is relatively low. For example, sectors such as the food industry, textile industry, clothing industry, and life services are all typically labour-intensive. In capital-intensive sectors, the proportion of firms’ dependence on capital is relatively high, while the organic composition of money capital is relatively high. For example, sectors such as the steel and petrochemical industries are capital-intensive. In technology-intensive sectors, the proportion of firms’ dependence on technology is relatively high, and their products generally consume less material and have higher added value. For example, sectors such as computers, precision instruments, aerospace engineering and bioengineering are technology-intensive. Factor Intensity Taxonomy can reflect the level of economic development of a state and the relative proportion of different resource elements in the sector.

5.6 The Differentiation Process of the Sector According to the Four Sector Taxonomy proposed by Machlup and Porat, the sector in a state’s economic system can be at least divided into four major categories: agriculture, industrials, service, and information. Each sector category is further subdivided below, and its differentiation process is briefly analysed.

5.6.1 The Differentiation of the Agricultural Sector Agriculture is a sector that uses the growth and development laws of plants and animals to obtain products through artificial cultivation. Agriculture is the source of food and clothing, the foundation of survival, and the basic production activity on which mankind depends for a living. In the national economy, agriculture is the primary sector. The main objects of agricultural production are living animals and plants, and the products obtained are animals and plants. Agriculture in a broad sense includes industries such as crop cultivation, animal husbandry, aquaculture (fishery), and forestry; agriculture in a narrow sense only refers to planting, including the production of food crops, cash crops, fodder crops, green manure and other

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crops. According to the nature of productivity and the level of development, agriculture can be divided into primitive agriculture, ancient agriculture, modern agriculture and contemporary agriculture. Modern agriculture refers to agriculture in which labour tools change from human and livestock to mechanised farm tools, and production activities transform from direct experience to modern experimental science. Contemporary agriculture refers to socialised agriculture, which widely uses modern science and technology, modern mechanised tools and production materials and adopts modern production management methods. With the further development of the division of labour in agriculture, a number of industries continue to be differentiated from agriculture. For example, the orchard industry is differentiated from forestry because of people’s need for fruits. With the professional development of the commodity economy, the orchard industry specialises in apple orchards, litchi orchards, cherry orchards, grape orchards, etc., each of which can be further subdivided into different types. For instance, grapes are divided into different types, such as table grapes, wine grapes, and raisin grapes. With the urbanisation of human society, when people’s consumption demand for milk, cheese, butter and other dairy products is increasing, dairy agriculture differentiates itself from animal husbandry, and dairy farms emerge across the world. The increase in people’s demand for farming cultural experience and agricultural leisure tourism quietly increases agritourism. In addition, following the continuous progress of science and technology in human society, modern technologies are driving agricultural production to a higher level. For example, the application of satellite positioning in agricultural production has led to the emergence of precision agriculture. This technology is to install satellite locators on planters, fertiliser spreaders or combine-harvesters so that the locators can transmit the real-time agricultural information to the control centre for calculation to realise the precise seeding, precise fertilisation and precise harvest, which greatly improves the level of agricultural production. Another example is the application of modern biotechnology with genetic engineering as the core, which leads to the emergence of genetic agriculture, enabling the agricultural production of more new varieties with better quality, higher yield, and more adaptability, thereby enhancing the direct control of mankind on the natural production of agriculture.

5.6.2 The Differentiation of the Industrial Sector The industrial sector refers to the sector that transforms natural resources and raw materials into products after human production and processing. Industrials is one of the most important material production departments in a state’s economic system. It provides raw materials, fuels, power, and production technology for industrials and other departments in the economic system. In the economic system of a state, the industrial sector is also known as the secondary sector. The industrials of human society has gone through the development stages of handicrafts, machinery industrials and modern industrials. In ancient society, the handicrafts were originally a

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sideline of agriculture. However, with the development of the social division of labour, it was not until the late primitive society that handicrafts gradually separated from agriculture and formed an independent production department. By the eighteenth century, the Industrial Revolution in the U.K. gradually transformed the former workshop handicrafts into large-scale machinery industrials; with the advancement of science and technology, from the end of the nineteenth century to the beginning of the twentieth century, industrials entered the modern industrials age. According to the different end-users, modern industrials can be roughly divided into two categories: light industrials and heavy industrials. According to the classification criteria of light and heavy industrials by China’s National Bureau of Statistics, the light industrial sector mainly refers to industrials that provide humans with consumer goods and hand tools. In terms of raw materials, light industrials can be divided into two categories: (1) light industrials using agricultural products as raw materials, such as food manufacturing, beverage manufacturing, tobacco processing, textile, sewing, leather and fur manufacturing, papermaking, and printing; (2) light industrials using industrial products as raw materials, such as cultural, educational, sporting goods, chemical medicine manufacturing, synthetic fibre manufacturing, daily chemical products, daily glass products, daily metal products, hand tool manufacturing, medical equipment manufacturing, cultural and office machinery manufacturing. Heavy industrials mainly refers to the industrial sector that provides the material and technological foundation and main means of production for different departments of the national economy. According to the nature of production and product use, heavy industrials can be divided into three categories: (1) mining industrials, for instance, oil extraction, natural gas extraction, coal mining, metal mining, nonmetal mining, and timber logging; (2) raw material industrials, which refer to the industrials that provide basic materials, power and fuels to different departments of the national economy, such as metal smelting and processing, coking and coke, chemicals, chemical raw materials, cement, wood-based panels, and power, petroleum and coal processing; (3) processing industrials, including machinery and equipment manufacturing industrials which equip departments of the national economy with metal structures, cement products, as well as industrials that provide production materials (i.e., fertilisers and pesticides) for agriculture. With the extensive and in-depth development of the division of labour in the industrial sector, a number of industries continue to be differentiated from the industrial sector. The above classification is only a rough division. In fact, each industrial sector can be further subdivided. For example, machinery industrials can be further divided into industrial equipment and machinery manufacturing industries, agricultural machinery manufacturing industries, and transportation machinery manufacturing industries based on different service targets. Transportation machinery manufacturing can be further subdivided into railway locomotive and vehicle manufacturing, automobile manufacturing, shipbuilding and aircraft manufacturing. Power industrials can also be divided into thermal power industrials, hydropower industrials, and nuclear power industrials. With the progress of science and technology, technological clusters promote the development of modern industrials to a higher level, and some industries have also

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emerged. For example, the wide application of electronic control technology in the industrial field has enabled industrial production to automate the production process based on machine automation. Microelectronics-centric technology clusters have spawned emerging industries, including bioengineering, optical fibres, new energy sources, new materials and robots. In the field of new energy, as humans have mastered the technologies of wind power, solar power and bioenergy generation, the wind power industrials, solar power industrials and bioenergy industrials have emerged naturally. For transportation machinery, with the mastery of new power and aerospace technology, aerospace industrials such as space launch vehicles, man-made earth satellites and manned spacecraft have been developed.

5.6.3 The Differentiation of the Service Sector The service sector refers to the sector that provides and sells service commodities and provides services to society. Compared with products from other sectors, service goods are generally nonphysical, nonstorable and simultaneous with production and consumption. The service sector plays a connecting and coordinating role among different departments in a state’s economic system. The service sector has gone through a long historical process from serving the circulation of goods to serving human life and then further developing to serving production and operation. Commerce is the earliest service sector in human society. Commerce is an economic activity that realises the circulation of goods through exchange activities such as buying and selling commodities. It is generally believed that the commercial activities of human society originated from bartering behaviours in primitive society. To analyse the process of the gradual differentiation of the service sector, let us first understand the development of ancient Chinese commerce. Commercial transactions appeared very early in ancient Chinese society. In the Shang Dynasty, many merchants were engaged in long-distance trafficking in ox carts or boats. By the late Shang Dynasty, merchants specialising in commodity trading had appeared in the capital. Jiang Zi-Ya19 used to slaughter cattle in Chaoge and sold rice for a living in Mengjin. By Western Zhou, commerce had become an economic sector of society and was monopolised by the government. The commodities on the market mainly included crops, silk, jewellery, weapons, cattle, horses, slaves, etc. In the Western Zhou Dynasty, except for shells, copper coins were used as currency. During the Spring and Autumn Warring States Period, a great deal of commodity markets and large merchants appeared; Fan Li (536–448 B.C.), Xian Gao, Bai Gui, and Lü Pu-wei (29–235 B.C.) were all famous merchants at that time. 19

Additionally, known as Jiang Tai Gong, he bore the surname Jiang, and given name Shang. His courtesy name is Zi-Ya. He was an outstanding politician and military strategist during the Shang and Zhou Dynasties in ancient China, who helped the three generations of King Wen, King Wu and King Cheng of Western Zhou politically and militarily. He was known in history as a noble minister if assisting an emperor, a noble monarch if governing a regional state and he has made outstanding contributions to the establishment and consolidation of the Western Zhou Dynasty.

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After the unification of China, the First Emperor of Qin (259–210 B.C.)unified the units of measurement and the forms of currency and built Qin Zhi Dao (the first state highway), all of which promoted the development of commerce. During the two Han Dynasties, with the development of agriculture (crop cultivation), animal husbandry, and handicrafts, commerce gained further development. At that time, the capitals of Chang’an and Luoyang, as well as major cities such as Handan, Linzi, Wan (Nanyang), and Chengdu, all developed into renowned commercial centres. Each city has a shi 市 market dedicated to commodity trading, which is managed by full-time officials established by the government. During this period, the Han Dynasty opened two Silk Roads on land and by sea, which promoted the development of Sino-foreign trade. During the Sui Dynasty, the Grand Canal that ran through the north and the south was excavated, and the development of shipping and transportation promoted the expansion of the scope of commodity circulation. In A.D. 713, in the Tang Dynasty, there was a guifang 柜坊 counter store specialising in currency deposit and lending business (which was actually the earliest prototype of bank in China), and later feiqian 飞钱 flying cash20 appeared. The emergence of guifang and feiqian brought more convenience to commercial transactions. The government of the Tang Dynasty allowed foreign businessmen to trade freely within the territory. For a time merchants from the Western Regions, Persia, and Dashi gathered in the city, making the city of Chang’an a prosperous business. During the Tang Dynasty, rural fairs also developed further, especially near the main roads of water and land transportation. Fairs continued to increase, and some developed into important towns. In the Song Dynasty, the rapid development of agriculture and handicrafts provided a solid material foundation for the prosperity of commerce. The government gradually relaxed restrictions on commodity transactions so that domestic trade, border trade and foreign trade advanced together. The Northern Song Dynasty began to issue the paper money jiaozi 交子 currency (the earliest paper currency in the world). All of these brought unprecedented prosperity to the country’s commerce. Dongjing (now Kaifeng), the capital of the Northern Song Dynasty, had developed into a mega-city with a population of more than one million, with bustling commercial neighbourhoods and professional transaction venues. Along the River during the Qingming Festival, Northern Song painter Zhang Ze-Duan depicted the bustling scene of commerce in Tokyo at that time. Lin’an (now Hangzhou), the capital of the Southern Song Dynasty, had a population of one million in its heyday. It was the largest city in the world at that time. Its booming commerce of nonstop morning and evening markets flooded the city with various stores, restaurants and tea houses. At that time, agricultural products and handicrafts such as grain, bamboo and woodware entered the market and became important commodities. As the variety of goods increased, fairs of all types emerged. Fairs of different types, both regular and irregular and professional and seasonal, appeared in cities. At the same time, commercial Feiqian 飞钱 flying cash, also called bianhuan 便换 easy exchange appeared in the Yuanhe reign of Emperor Xianzong of Tang (A.D. 806), was the oldest type of paper currency for transfer between different places, similar to today’s bills of exchange. It is the earliest bill of exchange in China and the world. See New Book of Tang (Volume LIV)—Treatise on Trade.

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taxes gradually became an important source of government revenue. In the Northern Song Dynasty, dozens of countries in Southeast Asia, South Asia, the Arabian Peninsula and even Africa traded with China. Overseas trade developed even further in the Southern Song Dynasty, and foreign trade taxation became an important source of wealth for the treasury. In the Yuan Dynasty, the redredged Grand Canal connected the shipping from Hangzhou to Dadu, the great capital of the Yuan Dynasty, and at the same time opened up maritime transportation from the Yangtze River estuary to Zhigu (Tianjin) through the Yellow Sea and the Bohai Sea. The Yuan government also set up relay stations at regular intervals, and the Silk Road across Europe and Asia began to prosper again, all of which prompted the continued development of commerce in the Yuan Dynasty. At that time, Dadu was a bustling international commercial metropolis, the city of more than 30 different markets. Caravans came here from Japan, North Korea, Eastern Europe, Central Asia, Southeast Asia, and even the coast of Africa. All kinds of domestic and foreign commodities converged here for busy transactions. During the Ming and Qing Dynasties, the peasant economy and the market became increasingly close, and the commercialisation of agricultural products was developed. The urban economy was unprecedentedly flourishing, and many large cities and rural markets were prosperous. Among them, Beijing and Nanjing were nationwide commercial cities, bringing together specialty products from all aspects. At that time, regional merchant groups emerged throughout the country, among which merchants from Huizhou and Shanxi had the largest number and the most powerful strength. After accumulating commercial capital in the salt industry, Huizhou merchants began to operate in tea, timber, and grain throughout the country. In addition to dealing with bulk commodities and long-distance trafficking, they also managed in financial businesses such as pawnshops. Shanxi merchants also became rich by engaging in the salt industry. After accumulating huge amounts of commercial capital, they gradually began to sell silk, ironware, tea, cotton, wood and other commodities. During the reign of Qianlong Emperor of Qing, Shanxi merchants began to set up piaohao 票号 draft banks, the financial institutions that offered deposits, lending, and exchange services. Shanxi merchants had a wide range of business, even expanding to Japan, Southeast Asia, Russia and other places. In 1882, Shanghai Buffer Stock Company was established, which was the earliest securities trading institution in China. In 1897, the Imperial Bank of China was established in Shanghai, which was the first bank in China. From 1897 to 1911, China opened a total of 20 banks of all types, all of which were stock corporations. In January 1904, the Qing government promulgated The Business Law, which was the first modern commercial law in Chinese history. In 1906, the Qing government promulgated The Bankruptcy Law. The Business Law and The Bankruptcy Lawwere collectively referred to as the Commercial Law of the Qing Dynasty. At this point, China had an independent system of commercial law. Between 1904 and 1908, the number of private firms in China increased rapidly, during which time 272 firms were registered. China’s economic system changed drastically in the late Qing Dynasty, so that the emergence of a large number of new industries bred relevant associations rather quickly. Between 1840 and 1903, a total of 166 associations were established in the four cities of Shanghai, Suzhou, Hankou and Beijing. The Shanghai Business

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Conference Centre was established in 1902, which was China’s first chamber of commerce. From 1902 to 1912, apart from Mongolia and Tibet, there were 998 chambers of commerce in all provinces and regions in China.21,22 Through a rough understanding of the 3,000-year brief history of ancient Chinese commerce from the Western Zhou Dynasty (founded in 1046 B.C.) to the end of the Qing Dynasty (1911), it is apparent that commerce and markets gradually emerged with the progress of commodity exchanges, which were then subsequently differentiated from agriculture and handicrafts to form an independent industry as a result of the development of social division of labour and the appearance of professional businessmen. The growth of commerce and the markets gradually boomed service industries such as transportation, catering, hotel, and finance. With the evolution and expansion of market transactions from simplicity to complexity, from low-level to high-level, from domestic trade to foreign trade, more commodities and industries were involved in commercial circulation and market transactions, thus giving birth to numerous service industries, which infiltrated, transformed and improved all aspects of the production, operation, management, sales and other aspects of agriculture and handicrafts, thereby promoting the continuous deepening, specialisation, and refinement of agriculture and handicrafts, and more industries were differentiated from agriculture and handicrafts. It is such a positive feedback loop that has continuously given birth to more service industries, thus promoting the continuous expansion of the scale and scope of market transactions and the growth and development of the entire social and economic system. In the sector system of the economic system, the service sector is a sector category that includes numerous subdivided industries. In the actual work of China’s current national economic accounting, the service sector is regarded as the tertiary sector; that is, the service sector is defined as the department of all sectors except agriculture and industry. According to China’s 2012 Dividing Basis of Three Sectors for National Economic Activities (GB/T4754-2011) and other standards, China divided the service industry into 15 divisions and 3 major sections: (1) wholesale and retail; (2) transportation, warehousing and postal; (3) accommodation and catering; (4) information transmission, software and information technology services; (5) finance; (6) real estate; (7) leasing and business services; (8) scientific research and technical services; (9) water conservancy, environment and public facilities management; (10) resident service, repairs and other services; (11) education; (12) health and social work; (13) culture, sports and entertainment; (14) public administration, social security and social organisations; (15) international organisations; and services in agriculture, forestry, animal husbandry, and fishery; auxiliary activities in mining; metal products, machinery and equipment repairs in manufacturing. According to 21

Yu, H. P. (1993). Chamber of Commerce and China’s Early Modernisation. Shanghai People’s Publishing House. pp. 76, 134. 虞和平. (1993). 商会与中国早期现代化. 上海人民出版社. pp. 76, 134. 22 The literature in this paragraph is compiled from: Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. pp. 62–67. 赵德馨. (2016). 中国近现 代经济史. 高等教育出版社. pp. 62–67.

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the classification methods of the United Nations and the World Trade Organization, the service sector mainly includes 11 divisions: (A) business services (which can be further divided into professional services, computer services, rental services, etc.); (B) communication services (which can be divided into postal services, courier services, telecommunications services, audio-visual services, etc.); (C) construction and related engineering services; (D) distribution services (which can be divided into commission agency services, wholesale services, retail services, franchise services, etc.); (E) educational services; (F) environmental services; (G) financial services (which can be divided into insurance and insurance-related services, banking and other financial services, securities services, etc.); (H) health-related services and social services; (I) tourism and travel-related services; (J) entertainment, cultural and sports services; (K) transportation services (which can be divided into shipping services, inland water transportation services, air transportation services, aerospace transportation services, railway transportation services, road transportation services, pipeline transportation services, transportation auxiliary services, etc.). Social progress and the increasingly specialised social division of labour allow the modern service sector, which has highly intensified intellectual elements, highly value-added output, less resource consumption, and less environmental pollution, to obtain rapid development. The modern service sector is different from traditional services such as commerce, accommodation, catering, warehousing, and transportation and is represented by education and training, finance and insurance, accounting, legal services, information transmission and computer software, leasing and business services, scientific research and technical services and geological surveys, culture, sports and entertainment, real estate, and residential community services. With the extensive and in-depth development of the division of labour in the service sector, a number of industries continued to be differentiated from the service sector. The prevalence of the Internet and its integration with traditional services resulted in a great number of brand new industries of new formats, such as online finance, online ticketing, online recruitment, online matchmaking, and e-commerce. For example, the differentiation of online retails from retails and the combination of online retails and express services have brought more convenient shopping experiences. In the past, people needed to go to bookstores and shops to purchase books and daily necessities, but now they only need to sit at home and shop by browsing the web and clicking the mouse. When selecting products, customers can compare products between a dozen vendors, and the products they ordered can be delivered to their home directly, which is more convenient. For example, when purchasing books on the Amazon website, one can easily select books in different languages and can easily compare the prices, contents and other information of similar books before making an order.

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5.6.4 The Differentiation of the Information Sector The information sector, also known as the knowledge sector, refers to the sector that provides information products and services to society. The information sector in the narrow sense refers to the information service sector, that is, the industries related to information production, collection, conversion, storage, transmission, exchange, distribution, search, usage, and information system construction, including news, publishing, broadcasting, film and television, network, telecommunications, advertising, intelligence, books, audio and video, database, archives, printing and other departments. The information sector in a broad sense refers to all sectors related to information production, storage, circulation, and utilisation, including information service, software technology and information equipment (i.e., computers, communication equipment, televisions, cameras, projectors, cameras, tape recorders, etc.) manufacture. The information sector is a kind of knowledge, technology, and information-intensive sector that was gradually differentiated from the service sector. In a state’s economic system, the information sector belongs to the fourth sector. Since Machlup first proposed the concept of the knowledge sector, scholars have conducted extensive discussions on the concept and scope of the information sector. However, due to different research purposes and perspectives, there are still divergent opinions about the concept of the information industry. The U.S. Department of Commerce classified the information sector into hardware, software and services, telecommunication equipment manufacturing, and telecommunication services in The Digital Economy 2000, published by the United States Department of Commerce in accordance with the country’s 1987 Standard Sectoral Classification. In the North American Sectoral Classification System, jointly formulated by NAFTA (the United States, Canada, and Mexico) in 1997, the information sector was categorized into four industries: publishing, film and audio-visual, radio and television and telecommunications, and information and data processing services. The European Information Providers’ Association (EURIPA) defined the information sector as an electronic information industrials that provides information products and services. The Japan Association for Science, Technology and Economics divided the information sector into software, database, telecommunication and corresponding information services. Although different countries and regions have different classification criteria, in general, the information sector includes the three major parts of information content services, information software technology, and information hardware equipment. As an emerging category, the information sector will develop and change with its connotation and extension as the sector continues to mature. With the division of labor and professional development of the information industry, the information sector will continue to differentiate into smaller industries, and each category of the information industry can be further subdivided. For example, the news industry can be divided into paper newspapers and periodicals, radio news, television news, etc., according to different information carriers. The

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rise of the Internet also led to the creation of network newspapers and periodicals, network broadcasting and network television. Merely news websites can be further subdivided into comprehensive news websites (i.e., Sina.com and Sohu.com) and professional news websites (i.e., Chemical News Network and Building Materials News Network). The book publishing industry can also be divided into paper publishing, electronic publishing, online publishing, and mobile publishing. The continuous progress of technology clusters such as modern communication technology, digital technology and network technology has greatly promoted the penetration of the information sector in more fields and its development to a higher level and has also given birth to some emerging industries. For example, the ecommerce produced by the alliance of the Internet and commercial transactions, the e-government created by the union of the Internet and government administration, the remote diagnosis and treatment driven by the combination of the Internet and medical services, and the distance education staged by the integration of the Internet and education and training. For another example, with the fusion of the Internet with the telephone network and television network and the connection between the Internet and the Internet of Things, smart buildings, smart homes, smart medical care, and smart logistics will enter our lives, which will greatly extend human perception and bring more convenience to life. The modern information sector is rapidly changing people’s studies, work and lifestyles and has a profound impact on human society! ∗ ∗ ∗ Through the above simple analysis of the further subdivision and differentiation of agriculture, industrials, service and information sectors, we will be surprised to find that, from the perspective of long-term historical evolution, the sectoral evolution of human society is very similar to a huge tree that keeps forking and growing: agriculture is its root and trunk, industrials, service and information sectors are larger branches that grow from the trunk, the industries in the major sectors are its finer branches, while the microeconomic organisations such as the firm are the leaves attached to the branches. Agriculture continuously absorbs and transforms natural resources from nature to support the growth of industrial, service and information sectors, while these sectors promote the level of agricultural production and development in turn. This is similar to the roots of the big tree continuously absorbing water and nutrients from the soil to support the growth of the trunk and the branches, while in turn, the leaves on the branches provide energy and power through photosynthesis and respiration to the roots and trunk. From a global perspective, the economic system of every state contains the four major sectors of agriculture, industry, services, and information. However, due to the differences in the sectoral structure, growth stage and development level of the four major sectors, the level of economic development of different states is also different. Similar to the same species of trees that grow in different regions, because of the differences in soil, water quality and climate conditions, they grow into different shapes in different regions. The German philosopher Leibniz once suggested that “no two leaves are ever exactly alike”. In fact, there are no two identical trees in

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the world, which is also the truth for different states that there are no two identical economic systems in the world. In this sense, each state should choose the path that suits its own economic development according to its own national conditions! In summary, it can be concluded that sectoral differentiation in human society is actually a gradual bifurcation, which is first the differentiation of handicrafts from agriculture, followed by the differentiation of services from handicrafts and agriculture, and then the differentiation of information from services. Industries inside each of the four major sectors of agriculture, industrials, services and information are also gradually subdivided from the original sector. Sectoral differentiation in human society is in full compliance with the law of bifurcation, which is also a concrete manifestation of the bifurcation law in sectoral evolution. It is under the effect of the bifurcation mechanism that the four major sectors of human society have realised the growth and evolution from unity to plurality, from simplicity to complexity, and from low-level to high-level.

5.7 Sectoral Development Dynamics There are many factors that affect sectoral growth and development, but in general, they can be divided into internal factors and external factors.

5.7.1 The Dynamic Factors in Sectoral Development From the external environment of the sector system, the demand of the external environment is the primary force for sectoral development, while the supply of resource elements by the external environment to the sector is a necessary condition for sectorak evolution. The general external factors that affect sectoral development are demand and supply, and the specific factors include firms, resources, markets, knowledge, institutions, and technology. From the perspective of the internal environment of the sector system, the sector system itself contains the six factors of firms, resources, markets, knowledge, institutions, and technology. In fact, the most basic key elements that make up the sector system basically correspond to the specific external factors that affect the development of the sector system, but the external environmental factors are more complex and diverse. In the long run, the process of growth and evolution of a sector system is actually a continuous absorption, internalisation, and integration of these elements from the external environment. Therefore, the internal dynamics that can affect the input and output of the sector system can only come from these six elements within the sector system. Therefore, it can be concluded that the internal dynamics that drive the development of sector systems come from the six factors of firms, resources, markets, knowledge, institutions, and technology. Among them, the most important dynamic

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factor is the firms inside the sector, and among all the firms inside the sector, core firms play a crucial demonstration and leading role in sectoral growth and evolution. Through the above brief analysis, it is concluded that the key driving factors affecting the development of the sector system mainly include the following eight categories: External factors: demand and supply; Internal factors: firms, resources, markets, knowledge, institutions and technology. For the convenience of analysis, the internal drivers that affect the development of the sector system are divided into two categories: A. Explicit factors (surface factors): firms, resources, and markets B. Implicit factors (deep factors): knowledge, institutions, and technology. If the internal and external factors that promote the development of the sector system and the sectoral input–output cycle are combined, the relation between the dynamics behind sectoral development can be drawn (Fig. 5.3). In the growth and evolution, driven by the demand and supply factors in the external environment, the sector system carries out a cyclic operation process of input → output → reinput → reoutput. From the internal environment of the sector system, the sector is constantly absorbing, internalising, and integrating in the six aspects of firms, resources, markets, knowledge, institutions, and technology. In this process, the interactions between these six factors in the sectoral niche and the six factors within the sector jointly promote the growth and development of the sector. In the growth and evolution of the sector system, these six factors within the sector do not work individually or separately but coordinately and cooperatively. That is, every two factors are interrelated, interacted, and interinfluenced, and they together form the network of dynamic relations within the sector. This interrelationship is represented by a dashed double arrow in Fig. 5.3.

Fig. 5.3 Relations between the dynamics behind sectoral development

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5.7.2 The Primary Dynamics in Sectoral Development The social production activities of human beings serve first for the needs of human life and ultimately for the needs of human existence and development. Human demand is the primary force for sectoral development. According to Marx’s point of view, in the production activities of human society, the means of consumption and the means of production should be harmoniously proportioned, and only when the production proportions of these two major departments are coordinated can the mass production of the entire society realise a virtuous circle. In terms of system, Marx’s thought is quite insightful. At the current stage of human society, the categories of the sector in the socioeconomic system can be at least divided into the four major sectors of agriculture, industrials, services, and information. In terms of system, these four major sectors should be harmoniously proportioned, and only when the production proportions of these four major sectors are coordinated can the mass production of the entire society realise a virtuous circle. The basis for harmonious proportions of the major sectors of human society is that the products manufactured by all sectors are neither too many nor too few and can just meet the needs of human society within a certain period of time. In a state system, the basis for harmonious proportions of the major sectors is that the products manufactured by all sectors can meet the actual needs of all citizens within a certain period of time. Therefore, it is necessary to analyse the role and transmission process of human demand in the major sectors. The external dynamics for the development of the socioeconomic system comes from human demand, which first acts on the production department of the means of consumption, then passes to the production department of the means of production, and finally returns to the production department of the means of consumption, thus achieving a complete cycle of mass social production. The development of the social division of labour increases the number of sectors and allows human needs to penetrate more sectors. In terms of the sequence of sectoral dominance, this demand first functions on agriculture, then passes to industry to the services to the information, and finally returns to agriculture to realise a complete cycle of mass social production. In this process, with the continuous increase and enrichment of human knowledge, human production technology is also advancing and progressing, as is the economic system, which is persistently updating and developing. In the cycle of social mass production, human needs are constantly increasing and enriching and are developing from low-level needs to high-level needs following the continuous progress of human society, which in turn stimulates production and economic activities to a higher level. Therefore, the effect of human demand on the economic system is actually a dynamic process, which can be analysed through the following two chains: A. demand → material demand → material production → material products B. demand → mental demand → mental production → mental products The core of the mental product of human society is knowledge. The combination of knowledge and production activities produces technology, and in the process of

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coordinating and organising social production, institutions are created. In addition, in the process of mental production, human society is inseparable from the study and inheritance of previous cultural knowledge, so cultural education constitutes an important link in the process of social mental production. Combining the sequence of the emergence of the leading sectors, the effect process of human demand on the economic system can be described as the following two chains: A. Surface factor chain: material demand—agriculture sector—industrial sector— service sector—information sector B. Deep factor chain: mental demand—knowledge—technology—institutions— cultural education If the above ten factors are used as ten dimensions to describe the effect process of demand on the economic system, the interaction between social demand and its effect (Fig. 5.4) and the evolution of social demand can be drawn (Fig. 5.5). In the figure, the ten dimensions are ➀ material demand; ➁ mental demand; ➂ agriculture sector; ➃ knowledge; ➄industrial sector; ➅ technology; ➆ service sector; ➇ institutions; ➈ information sector; and ➉ cultural education. From the surface factor chain of the economic system, the effect process of demand in Chain A forms a cycle, that is, the large solid circle in Fig. 5.4. This process can be described as follows: human material demand → the development of agriculture sector → the development of industrials sector → the development of service sector → the development of information sector → the development of material production, and the development of material production booms human material demand. This process is cyclical. From the deep factor chain of the economic system, the effect process of demand in Chain B forms a cycle, that is, the small solid circle in Fig. 5.4. Fig. 5.4 Interaction between social demand and its effect

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Fig. 5.5 Evolution of social demand

This process can be described as follows: human mental demand → the growth of knowledge → the progress of technology → the update of institutions → the development of cultural education, and the development of cultural education promotes the development of human mental demand. This process is also cyclical. During the functioning of demand and the process of transmission, agriculture, industrials, services, information and other sectors are interrelated, interacted, and interinfluenced. The growth and evolution of each sector is accompanied by the development and progress of human society in the four aspects of knowledge, technology, institutions, and cultural education. The development and progress of knowledge, technology, institutions, and cultural education promote the growth and evolution of the sector, and the growth and evolution of the sector in turn encourage the development and progress of knowledge, technology, institutions, and cultural education, which is cyclical. Therefore, Chain A and Chain B are in fact twining and evolving together. The four major sectors in human society of agriculture, industrials, services, and information continue to grow and evolve over the long period of history, while at the same time, the knowledge, technology, institutions, and cultural education in human society are also developing and progressing, as well as the needs of human society, which are constantly enriched and improved. Therefore, from a dynamic point of view, human society is expanding outward in the above ten dimensions. It is not difficult to find that the evolutionary trajectory of human society’s material needs is a gradually expanding spiral over time. At the same time, the evolutionary trajectory of human society’s mental demand is also a gradually expanding spiral. In the development of human society, these two spirals are in fact intertwined (Fig. 5.5).

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The development of human society increases and expands the needs of human beings. The Hierarchy of Needs Theory proposed by American psychologist Abraham Harold Maslow (1908—1970) in 1943 classified human needs into five rungs of physiological needs, safety needs, belonging and love needs, social needs or esteem needs, and self-actualisation needs. Maslow’s Hierarchy of Needs Theory discussed human needs from the perspective of personal development. However, from the long period of human social history, human needs in each era have the characteristics of that era. In general, the variety of human needs is increasing, and the level of human demand is rising. For example, people in the industrial age have more needs than those in the agricultural age, and people in the information age have more needs than those in the industrial age. The reason lies behind this is that the continuous division of labour in sectors gives rise to more diversified commodities, thus providing people with more consumption options. Like a person living in the seventeenth century, he could not possibly imagine purchasing an automobile, for which had not existed. Every time the emergence of a new leading sector in human society will give birth to a batch of new industries, which will bring brand-new products and services to human society, thereby stimulating new consumption demand. When people’s consumer demand is passed on to the sector again, it will be transformed into the primary force for sectoral development. The principles of modern economics and the history of economic development in developed countries have proven that the continuous increase in social aggregate demand is an objective law of human social and economic development, which reflects the continuous progress of human society as well as its level of social and economic development.

5.7.3 The Role of the Core Firm The sector is the firm community composed of firms. Firm is the basic unit of the sector. Among all the internal factors that drive sectoral development, firms are the most initiative and important. Among all the firms in a sector, the most critical one is the core firm. A core firm often leads the growth and development of a sector. In the actual sector system, nearly every industry has several large-scale core firms that occupy important pivotal positions. In addition, in every core firm, there will always be an outstanding entrepreneur. A core firm in the industry refers to a firm whose market share is at the forefront of its peers, and at the same time, it is in a predominant and dominant position in terms of price, technology, and institutions. From the geographic scope of sectoral development, the core firm can be divided into the three levels of regional, national, and transnational. Microsoft, for example, is a multinational core firm in the global software industry. With the extensive and in-depth development of global economic integration, multinational core firms generally take the form of multinational conglomerates, which often contain many industries, and dominate or dominate the layout and development of these industries in the global market.

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The core firm in each industry leads the development of this industry. The core firm in an industry often represents the predominant position of that industry in its sector and often possesses the most advanced knowledge, technology, institutions, and organisational structure in the industry. The organisational structure, corporate culture, management system and corporate behaviour of the core firm are often mimicked by other firms in the industry. The continuous diffusion of advanced knowledge and technology possessed by the core firm in the industry directly drives the update and development of industrial knowledge and industrial technology. Additionally, the core firm is often the maker of industrial institutions, such as industrial standards and industrial norms. A core firm is naturally generated from market competition, which evolves and grows together with the entire industry as well as other firms within the industry. From the surface factors of industrial evolution, the core firm first drives the growth and evolution of its related firms in the industry that are closely connected with its business and then leads the growth and evolution of the entire industry. From the deep factors of industrial evolution, the reason that the core firm can lead the industry is that it has advanced industrial knowledge, makes use of its superior market position to formulate industrial institutions, utilises these institutions to turn its corporate technology into the leading technology in the industry, and influences the growth and evolution of other firms within the industry in terms of knowledge, institutions, and technology, thus leading the growth and evolution of the entire industry. Therefore, in leading the growth and evolution of the industry, the core firm plays a role through the following two chains: A. Surface factor chain: core firms → related firms → entire industry B. Deep factor chain: industrial knowledge → industrial institutions → industrial technology. In the growth of an industry, these factors are interrelated, interacted and interinfluenced, thus jointly promoting the growth and evolution of the industry. If these six factors are used as six dimensions to describe the process of industrial growth, a map of the positive interaction between core firms, related firms and the entire industry (Fig. 5.6) and their coevolutionary trajectory (Fig. 5.7) can be drawn. In the figure, the six dimensions are ➀ core firms; ➁ industrial knowledge; ➂ related firms; ➃ industrial institutions; ➄ entire industry; and ➅ industrial technology. From a static point of view, the factors in Chain A form a virtuous circle of mutual promotion, that is, the solid circle in Fig. 5.6. This process can be described as follows: the growth of core firms → the growth of related firms → the growth of entire industry, and the growth of industry promotes the growth of core firms. At the same time, the factors in Chain B also form a virtuous circle of mutual promotion, that is, the small solid circle in Fig. 5.6. This process can be described as follows: the progress of industrial knowledge → the progress of industrial institutions → the progress of industrial technology, and the improved industrial technology promotes the progress of industrial knowledge.

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Fig. 5.6 Positive interaction between core firms, related firms and the entire industry

Fig. 5.7 Evolutionary trajectories of core firms, related firms and the entire industry

In the process of industrial growth and evolution, because the above six factors are interrelated, interacted, and interinfluenced, Chain A and Chain B are twining and coevolving.

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From a dynamic point of view, a normally developing industry is continuously growing in these six aspects, that is, consistently expanding outward in these six dimensions. It is not difficult to find that in the industrial evolution from small to large, from weak to strong, the cogrowth trajectory of the core firms, the related firms, and the entire industry is actually a gradually expanding spiral. At the same time, the cogrowth trajectory of industrial knowledge, industrial institutions, and industrial technology is also a gradually expanding spiral. In the development of industrial evolution, these two spirals are in fact intertwined (Fig. 5.7). The growth and evolution of a sector system is accompanied by the collaborative growth and evolution of firms, markets and industries. In this process, corporate evolution, market evolution, and industrial evolution are coupled to each other, forming a mutually coupled coevolution among the three. The growth of any industry will inevitably be accompanied by the growth of the industrial market. As the industry gradually grows, the number of firms in the industry and the number of products produced by the industry continue to increase, thereby promoting the formation and expansion of the industrial market. Therefore, the growth and evolution of the industrial market are embedded in the growth and evolution of the industry. The core firm leads the collaborative evolution of the firms, markets and industries. From the surface factors of the evolution of the sector system, the core firm drives the growth and evolution of its related firms in the industry, and the division of labour and coordination between the core firm and its related firms motivates the intercorporate division of labour and coordination within the industry, which improves the operational efficiency of the entire industry, pushes the industry to provide various products with a greater variety and quantity into the market, and directly promotes the growth and expansion of the industrial market. From the deep factors of the evolution of the sector system, the core firm through its own advanced knowledge, technology and institutions first affects the knowledge, technology and institutions of its related firms, then the knowledge, technology and institutions of the industrial market, eventually the knowledge, technology and institutions of the entire industry. This process actually contains the interaction of knowledge, institutions, technology, etc., between the core firms, related firms, industrial markets and the entire industry. This interactive process can be briefly described in Fig. 5.8. The interaction process of the above three aspects is not separated and isolated from each other but is interrelated, interacted, and interinfluenced. In modern society, the industrial market, by its very nature, can also be regarded as a special type of firm, and its products are to provide transaction services for other firms. Therefore, for the interaction process between core firms, related firms, and industrial markets,

Fig. 5.8 Interactions between core firms, related firms, the industrial market and the entire industry

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please refer to The Interaction between Internal and External Factors in Corporate Evolutionary Mechanism of Chap. 4. Apparently, in the growth and evolution of the industrial market, in addition to the influence from the core firms, the related firms and the entire industry, it will also be affected by other factors outside the industry, especially the other markets in the external environment. Therefore, in pushing the growth and evolution of the industrial market, core firms play a role through the following two aspects: C. Surface factor chain: core firms → related firms → industrial market D. Deep factor chain: {Knowledge} → {Institutions} → {Technology} Among them, {knowledge} includes core corporate knowledge, related corporate knowledge and industrial market knowledge, {institutions} include core corporate institutions, related corporate institutions and industrial market institutions, and {technology} includes core corporate technology, related corporate technology and industrial market technology. From a static point of view, the interaction process of factors on Chain C and Chain D is similar to that shown in Fig. 5.6, which can be represented by large solid circles and small solid circles in the figure, respectively. Factors in Chain C form a virtuous circle that promotes each other. This process can be described as follows: the growth of core firms → the growth of related firms → the growth of the industrial market, and the growth of the industrial market promotes the growth of core firms. At the same time, the factors in Chain D also form a virtuous circle of mutual promotion. This process can be described as: the progress of {knowledge} → the progress of {institutions} → the progress of {technology}, and the improved {technology} promotes the progress of {knowledge}. In the growth and evolution of the industrial market, the above six aspects are interrelated, interacted and interinfluenced. Therefore, Chain C and Chain D are in fact twining and coevolving. From a dynamic point of view, the trajectory of this evolution is similar to that shown in Fig. 5.7, which is also a gradually expanding spiral. That is, in the industrial evolution from small to large, from weak to strong, the cogrowth trajectory of the core firms, the related firms, and the industrial market is a gradually expanding spiral. At the same time, the cogrowth trajectory of this industry’s industrial knowledge, industrial institutions, and industrial technology is also a gradually expanding spiral. In the development of industrial evolution, these two spirals are in fact intertwined. A sector is composed of many industries, and each industry forms a market with its own features, and different industrial markets together form the sector’s market system. The evolution of a sector system includes the coevolution of firms, markets, and industries within the sector. The analysis in Chap. 4 shows that the evolution of the firm is a cyclical helix, while the evolution of the sector is a cyclical super helix. In other words, the evolution of a sector includes numerous cyclical corporate helices, cyclical market helices, and cyclical industrial helices; that is, a large helix possesses multiple small helices, and a small helix possesses multiple micro helices.

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It is clear that the factors affecting the growth and development of a sector actually form an interwoven complex giant system of all levels, all types and all structures.

5.8 Sectoral Evolutionary Mechanism The growth and development of the sector from small to large, from weak to strong, is a process of continuous evolution of the sector over time. In this process, division of labour and coordination, interaction between internal and external factors, competition and cooperation, and intersectoral interaction are important mechanisms behind sectoral evolution.

5.8.1 The Division of Labour and Coordination In sectoral input–output operations, the division of labour and coordination are the two most basic and necessary mechanisms. In an economic system, the division of labour and coordination of the sector also include further division of labour and coordination of the industries. The division of labour enables the industries within the sector to specialise, deepen, and refine; coordination can encourage the industries within the sector to connect, complement and coordinate. If there is no division of labour and coordination, no sector can smoothly grow and evolve from weak to strong. Sectoral division of labour is actually the concrete manifestation of the bifurcation law in sectoral operation, while sectoral coordination is the exhibition of the synergy law. In the economic field, the phenomenon of continuous bifurcation of sectors has been noticed for a long time, which can also be confirmed by the fact that the classification of sectors by economists increases with the development of society. For example, in the 1860s, the sectors of human society were relatively primitive and simple, so Marx divided the production department of society into two major categories: the means of production and the means of consumption. By the 1930s and 1940s, the sectors of human society began to become more complex, and the service sector had been greatly developed. Therefore, Fisher and Colin Clark divided social and economic activities into three major sectors: agriculture, industrials, and services. By the 1960s and 1970s, the sectors of human society were becoming more sophisticated, and the information sector was flowering. Therefore, Machlup and Porat further divided the sectors into four major sectors: agriculture, industrials, services, and information. Compared with the bifurcation mechanism, the understanding of the synergy mechanism in economic activities is insufficient. The long-term separation of microeconomic theory and macroeconomic theory in economic research, for example, is actually a concrete reflection of this status quo.

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From historical development, the four major sectoral departments of agriculture, industrials, services, and information in human society have been differentiated from the original sectors and have gradually progressed with the development of the social division of labour. At different development stages of human society, these four major sectors successively dominated the economic activities of human society. In fact, under the effect of the bifurcation law, each of the four major sectors has further differentiated into more detailed industries. For example, primitive agriculture evolved from the initial gathering-hunting activities to crop cultivation, animal husbandry, fishery, handicrafts, etc. The handicrafts were divided into clay handicrafts, bamboo and wood handicrafts, stone handicrafts, weaving handicrafts (the materials were branches and vines at first, then kudzu, hemp, and silk, etc.). From a long-term perspective, firms, resources, markets, knowledge, technology, institutions, etc., of the sector are constantly evolving from unity to plurality, from low-level to high-level, and from simplicity to complexity under the combined effect of the bifurcation law and the synergy law. Such changes, for instance, occurred in sectoral organisation, technology, and institutions during the industrialisation of western developed countries from the mid-nineteenth century to the mid-to-late twentieth century. Before the middle of the nineteenth century, the sectoral organisation was in the simple form of workshop, the production technology was featured with horizontal division of labour, the institutions were the apprenticeship formed between the workshop owner and the employee, and the representative industry was tool manufacturing. From the middle of the nineteenth century to the beginning of the twentieth century, the sectoral organisation evolved into the mechanised factory dominated by the linear organisation (U-shaped organisation), the production technology was the large-scale production with vertical division of labour, the institutions were the centralised hierarchical management system, and the representative industries were the textile as well as machinery and equipment manufacturing. From the beginning to the middle of the twentieth century, the sectoral organisation evolved into the large-scale modern firm dominated by the decentralised divisional organisation (M-type organisation), and the production technology was the mass customisation production (Ford-style production) that combines vertical and spatial division of labour. The institutions were the decentralised hierarchical management system, and the representative industries were the steel and the automobile manufacturing. In the mid to late twentieth century, the sectoral organisation evolved into network organisation (i.e., sectoral networks of firm clusters, firm alliances, sector zones, etc.), and the production technology was flexible production and outsourcing production that combines vertical, spatial, and modular division of labour, the institutions were the network management system that combines hierarchy and market, and the representative industries were automobile manufacturing and computer manufacturing.23

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Deng, Z. T. (2009). A System Economic Analysis of Production Network. Shanghai Journal of Economics (09):45. 邓智团. (2009). 产业网络化的系统经济学解读: 以计算机全球生产网络为 例. 上海经济研究 (09):45.

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Section 5.1 briefly introduced the classical theories on economic growth. On this basis, the general laws of economic development are expounded from the interrelations between the division of labour, market and sectoral development. First, it is necessary to introduce the concept of the sectoral chain to illustrate the issue. The sectoral chain refers to a group of production and operation network organisations from resources (including natural resources and social resources) to final consumer goods through the demand chain, supply chain, technology chain, information chain, etc., with the corporate chain as the carrier and the value chain as the basis. Here, the corporate chain refers to the intercorporate connection formed by the actual supply–demand relation in production and operation. The value chain refers to the dynamic link in which a firm creates value in production and operation. The value connections between business units within the firm constitute the value chain of the firm. The value links between upstream and downstream related firms within the industry constitute the industrial value chain. The interindustrial value connection within the sector constitutes the sectoral value chain (network). The demand chain refers to the demand relationship chain formed by the demand for corporate products (or services), including the consumer demand chain and the producer demand chain. Supply chain refers to the supply relationship chain formed by providing resource elements for firms in the process of production and operation. The technology chain refers to the technology connection between firms and their upstream and downstream links in the same sectoral chain, including the technical standard chain, product technology chain and technical service chain. Information chain refers to the relation of information exchange between firms and consumers, firms and firms, firms and governments, and firms and other social organisations, including demand information chain, supply information chain, knowledge information chain, institutional information chain, technological information chain, etc. In the actual economic system, the extent of development, growth and perfection of the sectoral chain reflects the development degree of the sector system. Generally, the longer a sectoral chain of a sector system, the more complete the sectoral level, the closer the production links, and the more harmonious the division of labour and coordination among its internal corporate chain, demand chain, supply chain, technology chain, and information chain, the smoother the exchanges of personnel, resources, commodities, funds, and information inside and outside the sector, and the higher the development level of this sector system. Here, we borrow the sectoral chain cobweb model proposed by Wu Jin-Ming and Shao Chang (Fig. 5.9) to illustrate the general process of sectoral growth and evolution in the economic system. In Fig. 5.9, the A axis represents the perfection of market transactions, where A3 > A2 > A1 indicates the continuous improvement of market transactions; the B axis represents the development of the sectoral chain, where B3 > B2 > B1 indicates the continuous improvement in the development level of the sectoral chain; and the C axis represents the specialisation of the social division of labour, where C3 > C2 > C1 indicates the continuous deepening of the specialisation of the social division of labour. The origin O, where the three coordinate axes intersect, represents the initial

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Fig. 5.9 Cobweb model formed by sectoral chains24

state where there is neither a social division of labour nor market transactions nor the birth of a sectoral chain. The existence of C1 (social division of labour) promotes the generation of A1 (market transaction), which needs B1 (sectoral chain) to connect. The birth of B1 encourages the further specialisation of the social division of labour, evolving from C1 to C2 . Accordingly, under the influence of C2 , the market transaction develops from A1 to A2 , which in turn advances the development of the sectoral chain from B1 to B2 . On the same principle, B2 fosters the development of C2 to C3 , then C3 stimulates the development of A2 to A3 , and A3 boosts the development of the sectoral chain from B2 to B3 … This process continues cyclically, thus realising the ongoing perfection of the market transaction institutions, the constant expansion of the market transaction scale, the sustained extension of the sectoral chain, and the steady growth of sectoral development. The sectoral operating mechanism reflected in this model is actually a vivid description of the division of labour, market transactions, and economic growth expounded by economists from Adam Smith to Yang Xiao-Kai. From the growth and evolution of the sector system, the specialisation of division of labour first begins within economic units, then between economic organisations, Source: Wu, J. M., Shao C. (2006). Research on Formation Mechanism of Industry Chain: “4 + 4 + 4” Model. China Industrial Economics (04):38. 吴金明., 邵昶. (2006). 产业链形成机制研 究——“4 + 4 + 4”模型. 中国工业经济 (04):38. The cobweb model diagram drawn by Wu JinMing and Shao Chang is very imaginative, and it is this diagram that inspired many of the author’s thinking in terms of sectoral development. Einstein once said, “imagination is more important than knowledge. For knowledge is limited, whereas imagination embraces the entire world, stimulating progress, giving birth to evolution”, and “it is, strictly speaking, a real factor in scientific research”, which is very true! 24

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finally between industries and sectors when markets and industries emerged. This is an uninterrupted level upgrade of the specialisation of the division of labour. The specialisation of the division of labour not only improves production efficiency but also promotes the continuous increase in product categories. To meet diversified consumer needs, there is a need to exchange products. With the maturing of product exchange, the market is born and prospered naturally. The development of market exchange then nurtures the specialisation of the division of labour between the individuals, between the individuals and social groups, and between different social groups, thereby advancing the formation and growth of the sectoral chain. The growth and extension of the sectoral chain includes the value-added process of the value chain inside the sector, so the growth of the sector generates economic growth with increasing returns. As early as the Neolithic Age, a natural division of labour based on sex appeared in the production activities of human society. Anthropologists have studied the Yangon Temple in Huainan County and Beishouling Tombs in Baoji (early Yangshao culture, approximately 5000–4000 B.C.) in Shaanxi Province and found that at that time, men were mainly engaged in tool making, hunting and some agricultural activities, while women were engaged in agriculture, textile and sewing activities.25 From the point of view of economic history, human society already had some kind of division and specialisation according to gender and age in the most primitive tribes, but this kind of division and specialisation is very superficial.26 In the late primitive society, with the deepening of the social division of labour, the handicrafts gradually separated from agriculture to an independent production department. Approximately 3500–3000 B.C., stone and pottery were professionally produced in handicraft production by some social groups in China. For instance, stone workshops in Honghuatao in Yidu, Hubei Province and Xiawanggang, Xichuan, Henan Province, and pottery workshops in Baidaogouping, Lanzhou, Gansu Province, were both large-scale handicraft bases at that time. These stoneware and pottery were all produced for exchange.27 For another example, at approximately 3,500 B.C., jade smiths specialising in jade ware were differentiated from stonemasons in eastern China, and at approximately 3500–2700 BC, Chinese society already had a copper industry and coppersmiths who mastered copper smelting techniques.28 After the emergence of the state, the specialisation of the social division of labour further advanced, and society was divided into 25

Su, B. Q., Zhang, Z. P., Yan, W. M. (eds.). (2014). China Ancient Times. Shanghai People’s Publishing House. pp. 77–78. 苏秉琪 (ed)., 张忠培., 严文明. (2014). 中国远古时代. 上海人民出 版社. pp. 77–78. 26 The literature in this paragraph is compiled from: Zou, W., Zhuang, Z. Y. (1996). Division of Labour, Transaction and Economic Growth. Social Sciences in China (03):7. 邹薇., 庄子银. (1996). 分工、交易与经济增长. 中国社会科学 (03):7. 27 Su, B. Q., Zhang, Z. P., Yan, W. M. (eds.). (2014). China Ancient Times. Shanghai People’s Publishing House. pp. 489–491. 苏秉琪. (ed)., 张忠培., 严文明. (2014). 中国远古时代. 上海人 民出版社. pp. 489–491. 28 Su, B. Q., Zhang, Z. P., Yan, W. M. (eds.). (2014). China Ancient Times. Shanghai People’s Publishing House. pp. 407–409. 苏秉琪 (ed)., 张忠培., 严文明. (2014). 中国远古时代. 上海人民 出版社. pp. 407–409.

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different classes, such as farmers, craftsmen, merchants, soldiers, and officials. The book Kaogong ji《考工记》Artificers’ Record, which was written between the end of the Spring and Autumn Period and the beginning of the Warring States Period, described the contents of 30 work types in six categories, including pottery, carpentry, jade, gold, leather, and dyeing, reflecting the division of labour and technology of the state-owned handicrafts in the Qi at that time; Among them, “the knives of Zheng, the axes of Song, the pen-knives of Lu, and the double-edged swords of Wu and Yue are famous for their origin. In no other places, can one make these things so well. This is natural because of the qi of the Earth”, which in fact pointed out the regional division of labour and comparative advantages of the vassal states at that time in terms of handmade products. With the professional progress of agriculture and handicrafts, commerce began to rise, and market transactions gradually flourished. In the era of traditional agriculture, a household was a production unit, and the division of labour that men farming and women weaving was formed. When landlord manors later appeared, the specialisation of the division of labour had been further developed. According to Simin Yueling《四民月令》Eastern Han Monthly Instructions for the Four Classes of People, the landlord farms in Luoyang at that time were not only engaged in cultivation (i.e., ploughing, sowing, split planting, hoeing, irrigation, and harvesting, etc.), sericulture (i.e., planting mulberries, raising silkworm, spinning, weaving, dyeing and making silk, etc.), brewing (i.e., wine, sauce) and other cottage handicrafts but also used crops, textiles, and silk as commodities for commercial transactions. In the landlord’s farms, the division of labour such as needlework (female workers specialising in spinning, knitting, weaving, dyeing, etc.), female cooks (specialising in food preparation and cooking), silkworm nurseries (specialising in sericulture), and seamstresses (especially in charge of sewing, disassembly and washing) already exist.29 The landlord farm here is actually a small family farm integrating agriculture, indutrials, and commerce. In the feudal dynasty, government-run workshops and businesses were actually the firms in ancient society, but the main target of their services was the feudal ruling group. To explain the evolution of market transactions, the illustrations of Yang Xiao-Kai and Yew-Kwang Ng (Fig. 5.10) are used here to elaborate this process. Figure 5.10 depicts the evolution of market transactions in which individuals develop from self-sufficiency to the exchange of four products with the maturation of the division of labour. In the figure, the thin line represents the product flow, the arrow represents the direction of the product flow, the number next to the thin line represents the product involved, and the circle with the number i represents the individual who sells product i. In Fig. (a), individuals each produce the goods they need for their own consumption (i.e., self-sufficiency). In Fig. (b), they each sell one other individual their own product, each purchase one product from that one, and each produce three products for their own. In Fig. (c), they each sell two other individuals their own product, each purchase two products from the other two, and each produce two products for Shi, S. H. (1980). A Review of Ancient Chinese Agricultural Books. China Agriculture Press. 石 声汉. (1980). 中国古代农书评介. 农业出版社.

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Fig. 5.10 Coevolution of the division of labour and market synergy30

their own. In Fig. (d), they each produce one product for their own and sell it to the other three individuals, and each purchase three products from the other three, which means that four products are all involved in the transaction. Fig. (a) and Fig. (d) describe the evolution of market transactions under different divisions of labour, from self-sufficiency, partial division of labour, to complete division of labour. As shown in Fig. (d), in a state of complete social division of labour, the market forms an interrelated transaction network. In the above coevolution of the division of labour and the market, it is actually possible to replace the subjects involved in product sales from individuals to households, landlord manors, natural villages, market towns and even cities to examine market evolution in the traditional agricultural era. The collaborative evolution between the division of labour and the market is an interactive process. On the one hand, the social division of labour promotes the formation and market evolution, and the market is an inevitable product of the development of the social division of labour and commodity exchange. On the other hand, during its development and growth, the market also promotes the further development of the social division of labour and commodity exchange. In the early stages of human society, people produced and consumed very few products. At that time, the degree of social division of labour and the level of commodity exchange were quite low. People’s commodity exchange activities had neither a fixed place nor a fixed time nor common transaction routines and norms. With the enrichment of commodity exchange types and the increase in exchange frequency, trading activities have gradually developed from irregular locations and times to regular locations and times, 30

Yang, X. K., Ng, Y.-K. (2015). Specialization and Economic Organization: A New Classical Microeconomic Framework. Elsevier. p. 191. Figure 7.2. The Evolution of the Division of Labor.

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and the market has gradually progressed from unorganised to organised, from simple to complex, and from low-level to high-level. People learn the supply and demand of commodities through exchange activities in the market, which directly affects the type, quantity, launch time and marketing strategy in terms of the commodities people produce. The market connects producers, distributors and consumers in the development of the commodity economy and provides exchange places, exchange times and other conditions for producers, suppliers and distributors. With the emergence of professional merchants, commerce differentiated from agriculture and handicrafts and continued to develop. Commerce connects the originally self-sufficient natural villages, market towns and cities and continuously expands the extent of the market, thus forming a crisscross market trading network. From the geographical space, with the development of the social division of labour and commercial circulation, the scale and scope of market transactions are constantly expanding. In the agricultural age, commodity transactions were first carried out within natural villages, thus shaping village fairs. When commodity transactions arose between natural villages, village fairs were formed. Commodity transactions between villages and towns within a certain area promote the birth and growth of urban commodity transaction networks, and the maturation of commodity transactions between urban and rural areas gives rise to the formation and development of urban markets. Commodity transactions between different cities have resulted in larger regional markets. Within a state, with the development of road traffic, interconnections between the isolated regional markets are realised such that the market network is connected vertically and horizontally from part to the whole, and finally, a national transaction network is formed. International trade is initiated when commodity transactions cross national borders between countries. The continuous growth of international trade then drives the formation and development of the world market. From the process of market evolution, it is obvious that it is the development of road traffic, shipping traffic and the invention of new means of transportation that have played an important role in encouraging the interconnection between regional markets and the continuous expansion of market transactions. From the process of market development, the internal factors that promote the expansion of the market scope mainly include knowledge, institutions and technology of market transactions. The progress of human society in road traffic, shipping traffic and new means of transportation can be regarded first and foremost as technological progress in the field of commercial circulation, and in a broader sense, they can also be included in the scope of technological advancement in market transactions. In modern society, in terms of sectoral division, a state’s economic system contains subsystems such as agriculture, industrials, services, and information. Within every sector system, there are three levels of sectoral organization, which, from low to high, are the intracorporate synergistic network, the intraindustrial synergistic network and the intrasectoral synergistic network, each forming a synergistic network. Inside a firm, there is an exchange network of the division of labour and coordination between the departments (or branches) within the firm, and it is the entrepreneur who leads the coordination. Outside a firm, there are three levels of market transaction networks, which, from low to high, are the intercorporate market transaction

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network, the interindustrial market transaction network (system), and the intersectoral market transaction network (system). In the hierarchical market transaction network, the leaders who play a synergistic role are firm organisations, core firms in the industry, and core conglomerates in the sector. Therefore, from the economic system as a whole, the exchange (or transaction) network is actually the basic form of the coevolution among the subsystems within the economic system. In summary, the hierarchy of the bifurcation and synergy mechanisms of the economic system can be concluded as follows (Table 5.2). Under the action of the bifurcation and synergy mechanisms, the intersection and integration of new industries and new industries, new industries and old industries in a state’s economic system will occur, thus giving birth to a batch of new industries. These new industries cross-integrate with other new and old industries and bring forth more brand new industries. Interrelated industries form a sector, and sectors will continue to intersect and integrate with each other, thus giving birth to a number of new sectors, which in a wider range and deeper level, are cross-integrated with sectors in other states or regions and will bring forth a number of newer sectors. This intersection, fusion, and innovation will continue in cycles, similar to the mating, breeding, and reproduction of animals in nature. In this process, exchanges in terms of personnel, resources, commodities, funds, and information are always in progress between different firms, industries, and sectors to enhance the self-adjustment and self-adaptability of the internal environment of the firms, industries and sectors and to evolve to a more advanced order. Over time, the economic system of a state has gradually realised the evolution from unity to plurality, from simplicity to complexity, and from low-level to high-level. In the operation of the sector system, the firms, resources, products, knowledge, technology, institutions and other factors of the sector are interrelated, interacted, interinfluenced and interrestricted. Each factor plays a role in the influence and Table 5.2 Hierarchy of the bifurcation and synergy mechanism of the economic system Large system Smaller systems are formed after the large system is bifurcated

Synergistic hierarchy and modes within each sector system

Synergistic Dominator of hierarchy and Synergy modes between the subsystems within each sector

Economic System

Intrasectoral synergistic network ↑ Intraindustrial synergistic network ↑ Intracorporate synergistic network

Intersectoral Core conglomerates market transaction in the sector network (system)

Information

Services

Industrials

Agriculture

Interindustrial Core firms in the market transaction industry network (system) Intercorporate Firm organisations market transaction network (system) Corporate internal Entrepreneur exchange network

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restriction of other factors, and the change of any one of them will cause the change of other factors to varying degrees. For example, new discoveries of humans in basic knowledge often lead to the birth of new technologies (i.e., human understanding of atomic structure leads to the birth of nuclear energy technology). The birth of new technologies will inevitably cause changes in various aspects, such as firms, industries, resources, markets, and institutions, and vice versa. Apparently, at different stages of sectoral development, the relative positions of these factors are not fixed but are often in alternation. For example, in a particular period of time, technology plays a leading role in sectoral development, while in another period, institutions become dominant. Therefore, when studying sectoral development, it is necessary to analyse from a dynamic perspective. From the factors inside the sector, at least these six issues need to be addressed simultaneously, rather than just focusing on one of them.

5.8.2 The Interaction Between Internal and External Factors A sectoral niche is the specific resource collection that a sector occupies in the socioeconomic environment to support its survival and development. The niche of an industry can be regarded as the sum of the niches of the many firms that make up the industry. The niche of a sector can also be considered the sum of the niches of the many industries that make up the sector. The formation, change and expansion of the sectoral niche are the result of the interaction between the sector and the external environment, as well as the result of the competition and cooperation between many factors inside and outside the sector. In the previous analysis of the factors that affect sectoral development, it is concluded that the general external factors are demand and supply, while the specific factors include the six factors of firms, resources, markets, knowledge, institutions and technology. These six factors are also the most basic key elements that constitute a sector. It is known that sectoral growth and evolution is actually a process of constantly absorbing, internalising and integrating these six elements. Therefore, it can be judged that in the sectoral niche, in addition to the two general factors of demand and supply, the six specific factors including firms, resources, markets, knowledge, institutions, and technology are important factors that affect the growth and evolution of the sector. How do these sectoral niche factors affect sectoral growth and evolution? The interaction and exchange between sectoral niche factors and key sectoral internal elements (factors) is not only a pivotal bridge for the external environment and the internal environment to communicate supply and demand but also a general mechanism behind the cooperation, competition, learning and innovation among the firms inside and outside the sector. It is the interactions and exchanges of the factors inside and outside the sector that promote its growth and evolution. Chap. 4 has already analysed the general mechanism of cooperation, competition, learning and innovation among firms, which is no longer repeated here. The

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exchanges of supply and demand between the external and internal environments of the sector are similar to the exchanges of supply and demand between the internal and external environments of the firm. However, the main body of the exchange activities in the firm is the humans, and the main body of exchange activities in the sector is the firms and other economic organisations. The exchanges of supply and demand inside and outside the sector are more complicated than the exchanges of supply and demand inside and outside the firm. In the process of sectoral growth and evolution, in addition to the interaction of cooperation, competition, learning and innovation among the firms inside and outside the sector, such interactions take place between the industries within the sector and between the firms within the industry. At the same time, exchanges and interactions also take place between the markets inside and outside the sector, including exchanges in resources and products, as well as mutual learning and innovation in market transactions in terms of knowledge, institutions, and technology. In addition, the exchanges and interactions on knowledge, institutions, and technology carried out inside and outside the sector are more complex than those inside and outside the firm. There are exchanges and interactions at the sectoral level and the industrial level, as well as the corporate level. In the operation of the sector system, there are always exchanges and interactions between the sector and the external environment in the eight aspects of demand, supply, firms, resources, markets, knowledge, institutions, and technology. It is the constant interaction of these internal and external factors that promote the growth and evolution of the sector from small to large and from weak to strong. At different stages of sectoral evolution, the intensity and relative positions of these factors affecting sectoral growth are not fixed but are in dynamic and cyclical alternation. For example, in a particular period of time, institutions play a leading role in sectoral growth and evolution, while in another period, technology becomes dominant. The change in the predominant factor will exert a major influence on the growth and evolution of the sector and have a significant effect on the other factors, which is a process of collaborative interaction. Social demand in the external environment is the primary force for sectoral development, so if there is no social demand, the sector will lose the dynamics for development. At the same time, for a sector to grow and develop, it also needs the external environment to provide it with various resource elements. Therefore, among the many factors of the sectoral niche, the demand factor and the supply factor are obviously two key factors that affect the growth and development of the sector.

5.8.3 Competition and Cooperation Every sector exists in a particular socioeconomic system, and it must have various relationships with other sectors in the economic environment. Of the many intersectoral relationships, the most basic ones are competition and cooperation.

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Intersectoral competition and cooperation are also more complicated than intercorporate competition and cooperation, including not only competition and cooperation at all levels from firm, industry to sector but also competition and cooperation in all geographical spaces from the same region (state) to different regions (states). In the sector system, competition and cooperation are common between industries of the same type as well as of different kinds. There are more intraindustrial competitions than intraiindustrial cooperations. Firms within the same industry face direct competition in terms of talents, resources, products, and markets. There are more interindustrial cooperations than interindustrial competitions. Firms from different industries face indirect competition in terms of humans and resources. Intersectoral competition and cooperation are not absolute but can be transformed into one another under certain conditions. Intersectoral competition and cooperation are specifically carried out through firms inside and outside the sector. The intercorporate cooperation, competition, learning and innovation inside and outside the sector are carried out through the communications and interactions of the factors inside and outside the sector. In an economic system, it is the exchange and interaction of the factors inside and outside the sector that promote the coevolution of firms, markets, industries, and sectors. In the socioeconomic system, intersectoral competition and cooperation lead to the intersectoral exchange and interaction of firms, resources, markets, knowledge, institutions, and technology, which in turn leads to intersectoral ebbs and flows. The changes in the leading positions of the three major sectors in human society are actually the process of each sector going up and down. In the social and economic activities of human beings, agriculture was at first in a dominant position. However, after the industrial revolution, human resources, capital and other resource elements in society began to flow from agriculture to industry. The employment and inputs in agriculture continued to decrease, followed by a proportional decline of agricultural output in a country’s total output value, while the employment and inputs in industrials started to rise, as well as the proportion of industrial output in a country’s total output value, eventually leading industrials to dominate and agriculture to take second place. However, with the further development of society, industrials has backspaced to its original position when the service sector has gradually become primary. Within the sector system, interindustrial competition and cooperation also lead to interindustrial ebbs and flows. In an economic system, moderate competition within a sector plays a positive role in maintaining the overall vitality of a sector and promoting the coevolution of its internal firms, markets, industries and the entire sector. Competitive factors in a sector are often conducive to the healthy growth of the industries or firms in the sector. Generally, for a firm that has been in a competitive environment for a long time, the pressure to survive and develop can prompt the firm to improve its learning and adaptability, as well as to continuously improve its own quality and overall competence. The positive role of competition can be illustrated by the eel effect of the biological world. Hokkaido produces an eel that is so fragile that it dies in less than half a day as soon as it leaves the deep sea. Since the price of fresh eels is higher than that of dead

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eels, local fishermen hope to extend the fresh life of the eels as much as possible, but the fishermen have tried everything to no avail. It was later discovered that after putting a few pikes, eels’ natural enemies, into a shoal of eels, the original dying eels became alive and well. The overall vitality of the eel group increased greatly, and the mortality rate was also significantly reduced. It turned out that a pike would chase and hunt at the sight of an eel, and the eel would swim and try to escape at full split for fear of being eaten, which instead stimulated the vitality of eels. These eels survived. This was called the eel effect. The eel effect shows that if a biological population has no competitors, its individuals will often develop inertia, and the population will become slack due to their self-complacence, which will cause the entire population to lose vitality. However, the introduction of competitors will stimulate the vitality of individuals and populations. The enlightenment of the eel effect to actual economic activities is that competition is conducive to stimulating the vitality of the sector and improving its overall competence. Only when the sectors survive in a competitive environment are they more likely to grow and develop, while the sectors in a protective environment (i.e., policy barriers, market isolation, etc.) grow slowly. Why is China’s publishing industry small in scale and weak in international competitiveness? The main reason lies in the protection from policies and the absence of necessary competitive factors in the industry, that the majority of publishing houses lack crisis awareness, and the long-term self-complacence of the status quo has cultivated their inertia. In 1973, Leigh van Valen proposed the coevolution theory (also known as the Red Queen hypothesis) when he was studying biological evolution. He believed that biological individuals and their environment are evolving together, and the organisms stimulate each other due to competition. Coevolution is an important driving force for continuous biological evolution. Due to the existence of the coevolution law, survival competition in the environment has become regular, which makes biological evolution a long-term sustainable process.31 Barnett and Hansen (1996) introduced this hypothesis into the study of competitions in organisational evolution, arguing that competition is an important factor driving organisational evolution, and if a firm wants to maintain good long-term development, it must actively participate in competitions. Since competitors are growing and the external environment is rapidly changing, every firm needs to keep moving forward to ensure its relatively front position. Although a firm can avoid competition through strategies such as specialisation and resource monopoly, it will lose the opportunity to participate in the Red Queen evolution, which is detrimental to the development of the firm in the long run; however, the failure rate is greatly reduced for those firms that are often showered in competition. Therefore, competition will promote better evolution, and firms should choose and confront competitions bravely, rather than avoid competition”.32 31

Qian, H., Xiang, B. H. (2006). The Theory Bases and Research Assumptions of Organization Evolution. Journal of Dialectics of Nature (03). 钱辉., 项保华. (2006). 企业演化观的理论基础 与研究假设. 自然辩证法通讯 (03). 32 Li, X. M. (2006). Research on Enterprise Environment, Environmental Factors Interaction and Enterprise Evolution. Dissertation, Tianjin University. p. 11. 李晓明. (2006). 企业环境、环境因 子互动与企业演化研究. 博士学位论文, 天津大学. p. 11.

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The above view of the Coevolution Theory is exactly the opposite of the traditional corporate strategy theory that advocates avoiding or eliminating competition. Considering the long-term development, firms should strategically dare to devote themselves to a fierce competitive environment, constantly improve their own quality and enhance their overall ability in the competition, and achieve coordinated evolution with the environment to ensure that they are not eliminated. At present, with the extensive and deepening development of information technology, the ecological environment of firms is changing even faster, which puts forward new requirements for firms to continuously enhance their environmental adaptability. The pace of reform and innovation accelerated by firms for competitive advantages to adapt to the environment in turn promotes the change speed of their ecological environment, forming a positive feedback cycle of collaborative evolution between firms and their ecological environment.

5.8.4 Intersectoral Interaction33 According to the different dominant positions of sectors, the development stage of human society can be divided into five historical stages: primitive age, agricultural age, industrial age, service age and information age. At every age, human society has made certain developments and advances in knowledge, technology, and institutions. From the economic activities in human society, these knowledge, technology, and institutions correspond to the leading sectors. See Table 5.3 for the specific knowledge, technology and institutions corresponding to the leading sectors. From the economic development history, the development process of the leading sectors of human society from a lower stage to a higher stage is generally advancing along a wavy curve; that is, before the original leading sectors have entered the peak of their development, the new leading sectors have already emerged. When the peak of the original leading sectors has passed before the recession, the new leading sectors gradually strengthen until they take an absolute dominant position. For example, in many countries around the world, industry has emerged before agriculture has reached its peak of development. After the peak, yet before its recession, an industrial revolution has been ushered in, and the share of industrials in the national economy has gradually increased until it dominates. Every time a new type of leading sector appears in human society, it will have a certain impact on the production mode of the original leading sector and will replace, transform and upgrade the technical means and economic system of the original sector with updated technical means and sectoral institutions to promote the original sector to reach a higher level of development. On the other hand, the original sector also plays a necessary supporting role for the new leading sector in terms of 33 The main content of this section was first published on the 28th issue of New Economy magazine in 2015 at Guangzhou with the title A Brief Discussion on the Interrelationships between Sectoral Departments in the Economic System.

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Table 5.3 Knowledge, technology and institutions corresponding to leading sectors Factors

Notes

Main sectors

Knowledge

Technology

Institutions

Agriculture

Agricultural knowledge

Agricultural technology

Agricultural institutions

Contains the knowledge, technology, institutions and other components of the primitive age

Industrials

Industrial knowledge

Industrial technology

Industrial institutions

Contains the knowledge, technology, institutions and other components of the agricultural age

Services

Services knowledge

Services technology

Services institutions

Contains the knowledge, technology, institutions and other components of the industrial age

Information

Information knowledge

Information technology

Information institutions

Contains the knowledge, technology, institutions and other components of the service age

resources, products, and markets. Agriculture, for example, supports industrials by providing it with food, raw materials, labour and markets. At a primitive age, the economic activities of human society were mainly gathering and hunting activities. People mainly use simple processed bamboo, wood or stones as tools for gathering and hunting. At that time, the knowledge, technology, and institutions related to primitive economic activities accumulated by mankind were simple and primitive. During the Neolithic period, approximately 10,000 B.P. to 12,000 B.P., primitive agriculture, including crop cultivation and animal husbandry, was born naturally and gradually developed as a result of technical inventions in terms of plant cultivation and animal husbandry.34 In agricultural production, people have gradually accumulated knowledge, technology and institutions related to agriculture. In the agricultural age, mankind replaces, transforms and upgrades the technical means and economic institutions of the primitive economy, thereby transforming and transitioning human society from the primitive age to the agricultural age. 34

Coclanis, P. A. (2009). Historical Changes and Effects of the World Agricultural Institutions (Su, T. W., trans.). World History (06). 彼得·考克莱尼斯. (2009). 世界农业制度的历史变迁与功效 ( 苏天旺, trans.). 世界历史 (06).

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Between 1750 and 1880, the invention and wide application of a large number of human technologies in steelmaking, railways, steam engines, electric power, petroleum energy, machine manufacturing, etc., triggered the industrial revolution, thus bringing human social production activities into an era dominated by industrials. In the industrial age, mankind replaces, transforms and upgrades the technical means and economic institutions of the agricultural economy, thereby transforming and transitioning human society from the agricultural age to the industrial age. At the same time, human industrial activities are also transforming and upgrading the remaining primitive economic activities. Primitive economic activities such as collecting wild fruits and fishing were replaced by modern orchards, pond fish farming and other production methods in the industrial era. Compared with the agricultural era and the industrial era, the entry of human society into the service era does not have a significant sign. In a state’s economic system, when the service sector dominates the output value of the entire national economy, it can be said that the state has entered the service era. The important inventions of human society in the service sector include currency (i.e., shells, metal coins, paper money, etc.), money orders, stocks, telephones, and means of transportation (i.e., vehicles, ships, aircraft, etc.). In the service age, mankind replaces, transforms and upgrades the technical means and economic institutions of the industrial economy, thereby transforming and transitioning human society from the industrial age to the service age. The service sector is also transforming and upgrading agricultural economic activities at the same time. For example, in the service era, agricultural economic activities such as seed selection, breeding, and sales of agricultural products have been replaced by economic organisations such as specialised seed selection institutions, breeding institutions, and agricultural product sales firms. Since the middle of the twentieth century, human society has gradually entered the information era. In February 1946, the world’s first electronic computer was born, which is an important symbol of the emergence of modern information technology. Since then, Internet information technology has been brought into glory by a series of important events, namely, computer connectivity technology in 1969, network information transmission technology in 1973, and Worldwide Web technology in 1989. In the information age, mankind replaces, transforms and upgrades the technical means and economic institutions of the information economy, thereby transforming and transitioning human society from the service age to the information age. The information sector is also transforming and upgrading industrial and agricultural economic activities at the same time. In fact, every time a new type of leading sector emerges in human society, it will have a vital influence on all previous sectors, which is all-round, manifesting in the infiltration, transformation and upgrade of the original sector in terms of knowledge, technology, institutions, organisation, and sectoral structure. For instance, in modern society, the development of industrials has promoted the commercialisation of agriculture, while commercialisation has also encouraged agriculture itself and its technology. The wide application of modern industrial knowledge and technology in

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the field of agricultural production has directly driven the mechanisation of agricultural tools and advanced innovations in the production, transportation, processing, marketing and financial services of agricultural products. Modern industrials provide a variety of advanced and efficient agricultural machineries, equipment and other tools for agricultural production, which greatly upgrades the productivity and level of agricultural production. For another example, the influence of the modern service sector on agriculture is manifested in the penetration, transformation and perfection of all aspects of agricultural production, operation, and management, as well as the further deepening, refinement and modernisation of the agricultural division of labour and professional development, thereby enhancing the production level of agriculture. For another example, the impact of the information sector on agriculture is mainly manifested in the extensive penetration of information technology in agricultural production, as well as the further agricultural modernisation on the basis of the influence from industrial and service sectors in terms of level and quality. The role of modern information technology in promoting agriculture is reflected in the penetration, transformation and improvement of all aspects of agricultural production, operation, management, and services, pushing contemporary agriculture to automation, intelligence, and informatisation.35 From the occurrence sequence of the leading sectors in human society, the leading sectors are agriculture, industry, services and information. If circles are used to represent each leading sector and arrows to represent the interinfluence between the leading sectors, then the interrelation between the four leading sectors can be shown in Fig. 5.11. In Fig. 5.11, the solid arrow indicates the support of the original sector to the new sector (in terms of resources, products, and markets). The dotted arrow indicates the penetration, transformation and upgrading of the new sector to the original sector. Figure 5.11 shows that the information sector is currently at the highest level of the human social and economic system, and it has huge sector potential energy, which can fully infiltrate, transform and upgrade the original sectors such as agriculture, industrials, and services. The impact of the information sector on the original sectors can be divided into the following three levels: The first level: [information sector] → service sector; The second level: [information sector + service sector] → industrial sector; The third level: [information sector + service sector + industrial sector] → agricultural sector. At the first level, the information sector directly penetrates, transforms and upgrades the service sector. At the second level, the information sector fully penetrates, transforms and upgrades the industrial sector through integration with the service service sector. At the third level, the information sector fully penetrates, transforms and upgrades the agricultural sector through integration of the service and industrial sectors. 35

For a detailed explanation, please refer to Sect. 6.3, Development of Contemporary Agriculture in China.

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Fig. 5.11 Interinfluences between leading sectors

Agriculture is the oldest and most fundamental sector that human society depends on for survival. Many economics treatises believe that agriculture is a declining sector and that agriculture has scarce development potential. Is that truly? Adherents of this argument obviously have noticed only a few historical stages while ignoring the perennial trend of human social development and the great creativity of mankind! In fact, each one of industrials, service and information can fully penetrate, transform and upgrade agriculture, so there is still great potential for agricultural development! Regarding the supporting role of the original sector to the new sector, scholars at home and abroad have carried out relevant studies. For example, as early as the 1940s, Chinese economist Zhang Pei-Gang (1913–2011) discussed the importance of agriculture for industrialisation in his book Agriculture and Industrialisation36 from the five aspects of food, raw materials, labour, market, and capital. In 1961, the American economist Kuznets proposed in his book Economic Growth and the 36

Originally in English, Agriculture and Industrialisation was Zhang Pei-Gang’s doctoral thesis in 1945 while studying for a Ph.D. in economics at Harvard University, which laid the theoretical foundation for the industrial development of agricultural countries. In 1947, it won the 1946–1947 Harvard University Award for Best Paper in Economics, the David A. Wells Prize; The English edition of the book was originally published by Harvard University Press in 1949 and reprinted in 1969; The Chinese edition was published by Huazhong University of Science and Technology Press in 1984 and republished in 1988.

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Contribution of Agriculture that the contributions agriculture provide to economic growth include products, markets, labour, and foreign exchange. Before the 1960s, under the influence of mainstream Western economic thinking, many developing countries implemented an industrialisation strategy that emphasised industrials and ignored agriculture, which led to the decline of agriculture and the interruption of industrialisation, ultimately causing incalculable economic losses.37 This fact also proves from the negative that agriculture is supportive of industrials. The supporting role of industry on services is mainly manifested in the fact that the industrial sector has provided a large number of modern machinery and technical means for the service sector, thereby improving the operating efficiency, service level and development level of the service sector. For example, the development of the shipbuilding industrials, railway industrials, automobile industrials, and aviation industrials has not only greatly improved the operating efficiency of modern transportation services but also expanded their scale and scope. For another example, refrigerator and freezer industrials provide modern commercial firms, such as large-scale shopping malls and supermarkets, with technical means of fresh-keeping storage, which enables shopping malls and supermarkets to store and sell more perishable goods. The supporting role of the service service sector in the information sector is mainly manifested in the service sector providing the information sector with human resources, capital and other social resources, as well as support in transportation, commerce, and markets. For example, education services provided specialised human resources for the development of the information sector, while venture capital and other financial services directly contributed to the rise of the early Internet industry. Without the support of the transportation, warehousing and other service industries, it would be unimaginable for firms such as Dell and Hewlett-Packard to sell their computer products to the world! At present, human society has developed into the information age. In the socioeconomic system, the information sector has gradually taken the leading position, and it will have a wide and profound impact on the political, economic, human-culture, science, education, and legal systems of human society. Today, modern information technology clusters, including Internet information, digital communication, satellite remote sensing, the Internet of Things, sensor networks, robotics, etc., are playing an increasingly important role in promoting the transition of traditional agriculture to contemporary agriculture, the upgrading of traditional industrials to new industrials, and the development of traditional service services to modern services.

5.9 Distribution in the Sector System This part examines the distribution issues at the sectoral level of the meso-economy.

37

Bi, Y. F. (2008). Exploration and Debate on the Road to Agricultural Industrialisation in Modern China. The 13th Annual Meeting of the Chinese Society for the History of Economic Thought.

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Within the economic system, the distribution activities at the meso level are divided into the two levels of the distribution within the industry system and the distribution within the sector system. The distribution within the industry system mainly includes the distribution of industrial elements such as resources, firms and markets; the distribution within the sector system mainly includes the distribution of sectoral elements such as industrial resources, related industries and market systems. In the operation of the sector system, in terms of surface factors, the distribution activities in the sector system are reflected in the interindustrial supply and allocation of the three factors of resources, firms and markets by the external environment. In terms of deep factors, it is actually a dynamic process of interindustrial absorption, integration, application and innovation within the sector in the three aspects of knowledge, institutions and technology. Within the sector system, the distribution activities of sectoral elements are generally coordinated with government departments through market mechanisms to jointly allocate resources. The distribution organisations of government departments generally include tax organisations, fiscal organisations, and financial regulatory organisations. The distribution activities within the sector system can be vertically divided into the three levels of firm, industry and sector. Chap. 4 has analysed the distribution issues within the firm system. Here, we will focus on the distribution issues at the industry and sector levels. An industry is a collection of different firms manufacturing similar products. A sector is a collection of different industries that are interrelated. Therefore, the exchange process between industries or sectors is actually carried out by specific firms. The exchange between different industries (or sectors) is actually a process of output distribution, which is the first distribution activity. Part of the distribution within the firm system as known is tax collected by government departments. The government’s act of collecting taxes from firms is not achieved through market exchanges but by the implementation of tax policies and other national compulsory means. The collection of tax revenue by governments at all levels within a state forms the state’s fiscal revenue. The process by which government departments allocate the revenue received within the state is in effect a redistribution activity. From the subsystems that make up the state system, redistribution activities within the state include government expenditures in the systems, such as polity, economy, human-culture, law, science, and education. Economic issues related to taxation and finance are the subject of fiscal economics (or public economics). Governmental redistribution has gone beyond the functional scope of a sector system and actually belongs to the distribution outside the sector system. Regarding the distribution outside the sector system, from a higher level, it can be divided into the exchange and distribution at the national economic system, state system, international system, and natural ecosystem. In modern society, because the economic systems worldwide have been integrated into the global economic system, these exchanges and distributions at different levels are interrelated, interacted, interinfluenced and interrestricted into an extremely large network system of exchange and distribution with a complex structure. To make the investigation more intuitive, the general operational structure of the sector system (Fig. 4.6) and the relation diagram of dynamic factors in sectoral

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development (Fig. 5.3) in the previous article are combined for analysis. Firms, resources and markets are necessary factors that constitute an industry (or sector). In the previous analysis of the growth and evolution of the sector, it is concluded that the growth of a sector is in fact the absorbing and integrating of these three factors from the environment. Among them, firms are the most active factor. Driven by entrepreneurs, a firm can move from one industry to another or even enter several different industries at the same time. It is the transfer of a large number of firms in different industries that leads to the interindustrial flow and distribution of humans, capital, and material resources, and the interindustrial correlation drives the rise and fall of professional markets. A necessary condition for the growth and development of a sector is that its external environment must provide it with resource elements. There are many different sectors in a state’s economic system, and different ways of resource allocation will cause different output effects, causing ebbs and flows between different sectors (or industries). For a sector system, through what means or ways can the resources allocated to different industries be balanced to achieve the optimal output yield for the economic system? The answer given by Western classical economics is to rely on the invisible hand of the free market to allocate resources, while economists represented by Marx and Keynes (John Maynard Keynes, 1883–1946) advocated relying on the visible hand of government to allocate resources. The basic idea of this book is to allocate resources together through the coordination of market mechanisms and government departments.

5.9.1 The Input–Output Relations in the Sector System Figure 5.2 shows that from the surface factors of the sector system, the operating chain of a sector system is input → firm → resources → market → output. In terms of system, a sector system can be regarded as a system that inputs resources and outputs functions. From the input perspective of the sector system, the sectoral input includes the four aspects of resources, firms, markets, and sectoral input relation. From the output perspective of the sector system, the sectoral output also includes the four aspects of synergy function, value-added function, exchange function, and sectoral output relation. Here, the synergy function refers to the function of the sector system connecting scattered and disorderly upstream and downstream firms into an interrelated firm network according to the supply–demand relation of production and operation. The value-added function refers to the function of all firms in the sector system jointly creating value through the division of labour and coordination. The exchange function refers to the function of the sector system connecting all internal markets to promote the exchange of commodities. The sectoral input relation refers to the interrelationship between the input factors and the ratio structure of inputs in sectoral growth. The sectoral output relation refers to the interrelationship between the output results of industries and the ratio structure among different industries in the process

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of sectoral operation. It reflects the distribution relation of different industries in the sector system. From the sectoral input–output recycling process, what is the law between the input and output of the sector system? Let us start with the analysis from the input end of the sector system. From the external environment of the sector system, the external environment includes the natural environment and the social environment (international environment). From the state system in the social environment, the state system includes the human-culture system, the economic system, the political system, the legal system, the science system, and the education system. From the growth and evolution of the sector system, the factors that exist in the external environment that can be absorbed and integrated by the sector can be regarded as the resources of the sector. Therefore, the resources of the sector system can be divided into two categories: natural resources and social resources. Social resources can be divided into resources such as human-culture, economy, polity, law, science, and education. The resource elements that different sectors rely on are not exactly the same. For example, for agriculture, land is its core resource element; for the extractive industry, coal, iron and other mineral deposits are its core resource elements; for finance, currency is its core resource element; and for the publishing industry, knowledge is its core resource element. In addition to core resources, the normal development of all sectors must include other common resources, such as human resources, capital, venues, laws, policies, public services, public security, public order, and infrastructure. According to the classification of the environment system, all the resources needed for sectoral development can be divided into nature, economy, polity, law, humanculture, science and education. For example, land and minerals belong to natural resources, commodities and capital belong to economic resources, laws and policies belong to legal resources, labour belongs to human resources, basic knowledge and technology belong to scientific resources, and applied knowledge belongs to educational resources. Public services, public security, public order, public infrastructure, etc., however, belong to the category of public goods, which generally should be provided by government organisations. Government organisations are the core elements of the political system, so public goods can be classified as broad political resources. For a specific industry, the firms and markets that exist outside the industry can be regarded as special element resources for this industry. When an emerging industry is born, in addition to newly created firms inside the industry, firms outside the industry will also continue to move into the industry. As the number of firms in the industry continues to increase, the industry will grow and expand. As the exchange of products and services between the firms inside the industry and the firms outside increases, the market inside the industry is also created and grown. For an industry to develop normally, smoothly, and healthily, it is necessary to maintain an appropriate proportional relationship between the resources, firms, and markets invested in the industry. At different stages of development of any industry, the ratio relations between these

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factors are different, and the ratio structure between them forms the input structure of the industry. From the deep factors of the sector system, the operating chain of a sector is input → knowledge → institutions → technology → output. Among them, knowledge actually includes knowledge about resources, firm and market, while similarly institutions include institutions of resources, firm, and market, and technology includes technology of resources, firm, and market. Because the so-called industry is actually a collection of firms of the same type, the knowledge, institutions, and technology of firms here are actually the knowledge, institutions, and technology of the industry. For an industry to develop normally, smoothly, and healthily, it is necessary to maintain an appropriate proportional relationship between the knowledge, institutions, and technology invested in the industry. At different development stages of any industry, the ratio relations between these factors are different, and the ratio structure between them is actually the deep structure of the industry’s input relation. In the Economics of old days, the allocation of resources was generally regarded as the central issue of research, while the allocation of firms and markets was neglected. In fact, for the normal and healthy development of an industry, the configuration of firms and markets is equally important. In an industry, if the upstream and downstream firms have relatively complete supporting facilities and the infrastructure and legal system provided by the environment are rather complete, the industry will grow rapidly. The growth and expansion of an industry is also inseparable from the supporting facilities of markets. A well-equipped industrial market will facilitate the interindustrial trading of commodities (or services). The expansion of the transaction scale can promote the development of the industry, and the development of the industry will further increase the prosperity of market transactions. In countries that implement a market economy, the allocation of resources generally occurs in two ways: market allocation and government allocation. Market allocation occurs through the invisible hands, such as supply and demand and price mechanisms, while government allocation occurs through the visible hands, such as policy tools and fiscal and taxation means. Similarly, these two methods can also be adopted for the configuration of firms and markets. People often allow firms and markets in the industry to grow spontaneously, not realising that rational allocation is conducive to the development of the industry. This in fact is the market’s supply and demand mechanism playing a regulatory role. When they realise that the rational allocation of firms and markets is conducive to the development of the industry, people can actively allocate firms and markets in the industry by implementing certain policies, administrative means, etc. Then, it can be analysed from the output end of the sector system. Among the four aspects of sector system output in terms of synergy function, value-added function, exchange function and output relation, there have been a great deal of studies and discussions on the value-added function and exchange function in economics, but the research on synergy function and output relation is insufficient. The value-added function can be intuitively understood from the process of firms integrating resources to create value and the exchange function from the process of markets exchanging goods to realise value, as well as the synergy function from the

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supply–demand chain (industrial chain) formed in corporate production and operation. In fact, the sectoral chains of industries in the sector system are interrelated and crisscrossed to form a complex firm network. The synergy function of the sector system is mainly reflected in the interindustrial correlation effect. It is precisely the correlation effect between industries in the sector system that makes its input–output relation complicated. For the clarification of the input–output relations in the sector system, it is necessary to discuss the intersectoral correlation effect, the allocation of sectoral elements and some other issues due to the complexity in the actual operation of the sector system. To make the narrative clearer, these issues will be addressed separately below. The input–output relations in the sector system will be further discussed in Sect. 7.5, which is much involved with macroeconomics. All aspects of the sector system are interrelated; therefore, readers need to connect the context in the reading to avoid one-sided, out-of-context understanding. Due to the excessively detailed division of labour in the modern disciplinary system, different economists of different schools worldwide have studied the laws or characteristics of industry (or sector) operations from different perspectives, such as resources, firms, markets, knowledge, institutions, and technology. However, few people integrate these factors into a unified framework for systematic research, which has caused today’s economics to present a fragmented picture. Only by organically combining, comprehensively considering and researching these factors can one-sided conclusions be avoided.

5.9.2 Intersectoral Correlation Effect Sectoral correlation, also known as sectoral linkage, refers to the objective intersectoral linkage formed in production, exchange, and distribution. Sectoral correlation reflects the complex and close economic and technological linkages that exist widely among sectors in economic activities. The essence of sectoral correlation is the intersectoral supply–demand relationship.38 The following takes the sectoral correlation involved in bread production as an example to analyse the interindustrial supply–demand chain of products. Figure 5.12 is a diagram of the supply and demand chain of major products between industries in bread production, where the arrow indicates the direction of resource or product flow, and the ellipse represents different industrial markets. It is known that when bakeries produce bread, they need to use certain production tools (i.e., flour mills, bread machines, toasters, etc.) in addition to the factors of production, such as manpower, capital, raw materials and sites. Under the modern

38

Yang, G. P., Xia, D. W. (eds). (1998). A Course in the Economics of Sector. Shanghai University of Finance and Economics Press. p. 110. 杨公朴., 夏大慰. (1998). 产业经济学教程. 上海财经大 学出版社. p. 110.

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Fig. 5.12 Supply–demand chain of major products between the industries in bread production

social division of labour, if a bakery wants to successfully realise the whole production process of bread, it must use the relevant products or services provided by other firms (or organisations). Otherwise, it is unimaginable to successfully realise the whole production process. Throughout the production process, bakeries need products or services provided by many other industries. For example, the human resources required by a bakery involve human training and the education industry. The capital needed comes from the financial industry (loans from the bank). The wheat, corn and other raw materials needed come from the agricultural industry. The factories, warehouses and other buildings used come from the construction industry. The land occupied by the factories comes from the landowner (government or other organisations). The public services, road facilities and other public goods used come from government departments. The flour mills, toasters, ovens and other food processing machines used by bakeries come from machinery plants. If tracing up or down the supply and demand chains of all products and resources, it is easy to discover that the resulting supply and demand chains formed by this are crisscrossed and interrelated into a huge network with a complex structure. It can be difficult to fully sort out the relationships between all industries or firms involved. Here, we only focus on the product supply–demand chain along the production and exchange process of food processing machines (as shown in Fig. 5.12). To make the analysis concise, the other factors of production involved in each link are greatly simplified here. For instance, in production, mining fields need capital and machinery, steel plants require labour, machinery, coke, lime, and fuel, and machinery plants need labour, capital, and electricity. However, only key elements such as labour, capital and technology are indicated in the figure. Figure 5.12 shows that bread production involves at least five industries: the extractive industry, the metallurgical industry, the machinery manufacturing industry, the food industrials industry, and the agriculture industry. Natural resources include iron ore deposits and land, and social resources include human resources, capital, technology, machinery, and public goods. The firm types involved include mining fields, steel mills, machinery plants, and bakeries. The industrial markets involved include the ore market, the steel market, the food machinery market, and the bread market. There is a close economic and technological connection between these industries: the output from one industry provides element input for other industries, and different industries are linked through the industrial market. An industry that is too small or under output will affect the input of elements in another industry, which in turn will affect the growth and expansion of this industry. Similarly, the growth of a core

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industry will drive the development of other industries that are closely related to it. In the economic system, the interconnection of the rise and fall between different sectors is the intersectoral correlation effect. There are many types of sectoral correlation, which can be divided into product (or service) correlation, technology correlation, price correlation, investment correlation, employment correlation, etc., according to the way in which sectors rely on each other.39 For example, the product of extractive industries is iron ore, which provides the metallurgical industry with iron ore as a raw material (i.e., element input), and a product relationship is formed between the extractive industry and the metallurgical industry. For example, between machine manufacturing and the food industrials, machine manufacturing provides a variety of food processing machinery for the food industrials. Food processing machinery is a production tool that actually embodies the technical means of production. Therefore, a technical connection is formed between machine manufacturing and the food industrials. Different industries are linked together through the industrial market. The price fluctuations of products in one industry will directly cause the price fluctuations of products in adjacent industries, which is the interindustrial correlation of price. In Fig. 5.12, there is actually a degree of price correlation between markets in the extractive industry, the metallurgical industry, the machinery manufacturing industry, and the food industrials industry. For another example, the electric power industry provides electric energy for the metallurgical industry, so when the metallurgical industry expands, if the electric power industry does not improve its power supply capacity accordingly, the normal production activities of the metallurgical industry will be directly affected. Therefore, after expanding the scale of investment in the metallurgical industry, it is also necessary to scale up the investment in the electric power industry. In summary, there is an investment link between the electric power industry and the metallurgical industry. The intersectoral correlation of employment is universal. The development of one sector will drive the growth of another, which will correspondingly lead to an increase in employment. Apparently, there is also the opposite situation; that is, the development of one sector may also lead to a decrease in employment in another sector. Among the various types of sectoral correlation, the intersectoral correlation of products (or services) is the most basic, from which other correlations are derived. Accelerating a state’s economic development cannot be achieved only by speeding up the growth of a certain sector but must be realised through the coordinated development of the relevant sector system. The actual intersectoral correlation effects require the products (or services) provided by related sectors to perform a dynamic balance in quantity and proportion and to achieve mutual adaptation and matching in terms of technology and quality. Otherwise, it is difficult for a state’s sector system to maintain long-term, stable and healthy development. The objective intersectoral correlation effect in fact reflects the synergy function in sectoral development. When

Jian, X. H. (ed). (2001). The Economics of Sector. Wuhan University Press. pp. 68–69. 简新华 (ed). (2001). 产业经济学. 武汉大学. pp. 68–69.

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the sectoral policies or administrative measures implemented by government departments can promote the synergy of the sector system, a state’s sector system will enter a sound development track; otherwise, they will hinder the healthy development of the sector system.

5.9.3 The Distribution of Elements in the Sector System In this section, the above diagram of the relation between the impacts behind sectoral development (Fig. 5.3) is combined to carry out a brief analysis on the distribution of factors in the sector system. From the input of the sector system, a sector must have external supply as a necessary condition before it starts to operate. Otherwise, even if there is a strong external demand, the sector cannot survive and develop. What exactly do these external supplies include? From the deep factors of the dynamics of the sector system, the sector can be supplied externally from the three aspects of resources, firms and markets that make up the sector system. The process of external supply can also be seen as the process of the external environment’s allocation of factors to the sector system. For ease of understanding, the following will still use bread production as an example.

5.9.3.1

Resource Allocation

In the bread production process, in terms of resources, any shortage or deficiency of resources such as land, iron ore deposits, human resources, capital, technology, machinery, and public goods will affect the final bread production and supply. Among them, the distribution of nonrenewable natural resources such as land and mineral deposits often has a relatively long-term impact. Across the world, natural resources such as land and minerals are state-owned in some countries but privately owned in other states. Even in a state with public ownership of land, if the laws and regulations are not sound enough or the government officials who implement the allocation violate the law, the initial distribution of these natural resources may also cause unfair allocation of resources. What are the consequences of such unequal distribution? A simple analysis can be made. If a state’s iron ore deposits are monopolised by a small number of private companies and the import trade of iron ore is restricted, the price of iron ore in this state’s ore market will be manipulated and increased by monopolies driven by interests. Because of the pricing correlation between industries, the price increase in iron ore will ultimately be passed on through the supply–demand chain of iron ore → steel → food machinery → bread to bread. People originally need to spend 3 yuan to buy 1 loaf of bread, but now they need to spend 5 yuan to buy 1 loaf of the same quality. In this bread consumption, each buyer spends an extra 2 yuan, and the interests of consumers are obviously infringed upon. However, in real life, few consumers truly

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understand that the extra 2 yuan they spend is one of the consequences caused by the monopoly of domestic iron ore deposits by a few firms! Perhaps some will treat the 2 yuan merely as a negligible loss. However, such a seemingly minor injustice will often be amplified into a series of unfair distributions after some market transmission. Calculations can be made here. Each person spends an extra 2 yuans on bread each day. After going through the four links above, assuming that the iron ore mine receives only 50 cents, each person will pay an extra 182.5 yuans to the iron ore mine every year. If 200 million people in the state consume 1 loaf of bread every day throughout the year, which is entirely possible, the iron ore mine will earn an additional 36.5 billion yuans each year. If iron ore owners use 1/3 of the 36.5 billion yuans for real estate speculation, then 12 billion yuans of funds will be invested by the iron ore owners in the real estate market after being amplified by the financial credit market. It will be enough to trigger a speculative heat wave that is no small. Under the temptation and drive of huge profits, people will extract more funds from other industries to invest in real estate, which will eventually lead to the abnormal expansion of the real estate industry. How can China’s housing prices not climb when speculators of a large number put the tens of billions they have received from the real estate back into it again40 ? If the government does not adopt redistribution policies (i.e., property tax, subsidies to low-income families, etc.) to narrow the gap between the rich and the poor, market transmission will further widen the income gap between different classes of society, ending with a minority of people making fortunes through monopoly and speculation and a majority of people being taken advantage of and becoming increasingly impoverished. This example shows that the initial unreasonable distribution of resources often leads to disparities in national income between the rich and the poor, which is in fact a process of gradually gathering and transferring scattered money to the wallets of a few people. This is the huge gap caused by a small gap in China’s social income distribution after the continuous amplification of intermediate markets. The brief analysis above indicates that the initial unfair distribution of resources may lead to the monopoly of some particular firms (or industries), which will not only cause losses to the public interest but may even cause huge disparities in income distribution. Therefore, in the case of an unfair initial allocation of resources, spontaneous regulation from the market alone cannot narrow the distribution gap of national income but instead will widen the small income distribution gap between different classes because of the market correlation effect, which is proven by the fact that there has always been a difference in resource allocation between urban and rural areas in China, and such an income distribution gap has been widening under the influence of market mechanisms since the reform and opening up. For another example, when domestic wheat cultivation fails due to the impact of natural disasters, if the government does not use all means (i.e., importing wheat, removing wheat reserves, etc.) to timely supply domestic market demand, bread 40

The rising prices of China’s real estate market are caused by a variety of factors. The main reason is that local governments rely on auctions of land to maintain fiscal revenues, resulting in a continuous increase of land prices.

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prices will rise shortly afterwards, ending in another violation of consumers’ interests. For another example, in the many links of the product supply and demand chain of iron ore → steel → food machinery → bread, if one of the links is interrupted (i.e., the steel → food machinery link is interrupted due to regional market separation), if the government does not take timely measures to eliminate regional market separation and unblock the circulation of goods, people in areas lacking food machinery may not be able to buy bread for a long time or consume high-priced bread. In this way, the interests of consumers in these areas will also be harmed. In this process, from the surface, it is the interruption in the supply chain that causes the loss, while from a deeper perspective, the cause is rooted in the failure of the government to fulfill its responsibility to provide a fair environment for society (at least the lack or insufficiency of public goods such as commercial policies). From the above examples, whether the distribution of resource sources (i.e., land, mineral deposits, etc.) or the regulation of resource supply chains (or channels), if the government cannot make overall plans, allocate resources scientifically and reasonably, and uphold social justice, an unfair resource distribution will damage the interests of the public and may even lead to unfair income distribution. According to the theory of resource allocation, resource allocation is generally divided into two levels, namely, the first allocation of resources and the second allocation of resources. The first allocation of resources refers to the allocation of social resources among sectors, regions, and firms within a particular period of time. The second allocation of resources refers to the second allocation of resources formed by the flow and reorganisation of resources between sectors, regions, and firms after the first allocation of resources. Through the first allocation of resources, the initial state of the allocation ratio of production factors has been formed within a certain period of time; through the second allocation of resources, the allocation ratio of production factors in the subsequent period has been adjusted, thus forming a new sectoral structure. There are two mechanisms of government allocation and market allocation for both the first allocation and the second allocation of resources. The government’s mechanism for resource allocation is the allocation of labour, material, capital and other resources through the government’s administrative power and means. The purpose of increasing investment is generally achieved through financial appropriations. The market’s mechanism for resource allocation is the allocation of labour, material, capital and other resources through the urge from the price signal formed in the supply and demand. The two mechanisms of government allocation and market allocation complement each other, and both function an irreplaceable part in resource allocation.41

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Xia, X. Y., Li, H. B. (1999). The Theory of Economy Structure and Its Development in China. Journal of Guangxi Vocational Normal University (04):8. 夏兴园., 李洪斌. (1999). 经济结构理 论及其在中国的发展. 广西经济管理干部学院学报 (04):8.

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Firm Allocation

A firm’s distribution (allocation) to industries is often determined by its entrepreneur’s personal preference and subjective judgment. Different entrepreneurs will choose different industries to start their businesses because of their different personal preferences. When entrepreneurs believe that entering another industry will yield higher returns, they will invest in these fields or move their original business to this new industry. Generally, the more firms enter an industry, the faster the industry will grow. In the bread production process, in terms of firms, any shortage or deficiency in any type of firm, such as mining fields, steel mills, machinery plants and bakeries, will affect the final bread production and supply. Within a state, if the machinery manufacturing industry in a particular region is underdeveloped and the number of professional machinery manufacturers is insufficient, the types and quantities of food processing machinery they provide will also be limited. If the commercial circulation and market network of the national food machinery are relatively backward, the development of the local food processing industry will be restricted. In this way, there will be two results: first, fewer local food processing firms and a limited variety and quantity of food (including bread);and second, the slow progress of local food processing firms (including bakeries) improving technology and expanding the production scale. For example, if local bakeries want to improve their technology, they often need to buy the required food processing machinery from other regions or even import from abroad, which increases the actual production cost (at least the cost of long-distance transportation). Both of these aspects will lead to higher prices of locally produced bread, which will infringe on the interests of local consumers. In the supply chain of production tools, machinery plants provide food processing machines for bakeries, so the machinery manufacturing industry is located upstream of the food processing industry. This example reflects that the development degree of the upstream industries will constrain the development of the downstream industries. If going back along the raw material supply chain of food processing firms, it will be found that if the food processing industry in a region is not developed, it will also restrict or limit the commercial development of agricultural products in the region because agricultural products such as fruits, vegetables, and grains are relatively easy to rot and are generally not easy to store for a long time. If in a particular year, there is a large harvest of local agricultural products, which cannot be sold out in a short period of time, one solution is to transport the surplus to other areas for sale.42 However, a better solution is to deep-process the surplus on the spot into different types of foods with longer shelf life (i.e., pickled products, canned food, beverages, dried fruits, biscuits, etc.) to supply a wider market demand. If the local food processing industry is underdeveloped, the types and quantities of 42

The actual result of this solution is often that the sales income of agricultural products cannot cover the cost of transportation. Farmers feel it unworthy and will usually let these unsold agricultural products rot in the fields or feed them to livestock.

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agricultural products demanded by local food processing firms will also be limited, which directly restricts the development of local agriculture. In the supply chain of raw materials, agriculture provides food processing firms with raw materials such as fruits, vegetables, grain and other agricultural products, so the food processing industry is located downstream of agriculture. This example reflects that the development degree of the downstream industries will also constrain the development of the upstream industries. In fact, this interrelation, interinfluence, and interrestriction between the upstream and downstream of the industry also exists between the extractive industry (mining fields) and the metallurgical industry (steel mills), as well as the metallurgical industry (steel mills) and the machinery manufacturing industry (machinery plants). Therefore, from the product supply–demand chain, the development of upstream industries will affect and restrict the development of downstream industries. Similarly, the development of downstream industries will in turn affect and restrict the development of upstream industries. From a deeper level, this actually involves the proportional structure and geographical layout of sectors (or industries) within a state.

5.9.3.3

Market Allocation

As a component of the industry itself, the market’s own exchange function plays an indispensable role in the development of an industry (or sector). In the bread production process, in terms of markets, any shortage or deficiency of markets, such as the ore market, steel market, food machinery market and bread market, will affect the final bread production and supply. For example, within a state, when the iron ore market network is underdeveloped or the commercial distribution channels are relatively backward, it will first affect the supply of raw materials for steel firms and will often increase the cost of steel firms to find raw materials. The backward commercial distribution channels will often lead to an increase in the transportation costs of steel firms, which will lead to an increase in the price of steel products in the steel market. The increase in the price of steel products will be transmitted to the most terminal bread retail market through the chain of steel market → food machinery market → bread market, thus violating the interests of consumers. Similarly, in the commodity supply–demand chain, if the market network of the steel or the food machinery is not developed or the commercial circulation channels are relatively backward, it will eventually affect the end bread retail market. From the point of view that the industrial market is a constituent element of every kind of industry, the shortage or insufficiency of any type of market will directly affect and restrict the growth and development of the industry itself. Here, the exchange function of the market plays an important role in commodity distribution. For example, before 1978, the planned economy model was implemented in the Chinese economic system. Products from different industries were distributed through the state monopoly of the purchase and supply. However, this allocation method often fails to truly reflect the total cost of each category of goods due to the

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lack of a free and flexible price adjustment mechanism. The distortions of commodity prices triggered by the distribution disconnect demand and supply regularly, resulting in low efficiency and slow development of the entire sector system in the economic system and ultimately leading to a prevalent shortage of social commodities. Since the Chinese government implemented the reform and opening up after 1978, especially after the official establishment of a market economic structure in 1992, all kinds of markets have sprung up on the Chinese land, and miscellaneous commercial distribution channels have connected the previously isolated areas. Large and small markets are crisscrossed and intertwined into a complex network with a threedimensional structure. Commodities from all over the world have been exchanged efficiently and extensively with the help of the invisible hand of the market network, and the long-suppressed market power has finally been awakened. China has gradually moved out of the era of a shortage economy, and people in different regions have the opportunity to purchase a wider variety of products. Under the conditions of a market economy, firms in industries play a dominant role, but this does not mean that the government has nothing to do with market allocation. In a state’s economic system, only when the sectors maintain a reasonable proportional structure can it be beneficial to the coordinated development of the entire sector system. Every sector is composed of numerous industries, and each industry contains an industrial market, which determines that within a sector, all industrial markets need to maintain a particular proportional structure to ensure the coordinated development of the entire sector. Furthermore, within a state’s economic system, all sectoral markets also need to maintain a particular proportional structure to ensure the coordinated development of the entire sector system within the state’s economic system. Specifically, within a country’s economic system, it is more conducive to the coordinated development of the state’s industrial system when a reasonable proportional structure is maintained between sectoral markets such as the agricultural market, industrial market, service market and information market. At the same time, it is necessary to maintain a reasonable proportional structure among the industrial markets within each sector category. For example, within a state’s agriculture system, it is more conducive to the coordinated development of the entire agricultural sector when a reasonable proportional structure is maintained between industrial markets such as crop cultivation, animal husbandry, aquaculture (fishery), and forestry. Therefore, the government can be a critical regulator in market allocation in terms of perfecting elements, a reasonable layout, and the adjustment of its proportional structure. The external environment supplies the sector system in the three areas of resources, firms and markets. From the deep factors of the dynamics of the sector system, it is the dynamic process of the absorption, integration, application and innovation of the sector system in the aspects of knowledge, institutions and technology, which will not be further discussed here.

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5.10 Overall Sectoral Competence With the sectoral operating cycle of input → output → reinput → reoutput, firms within the sector continue to absorb, internalise, and integrate resources through market transactions. The ever-increasing transaction demand promotes the growth and evolution of the market, the growing market attracts more firms to enter the sector, and the continuous increase in the number of firms has promoted the growth of the sector. In this process, firms in the industry are also growing and evolving at the same time and are constantly searching, learning, internalising, integrating knowledge and technology and are continuously adjusting and updating the corporate institutions. The continuous innovation activities of a large number of firms in the industry directly promote the continuous progress of industrial knowledge and industrial technology and the improvement of industrial institutions. The continuous advancement of corporate knowledge and corporate technology directly promotes the advancement of market transaction knowledge and technology, which then drives the development of market transaction institutions. This process is consistent with the growth and evolution of the market itself. Within a sector system, it is the coevolution of firms, markets and industries that have realised the growth and evolution of the entire sector. In the growth of a sector from weak to strong, the overall sectoral competence is constantly improving and growing. In the growth and evolution of the sector system, in addition to the coevolution of its internal firms, markets and industries, the sector also exchanges personnel, materials, currencies, commodities, knowledge, institutions, technology and information with the government, firms, households, scientific research institutions, universities and other social organisations in its external environment. A state’s government is crucial in the development of the sector, including the construction of public infrastructure, the establishment of a sectoral innovation system, the formulation and implementation of relevant sectoral policies, the guidance and adjustment of the sectoral proportional structure, and the cultivation and perfection of market transaction systems. Sectoral growth and evolution is actually a dynamic process in which the sector continuously adapts to the external environment and consistently realises the coupling of its internal and external environments. Overall sectoral competence refers to the comprehensive competence of firms within the sector to effectively integrate resources, provide products or services, and meet the needs of society. Overall sectoral competence is generally composed of the eight aspects of input, firms, resources, markets, knowledge, institutions, technology, and output. The stronger a sector’s abilities in these eight dimensions, the stronger its overall competence, and the stronger its comprehensive competitiveness. If the eight dimensions of input, firms, resources, markets, knowledge, institutions, technology, and output are used to describe the overall sectoral competence, then the potential energy diagram of sectoral competence can be drawn, as shown in Fig. 5.13. In Fig. 5.13, the eight dimensions are ➀ input; ➁ firm; ➂ knowledge; ➃ resources; ➄ institutions; ➅ market; ➆ technology; and ➇ output.

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Fig. 5.13 Potential energy diagram of sectoral competence

In the ➀ dimension, the sector changes from oa → oA, indicating that the overall investment from the external environment in the industry increases from point a to point A; In the ➁ dimension, the sector changes from ob → oB, indicating that the number, scale and production capacity of firms in the sector increases from point b to point B; In the ➂ dimension, the sector changes from oc → oC, indicating that the sector’s ability to learn, integrate and apply knowledge increases from point c to point C; In the ➃ dimension, the sector changes from od → oD, indicating that the sector’s ability to absorb, transform and utilise resources increases from point d to point D; In the ➄ dimension, the sector changes from oe → oE, indicating that the sector’s ability to construct, adjust and improve the institutions increases from point e to point E; In the ➅ dimension, the sector changes from of → oF, indicating that the quantity, scale and transaction capacity of the market in the sector have increased from point f to point F; In the ➆ dimension, the sector changes from og → oG, indicating that the sector’s ability to learn, apply and innovate technology increases from point g to point G; In the ➇ dimension, the sector changes from oh → oH, indicating that the sector’s overall output level and ability to the external environment increases from point h to point H. The above eight dimensions are a rough competence division based on the investigation of the entire sectoral input and output process. In fact, each sectoral ability can be further subdivided. For example, the external environment’s investment in the sector includes human resources, capital, policies, scientific research and innovation, infrastructure construction, etc. The improvement of the sector’s market competence not only refers to the quantity increase, the scale expansion, and the improvement in

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the transaction efficiency and level of the commodity market but also to the increase, improvement, and perfection of a multilevel and diversified market system including commodity markets, labour markets, capital markets, technology markets, information markets, and property rights markets in terms of quantity, scale, efficiency, and level. Each of these markets can be further subdivided; for instance, the capital market can be divided into the credit market, bond market, and stock market. Knowledge and technology in the sector include not only industrial knowledge and industrial technology but also market transaction knowledge and market transaction technology. Market transaction knowledge and market transaction technology can be further divided according to different sectors, markets and types of commodities. In addition to industrial institutions, institutions in the sector also include market transaction institutions, such as market access rules, market transaction rules, transaction bidding rules, and transaction arbitration rules. In Fig. 5.13, the small circle enclosed by a, b, c, d, e, f, g, h and a represents that the sector is in a lower position of potential energy, where the overall sectoral competence is relatively low, indicating that its market competitiveness is relatively weak. The large circle enclosed by A, B, C, D, E, F, G, H, and A represents that the sector is in a higher position of potential energy, where the overall sectoral competence is relatively high, indicating that its market competitiveness is relatively strong. The development of a sector from a, b, c, d, e, f, g, h and a to A, B, C, D, E, F, G, H and A is the process of the sector evolving from small to large, from weak to strong. Through the potential energy diagram of sectoral competence, sectoral growth and development can be vividly described. In actual sectoral growth and evolution, it is generally impossible for the sector to increase its abilities in the above eight aspects evenly in proportion, but with some abilities enhancing rapidly, some slowly, and some fluctuate. Therefore, the actual potential energy diagram of the sector generally does not form a regular circle. The concept of overall sectoral competence and the potential energy diagram of sectoral competence have provided a relatively comprehensive comparison metric for the horizontal comparison of the same type of sectors in different economic systems and a more comprehensive thinking framework for the government to support the development of related sectors. Apparently, the discussion of overall sectoral competence is still superficial, and the study in this area needs to be further discussed.

5.11 Sectoral Life Cycle The sector is the firm community composed of firms. A firm has its life cycle, and so does the sector. A sector generally has its life cycle of birth, growth, ageing and death. In the real economic system, some sectors have a long life cycle (i.e., planting agriculture), while some sectors have a relatively short life cycle (i.e., extractive industries). From the direction and state of sectoral evolution, the sectoral lifecycle can be divided into three stages of growth and progression, stability maintenance, and regression and decline.

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There are generally two directions of sectoral evolution, namely, progression and regression. Sectoral progression refers to sectoral evolution in a direction beneficial to sectoral development in terms of firm quantity, resource transformation, market scale, overall output, and niche quality, specifically shown in the continuously increasing number of firms, the enhanced resource transformation capabilities, the constant expansion of the extent of the market, the improved overall output capacity, and the better quality of the sectoral niche. Sectoral regression refers to the sectoral evolution in a direction unfavourable to sectoral development in terms of firm quantity, resource transformation, market scale, overall output, and niche quality, specifically shown in the continuously decreasing number of firms, the weakened resource transformation capabilities, the constant shrinking of the extent of the market, the reduced overall output capacity, and the worse quality of the sectoral niche. Under the combined action of external and internal motivations, there are only three possible outcomes of the sector’s ultimate evolution, namely, continuous progression, remaining the status quo, and regression and decline. In the actual economic system, the state of the sector corresponding to the three evolutionary results is as follows:

5.11.1 Sectors that Grow Up The decisive force of sectoral progress mainly comes from the social needs of the external environment. As long as human needs exist, the sector will progress continuously. The stronger the demands of human society are, the more sufficient the driving force for sectoral progression. In a state’s economic system, except for special circumstances such as wars, social unrest, and natural disasters, generally the state’s agriculture, industrials, services and other sectors will continue to grow. The potential energy diagram of sectoral competence clearly describes how a sector grows and progresses. In the potential energy diagram (Fig. 5.14) of sectoral competence growth, the eight dimensions are ➀ input; ➁ firm; ➂ knowledge; ➃ resources; ➄ institutions; ➅ market; ➆ technology; and ➇ output. Figure 5.14 shows that at first, the sector’s output capacity was quite weak (the starting point shown in the figure is zero), but driven by the demand outside the sector, the capabilities of the sector continue to improve, and the sector starts to grow. From the surface factors (firms, resources and markets) in sectoral operation, after the birth of the firm, which represents an emerging industry driven by social demand, new firms will continue to enter this industry, followed by resource elements such as talents and capital, thus prompting the growth of this new industry. The intercorporate division of labour and coordination within the industry promote the industry to manufacture products with a richer variety and a larger quantity into the market, which directly promote the growth and expansion of the industrial market. The expansion of the market has attracted more firms, thereby promoting further growth of the industry. From the deep factors (knowledge, institutions and technology) of sectoral

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Fig. 5.14 Potential energy diagram of the growth of sectoral competence

operation, the enhancement in the abilities of the firms, resources and markets also boosts sectoral competence in terms of knowledge learning and innovation, institutional construction and perfection, and technological innovation and application, which in turn encourages the output capacity of the entire industry. The improvement of the industry’s output capacity enhances the industry’s reproduction input capacity. Under the effect of the bifurcation and synergy mechanism, new industries have been continuously differentiated from this industry, and the intersection and merging of new and old industries has spawned a batch of newer industries, which has resulted in an increasing number of industries in the sector. As the input–output cycle progresses, the overall sectoral competence continues to grow, the sectoral scale keeps expanding, the competitiveness of the sector increases, and the sectoral niche expands accordingly. Thus, it is not difficult to find that in the process of sectoral growth and progress, sectoral competence undergoes a process from weak to strong, and the evolutionary trajectory of sectoral competence is actually a gradually expanding spiral (Fig. 5.14).

5.11.2 Stagnant Sectors When the external environment is less demanding and the sector lacks competitive factors, the sector will maintain a relatively stable state for a certain period of time. When the external environment changes slowly, which means that the industry is facing a relatively stable external environment, the industry can remain in a relatively stable operating state and continue until the external environment changes drastically. During this period, the industry is characterised by an unchanged sectoral scale, relatively solid market competitiveness, and steady sectoral niche.

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In ancient society, when a dynasty developed to a certain stage and the development of social productivity was seriously hindered by the lag of social system reform, if there were no major technological innovations during the same period, the socioeconomic system would often be stagnant. In ancient Chinese history, the socioeconomic system was stagnant in the middle and late stages of almost every feudal dynasty. The most typical is agriculture in the late Qing Dynasty in China. In a century from 1800 to 1900, China’s agricultural production had little development and was basically stagnant. At present, under economic globalisation, rapid knowledge and technological innovation, the external environment of the sector is changing fiercely. In a drastically changing external environment, no sector can retain the status quo in the long term. Therefore, maintaining stability can only be a relatively short-term phenomenon in the process of sectoral development.

5.11.3 Decaying and Declining Sectors When the needs of the external environment continue to weaken or even disappear, the sector will regress continuously. When the external environment changes rapidly and the internal dynamics is insufficient, the sector will not be able to actively adapt to the changing environment. With the passage of time, the overall sectoral competence will be gradually degraded, and the result of sectoral evolution will be demonstrated in the continuous reduction of sectoral scale, the decline of competitiveness, and the shrinkage of corporate niche. For resource industries such as coal and iron ore mines, when the resources are exhausted, the industry will naturally decline and die out, and the original firms in the industry need to move to new industries for development. Industrial transfer is formed by a large number of firms changing industries. If we observe the potential energy diagram of sectoral competence, a declining industry has experienced a process from strong to weak over time. The evolutionary trajectory of sectoral competence decline is actually a gradually shrinking spiral. In the potential energy diagram (Fig. 5.15) of sectoral competence decline, the eight dimensions are ➀ input; ➁ firm; ➂ knowledge; ➃ resources; ➄ institutions; ➅ market; ➆ technology; and ➇ output. Figure 5.15 shows that at the beginning, the output capacity of the sector was strong. Due to the gradual weakening of external demand, the capabilities of the sector are constantly decreasing, and the sector is declining and shrinking. From the surface factors of sectoral operation, under the circumstance of the gradual weakening of social demand and the continuous reduction of corporate profits, firms are withdrawing from the sector, and talents, capital and other resource elements are flowing to other sectors. The gradual shrinkage of sectoral scale directly leads to the contraction of the industrial market. The shrinking of the industrial market forces more firms to withdraw from industries, resulting in their contractions. The contraction of the industries in the sector further exacerbates the contraction and decline of the sector. From the deep factors of sectoral operation, the diminution in

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Fig. 5.15 Potential energy diagram of the decline of sectoral competence

the abilities of the firms, resources and markets also impedes sectoral competence in terms of knowledge learning and innovation, institutional construction and perfection, and technological innovation and application, which in turn impairs the output capacity of the entire sector. The reduction of the sector’s output capacity weakens the sector’s reproduction input capacity. As the input–output cycle progresses, the overall sectoral competence continues to decline, the sectoral scale shrinks, the competitiveness of the sector decreases, and the sectoral niche shrinks accordingly.

5.12 Sectoral Evolutionary Trajectory With the continuation of time, the morphological characteristics of the sector will continue to change, and the historical process of these changes is a sectoral evolutionary trajectory. Sectoral evolution is a combined result of external pressure and internal dynamics. When the external demand and supply are strong, the sector will progress in evolution, its scale will continue to be enlarged, and its sectoral niche will gradually expand. When the external demand and supply become weak, the sector will regress in evolution, its scale will continue to be reduced, and its sectoral niche will gradually shrink. The decline of resource-based industries such as coal and iron ore mines is generally directly reflected in the reduction of external supply due to the gradual depletion of mineral resources, which leads to the natural decline of the industry. Different from the micro-level firm system, in the forces affecting the evolution of the sector system, the influence from the outside is greater than that from the inside. Whether the final result of a sector system is progress or regress ultimately depends on the external driver.

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The external driving force for the evolution of the sector system comes from the niche system of the environment outside the sector. In the sectoral niche system, the demand for products and services, the supply of resource elements, polity, law, human-culture, science and education are the main factors that affect the sector system. Among them, the most direct influencing factors are the demand for products and services and the supply of resource elements, which have an important impact on corporate growth and development within the sector system. The human-culture factor in the sectoral niche system is a core factor that affects sectoral evolution because the survival and development needs of humans cause the demand for products and services, and the level of human understanding of the world restricts the supply of resource elements. In addition, human-cultural factors also affect the evolution and development of firms of all types in the sector system from the deep level of firms. The internal dynamics that drive the evolution of the sector system come from the six factors of firms, resources, markets, knowledge, institutions, and technology. Among them, the most important dynamic factor is the firms, and among all the firms, core firms play a leading role. As previously analysed, core firms play a leading role in the growth and development of an industry. It is the core firms that drive the development of related firms, thus driving the growth and expansion of industries and thus promoting the development of the entire sector. From the relation between the impacts behind sectoral development (Fig. 5.3), it is evident that sectoral operation starts with input and ends with output. In this process, the dynamics for sectoral development are formed by the two chains of: Chain A (surface factor chain): input → firm → resources → market → output Chain B (deep factor chain): input → knowledge → institutions → technology → output. From the sectoral input–output process, on the one hand, a sector is first tempted by the demand from other organisations in the sectoral niche system (i.e., governments, firms, or households) before starting input. It is this demand that induces specific firms in the sector to make a decision to start manufacturing certain products to put relevant resources into the production process; on the other hand, only after firms produce products and provide products to customers through market exchanges does a complete sectoral operating process end. Therefore, the process of sectoral operation is actually the response of the sector to the consumption demand in the niche, and it is also the process of the sector’s production supply to the niche. The input–output recycling process of the sector is actually a cyclical process that continuously meets the consumption demand of other organisations in the niche and creates production supply for them. In terms of the deep factors of sectoral operation, this is actually a cyclical process of consistently absorbing consumption demand information in the niche and creating customer value for them, and it is also a process of increasing the value of the sectoral chain. From the exchange link, apart from the interindustrial exchanges within the sector and the intercorporate exchanges within the industries, there are also exchanges of personnel, materials, commodities, funds, knowledge, institutions, technology, and

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information between the sector and its niche system, which are realised through the firms in the sector and the other organisations in the environment. The exchange mentioned here includes the external environment’s resource supply to the sector and the sector’s product supply to the external environment. The smooth exchange inside and outside the sector system directly affects whether an industry can grow easily. In addition, the sequencing of development (also the real-time structure) of different industries in a sector has different values and significances for the scale expansion and development speed of the sector. If a core industry in the sector can be prioritised for development, then this core industry can drive other related industries to grow together, thus driving the rapid growth of the entire sector. In contrast, if the core industries in the sector are not given priority to development, the correlation effect of the core industries in the sector will not be exerted, which will delay the rapid growth of the whole sector. It is known that the interindustrial association within the sector is interrelated through the intercorporate supply–demand chain of products, and the supply and demand of products between firms are generally realised through market exchanges. The level of market exchange and exchange efficiency directly affects the development of the sector. Therefore, the improvement of the exchange level and exchange efficiency between a sector and its external environment and between different industries within the sector has an important value and effect on the scale expansion and development speed of the sector. From the perspective of distribution, the efficiency of the distribution process and the reasonability of the distribution result directly affect the entire sector’s operating efficiency, which is also related to its strength of competitiveness. Obviously, highly competitive sectors can gain more niche space than sectors with weak competitiveness, and they can grow rapidly in a relatively short period of time. From the point of view of the resource allocation process, if too much resource allocation tends to be in the public goods industry, the input of the individual product industry is inhibited, and if the allocation of resources is too much toward the individual product industry, the input of the public goods industry is inhibited. The public good industry and the private good industry are interrelated, interinfluenced, interacted, and interrestricted. If the distribution relationship between the two cannot be coordinated, it will affect the healthy development of the entire national economy. Judging from sectoral distribution results, income distribution regulates the interests of different industries in the sector, different firms in the industries and different classes in the firms. Whether the distribution results are scientific and reasonable affects the subsequent operating efficiency and development of the sector. In addition, in the socioeconomic system, all kinds of resources are limited. If the limited resources are excessively occupied by noncore industries, it means that the resources required by the core industries will be relatively reduced. In this way, noncore industries will squeeze the growth of core industries, which is very detrimental to the scale expansion and rapid development of the entire sector. Noncore industries have less correlation influence than core industries, so their role as sectoral scale expanders and industrial pushers. Therefore, the improvement of distribution efficiency and rationalisation of distribution in the sector system also have important value and effect in the growth and development of the sector.

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Therefore, from the two links of exchange and distribution, exchange and distribution constitute the two key links in sectoral development and evolution. From the internal environment, the sector system must obtain resource elements from its niche before production. Whether the sector can obtain the required resource elements depends on the sector’s own resource absorption capacity. The sector incorporating resource elements from the niche into the sector is actually a necessary prerequisite for the smooth growth and evolution of the sector. From the growth and evolution of the sector system, the absorption and integration of resource elements in sector is also reflected in the growth and development of sectoral organisations, namely, firms, industries, and industrial markets within the sector. Based on the above analysis, the two operating chains of dynamics behind sectoral development shown in Fig. 5.3 can be described as follows: Chain A: resource absorption → sectoral organisational growth → market exchange efficiency improvement → sectoral distribution level improvement → sectoral competence enhancement Chain B: information absorption → industrial knowledge accumulation → industrial institutional innovation → industrial technological innovation → sectoral chain value growth Chain A reflects the growth of the surface features of the sector system, while Chain B reflects the growth process of the essential features of the sector system. In the evolution of the sector system, the above ten factors are closely linked to jointly promoting sectoral growth. If these ten factors are used as ten dimensions to reflect the development and evolution of the sector system, the sectoral evolutionary trajectory can be drawn (the shape of the diagram is similar to Fig. 4.19, which is no longer repeated here). In this figure, the ten dimensions are ➀ resource absorption; ➁ information absorption; ➂ sectoral organisation; ➃ knowledge accumulation; ➄ market exchange; ➅ institutional innovation; ➆ sectoral distribution; ➇ technological innovation; ➈ sectoral competence; and ➉ sectoral value. In the process of development and evolution, the sector system is growing in these ten aspects, that is, expanding outwards in the ten dimensions. It is not difficult to find that with the continuation of time, the running trajectories of the sector system in Chain A and Chain B are two gradually expanding spirals with the same starting point. During the operation of the sector system, these ten aspects are closely linked and coordinated. Therefore, chain A and chain B are growing and evolving in an intertwined spiral shape, which is similar to the double helix structure of biological DNA. The specific shape of the diagram is similar to the diagram of the corporate evolutionary trajectory in Chap. 4 (i.e., Fig. 4.19), which is no longer repeated here. The growth and development of the sector is a history of continuous evolution throughout time. From birth, growth to maturity, the sector experiences a process from unity to plurality, from low-level to high-level, and from simplicity to complexity. With the continuous expansion of the sectoral scale, the number of industries and industrial markets within the sector is rising, the sectoral structure and market network are becoming increasingly complex, and the interconnection, interaction

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and interinfluence between the industries and markets within the sector are becoming cumulatively sophisticated. In the actual economic system, the development of the sector system in these ten dimensions is not always synchronised evenly but fluctuates frequently such that some factors (i.e., firms and markets) may change rapidly, while some (i.e., distribution systems) may change slowly. Therefore, in fact, the trajectory of sectoral development and evolution is not necessarily a smooth and regular spiral. In the development and evolution of the sector system from small to large, its niche system also experiences a process from unity to plurality, from low-level to high-level, and from simplicity to complexity. The evolution of the sectoral niche and the evolution of the sector are carried out simultaneously through the interaction of factors such as firms, resources and markets inside and outside the sector system, forming a two-tiered (i.e., surface and deep) network, which constitutes a multidimensional complex dynamic picture. The sector system exists in a particular socioeconomic environment, and the evolution of the sectoral niche system is only part of the evolution of its external environment. In fact, the external environment of the sector system, whether it is the natural environment or the social environment (i.e., the human-culture, economy, polity, science, law, and education systems in the state system), is continuously evolving. The internal evolution of the sector system and the evolution of the external environment proceed at the same time, and the two are interrelated, interacted and influenced. Therefore, the essence of the evolution of the sector system is a process in which the internal factors of the sector and the external niche factors of the sector are continuously coupled over time in the interaction and communication.

Chapter 6

The Long-Term Evolution of Agriculture in China

This chapter follows Chap. 5, taking the long-term evolution of agriculture in China as a case study to provide historical facts for the theoretical framework of the sector system. According to the historical process, this chapter divides Chinese agriculture into three stages: ancient agriculture, modern agriculture and contemporary agriculture. The section of ancient agriculture explains the historical stages and main characteristics of ancient Chinese agriculture, discusses the relationship between ancient Chinese crop cultivation and animal husbandry, describes the market transaction network of ancient Chinese society, and expounds the agricultural knowledge, agricultural institutions and agricultural technologies corresponding to the deep structure of the agricultural system. The section of modern agriculture discusses the important influence of institutional reforms on economic development through the comparison of modern reforms between China and Japan, briefly depicts the process of China’s modern industrialisation and the impact of modern industrialisation on agricultural commercialisation, and describes the achievements of China’s modern agricultural mechanisation. The section of contemporary agriculture expounds the industrialisation trend of contemporary agriculture, lists its main technologies, and discusses the respective impact of contemporary industrials, contemporary services and contemporary information on agriculture. The famous economist Schumpeter pointed out that “the subject matter of economics is essentially a unique process in historic time. Nobody can hope to understand the economic phenomena of any, including the present, epoch who has not an adequate command of historical facts and an adequate amount of historical sense or of what may be described as historical experience.”1 Any economic theory that cuts off history is a rootless tree.2 To understand the sectoral structural framework proposed in the book from historical facts, this chapter briefly expounds the long-term changes in Chinese agriculture 1

Schumpeter, J. A. (1954). History of Economic Analysis. Oxford University Press. pp. 12–13. Wu, Y. H., Zhang, J. X. (eds). (2014). History of Foreign Economic Thoughts. Higher Education Press. p. 6. 吴宇晖., 张嘉昕. (eds). (2014). 外国经济思想史. 高等教育出版社. p. 6.

2

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and the evolution of market networks, agricultural books, agricultural institutions, agricultural tools, and modern industrialisation by means of historical investigation. According to the historical stages of agricultural development in human society, agriculture can be divided into the three periods of primitive agriculture, traditional agriculture, and modern and contemporary agriculture. Generally, the agricultural stage before the class society is classified into the period of primitive agriculture; the agricultural stage after the primitive agriculture and before the industrial age is classified into the period of traditional agriculture; and the agricultural period after the industrial age is classified into the period of modern and contemporary agriculture. In different parts of the world, the process of agricultural development is not completely consistent, so different countries have different historical stages of their own agriculture. Based on the viewpoints of some agricultural historians, the book divides the history of China’s agricultural development into the following stages (Table 6.1).

6.1 The Long-Term Transition of Agriculture in Ancient China The agriculture of human society originated in the Neolithic period at approximately 10 000 B.P. to 12 000 B.P. According to the authoritative research of most scholars, agriculture first appeared in approximately 5 to 9 regions of the world simultaneously and independently, and then farming and animal husbandry gradually spread throughout the world.3 China is one of the world’s agricultural origins, and China’s cultivation appeared in the Neolithic Age at approximately 9000 to 10 000 B.P.4 Thousands of primitive agricultural sites in the Neolithic Age have been discovered in mainland China, among which the earliest were 10 000 B.P.5 China’s agriculture was first initiated in the Yangtze River Basin and the Yellow River Basin and then in the other regions. The latest archaeological research indicates that approximately 8200 B.P. to 13 500 B.P., cultivated rice appeared in the Yangtze River Basin of China. The Shangshan Site in Pujiang County of Zhejiang Province is the world’s earliest remains of rice production, where our ancestors began to cultivate rice approximately 10 000 years

3

Coclanis, P. A. (2009). Historical Changes and Effects of the World Agricultural Institutions (Su, T. W., trans.). World History (06). 彼得·考克莱尼斯. (2009). 世界农业制度的历史变迁与功效 ( 苏天旺, trans.). 世界历史 (06). 4 Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. p. 17. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. p. 17. 5 Peng, J. S. (2011). The Connotation of Farming Culture and Its Inspirations to Modern Agriculture. Northwestern Journal of Ethnology (01). 彭金山. (2011). 农耕文化的内涵及对现代农业之意义. 西北民族研究 (01).

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Table 6.1 History of China’s agricultural development Stages

Start & End year

Primitive agriculture

10 000 B.P.–4100 B.P Approximately 6000 years ★Approximately 2070 B.C., the Xia Dynasty established,6 and ancient China passed into a class society

Time span

Iconic events

Traditional agriculture

2070 B.C.–1861

3930 years

★In the first century B.C., the Han dynasty created Fan Shengzhi Shu 《泛胜之书》The Book of Fan Shengzhi ★In the sixth century A.D., Jia Si-Xie of the Northern Wei Dynasty completed Qimin Yaoshu 《齐民要术》Essential Techniques for the Welfare of the People ★In 1149, Chen Fu Nongshu《陈 旉农书》Chen Fu’s Treatise on Agriculture was written by Chen Fu in Southern Song Dynasty ★At the beginning of the fourteenth century, Wang Zhen of the Yuan Dynasty wrote Wang Zhen Nongshu《王祯农书》Wang Zhen’s Treatise on Agriculture ★In 1639, Xu Guang-Qi of the Ming Dynasty published Nongzheng Quanshu《农政全书》 Complete Treatise on Agriculture ★In 1861, the Qing Dynasty government launched the Self-Strengthening Movement, and the process of China’s industrialisation began

Modern agriculture

1861–1949

88 years

★In 1896, Luo Zhen-Yu and others initiated the Farm Bureau Federation in Shanghai, and founded Acta Agriculturae in 1897 ★In 1897, Zhejiang Silkworm Institute, the earliest agricultural school in modern China, was established ★In 1906, the Qing government set up Agricultural Experiment Station in Beijing ★In 1911, the Qing Dynasty fell; In January 1912, the Republic of China was established ★In 1915, agriculture in China began to introduce contemporary machinery (continued)

6 The calculations on the founding year of Xia Dynasty are many; According to the chronology based upon the Xia–

Shang–Zhou Chronology Project, commissioned by the Chinese government in 1996, the Xia ruled between 2070 and 1600 BC, existing 470 years approximately.

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Table 6.1 (continued) Stages

Start & End year

Contemporary agriculture 1949–present

Time span

Iconic events

More than 70 years

★In October 1949, the People’s Republic of China was established ★In 1958, China built its first tractor, indicating the start of China’s agricultural mechanisation ★In 1976, China began to promote the technology of indica hybrid rice, and the modern service sector started to enter the Chinese agricultural field ★In 1996, the backbone network of China’s public Internet was completed and opened, and China began to enter the information age

ago.7 The cultivated rice of 8000 B.P. to 9000 B.P. discovered in Dongting Lake, and the cultivated rice of 7000 B.P. unearthed from the Hemudu Site in Zhejiang, as well as the ancient cities, the altars of 6000 B.P., and the rice fields of 6500 B.P. detected at the Chengtoushan site in Hunan all indicate that the civilisation of the Yangtze River first appeared in the Yellow River Basin.8 China’s geographical conditions are complex, and different regions vary greatly in agriculture. In the Neolithic Age, China’s agricultural activities can be roughly divided into four regions9 : The Yellow River Basin and its northern part, a dryland agriculture based on foxtail millet (粟) and proso millet (黍) cultivations; The north of the Great Wall and the western regions, a nomadic husbandry focusing on raising cattle, sheep, and other livestock, given credit to a relatively developed hunting economy; The vast areas of the Yangtze River Basin, a paddy field agriculture relying on rice cultivation; The southern regions and the coastal areas, an agriculture in which harvesting and fishing account for a large proportion.

6.1.1 Historical Stages and the Main Features of Agriculture in Ancient China The combination of primitive agriculture and traditional agriculture was included in the scope of ancient agriculture. Compared with other countries, the most typical feature of ancient China’s agricultural production lies in its intensive cultivation. 7

Feng, Y., Li, M. M. (2020, December 4). The Fragrance of Chinese Rice and the Great River of Ten Thousand Years. Xinhua Daily Telegraph. 冯源., 李牧鸣. (2020, December 4). 中华稻香, 万 年前飘起一条大河边. 新华每日电讯. 8 Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. p. 3. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. p. 3. 9 Zhai, H. Q. (ed). (2006). Introduction to Agriculture. Higher Education Press. p. 107. 翟虎渠 (ed). (2006). 农业概论. 高等教育出版社. p. 107.

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Therefore, according to the periodisation method10 proposed by the agricultural economic historian Li Gen-Pan (1940–2019) in 1983, ancient China’s agricultural history can be divided into the period of primitive agriculture, the period of ditch agriculture, the formative period of intensive cultivation, the extended period of intensive cultivation, and the developmental period of intensive cultivation. Among them, except for the first stage, which belongs to primitive agriculture, the other four belong to traditional agriculture. The social eras corresponding to these five stages are as follows: 1. The period of primitive agriculture: from the birth of agriculture 10 000 years ago to 4000 years ago when ancient Chinese entered a class society; 2. The period of ditch agriculture: from Youyu-shi, Xia to Shang, Western Zhou, Spring and Autumn, when primitive agriculture transitioned to intensive cultivation; 3. The formative period of intensive cultivation: from the Warring States to the Qin, Han, Wei, Jin and Southern and Northern Dynasties, when a system of intensive cultivation techniques was formed in the northern dry lands; 4. The extended period of intensive cultivation: from Sui, Tang to Song, Liao, Jin and Yuan, when a system of intensive cultivation techniques was formed in the southern paddy fields; 5. The developmental period of intensive cultivation: this includes the Ming and Qing dynasties, when multicropping methods were promoted and cultivation techniques were refined. The evolution of these five stages in terms of cultivation system, crop composition, agricultural technology and farm tools is roughly as follows:

6.1.1.1

Stage I: The Period of Primitive Agriculture

This period began with the invention of agriculture 10 000 B.P., and ended with the formation of class society approximately 4000 B.P, around the late stage of Chinese primitive society. The time span of this period is approximately 6000 years.

10

Li, G. P. (1990). A Discussion on the Stages and Features of Ancient Chinese Agricultural History. In: Economic History Research Group of Institute of History at Chinese Academy of Social Sciences (ed). Questions in Ancient Chinese Social and Economic History. Fujian People’s Publishing House. 李根蟠. (1990). 试论中国古代农业史的分期和特点. In: 中国社会科学院历 史研究所经济史研究组 (ed). 中国古代社会经济史诸问题. 福建人民出版社.

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The cultivation system in this period mainly carried out shifting cultivation,11 initially virgin land cultivation, followed by abandoned land cultivation. The highlight of cultivation technology during this period was slash-and-burn agriculture,12 and the technological focus gradually shifted from the forest to the land. There were many more varieties of plants cultivated and used in this period than in later generations, including foxtail millet (粟), proso millet (黍), rice (稻), wheat (麦) and soybeans (菽). Among the crops, the north is dominated by foxtail millet, and the south is dominated by rice. The main raw materials for clothing are linen, hemp cloth and silk. This composition remained unchanged until the Tang and Song dynasties. The vast majority of agricultural sites in this period showed an economic outlook that was dominated by crop cultivation, combined with farming, grazing, gathering, fishing and hunting. Hunting and fishing have long been important in the places north of the Great Wall and along the rivers, streams, lakes and seas in the south. With the development of crop cultivation, animal husbandry has gradually appeared in some areas of the north. The livestock that people kept were mainly pigs at first, then liuchu 六畜 six domestic animals of pigs, cattle, sheep, dogs, horses, and fowls. Farm tools in this period were mainly stone tools supplemented by wood, bamboo, bone and clam tools. Farm tools discovered by archaeological studies include cutting tools such as stone axes and stone adzes; planting tools of bamboo sticks; harvesting tools such as stone knives and stone sickles; and earth-turning tools such as stone hoes, stone shovels, and stone ploughs. These tools are operated entirely by hand.

6.1.1.2

Stage II: The Period of Ditch Agriculture

Starting from the time of Youyu-shi and the Xia dynasty, passed through the Shang and Western Zhou dynasties, and ended in the Spring and Autumn Period, this period experienced Chinese slave society and feudal lordship society. The time span of this period is approximately 1594 years.

11

It refers to one of the oldest and primitive farming systems in the early stages of human cultivation, a land-use technique in which plots of land are cultivated temporarily, then abandoned (usually when the soil shows signs of exhaustion, or when overrun by weeds) and allowed to revert to their natural vegetation. 12 Slash-and-burn agriculture is a technique in agriculture left over from the Neolithic Age, and it is an ancient and primitive form of farming. This method now still exists among the indigenous tribes in tropical rainforest and hilly areas in South America, Africa and Southeast Asia. The method begins by cutting down the trees and woody plants in an area. Then, the biomass is burned into a swidden, which can be directly sowed without ploughing. Usually, after one year, the plot’s productivity decreases due to depletion of nutrients along with weed and pest invasion, causing the farmers to abandon the field and move over to a new area. The benefits of burning plants are it can, first, improve the acidic soil because the resulting ash is alkaline; second, the nutrient-rich layer of ash makes the soil fertile and increases production; and finally, the fire burns the grass seeds and pest eggs, thereby reducing the workload of weeding and controlling pests.

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This period transitioned from primitive agriculture to intensive cultivation and traditional agriculture, featuring the close relation between ditch agriculture and leisi 耒耜 an ancient plough, ougen 耦耕 pair ploughing, and well-field system. In this period, ditch agriculture was mainly adopted in the North China Plain region, and a more extensive fire-ploughing and water-weeding method was implemented in the paddy fields in the south.13 In line with ditch agriculture, the cultivation system was changed from shifting cultivation to a fallow system. Crop cultivation had facilitated its dominant position vastly across regions, and aquaculture, artificial tree planting, and professional gardening have emerged one after another. Animal husbandry had also developed greatly, and techniques such as dry lot feeding, castration, animal body reading, protection of pregnant animals, and pasture management had all emerged. Bronze tools dominated this period, but wood and stone tools were still widely used. Compared with the period of primitive agriculture, the types of farm tools had not changed much, and ploughs had been further developed. Leisi 耒耜, an ancient plough and chujue 锄镢, an ancient hoe, were the main farm tools at that time, and iron farm tools and cattle farming appeared in the later period.

6.1.1.3

Stage III: The Formative Period of Intensive Cultivation

Starting from the Warring States Period and passing through the Qin, Han, Wei, Jin to the Southern and Northern Dynasties, this period formed and developed China’s feudal landlord economy. The time span of this period is 1064 years. This period further developed paddy fields in the south and constructed a number of large-scale irrigation projects. In the north, dryland agriculture continued to dominate. The cultivation system was changed from a fallow system to an intensive cropping system. With diversified operations, in this period, sericulture and agriculture were treated as equal, and agriculture was dominated by crop cultivation. Animal husbandry had also made great progress. This period greatly improved agricultural technology and formed and matured the system of intensive cultivation techniques in northern drylands, creating a complete ploughing (耕) raking (耙) levelling (耢) pressing (压) hoeing (锄)combined approach to resist drought and conserve moisture. Artificial fertilisation was popularised at that time. Seed selection techniques had made great progress in the cultivation of numerous crop varieties, and achievements in pest elimination, disease control and the prevention of natural disasters have been remarkable. It appeared Qimin Yaoshu《齐民要术》Essential Techniques for the Welfare of the People, a masterpiece that represented the highest level of agriculture in the world at that time. Huo-geng shui-ou 火耕水耨 fire-ploughing and water-weeding is a relatively primitive rice cultivation technique, suitable for labour-scarce regions which have a vast territory but a sparse population. This method is to burn the woods with fire to create a swidden, then place rice seedlings in the swidden plot. When the rice seedlings grow out, farmers put water into the field. Weeds are difficult to survive under water flooding, but rice seedlings can grow normally, thus to eliminate weed.

13

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During this period, iron farm tools were widely used, not only iron spades and iron hoes but also iron ploughs, rakes, harrows, and louche 耧车 drill sowing vehicles and mobile animal-drawn agricultural seed drills. Iron ploughs and cattle farming had been popularised, and agricultural power had developed from human power to animal power, hydropower and wind power.

6.1.1.4

Stage IV: The Extended Period of Intensive Cultivation

Including the Sui, Tang, Song, Liao, Xia, Jin and Yuan dynasties, this period matures China’s feudal landlord economy. The time span of this period is 778 years. During this period, the equal-field system, which began in the Northern Wei Dynasty, continued to be implemented in the Sui and Tang Dynasties, and the land tenure system was fully established in the Song Dynasty. At the same time, China’s economic centre began to shift from the Yellow River Basin to the south of the Yangtze River. This transfer began in the Wei, Jin, Southern and Northern Dynasties and was finally completed in the Song Dynasty. This period developed crop rotation and multiple cropping systems and popularised the double cropping system of rice and wheat in the south. In terms of crop composition, the area of wheat cultivation in the north continued to enlarge and was extended to the south of the Yangtze River, while rice cultivation in the south further developed and expanded to the north, thus allowing wheat and rice to replace foxtail millet and finally occupied the first place in food crops. At the same time, levant cotton from the northwest and ceiba from the south were introduced to the Yellow River Basin and the Yangtze River Basin, replacing silk and linen as the main clothing materials. In the composition of livestock in agricultural areas, the proportion of horses decreased, cattle were further valued, and pigs continued to occupy an important position. In terms of agricultural technology, this period formed the intensive farming technology system for southern paddy fields, as well as a complete ploughing (耕) raking (耙) pulverising (耖) mud loosening (耘) weeding (耥) combined soil approach for paddy fields. Northern dryland agricultural technology had been improving, but its development had been slow. Farm tools in this period were more complicated in structure and more complete in functionality. Agricultural tools for drylands and paddy fields were fully equipped, which include, for example, crankshaft plough, which had eleven structurally complete components and was easy to use, iron rake used for deep ploughing, and tools customised for southern paddy fields such as chao 耖 a harrow-like implement for pulverising soil, yundang 耘荡 a farm tool for weeding and mud loosening in paddy fields, water wheels, and seeding horses, as well as highly efficient farm tools for joint operations, such as fenlou 粪耧 a drill for excrement to the soil, tuilian 推 镰 a mower consisting of sickles and rollers for grass cutting, and watermills. These tools in traditional agriculture had reached a near-perfect level.

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6.1.1.5

297

Stage V: The Developmental Period of Intensive Cultivation

This period included the Ming and Qing Dynasties (until 1861). The time span of this period is 493 years. Fixed-rate rent became the dominant form of land rent in this period, and the rapid population growth led to a national pattern of more people and less land. Intensive cultivation had further developed. The Northeast was turned into an important agricultural area. The traditional pastoral areas shrank, followed by a decline in animal husbandry. There was an imbalance in the proportion of agriculture, forestry and animal husbandry. Multiple cropping had the chance for rapid growth in this period. The north developed the two-year three-cropping system; the south of the Yangtze River promoted double-cropping rice; and southern China and parts of Taiwan emerged the threecropping system. The method combining intercropping and one-year-three-cropping or two-year-three-cropping in some regions maximised the use of land. During this period, the introduction of New World crops significantly affected the composition of crops in China. High-yielding crops that can endure drought and acidity, such as maize, lesser yam, and potato, were quickly promoted, which solved the food needs from the population surge. The introduction of cash crops such as tobacco, peanuts, tomatoes and sunflowers had enriched people’s economic lives. During this period, the agricultural technology of intensive cultivation was further developed. Deep ploughing was further emphasised, and more detailed methods appeared, such as double ploughing and rotary ploughing. The variety, brewing, and application of fertilisers continued to advance, approaching the limit that traditional agriculture can achieve. The selection and breeding of crop varieties had progressed greatly, and a large number of local varieties have emerged. There are many innovations in the cultivation of crops. With the breakthroughs in traditional agricultural technology, technologies from the western world began to be known and learnt. This period not only appeared in books such as Nongzheng Quanshu《农政全书》 Complete Treatise on Agriculture that summarised many of the agricultural experiences and techniques of the ancient Chinese working people but also appeared in some high-level local agricultural books. During this period, there were few significant developments in agricultural production tools. Although daigeng jia 代耕架, a human-powered ploughing tools hauled by ropes, appeared in the south of the Yangtze River, it had not been popularised. On the one hand, this is because under the feudal landlord system and smallholder operations, farm tools were approaching the limit of China’s technical level at that time. On the other hand, the abundant labour caused by excessive population and scarce land had inhibited the innovation of efficient new tools. Looking at the history of the development of ancient Chinese agriculture, we can see that it shares the same laws with the development of agriculture in other states around the world. For example, they all started with primitive agriculture, featuring the use of wood and stone tools and the implementation of slash-and-burn agriculture and shifting cultivation. After entering class society, they promoted metal farm tools. Their agricultural power, taking cattle ploughing and iron ploughing as

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a typical form, is all a set of agricultural technology based on intuitive experience formed by manpower and animal power. They all transitioned gradually from shifting cultivation to crop rotation, with small-scale farmers operating as the mainstay. The production structure of ancient Chinese agriculture is an economic structure centred on crop cultivation, combined with farming and animal husbandry and integrated management, which had been brewing since the primitive agricultural era, formally formed in the Warring States period, and lasted until the Ming and Qing dynasties. The typical feature of ancient China’s agricultural production is intensive cultivation. China’s intensive cultivation is a labour-intensive agriculture that uses comprehensive measures such as intensive ploughing, precision management, seed selection, and heavy fertilisers and efficient land use as a means to increase the yield per unit area. Whether in terms of agricultural technology and cultivation measures or in terms of land use and land productivity, traditional intensive cultivation in ancient China had reached the highest level of the world in ancient agriculture.14

6.1.2 The Relations Between Crop Cultivation and Animal Husbandry in Ancient China Since the Neolithic Revolution, agriculture has constituted the economic foundation of human society. Crop cultivation and animal husbandry are the two main sectors in agriculture. The ratio, layout, and combination of the two constitute an agricultural production structure that has a huge impact on the economic and political development of the entire society. What was the relationship between crop cultivation and animal husbandry in ancient Chinese agriculture? Li Gen-Pan accurately summarised the main features of the relationship between crop cultivation and animal husbandry in ancient China. He pointed out that “the areas dominated by farming peoples and crop cultivation and areas dominated by nomads and animal husbandry coexist and are clearly separated simultaneously; inside the areas that are dominated by farming, the large-scale state-owned ranches that are based on horse breeding and are mainly used for military purposes coexist

14

The content about the stages and features of ancient Chinese agricultural history quoted the research results of Li Gen-Pan. Li, G. P. (1990). A Discussion on the Stages and Features of Ancient Chinese Agricultural History. In: Economic History Research Group of Institute of History at Chinese Academy of Social Sciences (ed). Questions in Ancient Chinese Social and Economic History. Fujian People’s Publishing House. 李根蟠. (1990). 试论中国古代农业史的分期和特点. In: 中国社会科学院历史研究所经济史研究组 (ed). 中国古代社会经济史诸问题. 福建人民出 版社.

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with the small-scale private animal husbandry (operated by farmers and landlords) that mainly raises pigs and serves agricultural production”.15 As early as the late Palaeolithic, gathering and hunting were still the main production activities of people. Archaeologists have discovered the remains of domestic pigs in a cave site of human beings that dates back 9000 years ago, which was discovered in the Zengpiyan rock in Guilin of Guangxi. This suggests that livestock breeding had already existed in China at that time. From the Neolithic human sites, the vast majority of remains have shown an economic outlook that is dominated by crop cultivation and supplemented by animal husbandry, gathering, fishing and hunting. Geographically, crop cultivation in the north was mainly foxtail millet and proso millet, while the south was mainly rice; both the north and the south bred pigs, dogs, cattle, sheep, and fowls. Horses, however, were more common in the north than in the south because buffaloes were more popular there. Archaeological studies have shown that the development of China’s crop cultivation occurred earlier than that of animal husbandry. Although both of them sprouted in the late Palaeolithic period, the animal husbandry economy, especially the formation of nomadic tribes, began to grow after the planting economy had gained considerable scale. Both primitive crop cultivation and primitive animal husbandry had sprouted in the primitive hunting economy. To facilitate hunting activities, dogs were the first animals people domesticated and raised. Livestock were originally raised as a supplement to crop cultivation in the primitive agricultural age. They can be treated as food to improve human nutrition; their fur can be used as clothing to remove the cold; and their bones can be processed as production tools. Later, large livestock such as cattle and horses were domesticated for riding or horse-drawn carriages. Since then, cattle and horses had gradually become draught animals, mainly used for the transport of agricultural products and land ploughing.16 From the industrial features and geographic distribution, ancient Chinese agriculture can be divided into two major economic regions, farming areas and nomadic areas. The two major economic zones are roughly divided by the Great Wall of Qin, forming distinct land use patterns, production structures and production technologies. In the area south of the Great Wall and east of Qinghai, Gansu, the temperature is warm, and rainfall is abundant, which can meet the requirements of agricultural production. Residents in these areas have established an agricultural-based political power, mainly engaged in diversified agriculture with crop cultivation and grain production as the core. The Mongolian-Xinjiang Plateau north of the Great Wall is composed of deserts and grasslands, and the climate is dry and cold, which is better

15

Li, G. P. The Relationship between Agriculture and Animal Husbandry in Ancient China. Chinese Agricultural History and Culture. 李根蟠. 中国古代的农牧关系. 中国农业历史与文化. http:// www.agri-history.net/scholars/lgp/lgp15.html. 16 The above archaeological facts and main opinions on the relationship between agriculture and animal husbandry in ancient China quoted the research results of Li Gen-Pan. Li, G. P. The Relationship between Agriculture and Animal Husbandry in Ancient China. Chinese Agricultural History and Culture. 李根蟠. 中国古代的农牧关系. 中国农业历史与文化. http://www.agri-history.net/ scholars/lgp/lgp15.html.

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for animal husbandry. In these areas, nomads have established nomadic culturebased regimes and mainly engaged in nomadic herding with animal husbandry and livestock production as the centre. In Chinese history, almost the same time when the middle and lower reaches of the Yellow River transited from primitive society to class society, nomadic tribes emerged somewhere in the west, north and east. In these areas, nomadic and seminomadic peoples such as the Xiongnu (匈奴), Rouran (柔然), Xianbei (鲜卑), Turks, Khitan, Jurchen, and Mongolia had come out one after another. They drove tens of thousands of huge herds living on the vast grasslands. Herds were their main means of subsistence and means of production. Their herds were sheep based, horses followed, and donkeys, mules, camels, etc. The division of farming areas and nomadic areas is not absolute. There is an element of animal husbandry within the farming areas, and there is also an element of crop cultivation within the nomadic areas, although relatively small. For example, wheat dating back 5000 years was found at the Minle Dongshui Shan Site in Gansu, and the remains of cultivated wheat were nearly 4000 B.P. unearthed from Gumugou along the Peacock River in Xinjiang, both indicate that wheat cultivation began in western China as early as ancient times. In addition, there are different types of agriculture within the farming areas, such as fisheries in areas adjacent to lakes, seas and rivers and forestry in mountainous areas rich in trees. The stone tools, small scrapers, and cutters used for fishing discovered from the Neolithic farming site in the Northeast China Region, for instance, unveiled its ancestors’ economic lives of fishing. Even in modern times, some ethnic minorities in the Northeast region (i.e., the Nanai and Oroqen people) still live on fishing. For another example, in different types of Neolithic agricultural sites in southern Guangdong and Guangxi, as well as Fujian and Jiangxi provinces, the collection of fish and shellfish is critical in the local ancestors’ economic lives. Overall, the main types of agriculture in the farming areas were dryland farming and paddy field farming, and roughly with the Qinling–Huaihe Line as the boundary, these regions were divided into the northern dryland farming areas and the southern paddy field farming areas Before the Mid-Tang Dynasty, dryland farming in the Yellow River Basin was in a leading position, but after the Mid-Tang Dynasty, southern paddy field farming gradually took the lead. Different types of agriculture also existed within the areas ruled by nomadic peoples. Both Northeast China and Xinjiang are home to crop cultivation and fisheries. Xinjiang, with vast grasslands and deserts, as well as inland rivers and oases, is an area where agriculture and animal husbandry meet and cooperate. During the Han and Wei Dynasties, the northern Tianshan Mountains were the nomadic areas of the Xiongnu (匈奴), Wusun (乌孙), Dingling (丁零) and other ethnic groups, and the southern Tianshan Mountains were mostly small states of semi-nomads. The Di and Qiang peoples in Gansu and Qinghai were mainly nomads and grew wheat. The economy of the Qiang was more nomadic, while the Di was more cultivated. Southwest China (including Sichuan, Yunnan, Guizhou, Tibet and other provinces) was originally a region where nomadic and farming peoples coexisted. In terms of

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geographical distribution, a cross between crop cultivation and animal husbandry was formed from the northeast to the southwest.17 In ancient Chinese history, although farming and nomadic peoples were often in a state of separation and confrontation, farming and nomadic areas were economically interdependent. Farming areas that were more focused on crop cultivation needed to obtain livestock and livestock products from nomadic areas as a supplement to their economy. Weak in crop cultivation, nomadic areas had to import agricultural products and handicrafts from the farming areas and export their surplus livestock products to the farming areas. The exchanges between farming areas and nomadic areas in ancient China played a positive role in promoting the economic and cultural development of both sides. Nomadic livestock and livestock products were imported into central China through border markets, supporting the development of animal husbandry and crop cultivation in central China. Zhang Qian’s envoy to the Western Regions in the Han Dynasty brought good horses, grapes, pomegranates, walnuts, alfalfa, and flax from the Western Regions back to central China. Food, iron, cotton and other products and production technologies in central China had also been imported into the northern nomadic areas, which had greatly supported and enriched the material and cultural life of the people in these areas. In 697 AD, Empress Wu Ze-Tian (624–705) of the Tang Dynasty once gave Qapaghan Qaghan (?-716) of East Turkestan a batch of materials, including 40 000 husks (a dry measure for grain originally equal to ten 斗 dou, redefined to be five dou in the late Yuan) of cereals, 50 000 pieces of silks and satins, 3000 farm tools, and 40 000 jins (a weight equal to half a kilogram) of iron to help their agricultural production (Old Book of Tang—Biographies of Tujue). The economic and cultural exchanges between the farming areas and the nomadic areas were a unique combination of crop cultivation and animal husbandry in feudal society at that time. Economic ties between farming areas and nomadic areas were generally achieved through border markets, official and nongovernmental exchanges, etc. However, if the economic connections were hindered and could not proceed smoothly, they were often resolved by means of war. In Chinese history, there have been countless wars between the northern nomads and the Han regime in central China. Nomads have invaded central China several times and have even established regimes or dynasties. Behind these ethnic wars, apart from the contradictions between the rulers of ethnic groups, the underlying reason is the inherent economic needs between the two major economic zones. A typical example is the 1449 war against the Ming Dynasty launched by Esen, the leader of the Mongolian Oara tribe. Initially, their request was simply frontier trade, which was rejected by the Ming government and caused the wars. However, conflicts did not diminish their passion for trade, which

17

The above illustrations on ancient China’s farming areas and nomadic areas quoted the results of Li Gen-Pan. Li, G. P. (1993). “Multiconvergences” in the History of Chinese Agriculture. Researches in Chinese Economic History (01). 李根蟠. (1993). 中国农业史上的 “多元交汇”. 中国经济史研 究 (01).

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was finally realised through the wars. The wars removed obstacles to economic exchanges between the two major economic zones.18

6.1.3 Market Transaction Network in Ancient China Primitive handicrafts appeared in the period of primitive agriculture and were originally a part of primitive agriculture. Until the late primitive society, the handicrafts gradually separated from agriculture with the social division of labour and formed an independent production department. Both the Yellow River Basin and the Yangtze River Basin in China have long periods of frost, during which agricultural cultivation cannot be carried out. Nevertheless, the ancient people could use this fallow period to engage in handicraft production. For a long time, people had been engaged in both farming and handicrafts. With the continuous increase in products, both sides would supply the remaining products to meet each other’s needs. According to the Mencius of the Warring States Period, once a blacksmith requested pottery, a potter luckily needed some iron implements, so the two exchanged their products. The book also recorded a man named Xu Xing who made a living by weaving mats and making straw shoes. Producers of different goods exchanged their products, where a market was naturally created. Simin Yueling《四民月令》Eastern Han Monthly Instructions for the Four Classes of People written in Eastern Han Dynasty recorded that farms also produced liquor, vinegar, medicine, pickled food and silk fabrics, etc., not only for their own consumption but also for the market, which is evident that the element of market economy had appeared in the agricultural economic activities in the Eastern Han Dynasty. The Records of the Grand Historian - Biographies of Usurers listed many agricultural products from different regions, such as dates from Anyi, chestnuts from Yan Qin, oranges from Jiangling of Shu Han, lacquer from Chen Xia, mulberries and hemp from Qi Lu, and bamboo from Weichuan, which, to a certain extent, reflected the division of labour within agriculture at that time. In the Eastern Han Dynasty, professional households specialising in planting blue dyes had already appeared, and the regional division of labour in fabrics was also recorded in the Han slips of Juyan and Dunhuang. During the Han dynasty, the textiles used by the soldiers stationed at the Western Frontier Fortress came from Hanoi, Guanghan, and Rencheng, which indicates that the market network at that time was a relatively large scale. In the Han Dynasty, there were already 20 to 30 large-scale cities located on the main roads, large or small, which connected the regions of China. These cities played an important role in the business exchanges and market transactions between the regions. On this basis, historian Xu Zhuo-Yun put forward the view that the “market trading 18

The content of the relationship between agriculture and animal husbandry in ancient China is based on the research results of Li Gen-Pan. Li, G. P. The Relationship between Agriculture and Animal Husbandry in Ancient China. Chinese Agricultural History and Culture. 李根蟠. 中国古 代的农牧关系. 中国农业历史与文化. http://www.agri-history.net/scholars/lgp/lgp15.html.

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network combines individual members of agricultural society into a huge economic network”.19 This view is very insightful. In the same areas, village fairs were created through the trading and shipping of agricultural and handmade products from farm households to villages. With the help of urban and rural trafficking, the commodities in village fairs flowed to the cities, where the products from rural areas and the products from cities can exchange and trade, thereby forming a large-scale urban market. Commercial transactions between urban markets, in turn, had boomed commerce and trafficking among urban merchants, thus forming a larger regional market. The vertical and horizontal connection between the part and the whole had led to the formation of a national market transaction network consisting of village fairs, urban markets, and regional markets. In this process, the specialised development of the division of labour in agriculture had promoted the formation and growth of the market, the commercial circulations between urban and rural areas have enlarged the scale of market transactions, and the commercial networks between different regions had expanded the scope of market transactions. With the commerce and trade of merchants, the types and varieties of agricultural products and handicraft products in regions have also been enriched. The ever-enriching product categories had stimulated more demand, which in turn promoted the further expansion of the extent of the market. The expansion of the extent of the market in turn encouraged the development of agriculture and handicrafts. A state’s economic development is closely related to the state’s political environment, economic policies, etc. Xu Zhuo-Yun, who conducted deep studies on agriculture during the Han Dynasty, pointed out that “the productivity of the Han Dynasty was good enough for prosperous manufacturing and commerce”. However, the Han Dynasty’s physiocratic policy making and its strong imperial power pressured its manufacturing and commerce to wither and fade as soon as they sprouted.20 Judging from the historical changes of the ancient Chinese market economy, the reason behind the failure of the Han Dynasty to develop manufacturing and commerce is in fact the main reason why ancient China could not drive manufacturing and commerce at full speed. In Chinese history, almost at the beginning of a feudal dynasty or regime, its rulers often adopted the policy of rest and recuperation to restore and develop agricultural production, which then flowered the handicrafts. The abundance of products naturally increased the inherent demand for commercial transactions between regions. Driven by this demand, the scale and scope of commercial transactions continued to expand and eventually became a market transaction network that was interrelated, mutually supportive, and interinfluenced. When the state was unified, the traffic was smooth, the business travel was unimpeded, and it was relatively easy for the local market to communicate and to integrate local economic networks into 19

The historical information related to the Han Dynasty in this paragraph is requoted from Xu Yu-Yun’s discussion. See: Xu Zhuo-Yun. (2011). Intensive Farming and Market Economy in the Han Dynasty. China Rural Science & Technology (09). 许倬云. (2011). 汉代的精耕农业与市场 经济. 中国农村科技 (09). 20 Xu, Z. Y. (2011). Intensive Farming and Market Economy in the Han Dynasty. China Rural Science and Technology (09). 许倬云. (2011). 汉代的精耕农业与市场经济. 中国农村科技 (09).

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a national economic network. In the middle and late feudal dynasties, social contradictions intensified, and these disputes eventually led to the division of the country. Local separatism blocked local traffic and isolated business travel, which broke the national economic network into localised economic networks, continuously reducing the scale and scope of regional commercial transactions. The shrinking extent of the market was first manifested in regional economic separation. The further reduction of the market network would form a closed economic system. In this case, the rural economy would often form a small self-sufficient village. There had been countless successions of dynasties in ancient Chinese history. Usually, after the next feudal dynasty reunified the country, these closed self-sufficient systems would break the isolation and, pushed by their internal demand, reintegrated into a national economic network again. In the 2386-year-old traditional agricultural society, from the beginning of the Warring States Period (475 B.C.), when the Chinese traditional agricultural peasant economic system was formed, to the end of the Qing Dynasty in 1911, China had repeatedly staged historical dramas of the integration, expansion, rupture, shrinkage and reintegration of the economic network. In the past, economic circles generally believed that the traditional Chinese agricultural society was a closed system composed of self-sufficient villages and suggested that the villages were isolated and lacked economic ties with each other. However, in fact, from a long-term perspective, the isolation and self-sufficiency of villages in China’s traditional agricultural society is only a temporary phenomenon, existing in a particular period of time.

6.1.4 Agricultural Books in Ancient China21 China is an ancient civilisation with a long history based on agriculture. It has accumulated rich agricultural knowledge for human society. The agricultural classics in China from ancient times to the present are voluminous. Only from the beginning of the Warring States period in 475 B.C. to the end of the Qing Dynasty in 1911, China produced a considerable number of agricultural books (on agricultural production techniques in a broad sense and knowledge directly related to agricultural production). A total of 542 types of ancient Chinese agricultural books were recorded by the agricultural historian Wang Yu-Hu (1907–1980) in his Books of Chinese Agriculture (1964), among which more than 200 were lost books. A total of 643 categories of the existing and lost agricultural books were recorded in United Catalog of Ancient Chinese Agricultural Books edited by the Beijing Library in 21

The information about ancient Chinese agricultural treatise in this section combines the review materials in The History of Chinese Science and Technology · Agronomy Volume and A Review of Ancient Chinese Agricultural Books. See: Dong, K. C., Fan, C. Y. (eds). (2000). The History of Chinese Science and Technology · Agronomy Volume. Science Press. Introduction. 董恺忱., 范楚 玉. (2000). 中国科学技术史.农学卷. 科学出版社. “导言”. Shi, S. H. (1980). A Review of Ancient Chinese Agricultural Books. China Agriculture Press.

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1959; 243 kinds of existing agricultural books were reviewed in the 1975 A Book on Ancient Chinese Agricultural Books written by the Japanese scholar Motonosuke Amano (1901–1980), and in its appendix, approximately 600 varieties were listed.22 In-depth studies on the agricultural books of the Ming and Qing dynasties believed that there were approximately 830 types of agricultural books in the Ming and Qing dynasties in China (most of them were from the late Qing Dynasty), and more than 500 categories were not listed in Books of Chinese Agriculture or A Book on Ancient Chinese Agricultural Books, among which approximately 390 existed, and approximately 100 were lost or unknown.23 Ancient Chinese agricultural books generally refer to the works of Chinese people summarising traditional agricultural production technology and management experience before being influenced by modern and contemporary science and technology and agricultural management science. From the compilation form, ancient Chinese agricultural books can be roughly divided into two categories: comprehensive agricultural books and professional agricultural books. In terms of genre, comprehensive agricultural books include encyclopaedias arranged by production projects, monthly instructions for four seasons, and popular books combining the above two features. The scope of the content ranges from large-scale national agricultural books to small local books on agriculture. From a broad perspective of agriculture, ancient Chinese agricultural books include food production, crop cultivation (i.e., tea, oil, hemp, cotton, dyes, herbs, etc.), vegetables, flowers, horticulture, fruit trees, sericulture, animal husbandry, veterinarians, locust control, aquaculture, farm tools, farming methods, farmland water conservancy, processing and storage of agricultural and sideline products, and many other categories. These books are not only rich in content and knowledge but also have an unparalleled quantity over all other countries. Chinese writings on agriculture and agriculturalists, such as Shennong《神农》 Divine Farmer, Yelao《野老》Village Man, were included in the doctrines of the Hundred Schools of Thought (Chinese: 诸子百家; pinyin: zhuzi baijia) as early as the Warring States period, but have long since been lost. The four agricultural works of Shangnong 上农 The Supreme Importance of Agriculture, Rendi 任地 The Requirements of the Land, Biantu 辩土 Discriminating Types of Soil, and Shenshi 审时 Examining the Seasons recorded in the book Lüshi Chunqiu《吕氏春秋》The Annals of Lü Buwei of the Warring States Period contained a great deal of agricultural technological content of intensive farming and made a theoretical synthesis of the basic concepts of pre-Qin farming technologies in terms of land use, farmland layout, soil improvement, cultivation preservation, seed selection, plant spacing, weeding, farming seasons, pest prevention, fertiliser usage, and water supply, reflecting the 22 Dong, K. C., Fan, C. Y. (eds). (2000). The History of Chinese Science and Technology · Agronomy Volume. Science Press. see Introduction. 董恺忱., 范楚玉. (eds). (2000). 中国科学技术史.农学 卷. 科学出版社. “导言”. 23 Wang, D. (1989). A Discussion on Ming and Qing Agricultural Books and Their Characteristics and Achievements. In: Research Office of Agricultural History and Heritage at South China Agricultural University (ed). Studies on Agricultural History (VIII). China Agricultural Press. 王 达. (1989). 试论明清农书及其特点与成就. In: 华南农业大学农业历史遗产研究室 (ed). 农史 研究-第八辑. 农业出版社.

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origin of China’s tradition of intensive farming. The chapter of Diyuan 地员 Diyuan Categories of Land in the Guanzi《管子》discussed the relationship between groundwater level, soil properties and plants. These comprehensive agricultural papers were all very important at that time. From the Qin and Han Dynasties to the Wei, Jin and Southern and Northern Dynasties, a technical system of intensive dryland farming gradually formed in northern China, and the focus of agriculture in this period was mainly the Yellow River Basin. During this period, the number and types of agricultural books began to increase. There were more than 30 categories of agricultural books, and the main types, including comprehensive agricultural books and professional agricultural books emerged. The coverage of professional agricultural books has been broadened, involving animal husbandry, sericulture, horticulture, pisciculture, climate and cultivation, etc. During this period, the most important agricultural books were Fan Shengzhi Shu《氾胜之书》The Book of Fan Shengzhi, Simin Yueling《四民月令》 Eastern Han Monthly Instructions for the Four Classes of People, and Qimin Yaoshu 《齐民要术》Essential Techniques for the Welfare of the People. The Han Dynasty witnessed the release of comprehensive agricultural books such as Fan Shengzhi Shu and Simin Yueling, as well as monographs on animal husbandry, sericulture, gardening, tree planting, and pisciculture. Fan Shengzhi Shu was written in the first century B.C., but only 3500 Chinese characters have survived. The basic principles of dryland farming, proposed by the book, are to “choose the appropriate season, to eliminate soil blocks by ploughing, raking, pressing, and hoeing, to maintain fertility and moisture of the soil through fertilisation and irrigation, as well as to hoe in time to eliminate weeds and prevent natural evaporation and to harvest in time to prevent germination and reduce losses caused by adverse weather”. This book not only summarised the comprehensive factors of crop cultivation but also proposed different cultivation methods and measures according to the features and requirements of different crops. The book introduced the preparation of compartment fields (qutianfa 区田法, deep-ploughing and planting in square compartments, which enabled plants to better resist drought) and different seed selection and cultivation measures, such as the suixuanfa 穗选法 ear-selection method and jinzhongfa 浸种法 seed-immersion method. Simin Yueling《四民月令》Eastern Han Monthly Instructions for the Four Classes of People written by Cui Shi in the second century A.D. is a representative monthly guide for farmers in China, reflecting the activities of the landlords in the Yellow River Basin during the Eastern Han Dynasty. In the book, the monthly arrangements include ploughing, sowing, germination, split planting, hoeing, irrigation, harvesting, and storage, as well as sericulture, weaving, bleaching, dyeing, clothing, food processing, brewing, etc., and even farmland water conservancy, fruit trees, and housing repairs. However, the description of production technology is rather simple. In the sixth century A.D., Qimin Yaoshu《齐民要术》Essential Techniques for the Welfare of the People written by Jia Si-Xie in the late Northern Wei Dynasty is the earliest and most complete comprehensive agricultural treatise in China. It is an outstanding representative of ancient Chinese agricultural works and has a great impact on the development of Chinese agronomy. The book covered the farming and

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management of grains, vegetables, beans, melons, herbs, oil crops, fibre crops, dye crops, fodder crops, the cultivation of fruit trees and timber trees, sericulture, animal husbandry, pisciculture, and the brewing and processing of agricultural products. It systematically summarised the experience of agricultural production in the middle and lower reaches of the Yellow River Basin, made an incisive theoretical summary of the technical system of intensive cultivation in the northern drylands, and put forward the guiding ideology of “acting according to the seasons and the land, that you will gain more with less”. Throughout the book, the idea of intensive use of land was emphasised, and human initiative was given full play under the premise of following objective laws, for instance, how to improve efficiency by the appropriate arrangement, cultivation and management of different crops according to seasons, climates and soil features. From the Sui, Tang to Song, Liao, Jin, and Yuan periods, the technical system of paddy field-intensive farming in southern China gradually formed. During this period, the focus of agriculture gradually shifted to the Yangtze River Basin. During this period, the number of agricultural books increased unprecedentedly. There were more than 130 kinds of agricultural books in total, which was more than 4.5 times the total agricultural books from the Warring States Period to the Sui Dynasty before 1064. Comprehensive agricultural books continued to develop from system to content, and new monographs on sericulture, tea, flowers, vegetables, fruit trees, farm tools, and crop varieties appeared in professional agricultural books. The number of professional agricultural books accounted for more than half of the total agricultural books in this period, which indicates that agricultural knowledge was further specialised and refined. During this period, the most influential agricultural books included Han E’s Sishi Zuanyao《四时纂要》Outline of the Four Seasons, Chen Fu’s Treatise on Agriculture, Wang Zhen’s Treatise on Agriculture, etc. Lu Gui-Meng’s Leisi Jing《耒耜经》The Classic of Plough in the Tang Dynasty, Lu Yu’s Chajing 《茶经》The Classic of Tea, and Qin Guan’s Chanshu《蚕书》Book on Sericulture in the Northern Song Dynasty were also critical agricultural treatises. In addition, Tang Dynasty ‘s Simu Anji Ji《司牧安驥集》Horse-herder’s Collection of Ways to Pacify Thoroughbreds, Han Yan-Zhi’s (Song) Ju Lu《橘录》Record of Citrus, Cai Xiang’s Lizhi Pu 《荔枝谱》Monograph on Lychees, Ou-Yang Xiu’s Luoyang Mudan Ji《洛阳牡丹记》Peonies of Luoyang, Zhou Shi-Hou’s Luoyang Huamu Ji《洛阳花 木记》Flowers and Trees of Luoyang, Chen Ren-YuJun Pu《菌谱》 Monograph on Mushrooms, Wang Zhuo’s Tangshuang Pu《糖霜谱》Monograph on Sugar Frost, etc., were also representative and important. Nongsang Jiyao《农桑辑要》Essentials of Agriculture and Sericulture, compiled by the Department of Agriculture in the Yuan Dynasty, was an important comprehensive agricultural book in this period. Nongsang Yishi Cuoyao《农桑衣食撮要》Selected Essentials of Agriculture, Sericulture, Clothing and Food compiled by Lu Ming-Shan in the Yuan Dynasty was one of the best monthly instructions for farmers in this period. Han E’s Sishi Zuanyao《四时纂要》Outline of the Four Seasons was written at the end of the Tang Dynasty or the beginning of the Five Dynasties. It was an encyclopaedia for rural daily use, and it had a great influence on the compilation of the farmer’s calendar in later generations. This book listed the farming and other activities

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of rural residents in detail on a monthly basis, recorded tea-growing techniques and the intercropping methods of fungus, alfalfa and wheat, and included many veterinary prescriptions. During the Southern Song Dynasty, Chen Fu’s Treatise on Agriculture written in 1149 mainly summarised the agricultural production experiences in the lower reaches of the Yangtze River, such as rice cultivation, sericulture, mulberry planting, and cattle raising, which was an important symbol of the formation of the technical system of intensive paddy field cultivation in southern China. The book put forward the viewpoint that soil fertility can be changed and strengthened through rational fertilisation and soil improvement and advocated intensive management and work within one’s ability. It discussed the specific measures of paddy field operations, such as seedlings and ploughing, and recorded the breeding and medical treatment of water buffalo in paddy fields. The Treatise on Agriculture was written by Wang Zhen at the beginning of the fourteenth century in the Yuan Dynasty. It comprehensively analysed the agricultural production techniques in northern dry lands and southern paddy fields and conducted a comparative study on agricultural activities in the north and south. It described the cultivation, protection, harvesting, storage and utilisation of grains, rice, wheat, melons, vegetables, herbs, fibres, bamboo, and fruit trees. The book focused on 20 categories of agricultural implements and more than 300 illustrations, reflecting the shapes of farm tools, harvesting tools, irrigation tools, transportation tools, textile tools, cooking utensils and containers used in the Song and Yuan dynasties. Each figure was accompanied by an explanation describing its origin, structure, and usage. Lu Gui-Meng’s Leisi Jing《耒耜经》The Classic of Plough of the Tang Dynasty described five commonly used farm tools, mainly ploughs, in southern paddy fields. Lu Yu’s Chajing《茶经》The Classic of Tea written in the Tang Dynasty, which systematically summarised the experience of growing tea and making tea and drinking tea before the Tang Dynasty, was a tea book that had a great influence both at home and abroad. Simu Anji Ji《司牧安驥集》Horse-herder’s Collection of Ways to Pacify Thoroughbreds from the late Tang Dynasty is the oldest surviving collection of veterinary prescriptions in China, mainly for horse diseases. It also excerpted empirical prescriptions for horse diseases before the ninth century. Qin Guan’s Chanshu 《蚕书》Book on Sericulture in the Northern Song Dynasty recorded in detail the actual production process of silkworm rearing, egg bathing and silk reeling, as well as the structure and usage of the reeling car. Han Yan-Zhi’s (Song) Ju Lu《橘录》 Record of Citrus was the first book in China and the world that summarised citrus cultivation techniques. It recorded many citrus varieties and their natures and names. The planting, transplanting, grafting, management, pest control, fruit collection and processing were all illustrated in detail. Jun Pu《菌谱》 Monograph on Mushrooms written by Chen Ren-Yu in the Southern Song Dynasty is China’s first monograph on mushrooms. The book compared 11 types of mushrooms produced in Zhejiang in terms of production area, nature, flavour, shape, grade, growth and picking time. Nongsang Jiyao《农桑辑要》Essentials of Agriculture and Sericulture in the early Yuan Dynasty was to compile documents of previous generations but paid special attention to sericulture. It also recorded the crops that were introduced to central China not long ago and the agricultural techniques that were peculiar at that time,

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such as ramie, cotton, watermelon, carrot, chrysanthemum, amaranthus, columbine, sugar cane, and beekeeping. During the Ming and Qing dynasties, China’s technical system of intensive farming continued to develop, and at the same time, multicropping planting methods were promoted, and various agricultural technologies were further refined. In this period, agricultural writings were unprecedentedly active, and a great number of books were born. The number and types of agricultural books were the largest in history, and agricultural knowledge was further specialised and refined. Specialised agricultural books were not only large in number but also in variety. For example, there had been new books on wild vegetables and locust control and a series of books simply on one kind of animal or plant. In the existing categories of professional agricultural books, the number of silkworms, aquatics and meteorological books has increased. In addition, local agricultural books with strong regional characteristics became widely available. Agricultural books of this period more abundantly and extensively recorded the practical agricultural operations, in some of which the budding of modern agronomy appeared, such as the adoption of the contents of western agronomy works, the proposal of the quantitative relationship in production technical measures, the recognition of the hybrid advantage in breed selection, and the belief that agricultural output is related to environmental conditions. During this period, there were many valuable agricultural books. The more prominent ones include Nongzheng Quanshu《农政全书》Complete Treatise on Agriculture, Tiangong Kaiwu - Naili《天工开物·乃粒》The Exploitation of the Works of Nature Grains, Bianmin Tuzuan《便民图纂》Illustrated Encyclopaedia for the Convenience of the People, Shenshi Nongshu《沈氏农书》Master Shen’s Book on Agriculture and Bu Nongshu《补农书》A Supplement to Shen’s Book, Zhiben Tigang - Nongze《知本 提纲·农则》An Outline of Knowledge of Essential Principles - Agriculture, Sannong Ji《三农纪》Record of the Three Branches of Agriculture, Yuan Heng Liaoma Ji《元 亨疗马集》Collection of Yuan and Heng’s Equine Therapy, Xuepu Zashu《学圃杂 疏》Gardening and Various Thinnings, Hua Jing《花镜》Mirror of Flowers, Wuxing Canshu《吴兴蚕书》Silkworm Raising in Wuxing, Guang Cansang Shuo Jibu《广蚕 桑说辑补》A Supplement to the Treatise on Sericulture, and Min Zhong Hai Cuoshu 《闽中海错疏》Marine lives in Fujian, etc. Among them, the most important encyclopaedia of agriculture was Nongzheng Quanshu《农政全书》Complete Treatise on Agriculture compiled by Xu Guang-Qi in the Ming Dynasty. During this period, there was a significant increase in local small books on agriculture, such as Zhejiang’s Shenshi Nongshu《沈氏农书》Master Shen’s Book on Agriculture and Bu Nongshu《补农书》A Supplement to Shen’s Book, Sichuan’s Sannong Ii《三农纪》Record of the Three Branches of Agriculture, Shandong’s Nongpu Bianlan《农圃便览》A Brief Guide to Farming, and Shaanxi’s Nongyan Zhushi《农言著实》Practical Advice on Farming. Shenshi Nongshu《沈氏农书》 Master Shen’s Book on Agriculture at the end of the Ming Dynasty was a typical representative of private small books on agriculture, reflecting the self-sufficient management experience of small farms in the Taihu Lake area where mulberry and rice were grown. A large number of agricultural books on one single production had emerged, some of which were very specialised. For instance, Li Sheng Yu Jing

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Daopin《理生玉镜稻品》Varieties of Rice, which specifically recorded rice varieties, and Jiangnan Cuigeng Kedao Bian《江南催耕课稻编》Compilation of Accelerated Tillage of Rice in Jiangnan, advocating the promotion of double-cropping rice in Jiangnan. Monographs reflecting faster-spreading edible and cash crops had also appeared, such as Yancao Pu《烟草谱》Monograph on Tobacco, Jinshu Chuanxi Lu 《金薯传习录》Record of the Transmission of the Golden Potato, and Mumian Pu《 木棉谱》Monograph on Ceiba. In terms of sericulture, there were Binfeng Guangyi《 豳风广义》Explanation of the Customs of Bin, and Yuan Heng Liaoma Ji《元亨疗马 集》Collection of Yuan and Heng’s Equine Therapy in the aspect of animal husbandry and veterinary. The special book Binfeng Guangyi《豳风广义》Explanation of the Customs of Bin by Yang Shen recorded his own experience in sericulture and silk reeling. The methods of raising pigs, sheep, fowls, ducks, etc., were also attached at the end of the book. Other agricultural books on gardening, flowers, tea planting, pisciculture, etc., were also many, to beekeeping, mushroom planting, locust control, and outdoor rearing of tussah silkworms. There were also some agricultural books focusing on the principles of agricultural production technology, such as Ma YiLong’s Nongshuo《农说》Treatise on Agriculture in the Ming Dynasty and Yang Shen’s Zhiben Tigang《知本提纲》An Outline of Knowledge of Essential Principles in the Qing Dynasty, which marked a newer level of traditional Chinese agronomy. Nongzheng Quanshu《农政全书》Complete Treatise on Agriculture complied by Xu Guang-Qi of the Ming Dynasty was published in 1639 and was an encyclopaedia of the scientific studies of agriculture. The book contained more than 700 000 words, including 12 categories such as agriculture-oriented economy, field system, farm work (centred on wasteland reclamation by station troops), water conservancy, farm tools, arboriculture (grains, vegetables, fruit trees), sericulture, broad sericulture (ceiba, ramie), planting (economic crops), animal husbandry, manufacturing, and famine relief. It extensively absorbed the agricultural achievements of the past dynasties, carried out a high-level summary of the traditional Chinese agricultural system, concluded the cultivation experience of cotton since the Song and Yuan dynasties and sweet potato and other plants in the late Ming Dynasty, and proposes the idea of controlling locusts. The book put forward the idea of developing water conservancy in the north and changing the situation of the South-to-North transfer of grains. It also included the Tai Xi Shui Fa《泰西水法》The Hydromethods of the Great West reflecting the achievements of European science and technology. This masterpiece had made progress in many aspects of the development of Chinese agronomy: for the first time, it systematically discussed the three agricultural measures of land reclamation, water conservancy, and famine preparation and added the missing links in previous agricultural books. In addition to the collection of scientific and technological knowledge accumulated by predecessors, the book also absorbed Western agricultural knowledge brought by Western missionaries. Its application of imagenumerology to agricultural research was a major breakthrough in the ideology and methods of Chinese agricultural research. In addition, Shoushi Tongkao《授时通考》General Treatise of Agriculture Composed by Imperial Order was also a large comprehensive agricultural treatise compiled in 1742 on imperial order during the reign of Qianlong Emperor of Qing.

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The book was mainly a compilation of previous agricultural materials, which was rigorous in genre, well cited and rich in illustrations, but with little innovation in content. Nevertheless, it had collected and preserved a large amount of valuable historical materials, with more than 420 kinds of cited documents, and was the agricultural book with the most historical documents cited among ancient agricultural books in China. The traditional agricultural knowledge reflected in ancient Chinese agricultural books is derived from the experience of long-term agricultural production. Although this knowledge is based on intuitive experience, it is not completely confined to the scope of pure experience. Instead, distinctive agronomic ideas were formed very early. The most representative one is San Cai Theory (Universe-Earth-Human theory) and intensive management ideas. The Universe-Earth-Human theory indicates the three most important factors of heaven, earth and humans. The clear expression of the Universe-Earth-Human theory in agricultural production begins with the Shenshi 审时 Examining the Seasons article in Lüshi Chunqiu《吕氏春秋》Master Lü’s Spring and Autumn Annals, which wrote, “What sows the grain is Man, What germinates it is Earth, What nourishes it is Heaven.” Among them, Grain refers to crops, which are the objects of agricultural production; Heaven refers to the natural climate, rain, etc., and Earth refers to the natural soil, topography, etc. Heaven and Earth constitute the external environment of agricultural production, and Human is the main body of agricultural production. This expression defines the nature of agricultural production as an interrelational, interdependent and interrestrictive ecosystem and economic system composed of agricultural organisms, the natural environment and humans. The Universe-Earth-Human theory is the core guiding ideology of ancient Chinese agricultural production, and it is the main theoretical basis of the works of Chinese agronomy. The twenty-four solar terms, constant soil fertility and intensive cultivation in traditional Chinese agriculture are the products of the Universe-Earth-Human theory corresponding to heaven, earth and human.24 The theory regards agricultural production as a totality composed of grain, heaven, earth, and human. The holistic, connective, and dynamic views it contains run through all aspects of production technology in Chinese traditional agriculture. In its theoretical system, humans do not appear as the masters of nature but as participants. Humans and nature are not in confrontation but in coordination. The Universe-Earth-Human theory is an important guiding ideology for intensive farming techniques in traditional Chinese agriculture. It is the sublimation of the long-term practical experience of ancient Chinese agricultural production.25 Through a rough analysis of the development of ancient Chinese agricultural books, it is not difficult to see that people’s understanding of nature and agricultural production has continued to expand and deepen over time. With the progress of the times, the division of labour in agricultural production has become more specialised, 24

You, X. L. (2007, March 14). Agricultural Culture: Historical Support for Agricultural Development. Henan Daily. 游修龄. (2007, 3.14). 农耕文化: 农业发展的历史支撑. 河南日报. 25 Li, G. P. (2007, March 14). Agricultural Culture: Historical Support for Agricultural Development. Henan Daily. 李根蟠. (2007, 3.14). 农耕文化: 农业发展的历史支撑. 河南日报.

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and more professional agricultural books have been created. Generally, agricultural knowledge in ancient China has been continuously developed and has progressed from the surface to depth, from the phenomenon to essence, and from the lowlevel to the high-level. Although ancient Chinese agronomy reaches the peak of traditional agriculture in the ancient world, it fails to achieve a universal theoretical understanding in the basic theory of agriculture. Compared with modern agronomy based on experiments, ancient Chinese agronomy obviously has limitations.

6.1.5 Agricultural Policies in Ancient China The ancient agricultural system in China included many systems, such as the agricultural farming system and agricultural land system. The agricultural farming system refers to the land use methods in crop cultivation and the relevant agricultural norms to ensure high and stable crop yields. Its core is how to correctly handle the contradiction between land use and cultivation to keep the land fertile. The agricultural land system here mainly refers to the system related to the ownership of land. In the period of primitive agriculture, the ancient Chinese generally applied shifting cultivation. When implementing slash-and-burn, plots of land were usually cultivated for one year and then abandoned. Extensive management was carried out by year-to-year plot changes. Soil loosening tools such as hoes, shovels, and ploughshare were invented in the hoeing stage. At this stage, ancients extended cropping periods from one year to two or three years. The tools invented and used in the ploughing stage were stone ploughs, and field cultivators. The cropping periods and fallow periods were both extended at this stage, and the cultivation partly relied on natural forces and partly on artificial measures. The remains of rice crops from 9000 years ago found in Pengtou Mountain, Li County, Hunan Province, and the rice crops 7000 B.P. discovered in Hemudu, Yuyao, Zhejiang26 indicated that rice cultivation had already appeared at that time in southern China. The agricultural production tools and food processing tools unearthed at the Peiligang Cultural Site in Henan Province suggest that humans had been engaged in agricultural farming in the Yellow River Basin eight or nine thousand years ago. Large villages and livestock breeding facilities found at the Yangshao Cultural Site in Henan revealed that agriculture here had entered the hoeing stage approximately 6000 years ago. Archeological discoveries at the Guangfulin Cultural Site in Songjiang District of Shanghai uncovered stone farm tools such as stone ploughs and stone sickles invented by the ancestors living in the Yangtze River Delta in the late Songze culture period between 6000 and 5400 B.P., which showed that the agriculture here had already shifted from the primitive to the ploughing stage. In the primitive agricultural age, agricultural production features wood and stone farm tools, slash-and-burn, and shifting 26

Li, G. P. (1993). “Multiconvergences” in the History of Chinese Agriculture. Researches in Chinese Economic History (01). 李根蟠. (1993). 中国农业史上的 “多元交汇”. 中国经济史研究 (01).

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cultivation.27 Ancient China’s agricultural cultivation in central China has generally experienced three stages: the abandoned land cultivation and fallow cultivation system from the Western Zhou to the Warring States, the crop rotation and multiple cropping system from the Qin and Han Dynasties to the Sui and Tang Dynasties, and the crop rotation and multiple cropping system and the intercropping system from the Song and Yuan Dynasties to the Ming and Qing dynasties. Cultivation systems such as crop rotation and multiple cropping systems, as well as intercropping systems, have continued to this day.28 Land ownership can generally be divided into three basic systems: public ownership, private ownership, and mixed public and private ownership. In different periods in ancient Chinese history, different land ownerships have their own uniqueness. In the period of primitive society, clan communes implemented the public ownership of land. During the nearly four thousand years from the Xia Dynasty to the Qing Dynasty, China’s land ownership system has undergone different forms of evolution, such as the well-field system, field-naming system (mingtian system 名田制), royal-field system (wangtian system 王田制), colony-field system (tuntian system 屯田制), land-quota system (zhantian system 占田制), equal-field system (juntian system 均田制), and land-tenure system (zudian system 租佃制). During the Xia, Shang and Zhou Dynasties, Chinese society implemented the slave-owner state ownership of land, the well-field system, which was in fact a land system for the transition from public ownership to private ownership. The well-field system was formed in the Shang Dynasty, prevailed in the Western Zhou Dynasty, became strained in the Spring and Autumn period and was abolished during the Warring States period. Under this system, the ownership of the land belongs to the king of the primitive regional state, and the king granted the lands to the feudal vassals and ministers according to their titles. For the land granted by the seal, the sealee only had the right to use but no private rights, and the land could not be transferred or sold. The state governors and aristocrats at that time divided a square area of land into nine identically-sized sections, similar to the # symbol. The eight outer sections were privately cultivated by serfs, and the centre section was communally cultivated on behalf of the landowning aristocrat. Eight outer sections shared one well for cultivation, and the eight serfs had to cultivate on the public communal land in the centre before they could cultivate on their private lands, which was known as the wellfield. The work of self-employed farmers in the public land is in fact equivalent to the labour rent. Since the reform of Shang Yang (approximately 395–338 B.C.) in Qin State, the ancient well-field system was completely abolished, and it was replaced by the feudal land system, the mingtian zhi 名田制 field-naming system. The most prominent feature of this system is that while distributing land based on household registration, it assigns different titles and their corresponding amounts of land based on military merits. The field granted by the state becomes private land, and the state Agricultural Culture: Historical Support for Agricultural Development. Henan Daily. 农耕 文化: 农业发展的历史支撑. 河南日报. http://www.ha.xinhuanet.com/add/2007-03/14/content_9 510657.html. Accessed 14 March 2007. 28 Ibid. 27

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no longer takes it back, and these lands can be bought and sold freely. The later Han Dynasty basically inherited the field-naming system initiated by Qin State. By the time of Emperor Wu of Han, land annexation became increasingly serious, almost to the extent that “the rich were crisscrossed with fields, while the poor had nowhere to live”. After that, the country began to reward military merits with gold and silver in kind, and the field-naming system eventually died out. At the end of the Western Han Dynasty, during the new dynasty (8–23 AD) established by Wang Mang (45–23 BC), the royal-field system was once promoted for the purpose of restraining land annexation but was abolished after only three years of implementation. The royalfield system nationalised the land, prohibieds private ownership, and limited the area of land occupied by a family of no more than eight males to one jing 井 well (i.e., 900 mu [1 mu = 0.0667 hectares] in the ancient system). The excess part is allocated to neighbouring clans for farming, and landless farm households can be granted land by the state according to the standard that one household can receive 100 acres of land. During the Three Kingdoms period, wars were frequent, people fled everywhere, and a large amount of land was abandoned. To meet the needs of war, the Cao Wei regime implemented the colony-field system, followed by the Wu and Shu regimes. The tuntian system 屯田制度, colony-field system, can be divided into two types: the military-colony system and the civil-colony system. The military-colony system refers to the organisation of soldiers to open up barren fields to supply the army with food, while the civil-colony system refers to convening landless farmers or refugees to cultivate wastelands to produce food for the army or the state. Colony fields were owned by the state. To cultivate on these fields, soldiers and farmers must hand over a certain amount of grain to the state and the army. The rest of the grain belongs to the cultivators. Soldiers and civilians in the field were not allowed to leave the farmland at will; otherwise, they would be convicted, and their families would be implicated. In the first year of Taikang in the Western Jin Dynasty (A.D. 280), to strengthen the control of self-cultivating farmers and restrict land annexation, Emperor Wu of Jin, Si-Ma Yan (236–290) promulgated the land-quota system. The system stipulated the maximum number of plots occupied by different ranks of aristocrats and officials. The number of labours owned by the aristocracy was also restricted, and the acres and rents of land were regulated according to the strength of the labour forces. It also ruled the specific amount of taxes paid in kind. In the 9th year of Taihe in the Northern Wei Dynasty (A.D. 485), to increase the state’s fiscal revenue, Emperor Xiaowen of Northern Wei, Tuo-Ba Hong (467–499) promulgated and implemented the equal-field system, followed by Northern Qi, Northern Zhou, Sui and Tang. According to this system, the state divided the state-owned land into four types of grain fields, hemp fields, mulberry fields, and residential land and allocated them in accordance with the different types and quantities of labour. The land allocated to the recipient shall not be bought or sold. For those who were old or dead, the grain field shall be returned to the government, while the mulberry field shall be passed on to future generations. Public fields were granted to the local officials according to their positions but were not allowed to be bought or sold. There were also special preferential provisions and other more detailed regulations for elderly individuals, the young, the disabled, and the widows. The equal-field system is a land system in

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which state ownership and private ownership coexist. Among them, the ownership of open fields granted or returned belongs to the state, and the ownership of mulberry plantations that do not have to be returned belongs to the farmers. The equal-field system is more feasible and perfect than the previous land-quota system, and it is the most effective and detailed land system in ancient Chinese history. After the middle of the Tang Dynasty, due to the growth in population and the increasingly serious land annexation, the foundation for the implementation of the equal-field system, the state ownership of land was severely damaged and finally collapsed completely with the outbreak of the An Lushan Rebellion. After the Song, Yuan, Ming, and Qing dynasties, private ownership of land became increasingly strengthened, but the state and the royal family still retained a large amount of land. In the Song Dynasty, the government adopted a policy of not suppressing mergers and acquisitions, and land annexation became increasingly serious, which led to the development of the landtenure system and the gradual popularisation of contract tenancy and fixed-lease systems. According to the land tenure system, after the expiration of the tenancy contract, the tenant farmers can decide to leave or continue to renew the contract, thereby reducing the farmer’s personal attachment to the landlord. Fixed land rent stimulated the enthusiasm of tenant farmers for production, which in turn promoted the development of agriculture. In the Ming and Qing dynasties, the land tenure system further developed, and emphyteusis became popular in the developed areas of the southern commodity economy. Emphyteusis refers to the perpetual contract for land that actually allows the permanent right to the enjoyment of a property (a land perpetual lease, which is different from farm ownership). Under the emphyteusis, tenant farmers who rent the land not only use the land for a long time but can also sell, mortgage, and pawn the land perpetual lease. This system further enhanced the production enthusiasm of the tenant farmers, thereby promoting agricultural production at that time.29 The land ownership system in the Qing Dynasty mainly included state land ownership (i.e., official fields), collective land ownership (i.e., clan and temple fields, etc.), and private land ownership (i.e., landlord’s private fields, self-cultivation fields, etc.). In the early years of the Qing Dynasty, self-cultivated farmers accounted for a larger proportion of land, and by 1840, the landlord class occupied a larger proportion.30 Looking at the land systems implemented in ancient Chinese history, it is clear that each system is not rigid. They all need to be constantly adjusted to adapt to the development of society. Looking through the history of land ownership in China, the primitive society initially practiced clan public ownership; then, in ancient times, a well-field system was implemented in the transition from public ownership to private ownership, followed by a field-naming system, which was carried out during the Shang Yang Reform Period to legalise private ownership of land. Although there were 29

This paragraph is mainly referenced from: Jia, C. Z. (2005). An Analysis of the Ancient Chinese Land System. Journal of History and Chorography (Cangsang) (06). 贾春泽. (2005). 中国古代土 地制度浅析. 沧桑 (06). 30 Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. p. 39. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. p. 39.

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various forms of state ownership of land in subsequent dynasties, private ownership was still the main system performed. Apart from the short-lived royal-field system, the equal-field system was enforced for nearly 300 years from the 9th year of Taihe in the Northern Wei Dynasty to the first year of the Jianzhong reign of Emperor Dezong of Tang (A.D. 780), which once changed the land system dominated by private ownership. However, for more than 1100 years since then, the land system has been restored to private ownership. It was not until the establishment of New China and the completion of rural land reform that private ownership finally and truly ended on the land of China.

6.1.6 The Evolution of Agricultural Tools in Ancient China The development of ancient agricultural technology is mainly manifested in the continuous progress of biological domestication, breed selection, breeding and reproduction, crop cultivation, field farming, water conservancy irrigation, fertiliser application, and farm tools. In the development of ancient agricultural technology, the most representative changes are mainly reflected in the evolution of farm tools. From the archaeological evidence and documentary records, ancient Chinese agricultural tools have generally undergone the renewals of materials from wood, stone, bronze to iron, the structure from simplicity to complexity, the function from low-level to high-level, and the variety from less to more. In the primitive agriculture era, stones, bones, clams, horns and other materials were used by ancient people to make farm tools. China’s earliest complete sets of standardised farm tools appeared in the early and mid-Neolithic period, including stone shovels, millstones, stone grinding rods, and stone sickles.31 At the end of the Neolithic Age, between 6000 and 5400 B.P., the ancestors in the Yangtze River Delta invented the triangular stone plough, which made deep ploughing and largescale arable land farming possible. In the time of Youyu-shi and the Xia dynasty, more than two thousand years B.C., China had developed metal tools, such as copper rods in the Shang Dynasty for ploughing and weeding and shovels, hoes, sickles and mows made of bronze since the Zhou Dynasty.32 The types of bronze farm tools in the Shang and Zhou dynasties include ben 锛 adze, cha 臿 an ancient tool to separate the grain from the husk, fu 斧 axe, qiang 斨 an ancient axe, 鎛, chan 铲 shovel, nou 耨 an ancient tool for weeding, lian 镰 sickle, and li 犁 plough. The emergence of bronze farm tools is a major advancement in human production technology. During the Spring and Autumn Warring States period, three technologies of pig iron smelting, steelmaking and pig iron softening appeared, making ironware 31

Su, B. Q. (ed)., Zhang, Z. P., Yan, W. M. (2014). China Ancient Times. Shanghai People’s Publishing House. p. 484. 苏秉琪 (ed)., 张忠培., 严文明. (2014). 中国远古时代. 上海人民出版 社. p. 484. 32 Dong, K. C., Fan, C. Y. (eds). (2000). The History of Chinese Science and Technology · Agronomy Volume. Science Press. see “Introduction”. 董恺忱., 范楚玉. (2000). 中国科学技术史.农学卷. 科 学出版社. “导言”.

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widely used in the production of sharp farm tools and speeding up the process of replacing wood, stone, and bronze farm tools with iron tools. Iron hoe, iron rake and iron sickle appeared in the Warring States Period. In the middle of the Warring States, iron plough agriculture was more common in the middle and lower reaches of the Yellow River, and deep ploughing methods had gradually become popular.33 The use of iron farm tools is a turning point in agricultural production technology. It can clear a large area of forest and turn it into farmland, pasture, etc., and make large-scale field farming possible; it can even make a series of changes in agricultural production relations, cultivation systems and crop cultivation techniques. Since the Spring and Autumn Warring States Period, ploughs drawn by farm animals have gradually become popular in some parts of China. The model of wooden ox-plough in the late Western Han Dynasty unearthed in Mozuizi, Gansu, showed that ploughing was shaped in the Han Dynasty. During the two Han Dynasties, iron farm tools were widely used, including iron ploughs, iron-toothed rakes, iron rods, etc., as well as new-type tools, such as soil covering tools, field management tools, irrigation tools, harvesting, threshing, collecting and transportation tools, and processing tools. Then, the Eastern Han Dynasty developed water mills.34 Emperor Wu of Han had begun to promote the use of louche, 耧车 drill sowing vehicles during the Han Dynasty, which could complete the three processes of trenching, sowing, and soil covering at the same time, which greatly improved the efficiency and quality of seeding. In the Eastern Han Dynasty and the Three Kingdoms, waterwheels were used to irrigate field plots. During the Wei and Jin Dynasties, chao 耖, a harrow-like implement for pulverising soil, was widely used in southern paddy fields. By the late Tang Dynasty, the more advanced crankshaft plough had been widely used in southern paddy fields. Before the Song Dynasty, there were harvesting tools such as bolian 拨镰 a sickle to scatter grass, ai 艾 a cutting knife, yilian 翳镰, tuilian 推镰 a mower consisting of sickles and rollers for grass cutting, and goulian 钩镰 a long sickle with a barb on the spear head. The Song and Yuan dynasties appeared louchu 耧锄 drill hoe, a farm tool towed by animal power that can weed and cultivate soil.35 In the Yuan Dynasty, yundang 耘荡, a farm tool for weeding and mud loosening in paddy fields (later known as tang 耥), was invented.36 Farm tools, in the process of evolution, have also been strongly influenced by agricultural institutions. The peasant economy of traditional Chinese agriculture originated at the end of primitive society and took shape in the Warring States period. 33 Dong, K. C., Fan, C. Y. (eds). (2000). The History of Chinese Science and Technology · Agronomy Volume. Science Press. see Introduction. 董恺忱., 范楚玉. (2000). 中国科学技术史.农学卷. 科学 出版社. “导言”. 34 Agricultural Culture: Historical Support for Agricultural Development. Henan Daily. 农耕 文化: 农业发展的历史支撑. 河南日报. http://www.ha.xinhuanet.com/add/2007-03/14/content_9 510657.html. Accessed 14 March 2007. 35 Agricultural Production Tools. China Five Thousand Years. 农业生产工具. 中华五千年. http:// www.zh5000.com/ZHJD/ctwh/2007-09-15/1148102435.html. Accessed 15 Sept 2007. 36 Dong, K. C., Fan, C. Y. (eds). (2000). The History of Chinese Science and Technology · Agronomy Volume. Science Press. see Introduction. 董恺忱., 范楚玉. (2000). 中国科学技术史.农学卷. 科学 出版社. “导言”.

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Under the traditional Chinese peasant economy, land can only be divided into small plots for farming. To adapt to the small field plots, farm tools became even smaller and lighter. For example, since the promotion of ouli 耦犁 coupled ploughing, a ploughing method in the mid-Western Han Dynasty, farm tools were not becoming larger and more efficient but gradually being transformed to be more suitable for the peasant economy. Ploughing, from two heads of cattle and three people to two heads of cattle and two people and then to one head of cattle and one people, resulted in the popularisation of the relatively portable and easy-to-use crankshaft plough. This development of farm tools led to the strengthening of the peasant economy after the Tang and Song dynasties. Self-cultivation farmers became active again, and subordinate tenant farmers were transformed into contractual tenant farmers.37 Before the seventeenth century, China’s farm tools were in the advanced ranks in the world but remained stagnant for a long time after entering the eighteenth century, where we can barely see any improvement. In the past two or three centuries, the farm tools of European and American countries have developed greatly. Following the prosperity of the natural sciences, new types of agricultural machinery were invented and created. For example, the United States has used animal-powered machinery since the beginning of the nineteenth century. Field tillers, seeders, mowers, harvesters, threshing machines, etc., have come out one after another; Iron ploughs quickly replaced wooden ploughs and have been widely used since the 1830s. By the 1850s, horse-drawn farm tools were popularised, and steam engines were popularised in 1850. At the beginning of the twentieth century, the internal combustion engine achieved rapid development. In 1910, the United States began to implement agricultural mechanisation and became the first country in the world to implement agricultural mechanisation.38 By 1930, despite the relatively depressed state of American agriculture, there were already nearly a million tractors in use on American farms.39

6.2 The Evolution of Modern Agriculture in China At the end of the Qing Dynasty and the beginning of the People’s Republic of China, the spread and introduction of modern agriculture were mainly manifested in the founding of agricultural journals, the translation of Western agricultural books, and the establishment of agricultural schools and research institutions. In 1896, Luo 37

Li, G. P. (1999). Intensive Cultivation, Small-scale Farming Economy, and Transformation of Traditional Agriculture. Chinese Agricultural History and Culture. 李根蟠. (1999). 精耕细作、小 农经济与传统农业的改造散论. 中国农业历史与文化. http://www.agri-history.net/scholars/lgp/ lgp11.html. 38 Source: Shen, Z. Z. (2003). A Review of the Introduction and Impact of Modern American Agricultural Technology. Historical Research in Anhui, (03). 沈志忠. (2003). 近代美国农业科技 的引进及其影响评述. 安徽史学, (03). 39 Freeman, C., Louçã, F. (2001). As Time Goes By: From the Industrial Revolutions to the Information Revolution. Oxford University Press. p. 286.

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Zhen-Yu (1866–1940) and other social elites who were keen to improve Chinese agriculture founded the Agricultural Affairs Association in Shanghai, and the Journal of Agriculture sponsored by the organisation systematically disseminated modern agricultural knowledge to Chinese society and had a wide-ranging influence on the modern development of Chinese agriculture. In 1897 and 1898, the two earliest agricultural schools in modern China, Zhejiang Silkworm Institute and Hubei Agricultural School, were established successively. In 1898, China’s first agricultural university, Jingshi University, was also founded in Beijing. In terms of agricultural research, the Qing government established the Agricultural Experiment Station in Beijing in 1906, and in 1931, the government of the Republic China established the Central Agricultural Laboratory; since then, local agricultural research institutions in provinces across the country have also emerged. By 1933, China had 691 agricultural institutions of all types with more than 7600 employees, including 278 experimental research institutions.40 In 1861, the Qing government launched the Self-Strengthening Movement, also known as the Westernisation or Western Affairs Movement. In December of the same year, the Qing government’s first ordnance factory, Anqing Ordnance Institute, was established, thus beginning China’s modern industry. The development of modern industrials inevitably influenced traditional agriculture (mainly due to intersectoral correlation), thereby driving the transformation of traditional agriculture to modern agriculture. China began modern education in 1862, the year the Westernisation Group founded the Jingshi Tongwen Guan 京师同文馆 School of Combined Learning, the first modern school in modern China, which to some extent also promoted the development of traditional agriculture to modern agriculture. Therefore, this book regarded 1861 as the starting point of modern Chinese agriculture41 and the 88 years from 1861 to 1949 in China as the period of modern agriculture. In general, this period transitioned Chinese agriculture from traditional agriculture to contemporary agriculture. After the outbreak of the Opium War in 1840, China gradually became a semicolonial and semifeudal society. Profound changes had taken place in China’s agricultural economy, and the natural economic structure of men farming and women weaving in traditional agriculture had begun to disintegrate. On the eve of the Opium War, China’s domestic commodity circulation was mainly grain-based, but by the early twentieth century, it had been replaced by industrial products such as cotton cloth and cotton yarn. The plundering of Chinese agricultural and by-product raw materials by the Western powers on the one hand, and the dumping of their industrial products in the Chinese market on the other, brought China’s urban and rural handicrafts and traditional family textile industry in a difficult position while at the same time

Source: Zhai, H. Q. (ed). (2006). Introduction to Agriculture. Higher Education Press. p. 115. 翟 虎渠 (ed). (2006). 农业概论. 高等教育出版社. p. 115. 41 The belief held by some scholars that 1840, the outbreak year of the Opium War, is the starting point of modern Chinese agriculture, is actually a rough point in time from a sociological point of view. From an economic point of view, such division is not accurate. 40

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prompting a significant development in the commercialisation of Chinese agricultural production. During this period, China’s export-oriented cash crop cultivation and sericulture expanded rapidly, and in some ports and traffic developed places, a number of specialised production areas even appeared.42 In modern China, the growth of farmland is usually in line with the population. However, the average annual growth rate of the population from 1840 to 1949 was 6.7‰, while farmland was only 3.4‰ from 1812 to 1949, indicating a serious population pressure that resulted in more people and less land. In the nineteenth century, the most crucial food in China’s agricultural production was grain, which often accounted for approximately 80% of the total planted (seeded) area. Between 1840 and 1910, China’s grain yield fluctuated in the range of 204 ~ 223 jin/mu (jin, unit of weight [=1/2 kg]; mu, unit of area [=0.0667 hectares]).43 Compared with the reign of Qianlong Emperor and Jiaqing Emperor of Qing (1736–1820), the grain yield in modern China showed a downward trend year by year. From 1914 to 1949, the yields of grain, oil and cotton all declined. Apart from the effects of wars and natural disasters, the inherent problems of traditional agriculture began to reveal themselves. Since the twentieth century, China’s total grain output has continued to grow in general and reached its highest in 1936. Due to the slight improvement in the structure of agricultural production, the growth rate of cash crops is faster than that of grain. Affected by imported cotton, cotton production has grown rather slowly.44 The outbreak of the Chinese Civil War, the Second Sino-Japanese War, and the Chinese Communist Revolution afterwards brought the Chinese economy into a wartime state, and the national economy was severely damaged.

Zhai, H. Q. (ed). (2006). Introduction to Agriculture. Higher Education Press. p. 115. 翟虎渠 (ed). (2006). 农业概论. 高等教育出版社. p. 115. 43 Wu, H. (1985). Research on Grain Yield per Mu in Past Dynasties in China. China Agriculture Press. p. 198. 吴慧. (1985). 中国历代粮食亩产研究. 农业出版社. p. 198. 44 The situation of modern Chinese agriculture in this paragraph is quoted from Wu Cheng-Ming’s research results. See: Wu, C. M. (1989). Inspection of Agricultural Productivity in Modern China. Researches in Chinese Economic History (02). 吴承明. (1989). 中国近代农业生产力的考察. 中 国经济史研究 (02). 42

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6.2.1 China Versus Japan: The Impact of Institutional Reform on Economic Development In the First Sino-Japanese War between 1894 and 1895, the defeat of the Qing army accelerated the decline of the feudal Qing regime, and the failure of the reform movement, the Hundred Days’ Reform, promoted by Kang You-Wei (1858– 1927) and Liang Qi-Chao in 1898, greatly delayed the process of China’s economic modernisation. The First Sino-Japanese War was seemingly a victory of the Japanese military but was in fact a victory of Japanese polity, economy and institutions if deeply analysing the supporting forces behind the two militaries. Japan’s Meiji Restoration movement carried out from 1868 to 1890 was a successful political reform, enabling the rapid development of the Japanese economy, which then provided a solid material foundation for the Japanese military. In the process of Meiji Restoration, Japan had studied the West in all aspects. In addition to focusing on introducing advanced Western science and technology, realising industrialisation and military modernisation, it also paid great attention to the Western political system (i.e., the promulgation of the Constitution, the establishment of the National Diet, the implementation of the cabinet system, the abolition of the identity system, the establishment of a civil service examination system, etc.); The Japanese government had extensively learned from Western countries in terms of polity, law, treasury, finance, education, military, etc., and had carried out thorough reforms in these aspects, allowing a giant leap of Japanese economy and national power. After half a century, it caught up with Western countries and grew into a dominant Asian power. In contrast, in China’s SelfStrengthening Movement, the Qing feudal forces only advocated learning Western technology and the military and vehemently avoided political reforms to preserve their vested interests, and the actions of the Westernisation group only dominated part of the economic and military reforms. Although the subsequent Hundred Days’ Reform involved reforms at the institutional level, it was eventually strangled by the feudal and conservative forces, thus making China’s road to modernisation full of hardships and frustrations! In terms of economic development, the Meiji Restoration can be regarded as Japan’s industrial revolution. It was this movement that prompted Japan to transform from a backward traditional feudal country to a industrialised capitalist power. Since the 1880s, China and Japan had both begun the process of economic modernisation almost simultaneously. At that time, the two countries had many similarities in historical background, initial conditions, international environment, and development process, especially the low economic level in the initial period of modernisation From 1883 to 1887, Japan’s national income was 600 million yen, and the per capita national income was only 15.6 yen in terms of the average price from 1883 to 1887, which was approximately 13.2 US dollars at the exchange rate at the time. In the same period (1887), China’s national income was 3.214 billion taels, and its per capita national income was 8.5 taels (both current-year prices), or approximately US$10.88 at the exchange rate of the year, which was 82.4% of Japan’s per

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capita income. In the process of modernisation, China and Japan were almost at the same level at the beginning. However, in the 50 years from the 1880s to the 1930s, Japan’s economy made remarkable progress, while China lagged far behind. In the 49 years from 1887 to 1936, Japan’s national income and per capita national income increased significantly. The actual national income climbed from 4.342 billion yen in 1887 to 20.714 billion yen in 1936, an increase of 3.8 times in 49 years, with an average annual growth rate of 3.16%. The per capita national income increased from 112 to 292 yen, an increase of 1.6 times, with an average annual increase of 1.94%. In the same period, China’s actual national income increased from 14.343 billion yuan in 1887 to 30.94 billion yuan in 1936, an increase of only 1.2 times in 49 years, with an average annual growth rate of 1.58%. The per capita national income increased from 37.98 yuan to 60.57 yuan, an increase of only 59.48%, and the average annual growth rate was only 0.96%. It is apparent that during this period, the speed of China’s economic development fell far behind that of Japan. By the 1930s, Japan had successfully achieved national industrialisation and entered the ranks of modernised countries, while China had not yet begun industrialisation. From the 1880s to the 1930s, Japan’s modern industrials developed rapidly, its economic strength increased significantly, and it gained world-recognised economic development achievements. From 1881 to 1937, the growth rate of Japan’s Industrial Production Index was 5.4%, far exceeding that of Europe and the United States during the same period. The growth rate was 3.7% in the United States, 3.1% in Italy, 2.9% in Germany, and 1.6% in the United Kingdom. Japan’s share of the world’s total industrial output rose from less than 1% in 1890 to 4% in 1937, leaving Western countries scratching their heads. During the same period, the growth rate of China’s economy was not only much lower than that of Japan during the same period but also lower than that of developed countries. The United States, for instance, had a 5.2% average annual growth rate of national income and a 1.4% average annual growth rate of per capita national income from 1834/1843 to 1869/1878, while the United Kingdom had growth rates of 3.2 and 1.5%, respectively, from 1801/1811 to 1831/1841. The growth rates of both countries were higher than that of China, with only 1.58 and 0.96% each.45

6.2.2 Industrialisation in Modern China Since the Opium War in 1840, China had begun the process of transition from a traditional society to a modern society. In the 1860s and 1990s, stimulated by Western capitalism and foreign companies, the Westernisation Group in the Qing government set off a Self-Strengthening Movement in regions to learn skills from foreigners to 45

The above two paragraphs refer to the research results of Zhang Dong-Gang on the modern economic development of China and Japan. See: Zhang, D. G. (2007). A Macro Analysis on the Moving Trend of Aggregate Demand in Modern China. Journal of Zhejiang University(Humanities and Social Sciences) (06). pp. 36–45. 张东刚. (2007). 近代中国总需求变动的宏观分析. 浙江大 学学报(人文社科版) (06). pp. 36–45.

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pursue self-renewal. Under the demonstration of the Westernisation Group’s military industrials, civilian industrials, bureaucrats, landlords, and businessmen began to invest in the establishment of new industrials and thus began the difficult process of industrialisation in modern China. At the beginning of 1861, the Qing government established the Ministry of Foreign Affairs and appointed two ministers of commerce of Beiyang (northern ports) and Nanyang (southern ports). The Qing government then sent personnel overseas to purchase and reproduce foreign ship guns and built up military factories across the country. From 1861 to 1890, the Qing government established 24 military factories and shipyards, among which the larger military factories include Jiangnan General Administration of Manufacturing, Fuzhou Shipping Bureau, Jinling Manufacturing Bureau, Tianjin Machinery Bureau, and Hubei Gun Factory.46 In December 1861, Zeng Guo-Fan (1811–1872) established the Qing government’s first weapons factory, Anqing Ordnance Institute, which raised the curtain on China’s modern industrials. In 1865, Li Hong-Zhang (1823–1901) founded the Jiangnan Manufacturing Bureau in Shanghai, which was the largest military industrial enterprise of the Qing government. The Fuzhou Shipping Bureau, founded by Zuo Zong-Tang (1812–1885) in 1866, was the most fully equipped new shipbuilding plant of the Qing government. In addition to the establishment of military factories, the Westernization Group also operated government-run, government-supervised merchant undertakings and merchant-bureaucrat combinations and established a number of civilian-run enterprises in mining, ironmaking, textile, steamship, telecommunications, and railways, including the China Merchants Steamship Navigation Company, Kaiping Mining Bureau, Tianjin Telegraph Bureau, Tangshan Xugezhuang Railway, Shanghai Mechanical Textile Bureau, Lanzhou Textile Bureau, etc. Before 1894, a total of 27 civilian-run enterprises were established, including 16 in the mining and smelting industry, 6 in the textile industry, and 5 in the transportation industry. By 1894, the telecommunications industry had established 39 telegraph lines (approximately 23 296 km in length), and by 1895, a total of 477 km of railways had been built.47 Among them, the China Merchants Steamship Navigation Company, founded by Li Hong-Zhang in Shanghai in 1872, was the earliest shipping company and the first modern enterprise in China to issue shares and operate as a joint-stock company. The Shanghai Mechanical Textile Bureau established in 1879 is the first modern cotton textile factory in China. These enterprises founded by the Westernisation Group trained a group of new technical talents and workers, which objectively stimulated the development of Chinese capitalism and laid a certain foundation for the industrialisation of modern China. From the 1860s to 1894, overseas Chinese, merchants, landlords and handicrafts invested in the establishment of 171 industrial and mining enterprises, of which 145

46

Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. p. 47. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. p. 47. 47 Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. p. 48. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. p. 48.

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were machine manufacturing, 22 were machine mining, 3 were machine transportation, and 1 was electric light. These included China’s first glass factory, the first paper mill, the first plastic flower factory, the first mechanical rice mill, the first match factory, and the first silk reeling factory. Compared with foreign capital and official capital from the Qing government, private capital was relatively weak, with only 40% of Qing government capital and 20% of foreign capital during the same period.48 The Self-Strengthening Movement, which lasted for more than 30 years from 1861 to 1894, did not make China rich and powerful at that time. However, this movement introduced advanced technology and machinery from the West, prompting China’s production to shift from handicrafts to machinery industrials. It can be regarded as the starting point of China’s industrial revolution. The fundamental purpose of the Westernisation Group was to maintain the Qing government’s reign, and they only paid attention to the introduction of Western technology and machinery rather than advanced Western systems, let alone political reform. The Self-Strengthening Movement was doomed to failure because of its conservative ideology and its superficial emphasis on Western technology. According to Angus Maddison (1926–2010), China’s GDP’s share in the world’s GDP was 32% in 1820, 5% more than the whole of Europe (27%), and 13% in 1890, which was one-third less than Europe’s (40%). By 1900, the gross domestic product of the United Kingdom, the United States, Germany, France, and Russia had all surpassed that of China. The per capita levels of industrialisation in 1900 calculated by population (relative to U.K. in 1900 = 100), the United States, German States/Germany, France, Italian States/Italy, Russia, Japan, and China were 69, 52, 39, 17, 15, 12, and 3.49,50 Between 1894 and 1911, China’s national capital grew rapidly, with an average annual growth rate of 15.1%. From the outbreak of the 1911 Revolution to 1920, foreign industrial investment in China declined due to the European War, with a growth rate of only 4.5%. The growth rate of bureaucratic capital dropped to 3.8%, while that of national industrial capital remained high at 10.5%. According to the economic historian Wu Cheng-Ming (1917–2011), by 1920, the vast majority of China’s handicrafts were growing, so as its total output value; and the fastest growth of the mechinery industry was also the fastest growth of the handicraft industry, even within the same industry. Of China’s total manufacturing output in 1920, handicrafts accounted for 82.8%, and machinery industries accounted for 17.2%. After that, the situation slightly changed. The machinery industry accelerated its pace of replacing handicrafts, but the output value of handicrafts was still growing. By 1936, handicrafts accounted for 69.4% of the total manufacturing output, and machinery industrials occupied 30.6%. At that time, China’s two largest machinery industries 48

Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. pp. 49–50. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. pp. 49–50. 49 Kennedy, P. (1987). The Rise and Fall of Great Powers. Random House. p. 149. 50 Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. p. 56. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. p. 56.

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were the cotton textile industry and flour industry. In the beginning, the cotton textile industry focused on spinning coarse-count yarns and supplying handwoven fabrics, which had occupied 52% of the yarn market by 1920. Then, it turned to the production of loom cloth, which had accounted for 57% of the cloth market by 1936. By 1936, China’s cotton textile industry had surpassed the declining import of foreign yarns. The smooth development of the machinery cotton textile industry was mainly due to the support of textile households and the rise of new handwoven regions such as Dingxian, Gaoyang, Weixian, Baodi, Yulin and Pingyao. The machinery manufacturing firms and the hand-made textile households had in fact formed a symbiotic and complementary relationship. China’s machinery flour industry emerged in the early twentieth century. The machinery flour mills initially applied machinery milling, which integrated local and foreign technologies and equipment, before switching to full machinery roller milling. Machinery milling is actually an intermediate form of the storage-powered local flour mill and the electric-powered machinery flour mill. From 1931 to 1936, the output of machinery flour mills increased from 47 million bales to 123 million bales, while the output of local flour mills also increased from 166 million bales to 172 million bales, showing a parallel development of the local and the foreign. During the same period, the output of the machinery mill increased from 900 000 bales to 14.76 million bales. The three went forward together, forming a horizontal complementary relationship. In 1913, China imported 1.3 million quintals of flour, but by 1936, it imported only 255 000 quintals.51 This showed that China’s flour processing industry developed rapidly during this period and effectively curbed the import of foreign flour. In addition, light industries such as matches, knitting, electrical appliances, and daily-use chemicals were introduced from abroad to China, and most of them were first hand-made or produced by household casual labour. After the market demand expanded, mechanised mass production was implemented. At that time, among the traditional Chinese handicraft workshops, many improved their productivity through the continuous improvement of production tools. For example, in the silk industry, the first picking loom was first a hand-pulled machine, then a pedal iron turbine, and finally an electric iron turbine. By 1936, 20.3% of the silk looms in the national silk industry had adopted electric power, which accounted for 38.3% according to industrial productivity; that is, more than a third of the silk weaving workshops had been transformed into modern silk factories. In the silk reeling industry, the original hand-cranked silk car was improved to the foot-spinning car, then to the steam (for cocoon cooking) foot-spinning car, and finally to the steampowered silk car. In the cotton industry, the original hand cotton ginning machine was improved to the foot cotton ginning machine and then to the steam-powered gear cotton ginning machine. For handicrafts, the continuous improvement of production tools can easily transit their workshops to fully mechanised factories.52 51

Shanghai Grain Bureau. (1987). History of the Flour Industry in Modern China. Zhonghua Book Company. pp. 101, 106. 上海市粮食局. (1987). 中国近代面粉工业史. 中华书局. pp. 101, 106. 52 The above two paragraphs refer to the research results of Wu Cheng-Ming on China’s economic conditions from 1894 to 1936. See: Wu, C. M. The Road of Modern China’s Industrialisation. Literature, History and Philosophy, 1991, (6).

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The main tool applied in China’s traditional flour processing industry was stone mills, which were mainly used to process grain crops such as wheat, corn, millet, and sorghum. The establishment of Tianjin Yi Lai Mou Mill in 1878 marked the beginning of technological reform in the traditional Chinese milling industry. The stone mill in this mill was driven by a steam engine, and other tasks were still done by manpower. Between 1878 and 1913, there were approximately 26 machinery mills established nationwide that used steam engines to drive stone mills.53 After 1914, with the popularisation of reproduced engine and electric power technology in the national machinery industries, China’s machinery mill industry was further developed. For example, from 1925 to 1930, there were 208 mills in Tianjin that focused on grinding grains. The number of animal-powered mills accounted for 43.9% of all mills in 1925, but it fell to 3.5% in 1930, when there were only 22 mills using animal power in that year. From 1878 to 1936, there were 136 private machinery mills and small flour mills in China, and the number reached 368 if electric mills were added in Tianjin that mainly grind grains. These machinery mills were technically at the level between local flour mills and machinery flour mills and were in the middle stage of the transition from local mills to fully mechanised mills. The technological reform in traditional Chinese handicrafts and the continuous improvement of production tools not only provided space for the birth of the national machinery industrials but also promoted its professional development. The cotton ginning machine, cotton looms, silk looms, and silk reeling machines used in traditional Chinese handicrafts were generally simple wooden tools, and the efficiency was extremely low. In 1897, Shanghai Dai Ju Yuan Iron Shop was the first to reproduce cotton ginning machines. As the types increased, Dai Ju Yuan Iron Shop gradually expanded and developed into an ironware factory. In approximately 1900, the annual output of ginning machines produced by Chinese factories was approximately two to three hundred, and by 1913, the output had reached more than two thousand.54 The expansion of the cotton ginning machine formed the profession of ginning machine manufacturing; in 1913, there were already 17 cotton ginning machine manufacturers in Shanghai. Similarly, the reproduction of knitting machines by the national machinery industry had also emerged in the profession of knitting machine manufacturing. The knitting industry is a new handicraft industry that was introduced to China from abroad in the early twentieth century. It initially used hand knitting machines (mainly used for manufacturing socks) from Germany. After the First World War, the national machinery industry began the mass reproduction of hand knitting machines, and by 1924, the number of knitting machine manufacturers in the country had increased to 39. After a certain period of capital technology accumulation, China’s modern handicrafts and national machinery industries began to develop from a lower level to 53

Shanghai Grain Bureau. (1987). History of the Flour Industry in Modern China. Zhonghua Book Company. pp. 8, 14–15. 上海市粮食局. (1987). 中国近代面粉工业史. 中华书局. pp. 8, 14–15. 54 Shanghai Administration of Industry and Commerce. (1979). Shanghai National Machinery Industrials (I). Zhonghua Book Company. p. 171. 上海市工商行政管理局. (1979). 上海民族机 器工业(上册). 中华书局. p. 171.

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a higher level. Around the 1920s, China’s machinery manufacturing, hand-made cotton weaving, silk weaving, knitting, etc., began the transition to a large machinery industry. For example, after experiencing a period of hand-cranked lathes, a number of Shanghai’s national machinery manufacturers began to use electric power or engines. By 1920, 81 of the 114 machine repair factories had switched to motive power, accounting for 71% of the total.55 In 1929, 8 of the 15 machine manufacturers in Tianjin whose main business was to produce looms used electricity.56 According to a survey conducted by the Nanjing National Government in 1934 on small-scale dyeing and weaving factories in Shanghai, Jiangsu, Zhejiang, Anhui, Jiangxi, Shandong, Hebei, and Shanxi, in 415 dyeing and weaving factories, a total of 11 208 electric looms and 11 886 manual looms were used.57 Approximately 1920, areas with concentrated hand-weaving silk industry, such as Hangzhou, started the transition to machinery production. Hangzhou Weicheng Company, established in 1912, had 300 hand-pulling machines in 1920 and purchased 13 electric silk looms in 1926 and began to transform into an electric silk weaving factory. The Hulin Company, established in 1914, had 200 hand-pulled machines in 1920 and purchased 24 electric silk looms in 1924.58 These silk mills had not yet been fully transformed into mechanical chemical plants, and most of their tools and equipment coexisted with hand-pulled machines and electric silk looms. In 1927, there were approximately 1000 wooden machines, 6000 hand-pulled machines, and 3000 electric silk looms in the Hangzhou silk weaving industry. By 1936, the number of wooden looms had been reduced to 500, the number of hand-pulling machines to 800, and the number of power silk looms to 6200.59 During this period, the Suzhou silk industry also experienced the transition from manual silk weaving to machine silk weaving. In addition, other cities and towns, such as Huzhou, Shengze, Ningbo, and Andong, where the hand-weaving silk industry was more developed, had also begun to transform to machinery production. This showed that by 1936, the electric silk looms had already dominated the equipment of the Chinese silk industry but had not completely replaced the manual silk looms, and the Chinese silk industry was still in a transitional state.60 55

Shanghai Administration of Industry and Commerce. (1979). Shanghai National Machinery Industrials (I). Zhonghua Book Company. p. 304. 上海市工商行政管理局. (1979). 上海民族机 器工业(上册). 中华书局. p. 304. 56 Fang, X. T. (ed). (1930). Tianjin Weaving Industry. Economic Research Institute of Nankai University. p. 47. 方显廷 (ed). (1930). 天津织布工业. 南开大学经济研究所. p. 47. 57 Yan, Z. P. (1955). A History of Cotton Textiles in China. Science Press. p. 301. 严中平. (1955). 中国棉纺织史稿. 科学出版社. p. 301. 58 Xu, X. W. (ed). (1991). Modern History of Jiangnan Silk Industrials. Shanghai People’s Publishing House. pp. 143–146. 徐新吾. (ed). (1991). 近代江南丝绸工业史. 上海人民出版社. pp. 143–146. 59 Zhu, X. Y. (ed). (1985). A History of Zhejiang Silk. Zhejiang People’s Publishing House. p. 186. 朱新予 (ed). (1985). 浙江丝绸史. 浙江人民出版社. p. 186. 60 The above three paragraphs on modern industrialisation in China refer to the research results of Peng Nan-Sheng. See: Peng, N. S. (2002). The Development of Traditional Industrials and the Choice of China’s Modern Industrialisation. Journal of Huazhong Normal University (Humanities

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During the industrialisation period of modern China, some traditional handicrafts began to decline, and others transformed into modern industrials by adopting new technologies and equipment. In terms of regional distribution, modern industrials were mainly concentrated along the coast and the river. In 1937, there were 3935 factories registered in China, of which 61.91% were in Jiangsu, Zhejiang and Shanghai of the Yangtze River Delta (31.39% in Shanghai), 6% in Shandong, 5.2% in Hubei, 3.8% in Qingdao, and very few in other provinces and cities.61 On the whole, the proportion of modern industrials was much smaller than that of traditional handicrafts. In 1913, among the 21 713 factories surveyed, 1.60% used mechanical power and 98.40% did not. In 1916, of the 16 957 factories surveyed, 2.89% used mechanical power and 97.11% did not. In 1920, in the manufacturing industry, the output of handicrafts was approximately 8 billion yuan, accounting for 90.05%. By 1936, the output value of handicrafts was 10 billion yuan, accounting for 77.96%. The relative proportion of handicrafts was declining, but its absolute quantity was still growing (25% in 2016).62,63

6.2.3 The Impacts of Modern Industrials on the Commercialisation of Agriculture64 The development of modern industrials in China has promoted the commercialisation of agriculture, which has driven the development of agriculture and the progress of agricultural technology. For example, before the 1930s, sugarcane planting technology in Guangdong was still at the level of traditional agriculture. The industrialisation movement in Guangdong in the 1930s rapidly developed the mechanical sugar processing industry in Guangdong, accelerated the commercialisation of the sugar industry, and expanded the extent of the market for commercial sugar. The industry’s hunger for raw materials directly led to the growth of the sugarcane planting industry, thereby advancing sugarcane cultivation technology. In approximately 1930, Guangdong Province already had a certain industrial foundation. Guangzhou’s private machinery industrials, which developed in the late Qing Dynasty, reached a certain scale in the 1930s. Between 1932 and 1935, Guangzhou’s private machinery repair and Social Sciences) (02). 彭南生. (2002). 传统工业的发展与中国近代工业化道路选择. 华中 师范大学学报 (人文社会科学版) (02). 61 Liu, G. L. (1992). A History of Chinese Industry (Modern). Jiangsu Science and Technology Press. p. 270. 刘国良. (1992).中国工业史(近代卷). 江苏科学技术出版社. p. 270. 62 Wu, C. M. (2001). China’s Modernisation: Market and Society. Beijing Life·SDX Joint Publishing Company. p. 110. 吴承明. (2001). 中国的现代化: 市场与社会. 北京生活·读书·新 知三联书店. p. 110. 63 Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. pp. 74–75. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. pp. 74–75. 64 Wu, J. X. An Analysis of the Relationship between Modern Industrials and Modern Agriculture. Chinese Agricultural History and Culture. 吴建新. 试析近代工业和近代农业的关系. 中国农业 历史与文化. http://agri-history.net/scholars/wujianxin1.html.

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firms increased from 177 to more than 250; this industry could manufacture many types of machinery and was mainly sold in Guangdong Province. The machinery related to rural industries, such as reeling machines, pumping machines, grain milling machines, rice milling machines, oil presses, and engines, exerted an important influence on the development of the rural economy in Guangdong at that time.65 From the Ming and Qing Dynasties to modern times, the sugar handicrafts in Guangdong took the form of sugar huts closely integrated with crop cultivation. Regarding the operation of sugar farms in Guangdong, Guangdong Xinyu《广东新 语》Guangdong Neo-analects recorded in volume XXVII, the Analects of Grass, that “in sugar squeezing, a sugar hut is usually built up by one upper-class peasant family, or five middle-class peasant families, or eight to ten lower-class peasant families”. The production tools used in the sugar huts were mainly wooden roller-type sugar mills drawn by livestock. During the Republic of China, sugar huts were assembled by cane farmers according to their cattle, production materials and labour. A sugar hut needed to combine approximately 80–100 mu (1 mu = 0.0667 hectares) of cane land as raw material to start sugar squeezing.66 After the cane sugar is processed, the cane farmers need to shoulder the cane sugar to the fair, or the sugar shop or store for sale. It is conspicuous that China’s traditional sugar-making handicrafts were small in production scale, backward in mode of operation, complicated in circulation links, and low in commercialisation degree. Between 1933 and 1936, the Guangdong Provincial Government established two large sugar factories in Guangzhou and Shunde, the First Cane Sugar Plant and the Second Cane Sugar Plant. The sugar factories purchased squeezers, filter pressers and evaporation tanks from the United States and the Czech Republic. It was equipped with power plants, boilers and alcohol production equipment. It was the most mechanical sugar factory in mainland China at that time. By December 1936, the total sugarcane capacity reached 6000 tons per day.67 In addition to the processing and production of cane sugar, the sugar factory also had its own large-scale sugarcane cultivation field, responsible for the management of sugarcane varieties, as well as the tests and promotion of cultivation techniques. Through agricultural loans, sugar factories in major sugarcane areas supplied farmers with improved seeds and 65

Wu, Jin. (1981). Private Industrials in Guangzhou Before Liberation. In: People’s Political Consultative Conference Guangzhou Municipal Committee of Guangdong Province Literature and History Research Committee (ed). Guangzhou Literature and History Materials(23). Guangdong People’s Publishing House. pp. 84, 102. 伍锦. (1981). 解放前广州市私营工业. In: 中国人民政 治协商会议广东省广州市委员会文史资料研究委员会 (ed). 广州文史资料 (23). 广东人民出 版社. pp. 84, 102. 66 Rao, Z. Y. Chaozhou’s History · Industrials · Agriculture. Chaozhou Xiuzhi Museum, Republic of China. 饶宗颐. 潮州志·实业志·农业. 潮州修志馆, 民国. 67 Xi, Z. E. (1988). Chen Ji-Tang’s Experience in Setting Up a Sugar Factory and the Truth. In: People’s Political Consultative Conference Guangzhou Municipal Committee of Guangdong Province Literature and History Research Committee., Guangdong Federation of Manufacturing and Commerce (ed). Guangzhou Literature and History Materials (56). Guangdong People’s Publishing House. 洗子恩. (1988). 陈济棠办糖厂经过及其真相. In: 中国人民政治协商会议广东省委员会 文史资料研究委员会., 广东省工商业联合会合 (ed). 广东文史资料 (56). 广东人民出版社.

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chemical fertilisers, speeding up the popularisation and application of new agricultural technologies and thus prompting the transformation of Guangdong’s sugarcane planting industry from traditional to modern. The sugar factory directly purchased sugarcane from sugarcane farmers, freeing a large number of sugarcane farmers from the backward manual production of sugar and becoming involved in the industrialised division of labour. According to records, the two sugar factories loaned 398 000 yuan in 1934 and contracted to purchase 36 000 mu of sugarcane fields. From January to September 1935, the loan amounted to 1.008 million yuan, and the contracted acquisition of sugarcane was 49 000 mu.68 With the establishment of new sugar factories, new varieties of sugarcane and advanced cultivation techniques that could adapt to the needs of industrial processing have been quickly popularised and applied. Private farms specialising in the cultivation and promotion of sugarcane varieties also appeared in Xinhui. Their sales network was mainly across the Dongjiang and Xijiang plains and even as far as Wuzhou, the border of Guangdong and Guangxi.69 Due to the relevant policies implemented by the Guangdong Provincial Government in 1933 restricting private capital from entering the machinery sugar industry (not restricting the manual sugar industry),70 Guangdong Province did not have a new privately owned cane sugar factory for processing refined white sugar until 1937. The development of the public machinery sugar industry indirectly promoted the development and technological progress of the handmade sugar industry in Guangdong. In the small sugar factories developed after 1937, the sugar presser was changed from wooden to iron, the power from livestock traction to machine traction, and the production method from sugar filter to honey extractor. These technological advancements had increased production efficiency and improved product quality; by 1950, there were 150 private cane sugar factories in the whole province of Guangdong.71

68

Guangzhou First Sugarcane Plantation. (1935). A Brief Talk on Sugarcane Planting. Guangzhou First Sugarcane Plantation. pp. 71–73. 广州第一甘蔗营造场. (1935). 甘蔗种植浅说. 广州第一 甘蔗营造场. pp. 71–73. 69 Xinhui Minsheng Farm. (1935). Java Sugarcane Planting Law. Guangdong Xinhui Tiancheng Printing House. 新会民生农场. (1935). 爪哇蔗种植法. 广东新会天成印刷馆. 70 Guangdong Provincial Government Agriculture and Forestry Bureau. (1933). Interim Regulations on the Supervision of Private Sugar Plants in Guangdong Province. In: Proceedings of the 216th meeting of the 6th Committee of the Guangdong Provincial Government, September 1933. 广东省 政府农林局. (1933). 广东省民营糖厂监督暂行规程. In: 广东省政府第六届委员会第216次会 议录, 1933年9月. See: Guangdong Provincial Archives. (1987). Selection of Historical Materials on Guangdong Provincial Government Archives during the Republic of China (III). Guangdong Provincial Archives. p. 463. 广东省档案馆. (1987). 民国时期广东省政府档案史料选编(第3册). 广东省档案馆. p. 463. 71 Guangdong Sugar Company. (1950). An Overview of Guangdong Sugar Industry. South China Agricultural University. 广东糖业公司. (1950). 广东糖业概况. 华南农业大学农史室.

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6.2.4 Agricultural Mechanisation in Modern China The use of machines in modern Chinese agriculture came late and the number and areas where they were used were few. The use of contemporary machines to plough in agricultural production in China first began in 1880. From 1897 to 1911, Jiangsu, Zhejiang, Hunan, Fujian, Hebei, Shandong, the Northeast and other places had attempted to improve farm tools and new irrigation machines.72 Since the late Qing Dynasty, China had been introducing agricultural machinery from foreign countries. For example, in 1906, Shandong Agricultural Experiment Station purchased more than 20 types of agricultural machinery from the United States; in approximately 1907, the Fengtian Agricultural Experiment Station purchased agricultural machineries such as rakes, wheat mowers, grass mowers, and corn planters from the United States and Japan.73 In 1912, the Zhejiang provincial government purchased two iron-wheeled paddy field tractors and the accompanying agricultural machinery from the United States and then handed them to the pilot farm of the Agricultural College at Zhejiang University. In 1915, the three major companies in Huma, Heilongjiang, purchased five tractors and other machinery and farm tools from the Vladivostok branch of the American manufacturer, International Harvester Company, for large farmland operations. Agricultural reclamation companies in Suibin, Tailai and other places then purchased three tractors and some other large farm tools successively.74 In 1929, the Shanxi Agricultural Experiment Station purchased new trailers, two-row ploughs, three-row ploughs, two-row four-disc rakes, drills, and balers from the American Agricultural Tools Company.75 These were concrete attempts to mechanise modern Chinese agriculture. Between 1912 and 1931, there were quite a number of imports of machinery and tools, but the proportion of agricultural machinery and tools was very small, less than 1% in most years and merely 2% in the highest years.76 The only agricultural machinery factories established in China are the Changzhou Housheng Machinery Factory, Shanghai Zhonghua New Farm Tool Promotion Institute, Jiangsu Farm Tool Manufacturing Institute, and several factories producing

72

Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. p. 79. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. p. 79. 73 Ministry of Agriculture and Commerce. (1908). Report of Fengtian Agricultural Experiment Station (I, II). Ministry of Agriculture and Commerce. 74 Zhang, Y. Y. (ed). (1957). Data on the History of Modern Chinese Agriculture (II). Beijing Life·SDX Joint Publishing Company. pp. 359–360. 章有义 (ed). (1957). 中国近代农业史资料(第 二辑). 北京生活·读书·新知三联书店. pp. 359–360. 75 Source: Shen, Z. Z. (2003). A Review of the Introduction and Impact of Modern American Agricultural Technology. Historical Research in Anhui (03). 沈志忠. (2003). 近代美国农业科技 的引进及其影响评述. 安徽史学 (03). 76 Zhang, Y. Y. (ed). (1997). Ming and Qing Dynasties and Modern Agricultural History. China Agriculture Press. p. 44. 章有义. (ed). (1997). 明清及近代农业史论集. 中国农业出版社. p. 44.

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pumps in Shanghai.77 The machinery used in agricultural production is mainly a small number of tractors, pumps, rice mills, mowers, and seeders. Although contemporary machinery was introduced to China as early as 1915, the progress of agricultural mechanisation had been slow that by 1949, and there were only 401 tractors, mainly in the northeast (489 at most) and a few in southern Jiangsu and Shanghai. During the Republic of China, there was some development of machine irrigation in the lower reaches of the Yangtze River. For example, in the Wujin area, electric irrigation began in 1924, and by 1929, the area of electric irrigation had reached 43 000 mu; Wuxi, where machine irrigation had developed the fastest, had already accounted for 62–77% of the total cultivated land by 1937.78 In 1930, China imported 1.49 million agricultural machinery and 1.9 million quintals of chemical fertilisers.79 During the Republic of China, machinery such as mowers, threshers, rice mills and flour mills began to be introduced to some farm households.80 In 1930, the area of farmland that used electricity to irrigate was only 49 000 mu.81 In modern China, although agricultural mechanisation has progressed, development has been slow and rather limited. In 1920, of the total output of China’s industrial, agriculture, and transportation industries, contemporary industries that used machinery accounted for 7.84%, and traditional industries that did not use machinery accounted for 92.16%. In 1920, the share of new industries in the total output of industrials and agriculture was 7.37%, which had risen to 13.37% (an increase of only 6% in 16 years) by 1936.82

77

Li, W. Z. (ed). (1957). Data on the History of Modern Chinese Agriculture (I). Beijing Life·SDX Joint Publishing Company. p. 410. 李文治 (ed). (1957). 中国近代农业史资料(第一辑). 北京生 活·读书·新知三联书店. p. 410. 78 Wang, F. Z. (1963). Several Situations of the Use of Machines in Old Chinese Agriculture. Jianghai Academic Journal (09).; Investigation and Statistics Division of the Northeast Finance and Economics Commission. (1949). Statistics of Northeast Economics in the Period of the Puppet Manchukuo. pp. 1–15. 王方中. (1963). 旧中国农业中使用机器的若干情况. 江海学刊 (09).;东 北财经委员会调查统计处. (1949). 伪满时期东北经济统计. pp. 1–15. 79 Zhang, Y. Y. (ed). (1957). Data on the History of Modern Chinese Agriculture (III). Beijing Life·SDX Joint Publishing Company. pp. 876, 878. 章有义 (ed). (1957). 中国近代农业史资料(第 三辑). 北京生活·读书·新知三联书店. pp. 876, 878. 80 Source of data in this paragraph: Wu, C. M. (1989). Inspection of Agricultural Productivity in Modern China. Researches in Chinese Economic History (02). 吴承明. (1989). 中国近代农业生 产力的考察. 中国经济史研究 (02). 81 Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. p. 79. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. p. 79. 82 Zhao, D. X. (2016). China’s Modern and Contemporary Economic History. Higher Education Press. p. 83. 赵德馨. (2016). 中国近现代经济史. 高等教育出版社. p. 83.

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6.3 The Development of Contemporary Agriculture in China The establishment of the People’s Republic of China in October 1949 rapidly restored China’s rural economy. China’s agriculture had entered the stage of contemporary agriculture. In 1952, China’s agricultural production returned to the best level in history; in 1965, the country’s total agricultural output value reached 58.96 billion yuan. From 1952 to 1965, China completed agricultural cooperative transformation and the switch to people’s communes and established a monopoly system that was compatible with the planned economic structure. During this period, China’s systems in agricultural education, scientific research and technical promotion were generally established and formed a considerable scale. However, due to the later 10-year Cultural Revolution, the rural economy and agricultural production were severely damaged and were in a state of stagnation. It was not until the Chinese government implemented the Reform and Opening-up policy in 1978 that the Chinese economy truly ushered in a period of rapid development. In 1988, China’s rural social output reached 1253.5 billion yuan, 2.43 times that of 1978 at comparable prices, with an average annual growth rate of 13.1%, faster than the growth rate of total social output(1.9 times) and the average annual growth rate (11.2%) over the same period. The total agricultural output value (excluding village-run industrials) that year reached 586.5 billion yuan, an increase of 82.6% over 1978, with an average annual increase of 6.2%. In 1988, there were 18 881 600 township and village enterprises nationwide, with a total output of 649.57 billion yuan, accounting for 56% of the total output of rural society and 23.5% of the total output of the country, which indicated their pivotal position in the national economy.83 By the mid-1990s, in terms of agricultural products, China had successfully achieved a historic transition from a chronic shortage to a basic balance of supply and demand and to a surplus in harvest. The production of China’s major agricultural products since 1978 is shown in Table 6.2. In 1984, China experienced difficulties in selling grain and cotton for the first time. Based on this background, China’s agriculture began to adjust its structure. In the early 1990s, the improvement of China’s comprehensive agricultural production capacity, the oversupply and the decreased pricing of most agricultural products forced all regions to adjust the sectoral structure of agriculture to adapt to market changes. After continuous adjustments, China’s agricultural sectoral structure and rural economic structure have been continuously optimised as follows: the internal sectoral structure of agriculture has changed from crop-cultivation-cored to the common development of crop cultivation, forestry, animal husbandry and fisheries; the structure of the crop cultivation industry has shifted from food-based to the overall development of food crops, cash crops, and fodder crops; and the rural economic structure has switched from agriculture-based to agricultural and nonagricultural coordinated development. As a result, the regional comparative advantages 83

Source: Zhai, H. Q. (ed). (1999). Development of Contemporary Agriculture in China. In: Introduction to Agriculture. Higher Education Press. 翟虎渠 (ed). (1999). “中国近现代农业的发展. In: 农业概论. 高等教育出版社.

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Table 6.2 Output of major agricultural products in China85 Year

Grain

Cotton

1978

304.765

2.167

Meat 8.563

Milk 0.971

Eggs 1.991

Aquatic products

1983

387.28

4.637

14.021

2.219

3.349

5.458

1988

394.08

4.149

24.795

4.189

6.955

10.609

1993

456.488

3.739

38.415

5.637

11.798

18.23

1998

512.295

4.501

57.238

7.454

20.213

39.065

2003

430.695

4.86

69.329

18.486

26.067

47.046

2004

469.469

6.324

72.448

23.684

27.237

49.018

4.653

Unit: million tons Table 6.3 Proportional changes in the output value structure of China’s major agricultural industries86 Year

1978

1980

1985

1990

1995

2000

2001

2002

2003

2004

Crop cultivation

80

75.6

69.2

64.7

58.4

55.7

55.2

54.5

50.1

50.1

Animal husbandry

15

18.4

22.1

25.7

29.7

29.7

30.4

30.9

32.1

33.6

Fishery

1.6

1.7

3.5

5.4

8.4

10.9

10.8

10.8

10.6

9.9

Forestry

3.4

4.2

5.2

4.3

3.5

3.8

3.6

3.8

4.2

3.7

Source: National Bureau of Statistics of People’s Republic of China (ed). (2005). China Statistical Annals - 2005. China Statistics Press. 中华人民共和国国家统计局 (ed). (2005). 中国统计年 鉴—2005. 中国统计出版社 Employer: %

and scale advantages of agriculture have gradually been brought into play. Since the reform and opening up, the structure of China’s agriculture has undergone significant changes. In terms of products in different industries, the output of crop cultivation dropped significantly, from 80% in 1978 to 50% in 2004. The share of animal husbandry and fishery increased significantly, from 15 and 1.6% in 1978 to 33.6 and 9.9% in 2004, respectively, while forestry remained basically stable. Please refer to Table 6.3 to see the proportional changes in the output value structure of China’s major agricultural industries.84 The agricultural cooperative transformation implemented by the Chinese government from 1952 to 1956 expanded the scale of agricultural operations, which achieved significant results in a certain period of time. However, a series of errors in the implementation process, such as the abolition of the farmers’ management autonomy, stifled the enthusiasm and initiative of farmers in production, thus making the new 84

Source: Zhai, H. Q. (ed). (2006). Introduction to Agriculture. Higher Education Press. pp. 117, 145. 翟虎渠 (ed). (2006). 农业概论. 高等教育出版社. pp. 117, 145. 85 Source: Zhai, H. Q. (ed). (2006). Introduction to Agriculture. Higher Education Press. p. 117. Table 8–2. 翟虎渠 (ed). (2006). 农业概论. 高等教育出版社. p. 117. 表8-2. 86 Source: Zhai, H. Q. (ed). (2006). Introduction to Agriculture. Higher Education Press. p. 145, Table 10–4. 翟虎渠 (ed). (2006). 农业概论. 高等教育出版社. p. 145, 表10-4.

6.3 The Development of Contemporary Agriculture in China

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China’s action to transform the peasant economy into a dead end. After the Third Plenary Session of the Eleventh Communist Party of China (CPC) Central Committee in December 1978, China’s rural areas generally implemented the household contract responsibility system with remuneration linked to output. This policy has restored household management of production and farmers’ autonomy in management, greatly mobilised the enthusiasm and initiative of farmers, and achieved high-speed growth in agricultural production within a period of time. However, the problem of a small and scattered agricultural business scale has never been fundamentally resolved. At present, China’s population has surpassed any period in history, and the equal-field type of household production has in fact exacerbated the agricultural economic issues of small scale, scattered management, and weak reproduction capacity. This situation is unfavourable to the popularisation and use of large-scale high-efficiency agricultural machinery and tools, hinders the development of agricultural modernisation, and restricts the further improvement of agricultural labour productivity. The fundamental way to solve China’s agricultural problems is to reconnect the links of agricultural reproduction according to their internal connections with the market and guide scattered small households to participate in the social and economic system’s division of labour and coordination. Specific measures include establishing an agricultural market system, revitalising land use rights, implementing a joint-stock cooperative system, improving the level of agricultural science and technology, and performing agricultural industrialisation.

6.3.1 Contemporary Agricultural Industrialisation87 As Peter A. Coclanis, president of the American Society for Agricultural History, put it, the industrialisation of agriculture was similar to a steam-filled steam wheel in the eighteenth century and has been accelerating ever since. Starting in approximately 1800, the change in the world’s agricultural system gradually turned to industrialisation. The process of agricultural industrialisation, in a narrow sense, refers to the relative transfer of agriculture from traditional farming, animal husbandry, fishing, hunting, and gathering to production activities dominated by agricultural product processing and commercial operations or the process of systematically using scientific knowledge in agricultural production and management activities to increase agricultural productivity in a broad sense. From the application and promotion of modern scientific knowledge in the agricultural field, there have been three important turning points in the industrialisation process of world agriculture. 87

Coclanis, P. A. (2009). Historical Changes and Effects of the World Agricultural Institutions (Su, T. W., trans.). World History (06). 彼得·考克莱尼斯. (2009). 世界农业制度的历史变迁与功效 ( 苏天旺, trans.). 世界历史 (06).

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The first turning point was the rise of modern genetics approximately 1900, when botanists rediscovered the laws of biological genetics that Mendel discovered in 1865. In the 1930s, modern genetics led to hybridisation in the field of crop cultivation. It has been found that offspring produced by the planned hybridisation of different plant varieties or strains often enhance vitality and yield. The hybrid advantage of crops can enable agriculture to increase yields while reducing land occupation, so hybrid varieties are quickly adopted by farmers in the United States and worldwide. Once the hybrid varieties of crops are widely introduced and promoted by countries worldwide, scientific knowledge will be widely applied in agricultural production, and agricultural industrialisation institutions will be formed as a result. The extensive application of scientific knowledge in agricultural production directly promotes the mechanisation of farm tools and the innovations in the production, processing, transportation, marketing, and financial services related to agricultural products. By the middle of the twentieth century, new developments in agricultural industrialisation in developed countries had rapidly transformed agricultural production methods so that these countries could easily feed their population without many farmers. In 1950, for example, farmers accounted for only 11.6% of the labour force in the United States, compared with 21% in 1930 and 40% in 1900. The second turning point was that in the 1960s and 1970s, contemporary industrialised biological agriculture spread quickly from developed countries to less developed regions of the world. Among them, the efforts of the U.S. government and the Mexican government since the 1940s, as well as the support of organisations such as the Rockefeller Foundation and the Ford Foundation, have played an important role. A group of talented botanists, soil scientists, agronomists and agricultural economists went to some underdeveloped countries in Asia and Latin America and initiated a new round of changes in the agricultural system in these states. The third turning point was the introduction of transgenic technology and genetically modified crops into contemporary agriculture in the mid-1980s. Transgenic technology has been proven to change the maturity of crops, enhance environmental adaptability and crop resistance to diseases and pests, and further increase crop yields. Genetically modified crops have great potential to improve human meals. At present, genetic modification has begun to lead the production of important economic crops such as soybeans, corn, cotton, and rapeseed. These three turning points in the world agricultural industrialisation have changed the trajectory of agricultural development. Each turning point has greatly increased the yield and productivity of agriculture, which has also led to great changes in its structure and organisation. In the twentieth century, these changes formed the new sector system in agriculture.

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6.3.2 Contemporary Agricultural Technologies Since the middle of the nineteenth century, the research results and experimental methods of natural sciences (such as chemistry, biology, physiology, genetics, entomology, microbiology, soil science and meteorology) have been gradually applied to agricultural technology research and practice in different countries in the world, which has promoted the development of agricultural technology from the empirical stage to the contemporary agricultural science stage. In 1840, German chemist Justus von Liebig (1803–1873) published the book Organic Chemistry In Its Applications to Agriculture and Physiology,88 which marked the beginning of the development of contemporary agricultural science. Since then, experiment-based agricultural science has been formed. In 1883, the Russian geographer and soil scientist Vasily Vasilyevich Dokuchaev (Bac´ili Bac´ileviq Dokyqáev, 1846–1903) published the book Russian Chernozem, which laid the foundation for soil science. In the mid and late nineteenth century, Liebig’s research and discoveries in agricultural chemistry and plant nutrients directly led to the emergence of chemical fertiliser industrials. The application of chemical fertilisers in agricultural planting gradually became popular, which led to great changes in traditional agricultural farming techniques. With the development of synthetic chemistry, some countries have subsequently developed pesticides and herbicides, which have been widely used in crop pest control, thereby increasing the yield of crops. In 1953, the discovery of the double helical structure of biological DNA opened a new era in biological science research. The molecular biology developed on this basis directly led to the emergence of bioengineering in the 1970s, including the wide application of bioengineering technologies such as genetic engineering, cell engineering, hybrid breeding, and microbial pesticides in agriculture, continuously promoting the rapid development of contemporary agricultural technology. Contemporary scientific research on agriculture in China occurred later than that of developed countries in Europe and America. At the end of the nineteenth century, the establishment of a small number of agricultural, forestry and sericulture schools and the subsequent establishment of some higher agricultural schools played a leading role in the spread of contemporary science and technology. At the beginning of the twentieth century, contemporary scientific research on agriculture, which began with the improvement of crops, silkworms and livestock varieties and the control of diseases and pests, gradually developed in China. After the founding of the People’s Republic of China, especially since 1978, China has introduced new varieties of crops, livestock, poultry, and aquatic products to agriculture, as well as technologies in fields of seed processing, cultivation, breeding, fertilisation, storage and preservation, energy and environmental protection, and water-saving irrigation, etc., and has accelerated their application in agricultural production. Cutting-edge technologies for agricultural development (i.e., molecular biotechnology, DNA chip technology, 3S technology, etc.) have been introduced to 88

Liebig, J. (1840). Organic Chemistry In Its Applications to Agriculture and Physiology. London: Taylor and Walton.

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accelerate the transformation of Chinese agricultural technology from traditional to contemporary. The popularisation and application of contemporary agricultural technology has greatly promoted the development of China’s agricultural economy. For example, in 1975, Chinese hybrid rice breeding expert Yuan Long-Ping made a breakthrough in indica hybrid rice. China began to promote this planting technology in 1976. By 1999, it had promoted a total area of nearly 3 billion mu and increased rice yield by 200 billion kilograms, thus achieving a new leap in the history of rice cultivation.89 Since the founding of the People’s Republic of China, China’s agriculture has developed a series of core technologies in hybrid rice, hybrid corn, genetically modified pest-resistant cotton, and hybrid rape. More than 6000 new crop varieties and new combinations have been cultivated and promoted. Major crop varieties, such as grain, cotton, and oil, have been modified 5 to 6 times nationwide. Each modification increased the yield by more than 10%. In addition, China’s promotion and application of technological achievements in breed improvement, cultivation techniques, and disease and pest control supported the national grain yield from 68.6 kg per mu in 1949 to 310 kg per mu in 2005 and the total grain output from 100 million tons to 480 million tons. China has established a breeding system for improved varieties in animal husbandry and aquaculture and has developed high-quality compound feed and intensive breeding technologies, which contributed more than half of the scientific and technological progress of animal husbandry and aquaculture, thus making China rank first in the world in terms of the total output of meat, poultry eggs and aquatic products.90 In 2010, China’s agricultural technological progress contributed 52% to agricultural growth, the coverage rate of improved seeds reached over 96%, the unified seed supply rate reached 66%, and the comprehensive mechanisation level of farming and harvesting reached 52%.91 At present, high technology such as biological cell, genetic engineering, soilless farming, tissue farming, animal embryo transfer, etc., have begun to be comprehensively applied to breed improvement, livestock and poultry breeding, etc., which drives contemporary agriculture to a highly technological and industrialised future, revitalising the ancient agriculture of mankind.

89

Lu, Liang-Shu., Wang, Dong-Yang. (2002). Review and Prospect of Development of Agricultural Science and Technology in China in Recent and Modern Times. World Sci-Tech R & D (04). 卢良 恕., 王东阳. (2002). 近现代中国农业科学技术发展回顾与展望. 科技和产业 (04). 90 Chen, G., Liu, L. (2006). The Contribution Rate of Scientific and Technological Progress to Our Country’s Agriculture Raised Significantly. Xinhua Net. 陈钢., 刘林. (2006). 科技进步对我 国农业贡献率大幅提升. 新华网. http://news.sina.com.cn/c/2006-11-05/ 212410419726 s.shtml. Accessed 5 Nov 2006. 91 Shu, H. F. (2011, April 20). The Contribution of China’s Agricultural Progress Reached 52% Last Year. Science and Technology Daily. 束洪福. (2011, 4.20). 去年我国农业科技进步贡献率 达52%. 科技日报.

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6.3.3 The Impact of Contemporary Industrials on Agriculture In the traditional agricultural era, the farm tools applied by people were relatively simple tools, such as hoes, sickles and single ploughs, and the power was mainly animal power, such as cattle, horses or manpower. In the industrial age, the tools were tractors, harvesters, multi-component mechanical plows and other large and efficient mechanical equipment, and the power was petroleum energy, mechanical power, and electricity. Traditional agriculture has small production scale, less capital investment, low technological demand, relatively primitive product processing, and a low level of overall production, while contemporary agriculture has a large production scale, more capital investment, high technological demand, deep product processing, and a high level of overall production. The direct impact of modern industrials on agriculture is mainly manifested in the impact of industrial technology on farm tools, which provides a variety of advanced and efficient agricultural machinery, equipment and farm tools for agricultural production. Modern agricultural machinery, in addition to tractors, harvesters, and rice planters, also includes various types in terms of cultivation and planting, plant protection, forestry, fisheries, river dredging, drip irrigation, and greenhouses. In 1956, the world’s first practical rice planter was successfully developed in China.92 In 1958, the first tractor produced by New China opened its workshop in Luoyang, which marked the first step of New China’s agricultural mechanisation.93 The subsequent growth of China’s agricultural machinery manufacturing industry made itself a current annual output of 100 billion yuan after half a century of development. In the eight years since 2002, the annual growth rate of China’s agricultural machinery industry has remained above 20%, and the output in 2007 has exceeded 150 billion yuan94 ; in 2011, it achieved an output of 289.8 billion yuan.95 In 2019, China’s comprehensive agricultural mechanisation rate was 69%, among which the machine-cultivation, machine seeding, and machine harvesting rates were 84, 56, and 61%, respectively. The mechanisation rates of the three major food crops of wheat, rice, and corn were 95, 81, and 88%, respectively.96

92 Wang, Y. Q. A Centenarian’s Feelings on Agriculture, Rural Areas and Farmers. Farmers Daily. 王玉琪. 一位百岁老人的 “三农”情怀. 农民日报. http://finance.china.com.cn/roll/20120525/750 483.shtml. 93 Agricultural Machinery in 60 Years of Machinery: New China’s First Dongfanghong Tractor. Luoyang Net. 机械60年之农机: 新中国第一台东方红拖拉机. 洛阳网. http://info.mac hine.hc360.com/2009/09/02102560421.shtml. Accessed 2 Sept 2009. 94 The Profit of the National Agricultural Machinery Industry in 2009 is Expected to Exceed 10 Billion Yuan. China industrials News. 2009 年全国农机行业利润预计超过100亿元. 中国工业 报. http://www.nongjitong.com/blog/2010/27783.html. Accessed 29 Dec 2009. 95 Agricultural Machinery Industry Has Broad Development Prospects in 2012. China Machinery Net. 农业机械行业2012年发展前景广阔. 中华机械网. http://news.jc001.cn/12/0525/660913. html. Accessed 25 May 2012. 96 Xiao, L. S. (2020). Analysis of the Status Quo and Market Prospects of China’s Agricultural Machinery in 2020: Mechanisation Rate is Expected to Reach 70%. Qianzhan.com. 肖丽洒. (2020).

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The adoption of high-efficiency agricultural machinery and advanced technologies has updated, transformed and even replaced traditional methods and technologies, greatly improving agricultural production efficiency. For example, Heilongjiang Friendship Farm, which has 1.6 million mu of arable land, currently has a comprehensive mechanisation rate of 98%. Modern agricultural machinery with GPS positioning is used in the farm, that day and night nonstop seeding can be done without manual control, allowing the seeding of 100 000 mu (1 mu = 0.0667 hectares) in one day; Relying on modern agricultural machinery, not only work efficiency improves but also crop yields increases through precision seeding. Today, the average yield of rice per mu on the farm has reached 600 kg, while the average yield of corn per mu is 750 kg.97

6.3.4 The Impact of Contemporary Services on Agriculture The influence of the modern service sector on agriculture is manifested in the penetration, transformation and perfection of all aspects of agricultural production, operation, management, etc., as well as the further promotion of the agricultural division of labour, thereby enhancing the production level of agriculture. In this process, as agriculture absorbs, integrates and applies service sector knowledge, technology and institutions, the service sector promotes the continuous deepening, specialisation, and refinement of agriculture, thereby enabling more industries to differentiate themselves from agriculture. These newly-born industries often combine the dual characteristics of agriculture and services, and it is difficult to strictly divide them into one particular sector. For example, the modern agricultural service industry was born after the infiltration of modern services into agriculture. In 1976, China began to promote the technology of indica hybrid rice, which marked the beginning of the modern service sector’s entry into China’s agricultural field. As an important part of modern agriculture, modern agricultural services play a crucial role in promoting the development of modern agriculture. Modern agricultural services include variety improvement services (providing farmers with highquality seeds and breedings such as grain, livestock and poultry, aquatic products and seedlings), supply provision services (selling chemical fertilisers, pesticides and other agricultural supplies to farmers), circulation services (offering farmers with product exchange platforms and services through wholesale markets and supermarkets), insurance services (giving policy and commercial insurance services for farmers’ products), technological services (providing farmers with efficient planting and breeding models and agricultural technology) and agricultural training services. 2020 年中国农机行业发展现状和市场前景分析, 机械化率有望达到70%. 前瞻网. https://xw. qianzhan.com/analyst/detail/220/200303-bf950e32.html. Accessed 4 Mar 2020. 97 Liu, F., Guan, J. T. (2012). China’s No. 1 Farm: GPS Full Coverage of Agricultural Machinery, Unmanned Operation. Xinhua Net. 刘斐., 管建涛. (2012). 中国第一农场: 农机GPS全覆盖, 可 无人操控作业. 新华网. http://www.qianhuaweb.com/content/2012-05/25/content_2993485.html. Accessed 25 May 2012.

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The penetration of leisure services into agriculture created the agricultural leisure service industry, which integrated ecology, tourism, sightseeing, and leisure together to meet people’s needs for returning to nature and experiencing farming culture, as well as the demand for leisure and entertainment, thereby promoting agricultural development and improving the comprehensive benefits of agriculture. While the influence of information services on agriculture formed the agricultural information service industry, timely provision of farmers with information such as policy, technology, product price and market, supply and demand, etc.

6.3.5 The Impact of Contemporary Information Technology on Agriculture At present, human society has developed into the information age. In human economic activities, the information sector has gradually taken the leading position, and it will have a wide and profound impact on the political, economic, human-culture, science, education, and legal systems of human society. Among the many technologies supporting the development of the information sector, Internet Information technology first underwent rapid development and spread among different countries and regions in the world. On April 20, 1994, at the Computer Network Information Centre of the Chinese Academy of Sciences, China realised a full-featured connection with the Internet, marking a key step in China’s information networking.98 In January 1996, ChinaNet backbone networks were built and officially opened.99 Since then, the Internet has begun to enter public life and has developed rapidly in China. At the end of October 1997, China had 299 000 computers connected to the Internet and 620 000 Internet users.100 By the end of December 2011, the number of Chinese Internet users had reached 513 million, and the Internet penetration rate had risen to 38.3%.101 As of March 2020, the number of Chinese Internet users was 904 million, the Internet penetration rate achieved 64.5%, and the number of smartphone Internet users reached 897 million.102 The rapid development and wide application of information networks have effectively promoted the continuous progress of society as a whole in the areas of economy, culture, science, education, and institutions.

Internet Veterans Celebrate the 10th Anniversary of the Birth of the Internet in China. Sina.com. 互 联网元老共庆中国互联网诞生十周年. 新浪网. http://tech.sina.com.cn/i/w/2004-04-19/224435 1242.shtml. Accessed 19 Apr 2004. 99 Source: Tencent.com. http://news.qq.com/a/20090727/000766.html. Accessed 27 Jul 2009. 100 Source: China Internet Network Information Centre. 中国互联网络信息中心. http://news.xin huanet.com/ziliao/2003-01/21/content_699043.html. Accessed Oct 1997. 101 Source: Tencent.com. http://tech.qq.com/a/20120116/000266.html. Accessed 16 Jan 2012. 102 Chinese Internet Users Exceed 900 Million. Sina.com. 中国网民超9亿. 新浪网. http://finance. sina.com.cn/wm/2020-04-28/doc-iircuyvi0229128.shtml. Accessed 28 Apr 2020. 98

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If industrials and services can be regarded as the driving force behind the transformation of agriculture from traditional to contemporary, then the information industry can be regarded as the pusher to step up its modernisation. The impact of the information sector on agriculture is mainly manifested in the extensive penetration and effect of information technology on agricultural production. On the basis of the influence of industrials and services on agricultural modernisation, the information, while improving the modernisation quality and level of agriculture, also further promotes its professional development. At present, modern information technologies, including modern communications, satellite remote sensing, the Internet of Things, sensor networks, and robotics, have a direct role in promoting the transformation, upgrading and development of agriculture from traditional to contemporary. The role of modern information technology in promoting agriculture is manifested in the penetration, transformation and improvement of agricultural production, operation, management, and services and pushing the automation, intelligence, and informatisation of contemporary agriculture. In this process, as agriculture absorbs, integrates, and applies information knowledge, technology, and institutions, the information sector promotes the continuous evolution and development of agriculture to a higher level while simultaneously driving the continuous growth and expansion of industries inside agriculture. In agricultural production, modern information technology has penetrated into different industries and links of agriculture. For example, in crop cultivation, information technology has been applied in agricultural monitoring, precision fertilisation, intelligent irrigation, intelligent monitoring, and pest monitoring and control. In animal husbandry, information technology has reached livestock and poultry breeding, meat, egg and milk production, feed production, farm management, livestock and environmental control of poultry houses, as well as the automation, intelligence and digitalisation of each link. In grassland, information technology has been applied to grassland remote sensing monitoring, disaster early warning, grass seed protection, and fire emergency command. In fisheries, information technology has been integrated into water environment monitoring, real-time monitoring of fishing boats, and monitoring of catastrophic marine events. In terms of agricultural operations, modern information technology has directly promoted agricultural e-commerce, market informatisation, and leisure agricultural information services. In agricultural management, modern information technology has pushed forward agricultural e-government, resource informatisation, machinery cross-regional scheduling, and cooperative management of local agricultural markets. It also gave birth to agricultural information services in the field of agricultural services. Today, Chinese agriculture, which has a history of tens of thousands of years, is evolving from traditional to contemporary. The outstanding manifestation of this evolution is the wide application of modern information technology in agricultural production, and informatisation is becoming increasingly important in the development of contemporary agriculture. At present, there are more than 30 000 agricultural websites in China, many of which involve agricultural e-commerce. Among them, the One Stop service platform

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of the Ministry of Agriculture dedicated to providing online marketing services for farmers and firms has more than 360 000 registered members, with an annual information release volume of more than 100 000, and an average daily clicks of more than 180 000. Some provinces and regions have supported and established a number of specialised websites and trading networks around key local agricultural products. China’s agricultural system has successively built 19 provincial, 78 prefecture and 346 county levels of comprehensive information service platforms for work related to agriculture, rural areas and farmers. The Agricultural Machinery Cross-regional Operations Express Service provided by China’s Ministry of Agriculture can offer clients and service providers a free platform to timely release and receive supply and demand information for free and is able to dock services for 100 000 agricultural operators. Most wholesale markets across the country have established information systems based on information centres, testing centres and settlement centres, and have built up advanced quality testing centres for agricultural products, modern electronic monitoring systems, and smart IC card management systems, basically realising the informatisation of market management and electronic charging. The modern logistics system that matches the informatisation of the wholesale market is developing rapidly, and order agriculture, chain operations, and logistics distribution have become important methods for the development of new types of circulation.103 In recent years, agricultural information websites established in different parts of China have connected township governments, agricultural technical stations, leading agricultural firms, wholesale markets of agricultural products, farmers’ cooperative economic organisations, agricultural intermediary organisations, and large planting and raising households, thus constructing an extensive cross-regional new agricultural market network, which broke the state of division between regional markets and greatly promoted the spread and exchange of agricultural information. It not only expands the scope and scale of the agricultural market but also improves the transaction efficiency of the agricultural market. ∗ ∗ ∗ Through the understanding of the long-term development of China’s agriculture, it is known that China’s agriculture has been leading the world until the fifteenth century. However, in the 19th and early twentieth centuries, both Europe and North America experienced the agricultural and commercial revolution, while the agricultural production of Chinese society stagnated. In the late Qing Dynasty and modern times, what was the fundamental reason behind the stagnation of Chinese agriculture? In the 1930s, American agricultural economist John Lossing Buck (1890–1975) published two books, Chinese Farm Economy and Land Utilization in China, on the basis of investigation and analysis. He analysed China’s agricultural economy in terms of agricultural investment, operation, management, output, income, etc. He believed that the main problem of China’s modern agricultural economy is the 103

Source: Guo, Z. Y. (2011). Informatisation and Contermporary Agricultural Development. CIO Times. 郭作玉. (2011). 信息化与现代农业发展. 中国信息界. http://www.ciotimes.com/industry/ ny/55974.html. Accessed 24 Oct 2011.

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backwardness of technology in a broad sense. For this reason, Bu Kai proposed 108 suggestions to the Kuomintang government for improving the agricultural economy, including the establishment of rural financial facilities, the use of improved seeds and fertilisers, and the improvement of transportation conditions.104 American scholar Ramon H. Myers studied the agricultural economy of Hebei and Shandong in China from 1890 to 1949 in the book The Chinese Peasant Economy published in 1970. He came to the same conclusion as Bu Kai that the problem of modern Chinese agricultural economy in a broad sense is technological backwardness.105 British historian Mark Elvin pointed out in his book The Pattern of the Chinese Past in 1973 that China’s agricultural economy reached the high-level equilibrium trap before modern times; that is, traditional agricultural technology, the use of resources, and population growth have all reached the apex that agricultural farming could support, while jumping out the high-level trap requires an industrial revolution.106 Sociologist Huang Zong-Zhi published The Peasant Economy and Social Change in North China and The Peasant Family and Rural Development in the Yangzi Delta in 1985 and 1990.107 In the first book, he analysed the undeveloped growth phenomenon in which the total agricultural production in North China has increased since the Ming and Qing Dynasties, but the per capita productivity and per capita income have declined. He also noticed the impact of commerce on agriculture and the subsequent specialised production, disparity between the rich and the poor, and social polarisation. In the second book, he pointed out that a high degree of commercialisation occurred in Jiangnan from the Ming and Qing Dynasties, which instead of breaking the peasant economy consolidated and strengthened the peasant economy.108 The research of these scholars reflects the problems of modern Chinese agriculture from different aspects. From the historical development, the industrialisation initiated by the Self-Strengthening Movement of the Qing Dynasty had little impact on agricultural technology. The institutional reform of the 1911 Revolution did not transform the traditional peasant economy. Despite the development of agricultural commercialisation in modern times, the progress of agricultural technology was very limited, coupled with frequent wars that had damaged the agricultural market network several times. These factors are actually the reasons behind the stagnation.

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Stross, R. (1986). The Stubborn Earth: American Agriculturalists on Chinese Soil, 1898–1937. Berkeley: University of California Press. pp.162–165, 181–183. 105 Myers, R. (1970). The Chinese Peasant Economy: Agricultural Development in Hopei and Shantung, 1890–1949. Cambridge: Harvard University Press. p. 292. 106 Elvin, M. (1973). The Pattern of the Chinese Past. Stanford: Stanford University Press. pp. 310– 319. 107 Huang, Philip C. C. (1985). The Peasant Economy and Social Change in North China. Stanford University Press. Huang, Philip C. C. (1990). The Peasant Family and Rural Development in the Yangzi Delta. Stanford University Press. 108 Source: Chen, Y. X. (2001). A Study of Modern Chinese Agricultural Economy by American Scholars. Researches in Chinese Economic History (01). 陈意新. (2001). 美国学者对中国近代农 业经济的研究. 中国经济史研究 (01).

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If comparing the relation between the dynamics behind sectoral development in Chap. 5 (Fig. 5.3), it is clear that the stagnation of modern Chinese agriculture is caused by a combination of various factors. On the one hand, from the internal factors in sectoral development, the sluggishness of the dynamic factors inside the sector, including corporate organisation (lack of farm-based large-scale operation), resources (relatively reduced land resources), market (underdeveloped and repeatedly destroyed market network), knowledge (slow introduction of agricultural experimental scientific knowledge), institutions (lack of reforms in agricultural institutions from macro to micro levels) and technology (backward agricultural technology), caused the stagnation of modern Chinese agriculture. On the other hand, from external factors in sectoral development, insufficient demand and supply outside the sector is the main reason behind the stagnation of modern Chinese agriculture. From the production structure, since the Qing Dynasty entered central China in 1644, the long-term confrontation between the northern nomads and the southern farming peoples ended, which objectively reduced the state’s gigantic demand for horses as a war resource. As the lifestyle of the Manchu rulers was gradually assimilated by the farming culture, animal husbandry with horse raising as the core gradually declined, which caused an imbalance in the proportion of crop cultivation and animal husbandry. As a result, the animal husbandry demand for crop cultivation was reduced. In terms of distribution structure, starting from the middle and late Qing dynasties, clever and legal plunders from aristocrats, bureaucrats and landlords have increasingly polarised the distribution of social wealth. As a result, farmers and urban residents who accounted for the majority of society were becoming increasingly impoverished, which directly restricted the growth of the consumption capacity of the entire society. The stagnation of the consumption level bogged down the consumption demand, leading to the slump of production demand. From market exchanges, due to the decline of the ruling class, the decay of the social institutions, and the exploitation of excessive taxes, various social contradictions have been intensified, leading to peasant uprisings, war turmoil, and local power separation. These factors have blocked the originally connected market transaction network between urban and rural areas, between cities, and between regions, thereby inhibiting commodity circulation and market demand. From 1800 to 1900, in terms of agricultural knowledge, agricultural institutions, and agricultural technology, there were barely any innovations and inventions in the society of the late Qing Dynasty, and more were just gathering and repeating past experiences. It is the combination of these many factors that led to the long-term stagnation of Chinese agriculture in the late Qing Dynasty and modern times. After the founding of New China in 1949, institutional reform, knowledge advancement and technological development in the agricultural field pushed China’s agriculture into rapid growth. The subsequent industrialisation, marketisation and informatisation have fully penetrated, transformed and upgraded agriculture, thereby further promoting the level of production and development of agriculture.

Chapter 7

The Macro-level of the Economic System: The Dynamic Structure and Evolution of the National Economy

This chapter first briefly describes the main ideas of the representative theory of sectoral structure and lists and categorises the key words involved; puts forward a twotiered structural model of the economic system on the basis of analysing the internal and external environment and constituent elements of the national economic system; explores the dynamic factors affecting the development of the economic system from the angle of structure and expounds the transmission process of social demand in the economic system and the role of market and government; briefly explains the distribution within the national economic system and the state system from the macrolevel of the national economy and reviews the social practice history of resource allocation in the two systems of market economy and planned economy; analyses the main factors affecting sectoral structural evolution, expounds the general evolutionary trend of sectoral structure, discusses the relationship between sectoral input structure and output structure, and the direction of adjusting the sectoral structure; and expounds the openness and inclusiveness of the book’s theoretical framework. The main discussions of this chapter are as follows: 1.

The structural characteristics and operating laws of the national economic system were studied and discussed by economists worldwide with different methods and angles, such as the classical economic thoughts of William Petty (1623–1687), François Quesnay (1644–1774), and Adam Smith, etc., Hoffmann’s Empirical Rule, Kaname Akamatsu’s (1896–1974) Flying Geese Model Theory, the labour movement law put forward by Fisher and Colin Clark and the economic explanation given by Jean Fourastié (1907–1990), Kuznets’s empirical analysis and his per capita income influence theory, Wassily Leontief’s (1905–1999) input–output model, William Arthur Lewis’s (1915–1991) Duality Theory and the Theory of Economic Growth, Miyohei Shinohara’s sector-trade structure theory, the economic development strategy proposed by Albert Otto Hirschman (1915–2012), the Stages of Economic Growth and Development, and spreading effects of leading sectors suggested by Walt Whitman Rostow (1916–2003), Hollis Burley Chenery’s (1918–1993) formal

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structure and Industrialisation Stage Theory, the theoretical framework of New Structuralist Economics by Lin Yi-Fu, etc. Although the factors involved in these ideas and theories are complicated, the book roughly divides them into13 factors after classifying and listing their key words in terms of economic system structure, economic dynamics, external environment demand, external environment supply, social production, sector system, exchange system, distribution system, social consumption, science and technology, economic institutions, cultural education, and other social factors. These factors reflect the basic structure, operating characteristics, external supply and demand, composition links and dynamic factors of the national economic system. The ideas and theories put forward by these economists were the results of their observation, analysis and summary of the economic system in different times and spaces. From a systematic, holistic, and connected point of view, their observations are only one stage, one aspect, or one part of the entire process of human socioeconomic operation, each with its own focus, detail, and discovery! As the story of Blind Men and the Elephant described in the opening part, they just revealed part of the truth about the operation of the socioeconomic system. The main purpose of this book is systematic synthesis rather than comparative analysis; therefore, their thoughts and research results all provide a useful reference for the construction of the book’s theoretical framework. From the external environment of the national economic system, the general external factors that affect the development of the economic system are demand and supply, and the specific factors include natural resources, human-culture, economy, polity, science, law, and education. In terms of the internal environment of the national economic system, the national economic system is an organic system composed of surface factors such as production, sector, market, distribution, consumption and deep factors such as knowledge, technology, institutions, culture, and education. Among them, the production factor refers to social material production, which includes the production of private goods and the production of public goods. It should be emphasised that the production system of human society includes at least three aspects of population production, mental production and material production. This book examines population production and mental production within the discussions of human-culture systems and science systems (Sect. 8.4). From the operation of the national economic system, the growth and evolution of the economic system is a continuous cycle of production and consumption. The actual operating process within the economic system can be divided into the two chains of social production → sector system → exchange system → distribution system → social consumption and social production → science and technology → economic institutions → cultural education → social consumption, from which the book obtains the general operational structure of the economic system. In terms of socioeconomic relations, the complete production relation of

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a socioeconomic system should be composed of its internal production relations network and its external social relations network. From the internal environment of the state system, the direct external motivations for the evolution of a state’s economic system mainly come from the factors in its domestic environment in terms of human-culture, polity, science, law, education, etc. From the international environment, the indirect external motivations for the evolution of a state’s economic system mainly come from the factors in its international environment in terms of human-culture, economy, polity, science, law, education, etc. The general external factors that affect the development of the economic system are demand and supply, and the specific factors include human-culture, economy, polity, science, law, and education, among which the economic factor can be further divided into social production, sector system, exchange system, distribution system, and social consumption. The demand factor of the external environment is the primary force for the development of the economic system, while the supply of resource elements by the external environment is a necessary condition for the development of the economic system. The internal motivations that affect the development of a state’s economic system come from the factors within the economic system in terms of production, sectors, markets, distribution, consumption, knowledge, technology, institutions, culture, and education. Among them, the most important dynamic factors are the sector system and the consumption system within the economic system, and among all the sectors inside the sector system, leading sectors play a crucial leading role in the growth and evolution of the economic system. Combining the external and internal motivations and the productionconsumption cycle in the development of the economic system, the book draws the relation between the dynamics behind the development of the economic system. This picture is the essence of the book, which vividly summarises the general structure, basic dynamics and operating principles of the human socioeconomic system in a very concise form. The effect of human demand on the economic system is a dynamic process, which is achieved through the two chains of human demand – sector system – exchange system – distribution system – consumption system and human demand – science and technology – economic system – cultural education – consumption system. From this, the book draws the effect process of human demand and the evolution of human demand transmission in the economic system. In the process of demand function and transmission in the long period of history, the evolutionary trajectory of human society in the four aspects of sector system, exchange system, distribution system, and consumption system is a gradually expanding spiral, while at the same time, the trajectory of human society’s progress and growth in science and technology, economic institutions, cultural education is also a gradually expanding spiral. In the development of human society, these two spirals are in fact intertwined. In the long run, the evolutionary trajectory of human social needs is also a gradually expanding spiral.

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Regarding the relationship between the market and government in the economic system, the book argues that they are not in opposition to each other or in an either-or relationship but in a functional, complementary and cooperative relationship. In other words, in the operation of the economic system, it is necessary to attach importance to the exchange function of the market system and let the invisible hand of the market play its due role, while at the same time, the regulating function of the distribution system cannot be ignored so that the visible hand of the government can play its due role. Only by achieving organic coordination between the market and the government can the phenomena of market failure or government failure in economic operations be avoided. Within the national economic system, the distribution activities at the macro level are divided into two levels: the distribution within the national economic system and the distribution within the state system. The distribution within the national economic system mainly includes the distribution of resources among its subsystems of sector system, exchange system, distribution system, science and technology, economic institutions and cultural education. The distribution within the state system mainly includes the distribution of resources among its subsystems of human-culture system, economic system, political system, science system, legal system and education system. Within a specific state, private goods are generally distributed through the market organisations in the exchange system within the economic system; the public goods inside the economic system are generally distributed through the distribution organisations in the distribution system within the economic system; the public goods outside the economic system are generally distributed through the power organisations within the political system; and mixed goods are generally distributed through a combination of market mechanisms and government regulations. In terms of the distribution of public goods, whether it can take a holistic view to achieve the best efficiency in a scientific and reasonable approach is directly related to the sustainable, stable and healthy development of a state as a totality. Economic practices worldwide have proven that the implementation of a highly market economy or a highly planned economy is not conducive to the long-term, stable, and healthy development of a state’s economy. From the inside of the economic system, the main factors affecting sectoral structural evolution include demand, supply, knowledge, institutions, technology, firm, industries, and market. The external demand factors that affect sectoral development include the two basic needs of personal consumption and corporate consumption. In the sectoral demand structure, changes in the demand structure of personal consumption first affect the demand structure of corporate consumption, then the demand structure of specific industrial consumption, and finally the demand structure of specific sectoral consumption, while the changes in the demand structure at the three levels of firm, industry, and sector trigger the changes in the supply structure of resource elements at the corresponding levels, resulting in fluctuations in the relative quantity of the elements in the sector, the changes in

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the sectoral composition structure, and ultimately the changes in the sectoral output structure. In the demand structure of sectoral consumption, the ratio between personal consumption demand and corporate consumption demand is constantly changing, and the proportional relationship between the two directly determines the proportional relationship between the sector of the means of consumption and the sector of the means of production. In terms of the long-term history of human society, the resource elements invested by human beings in production reflect the law of evolution from simple to complex, from tangible to intangible, and from low-level to highlevel. In terms of the supply of resource elements, the evolution trend of the sectoral resource structure is labour-intensive → capital-intensive → technology-intensive → knowledge-intensive, which is a process of successive and continuous upgrading of the sectoral structure. In terms of the real world, it is still of practical significance to treat investment or monetary capital as an important factor that affects sectoral structure. 9. The dynamic transmission mechanism of economic growth is consumption structure → demand structure → supply structure → production structure → exchange structure → distribution structure → new consumption structure, while the new consumption structure also drives changes in the demand structure, which is a cyclical and dynamic process. In this process, the production structure, exchange structure, and distribution structure evolve from simplicity to complexity, from extensiveness to intensiveness, and from low-level to highlevel, which is the evolutionary process of the sectoral structure inside the economic system and the continuous renewals of the leading sector within the economic system. The sectoral evolution from simplicity to complexity and from a low-level to a high-level is always accompanied by the progress of human science, the improvement of institutions and the innovation of technology. At the same time, the consumption structure, demand structure, and supply structure in the economic system are also undergoing evolution and upgrading from unity to plurality, from simplicity to complexity, and from low-level to highlevel. The structural framework of the economic system proposed in the book can clearly explain the relationship between sectoral structural evolution and economic growth debated by Kuznets and Rostow. 10. If the operation of the sector system is described in terms of the eight dimensions consisting of economic structural factors such as consumption structure, demand structure, supply structure, production structure, exchange structure, and distribution structure, as well as the other two factors of sectoral growth and national income, the evolutionary trajectory of sectoral structure can be drawn. In the evolution of a sector from small to large and from weak to strong, the evolutionary trajectory of sectoral structure is actually a gradually expanding spiral. 11. From the stages of industrialisation development, the general evolutionary trend develops in sequence from the sectoral structure dominated by the primary sector to the secondary sector and then to the tertiary sector. From the inside of the three major sectors of agriculture, industrials, and services, the evolution

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of sectoral structure, resource structure, and market hierarchy in all countries across the world reflects the development law from simplicity to complexity, from extensiveness to intensiveness, and from low-level to high-level. 12. From the operations of the sector system, sectoral structure includes input structure, production structure, exchange structure, distribution structure, and output structure, and the evolution of sectoral structure is actually a long-term dynamic adjusting process. Through analysis, the book draws the dynamic mechanism behind the evolution of sectoral structure. The dynamic process of long-term changes in the sectoral structure within the national economic system can be clearly understood through this illustration. In the reproduction of human society, the intersectoral distribution is realised through the specific forms of firm production, market exchange, and government redistribution, which includes both the market’s spontaneous regulation and the government’s active regulation. In the process of sectoral input–output operations, sectoral input relations and sectoral distribution relations are interrelated, interacted and interinfluenced, and there is a dynamic relationship of actionreaction and feedback-adjustment between them from a long-term perspective. On the one hand, sectoral input structure determines production structure, production structure determines sectoral exchange structure, and sectoral exchange structure determines sectoral distribution structure, which reflects the decisive role of sectoral input relation on sectoral distribution relation; On the other hand, unbalanced and unreasonable distribution result will lead to the intersectoral flow and redistribution (or reallocation) of the sectoral element of resources, firms, and markets, while different strata within the sector system, and various external stakeholders will also request to adjust the unreasonable distribution institutions, which reflects the reactive force of sectoral distribution relation to sectoral input relation. The action-reaction process existing in the change of sectoral structure also includes the action-reaction between production structure and exchange structure, exchange structure and distribution structure, distribution structure and consumption structure, consumption structure and production structure, which is a complex nonlinear process with chain interactions. In a state’s economic system, the interaction between sectoral input relation and sectoral output relation is a long-term historical evolution, and its mechanism is sectoral input structure → sectoral production structure → sectoral exchange structure → sectoral distribution structure → sectoral output structure → new sectoral input structure, which is a cyclic and dynamic process. It is the dynamic mechanism of action-reaction and feedback-adjustment in social reproduction that promotes the long-term and worldwide transition of sectoral structure and social distribution institutions from unreasonable and unfair to relatively reasonable and fair. 13. In sectoral development, in addition to spontaneous adjustment by the market, it also requires active adjustment by the government. The fundamental purpose

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of the government’s initiative to regulate sectoral structure is to rationally allocate resources, optimise sectoral structure, and promote the fairness of social distribution. The general direction of the government to adjust the sectoral structure is to keep the dynamics for sectoral growth in a virtuous circle along the path of consumption structure → demand structure → supply structure → production structure → exchange structure → distribution structure → national income growth → new consumption structure unimpeded. To optimise sectoral structure, the government should regulate from the three aspects of resources, industries and markets, especially from the input of legal institutions, infrastructure and other public goods in these three aspects to promote the coordinated development of the sector system. In the process of adjusting the sectoral structure, the leading role of the government is to distribute resources fairly and reasonably within the whole society and to provide a good external environment for the coordinated development of industries or sectors. The government should mainly play a role at the meso-level or macro-level of the sector and should not interfere with corporate operations at the micro-level. The theoretical framework constructed in the book is an open system that is highly comprehensive and inclusive. The structural framework from the firm system, sector system, and national economic system to the state and social system suggested in the book can not only well accommodate the theoretical framework of New Structural Economics proposed by Lin Yi-Fu but can also accommodate some typical macrodynamic economics theoretical frameworks. The book unifies micro-, meso- and macro-economics in a complete theoretical framework from the overall ideological logic! However, this theoretical framework is obviously not refined enough and needs to be revised and improved in the future.

7.1 Representative Theories on the Sectoral Structure1 The theory of sectoral structure is that people deepen economic analysis to the level of sectoral structure, which is gradually produced and developed in the analysis of sectoral structure and the practice of sectoral structural policies.2 Economists 1

The content of this section on the theory of sectoral structure mainly refers to the relevant narratives of the following three books: Su, D. S. (ed). (2000). The Economics of Sector. Higher Education Press. pp. 226–230, 237–239; Liu, Z. Y (ed). (2007). Modern Course for the Economics of Sector. Science Press. pp. 158–165; Yang, J. W. (ed). (2008). The Economics of Sector. Shanghai Academy of Social Sciences Press. pp. 162–174. 苏东水 (ed). (2000). 产业经济学. 高等教育出 版社. pp. 226–230, 237–239; 刘志迎 (ed). (2007). 现代产业经济学教程. 科学出版社. pp. 158– 165; 杨建文 (ed). (2008). 产业经济学. 上海社会科学院出版社. pp. 162–174. This book makes necessary corrections to some contradictions and errors in the narratives of these books, such as Hoffmann’s ratio bound, etc., with reference to other relevant documents. 2 Su, D. S. (ed). (2000). The Economics of Sector. Higher Education Press. p. 224. 苏东水 (ed). (2000). 产业经济学. 高等教育出版社. p. 224.

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combined the economic practices of different countries to carry out multilevel, multiangle and multifield research on sectoral structure and economic development, thus forming different theories on sectoral structure. Below will briefly sort out representative theories related to sectoral structure based on the internal connections of different theories and the sequence of their proposed times. Grasping the substantive content of these theories will help a comprehensive understanding of the arguments of this book. Research on sectoral structure has gone through a long historical process, and the ideological origin can be traced back to the seventeenth century. William Petty, the founder of British classical political economy, discovered the income gap between the three sectors of agriculture, industrials and commerce as early as the seventeenth century. He pointed out that “there is much more to be gained by Manufacture than Husbandry, and by Merchandize than Manufacture”.3 This relative income gap between sectors promotes the flow of labour from low-income sectors to highincome sectors. To promote economic development, he advocated that the state should reduce nonproductive expenditures and increase productive expenditures. He also pointed out that the key reason behind the differences in national income levels and economic development stages of all countries is due to the differences in the sectoral structure and occupational population structure. Important works reflecting his sectoral economic thoughts include A Treatise of Taxes and Contributions (1662), Political Arithmetick (1672), etc. The main representative of French classical political economy and the founder of the Physiocrats, François Quesnay, published his important works Tableau Économique (Economic Table) and Analyse de la Formule Arithmétique du Tableau Économique (Analysis of the Arithmetic Formula of the Economic Table) in 1758 and 1766, respectively. He divided the economy into three sectors or, more accurately, classes of people: the proprietary class (landlords), the productive class (people in the agricultural sector) and the sterile class (those in manufacturing and commerce). He explained in graphs how the total products of a state circulate and distribute among the three major classes and how to serve the annual social reproduction, thus revealing the operating process of the production, exchange, and distribution of capitalist social wealth. These economic thoughts of Quesnay had a great influence on the development of political economy afterwards, and the basic principles of his economic table were even the earliest thought origin of later input–output economic analysis. Later, the British economist Adam Smith put forward his value theory, the division of labour theory and exchange theory in the book The Wealth of Nations published in 1776, thus laying the foundation for the overall understanding of economic thought (i.e., the future theory of economic structure). From investment, he pointed out that “the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufactures, and last of all to foreign commerce”. He believed that the reason behind the order from agriculture to manufactures and then to commerce is

3

Petty, W. (1690). Political Arithmetick. London: R. Clavel. p. 12.

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that the capital of individuals will naturally be employed in the manner most advantageous to the whole society.4 In response to the prevailing mercantilism hindering manufactures, he proposed that states should carry out international division of labour in accordance with absolute costs to achieve the purpose of rational allocation of resources and optimisation of sectoral structure. On the basis of research on the industrial history and statistical data of more than 20 nations from 1770 to the early twentieth century, German scholar Hoffmann pointed out that countries preferred heavy industrials in the early stages of their industrialisations; In his book Stadien und Typen der Industrialisierung (Stages and Types of Industrialisation) in 1931, he proposed the empirical law of sectoral structural evolution (also known as Hoffmann Theorem), which means that in the process of a country’s industrialisation, when the manufactures of consumer goods keep to decline, and the manufactures of production goods continue to grow, and the industrial net output of the two sectors (i.e., the Hoffmann’s ratio bound) gradually decreases, in terms of industrial structure, the dominance of light industrials is gradually replaced by heavy industrials; According to the trend of Hoffmann’s ratio bound, he divided the industrialisation process into four stages: Stage I, when the ratio is 5±1.5, the manufactures of the means of consumption dominate; Stage II, when the ratio is 2.5±1, the manufactures of the means of production grow faster than that of the means of consumption, but its scale is still smaller than that of the means of consumption; Stage III, when the ratio is 1±0.5, the manufactures of the means of production go on surging, and finally reach a state of equilibrium with the manufactures of the means of consumption; Stage IV, when the ratio is less than 1, the manufactures of the means of production surpasses the scale of the means of consumption and obtain the dominance.5 Hoffmann published The Growth of the Industrial Economy in 1958, which further elaborated on the general types of structural changes between industrial sectors. He believed that the growth rate of various industrial sectors in the process of industrialisation is not the same, thus resulting in specific structural changes between industrial sectors. The different growth rates of industrial sectors are caused by the interaction of the following factors: ➀ the relative quantity of production factors (natural resources, capital, labour); ➁ the allocation of resources in the domestic and international markets; ➂ technological progress; and ➃ the technical proficiency of the workers and the interests and hobbies of consumers.6 The Japanese economist Akamatsu proposed the flying geese model theory on sectoral development in 1932. He pointed out that the economic development of a country requires a comprehensive sectoral structure that combines domestic and

4

Smith, A. (1937). The Wealth of Nations. Random House. pp. 355, 360. Ji, Y. S., Dai, S. P. (2007). The Hoffmann Theorem and China Industrialization Pattern: A Case Study of Heavy-Chemical Industry. Jilin University Journal Social Sciences Edition (02):94– 97. 纪玉山., 代栓平. (2007). 霍夫曼理论适合中国的工业化模式吗?. 吉林大学社会科学学报 (02):94–97. 6 Yang, J. W. (ed). (2008). The Economics of Sector. Shanghai Academy of Social Sciences Press. p. 168. 杨建文 (ed). (2008). 产业经济学. 上海社会科学院出版社. p. 168. 5

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foreign trade. He advocates combining domestic development with the international market to make the sectoral structure international.7 He found that when sectors are transferred internationally between the pioneering states (regions) and the emerging states (regions), it is a dynamic sectoral gradient transformation and absorption; that is, within a particular period of time, the trade structure of the emerging states (regions) will generally go through three stages of product import, alternative production, and product export, and the associated sectoral structure is updated from labour and resource-intensive to capital-intensive and technology-intensive. International (or interregional) sectoral circulation and chain change mechanisms push the pioneering states (regions) and the emerging states (regions) to transform their sectoral structures to higher levels, which are generally from the sectors oriented by the means of consumption to that by the means of production, or from light industrials to heavy chemical industrials, and then to technology-intensive sectors. Later, in Japan’s Economic Development and International Division of Labour published in 1984, the Japanese economist Yamazawa extended Flying Geese Model Theory put forward by Akamatsu. He suggested that sectoral development generally has to go through the five stages of introduction → import substitution → export growth → maturity → reverse import. In this way, he revealed in more detail how the less advanced countries manufacture on their own to meet domestic demand by introducing products and technologies from advanced countries, exporting products when they have a surplus, and finally realising the economic take-off.8 Flying Geese Model Theory focuses on describing the international changes in the sectoral structure caused by industrial transfer. In 1935, British economist Fisher pointed out that the changes in the production structure of the sector are manifested in the nonstop transfer of human and material resources from the primary sector to the secondary sector and then to the tertiary sector, which cannot be prevented even if government intervention is implemented.9 On the basis of William Petty, by comparing statistics on labour input and total output of the three sectors in different periods in more than 40 countries and regions, British economist Colin Clark summarised the law of labour structure in the three sectors. In his book The Conditions of Economic Progress published in 1940, he proposed that with the increase in national per capita income, labour will first flow from the primary sector to the secondary sector and then to the tertiary sector, which is known as PettyClark’s Law. He believed that the reason for the movement of labour between sectors is due to the relative income gap between sectors in economic development. French economist Jean Fourastié pointed out that the transfer of labour within the sector and between sectors coexist at the same time. He believed that technological progress is the main reason for the evolution of the labour structure in sectoral distribution. Su, D. S. (ed). (2000). The Economics of Sector. Higher Education Press. p. 239. 苏东水 (ed). (2000). 产业经济学. 高等教育出版社. p. 239. 8 Yang, J. W. (ed). (2008). The Economics of Sector. Shanghai Academy of Social Sciences Press. p. 173. 杨建文 (ed). (2008). 产业经济学. 上海社会科学院出版社. p. 173. 9 Yu, R. G. (1996). A Commentary on Petty-Clark Theorem. Economic Perspectives (08):63. 于刃 刚. (1996). 配第-克拉克定理评述. 经济学动态 (08):63. 7

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On the one hand, technological progress increases the total production volume; on the other hand, technological progress also changes the production structure, which will accompany a change in the demand structure. Therefore, the abundant supply brought about by technological advancement stimulates new needs of mankind after satisfying their needs; this situation leads to a production structure dominated by technology and a consumption structure determined by the increasing demand and desire of human beings. The incoordination between the two forces the production structure to adapt to strong consumer demand and urges labour to shift from saturated sectors to those in strong demand.10 Combining the distribution of labour among sectors with national income, U.S. economist Kuznets used per capita national income as the criterion to make an empirical analysis of the relationship between the evolution of economic structure and economic development and developed the research of sectoral structure from input structure (labour structure) to output structure (national income structure), which greatly encourages the progress of the Theory of Economic Structure.11 His important works on economic structure include Modern Economic Growth (1966) and Economic Growth of Nations (1972). On the basis of long-term statistical data of major European and American countries, he examined the relationship between changes in the total economic output and changes in the employment structure, revealing the general direction of changes in the sectoral structure, thereby further verifying Petty-Clark’s Law. It specified that the sectoral structure is orderly evolved through stages and is influenced by the changes in per capita national income. This theory is well spread as the Kuznets per capita income influence theory.12 Kuznets analysed the shifts in production structure in the three major sectors of agriculture, industrials, and services. He pointed out that with the development of the economy and the continuous increase in per capita national income, all sectors in society are undergoing structural changes in both output and labour. The trends are as follows: a marked decline in both the shares of the agriculture sector in gross product and the labour force and a marked rise in both the shares of the industrial sector and the service sector in gross product and the labour force. When the share of the industrial sector in gross product continues to rise, its share in the labour force is generally unchanged or rises slightly. However, when the share of the service sector in gross product is unchanged or slightly increases, its share in the labour force increases generally and substantially. The rise in the share of the industrial sector is largely contributed to by manufacturing, accounting for approximately two-thirds of the rise in the share of the industrial sector. Within manufacturing, the shares of the new branches that are closely linked to modern technology rise conspicuously, showing an upward trend of their relative share in gross product and labour force, whereas those of the textiles 10

Yu, R. G. (1996). A Commentary on Petty-Clark Theorem. Economic Perspectives (08):63–64. 于刃刚. (1996). 配第-克拉克定理评述. 经济学动态 (08):63–64. 11 Feng, H. F. (1989). The Historical Sequence of Structure Reform. Modern Economic Science (03):46–47. 冯海发. (1989). 结构变革的历史顺序. 当代经济科学 (03):46–47. 12 Su, D. S. (ed). (2000). The Economics of Sector. Higher Education Press. p. 237. 苏东水 (ed). (2000). 产业经济学. 高等教育出版社. p. 237.

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and clothing and wood and leather branches decline, as well as their relative shares in gross product and labour force. Among the subdivisions of the service sector, only the share of government services tends to rise in most countries.13 He believed that there are three basic reasons behind the shifts in production structure: the basic structure of consumer wants, foreign trade, and technological innovation.14 Kuznets revealed the new shifts in the production structure of developed countries after they entered the stage of modern economic growth. His research deepened Petty-Clark’s Law and further clarified the relationship between the evolution of the production structure and economic development. American economist Wassily Leontief inherited the basic principles of Quesnay’s economic table and pioneered the input–output analysis by combining Marx’s theory of reproduction and Walras’ general equilibrium theory.15 Leontief applied the input– output analysis method to analyse the economic structure of the United States as early as 1931. The Structure of the American Economy, 1919–1929 he published in 1941 explained the basic principles and applications of the input–output analysis method. His book Input–Output Economics released in 1966 established a relatively complete input–output analysis system, including input–output analysis methods, input–output models, and input–output tables. The input–output analysis method he created provides a practical economic analysis method for studying the interdependencies between departments of social production and the systematic analysis of the intricate transactions between different sectors of a national economy or different regional economies. Wassily Leontief was credited with developing this type of analysis and earned the Nobel Prize in Economics for his development of this model. The input–output model has become the most common economic analysis tool used in the worldwide analysis of the structure of production. American economist William Arthur Lewis published Economic Development with Unlimited Supplies of Labour, Unlimited Labour: Further Notes and The Dual Economy Revisited in 1954, 1958 and 197916 and proposed and created the famous theory of Dual Economy. Lewis pointed out that a developing economy has a typical dual economic structure; that is, the developing economy is composed of two sectors, hereinafter called modem (agriculture) and traditional. The traditional sector is overpopulated and has low productivity of labour and a large amount of surplus labour. The modern sector includes modern industrials and a small amount of high-efficiency agriculture and modern commerce. This sector has higher productivity of labour, fewer employees, and employs persons who move over from the traditional sector. He believed that in developing economies, the strategy of economic development is to 13

Kuznets, S. S. (1971). Economic Growth of Nations: Total Output and Production Structure. Harvard University Press. pp. 309–311. 14 Kuznets, S. S. (1971). Economic Growth of Nations: Total Output and Production Structure. Harvard University Press. pp. 322–325. 15 Yang, J. W. (ed). (2008). The Economics of Sector. Shanghai Academy of Social Sciences Press. p. 165. 杨建文 (ed). (2008). 产业经济学. 上海社会科学院出版社. p. 165. 16 The original text was published in The Manchester School Volume 22, Issue 2, Volume 26, Issue 1, and Volume 47, Issue 3. See: Gersovitz, M. (ed.). (1983). Selected Economic Writings of W. Arthur Lewis. New York University.

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expand modern economic sectors and shrink traditional sectors, that is, to grow industrials by recruiting surplus labour from agriculture, thereby eliminating structural imbalances between and within industrials and agriculture. With further economic development, the labour force is gradually transferred from the traditional agricultural economic sector to the modern economic sector, and the economic structure is changed from a dualistic structure to a monistic economic structure. He published the book The Theory of Economic Growth in 1958, which comprehensively analysed the economic and noneconomic factors affecting economic development, including capital accumulation, technological progress, population growth, social structure, economic institutions, religion, culture, historical tradition, politics, psychology, etc.,17 and carried out a more in-depth analysis and discussion of the economic structure, especially the structure of production. In 1955, the Japanese economist Miyohei Shinohara proposed the industry-trade structure theory, also known as dynamic comparative cost theory, which pointed out that the mutual adaptation and dynamic rationalisation of sectoral structure and trade structure is an important way to enhance a country’s comparative advantage. It is emphasised that the infant sectors of emerging countries can be transformed from disadvantages into advantages through support, forming dynamic comparative advantages. He linked the adjustment of sectoral structure with trade policies, emphasised the coordination between optimising sectoral structure and rationalising trade structure, and advocated that the country implement appropriate protection policies for infant sectors to create comparative advantages and gain trade advantages. He pointed out that the economic development of a country depends not only on the abundance of resources but also on the support of the government. A country’s advantages in international trade should be consistent with its reasonable sectoral structure, and the government should foster and promote the development of domestic key sectors to enhance international competitiveness. He also put forward two basic criteria in 1957, the income elasticity criteria and the productivity increase criteria for planning the sectoral structure. Income elasticity criteria refer to the income elasticity of demand as the basic criteria for selecting strategic sectors. Income elasticity of demand (also called income elasticity) refers to the sensitivity of the quantity demanded for a certain good to a change in the real income of consumers who buy this good. Generally, only sectors with large income elasticity of demand can occupy a higher market share in future development and obtain a larger growth space. Productivity increase criteria refer to the sectors with fast productivity growth and a high rate of technological progress that are protected as infant sectors and are prioritised to develop to increase their proportion in the whole sectoral structure. Sectors with a rapid increase in productivity usually have faster technological progress, and correspondingly, their production costs have also fallen rapidly, leading to faster growth and better economic benefits. Prioritising resources to such sectors that can create more national income in a short period of time can improve the economic benefits of the entire society. The essence of the Shinohara criteria is to reflect the inherent roots of sectoral structural 17

Li, S. M., Zhou, C. Q., Zhao, C. L. (eds). (1993). Dictionary of Foreign Economists. Haitian Publishing House. 李善明., 周成启., 赵崇龄 (eds) (1993). 外国经济学家辞典. 海天出版社.

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evolution from both supply and demand. It advocates focusing on the development of these two types of sectors as the leading sectors and making them the pillar sectors of a country. His important research results in sectoral structure include industrial structure, modern industrial theory (industrial structure) and other works. American economist Albert Hirschman, in his book The Strategy of Economic Development published in 1958, designed an economic development strategy of unbalanced growth for developing countries. He proposed that developing countries should concentrate limited resources and capital to give priority to the development of a few leading industries and sectors and drive the development of other sectors through intersectoral linkage effects to solve the poverty problem in developing countries. He divided the intersectoral correlation into forward correlation, backward correlation and circular correlation and takes the largest sectoral correlation effect as one of the benchmarks for the selection of the leading sector. He believed that all sectors with linkage effects can gradually drive the development of backwardlinked sectors, forward-linked sectors and the entire industrial sector through the expansion and priority growth of leading sectors, thereby achieving overall economic growth. He pointed out that developing countries should pay attention to the linkage effect and the most effective order when formulating national economic plans, while at the same time, it is emphasised that the unbalanced development strategy must be implemented in the early stage of economic development, and the coordinated and balanced development strategy of the sectors of the national economy must be implemented in the advanced stage of economic development. The American economic historian Walt Rostow combined the analysis method of historical stages, the leading sectors and the psychological desire to put forward the famous stages of economic growth and development and spreading effects of leading sectors. He pointed out that the change in sectoral structure has a significant impact on economic growth, and the spreading effects of leading sectors should be emphasised in economic development. He believed that the ultimate motivation for social and economic development is the subjective tendency of people.18 In his book The Stages of Economic Growth published in 1960, he divided economic and social development into five stages: traditional society, the preconditions for take-off, takeoff, the drive to maturity, the age of mass-consumption, and beyond consumption (the search for quality), which he added in 1971, explaining the industrialisation process experienced by Western countries. Through analysis, he concluded that the economic evolution of each stage is characterised by the replacement of dominant sectors. He believed that the changing of human motivations is one of the driving forces for the successive replacement of economic stages. He put forward the spreading effects of leading sectors and the selection criteria for leading sectors (i.e., the Rostow criteria) in the book Leading Sectors and the Take-off (Chinese translation, 1998). He believed that economic growth is pushed by the rapid expansion of a few leading sectors and their spread to other sectors. He pointed out that a country should select sectors with stronger spreading effects, including prospective effects, retrospective Su, D. S. (ed). (2000). The Economics of Sector. Higher Education Press. p. 228. 苏东水 (ed). (2000). 产业经济学. 高等教育出版社. p. 228.

18

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effects and side effects, as the leading sectors to introduce the expansion of output in other sectors to upgrade the entire sectoral structure that would benefit the economy as a whole.19 The spreading effects of the leading sectors are mainly manifested in three aspects: ➀ Prospective effect, which refers to the leading sectors’ ability to induce emerging industries, new technologies, new quality, new energy or new economic activities; ➁ Retrospective effect, which refers to the development of the industries that produce new inputs, required by the leading sectors in rapid growth; ➂ Side effect, which refers to the booming of local economy and society, in terms of institutional construction, national economic structure, infrastructure, and population quality, etc., influenced by the rise of leading sectors. American economist Hollis Chenery put forward the formal structure and industrialisation stage theory of sectoral development and made a great contribution to the development of sectoral structure theory. His major works include The Process of Industrialization (1969), Patterns of development, 1950–1970 (1975, coauthored by Chenery and Syrquin), Industrialization and Growth: A Comparative Study (1986), etc. Through comparative research on the process of industrialisation in developing countries and the analysis of economic development and structural changes in different countries, he summarised the general model of sectoral development and revealed their formal forms, providing a theoretical basis for different countries and regions to formulate structural change policies according to their economic goals. Through the investigation of the status and role of different sectors within the industrials in long-term economic development, he revealed the reason behind the structural changes inside the industrials, which lies in the correlation effects between sectors. He pointed out that sectoral development is greatly affected by the per capita GDP, the scale of demand and the rate of investment, while it is less affected by the output rate of primary products and industrial finished products. He believed that to maintain economic growth, it is necessary to continuously adjust the production structure, adapt to the changes in the demand structure and use various technologies effectively. He also pointed out that the transfer of labour and capital from lower-productivity sectors to higher-productivity sectors can accelerate economic growth. He divided the stages of industrialisation into three successive stages from primary product production to industrialisation and finally to a developed economy and further subdivided these three stages into six periods: Period I, the structure is dominated by agriculture; Period II, the structure changes from traditional agriculture to modern industrials, and industrials are dominated by the production of primary products; Period III, manufactures change quickly from light industrials to heavy industrials, nonagricultural labour becomes the majority, and the tertiary sector starts to develop rapidly; Period IV, with the coordinated development of the primary and secondary sectors, the tertiary sector shifts from steady to sustained high-speed growth; Period V, the leading sectors of manufactures shift from capital-intensive to technology-intensive, while at the same time, the social lifestyle begins to modernise, 19

Cao, F. P., Zhu, M. H. (2007). A Benchmark Study on the Selection of Regional Leading Sectors. Coal Economic Research (07). 曹芳萍., 朱满华. (2007). 区域主导产业选择的基准研究. 煤炭经 济研究 (07).

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and high-end durable consumer goods are gradually popularised; and Period VI, the tertiary sector starts to differentiate. Intelligence-intensive and knowledge-intensive sectors separate from the service sector and appear to dominate. People’s consumer desires show great diversity and variability, and social life consumption develops toward individualisation. Lin Yi-Fu, a Chinese economist, put forward the theoretical framework of New Structural Economics in 2009. This theory stresses endowments (i.e., the relative abundance of the factors of production) in economic development and the differences in sector under various infrastructures20 and development levels and emphasises the analysis of the roles of the government and the market in economic development. The theory suggests that economic development is essentially continuous innovation and structural change of technology and sector. Economic development not only requires the existing sectors to continuously absorb new and better technologies but also needs the existing sectors to continuously upgrade from labour (or natural resource)intensive to capital-intensive. To achieve such sector upgrades, developing countries first need to upgrade their factor endowment structure (i.e., the relative abundance of natural resources, labour, human capital, and material capital) and the corresponding infrastructures. In economic development, the synergy between the government and the market must be brought into play at the same time because economic growth will keep changing the demand for institutional services, causing the existing institutional arrangements to gradually become obsolete. Therefore, government policies and various institutional arrangements must take into account the features of the economic structure of different development levels. The main ideas of this theory can be summarised in the following three points. First, the optimal economic structure, including sector, technology, finance, law, and other structures, varies with different stages of economic development. Factor endowments and the structure of an economy are given at each specific stage of development. They vary with the stage of economic development, so the optimal sectoral structure also changes with the stage of economic development. Different sectoral structures mean not only different sectoral capital intensities but also different optimal firm scales, production scales, market scopes, transaction complexities, and different types of risks. Therefore, each specific sectoral structure requires corresponding infrastructures to reduce the costs of economic operations and transactions as much as possible. Second, economic development is a continuous process, and the economic stages of different countries or regions are not just two points of poor and rich or developing and developed. It is a developing process from the low-income traditional agricultural stage to the middle-income industrialisation stage and then to the high-income postindustrialisation stage. Therefore, the traditional dichotomy does not apply to the understanding of the stages of economic development. For developing countries or regions, at any stage of development, the goals of their sectors and infrastructures are not necessarily 20

According to Lin Yi-Fu’s original note, infrastructure include two types of hard and soft. Hard infrastructure includes energy, transportation and communication systems, etc., while soft infrastructure includes the financial system, regulation, education system, judicial system, social network, value system, and other intangible structures in the economy.

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those of advanced economies that are at a higher stage than their own. Third, at each certain stage of economic development, the market is the most efficient mechanism for allocating resources, but in the economic transformation to a higher stage, the government also needs to be active in guiding the situation. As a continuous process, changes in the stages of economic development require the corresponding diversification and upgrading of sectors and improvements in infrastructure. The essence of sectoral diversification and upgrading is innovation. In this process, although some pioneering firms will create public knowledge for others, the investment of individual firms alone cannot completely improve the infrastructure required for economic development. Therefore, in the process of economic development, in addition to market mechanisms, the government must also play an active coordination and compensation role to improve infrastructure and to promote sectoral diversification and upgrading.21 The relevant theories introduced above are only some of the more representative theories of sectoral structure, and they basically reflect the general context of the development of sectoral structure theory. In fact, there are many economists who are engaged in research in this area and have contributed a great deal, such as J. Tinbergen, G. Ranis, John Fei, B. Higgins, Masao Baba, and Miyazawa Kenichi.22 Here, we will not go into the details. The ideas and theories put forward by these economists were the results of their observation, analysis and summary of the economic system in different times and spaces. From the content expressed by these thoughts and theories, it seems that the factors involved in the economic system and economic growth are numerous and complicated. If carefully categorising the key words expressed by these ideas and theories, it will be discovered that from the basic structure, constituent links and external environment of the economic system, these key words can be roughly divided into 13 factors in terms of economic system structure, economic dynamics, external environment demand, external environment supply, social production, sector system, exchange system, distribution system, social consumption, science and technology, economic institutions, cultural education, and others social factors, which are listed in Table 7.1 for concise and intuitive expression. In Table 7.1, Category 1 reflects the basic structure of the national economic system, Category 2 reflects the dynamics in the operation of the national economic system, 3 and 4 factors reflect the supply and demand outside the national economic system, and Category 5-12 reflect the constituent links and dynamic factors inside the national economic system. Table 7.1 shows that although the factors involved in the human socioeconomic system and economic growth are complex, the overall structure of the national economic system is very clear. Based on the abovementioned economists’ thoughts 21

Lin, Y. F. (2010). New Structural Economics: Reconstructing the Framework of Development Economics. China Economic Quarterly (01):1–3, 12, 14, 17. 林毅夫. (2010). 新结构经济学—— 重构发展经济学的框架. 经济学(季刊) (01):1–3, 12, 14, 17. 22 Su, D. S. (ed). (2000). The Economics of Sector. Higher Education Press. pp. 229–230. 苏东水 (ed). (2000). 产业经济学. 高等教育出版社. pp. 229–230.

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Table 7.1 Classification of factors involved in the national economic system and economic growth S/N Factor category

Keywords Involved in the representative theories of sectoral structure

1

Economic system structure

Demand structure, production structure, consumption structure, sectoral structure, industrial structure, trade structure, labour structure, output value structure, national income structure, input structure, output structure, occupational population structure, employment population structure, factor endowment structure

2

Economic dynamics

Labour movement, sectoral growth rate, sectoral gradient transfer, industrial transfer, sectoral correlation effect, leading sectoral renewal, sectoral innovation, sectoral upgrading, sectoral diversification

3

External environment demand Social demand, demand scale, demand & aspirations, the basic structure of consumer wants, consumption demand, people’s subjective tendency

4

External environment supply

Human resources, material resources, factors of production, means of consumption, means of production, abundance of resources, factor endowments, human capital, material capital, social capital, capital intensity, hard infrastructure23

5

Social production

Wealth production, absolute cost, international division of labour, alternative production, capital factor investment, investment rate, capital accumulation, sectoral labour input, total output, total production, gross economic output, per capita GDP, labour productivity, optimal firm scale and production scale

6

Sector system

Agriculture, industrials (light industrials, heavy industrials), commerce, services, primary sector, secondary sector, tertiary sector, consumer materials, production materials, labour and resource-intensive sectors, capital-intensive sectors, technology-intensive sectors, smart and knowledge-intensive sectors

7

Exchange system

Market, wealth exchange, product import, product export, international trade, foreign trade, domestic and international market resource allocation, import and export and international market, financial market in the financial system, market scope, transaction complexity, transaction costs

8

Distribution system

Intersectoral income distribution, wealth distribution, total product distribution, per capita national income, fiscal expenditure, financial regulatory organisations in the financial system

9

Social consumption

Population growth, overpopulation, consumer desire, consumer interests, psychology (continued)

23

This table breaks down the factors of the soft infrastructure proposed by Lin Yi-Fu, and the term soft infrastructure will no longer be included here. Please refer to Sect. 7.6 for specific explanation.

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Table 7.1 (continued) S/N Factor category

Keywords Involved in the representative theories of sectoral structure

10

Science and technology

scientific research, public knowledge, technology, technological progress, technological renovation, technological innovation

11

Economic institutions

Economic institutions, institutional arrangement, government policy, sectoral policy, trade policy, controls, fiscal policy, monetary policy, resource management policy

12

Cultural education

Culture, religion, historical traditions, value system, education, technical proficiency of workers, education system

13

Other social factors

Political system (polity, government role, government support, etc.), legal system (domestic law, judicial system, etc.), social structure, social network

and theories, the book obtains the diagram of the relation between the dynamics behind the development of the economic system (Fig. 7.2). Therefore, the above theories of sectoral structure provide a useful reference for the construction of the theoretical framework of this book.

7.2 The Environment, Elements and Structure of the Economic System In a state’s economic system, the actor at the sub-macro-level is the national economic system. The main function of the national economic system is to produce, exchange, distribute, and consume material products, which generally includes the sector system, exchange system, distribution system and consumption system.

7.2.1 The Internal and External Environments of the Economic System In modern society, an economic system that exists in a specific state system has both an external environment and an internal environment.

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7.2.1.1

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The External Environment of the Economic System

The external environment of the economic system refers to the collection of the factors that exist beyond the boundaries of the economic organisation, including sectoral organisation, exchange organisation, and distribution organisation, etc., and have an impact on the production, exchange, distribution, and consumption of the economic system. The external environment of the economic system includes the natural environment and the social environment. The external system that contains the economic system is composed of the three levels of the state system, the social system (state system), and the natural system. Details of the hierarchical relationship of each system in the external environment of the economic system are shown in Fig. 3.2 in Chap. 3. In the state system, the systems coexisting with the economic system include at least the human-culture, polity, science, law, and education. These systems that exist in the external environment, more or less, directly or indirectly, will have an impact on the growth and evolution of the economic system. For the economic system of a specific state, the factors from within the state system are undoubtedly the highest in terms of directness and intensity of impact. At the same time, certain factors from the international system and natural system will also influence the growth and evolution of a state’s economic system. Since the Great Discoveries of Geography in the fifteenth century, with the unfolding of economic globalisation, economic and trade links between countries and regions have been increasing, and the economic systems of different countries have increasingly integrated into the global economic network. From the perspective of the state system, within a specific state, relevant factors from the human-culture, polity, science, law, and education systems will all have an impact on the growth and evolution of the state’s economic system. These influences are mainly exerted through the demand and supply imposed on firms and markets in the economic system. For specific influencing factors, see Table 4.2 in Chap. 4. For example, the households in the human-culture system not only provide consumption demands for firms but also supply the labour force to firms. On the other hand, the humanistic and cultural knowledge in the human-culture system has a deep impact on entrepreneurship, enterprise spirit and corporate culture, especially on the shaping of the spiritual core of entrepreneurs, thereby guiding the values and ethical morals of corporate organisations. The direct influence of the political system on the economic system is through distribution organisations (i.e., taxation departments, fiscal departments, financial departments, etc.) in the economic system, especially through the three basic methods of tax collection and management, fiscal distribution and currency control. The administrative organisations (government departments) in the political system also allocate resources, firms, and markets in the sector system by formulating and implementing relevant sectoral policies (Sect. 5.9). The science system provides firms and industries with basic knowledge and technical foundations. Major scientific discoveries in particular often trigger technological revolutions in the sector, which then may lead to the rapid decline of certain industries and the birth of other emerging industries. The legal system prepares basic order and various legal support for the normal operation of the economic system. The education system

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cultivates delivers human resources for firms and industries, thereby supporting the sustainable development of the economic system. From the perspective of the social system (international system), the factors that have an impact on a state’s economic system include not only the factors from other countries but also the factors from international organisations. Whether it comes from factors within other countries or from international organisations, it can be roughly divided into human-culture, economy, polity, science, law, and education, among which the economic factors can be further divided into social production, sector system, exchange system, distribution system, and social consumption (see the analysis table in Sect. 7.1). In modern society, due to the widespread influence of economic globalisation, the economic systems of almost all countries have been integrated into the international economic system. The economic system of a country and the international economic system are closely linked through international trade, international investment, international credit and technological exchanges. From the perspective of the natural system, the main factors affecting a state’s economic system are the supply of natural resources, climate and geographical environment. Natural resources mainly include sunlight, air, water, land, minerals, organisms, etc. The climatic and geographic conditions of different countries affect the type, distribution and quantity of natural resources such as water, land, minerals, and organisms. The abundance of natural resources will also influence their comparative advantages, thereby affecting their divisions of labour in the international market. In the above analysis, it can be obtained that the general external factors that affect the development of a state’s economic system are demand and supply, and specific factors include natural resources, human-culture, economy, polity, science, law, and education, among which the economic factor can be further divided into social production, sector system, exchange system, distribution system, and social consumption. From the growth and evolution of the economic system, the external environment is of great significance to the demand and supply of the economic system. The demand of the external environment is the ultimate driving force for the development of the economic system, while the supply of resource elements by the external environment to the economic system is a necessary condition for the growth and evolution of the economic system. Here, the sum total of requirements from the external environment to all economic organisations in an economic system forms the external environmental aggregate demand in the economic system, while the sum total of supplies of resources from the external environment to all economic organisations in an economic system forms the external environmental aggregate supply to the economic system.

7.2.1.2

The Internal Environment of the Economic System

The complete production process of material products in human society is a totality composed of links including production, exchange, distribution and consumption. Within this totality, “production... appears as the starting point; consumption as the

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final end”.24 Therefore, the operating process of an economic system should include the complete production process of human society. The internal environment of the economic system is an organic system composed of production, exchange, distribution, consumption and other factors. The factors within the system are interrelated, interacted, and interinfluenced, forming a complex network. The internal environment of the economic system has its own hierarchy and functional structure, which changes continuously with the dynamic changes of the economic system. The three elements of production, exchange, and distribution inside the economic system have been analysed in the analysis of the operation of firms and sectors in Chaps. 4 and 5. The element production here corresponds to the sector system, the exchange corresponds to the exchange system (or market system), and the distribution corresponds to the distribution system. Consumption has also been analysed in the production activities of firms in Chap. 4, but it is mainly from the micro level. In fact, in a state system, the element of consumption is also a system composed of many factors. These internal factors are interrelated and intertwined, forming a consumption system with a complex network structure. Inside a specific socioeconomic system, the sector system, exchange system, distribution system and consumption system all possess multiple levels and functions and are all subsystems of the economic system from the system level. Below are some explanations and analyses of the element of consumption within the economic system. As the end of the complete production process of human society, consumption is of great significance in the social economy. Since the birth of Economics, consumption has been an important topic in economics studies. Adam Smith pointed out when criticising the mercantilism argument that “the purpose of manufacturing and commerce is production rather than consumption”: “Consumption is the sole end and purpose of all production. The interest of the producer ought to be attended to only thus far as it may be necessary for promoting that consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it.”25 The classical economist Say, based on the utility theory of value, believed that consumption means the elimination of utility, rather than that of materials or products; he clearly subdivided consumption into production consumption and nonproduction consumption, personal consumption and public consumption, as well as state consumption and private consumption in public consumption. Marshall inherited and developed Say’s thought, believing that what humans can produce and consume is only utility, not material itself. Marx understands consumption from the unity of opposites between production and consumption. He not only regards consumption as the end of social production and the end of the final goal but also treats consumption as a link in social reproduction that both counteracts the starting point of reproduction and recauses the beginning of reproduction: “Production is... at the same time consumption, and 24

Marx, K. (1904). A Contribution to the Critique of Political Economy. International Library Publishing Co., p. 275. 25 Smith, A. (1937). The Wealth of Nations. Random House. p. 625.

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consumption is at the same time production. Each is directly its own counterpart. However, at the same time, an intermediary movement occurs between the two. Production furthers consumption by creating material for the latter that otherwise would lack its object. However, consumption in turn furthers production by providing for the products the individual for whom they are products. The product receives its last finishing touches in consumption.” He pointed out that “... consumption provides the ideal object of production, as its image, its want, its impulse and its purpose. It furnishes the object of production in its subjective form. No wants, no production. However, consumption reproduces the want.”26 The views of these economists reflect that people’s understanding of consumption is constantly developing and gradually deepening. Among them, Marx’s consumption view embodies holistic systems thinking, which essentially reveals the status and role of consumption in the reproduction process of human society. “Production furthers consumption by creating material for the latter” by Marx refers to the first production process, while “consumption in its turn furthers production, by providing for the products the individual for whom they are products” means the reproduction process caused by consumption, which reflects the feedback effect of consumption on production; “No wants, no production. However, consumption reproduces the want.”, reflects the view that consumption induces new demand. These thoughts of Marx are vividly reflected in the relation between dynamics behind corporate and sectoral development (Fig. 4.11 and Fig. 5.3) in Chaps. 4 and 5. The book once again confirms the richness and scientific nature of Marx’s economic thought from the systematic analysis of the entire process of social reproduction. Based on the brief analysis above, a specific definition of consumption can be made. Consumption is a category opposite to production. As one of the important links in the reproduction of human society, it is not only the behaviour of people using product efficacy to meet the needs of production and life, but it also arouses people’s new demand for reproduced products. Consumption in a broad sense generally includes productive consumption and life consumption, while consumption in a narrow sense only refers to life consumption. In actual production or life, consumption is generally associated with product transaction (exchange) behaviour. It is composed of the consumption subject, consumption object, consumption media, consumption method and other elements. Here, consumption subject refers to the individual or organisation that conducts consumption activities (including household, firm, societal community, and government, etc.) Consumption object refers to the product (including material product, mental product or service) used by the consumption subject for consumption. Consumption medium refers to the medium that connects consumption subject and consumption object, mainly including currency and currency derivatives. With the advent of the information age, people have created the Internet as a new type of consumer media. The consumption method includes 26

Marx, K. (1904). A Contribution to the Critique of Political Economy. International Library Publishing Co., pp. 278–279. The literature on consumption in this paragraph is compiled from: Wang, C. K. Cheng, E. F. (2011). A Study on Economic Power System. Shanghai University of Finance and Economics Press. pp. 275–279. 王朝科. 程恩富. (2011). 经济力系统研究. 上海财经 大学出版社. pp. 275–279.

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single consumption, multiple consumption, spot consumption, and futures consumption. With the development of human society and the advancement of modern technology, people have created new consumption methods, such as the integration of production and marketing. It is concluded in the table in Sect. 7.1 that the factors that affect the growth of the socioeconomic system include science and technology, economic institutions, and cultural education in addition to the social production system, sector system, exchange system, distribution system, and consumption system. Among them, the two factors of science & technology and economic institutions actually correspond to the deep factors of firms and sectors. In Fig. 4.6 in Chap. 4 and Fig. 5.2 in Chap. 5, the deep factors of the general structure of firms and sectors are knowledge, technology and institutions. However, from the firm system to the sector system to the national economic system, as the level of the system rises, the factors of knowledge, technology and institutions it contains have become more complex and diverse. For example, the factors of knowledge, technology and institutions in the sector system include not only the factors of knowledge, technology and institutions in firms and industries but also the factors of market knowledge, market technology and market institutions in commodity exchange. Its complexity is obviously more complex and diverse than the factors of knowledge, technology and institutions in the firm system. Similarly, the factors of knowledge, technology and institutions in the national economic system are more complex and diverse than the knowledge, technology and institutions factors in the sector system. In the operation of the national economic system, the involved factors of knowledge, technology and institutions not only include the factors of knowledge, technology and institutions in the sector and the market but also contain the factors of knowledge, technology and institutions in the distribution and the consumption systems. For example, the distribution organisation in a modern state generally includes tax departments, fiscal departments, and financial departments. Their main methods of regulating the operation of the national economy are tax collection and management, fiscal distribution, and currency control, specifically, by formulating and implementing corresponding tax, fiscal, and monetary policies. The tax policy, fiscal policy, and monetary policy mentioned here are the distribution institutions in the national economic system, and the scientific knowledge and technical means related to this are the distribution knowledge and distribution technology in the national economic system. In fact, these contents are exactly the subjects studied by the economics of taxation, fiscal economics and financial economics in the branches of modern economics. A state’s economic system needs to constantly adapt to the external environment in its growth and development. When the external environment changes, the internal environment of the economic system must be adjusted accordingly until the internal and external environments are coupled. The higher the degree of coupling between the internal and external environments of the economic system, the better the growth space for the economic system, and the more orderly and healthy the development of the economic system. The coupling process of the internal and external environments of the economic system is the process of the growth and evolution of the economic system.

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7.2.2 The Constituent Elements and General Structure of the Economic System 7.2.2.1

The Constituent Elements of the Economic System

A complete economic system generally includes at least four elements: the sector system, exchange system, distribution system, and consumption system; otherwise, it is not a complete economic system. In addition, a sectoral organisation in the economic system must also have basic economic knowledge, economic institutions and economic technology to carry out normal production and operation; otherwise, it will be difficult for the sectoral organisation in the industry to successfully complete its production and operation. In the macroeconomic management of modern society, to regulate the production and operation of sectoral organisations in the national economic system, government departments often formulate and implement laws and regulations (i.e., the Anti-Monopoly Law that opposes monopoly of the market, etc.) to manage sectoral organisations or sectoral policies to encourage sectoral development. The legal norms or sectoral policies here are the economic institutions at the macro-level. Therefore, scientific knowledge, production technology and economic institutions are also important factors that constitute the economic system. In modern society, cultural and educational factors are also critical factors that make up the economic system. In the production and operation of modern society, on the one hand, firms’ investment in cultural factors is increasing (mainly in product cultural content, corporate culture construction, market brand image promotion, etc.). In particular, the cultural sector directly uses cultural resources as the core factor to carry out production and operation, and these need investments of corresponding cultural resources. On the other hand, firms are increasingly demanding high-quality talent with professional knowledge. The establishment of corporate core competitiveness is increasingly dependent on professional technology, and these require the support of the education system. Theodore Schultz pointed out in the Origins of Increasing Returns published in 1993 that “specialized human capital is an important source of increasing return event”, and “another class of investment in specialized human capital that results in increasing returns over the life span of human beings is exemplified by investment in primary schooling”.27 After studying the relationship between U.S. education investment and economic growth from the late 1920s to the late 1950s, he concluded that the average rate of return on education investment is 17%. In the growth of labour income, the proportion of income from the growth of education investment is as high as 70%. In the growth of national income, the income from the increase in education investment accounted for 33%.28 Therefore, a country’s economic system is generally an organic system composed of factors such as production, sectors, market, distribution, consumption, knowledge, 27

Schultz, T. W. (1993). Origins of Increasing Returns. John Wiley & Sons. pp. 26, 28. Tang, Z. R. (2014). An Analytic History of Western Economic Evolution. China Economic Publishing House. pp. 165–166. 汤正仁. (2014). 西方经济演化分析史. 中国经济出版社. pp. 165–166.

28

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technology, institutions, culture, and education. Each factor forms a subsystem with a certain structure and layers. These subsystems are intertwined, interrelated, interacted and interinfluenced, forming a complex giant system with a three-dimensional network structure. For example, the production system of human society includes at least three parts: population production, material production, and mental production, each of which can be regarded as a subsystem. These intertwined subsystems form the production system with complex network relations. The sector system can be divided into interconnected subsystems of agricultural systems, industrial systems, service systems, and information systems, constituting the sector system with complex network relations. The market system can also be divided into interwoven subsystems, such as the labour market, commodity market, capital market, technology market, and property market, creating the market system (exchange system) with complex network relations. The above elements of the economic system can be divided into the following two categories: A. Surface factors: production, sector, market, distribution, consumption. B. Deep factors: knowledge, technology, institutions and education. Since population production and mental production have special laws that are not exactly the same as material production, the book puts these two types of production activities into the human-culture system and the science system for discussion (Sect. 8.4); material production (which includes the production of private goods and the production of public goods) is the central content of the economic system to be studied. The three production activities in terms of population production, material production and mental production are closely related. They are interacted, interinfluenced and interrestricted. Therefore, when analysing material production activities, it is necessary to involve the analysis and discussion of some factors in these two production activities. For example, knowledge, technology, institutions, culture, education and other factors in the economic system in fact involve some factors in population production activities and mental production activities.

7.2.2.2

The General Structure of the Economic System

The general structure of the national economic system refers to the general order and form of interrelation, interaction, interinfluence and interrestriction formed among the subsystems within the national economic system in its dynamic evolution. The general structure of the national economic system reflects the structural features of the subsystems of a state’s economic system supporting each other in terms of function and is the basis for the coevolution of the external environment system and the national economic system, as well as the national economic system and its subsystems. From the operation of the national economic system, the growth and evolution of a state’s national economic system is a continuous cycle of social production and social consumption. Combining the components of the national economic system,

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the general operational structure of the national economic system can be drawn (Fig. 7.1). As shown in Fig. 7.1, the actual operating process of the national economic system can be divided into two chains (the solid arrow in the figure): Chain A (surface factor operating chain): social production → sector system → exchange system → distribution system → social consumption Chain B (deep factor operating chain): social production → science and technology → economic system → cultural education → social consumption Each link of Chain A reflects more of the production process of private goods, while each link of Chain B reflects more of the public goods. Among them, the sector system is the territory where entrepreneurs display their talents, the exchange system is the area where the invisible hand of the market plays a role, and the distribution system is the land for the visible hand of the government. In the actual operation of the national economic system, the factors on the two chains are in fact interpenetrated, intertwined, and inseparable. In the operation of the national economic system, the process reflected by Chain A is that the economic system continuously produces commodities to meet the consumption needs of society. The agriculture, industrials, services, information and other sectors within the sector system continuously exchange commodities through the market system. This, on the one hand, directly drives the differentiation of sectors within the sector system and the birth of new sectors, which in turn diversifies the market type and expands the transaction network in the exchange system and finally enriches and upgrades the social consumption system; on the other hand, the sector system and the exchange system put demands on the distribution system of the political system for public services and public goods, which in turn differentiates the internal organisation of the distribution system, deepens the structure, and improves the distribution system. The coordinated development of the sector system, exchange system, distribution system, and consumption system ultimately drives the development of the economic system. The process reflected by Chain B is a process of continuous learning, internalisation, integration, innovation and application of scientific knowledge and professional technology by economic organisations in the economic system, a process of continuous adjustment, reform, and improvement of

Fig. 7.1 General operational structure of the national economic system

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the economic system, as well as a process of constant enrichment of cultural products, unceasing differentiation of education majors, and perpetual improvement of the disciplinary system. The two types of economic operating processes reflected by Chain A and Chain B are actually combined into one. Together, they realise the cycle of social production and consumption in the operation of the national economic system. In the social division of labour in modern countries, the production functions of the two types of public goods, namely, science & technology and economic institutions, are generally classified into the subsystems of science and law of the state system. The production function of public goods such as cultural education is classified into the subsystems of culture (referred to as the human-culture system in this book) and education of the state system. Here is just a rough division of social functions for easy understanding of the operating process of the national economic system, while the real society’s division of the structure and functions of the state system appears more intricate and complicated. For example, in contemporary China, people generally put the research and exploration of natural sciences into the Academy of Sciences, the human social knowledge into the Academy of Social Sciences, applied technologies into the Academy of Engineering, policies and institutions into the government system at all levels from the central to the local. These questions involve the discussion of social division of labour, social structure, and social functions, which are in fact the subject of sociological research. In the actual operation of the national economic system, all the factors in Chain A and Chain B do not work individually or separately but coordinately and cooperatively. That is, every two factors are interrelated, interacted, and interinfluenced and together form a network of production relations within the national economic system. This relationship is represented by a dashed double arrow in Fig. 7.1. Combining sector, market, technology, institutions, and education, an important result of comprehensive research on the economic system is from Johann Peter Murmann’s empirical research on sectoral evolution.29 Johann Murmann analysed the coevolution of national sectors, technologies, and institutions through a comparative study of the synthetic dye industries in Britain, Germany, France, Sweden, and the United States from 1850 to 1914. It expounds the variations in sectoral evolution models under different national backgrounds and reveals two important reasons behind the success of the German synthetic dye industry. First, the institutions of the state (government), the sector, and the market in Germany provide a strong main dynamics for technological innovation. Second, technological progress will further push institutional innovations. He pointed out that the coevolution of technology and institutions is mainly promoted through the interaction between corporate populations and national university populations. If chemists trained by universities are the key to technological innovation of synthetic dyes, a country’s university education and training system will have a great impact on technological innovation. The

29

Murmann, J. P. (2003). Knowledge and Competitive Advantage: The Co-evolution of Firms, Technology, and National Institutions. Cambridge: Cambridge University Press. p. 121.

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industrial research laboratory model that emerged in Germany can better coordinate chemists to work for firms. This mode is a good union of industry, university and research. In addition, Germany’s mature and standardised market can link the supply of chemists with the needs of corporate talent and the producers and users of synthetic dyes, thereby establishing an organic bridge between supply and demand. Once firms adopting new technologies obtain higher profits, they will be encouraged to promote further innovation in the abovementioned institutions, and institutional innovation will continue to create technological progress. In a specific state, when its national economic system is growing and evolving, it is constantly communicating and exchanging personnel, resources, currencies, commodities, knowledge, institutions, technology, and information with its external environment in various forms. The relations established between the national economic system and the natural system, the social system (international system), the state system, and other subsystems in the state system in its external environment form the social network outside the national economic system. In terms of socioeconomic relations, the complete production relation of the national economic system should be composed of its internal production relation network and its external social relation network. The growth and evolution of the national economic system is essentially a dynamic process of the entanglement, interaction and influence of the two relationship networks inside and outside the national economic system. The dual relation networks inside and outside the national economic system constitute a multidimensional and complex dynamic picture.

7.3 The Dynamic Structure of the Economic System In modern society, there are many factors that can affect the evolution of a state’s economic system. Among the many factors, which ones are the key? This section will discuss this issue. Although there are many factors that affect the economic system, in general, they can be divided into external factors and internal factors. It is known that for a state’s specific economic system, the factors from within the state system are the highest in terms of the directness and intensity of impact. Therefore, to find the key factors that affect the economic system, it is necessary to focus on the internal factors of the state system. However, this does not mean that the key factors affecting the economic system only come from within the state system, and some factors from the international system and the natural environment cannot be ignored either. For example, for a state that is not self-sufficient in food but mainly depends on international trade, the international market is a key factor for the state’s economic system. In another case, for instance, in an agricultural society before the industrial revolution, natural environmental factors such as geography and climate were key factors for the economic systems of all countries.

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7.3.1 The Dynamics Behind the Development of the Economic System The external environment of a state’s economic system can be divided into at least two basic levels, the domestic environment and the international environment. The following sections discuss these two levels.

7.3.1.1

Domestic Environment

From the concept of a system niche, the domestic environment of a state’s economic system is the “domestic economic ecological environment”. In modern society, within a state, the systems coexisting with the economic system include at least the human-culture, polity, science, law, and education. From the integrity and synergy of the operation of the state system, the economic system is connected with the state’s internal human-culture system, political system, science system, legal system, education system and other subsystems. The economic system has formed a demand and supply relationship with these systems during its operation. Here, the sum total of requirements from the domestic environment to all economic organisations in the economic system forms the national aggregate domestic demand to the economic system, while the sum total of supplies of resources from the domestic environment to all economic organisations in the economic system forms the national aggregate domestic supply to the economic system. From the perspective of system evolutionary dynamics, the interaction between the internal factors of a country’s economic system and the country’s human-culture, polity, science, law, education and other internal factors forms the direct driving force for the continuous evolution of the country’s economic system. Therefore, the direct external motivations for the evolution of a state’s economic system mainly come from the factors in its domestic environment in terms of human-culture, polity, science, law, education, etc.

7.3.1.2

International Environment

From the concept of a system niche, the international environment of a state’s economic system is the international economic ecological environment. In contemporary society, due to the extensive and in-depth development of economic globalisation, there are more frequent exchanges between international societies in the fields of natural resources, human-culture, economy, polity, science, law, and education. In particular, the economic interaction between different countries is increasing. From the correlation and interaction between the domestic economy and the international economy, a state’s economic system has a certain connection with other countries’ internal human-culture, economy, polity, science, law, education and other systems. The state’s economic system has also formed a demand and supply relationship

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with other states’ systems during its operation. Here, the sum total of requirements from the foreign environment to all economic organisations in the state’s economic system forms the international environmental aggregate foreign demand to the state’s economic system, while the sum total of supplies of resources from the foreign environment to all economic organisations in this state’s economic system forms the international environmental aggregate supply to the state’s economic system. From the perspective of system evolutionary dynamics, the interaction between the internal factors of a country’s economic system and other countries’ humanculture, economy, polity, science, law, education and other internal factors forms the indirect driving force for the continuous evolution of the country’s economic system. Therefore, the indirect external motivations for the evolution of a state’s economic system mainly come from the factors in its international environment in terms of human-culture, economy, polity, science, law, and education, especially the social environmental factors that have economic ties with the state, such as trade, investment, and credit. Therefore, from the external environment of the national economic system, the general external factors that affect the development of the economic system are demand and supply, and the specific factors include human-culture, economy, polity, science, law, and education, among which the economic factor can be further divided into social production, sector system, exchange system, distribution system, and social consumption. The demand factor of the external environment is the primary force for the development of the economic system, while the supply of resource elements by the external environment is a necessary condition for the development of the economic system. From the internal environment of the national economic system, the economic system also includes factors such as production, sector, market, distribution, consumption, knowledge, technology, institutions, culture, and education. In fact, the most basic key elements that make up the economic system basically correspond to the specific external factors that affect the development of the economic system, but the external environmental factors are more complex and diverse. In the long run, the process of growth and evolution of a state or region’s economic system is a continuous absorption, internalisation, and integration of these elements from the external environment. Therefore, the internal dynamics that can affect the evolution of the economic system can only come from these six elements within the economic system. Therefore, it can be concluded that the internal motivations that affect the development of a state’s economic system come from the factors within the economic system in terms of production, sectors, markets, distribution, consumption, knowledge, technology, institutions, culture, and education. Among them, the most important dynamic factors are the sector system and the consumption system within the economic system, and among all the sectors inside the sector system, leading sectors play a crucial leading role in the growth and evolution of the economic system. If the external and internal factors that affect the evolution of the economic system are combined, the key dynamic factors that affect the development of the economic system will be obtained:

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External factors: demand and supply; Internal factors: production, sector, market, distribution, consumption, knowledge, technology, institutions, culture, education. For the convenience of analysis, the internal drivers that affect the development of the economic system are divided into two categories: A. Surface factors: production, sector, market, distribution, consumption. B. Deep factors: knowledge, technology, institutions and education. If the external and internal factors that affect the development of the economic system and the production-consumption cycle of the economic system are combined, the relation between the dynamics behind the development of the economic system can be drawn (Fig. 7.2). In modern society, due to the profound impact of economic globalisation, the aggregate demand that affects a state’s economic system actually includes two parts: the aggregate domestic demand from the domestic environment and the aggregate foreign demand from the international environment. Similarly, the aggregate supply that affects a state’s economic system also includes two parts: the aggregate domestic supply from the domestic environment and the aggregate foreign supply from the international environment. In growth and evolution, driven by the demand and supply factors in the external environment, the national economic system carries out a cyclic operation process of production → consumption → reproduction → reconsumption. From the internal environment of the economic system, the economic system is constantly absorbing, internalising, and integrating in terms of the sector system, exchange system, distribution system, science and technology, economic institutions, and cultural education.

Fig. 7.2 Relations between the dynamics behind the development of the economic system

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In this process, the interactions between these factors inside and outside the economic system jointly promote the growth and development of the economic system. In the growth and evolution of the economic system, these factors within the economic system do not work individually or separately but coordinately and cooperatively. That is, every two factors are interrelated, interacted, and interinfluenced, and they together form the network of dynamic relations within the economic system. This interrelationship is represented by a dashed double arrow in Fig. 7.2. It should be noted that the economic system analysed above refers to an open system, so demand and supply are external factors that affect the development of the economic system. For a closed economic system, the two factors of demand and supply refer to internal factors generated within the economic system. In this closed system, the figure above in fact reflects the economic operating mechanism of self-sustainability and self-sufficiency. If a state has no economic exchanges (mainly trade, investment, credit, etc.) with other countries, its economic system is a closed economic system. In the period of feudal society, natural villages in China, feudal manors in Western Europe, and aristocratic manors in Japan in the middle of the ninth century were such closed economic systems. In the feudal manors in Western Europe, there were mills, bakeries, breweries and shops, and there were more than ten kinds of craftsmen, such as blacksmiths, goldsmiths, silversmiths, carpenters, shoemakers, and spinners. There were also spaces for mental and cultural activities, the churches. Each manor produces the food, clothes, tools and other goods needed by the manor. The manor itself forms a highly self-sufficient economic unit.30 Figure 7.2 clearly shows that among the external factors that affect the development of the national economic system, the consumer demand of human society is endless. However, the external environment’s resource supply to the economic system is limited, especially natural resources, which is almost the largest boundary restricting the development of a specific economic system. When the ecological environment of human society is destroyed and the supply of natural resources cannot be sustained, the development of the economic system will be unsustainable. It can also be drawn from this that fully protecting the natural environment, wisely using natural resources, and maintaining the reproducibility of natural resources are of great significance to the sustainable development of human society. To enable the sustainable development of the socioeconomic system, there are two approaches from in terms of the external dynamic factors of the economic system. One is to limit the excessive expansion of consumer demand in human society, and the other is to continuously develop new resources that can be used by human society. From the internal dynamic factors of the economic system, there are at least six ways to continuously improve the operating efficiency and development of the entire economic system, that is, to improve the structure and function of the sector system, exchange system, distribution system, science and technology, economic institutions, and cultural education, to realise the sustainable development of the economic system under the existing 30

Jin, G. T., Liu, Q. F. (2011). Prosperity and Crisis: On the Ultra-stable Structure of China’s Society. Law Press. p. 25. 金观涛., 刘青峰. (2011). 兴盛与危机——论中国社会超稳定结构. 法 律出版社. p. 25.

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resource supply conditions. However, to achieve all of the above, it is impossible to rely solely on the economic system. This obviously requires the coordination and cooperation of the human-culture system, economic system, and political system in the social system. A specific state system requires the coordination and cooperation of a state’s human-culture, economy, polity, science, law, and education. However, the mutual coordination between these subsystems is obviously involved with the organisation, exchange, distribution and use of public rights in the entire social system. Among them, the political system plays an important leading role, which is where modern political economy needs to play a role.

7.3.2 The Transmission of Demand in the Economic System In real society, a normal life means food, clothing, habitation, transportation, love, marriage, family, children and parents. To obtain the necessary means of subsistence, people need employment and work, thereby obtaining income (i.e., allocated labour results, such as wages, etc.) to purchase and consume the means of subsistence. This process actually includes the cycle of demand → production → exchange → distribution → consumption → demand. A state’s economic system also contains such a cyclical process, but the factors involved vary, and the process is much more complicated. Here is a brief analysis of the transmission process of demand in the economic system. In a society, the primary force for the development of the economic system comes from human needs, which first act on the sector system (i.e., firms) and then pass to the exchange system (i.e., the market). After multiple distributions by the distribution system (i.e., taxation and finance), it then goes to the consumption system (specifically manifested as people’s product consumption behaviour) to realise a complete cycle of social production. In this process, with the continuous increase and progress of social science and technology, socioeconomic institutions are also constantly updating and developing, as well as cultural education, which is persistently perfecting and improving. In the cycle of social mass production, the types and levels of human consumption are constantly increasing and improving and are developing from a low-level to a high-level following the continuous progress of human society, which in turn stimulates social production activities to a higher level. Therefore, the effect of human demand on the national economic system is actually a dynamic process, which can be analysed through the following two chains: A. Surface factor chain: human demand – sector system – exchange system – distribution system – consumption system. B. Deep factor chain: human demand – science and technology – economic institutions – cultural education – consumption system. If the above eight factors are used as eight dimensions to describe the effect process of demand on the economic system, the effect process of human demand (Fig. 7.3) and the evolutionary diagram of human demand transmission can be drawn (Fig. 7.4).

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In the figure, the eight dimensions are ➀ human demand; ➁ sector system; ➂ science and technology; ➃ exchange system; ➄ economic institutions; ➅ distribution system; ➆ cultural education; and ➇ consumption system. From the surface level of the economic system, the effect process of demand in Chain A forms a cycle, that is, the large solid circle in Fig. 7.3. This process can be described as follows: human demand → sector system development → exchange system development → distribution system development → consumption system development → social development, and social development booms the human needs. This process is cyclical. Fig. 7.3 Effect process of human demand in the economic system

Fig. 7.4 Evolution of human demand transmission in the economic system

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From the deep level of the economic system, the effect process of demand in Chain B also forms a cycle, that is, the small solid circle in Fig. 7.3. This process can be described as follows: human demand → scientific and technological progress → economic system improvement → cultural and educational improvement → social development, and social development booms human needs. This process is also cyclical. During the functioning of demand and the process of transmission, the sector system, exchange system, distribution system, and consumption system are interrelated, interacted, and interinfluenced. The growth and evolution of each system is accompanied by the development and progress of human society in the three aspects of science and technology, economic institutions, and cultural education. The development and progress of science and technology, economic institutions, and cultural education promote the growth and evolution of the sector system, exchange system, distribution system, and consumption system, and the growth and evolution of the sector system, exchange system, distribution system, and consumption system in turn encourage the development and progress of science and technology, economic institutions, and cultural education, which is cyclical. Therefore, Chain A and Chain B are in fact twining and evolving together. A society’s sector system, exchange system, distribution system, and consumption system continue to grow and evolve over the long period of history, while at the same time, science and technology, economic institutions, and cultural education in human society are also developing and progressing, as well as the needs of human society, which are constantly enriched and improved. Therefore, from a dynamic point of view, human society is expanding outward in the above eight dimensions. It is not difficult to find that in the process of demand function and transmission, the evolutionary trajectory of human society in the four aspects of sector system, exchange system, distribution system, and consumption system is a gradually expanding spiral with the passage of time. At the same time, the trajectory of human society’s progress and growth in science and technology, economic institutions, and cultural education is also a gradually expanding spiral. In the development of human society, these two spirals are in fact intertwined (Fig. 7.4). In the long run, the evolutionary trajectory of human social needs is also a gradually expanding spiral. In the national economic system, the evolution of the economic system includes the coevolution of the sector system, market system, distribution system, and consumption system. The analysis in Chap. 5 shows that the evolution of the sector system is a cyclical helix, while the evolution of the national economic system is a cyclical super helix. In other words, the evolutionary process of a national economic system includes numerous cyclical sector system helices, cyclical market system helices, cyclical distribution system helices, and cyclical consumption system helices; that is, a large spiral cycle possesses multiple small spiral cycles, and a small spiral cycle possesses multiple micro spiral cycles. From this, we can see that the factors affecting the evolution of the national economic system have actually formed an interwoven complex giant system of all types, all levels, and all structures. In the operation of the national economic system, the sector system, market system, distribution system, consumption system, science and technology, economic

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system, and cultural education in it are interrelated, interacted, interinfluenced and interrestricted. Each factor plays a role in the influence and restriction of other factors, and the change of any one of them will cause the change of other factors to varying degrees. For example, new discoveries in microelectronics have led to the birth of new technologies in electronic computers and the Internet. The application and popularisation of electronic computers and Internet technologies have promoted the in-depth development of the division of labour and specialisation, which has led to changes in aspects such as sector, market, distribution, consumption, institutions, culture, and education. Apparently, the growth and evolution of a state’s economic system is often unbalanced; that is, at different stages of the development of the economic system, the relative positions of these factors are not fixed but are often in alternation. For example, in a certain period, the progress of science and technology dominates the development of the economic system, while in another period, the prosperity of cultural education dominates the development of the economic system. This imbalance in the development of the economic system is generally determined by the order of decision-making in a state’s political system. Therefore, when studying economic development, it is necessary to analyse from a dynamic perspective. From the factors that affect the evolution of the economic system, at least these eight issues need to be addressed simultaneously, rather than just focusing on one of them.

7.3.3 The Role of the Market and the Government in the Economic System It is known that an economic system generally includes social production, sector systems, market systems, distribution systems, science and technology, economic institutions, cultural education, social consumption and other factors. Among them, the main function of the market system is the free exchange of resources to promote the efficient operation of the entire national economic system, while the main function of the distribution system is the rational allocation of resources to realise the overall distribution of resources at all levels and systems of the socioeconomic system and ultimately achieve the harmony and fairness of the incomes of all departments and classes in society. From the integrity, relevance and synergy of the operation of the national economic system, the development and improvement of the market system and distribution system will also affect the healthy development of a state’s economic system. Regarding the important role of the market in optimising the allocation of resources and improving the efficiency of economic operation, liberal economists since Adam Smith have conducted extensive and in-depth discussions. Since the world economic crisis occurred in the 1930s, economists have also deepened their understanding of market failures. The idea of state intervention in the economy represented by Keynesian economics has attracted wide attention from governments. However, the economic practices of major Western capitalist countries since the

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1970s have shown that excessive government intervention in the economy will affect its healthy development, and policy intervention is sometimes ineffective for the issues (i.e., the coexistence of economic stagnation, massive unemployment and rising prices) that have arisen in the operation of the economic system. The government failure existing in economic operations was discovered by economists. The overall thinking and theoretical framework proposed in this book is mainly the result of the isolation, one-sidedness and imperfection of economic theory. From the overall structure of the economic system proposed in this book, if any state wants a healthy and sustainable economic system, it needs to regulate from the overall economic picture, making general plans and formulating differentiated strategies according to its national conditions. Attention must be paid to the construction of the sector system and market system, as well as the improvement of the distribution system and consumption system, while at the same time, the state’s coordination in the three aspects of science and technology, economic institutions, and cultural education must not be neglected either. In the operation of the economic system, it is necessary to attach importance to the exchange function of the market system, while at the same time, the function of government departments to rationally allocate resources through the distribution system cannot be ignored. Under the free market mechanism, due to intercorporate competition, firms with strong potential will defeat firms with weak potential. This will not only enable some competitive firms to occupy more market shares and gain more profits but also cause some weakly competitive firms to lose market share, fall into losses or even bankruptcy. This is the survival mechanism of the market. In terms of distribution, there will naturally be differences in income distribution between superior and inferior firms. This difference will occur no matter for the investors (capitalist class), the managers, or the technicians and ordinary workers of firms. Without the guarantee and adjustment of other social institutions (i.e., the minimum wage institutions, unemployment benefit institutions, income redistribution institutions, etc.), this distribution gap will continue to widen after the accumulation of the circular operation of the economic system, which will eventually lead to the disparity between the rich and the poor and the polarisation of income. In the national economic system, due to the uneven development of sectors, this distribution effect of the market mechanism is also reflected in the income distribution of different sectors. For some economic institutions (especially income redistribution institutions) that are not sound and complete, the problems of income inequality and disparity between the rich and the poor will become more prominent. People have seen that in almost all states that have introduced a market economy, the disparity between the rich and the poor and the polarisation of income are serious social problems. In ancient Chinese society, although the market economy was not developed, similar situations of disparity between the rich and the poor and polarisation of income also appeared. The reasons were mainly the continuous annexation and concentration of land by the bureaucratic aristocracy and the landlord class, which ultimately led to the violent revolution by the unsurvivable poor. If these problems cannot be solved well, it will become a social issue that affects the long-term stability of a society. Therefore, it is necessary for any responsible government to establish and improve its legal institutions (especially the

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income redistribution institutions) and dynamically adjust and control these institutions according to actual conditions to eliminate income inequality and disparities between the rich and the poor to the maximum extent possible and to build a fairer, just and harmonious society. In short, regarding the relationship between the market and government in the economic system, the book argues that they are not in opposition to each other or in an either-or relationship but in a functional, complementary and cooperative relationship. In the operation of the economic system, it is necessary to attach importance to the exchange function of the market system and let the invisible hand of the market play its due role, while at the same time, the regulating function of the distribution system cannot be ignored so that the visible hand of the government can play its due role. Only by achieving organic coordination between the market and the government can the phenomena of market failure or government failure in economic operations be avoided.

7.4 Distribution in the Macro-economy Within the national economic system, the distribution activities at the macro level are divided into two levels: the distribution within the national economic system and the distribution within the state system. The distribution within the national economic system mainly includes the distribution of resources among its subsystems of sector system, exchange system, distribution system, science and technology, economic system, and cultural education. The internal distribution of the state system mainly includes the distribution of resources among its subsystems of human-culture system, economic system, political system, science system, legal system and education system. Within a specific state, private goods are generally distributed through the market organisations in the exchange system within the economic system; the public goods inside the economic system are generally distributed through the distribution organisations in the distribution system within the economic system; the public goods outside the economic system are generally distributed through the power organisations within the political system; and mixed goods are generally distributed through a combination of market mechanisms and government regulations. In terms of the distribution of public goods, whether it can take a holistic view to achieve the best efficiency in a scientific and reasonable approach is directly related to the sustainable, stable and healthy development of a state as a totality. Economic practices worldwide have proven that the implementation of a highly market economy or a highly planned economy is not conducive to the long-term, stable, and healthy development of a state’s economy.

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7.4.1 Distribution within the National Economic System To be more intuitive, the general operational structure of the national economic system (Fig. 7.1) in the previous article is combined for analysis. A complete economic system should at least include the production system (including population production, mental production and material production), sector system, exchange system, distribution system, consumption system, science and technology, economic institutions, cultural education and other factors. It is concluded in Chap. 5 that in the production activities of material products, private goods are produced by firms and are generally distributed through market exchange activities. Public goods are organised and produced by the government and are generally distributed through fiscal expenditures or administrative means. The distribution of personal goods has been analysed in Chaps. 4 and 5, which will not be repeated here. Here, we briefly discuss the distribution of public goods. Within the economic system of a state, factors such as science and technology, economic institutions, and cultural education are basically within the scope of public goods. The tax organisation, fiscal organisation, and financial regulatory organisation in the distribution system are the functional organisations of a state power. Therefore, inside the economic system, the distribution of public goods mainly includes the distribution of factors such as science and technology, economic institutions, cultural education in the sector system, exchange system, distribution system, and consumption system. For example, the distribution of public goods in the construction of the distribution system includes scientific and technological investment, institutional construction, and cultural and educational investment on taxation, fiscal, and financial regulatory systems. In fact, this involves a country’s human, material, financial, knowledge, technology, system, education and other resources in the economic system production, exchange, distribution and consumption of all aspects of the rational allocation of the problem but is also related to these resources in the economic system of science and technology, economic system, cultural education, and the three aspects of investment. The distribution activities of a state’s governmental distribution organisation to its economic system include the distribution of sectoral resources, the investment of public goods, and the adjustment of sectoral taxation. For example, the government redistributes the resources previously monopolised by a few companies, such as land, mineral deposits, franchise rights, etc., to more other firms, which is the redistribution of sectoral resources. When the government uses part of its fiscal revenue for public goods (infrastructure construction such as transportation, energy, communications, etc.), this is the reinvestment of public goods. When the government supports or encourages the development of certain sectors (or industries), the government often implements tax reduction or exemption or fiscal subsidies for these sectors (or industries) to readjust sectoral taxation. In terms of distribution, these actions belong to the scope of redistribution. When the government uses part of its fiscal revenue to relieve citizens who are struggling with natural disasters, unemployment, or disease or to increase the income of low-income groups, this kind of distribution behaviour is

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a type of redistribution for individual citizens. This is also the income redistribution that was often emphasised in economics. Some economists limited the research scope of redistribution to the redistribution of citizens’ personal income, which, however, from the above brief analysis, appears to be provincial. This kind of research perspective often ignores the internal connections and mutual influences of exchange and distribution that exist widely between different levels, different systems, and different subjects. The policy measures they put forward will inevitably fall into a one-sided, imbalanced, and conflicting dilemma. In the operation of the national economic system, in terms of surface factors, the distribution activities in the economic system are reflected in the external environment’s supply and allocation of the subsystems of sector system, exchange system and distribution system. In terms of deep factors, it is actually a dynamic process of the absorption, integration, application and innovation among the subsystems within the economic system in the aspects of science and technology, economic institutions and cultural education.

7.4.2 Distribution within the State System In the development process of a state, the distribution activities in the state system can be divided into two aspects: on the one hand, the government’s distribution department distributes the state’s total income at different levels in the human-culture system, economic system, political system, science system, legal system, and education system. On the other hand, it also includes the rational allocation of public goods such as science and technology, law and order, cultural education (mainly humanistic and cultural knowledge as well as specialised education) by the government distribution departments in the subsystems of the state system. To be more intuitive, the general operational structure of the state and social system (Fig. 7.1) in Chap. 8 is combined for analysis. In modern society, a complete state system should include at least the natural environment, human-culture system, economic system, political system, science system, legal system, education system and other factors. Among them, the natural environment provides living space and natural resources for human society. The human-culture system provides society with basic human resources and produces the mental products of humanistic and cultural knowledge at the same time. The economic system produces, exchanges, distributes, and consumes material products. The political system provides public services and public goods and organises, exchanges, distributes, and uses public rights. The science system produces the mental products of natural knowledge and social knowledge. The legal system mainly formulates and supervises the laws and orders of all levels. The education system mainly educates and trains the talents of all types and levels. In a specific state system, population production activities are completed by households in the human-culture system, and the training of professional talent is completed by schools in the education system. Mental production activities are

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mainly completed by the human-culture system, the science system, the legal system, and the education system. Material production activities are mainly completed by the economic system. Public services, public goods, and public rights, however, are mainly organised by the political system. Whether material or mental products, they can be divided into private goods, public goods, and mixed goods (i.e., containing both private and public ingredients). Generally, personal goods can be distributed through market exchanges, public goods can be distributed through government fiscal expenditures or administrative means, and mixed goods can be distributed through a combination of market mechanisms and government regulations. Within a state system, the production, exchange, distribution, and consumption of personal goods can be included in the economic system. The distribution activities of public goods mainly include the distribution of humanistic-cultural knowledge, especially values, spiritual beliefs and ethical morals, scientific knowledge, including natural science and social science, legal institutions, professional education and other factors in the natural environment, human-culture system, economic system, and political system. For example, the distribution activities of public goods in the construction of the economic system include systematic investment in economic humanities (mainly including humanistic spirit, economic beliefs, economic ethics, etc.), economic science, economic law, and economic education. This actually involves a state’s human, material, financial, knowledge, technology, institutions, and education resources, as well as the rational allocation among the natural environment, the human-culture system, the economic system, the political system, the science system, the legal system, the education system and other subsystems in the state system. Within a specific state, the distribution of public goods within the economic system is generally implemented through the distribution organisations of the distribution system in the economic system. For the public goods outside the economic system, the distribution is generally accomplished through the power organisations in the political system. In terms of the distribution of public goods, whether it can take a holistic view to achieve the best efficiency in a scientific and reasonable approach is directly related to the sustainable, stable and healthy development of a state as a totality. If the distribution result is more scientific and reasonable, the overall structure of the state system will be more symmetrical, and its basic functions will be more sound. If the distribution result is unreasonable, the overall structure will be out of proportion, and the basic functions will be incomplete. In human society, the image of a state is usually imbalanced, the bureaucratic system in the state power is constantly expanding, which becomes extremely big and bloated because they occupy a great majority of social resources, while organisations such as scientific research institutions and cultural and educational organisations that should have invested more resources are stunted due to lack of nutrition. Compared with the material production system in a large size, the mental production system often appears skinny! This is a giant monster with unbalanced tissues and organs, deformed structure, and ugly appearance. What a ridiculously morbid social image!

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In economics, the long-term disconnect between economics and sociology31 leads to the one-sided development of economics, which in turn causes people to ignore the connection between economic factors and human-culture factors for a long time in economic practice. Under the guidance of various one-sided economics, the economic and social policies formulated by experts were often contradictory, resulting in the abnormal growth of the social structure and the imbalance of the social coordination mechanism. The overdevelopment of market mechanisms, the proliferation of consumerism, and the prevalence of money worship caused by profit orientation then led to the decline of the humanistic spirit, the materialisation of spiritual beliefs, and the collapse of public morals in the entire social human-culture system, which not only aggravated the destruction to the natural environment but also polluted the social environment, shaping the distorted and alienated personality of people. The material production in the economic system is originally to better serve human life, but in contemporary society, it has gone to the opposite side (for example, China’s gutter oil),32 grabbing the attention of economists, sociologists and government departments worldwide. It is in this sense that traditional economics based on the hypothesis of economic man needs deep reflection and a comprehensive reconstruction!

31

Under the social structural framework of this book (Fig. 3.2), Sociology should at least include Humanistic Sociology, Economic Sociology, Political Sociology, Scientific Sociology, Legal Sociology, and Educational Sociology. 32 Gutter oil (Chinese: 地沟油) is a general term for oil that has been recycled. It can be used to describe the processing of waste oil collected from sources such as restaurant fryers, grease traps, slaughterhouse waste, and fatbergs. Techniques include filtration, boiling, refining, and the removal of some adulterants. Testing of some samples of gutter oil has revealed traces of arsenic, lead, aflatoxins, benzopyrene, bacteria and many other highly dangerous and carcinogenic compounds. It will cause indigestion, diarrhea, abdominal pain, stomach and bowel cancer, and other diseases after consumption. However, some illegal traders in mainland China are driven by profits to produce and process gutter oil, and market it as edible oil at lower prices, which has caused great harm to people’s health. A nationwide campaign was set in motion to crack down on the widespread production and selling of gutter oil, after the exposure of gutter oil used by restaurants in March 2010.

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7.4.3 Institutions of Resource Distribution and Historical Choices of Social Practice Resource distribution has been in debate among economists of different schools and viewpoints for a long time. People’s understanding of resource distribution has gone through a long historical process. Only through a rational analysis of the history of human practice can the fallacies be eliminated, the thoughts clarified, the differences resolved, and the understanding improved. The following is a brief review of the history and choices of human resource distribution methods and social systems from the two aspects of the market economic structure of capitalist countries and the planned economic structure of socialist countries. In the history of capitalist society, the market economy structure has generally gone through the two major development stages of laissez-faire market economy and modern market economy. The laissez-faire market economy was formed from the mid-seventeenth century to the mid-eighteenth century and flourished from the mid-eighteenth century to the mid-nineteenth century. It was a resource allocation system gradually established during the transition from the agricultural age to the industrial age in the early capitalist countries of Western Europe. The basic principle is that the market mechanism spontaneously adjusts the allocation of resources; the government does not interfere with the operation of the market economy. Adam Smith made a classic exposition of these two basic principles in two works, The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776).33 After Adam Smith, liberal market economy theory has been continuously improved through the development of economists such as Marshall, Walras, and Pareto. They believed that the capitalist market economy is a perfect system with a self-balancing mechanism. The market mechanism itself is sufficient to ensure the long-term balanced operation of the economy. They emphasised that the invisible hand of the market can beautifully adjust the allocation of resources without any external intervention.34 The laissezfaire market economy system adapted to the needs of the Industrial Revolution and greatly promoted the socialised mass production and the development of commodity economies in the capitalist countries at that time. From the 1760s to the 1830s, Britain took the lead in completing the industrial technological revolution and realised the mass production of social machines, followed by the successive completions of industrial revolution by major European and American capitalist countries; Japan also quickly completed capitalist industrialisation after the Meiji Restoration in 1867. After the mid-nineteenth century, however, the shortcomings of the laissez-faire market economy were gradually exposed. The failure of market regulation and the exploding periodic economic crises severely restricted the smooth development of 33

Gu, H. L. (1995). Phases of Historical Development of Market Economy. Studies on Socialism with Chinese Characteristics (01). 顾海良. (1995). 市场经济历史发展的阶段性. 中国特色社会 主义研究 (01). 34 Su, D. S. (ed). (2000). The Economics of Sector. Higher Education Press. p. 224. 苏东水 (ed). (2000). 产业经济学. 高等教育出版社. p. 224.

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the capitalist economy. By the end of the nineteenth century and the beginning of the twentieth century, reforming the laissez-faire market economy system had become an inevitable choice for Western countries. The worldwide economic crisis that broke out in 1929 provided an opportunity to reform the capitalist laissez-faire market economy. In 1933, the US government introduced Roosevelt’s New Deal to moderately regulate macroeconomic activities, which for the first time impacted the old laissez-faire market economy.35 The worldwide economic crisis that broke out in 1929 put the explanations of liberal market economy theory into a dilemma. In this context, state intervention was born in the capitalist world. The main representative economic theory of state intervention is The General Theory of Employment, Interest and Money, written by British economist Keynes in 1936. Keynes pointed out in this book that insufficient effective demand prevents the capitalist economy from automatically achieving a balance between supply and demand. To solve this problem, he advocated abandoning economic liberalism and replacing it with the state’s policies to intervene in the economy. The means to intervene in the economy include implementing fiscal and monetary policies, stimulating effective demand through income distribution policies, and promoting economic growth by expanding public consumption and public investment expenditures. He believed that only by relying on the government’s comprehensive intervention in the economy can capitalist countries eliminate economic depression and unemployment. Keynesian theory pointed out the defects of the market mechanism and the necessity of government intervention in the economy, which inspired people to have a deeper understanding of the laws of the market economy. Keynes’s idea of government intervention in economic operations has exerted a wide range of influence in the Western capitalist world. Since then, the governments of capitalist countries have begun to actively participate in economic regulations, and the modern market economic system has emerged. After the end of World War II, almost all Western capitalist countries constructed new models of their own market economic structure in accordance with the requirements of modern market economic institutions. In the more than 70 years since 1945, the economies worldwide have undergone great changes. Generally, most countries in Europe and North America as well as Japan in Asia have entered the stage of mature capitalist market economy; the vast majority of developing countries in Asia, Africa, and Latin America are still in the process of transitioning from a traditional agricultural economy to a modern market economy. The transition of the market economy from a laissez-faire market economy to a modern market economy is the inherent requirement of socialised mass production and the rapid development of the commodity economy, and it is also the inevitable result of the continuous progress of the human social and economic system. In the modern market economy, modern firms are established as market entities, and the market mechanism still plays an important basic role in the allocation of resources, 35

Gu, H. L. (1995). Phases of Historical Development of Market Economy. Studies on Socialism with Chinese Characteristics (01). 顾海良. (1995). 市场经济历史发展的阶段性. 中国特色社会 主义研究 (01).

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while at the same time, the state’s function of regulating the economy is improved. The functions of the state in regulating the economy include the implementation of fiscal policies, monetary policies, sectoral policies and income distribution policies in accordance with the actual needs in the operation of the market economy; the formulation of corresponding market operation rules, the supervision of market order, the maintenance of fair market competition, and the protection of consumer rights and interests in accordance with the needs of the development of the market system; the establishment and improvement of a social security system in accordance with the actual needs of social and economic development; the establishment and improvement of corresponding laws and regulations to maintain the smooth operation of the market economy, etc.36 In the former Soviet Union, some Eastern European socialist countries, and China before 1978, resource allocation planned and arranged by the government was implemented in almost all areas of the national economic system. In the 1940s, Marx and Engels proposed the original idea of a socialist planned economy based on the basic contradictions of the capitalist society and the socioeconomic structure; Lenin (1870–1924) inherited Marx and Engels’ thoughts on the planned economy and put it into the establishment of the Soviet Union from 1918 to 1924; Stalin (1878–1953) began to gradually build up a centralised planned economy model in the Soviet Union in 1926. The core of this model is to incorporate nationwide production and exchange activities into a unified system and to solve the issues of resource allocation, income distribution, and personal consumption through national plans. Its typical feature is that it excludes the regulation of the market mechanism to the economy and has a high degree of social, economic and political unity. This economic model spread to Eastern European socialist countries such as Poland, Hungary, and Czechoslovakia after 1945 and then to China.37 Economic Problems of Socialism in the USSR written by Stalin in 1952 and Political Economy published by the Soviet Academy of Sciences in 1954 were the theoretical summaries of this model. The British economist and political philosopher Friedrich August Hayek (1899–1992) gave a fierce criticism of the drawbacks of the planned economy in his book The Road to Serfdom published in 1944. However, his warning at the time did not have a substantial impact on the Soviet Union and the countries in Eastern Europe, while these countries even achieved brilliant economic achievements for a period of time. However, due to inherent shortcomings, such as high centralisation, information lag, and rigid mechanisms, this model has caused a great deal of decision-making errors, waste of resources, and low efficiency. The failure of plans to regulate and control has led to a serious imbalance in the structure of the national economy. The death of the reform led to another concentrated outbreak of various social contradictions, 36

Gu, H. L. (1995). Phases of Historical Development of Market Economy. Studies on Socialism with Chinese Characteristics (01). 顾海良. (1995). 市场经济历史发展的阶段性. 中国特色社会 主义研究 (01). 37 Ou-Yang, B. S. (2005). Rethinking the Process of Planned Economy from Theory to Practice. Social Science Front (01). 欧阳北松. (2005). 对计划经济从理论到实践过程的再反思. 社会科 学战线 (01).

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which eventually led to a chain collapse of the Soviet Union and Eastern European countries from 1989 to 1991.38 Before the founding of the People’s Republic of China in 1949, Mainland China was a typical country with a traditional agricultural economy. By 1949, industrials accounted for 30% of the total output, of which the proportion of heavy industrials was 7.9%, and the national economy featured a dual structure.39 After 1949, New China quickly healed the wounds of war and resumed social production activities in just three years. Under the promotion of the government, it began to embark on the road of a planned economy in 1953. At that time, China’s planned economy featured a typical pyramid hierarchy. Under this highly centralised system, long-term investment decisions were made by the State Development Planning Commission, while decision makers and executors of short-term investments were governments at all levels, instead of firms by and large; firms could not have their own capital funds. In some extreme cases, firms could not even build a public toilet independently.40 This rigid planned economic system has severely constrained the vitality of firms and at the same time caused insufficient supply and long-term shortage of commodities in the entire society. After the Third Plenary Session of the Eleventh Communist Party of China (CPC) Central Committee in December 1978, the Chinese government carried out a series of reforms to the centralised planned economy that originated from the former Soviet Union. In 1984, the Third Plenary Session of the Twelfth CPC Central Committee proposed a planned commodity economy. In 1992, the Fourteenth CPC National Congress proposed the goal of establishing a socialist market economy. Since 1978, after more than 40 years of continuous reforms, China has basically established a market economy system and entered the ranks of market economies. At approximately the same time as China’s reform and opening up, the former Soviet Union and Eastern European countries also carried out their own distinctive economic reforms in the 1980s. By the end of the 1980s and the beginning of the 1990s, these countries successively completed the transition from a planned economy country to a market economy country. From the above facts, it is discernible that the capitalist countries worldwide have moved from a laissez-faire market economy to an economy intervened and controlled by the government, while some socialist countries have switched from government planning and adjustment to market control. Although capitalist and socialist countries differ greatly in their socioeconomic starting points, social institutions, and development paths, the two have achieved the same goal by different routes from their approaches of adjusting economic operations and the means of allocating economic 38

Ou-Yang, B. S. (2005). Rethinking the Process of Planned Economy from Theory to Practice. Social Science Front (01). 欧阳北松. (2005). 对计划经济从理论到实践过程的再反思. 社会科 学战线 (01). 39 Liu, Z. G. (2003). A Review of the Theoretical Studies of China’s Economic Structure. Journal of Shanghai Administration Institute (03):123. 刘志广. (2003). 中国经济结构理论研究述评. 上 海行政学院学报 (03):123. 40 He, X. D. (1991). Economic Structure and Holism. Economic Daily Press. pp. 129–130. 贺晓 东. (1991). 经济结构与整体主义. 经济日报出版社. pp. 129–130.

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resources. From the economic practices worldwide, whether it is a highly market economy or a highly planned economy, it is not conducive to the long-term, stable and healthy development of a state’s economy. At present, the means to regulate economic operations and allocate economic resources by countries worldwide are in fact a mixture of market and planned economy in different proportions.

7.5 Evolution Trend of the Sectoral Structure and Its Adjustment Analysing the factors that affect the evolution of sectoral structure helps us grasp the internal laws of the structural changes, thereby helping the government formulate scientific policies and adjust the sectoral structure through the implementation of these sectoral policies to promote the continuous rationalisation of the sectoral structure. When the key factors affecting sectoral structural evolution are mastered, the sectoral structure can be effectively adjusted and continuously optimised accordingly, thereby promoting the healthy development of the economic system.

7.5.1 The Main Factors Affecting Sectoral Structural Evolution What are the key factors affecting sectoral structural evolution? From the spheres of the external corporate environment in Chap. 4 (Fig. 4.2), it is clear that the external environment of the sector system surrounds the economic system, state system, social system (international system), and natural system from the inside to the outside. In the state system, the systems coexisting with the economic system include at least the human-culture, polity, science, law, and education. These systems that exist in the external environment, more or less, directly or indirectly, will have an impact on the growth and evolution of the sector system. For a state’s specific sector, the factors from within the economic system are the highest in terms of directness and intensity of impact. Therefore, to find the key factors that affect sectoral structural evolution, it is necessary to focus on the inside of a state’s economic system. However, this does not mean that the key factors affecting sectoral structural evolution only come from within the economic system, and some factors from outside the economic system cannot be ignored either. For instance, political factors often have crucial effects on the economic system, and these effects will directly affect the structural evolution of the sector system. The following is an investigation and discussion of the main factors affecting sectoral structural evolution from the inside of the economic system. It is evident from the relation between the dynamics behind sectoral development in Chap. 5 (Fig. 5.3) that the general external factors affecting sectoral development

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include demand and supply, and the specific internal factors include firms, resources, markets, knowledge, institutions, and technology.

7.5.1.1

Demand Factors

From the ultimate goal of human production, production activities are at first to satisfy living consumption. To efficiently manufacture products for living consumption, human society must carry out production (i.e., machine production) that serves productive consumption. Therefore, from the perspective of consumption, the products of human society can be divided into two categories: the means of living consumption and the means of productive consumption, and the corresponding consumer demand is living consumption demand and productive consumption demand. In real households, living consumption is ultimately completed by specific individuals. Therefore, living consumption demand can be called personal consumption demand. In real sectors, productive consumption is ultimately completed by specific corporate organisations. Therefore, productive consumption demand can be called corporate consumption demand. Therefore, the external demand factors that affect sectoral development include the two basic needs of personal consumption and corporate consumption. In the sectoral demand structure, changes in the demand structure of personal consumption first affect the demand structure of corporate consumption, then the demand structure of specific industrial consumption, and finally the demand structure of specific sectoral consumption, while the changes in the demand structure at the three levels of firm, industry, and sector trigger the changes in the supply structure of resource elements at the corresponding levels, resulting in fluctuations in the relative quantity of the elements in the sector, the changes in the sectoral composition structure, and ultimately the changes in the sectoral output structure. This series of continuous changes is listed more concisely in Table 7.2. From Table 7.2, it is apparent that the structure of personal consumption not only directly affects the production structure and scale of the final products of firms but also indirectly affects the demand structure of intermediate products, which in turn influences the industrial structure and scale of intermediate products and changes the structure and scale of the entire sector due to the interindustrial correlation. The increase in national income encourages personal consumption to expand its size, upgrade its structure, and become multilevelled and diversified, which drives the sectoral structure to develop toward multiple levels and diversification. In the demand structure of sectoral consumption, the ratio between personal consumption demand and corporate consumption demand is constantly changing, and the proportional relationship between the two directly determines the proportional relationship between the sector of the means of consumption and the sector of the means of production. It is the change in the ratio between personal consumption demand and corporate consumption demand that has led to the ups and downs between the consumption good sector and the production good sector, thereby promoting the continuous evolution and development of the entire sectoral structure.

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Table 7.2 Internal mechanism behind the evolution of sectoral structure caused by demand and supply Demand hierarchy

Supply hierarchy

Resource allocation

Element input

Sectoral structure

Output structure

↑ sectoral demand →

↑ sectoral supply →

government-based, market-assisted

sectoral sectoral element input composition portfolio → structure →

sectoral output structure

↑ industrial demand →

↑ industrial supply →

market-based, government-assisted

industrial industrial element input composition portfolio → structure →

industrial output structure

↑ corporate demand →

↑ corporate supply →

market transactions to corporate corporate allocate resources element input composition portfolio → structure →

corporate output structure

Note In the table, “↑” indicates the ascending direction of the level; “→” indicates that the previous factor causes the change of the subsequent factors

In the early stage of industrialisation, The empirical rule (the Hoffmann Theorem) Hoffmann put forward well explained the evolution of sectoral structure from the domination of the means of consumption (light industrials) to the means of production (heavy industrials). If we further analyse the structure of personal consumption, we can divide it into two factors: the size of the population and the structure of the population. Generally, the greater the population is, the greater the absolute amount of personal consumption demand. However, the personal consumption demand that is effective for actual economic growth is also closely related to the level of per capita income. For example, in two regions with the same population size, there is obviously a large gap in the amount of personal consumption demand between the economically developed region and the economically underdeveloped region. Even for two people in the same area, the difference in personal income will also differentiate their personal consumption needs. Therefore, changes in per capita income have an important impact on changes in sectoral structure. With the increase in per capita income, the total personal consumption demand will inevitably rise, which will encourage the continuous upgrading of the sectoral structure to a higher level. On the other hand, for any state or region, the metabolism of the population as well as the migration and flow of the population will cause the population structure of the state or region to change (i.e., the increase in the new population, the change in the labour force, the natural ageing of the population, etc.). Changes in the demographic structure will cause changes in the demand structure of personal consumption, which will then affect the sectoral structure, which is actually the main content of the study of Demographic Economics.

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7.5.1.2

397

Supply Factors

Before production, a firm must first obtain resource elements provided by the external environment to be able to carry out production smoothly. Similarly, the growth of an industry or sector must also obtain resources provided by the external environment to be able to grow and develop easily. Among the resource elements put into production and operation, the first factor is manpower, followed by natural resources (i.e., land, minerals, plants, animals, etc.), and social resources (i.e., machineries, commodities, currencies, capital, technology, institutions, knowledge, etc.). From the longterm historical development of human society, the resource elements invested by human society in production and operation reflect the law of evolution from simple to complex, from tangible to intangible, and from low-level to high-level. In ancient agricultural society, traditional agriculture dominated a state’s sector system. In addition to labour (farmers), the resource elements needed to develop agriculture were mainly natural resources (i.e., land, plants, animals, etc.). Since the human science and technology level was very low at that time, the production tools and agricultural technology used were relatively simple and rudimentary, and the capital invested in agricultural production was also extremely limited. The resource structure of traditional agriculture is labour-and-resourceintensive in general. Since 1800, agricultural production in some Western countries has gradually industrialised. With the improvement of human science and technology, efficient production tools and agricultural technologies are widely adopted in agricultural production, attracting more investment to agricultural production. With the gradual increase in the amount of monetary capital invested in the agricultural field, the resource structure of agricultural production has evolved from labour-and-resource-intensive to capital-intensive. Since the mid-nineteenth century, as natural sciences such as biology, chemistry, physiology, genetics, entomology, microbiology, soil science and meteorology have been gradually applied to agricultural production in countries worldwide, modern production tools and agricultural technologies have also been widely applied in agriculture, encouraging people to introduce more technologies to agricultural production. With the increase in the number of technologies put into agriculture, the resource structure in agricultural production has evolved from capital-intensive to technologyintensive. Since the mid-twentieth century, when human society entered the information age, the resource structure of agricultural production has gradually evolved from technology-intensive to knowledge-intensive. Since the Industrial Revolution in the eighteenth century, in the sector systems of Western countries such as Britain, Germany, and the United States, industrials have gradually surpassed agriculture and have taken the leading position in the sector system. Regarding the changes in the supply structure of resource elements in the development of the industrial sector and service sector in all countries, Japanese economist Akamatsu, British economists Fisher and Colin Clark, and American economist Hollis Chenery have all conducted more in-depth research. The introduction to the theory of sectoral structure in Sect. 7.1 concludes that from the perspective of international trade, Akamatsu studied the evolutionary law of sectoral structure in sectors’ international transfer. He pointed out that the sectoral structure of a state

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is upgraded in sequence from labour-and-resource-intensive to capital-intensive and then to technology-intensive. Fisher extended his vision to the changes in the production structure of the three major sectors and pointed out the phenomenon of human and material resources being transferred between the three sectors in turn. Colin Clark analysed the historical statistics and summarised the changing laws of labour structure in the three sectors. The Industrialisation Stage Theory put forward by Hollis Chenery further develops and improves the Hoffmann Theorem. His research on the advanced stage of industrialisation (i.e., the advanced economic stage) pointed out that the evolution of the leading sectors within the industrial sector is shifting from capital-intensive to technology-intensive. After that, the tertiary sector began to differentiate, and intelligence-intensive and knowledge-intensive sectors separated from the service sector and began to occupy a dominant position. Studies from these economists reflected the influence of the supply of resource elements on sectoral structure from different aspects. Their research conclusions show that the general trend of the evolution of the resource structure within the three sectors of human society is from labour-intensive to capital-intensive, from capital-intensive to technology-intensive, and from technology-intensive to knowledge-intensive. This is a process of successive upgrading and continual advancement of the sectoral structure. Some researchers have also come to some valuable conclusions by examining investment or monetary capital as an independent factor that affects sectoral structure. In fact, from the growth and evolution of firms, industries and sectors, investment or monetary capital can be fully trusted as one of the supply factors of resource elements. From the perspective of resources, monetary capital is a type of social resource; socalled investment is in fact the specific behaviour or process of investing a certain amount of monetary capital in a certain type of firm, industry or sector. From the growth and evolution of the three major sectors in human society, apart from primitive agriculture, monetary capital is an indispensable resource element invested in human production and operation. Even though the input of monetary capital in traditional agriculture accounts for a small proportion, the input has gradually increased in modern agriculture. After the Industrial Revolution, monetary capital was dominant in the structure of inputs of resource elements in the sector system. Commerce is the earliest industry in the service sector, and commercial operations are closely related to the use of monetary capital from beginning to end. From a global perspective, the economies of most developing countries are currently still in the industrialisation stage, so it is still of practical significance to treat investment or monetary capital as an important factor that affects sectoral structure. From the growth and evolution of firms, industries, and sectors, investment activities at these three levels will all influence the sectoral structure. When an entrepreneur starts a new business, if he has sufficient venture capital, it is obviously beneficial to the rapid growth of his firm. If he lacks sufficient venture capital, then the firm he built up can only move forward slowly, relying on self-accumulation. In an area where capital accumulation is relatively weak, even if people have good entrepreneurial projects, starting a business is extremely difficult and full of risks. At this time, if the government can establish business incubation bases, set up venture capital funds,

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and provide loan support, this will play an important role in supporting the growth of new firms and emerging industries. For a new industry, if there are missing or imperfect links in this industry, it will also affect its normal development. At this time, if the government can invest in these links or introduce relevant policies to guide private capital to invest, it will remove obstacles to the growth of the industry. Within a sector, industries with more investment will grow and develop faster than those with less investment or no investment, thereby changing the sectoral structure of the entire sector.

7.5.1.3

Knowledge Factors

From the historical process of human society’s production and operation, knowledge is involved in human production and operation except in primitive society. However, the knowledge invested in traditional agriculture is relatively simple and elementary and only occupies a small proportion of the structure of factors of production. The knowledge invested in modern and contemporary agriculture has become more advanced, and its proportion has gradually increased. After the industrial revolution, knowledge has become more complex, diversified, and developed in the structure of inputs of resource elements in the sector system, and it has accounted for a larger proportion. In the postindustrial era, especially in the era of the knowledge economy, scientific knowledge and professional technology are closely integrated, and they have gradually taken a leading position in the structure of inputs of resource elements in the sector system. In primitive society, human production activities were mainly gathering and hunting. People passively collected wild fruits and tender leaves from the primitive jungle and hunted fish and beasts for a living, which can hardly be regarded as material production activities. Humans began to actively engage in the production of material products such as plant cultivation and animal domestication after their invention of agriculture. With the accumulation of knowledge, people continued to create labour tools and production technologies, which had in turn improved people’s understanding of the natural world and production activities. It is in this mutual encourage that humans became proactive in knowledge production, which was gradually developed, thereby greatly enriching the knowledge in human society. When human beings put the knowledge accumulated in production into social production activities as the factors of production, all kinds of knowledge factors are integrated into material products so that more knowledge factors are contained in material products. Modern high-tech products often contain a large amount of knowledge and technology, which are closely combined with the materials to form the structure and function of the product. For example, computers commonly used by modern people are very representative. They include materials such as plastics and metals, as well as knowledge and technologies such as software programs and microelectronic integrated chips. Material and knowledge, hardware and software are closely connected and organically combined to form the structure and function of the computer. If people compare ancient machines with modern machines, they will easily find that

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ancient machines are structurally very simple and contain relatively little knowledge and technology, while the structure of modern machines is extremely complex and contains a great deal of knowledge and technology. For example, ancient horsedrawn carriages generally have twenty or thirty components, with simple structures and are easy to manufacture. Modern cars, however, have more than 30,000 parts and components, which are not only complex in structure and diverse in functions but are also complicated in design and manufacturing involving subjects such as mathematics, physics, chemistry, materials, machinery, and craftsmanship. At present, human society has entered the era of the knowledge economy. Highly developed science and technology, the unprecedented development of social productivity, and the extensive application of information technology and the Internet widely permeate various scientific knowledge and modern technologies into the sectors of human society, which has greatly increased social productivity. As a result, the number of people engaged in the primary and secondary sectors has gradually decreased to a smaller proportion of the total employment, and more people moved to the tertiary and fourth sectors to engage in modern service or information sectors. Correspondingly, the proportions of the primary sector and the secondary sector in the overall GDP will gradually decline, while the proportions of the tertiary sector and the fourth sector will gradually rise. Under this development trend, a state’s scientific system (or scientific research system) will play an increasingly important role in the production of the entire society, and they generally undertake the research and production functions of the latest scientific knowledge.

7.5.1.4

Institutional Factors

To achieve their economic development goals, governments of different countries often formulate and implement some sectoral development strategies and sectoral policies to optimise and upgrade the sectoral structure of their economic system by encouraging or restricting the development of certain sectors. The government can also adjust the state’s sectoral structure and national income distribution by implementing measures including resource allocation institutions, fiscal policies, monetary policies, distribution policies, and sectoral control. The resource allocation institutions (i.e., market economy or planned economy), fiscal policies, monetary policies, distribution policies, sectoral policies, etc., involved here all belong to the category of institutions in a broad sense. From the internal and external environments of the sector system, the institutional factors that affect the sectoral structure can be divided into two major categories: internal institutional factors and external institutional factors. From the sectoral input–output operation, the institutions that affect the sectoral structure can be divided into three types: resource institutions, corporate institutions, and market institutions. Vertically from the system level, these three institutions can be divided into three levels: firm, industry, and sector. From a higher level of the vertical system, institutional factors can also be divided into the economic system, state system, social system (international system), and natural ecosystems (part of natural system). With

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the development of international trade and the formation of the world market, the economic systems of all countries worldwide have been integrated into a global economic system. Therefore, these institutional factors at different levels are interrelated, interact, and interinfluence into a complex institutional network system with a complex structure. Institutional factors of different types have different effects on the structures of different types of sectors. For example, for resource sectors such as iron mines, resource institutions will directly affect their structures. However, for sectors relying on international trade, market institutions (i.e., international trade policies) will directly affect their structures. Institutional factors at different levels have different effects on the structure of the same sector. For example, for a specific sector within a state, compared with the state’s legal system, the sectoral policies from the economic system have a more direct influence on the structure of the sector. It is precisely because of the various types and levels of institutional factors that they have different mechanisms and degrees of influence on sectoral structures. Therefore, it is necessary to carefully classify these institutional factors when discussing their impact on the sectoral structure. Some treatises of institutional economics often discussed the impact of institutional factors on economic development regardless of level, type, or nature when analysing and studying economic issues, which is rather unscientific. This will not only cause confusion in the narrative but also easily lead to misunderstandings. The market economy implemented by capitalist countries and the planned economy carried out by some socialist countries are actually the two basic forms of resource allocation institutions at the level of the state system. From the economic practices of countries worldwide, these two resource allocation institutions complement each other at different levels of the economic system. From the growth and evolution of firms, industries, and sectors, different states have different forms and means of resource allocation at these three levels, which reflects the differences in resource allocation institutions performed by different countries. For example, in some capitalist countries that implement a market economy, resources are basically allocated by market transactions at the firm and industry levels, while the government only participates in the allocation of some resources at the sector or higher economic system levels. In the former Soviet Union and other socialist countries that administer planned economy, however, the planned economic institutions cover almost all resource allocations in the economic system at firm, industry and sector levels, and market exchanges are only conducted at the level of the international system.

7.5.1.5

Technological Factors

Like the knowledge factors, from the historical process of human society’s production and operation, technological factors are involved in human production and operation except in primitive society. However, the technologies invested in traditional agriculture are relatively simple and elementary and occupy only a small proportion of the structure of factors of production. The technologies invested in modern

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and contemporary agriculture have become more advanced, and their proportion has gradually increased. After the industrial revolution, technology has become more complex, diversified, and developed in the structure of inputs of resource elements in the sector system, and it has accounted for a larger proportion. In the postindustrial era, especially in the era of the knowledge economy, modern high-tech transformed from scientific knowledge has gradually taken a leading position in the structure of inputs of resource elements in the sector system. In ancient societies, humans’ knowledge of the world and the application of this knowledge were often accidental behaviours, that is, the connection between scientific discoveries and technological inventions was not close. The connection between the two is often intermittent, so the speed of technological progress at that time was very slow. Since the Industrial Revolution, the connection between science and technology has become increasingly closer, thus accelerating the pace of transforming scientific knowledge into applied technology, which has also greatly promoted the rapid development of social productivity. The development of social productivity, on the one hand, has differentiated some people from the field of production to specialise in scientific research. On the other hand, it provides newer and richer material conditions for scientific research so that humans can work out more scientific knowledge than before. The combination of scientific knowledge and social production naturally gave birth to the applied technologies.41 In modern society, science and technology are interrelated, interacted, and interstimulated. The development of ancient technology is generally based on practical experience, while the development of modern technology is built on scientific experiments. A series of major technological developments (i.e., electric power, radio, computer, aerospace, atomic energy, etc.) in human society since the nineteenth century are first scientific breakthroughs and then technological achievements. Knowledge accumulation and technological progress play an important role in promoting the growth and development of the sector. It can be said that the emergence of every new sector in human society is always based on the discovery of new knowledge and the application of new technologies. For example, when people mastered the knowledge of electric power, electric power technology was invented. When the power technology was produced, the electric power industry and the electrical appliance sector were born naturally, and when people mastered the knowledge of electromagnetic waves, radio technology was invented. When radio technology came into being, the wireless communication sector and the television media sector came into being. The impact of technological progress on the sectoral structure is mainly reflected in the impact on the demand structure and the supply structure. From the demand structure, technological progress changes the demand by reducing the cost of corporate products and surging market sales, alters the structure of production demand by shrinking resource consumption and increasing alternative resources, and changes 41

Nevertheless, there were also examples where technological inventions appearing earlier than the corresponding scientific knowledge. For example, people invented the steam engine as early as the end of the seventeenth century and the beginning of the eighteenth century, and the principle of steam expansion, the first law of thermodynamics, was not clearly expressed until the 1840s and 1850s.

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the structure of consumer demand by upgrading consumer products. From the supply structure, technological progress deepens the sectoral division of labour and grows the sectoral economy by producing new materials, new processes and new production tools that greatly enhance social productivity, upgrades the sectoral structure by encouraging emerging sectors, and transforms a state’s sectoral structure by repainting the pattern of international competition.42 In addition, technology reshapes the sectoral structure through its influence on the productivity of specific firms and industries. Different industries have different technological innovations and advancements, resulting in differences in productivity among different industries. During the same period, industries with higher productivity were able to generate more income than less productive industries, resulting in income differentials between different industries, which would attract factors of production such as labour and capital from less productive to more productive industries, thereby causing changes in sectoral structure. From a long-term perspective, the technology of human society is constantly innovating and progressing. Different industries have disparate abilities to absorb, digest and apply new technologies, resulting in differences in the spread speed and penetration depth of new technologies into different industries. These differences will cause a discrepancy in the growth rates of different industries, which in turn will lead to the long-term transition and the continuous upgrades of the sectoral structure.

7.5.1.6

Corporate, Industrial and Market Factors

When the scale of a single firm continues to expand, the geographical space distributed by its branches (or business network) expands from one city to other cities, from one region to other regions, and then from one state to other states. From a micro level, it is manifested as a process in which firms continue to absorb, integrate, and allocate resource elements, including human resources, natural resources, and social resources, from the external environment. The division of labour and professional development of firms are bound to accompany the growth and development of professional markets. The geographic expansion of firms in large numbers will inevitably lead to the simultaneous geographic expansion of professional markets. From the evolution of the market network, the specific manifestation is the progression of professional markets from village and town markets to urban markets, from urban markets to regional markets, from regional markets to national markets, and from national markets to international markets. The coevolution of similar firms and professional markets, from a micro perspective, is manifested in the flow and dynamic combination of resource elements, including human resources, natural resources, and social resources. In a meso view, the combination of various resources, firms, and professional markets in different quantities and proportions forms a specific industrial structure. Similarly, the combination of resources, related industries and industry 42

Yang, J. W., Zhou, F. Q., Hu, X. P. (2004). The Economics of Sector. Xuelin Publishing House. p. 160. 杨建文., 周冯琦., 胡晓鹏. (2004). 产业经济学. 学林出版社. p. 160.

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markets in different quantities and proportions forms a specific sectoral structure. If a large amount of human resources, capital, and related technologies flow into a specific industry at the micro level, it will, from a meso perspective, demonstrate the rapid growth of this specific industry. Similarly, if a large number of similar firms and professional markets continue to expand geographically, from a meso perspective, it will be manifested as the geographical expansion of this particular industry. International trade or international economics, an important branch of traditional economics, mainly studies the trade relations and laws between states. Socalled trade refers to the transaction or exchange of commodities, which essentially reflects a commodity exchange relationship. Trade is generally divided into two categories, namely, international trade and domestic trade. International trade refers to trade activities carried out between states. Domestic trade refers to trade activities performed between different regions within a state, also called interregional trade or regional trade. International trade is actually a further extension of interregional trade in geographic space. The basic principles of the two are the same. In essence, they reflect the market exchange relationship. From the scope of market exchange, interregional trade corresponds to the regional market and the national market, while international trade corresponds to the international market and the global market. Due to the different tariff policies and trade institutions implemented by different states, the complexity of conducting international trade is apparently far greater than conducting domestic trade. There are two aspects to carrying out trade activities. The export of commodities, that is, selling products from the state (or region) to other states (or regions). The import of commodities, that is, purchasing products from other states (or regions) to the state (or region). The export of commodities can expand the market scope of domestic (or local) products and can effectively drive the production demand of local related sectors, thereby promoting the development of the local economy, while the import of commodities can increase the types and quantities of domestic (or regional) commodity supplies, can adjust the production structure of local related sectors, and can also enrich local consumer demand. Developing interregional trade within a state is conducive to giving play to the unique advantages of different regions and thus gaining comparative benefits. The positive effects of developing interregional trade include the increase in the degree of regional specialisation; the expansion of the socioeconomic division of the labour network, enabling regions to concentrate resources for the most beneficial sectors; the upgrading of the regional sectoral structure; and the improvement of the development level and per capita income of the region. Traditional trade theory believes that interregional trade depends on two points: the demand between regions and the trade barriers between regions. If the demand between regions is directly proportional to interregional trade, then the trade barriers between regions and interregional trade constitute an inversely proportional relationship. The Swedish economist Bertil Gotthard Ohlin (1899–1979) summarised the trade barriers between regions as transfer costs,43 including import and export tariffs of transported goods and special difficulties encountered in selling goods in different regions. If the transfer costs of 43

Ohlin, B. G. (1967). Interregional and international trade. Harvard University Press.

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a particular product are higher than the costs of local manufacturing, then the region will not obtain the product through trade but will produce the product on its own to meet local demand. Therefore, interregional trade can only be carried out when the transfer costs are less than the local production.44 From the definitions of industry and sector in Chap. 5, the market itself is an important factor that composes an industry or sector. The growth and evolution of an industry or sector also implies the growth and evolution of its internal market. When the business scope of a particular industry or sector exceeds the boundaries of its region, the scope of the market included in the industry or sector will also exceed the boundaries of this region, and interregional trade naturally occurs at this time. Furthermore, when the business scope of this industry or sector exceeds the boundaries of its country, international trade naturally occurs at this time. When a large number of firms enter a particular industry, the scale of this industry begins to expand. As the scope of production and operation of this industry expands from a village to a city, from a city to a region, and then from a region to a state, its market also develops from a village market to an urban market, from an urban market to a regional market, and then from a regional market to a national market. Among them, firms, industries, and markets are in fact in a relation of coevolution. The intercorrelation and evolutionary relationship between them can be explained and analysed well by using the cobweb model formed by sectoral chains mentioned in Sect. 5.8 (Fig. 5.9). To put it simply: division of labour and specialisation development → market transaction scale expansion → sectoral chain growth (sectoral structure evolution) → sectoral (or industrial) growth → further development of the division of labour and specialisation. Here, it is clear that interregional trade will occur in a region as long as the benefits brought by the division of labour and specialisation are greater than the costs (i.e., transaction costs) arising from the expansion of the market transaction scale; otherwise, it will not happen. Transaction cost refers to the sum of all costs incurred in the process of commodity transaction, including two categories: explicit costs and implicit costs. Explicit costs refer to the relevant costs that the transaction subject can measure before the transaction, such as related costs caused by information search, negotiation and contract, commodity transportation, and tax. Implicit costs refer to related costs that are difficult for the transaction subject to measure before the transaction. These costs are often discovered after the transaction, such as related costs caused by information asymmetry, integrity issues, institutional restrictions, and cultural differences. The concept of transaction cost here can fully cover the transfer costs incurred due to trade barriers, as outlined by Ohlin. Therefore, from this book, interregional trade and international trade are concrete reflections of the expansion of the market transaction scale in geographic space in sectoral growth and evolution. They are actually two relatively advanced stages (levels) in the growth and evolution of the market. From the general operational structure of the sector system in Chap. 5 (Fig. 5.2), we can see that the surface factor operating chain of the sector is input → firm → 44

Yang, J. W., Zhou, F. Q., Hu, X. P. (2004). The Economics of Sector. Xuelin Publishing House. pp. 157–158. 杨建文., 周冯琦., 胡晓鹏. (2004). 产业经济学. 学林出版社. pp. 157–158.

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resources → market → output, while the deep factor operating chain of the sector is input → knowledge → institutions → technology → output. It is concluded in Chap. 5, Evolutionary Mechanisms of Sectors that the most basic mechanisms of sectoral evolution is division of labour and coordination. Therefore, sectoral evolution can be examined from the two aspects of division of labour and coordination. To examine the process of sectoral evolution from the perspective of the division of labour, the interrelationship and evolutionary relation between firms, industries and markets is the process revealed by the cobweb model formed by sectoral chains. To examine the process of sectoral evolution from the perspective of coordination, the interrelationship and evolutionary relation between firms, industries and markets is the hierarchical structure revealed by the hierarchy of the bifurcation and synergy mechanism of the economic system (Table 5.2). From the economic system as a whole, the exchange (or transaction) network is actually the basic form of the coevolution among the subsystems within the economic system. From the process and results of market evolution, with the continuous expansion of the extent of the market, the knowledge of market transactions will continue to increase and enrich, the institutions of market transactions will continue to be improved and perfected, and the technology of market transactions will continue to advance and progress. Allied to this is that, from the process and results of sectoral evolution, with continuous scale expansion and structural upgrading, sectoral knowledge will continue to increase and enrich, sectoral institutions will continue to be improved and perfected, and sectoral technology will continue to advance and progress. If the cobweb model formed by sectoral chains (Fig. 5.9) is applied for analysis, the deep mechanism of the interconnection and evolutionary relationship between firms, industries, and markets is: Development of the division of labour and specialisation → expansion of the extent of the market {market transaction knowledge↑ + market transaction institutions↑ + market transaction technology↑} → sectoral structure upgrade {sectoral knowledge↑ + sectoral institutions↑ + sectoral technology↑} → sectoral (or industrial) growth → further development of the division of labour and specialisation. In the chain above, “→” indicates that the previous factor leads to the subsequent result; “↑” indicates that the factor has increased in quantity, quality, layer, and level. It is concluded in Table 5.2 that in the above relationship chain, the expansion of the extent of the market actually includes the expansion of transaction networks at four levels in terms of the corporate internal exchange network, intercorporate market transaction network, interindustrial market transaction network, and intersectoral market transaction network. Correspondingly, sectoral structure upgrade also includes the upgrading of synergistic networks within each specific sector at three levels in terms of intracorporate synergistic network, intraindustrial synergistic network, and intrasectoral synergistic network. Similarly, the division of labour and specialisation includes the four levels of intrafirm, interfirm, interindustry, intersector. From the geographic space, interregional trade is the result of the division of labour between regions nationwide. Similarly, international trade is the result of the

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division of labour between countries worldwide. The division of labour and specialisation is accompanied by the accumulation of knowledge, the improvement of institutions, the advancement of technology, and the enhancement of productivity within the entire sector system, and from a long run, sectoral structural evolution is manifested as a transition from labour-intensive → capital-intensive → technology-intensive → knowledge-intensive. Combined with the relevant theories of sectoral structure introduced in Sect. 7.1, what the book truly reveals is the deep principles behind the theories such as the gradient transformation of sectoral structure existing in the international trade discovered by Akamatsu, the coordination of sectoral structural optimisation and trade structural rationalisation emphasised by Miyohei Shinohara in his Industry-Trade Structure Theory, and the transformation stages of the internal sectoral structure revealed by Hollis Chenery. Readers will not be difficult to find after careful reading, and the general structure and evolutionary mechanism of the sector system proposed in this book are more inclusive and cover a broader range. In addition, it is evident from the relation between the dynamics behind sectoral development in Chap. 5 (Fig. 5.3) that the factors affecting sectoral development, apart from demand and supply, also include firms, resources, markets, knowledge, institutions, and technology. These factors are interrelated, interinfluenced, and interacted; therefore, the factors that affect sectoral development are also the factors that influence the development of interregional and international trade. Traditional trade theory only pays attention to factors such as demand, technology and transaction costs, which are obviously biased.

7.5.2 The General Trend of Sectoral Structural Evolution In the economic development of a state, its sectoral structure is constantly changing. Its current sectoral structure is not only the result of its long-term economic evolution but also the basis for its future economic development. A state’s economic development is the continuous evolution of its sectoral structure. There is an inevitable internal connection between the evolution of sectoral structure and economic growth. However, what is the relationship between the evolution of sectoral structure and economic growth? Regarding the nature of modern economic growth, some economists, represented by Kuznets, put sectoral structure within the economic aggregate framework in the analysis of the national economic aggregate and studied the changes of the sectoral structure from the changes of the economic aggregate; others, represented by Rostow, stressed the effect of changes in sectoral structure on the growth of national economy in the analysis of sectoral economy and studied the law of economic aggregate growth from the changing process of sectors. Due to the different perspectives and methods they adopted, their analysis of the same economic process came to very different conclusions.

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Kuznets believed that economic growth is an aggregate process; sectoral changes and total changes are interrelated, and they can only be properly measured when they are included in the total framework. The lack of the required total changes will greatly limit the possibility of changes in the underlying strategic sectors. In his view, in the relationship between the changes in sectoral structure and economic growth, the primary issue is the growth of the economic aggregate. Only with the rapid growth of the aggregate can the structure evolve rapidly. Without sufficient changes in the aggregate, the possibility of changes in the sectoral structure will be greatly restricted. His pivotal theoretical basis is the changes in the structure of consumer demand, which is directly related to the changes in the economic aggregate and directly drives the transformation of the production structure. At the same time, the higher the growth rate of per capita GDP is, the greater the changes in the structure of consumer demand. The conclusion drawn from his point of view is that the high growth rate of the economic aggregate causes a high rate of changes in the structure of consumer demand, and the high rate of changes in the structure of consumer demand drives the high conversion rate of the production structure. Rostow, however, believed that modern economic growth is essentially sectoral growth; modern economic growth is rooted in the cumulative diffusion of modern technology in production. These changes in technology and organisation can only be studied from a sectoral perspective; sectors are closely connected, and the economic aggregate index is nothing but the sum of the economic activities of sectors. His main theoretical basis is that the absorption of new technologies is originally the absorption based on specific sectors. The new introduction of important technologies or innovations to a particular sector is an extremely complex process that is connected with other sectors and crisscrossed with the operation of the entire economic system. His main conclusions are that sectoral analysis is the key to explaining the reasons for modern economic growth; the process of economic growth is the result of successive changes in the leading sectors. As he pointed out, “growth is based on the endless repeated take-off experience in different models and different leading sectors.”45 Kuznets and Rostow’s analyses are both reasonable and strong in arguments. However, who is right and who is wrong? In fact, from their respective perspectives, they only saw a part of the operation of the entire economic system, that is to say, what they discovered was only a partial truth. Only when their discoveries are organically combined can a more complete truth be obtained. If comparing the economic system of a state to a train pulled simultaneously by several locomotives, then these locomotives do not start at the same time but alternately run in turn. When a locomotive starts running, other locomotives are either pushed or pulled forward, and all the carriages behind are drawn forward as the locomotive runs. Here, the locomotives are similar to the leading sectors in different periods in the economic system, and the carriages are similar to the interrelated sectors or industries that are driven by the leading sectors in the economic system. 45

The above three paragraphs: Su, D. S. (ed). (2000). The Economics of Sector. Higher Education Press. pp. 233–234. 苏东水 (ed). (2000). 产业经济学. 高等教育出版社. pp. 233–234.

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In fact, Kuznets focused on the overall speed and fuel consumption of the train. He found that the faster the train runs, the faster the locomotives consume fuel, and the more frequently the locomotives run alternately due to the fuel filling. Rostow, on the other hand, focused on the respective operating conditions and forward speeds of the locomotives, stressing the fact that locomotives alternately run when the train is in motion. He noted that the more frequently the locomotives run alternately, the faster the overall speed of the train. He also noticed the complexity of the locomotives transmitting power to the other carriages. It is easy to discover that the disputes between these economists are similar to those in the Blind Men and the Elephant parable. The only difference is that blind men are quarrelling about the appearance of the elephant, while economists are arguing about the operation of the economic system. Combining the relation between the dynamics behind corporate development analysed in Chap. 4 (Fig. 4.11) and the relation between the impacts behind sectoral development in Chap. 5 (Fig. 5.3), it is not difficult to obtain, from the perspective of the firm, that the dynamic transmission mechanism of economic growth is consumption structure → demand structure → resource supply structure → production structure → exchange structure → distribution structure → new consumption structure. From the perspective of the sector, the dynamic transmission mechanism of economic growth is demand structure → resource supply structure → input structure → production structure → exchange structure → distribution structure → output structure → new demand structure. In the operation of the sector system, the output of one sector actually constitutes the input of another sector, which contains the widely existing correlation effect between sectors; therefore, the two can be considered together. Thus, the dynamic transmission mechanism of economic growth is consumption structure → demand structure → supply structure → production structure → exchange structure → distribution structure → new consumption structure, while the new consumption structure also drives changes in the demand structure, which is a cyclical and dynamic process. In this process, the production structure, exchange structure, and distribution structure evolve from simplicity to complexity, from extensiveness to intensiveness, and from low-level to high-level, which is in fact the evolutionary process of the sectoral structure inside the economic system and the continuous renewals of the leading sector within the economic system. From the deep factors in the evolution of firms, resources, markets, and industries, the sectoral evolution from simplicity to complexity and from low-level to high-level is always accompanied by the progress of human science, the improvement of institutions and the innovation of technology. At the same time, the consumption structure, demand structure, and supply structure in the economic system are also undergoing evolution and upgrading from unity to plurality, from simplicity to complexity, and from low-level to high-level. In the process of the growth and evolution of the sector system, the consumption structure, demand structure, supply structure, production structure, exchange structure and distribution structure are interrelated, interacted, interinfluenced and interrestricted, jointly promoting the growth and evolution of the sector system.

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In a state’s economic system, when a sector grows, it is reflected not only in the growth of the sector in terms of knowledge accumulation, institutional improvement, and technological progress but also in the growth of its output value. The growth of sectoral output is specifically manifested in the increase in the average income of the firms within the sector. After the income distribution within the firm, this income increase is reflected in the income increase of corporate personnel and the growth in government tax revenue. After the government taxation department pools the tax revenues from different sectors, it aggregates into a state’s fiscal revenue. Therefore, sectoral growth is subsequently reflected in the growth of national fiscal revenue. After the multiple distributions of fiscal revenue in the state system, the growth of fiscal revenue will eventually be reflected in the growth of national income. When the personal income of each citizen increases, their actual purchasing power will be enhanced accordingly. As people’s personal income continues to grow and their purchasing power continues to enhance, their consumption areas will expand, and their consumption levels will rise accordingly. In a state, an increase in the personal income of most citizens will cause changes in the state’s consumption structure. For example, if the population in a region has not solved the problem of food and clothing, their consumption structure will be relatively simple. At this moment, food obviously occupies a larger proportion of their consumption, and their consumption level remains rather low. When their income increases significantly, for example, not only is the issue of food and clothing solved but also they have the ability to purchase houses and cars, their consumption structure will become diversified (i.e., purchasing houses and cars, traveling, etc.). At this point, the proportion of food consumption is significantly reduced, and consumption will level up accordingly. In a state, with the development of the economy, when the personal income of most citizens increases to a certain level, the increase in the actual purchasing power of the citizens will promote the upgrading of the country’s consumption structure. The upgraded consumption structure will eventually encourage the growth of specific sectors through the transmission process of consumption structure → demand structure → supply structure → production structure → exchange structure → distribution structure → sectoral growth. In a state’s economic system, the sum of the output of all sectors is the state’s gross domestic product. From this point of view, it is completely feasible to analyse the operation of the economic system from the perspective of sectoral development or from the perspective of national income. Therefore, the issues discussed by Kuznets and Rostow are actually different aspects of the same process, but they may have overlooked the two important and closely related links of exchange and distribution in the economic system. If the factors of the above economic structure are used as different dimensions to describe the evolution of the sector system, the evolutionary trajectory of the sectoral structure can be drawn (Fig. 7.5). In the figure, the eight dimensions are ➀ consumption structure; ➁ demand structure; ➂ supply structure; ➃ production structure; ➄ exchange structure; ➅ distribution structure; ➆ sectoral growth; and ➇ national income. From a dynamic perspective, the structural optimisation and sound development of the sector system will promote the coordinated growth of these eight aspects, that

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Fig. 7.5 Evolutionary trajectory of the sectoral structure

is, the continuous expansion in the eight dimensions. It is not difficult to find that in the evolution of a sector from small to large, from weak to strong, the evolutionary trajectory of sectoral structure is a gradually expanding spiral. What is the general evolutionary trend of the sectoral structure? From a global perspective, with the exception of a few developed countries, such as the United States, which are already at the stage where the information sector dominates the economy, some more developed countries are still at the stage where the service sector dominates the economy. Most developing countries are mainly in economies where industrials dominate, and more economically underdeveloped countries are still in economies where agriculture dominates. From the stages of industrialisation development, sectoral structural evolution worldwide experiences the five stages of preindustrialisation, early industrialisation, mid-industrialisation, late industrialisation, and postindustrialisation. In these five stages, the general evolutionary trend develops in sequence from the sectoral structure dominated by the primary sector to the secondary sector and then to the tertiary sector. At each stage, the positions of the three major sectors are different, as shown in the following table (Table 7.3): From the inside of the three major sectors of agriculture, industrials, and services, the evolution of sectoral structure, resource structure, and market hierarchy in all countries across the world reflects the development law from simplicity to complexity, from extensiveness to intensiveness, and from low-level to high-level. The specific situation is shown in the following table (Table 7.4):

Predominant

Some room for development

Weak

Primary sector

Secondary sector

Tertiary sector

Some room for development, but rather small

Predominant

Declined

Early industrialisation

Gradually rising

Predominant

Remained

Mid-industrialisation

Predominant

Declined

Remained

Late industrialisation

Dominant

Declined

Remained

Post-industrialisation

46

Source: Liu, Z. Y. (ed). (2007). Modern Course for the Economics of Sector. Science Press. p. 162. 刘志迎 (ed). (2007). 现代产业经济学教程. 科学出版 社. p. 162.

Post-industrialisation

Periods Sectors

Table 7.3 General trend of the position occupied by the three sectors in different periods46

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Table 7.4 General evolutionary trend of the sectoral structure within the three major sectors Three major sectors

Agriculture

Industrials

Services

Structural evolution within the sector

Extensive agricultural sector → intensive agricultural sector → mechanised agricultural sector → precised agricultural sector

Light industrials → basic heavy industrials → processing heavy chemical industrials → lean and flexible industrials

Commodity circulation service sector → traditional service sector → modern service sector → information knowledge service sector

Structural evolution of Labour-intensive → sectoral resources capital-intensive → technology-intensive → knowledge-intensive

Labour-intensive → capital-intensive → technology-intensive → knowledge-intensive

Labour-intensive → capital-intensive → technology-intensive → knowledge-intensive

Hierarchical evolution Village fair → urban of sectoral market market → regional market → national market → international market

Village fair → urban market → regional market → national market → international market

Village fair → urban market → regional market → national market → international market

Source: compiled by the author of the book

7.5.3 The Relation Between the Sectoral Input Structure and Sectoral Output Structure It is concluded in Sect. 4.6 that in the operation of firms at the micro-level of the economic system, there is an inevitable inherent connection between the relations of factors of production and the relations of factors of distribution, and the difference in the structure of factors of production determines the difference in the structure of factors of distribution. From the meso-level of the economic system, there is also an inherent and inevitable connection between the relations of sectoral factors of production and the relations of sectoral factors of distribution (i.e., the distribution relationship between the distribution subjects in the outputs). The difference in the structure of sectoral factors of production determines the difference in the structure of sectoral factors of distribution. Here, different combinations of sectoral factors, such as resources, firms, markets, knowledge, institutions, and technology, have formed different sectoral input ratio structures. In the sector system, the varied combinations of elements put into the sector form disparate sector input ratio structures that determine the different sector output ratio structures. Due to the complexity of sectoral operations and the existence of sectoral correlation effects, the connection between the relations of factors of production and the relations of factors of distribution in the sector system is more complicated than the connection between the relations of factors of production and the relations of factors of distribution in the firm system. Among the taxonomies of sectors, there is a factor intensity taxonomy that classifies sectors according to the difference in the degree of dependence of sectors on

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different resource elements in the production process. According to this classification, sectors can be divided into labour-intensive sectors, capital-intensive sectors, technology-intensive sectors and knowledge-intensive sectors. This sector taxonomy highlights the compositional characteristics of the resource structure within the sector. For example, in labour-intensive sectors such as the food and clothing industrials, labour factors account for a large proportion of the production factors invested by firms, and capital and technology also occupy a certain proportion. For this type of sector, labourers should occupy a larger proportion in the distribution structure of sectoral output. Otherwise, there will be an unfair distribution of labourers, which reflects society’s underestimation of the value of labour and the occupation of the value created by labourers. The development of this type of sector obviously requires the establishment of a corresponding labour market, labour income security institutions, etc., to complement; otherwise, it will directly affect the healthy development of this type of sector. In capital-intensive sectors such as the petrochemical industrials and metallurgical industrials, capital factors account for a large proportion of the production factors invested by firms, and labour and technology also occupy a certain proportion. For this type of sector, investors should occupy a larger proportion in the distribution structure of sectoral output. Otherwise, there will be an unfair distribution of investors, which indicates society’s underestimation of the value of capital and the encroachment of the value created by investors. The development of this type of sector obviously requires the establishment of a corresponding capital market, investor capital income distribution institutions, etc., to complement; otherwise, it will directly affect the healthy development of this type of sector. In technologyintensive sectors such as electronic computers and bioengineering, technological factors account for a large proportion of the production factors invested by firms, and capital and labour also occupy a certain proportion. For this type of sector, technology investors should occupy a larger proportion in the distribution structure of sectoral output. Otherwise, there will be an unfair distribution of technology investors, and its essence is also the society’s underestimation of the value of technology and the encroachment of the value created by technology investors. The development of this type of sector requires the establishment of a corresponding technology market, technology patent distribution institutions, etc., to complement; otherwise, it will also affect the healthy development of this type of sector. In knowledge-intensive sectors such as publishing and media, knowledge factors account for a large proportion of the production factors invested by firms, and capital and technology also occupy a certain proportion. For this type of sector, knowledge investors should also occupy a larger proportion in the distribution structure of sectoral output. Otherwise, it will be an unfair distribution of knowledge investors, the essence of which is also society’s underestimation of the value of knowledge and the infringement of the value created by knowledge investors. The development of this type of sector also requires the establishment of a corresponding intellectual property market, intellectual property distribution institutions, etc., to complement; otherwise, it will also affect the healthy development of this type of sector. In the early days of an industrial society, technical personnel in a firm often participated in the distribution of labour results as ordinary employees of the firm; that is,

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they only receive wages and do not have the right to participate in profit distribution. With the development of society and the progress of science and technology, modern technology is playing an increasingly important role in production activities. In this context, the position of patent inventors and technical class in production activities has been continuously improved. In modern firms, patent inventors or important technical personnel hold a certain proportion of corporate equity and participate in corporate profit distribution as shareholders, which reflects the gradual progress of social distribution institutions. At present, the era of the knowledge economy has come, and the value created in production activities by knowledge and intelligence is increasing. Therefore, the investors of knowledge and intelligence should also obtain an income return equivalent to the value they create. China’s latest Corporation Law has abolished the requirement that intellectual property rights, as the share capital, should not exceed 70% of the registered capital of a limited company. This shows that the distribution dominance of the owners of knowledge and intelligence elements has been confirmed by China’s legal system. In the development of human society, the relative position of sectors such as agriculture, industrials, services and information is always changing. For example, in the era of agricultural society, agriculture is in a dominant position; in the age of industrial society, industrials are in a dominant position; in the postindustrial society, the service sector is in a dominant position; and in the era of information society, the information sector is in a dominant position. The direct cause of the change in the dominant position of different sectors is the intersectoral distribution difference. It is the distribution difference between sectors that causes the human resources, social capital and other resource elements in society to flow from one sector to another. The logic behind the changes in the sectoral structure is that the changes in the structure of factors of production in the sector system promote the evolution of the ratio structure of sectoral composition, and the changes in the sectoral composition ratio structure then drive the long-term transitions of relative positions of different sectors. At different historical stages of human society, the varied combinations of sectoral elements in the sector system form disparate sectoral composition ratio structures that determine the different sectoral output distribution structures. From the resource structure of the input end in the sector system, the long-term transition of the sectoral structure in human society experiences the evolutionary process of labour-intensive → capital-intensive → technology-intensive → knowledge-intensive, which actually reflects the characteristics of the long-term changes of the production structure at the micro level. At the same time, the regions and levels of market exchange in the sector system also undergo the long-term changes of village and town market → urban market → regional market → national market → international market, which actually reflects the long-term transition of the exchange structure at the micro level. In the development of human society, the evolution of the leading sectors in the sector system has undergone a long-term transition of agricultural sector → industrial sector → service sector → information sector. From the surface factors of sectoral development, the change in sectoral structure is actually realised through the intersectoral distribution of factors such as resources, firms, and markets. From

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the deep factors, this change is realised through the intersectoral distribution of factors such as knowledge, institutions, and technology. It is known that a firm is a system composed of manpower, resources and products. The intersectoral distribution of firms, from the perspective of the factors of the firm, is the intersectoral distribution of manpower (labour), resources (i.e., capital), and products (i.e., various intermediate products). With the deepening of the division of labour and the development of specialisation, the intersectoral distribution of markets has promoted the birth and growth of industrial markets and professional markets. From the geographical and level of market growth and evolution, the market is manifested as a longterm transition of village and town markets → urban markets → regional markets → national markets → international markets. It is through the exchange effect of markets at all levels that multiple distributions of output (results) have been realised among different sectors. From a micro level, this distribution is achieved through intercorporate exchanges and exchanges between individuals and firms. From the meso-level, this distribution is achieved through interindustrial exchanges. From the sectoral point of view, this distribution is achieved through exchanges between different sectors, such as agriculture, industrials, services, and information. For countries implementing a planned economy, these two levels of exchange function are replaced by administrative means of government departments. From sectoral output, the intersectoral distribution result reflects the long-term transition of agriculture, industrials, services, and information in terms of sectoral output according to their respective dominance in the economy. From the meso level, this change is reflected in the interindustrial changes in income and their ebbs and flows. From a micro level, this change is reflected in the evolution of the dominant position in the distribution relations of different classes of society. Correspondingly, in social forms other than primitive society, the predominant position of the distribution subject in social production activities has undergone a long-term transition of slave owner class → landlord class → capitalist class → technical class → intellectual class, which actually reflects the long-term transition of the distribution structure at the micro level. Here, we explain the internal mechanism of Petty-Clark’s Law from the historical process of sectoral operation. In the sector system, the relationship between sectoral input relation and sectoral distribution relation can be shown in Fig. 7.6. In Fig. 7.6, the black arrow indicates the decisive effect of sectoral input relation on sectoral distribution relation, the white arrow indicates the reactive force of sectoral distribution relation to sectoral input relation, the lower arc arrow indicates the feedback of the ratio structure of sectoral distribution to the ratio structure of sectoral input, and the upper arc arrow indicates the adjustment of the ratio structure of sectoral input to the ratio structure of sectoral distribution. Judging from the historical process of human social production, in a certain period of time, the decisive effect of sectoral input relation on sectoral distribution relation is determined by the level of social production, which is, in essence, determined by the human cognition level of socioeconomic laws at that time. The reactive force of sectoral distribution relation to sectoral input relation is mainly manifested in

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Fig. 7.6 Interaction between sectoral input relation and sectoral distribution relation

the continuous adjustment and transformation of the social distribution institutions (including the sectoral distribution institutions). Such institutional reform is usually started by the changes in the sectoral structure caused by the economic crisis or the changes in the social structure caused by the social revolution, which prompts people to constantly readjust and reform the unreasonable and unfair factors in the distribution institutions, making the social distribution institutions gradually rationalise and fair. The adjustment process mainly passively took place by means of periodic social revolution or power reconstruction in the traditional agricultural age and was generally carried out in the form of periodic economic crises or the reconstruction of international market patterns in the capital-dominated industrial age. From the operations of the sector system, sectoral structure includes input structure, production structure, exchange structure, distribution structure, and output structure, and the evolution of sectoral structure is actually a long-term dynamic adjusting process. Through the previous analysis, combined with the interactive relationship between sectoral input and sectoral distribution revealed in Fig. 7.6, the dynamic mechanism behind the evolution of sectoral structure can be drawn (Fig. 7.7). The dynamic process of long-term changes in the sectoral structure within the national economic system can be clearly understood through this illustration. In Fig. 7.7, the black arrow indicates the decisive effect of the former factor on the latter factor, the white arrow indicates the reactive force of the latter factor on the former factor, the lower arc arrow indicates the feedback of sectoral output relation to sectoral input relation, and the upper arc arrow indicates the adjustment of sectoral input relation to sectoral output relation. In the reproduction of human society, the intersectoral distribution is realised through the specific forms of firm production, market exchange, and government redistribution, which includes both the market’s spontaneous regulation and the government’s active regulation (i.e., taxes, subsidies, procurement, and relief). In

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Fig. 7.7 Dynamic mechanism behind the evolution of the sectoral structure

the process of sectoral input–output operations, sectoral input relations and sectoral distribution relations are interrelated, interinfluenced and interacted, and there is a dynamic relationship of action-reaction and feedback-adjustment between them from the perspective of long-term historical changes. On the one hand, sectoral input structure determines production structure, production structure determines sectoral exchange structure, and sectoral exchange structure determines sectoral distribution structure, which reflects the decisive role of sectoral input relation on sectoral distribution relation; On the other hand, unbalanced and unreasonable distribution result will lead to the intersectoral flow and redistribution (or reallocation) of the sectoral element of resources, firms, and markets, while different strata within the sector system, and various external stakeholders will also request to adjust the unreasonable distribution institutions, which reflects the reactive force of sectoral distribution relation to sectoral input relation. The action-reaction process existing in the change of sectoral structure is not a simple linear process but also includes the action-reaction between production structure and exchange structure, exchange structure and distribution structure, distribution structure and consumption structure, consumption structure and production structure, which is a complex nonlinear multidimensional process with chain interactions. In a state’s economic system, the interaction between sectoral input relation and sectoral output relation is a long-term historical evolution, and its mechanism is sectoral input structure → sectoral production structure → sectoral exchange structure → sectoral distribution structure → sectoral output structure → new sectoral input structure, which is a cyclic and dynamic process. When social distribution institutions are more reasonable and fair, this mechanism can promote a virtuous circle of the entire sector system, thereby promoting the continuous growth and development of a state’s sector system. When social distribution institutions are unreasonable and unfair, this mechanism will inhibit the virtuous circle of the entire sector system and even hinder the healthy growth of a state’s sector system. When social distribution institutions are extremely unreasonable and unfair, it will cause a serious imbalance in the sectoral structure. If the seriously imbalanced sectoral structure cannot be adjusted in time, it will hinder the smooth transmission of sectoral growth momentum and

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eventually lead to the outbreak of an economic crisis. Economic crises often intensify social contradictions, leading to class antagonisms and even social revolutions. The transmission of economic crises between states can also trigger international trade disputes and even international trade wars. To avoid economic crises and social revolutions, the ruling classes of all countries will be forced to constantly adjust the social distribution institutions, thereby gradually making the social distribution institutions more reasonable and fair. It is the dynamic mechanism of action-reaction and feedback-adjustment in social reproduction that promotes the long-term and worldwide transition of sectoral structure and social distribution institutions from extremely unreasonable and unfair to generally reasonable and fair, from generally unreasonable and unfair to relatively reasonable and fair. Since the world’s first economic crisis broke out in the United Kingdom in 1825, the economies of capitalist countries have fallen into a cycle of periodic outbreaks of crises. The most recent worldwide economic crisis was the global financial crisis triggered by the U.S. subprime mortgage in August 2007. Marx attributed the root of the capitalist economic crisis to the contradiction between the sociality of production and the private system of the means of production (i.e., the basic contradiction of capitalism); he believed that the reason for the periodic outbreak of economic crises lies in the stages of the movement process of the basic contradictions of capitalism. Only when the basic contradiction of capitalism develops to a critical point, that there is a serious imbalance in the proportion of social reproduction, will capitalist production experience an economic crisis. To overcome the economic crisis, the solution he proposed is to replace capitalist private ownership with the public ownership of the means of production, allowing the whole society to possess the means of production and to arrange production activities in a unified way. The way to eliminate economic crises proposed by Marx is actually to solve the issues in the distribution institutions of resource and property rights through the reform of social institutions. In the holistic analysis of the sectoral structure, this book has concluded that if a society wants to avoid an economic crisis, it must actively adjust the sectoral structure and optimise the social distribution institutions according to the actual situation of the social economy to promote a more reasonable and equitable social distribution relationship and to prevent the disparity between the rich and the poor and the polarisation of all social strata. To continue to achieve a reasonable sectoral structure and fair social distribution, it is not sufficient to rely solely on the distribution institutions of resource property rights, but it is necessary to establish a set of organically linked, coordinated, and effective institutional systems, including the distribution of resource property rights from micro (i.e., corporate institutions) to meso (i.e., industrial institutions and sectoral institutions), to macro (i.e., national economic institutions and legal institutions), and even to super macro (i.e., international trade institutions and international legal institutions), and at the same time use polity, economy, laws, policies and other means to guide the proportional and coordinated development of various departments of the national economy on the basis of scientific forecasts to promote the sustained, healthy and orderly development of the socioeconomic system.

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7.5.4 The Adjustment Direction of the Sectoral Structure When a society transforms from a traditional agricultural society to an industrial society, the accumulation of knowledge and technological progress in the entire society will make the industrials in the economic system have higher social productivity than agriculture, thus enabling the industrials to create more value than agriculture. Therefore, employment in the industrial sector can obtain higher income than employment in agriculture, thus moving the labour force from agriculture to the industrial sector. It has the same effect for a capitalist. If he can obtain more profits from the same monetary capital by investing in industrials than in agriculture, he will obviously choose industrials. When a large amount of labour and capital flows from agriculture to industry, industry will take the leading position in the national economy. As a result, the sectoral structure will change from being dominated by agriculture to being dominated by industry. In countries that implement a market economy, this is a process of spontaneously regulating the flow of resources through market mechanisms. This evolutionary process of the sectoral structure within the economic system is also suitable for explaining the interindustrial structural changes within the same sector. However, global sectoral development practices have proven that the market mechanism is not a panacea. When the market mechanism fails to adjust or has little effect due to its own defects, the sectoral structure will be out of proportion. When the proportion of a state’s sectoral structure is severely imbalanced, it will hinder the smooth transmission of the momentum for sectoral growth. If obstacles are not eliminated in time, they will eventually trigger an economic crisis and will cause a large number of bankruptcies and unemployment, thereby intensifying various social contradictions. An economic crisis is actually an internal economic mechanism that passively adjusts a seriously dysfunctional sectoral structure. As long as the factors that cause unreasonable sectoral structure and unfair distribution in the national economic system are not eliminated, economic crises will erupt periodically. To avoid economic crises, the government has the responsibility to continuously adjust the sectoral structure, optimise the allocation of sectoral resources, and continuously promote fairer social distribution. Therefore, in the development of a state’s sector system, in addition to the invisible hand from the market to make spontaneous adjustments, it also requires the visible hand from the government to make active adjustments. The fundamental purpose of the government’s initiative to regulate sectoral structure is to rationally allocate resources, optimise sectoral structure, and promote the fairness of social distribution. Within an economic system, from a macro perspective, an uncoordinated proportional structure between agriculture, industrials, services and information will affect the growth and development of the entire national economic system, and a serious imbalance in the ratio structure between major sectors may even hinder the normal development of the entire economic system. From the sector system, it is also necessary to maintain a proper interindustrial proportional structure within the sectors including agriculture, industrials, services, and information. If the proportional structure of the industries within a sector is not coordinated, it will affect the overall growth

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and development of the sector; from a micro perspective, specialised firms in an industry also need coordination. If the proportional structure of the specialised firms in the industry is not balanced, it will also affect the overall growth and development of the industry. From Fig. 7.6, to optimise the sectoral structure within an economic system, it is necessary to continuously adjust the relationship between sectoral input and sectoral distribution to make the social distribution institutions more reasonable and fair. The sectoral structure includes the input structure, production structure, exchange structure, distribution structure, and output structure. From the inside of the sector system, to optimise the sectoral structure, we must first maintain the normal and unimpeded operation of the sector system in terms of input structure, production structure, exchange structure, and distribution structure. From the outside of the sector system, to optimise the sectoral structure, it is also necessary to keep both the sector system and the consumption structure, as well as the demand structure and the supply structure in a dynamic relationship. From the previous trajectory of sectoral structural evolution (Fig. 7.5), the general direction of the government to adjust the sectoral structure is to keep the dynamics for sectoral growth in a virtuous circle along the path of consumption structure → demand structure → supply structure → production structure → exchange structure → distribution structure → national income growth → new consumption structure unimpeded. To highlight the importance of adjusting the sectoral structure, here is a typical example of sectoral structural imbalance. In the former Soviet Union in the 1980s, the development of the national economy was out of proportion, especially the imbalance between light industrials and heavy industrials in the industrial system. At that time, the industrial structure of the Soviet Union was more focused on the development of heavy industrials, mainly metallurgy, chemicals, and aircraft manufacturing, while light industrials, which produce consumer goods for civilian use, grew slowly. One consequence of such a structure was the serious shortage of domestic daily necessities. At that time, China had a relative surplus of light industrial consumer goods, and heavy industrials was still in its infancy. After comparing the economic structures of China and the Soviet Union, Mou Qi-Zhong, a private entrepreneur in Chongqing, discovered the business opportunities that existed between the two countries. In 1989, Mou Qi-Zhong led the Nande Group to successfully complete the largest single barter trade in the history of private trade between the two countries, trading more than 800 train carriages of daily necessities, light industrial products and machinery equipment produced by more than 300 factories in China for four civil aviation aircraft, the Tu154, and aviation equipment equivalent to the value of one aircraft from the former Soviet Union, which made Mou famous overnight.47 From the sectoral development, this cross-border trade implemented by Mou Qi-Zhong connects the sectoral supply and demand between China and the Soviet Union. The successful implementation of this cross-border trade fully demonstrated the ingenuity and outstanding business organisational capabilities of Chinese private entrepreneurs. Of course, if there was no serious imbalance in the proportional structure within the Soviet industrial system 47

Source: 牟其中(Mou Qi Zhong). Baidu Baike. http://baike.baidu.com/view/414586.html.

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at that time, it would be difficult for Mou Qi-Zhong to smoothly implement this trade. Two years later, in December 1991, the Soviet Union, a superpower that had existed for 69 years, disintegrated. There are many reasons that led to disintegration. In addition to institutional rigidity, failed reforms, party corruption, and ethnic conflicts, the serious imbalance in the structure of the entire national economic system is obviously an important reason that cannot be ignored. To optimise the sectoral structure and promote the coordinated development of the sectors, the government is responsible for the rational allocation of resources among different sectors. To this end, the government should eliminate unfair and unjust factors in resource allocation, actively promote institutional innovation and sectoral evolution, and improve the efficiency of resource allocation by optimising the sectoral structure. However, what should be done to optimise the sectoral structure? To optimise sectoral structure, the government should regulate from the three aspects of resources, industries and markets, especially from the input of legal institutions, infrastructure and other public goods in these three aspects to promote the coordinated development of the sector system. In the process of adjusting the sectoral structure, the leading role of the government is to distribute resources fairly and reasonably within the whole society and to provide a good external environment for the coordinated development of sectors or industries. The government should mainly play a role at the meso-level or macro-level of the sector, and should not interfere with corporate operations at the micro-level. Specifically, the government can promote the coordinated development of the sector system from the following aspects: The first is to make sectoral planning and rational layout according to the resource characteristics of different regions and formulate and introduce relevant sectoral policies to guide sectoral development; The second is to invest in the construction of infrastructure such as transportation, energy and communications to provide basic conditions for sectoral development; The third is to build a social credit system, improve the legal system, maintain social fairness and justice, and provide an orderly, fair, secure and sound social environment for economic development; The fourth is to focus on supporting characteristic and emerging industries, eliminate obstacles to the smooth growth of the sectoral chain, promote mutual support between industries and form an organic sectoral network; Fifth, accelerate the pace of restructuring, integrating, and eliminating declining industries, promote the intersectoral and interindustrial interactions and exchanges of the production factors, and promote the continuous optimisation and upgrading of the sectoral structure; The sixth is to strengthen the interconnection between professional markets, establish a multilevel market system, and constantly improve the exchange function of the market. For a country such as China with a vast territory and complex geography, the resource endowments vary greatly between regions. Each region should formulate a sectoral proportion structure suitable for the characteristics of the region according to the local population, resources, and economic development level. On the basis of maintaining the coordinated development of sectors, local characteristic sectors should also be highlighted. For example, since Shanxi Province is rich in coals,

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it should focus on the development of an energy sector centred on coals; Yunnan Province is rich in plants and ethnic culture, so it should focus on the development of the related sectors centred on plants, flowers and ethnic cultural tourism. The healthy development of the sectors in a region has much to do with the external environment, such as the local public infrastructure, legal system, social credit, and social order. If the infrastructure in an area in terms of roads, power and communications is imperfect, it will directly affect the smooth development of the production and operation of related firms. For example, for an iron mine far away from the city, if there is no road from the iron mine to the city, the iron ore produced by this mine will not be able to be shipped to the city for sale in time; if there is no corresponding power supply to this mine, it will be difficult for this mine to smoothly carry out production activities. In addition to infrastructure, if a region lacks social credit, morals, public security, fairness and safety, even if the local area has good and unique resources to be developed, investors will still be discouraged. Without sufficient capital investment, it is difficult for any industry to grow rapidly. In terms of emerging industries, when an industry just started, the number of companies was generally small, and they were often faced with many difficulties in talent, capital, and market development. If the government can actively support these firms at this stage, it will be very helpful to the rapid growth of these emerging industries. Supportive measures that the government can take include the establishment of business incubation bases and venture capital funds, the provision of interest-free loans or financial discounts, tax reductions and exemptions, product (or service) procurement, etc., which can also be gradually cancelled after firms and industries have grown stronger. For declining industries, the government should formulate and implement relevant sectoral policies to reorganise or reintegrate various element resources in these industries, eliminate some environmentally polluting and technologically backward companies, and guide them to gradually transfer to other emerging industries. Compared with countries with a relatively complete market economic structure, countries such as China that have just entered the market economy have much basic work to do in improving the market exchange function. It is known that the market is generally composed of transaction subjects, transaction objects, transaction media, transaction venues and transaction rules and other elements. In terms of promoting the perfection of market elements, the government needs to ➀ improve transaction rules, regulate the behaviour of transaction subjects, and eliminate market monopoly. Trading rules refer to the rules and regulations that all transaction subjects need to abide by in their transaction activities. ➁ Establish different types of professional markets for different transaction objects with different characteristics. For example, for different transaction objects such as commodities, human resources, capital, technology, information, and property rights, professional markets such as commodity markets, talent markets, capital markets, technology markets, information markets, and property rights markets can be opened. ➂ Perfect the transaction media and regulate its use. The transaction media in modern society includes two major categories: currency and credit. What the government needs to do is to perfect the currency system and credit system, reasonably control the

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amount of currency in circulation, formulate credit evaluation standards, and regularly conduct credit evaluations of transaction subjects. ➃ Provide comprehensive transaction venues and establish different forms of transaction venues in view of the characteristics and practical needs of different professional markets. For example, to facilitate the trading of bulk commodities, it is necessary to establish a relatively concentrated commodity exchange; decentralised human resource markets should be established to meet the needs of human resources in regions at different levels. In the rational layout and structural adjustment of the market, the government can regulate in the following aspects: First, make reasonable planning and layout of the sector’s internal market, as well as formulate and implement relevant market policies to guide market construction, according to the features of resources and the conditions of sectoral development in different regions; Second, establish professional markets at different levels in regions in appropriate proportions in accordance with the actual requirements of sectoral development, and finally form a market system with complete supporting facilities, reasonable structure and complete functions; Third, improve the market transaction institutions, establish a full market credit institutions, maintain fair transactions in the market, and provide an orderly, fair and just market environment for sectoral development; Fourth, eliminate the factors that hinder the circulation of commodities in commercial channels, promote vertical networking between different industry markets and horizontal networking between the markets in different regions, and build a specialised, coordinated, complementary and crisscross market system with a three-dimensional network structure.

7.6 The Openness and Inclusiveness of the Book’s Theoretical Framework 7.6.1 The Openness of the Book’s Theoretical Framework The socioeconomic theoretical framework constructed by the basic methods of system theory in this book is an open system. On the one hand, it is created on the basis of integrating numerous micro-, meso- and macroeconomic theories; on the other hand, when it faces various social and economic theories at home and abroad, it can connect with them at various levels and in different aspects. The openness of the theoretical framework of this book is mainly manifested in the following four aspects: From the microeeconomic level, Chap. 4 can be connected with the relevant contents of Business Economics, Corporate Ecology, Corporate Management and other disciplines. From the mesoeconomic level, Chap. 5 can be connected with the relevant contents of the Economics of Sector, Regional Economics, Sectoral Management and other disciplines.

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From the perspective of macroeconomics, Chap. 7 can be connected with the relevant content of National Economy, Domestic Trade, International Economics, Public Economics, the Economics of Taxation, Fiscal Economics, Financial Economics and Economic Management and other disciplines. From the perspective of the integration of Economics, Humanities and Social Sciences, Chap. 8 can be connected with the relevant content of social economics, political economy, demographic economics, cultural economics, public administration, sociology, political science, cultural studies, anthropology, philosophy of history and other disciplines.

7.6.2 The Inclusiveness of the Book’s Theoretical Framework The theoretical framework of this book is very inclusive. The general structural framework of the economic system proposed in this book is able to contain many ideological elements of traditional economic theories. To explain the dynamics of social development, this book stepped out economics and extended to sociology (Chap. 8). The structural framework from firm system, sector system, national economic system to state system and social system (international system) suggested in the book not only well accommodate the framework of New Structural Economics proposed by Chinese economist Lin Yi-Fu in 2009 but can also accommodate some typical macrodynamic economics theoretical frameworks. The book introduces typical theories of social economics (i.e., Adam Smith’s theory of the division of labour and market theory, Petty-Clark’s law, Leontief’s input–output model, Chenery’s theory of sectoral structure, Yang Xiao-Kai’s new classical economic framework and Malthus’s population theory, etc.), and analyses the factors influencing the long-term transition of social development. It is for these reasons that this book is more comprehensive and inclusive than other economic treatises that only analysed the social economy from a micro-, meso- or macro-part, -aspect or -level.

7.6.2.1

Inclusion of Lin Yi-fu’s theoretical framework of New Structural Economics

Among contemporary economists, the framework of New Structural Economics put forward by Lin Yi-Fu, a famous Chinese economist, in 2009 is representative and innovative. Comparing the concepts and basic ideas of The Framework of New Structural Economics proposed by Lin Yi-Fu (Sect. 7.1) with the relevant concepts and basic ideas of this book, it is found that the general structure of the economic system proposed in this book is well inclusive of Lin Yi-Fu’s theoretical framework structure. In Lin Yifu’s theoretical framework, factor endowments and infrastructure are two basic concepts. He pointed out that the factor endowments used by firms for production in economic activities are composed of land (or natural resources), labour, and capital (including physical capital and human capital). The infrastructure required

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for economic development includes hard (tangible) infrastructure and soft (intangible) infrastructure. Highways, ports, airports, telecommunications systems, power facilities, and other public facilities are all hard infrastructures, while institutions, regulations, controls, social capital, financial systems, education systems, judicial systems, social networks, value systems, and other social and economic arrangements are all soft infrastructures.48 In Lin Yi-Fu’s theoretical framework, the concept of factor endowments is equivalent to the concept of resource elements in this book, but this book analyses labour or human capital as a key factor in the formation of a firm. The infrastructure is illustrated in this book as the environmental conditions and public goods from the outside, but this book further subdivides the factors inside soft infrastructure.49 For example, this book includes the institutions, regulations, controls, policies and other factors in the soft infrastructure into the category of economic institutional factors, the social capital into the social resources, the education systems and the judicial systems into the education system and the legal system of the state system, respectively, the social networks into the network of social relations outside economic organisations (i.e., firms, markets, and sectors, etc.), and value systems into the deep factors of the human-culture system. The financial system can be divided into three parts: financial firms (i.e., securities, insurance, commercial banks, etc.), financial markets (i.e., currency capital markets, etc.), and financial regulatory organisations. They can be included in the sector system, the exchange system and the distribution system of the national economic system in this book. In addition, the fiscal policy, monetary policy, and resource management policies implemented by government departments discussed in Lin Yi-Fu’s theory can be included in the distribution institutions of the economic system distribution system in this book. The financial development and foreign capital issues discussed in Lin Yi-Fu’s theory actually involve the supply of capital factors and the construction of financial markets. Trade policy issues in fact associate the construction of international markets. The development policy and strategy of human capital discussed in Lin Yi-Fu’s theory could be included in the education system of the state system in this book. The policies or strategic issues discussed here are in fact closely connected with the institutional system, including the corporate institutions, industrial institutions, sectoral institutions, economic institutions, and legal system. After such a comparison, it is quite obvious that the structural framework proposed in this book from the firm system, the sector system, to the national economic system, the state and the social system in fact can well accommodate the framework of New Structural Economics proposed by Lin Yi-Fu. Comparatively, the analysis of the economic structure framework proposed by Lin Yi-Fu is more vivid and professional and emphasises the applied research of economic policies. The economic structural 48

Lin, Y. F. (2010). New Structural Economics: Reconstructing the Framework of Development Economics. China Economic Quarterly (01):10. 林毅夫. (2010). 新结构经济学——重构发展经 济学的框架. 经济学(季刊) (01):10. 49 It should be noted that the author of this book did not read Lin Yi-Fu’s paper on New Structural Economics until the completion of the structural framework of the economic system of this book in December 2012. The method of system theory adopted in this book is also different from the method of neoclassical economics adopted by Lin Yi-Fu.

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framework proposed in this book is, however, more systematic and universal and highlights the hierarchy, interconnections, and general structure of the economic system.

7.6.2.2

Tolerance of Three Typical Theoretical Frameworks of Macro Dynamic Economics

Among the theories of dynamic economics, the most representative are Marx’s theory of social reproduction, Kalecki’s theory of effective demand and Keynes’s theory of money. They all analyse the process of demand on the economic system from different aspects. Now, let us briefly introduce their thoughts from the economic development momentum. Marx divided the entire society into two major classes, labourers and capitalists; the social production system into two major categories, namely, the production department of the means of subsistence and the production department of the means of production; and the economic output into two parts, labourers’ wages and capitalists’ profits. Through the analysis of the income distribution structure and distribution relationship of the two major classes, he pointed out that insufficient consumption of the working class will lead to insufficient effective demand for the entire society, and insufficient effective social demand is an important reason for the cyclical fluctuations of the capitalist economy. Marx believed that for social reproduction to proceed smoothly, the output exchanged between the two major sectors must be equivalent, and the demand for this exchange between them must also be equal. Since the expansion and recession of the economic system are determined by the relationship between effective demand and total supply and total supply is relatively stable in the short term, the change in effective demand becomes the key to determining the direction of the economic system. According to Marx’s analysis, under the capitalist system, on the one hand, each capitalist is driven by external pressure (market competition) and internal motivation (chasing profits) to encourage capitalists to continue to invest in their own firms and expand the scale of production. The socialisation of production has provided a material basis for expanding the scale of production, which has led to an unstoppable development trend of the social productivity of the capitalist economy. On the other hand, from income distribution, capitalists’ profits grow faster than labourers’ wages, which greatly limits the consumption power of the working class. The limited consumption of the capitalist class weakened the consumption capacity of the entire society, which in turn led to a decline in the effective demand of the entire society and the relative surplus of social production. With the continuous expansion of social productivity and the relative decline of effective social demand, the contradiction between supply and demand in social production continues to intensify, which eventually triggers the economic crisis of capitalism. In Marx’s view, the direct reason for the capitalist economic crisis lies in social demand, that is, demand restrictions and insufficient consumption caused by the poverty of most people represented by the working class. Phenomenically, the lack of effective demand is the direct cause of the capitalist economic crisis,

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but behind the insufficient effective demand, there are deeper reasons. Marx believed that the capitalist private ownership of the means of production and the wage labour system determine that the capitalist income distribution institutions are antagonistic. These antagonistic distribution institutions determine that the consumption needs of the working class can only be confined within narrow limits. Therefore, he believed that the movement of the basic contradictions of capitalism, the private ownership of capitalist means of production and the socialisation of production, is the deep-seated cause of insufficient social consumer demand and therefore insufficient effective demand and the fundamental cause of the capitalist economic crisis.50 Polish economist Michal Kalecki proposed in the book An Essay on the Theory of the Business Cycle published in 1933 that the capitalist economy is a demanddetermined system. Capitalist unemployment and the decline in output are caused by insufficient aggregate demand. Insufficient effective demand is the fundamental cause of cyclical fluctuations in the capitalist economy; he regarded investment as a key factor that determines aggregate demand and therefore output. He believed that the main reason for insufficient investment is monopolistic competition and capitalism’s income distribution pattern.51 Kalecki’s effective demand theory is deeply influenced by Marx’s reproduction theory, but in a sense, it is closer to Keynes’s effective demand theory. The essence of what is now called Keynesian Theory was included in his papers published from 1932 to 1935. His analysis of the effective demand problem using the methods of Marx’s reproduction theory not only predates Keynes but also more profoundly presents the nature of effective demand.52 Kalecki also divided the entire society into two classes, labourers and capitalists, but he expanded the social production system into three sectors (i.e., wage goods production, consumer goods production, and investment goods production). He divided economic output into two parts: labourers’ wages and capitalists’ profits. Among them, labourers earn wages and spend all of them for consumption, and their savings are usually zero. Capitalists make profits and use them for investment and consumption, respectively. He believed that under imperfect competition, capitalists’ investment is insufficient. From income distribution, the growth rate of labourers’ wages cannot keep up with the growth rate of capitalists’ profits, capitalists’ consumption expenditures have been very stable for a long time, and their growth has been quite slow, which has caused the consumption growth of the entire society to be very slow. Insufficient consumption will result in a backlog of products and a decline in profits, causing capitalists to reduce investment, which in turn will lead to underinvestment

50

This paragraph is referenced from: Ning, J. M. (2010). A Comparative Study of Marx’s and Kalecki’s Effective Demand Theories. Economic Review Journal (03). 宁军明. (2010). 马克思与 卡莱茨基有效需求理论的比较研究. 经济纵横 (03). 51 Ning, J. M. (2010). A Comparative Study of Marx’s and Kalecki’s Effective Demand Theories. Economic Review Journal (03). 宁军明. (2010). 马克思与卡莱茨基有效需求理论的比较研究. 经济纵横 (03). 52 Chen, X., Jin, W. P. (2004). Effective Demand: Marx, Keynes, and Kalecki Economics. Nankai Economic Studies (02):52. 陈祥., 靳卫萍. (2004). 有效需求: 马克思、凯恩斯与卡莱茨基经济 学. 南开经济研究 (02):52.

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in the entire economic system. Analysing production input, he pointed out that capitalist investment expenditure and consumption expenditure are the main factors that determine the effective demand changes of the entire economic system. From a longterm perspective, the changes in capitalist consumption expenditures are relatively stable, so he believed that capitalist investment expenditures are the main reason for the changes in the effective demand of the entire economic system, and investment plays a dominant role in economic growth. He believed that the reason for the lack of effective demand is insufficient investment demand, which leads to insufficient utilisation of social production capacity. Investment decisions depend on corporate capital accumulation, expected profitability, existing capital stock and technological progress. Corporate capital, profitability and technological progress promote investment, while capital stock inhibits investment behaviour. He believed that investment has a dual role in capitalist economic activities. It is not only the source of economic prosperity but can also cause economic depression. On the one hand, in economic upswings, capitalists move vast amounts of capital into firms. Therefore, the capital stock accumulates in the boom, while the profit level remains unchanged. This leads to a decrease in the corporate profit rate, which in turn discourages investment. A decline in investment further leads to insufficient effective demand, which brings about a further drop in the output, income and profit of firms, trapping the entire economic system in an inwardly converging spiral movement until the lowest point of recession. On the other hand, with the shrinking capital stock, the corporate profit rate begins to rise, prompting capitalists to increase investment. The increase in investment brings the entire economic system into an outwardly expanding spiral movement until the peak of prosperity. After such repetition, capitalist economic activities have formed cyclical fluctuations in the long run. Keynes’s expression of effective demand is described in terms of the price when total demand and total supply reach equilibrium. According to Keynes’s definition, effective demand refers to the commodity price when the total supply quantity of goods provided by all firms in society is exactly equal to the total market demand quantity, which results from the profit-maximising decision of all firms in society and is a supply-demand equilibrium point in the economic system. This equilibrium point determines the actual output of the sector system and the actual social employment in the economic system. Keynes believed that effective demand in a closed economy includes consumer demand and investment demand, and investment demand determines consumer demand because social consumption changes with the increase or decrease in national income. Investment will eventually affect national income and social consumption through the effect of a multiplier. He believed that consumption depends on income and that the propensity to consume is diminishing, which means that the growth rate of consumer spending on consumption is smaller than the growth rate of income itself. Because the rich have a higher propensity to save than the poor, the marginal propensity to consume is diminishing in capitalist economic relations. In the effective demand composition of Keynes, investment demand plays a decisive role, and investment fluctuations are the main cause of insufficient effective demand and fluctuations in national income. In Keynes’s investment theory, an important concept is the marginal efficiency of capital. The marginal efficiency of capital is

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a discount rate, which refers to the profit rate calculated by the compound interest that a firm can expect to obtain when planning an investment. In Keynes’s view, the marginal efficiency of capital is a monetary value quantity, not a physical quantity. It is determined by the expected future returns of the firm. He believed that in the capitalist monetary economic system, intercorporate competition is reflected by the comparison of marginal efficiency of capital and market interest rate. It is through the comparison between the two that determines the investment demand from the firm and the corresponding output and employment. He also pointed out that the instability of firms’ expectations of the future leads to violent fluctuations in the marginal efficiency of capital, which can explain the cyclical fluctuations of the economy. Through the concept of marginal efficiency of capital, Keynes analysed the simultaneous equilibrium of capital stock and income flow (i.e., savings and investment). He found that every change in income flow will affect the value of capital stock, which in turn influences investment, and that changes in investment will alter income flow. From this, he explained the dynamic monetary relations in the capitalist economic system and constructed a dynamic equilibrium monetary theory.53 From the simple description above, it is conspicuous that Marx’s social reproduction theory focuses on the analysis of the macroeconomic operation in terms of surplus value (or profit) production, income distribution structure, and economic system; Kalecki’s theory of effective demand focuses on the analysis of the macroeconomic operation from production factor input (investment) and income distribution determinants. He also noticed the connection between investment behaviour, corporate capital accumulation, expected profitability, capital stock and technological progress; Keynes’s monetary theory focuses on the analysis of the macroeconomic operation from the production factor input (investment), social employment, and monetary market. He also noticed the connection between psychological expectations, capital stock and income flows. From Fig. 7.2, whether it is Marx’s theory of social reproduction, Kalecki’s theory of effective demand, or Keynes’s theory of money, their theoretical frameworks are part of the structure of the economic system proposed in this book. In connection with the analysis of the operation of the firm system and sector system in Chaps. 4 and 5 and Fig. 7.2, the overall structure of the economic system proposed in this book can basically accommodate their theoretical essentials. In short, the book unifies micro-, meso-, and macroeconomics in a complete theoretical framework from the overall ideological logic. However, apparently, the entire theoretical framework proposed in this book is still rough, and there is still much integration and improvement work that needs to be done. In addition, I believe that this requires the joint efforts of economists and sociologists worldwide!

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This paragraph is compiled from: Chen, X., Jin, W. P. (2004). Effective Demand: Marx, Keynes, and Kalecki Economics. Nankai Economic Studies (02). 陈祥., 靳卫萍. (2004). 有效需求: 马克 思、凯恩斯与卡莱茨基经济学. 南开经济研究 (02).

Chapter 8

The Structure, Function and Evolution of the State and the Social System

This chapter first, sorts out the concepts of state in ancient and modern China and abroad, and briefly describes the birth process of primitive states in China based on recent anthropological and historical research results; puts forward a two-tiered structural model of the state system on the basis of analysing the internal and external environment and constituent elements of the state system; redefines the concept of human-culture by clarifying the connotation of culture; puts forward a two-tiered structural model of the human-culture system on the basis of analysing the internal and external environment and constituent elements of the human-culture system; explains the main functions, production activities and evolutionary mechanisms of the human-culture system, and explores the issue of social progress from the perspective of social reform; redefines the concept of polity by studying Chinese and foreign scholars’ political conceptions; puts forward a two-tiered structural model of the political system on the basis of analysing the internal and external environment and constituent elements of the political system; briefly discusses the dynamic factors affecting the development of the social system from the angle of structure; discusses the main mechanisms behind the evolution of social system from the four aspects of social division of labour, social coordination, stratification and differentiation, as well as gradual change and disruptive change; describes the development trajectory of the social system from the perspective of multifactor correlation and interaction; and demonstrates the book’s historical philosophy and views of social evolution. The main discussions of this chapter are as follows: 1.

2.

State is a form of social organisation that human society has evolved to a certain stage. The public perception and definition of the state is constantly changing as society develops. The appearance of a primitive state is a major event in the history of human evolution and represents the progression of human being from a natural person to a social person. The birth of a primitive state is a process of the continuous differentiation of social organisations, stratification of social structures, and the diversification of social functions. On the one hand, social organisations are undergoing differentiation from community organisations → public organisations

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→ power organisations; on the other hand, social form is gradually evolving from clan society → tribal society → chiefdom society, which is accompanied by the continuous progress of human society in terms of population production, mental production and material production. Human social production is a complex system composed of all social productions, including population production, material production, and mental production. The production relations of human society are also a complex system composed of all production relations, including population production relations, material production relations and mental production relations. In social development, the dominant social production and social production relations are not static. In the long primitive age, population production and population production relations had always been in a dominant position, which were replaced by material production and material production relations after entering the civilised era. Since human society entered the information age, mental production and mental production relations with science, technology, culture and art at the core have gradually become dominant. The state system is an organic system composed of the subsystems of humanculture, economy and polity, each of which is relatively independent and has its own unique functions. Among them, the main function of the human-culture system is to bear human beings and to produce and create humanistic and cultural knowledge. The main function of the economic system is to produce, exchange, distribute, and consume material products. The main function of the political system is to provide public services and public goods and to organise, exchange, distribute, and use public rights. From the history of social development, the first social subsystem formed in human society is the human-culture system, followed by the economic system and political system, which are all differentiated gradually from primitive social organisations. From the structural functionalism, the actual operating process within the state system can be divided into the two chains of resource development → humanculture system → economic system → political system → social development and resource development → science system → legal system → education system → society development, from which the book obtains the general operational structure of the state system. In terms of socioeconomic relations, the complete production relation of a state system should be composed of its internal production relations network and its external social relations network. The human-culture in this book is a compound word that includes both the meanings of humans and the culture created by humans. The book believes that the essence of culture is the evolution of the human spiritual world. Culture is the coevolution of individual consciousness and group consciousness in terms of knowledge, thoughts, feelings, values, spiritual beliefs, ethical morals, institutional norms and other ideologies in the interaction of human beings with the environment. The result of such progress is manifested on the one hand as the improvement of human intelligence and the specialisation of knowledge, on the other hand as the advancement of awareness and the diversification of knowledge among the entire human group.

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From the external environment of the human-culture system, the specific factors affecting the evolution of the human-culture system include nature, human-culture, economy, polity, science, law and education, among which the natural environmental factors include climate, geography, and biology. From the internal environment of the human-culture system, the human-culture system is an organic system composed of individuals, households, community organisations, humanistic-cultural knowledge, social institutions, cultural education and other factors. From the operation of the human-culture system, the growth and evolution of the human-culture system is a continuous cycle of population growth and cultural innovation. The actual operating process within the human-culture system can be divided into the two chains of population production → individuals → households → community organisations → social progress and mental production → humanistic and cultural knowledge → social institutions → cultural education → consciousness progress, from which the book obtains the general operational structure of the human-culture system. In terms of socioeconomic relations, the complete production relation of a human-culture system should be composed of its internal production relations network and its external social relations network. The production and cultivation of an individual by a social group is an educational process from a biological man to a social man. In the process of a person from infancy to adulthood, social groups play a pivotal cultural and educational role in the formation and cultivation of individual consciousness in terms of spiritual beliefs, social morals and social institutions. This cultural and educational role is one of the important functions of the human-culture system in a society. Spiritual belief, public morals, and social institutions are hierarchically nested. Generally, beliefs are the foundation of morals, while morals are the foundation of institutions. In social life, human behaviour beyond the constraints of moral norms is regulated and controlled through social institutions such as laws. (1) The forms of spiritual beliefs include religious beliefs, scientific beliefs, power beliefs, and materialised beliefs. Among them, religious beliefs are the most common and lasting form of spiritual belief in human society. Religion is the most effective cultural tool created by mankind to integrate social consciousness. Religion is featured with certain stability in social changes as one of the important contents of culture. In early human society, religion assumed the functions of world interpretation, judicial adjudication, social enlightenment, moral cultivation, and psychological comfort. In modern society, religion still assumes the functions of social enlightenment, moral cultivation, and psychological comfort. From the perspective of social development, religion often plays an important role in integrating social consciousness, carrying out social enlightenment, resolving social

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contradictions, stabilising social order, and enhancing social cohesion that cannot be replaced by other social forces. (2) Morals and institutions are the norm for regulating and adjusting public behaviour, but their functional forms and features are different. Morals are the rules for individuals to restrain their own behaviour, which are active, internal, autonomous, and nonmandatory, while institutions are the rules for social organisations to restrict individual behaviour, which are passive, external, heteronomous, and mandatory. Morals and institutions have different forms and features in different organisational systems of human society. (3) Belief behaviour is the internalised behaviour of individual consciousness, moral behaviour is the regulation of self-behaviour by individual consciousness, and institutional behaviour is the regulation of selfbehaviour by individual consciousness in accordance with external rules. From belief behaviour to moral behaviour to institutional behaviour, the practicality of the participants is increasing, while the initiative is weakening. Beliefs are the cornerstone that supports human moral life and fundamentally determine the scope, hierarchy and approach of public moral practice. Morals are the basic driving force for maintaining a stable, harmonious and orderly operating society and have important value and function in the practical activities of human society. In a legal society at the intersection zone of morals and laws, individual behaviour is regulated by both morals and laws. 10. In modern society, humanistic intellectuals, the producers of mental and cultural products in the human-culture system, shoulder the important historical mission to enlighten the public mind and lead social consciousness, thereby driving the public to continuously modify and improve the value system, mental belief system, and ethical moral system. 11. The social structural framework proposed in this chapter absorbs the ideological essence of Malthus’s population theory and effective demand theory, Marx and Engels’ views on the connection between material production and mental production, and Max Weber’s (1864–1920) important thoughts on mental beliefs and ethical morals to promote economic development, which not only established the links between human-culture system and economic system, human-culture system and political system, and economic system and political system, but also linked them with science system, legal system and education system, thus covering the subject of Cultural Economics, Population Economics, Political Economy, Cultural Politics and other disciplines. 12. Regarding the question of the evolutionary mechanism of the material world, the American systems philosopher Ervin Laszlo proposed General Evolutionary Systems Theory, while the Chinese philosopher Niu Long-Fei revealed the internal mechanism behind the evolution of the material world. The two mechanisms of positive feedback, self-generation and negative feedback, selfstabilisation proposed by Niu Long-Fei can scientifically explain the general

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progress of the material world from physical structure → chemical structure → biological structure → social structure. Human society was differentiated from animal society, and after a long cultural process, a higher-level social system with a humanistic-cultural structure was finally created. The progression of the entire physical world is a diachronic process of the hierarchical evolution of various structural systems and a process of synchronic coupling of systems at different levels, which can be represented by the general model of the progression of the physical world put forward by Niu Long-Fei. The book combines the general operational structure of the human-culture system with Niu Long-Fei’s thought of a positive–negative feedback cycle to draw the evolutionary mechanism of the human-culture system. This diagram can more clearly explain the evolution of the human-culture system. Social evolution is a process from microdisturbance to macroamplification, which is also a continuous cycle of knowledge and experience. In ancient times, when innovation was carried out by some stimulus or disturbance from the external environment, these stimuli or disturbances were often contingent or random, and these contingencies or randomness often determined the evolutionary path and development level of the human-culture system. The stimulus or disturbance from the external environment can even change the form of religious beliefs of certain social groups. In a social group, too strong negative feedback forces in the human-culture system tend to suppress the public’s innovative activities, thereby inhibiting the emergence and growth of the new structure in the social system. Only open social systems can achieve continuous innovation and evolution, while closed social systems will only become rigid or stagnant. In the evolution of a system, when the dynamic state of its positive feedback, self-generation develops to a critical pole, whether it is to return to the steady state of negative feedback, self-stabilisation at the original level or to leap to a new level of steady state, it depends on the specific influential factors inside and outside the system, which are often random. In the critical period of system evolution, some contingency factors often affect the direction and path of system change. Historian Huang Ren-Yu (1918–2000) recognised that the course of human history runs in the form of spirals. The book discusses the spiral evolution law of human history through the structural investigation of social subsystems such as human-culture, economy, and polity and the systematic synthesis of multiple disciplines. It is in this sense that the ideas of social evolution revealed in this chapter also reflect the philosophy of history in this book. Polity is the social structure created by the development of human society to a certain period of time. Political activities appear when society produces class antagonism and the state, and they are always directly or indirectly related to the state. The book defines polity from the perspective of a system in which polity is a social system with a particular structure and functions and an organic totality composed of power organisations, public rights, and public institutions.

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Its core function is to manage and coordinate public affairs through the organisation, exchange, distribution and use of public rights. Political activities are embodied in the interactive process in which community organisations, public organisations, and power organisations in society jointly handle public affairs under the constraints of public institutions such as the constitution. The ultimate goal is to promote the continuous progress and development of the entire society through the use of public rights. From the external environment of the political system, the specific factors affecting the evolution of the political system include internationals, humanculture, economy, polity, science, law and education, among which the international factors include international organisations and other countries. From the internal environment of the political system, the political system is an organic system composed of community organisations, public organisations, power organisations, social knowledge, public institutions, and public rights. From the operation of the political system, the growth and evolution of the political system is a continuous cycle of organisational innovation and political progression. The actual operating process within the political system can be divided into the two chains of social organisation innovation → community organisations → public organisations → power organisations → political organisation progress and social concept innovation → social knowledge → public institutions → public rights → political concept progress, from which the book obtains the general operational structure of the political system. In terms of socioeconomic relations, the complete production relation of a political system should be composed of its internal production relations network and its external social relations network. From the external environment of the social system, the external ecological environment’s supply of resources to society is a necessary condition for social growth and evolution, while from the internal environment of the social system, human demand within society is the primary dynamics for social development. From the social system at the state level, the general factors affecting social development are human demand and resource supply, while the specific factors include human-culture, economy, polity, science, law, and education. Combining the general and specific factors that affect social development with the social operating process, the relation between the dynamics behind social development can be drawn. In the evolution of human society, driven by human demand factors and resource supply factors, the social system carries out a cyclic operation process of ecological input → resource output → resource utilisation → social development. From the internal environment of the social system, the evolution of a social system is manifested in the continuous creation, differentiation, and growth of the human-culture system, and the subsystems, such as economy, politics, legal system, education, and science, are successively differentiated from the human-culture system. In the dynamic system of social development, if the subsystems such as humanculture, economy, and polity, etc., can complement, coordinate, and support each

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other, the entire social dynamic system will exert a synergistic effect of 1 + 1 ≥ 2, which will promote the development and progress of the society. In contrast, if the subsystems are incompatible, inconsistent, and contradict each other, then the entire power system will show the antagonistic effect of 1 + 1 < 2, which will hinder or delay the development and progress of the society. Among the three subsystems of the social system in terms of human-culture, economy and polity, the core control mechanisms are beliefs and morals in the human-culture system, the market and government in the economic system, and democracy and law in the political system. From the long-term evolutionary process of human society, among all the dynamics for social development, the most important factor comes from the human-culture system within the social system. While in the human-culture system, the level of human spiritual realm and public morals ultimately determines the degree of civilisation of a society. 21. In the process of social growth and development, division of labour and coordination, differentiation and stratification, gradual change and disruptive change are important mechanisms behind social evolution. (1) The first great social division of labour in human society was the separation of primitive agriculture (including crop cultivation and animal husbandry) from the gathering-hunting activities of primitive society. The second social division of labour was the differentiation of handicrafts from primitive agriculture and the formation of the professional craftsman class. The third social division of labour was the differentiation of commerce from agriculture and handicrafts and the formation of the professional merchant class. The fourth social division of labour was the differentiation of public organisations from general community organisations, which gave birth to the social management class and the primitive state. In a broader social sense, the division of labour can be understood from the two aspects of the division of labour in social organisations and the division of labour in social functions. From the long-term history of human society, whether it is the division of labour in social organisations or the division of labour in social functions, their evolutionary process is a historical process of gradual differentiation, and their abstract form is similar to the branching of trees in nature. It is of great cognitive value to understand the process of social division of labour as a natural bifurcation, which at least helps the public establish a mathematical model for the process of social division of labour to carry out corresponding logical analysis. (2) The social division of labour enables the subsystems within a social system to specialise, deepen, and refine; social coordination encourages the subsystems to connect, complement and coordinate. The social division of labour is actually a concrete manifestation of the bifurcation law in social development, while social coordination is the exhibition of the synergy law. From a long-term perspective, the human-culture, economy, polity, science, law, education and other subsystems of a state are constantly

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evolving from unity to plurality, from low-level to high-level, and from simplicity to complexity under the combined effect of the bifurcation law and the synergy law. (3) Social differentiation has at least three basic dimensions: the social division of labour, social stratification, and system functional differentiation. It is discernible that throughout the historical changes of human society, social change is the diachronic and synchronic unfolding of social differentiation in these three dimensions. The social division of labour is the basis and condition for social stratification and system functional differentiation, and it is the prerequisite for social differentiation. The social differentiation caused by the social division of labour will give rise to the evolution of the social structure, and when the social structure evolves to a certain extent, it will cause the differentiation of the social structure, which is accompanied by the differentiation of the social functions. The result of social differentiation is the birth of new subsystems in the social system, that is, the formation of new social structures and social functions at the macro-level, the emergence of new social organisations and new professional departments at the meso-level, and the creation of new social occupations and new personal roles at the micro-level. The more specialised the division of social labour, the more complex the social differentiation. On the one hand, the social division of labour promotes social changes and social development, while on the other hand, the social division of labour pushes the continuous growth of human rationality. The process of human social evolution is actually the continuous differentiation and reintegration of social systems, as well as the continuous optimisation and perfection of social structure and social functions. (4) During the evolution of human society, the structure and function of the social system are gradually changing, and the properties of each element within it will undergo qualitative changes when the amount of change accumulates to a certain extent, which will cause the social system to change abruptly. The evolution of the social system is a repeated and continuous process that alternates between gradual change and disruptive change, which promotes social transition from one state, or level, to another. It is precisely because of the evolutionary mechanism of gradual change and disruptive change that the social system realises the evolution process from unity to plurality, from low-level to high-level, and from simplicity to complexity. From the perspective of social innovation, the process of social evolution is a process of punctuated equilibrium; that is, a relatively long incremental innovation process is interrupted by short-term disruptive innovations, followed by another relatively long process of incremental innovation. A social system realises the development and change of society through intermittent innovation in all aspects in terms of human-culture, economy, polity, science, law, and education.

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22. Social evolution is a combined result of external pressure and internal dynamics. A society will progress when its social system has a sufficient supply of external resources and strong internal demand for human development, while it will stagnate or regress when its external resource supply becomes insufficient and its internal development demand is weakened. 23. From the development of the social system, the evolutionary process of the social system can be described by the two chains of ecological optimisation → humanculture system → economic system → political system → social development and resource utilisation → science system → legal system → education system → cultural progress, from which the evolutionary diagram of the social system (i.e., helix network) can be drawn. The trajectories of the two chains along which the social system develops and evolves are two gradually expanding spirals with the same starting point. The helix network in the book describes the evolutionary history of human society in a simplified and vivid way, which is of great significance for understanding the mechanisms behind social progress, reintegrating fragmented knowledge systems, and guiding social practices. 24. Regarding the development momentum of human society, the major viewpoint of the book is that the development momentum of human society is determined by the joint force of human-culture, economy, polity, science, law and education, among which the predominant factor (or force) is not fixed but is always in dynamic change in different historical stages of social development. From the macroscopic scale of time and space, the long-term evolutionary mechanism of the entire human social system follows two basic laws of the bifurcation law and the synergy law, while the social system embodies the remarkable characteristics of the collective complexity, the operational periodicity, and the structural fractality at the same time. The general trend of its evolution and development is a gradually expanding spiral from simplicity to complexity, from disorder to order, and from low-level to high-level. The evolution of human society is an interweaving and spiral helix network consisting of multidimensional dynamics! In the development process of human society, although its general trend is gradual progress, it is not simple and linear but full of complexities. The overall evolution of the human social system is the unity of bifurcation and synergy, gradual change and disruptive change, quantitative change and qualitative change, order and disorder, and progression and regression.

8.1 The Concept of the State The group of individuals of the same species organised in a coordinated manner is regarded as a society, which is actually a concept in biology. Commonly seen social creatures are ants, bees, etc. However, the society discussed in the book refers to the human society. The state is the product of the evolution of human society to a certain stage, and modern society is generally organised in the form of a state.

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In the modern global social system, macro-level actors include state systems and international organisations such as the United Nations. Modern people all live in specific states, but the state is not always there. It has its process of birth, growth, and evolution. Therefore, the public perception and definition of the state is also constantly changing as human society develops. In ancient and modern times, people from different eras and regions have given different conceptual expressions of the state. For example, the American political scientist David Easton (1917–2014) claimed in 1931 that he had collected one hundred and forty-five separate definitions.1 In ancient China, before the Qin Dynasty, state and home had different meanings. People called the fief of the feudal vassal the state, the land governed by the aristocratic family headed by the feudal minister the home, and the territory ruled by the emperor the tianxia 天下 world. After the unification of China by the First Emperor of Qin, the centralised power system was implemented, and the state was then used in common with tianxia. In the West, state was originally referred to as the ancient Greek city-state.2 In Roman times, people referred to the state as the republic, and in the Middle Ages the state as the kingdom. In 1513, the Italian political scientist Niccolò Machiavelli (1469– 1527) used the term status to refer to state, which has the meaning of regime; he pointed out that the state is the neutral term to cover “all forms of organisation of supreme political power, whether republican or princely”.3 Engels pointed out that “the state is a product of society at a certain stage of development”; it “would alleviate the conflict and keep it within the bounds of ‘order’; and this power, arose out of society but placing itself above it, and alienating itself more and more from it”.4 Lenin believed that “the state is an organ of class rule, an organ for the oppression of one class by another:”5 German sociologist Max Weber pointed out that the state “is a human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory.”6 His definition of the state described the state as a compulsory political organisation. The American political scientist Theda Skocpol advocated expanding the connotation of the state. He believed that in addition to coerciveness, the state also has the functions of social management and social services. When he studied the relationship between the states and social revolutions, he pointed out that “we can make sense of social-revolutionary transformations only

1 Easton, D. (1953). The Political System: An Inquiry into the State of Political Science. Alfred A. Kaopt, Inc. p. 107. 2 The term Polis which is often translated as the ancient Greek city-states, refers to the construction of walls to form a shared social space that can be guarded. It has two meanings of public power and geographical space. In the ideology of the ancient Greeks, a city-state is a state, which includes the actual content of political, economic, and cultural aspects of social life. 3 Machiavelli, N. (2014). The Prince (Parks, T., trans.). Penguin Classics. p. 5. 4 Engels, F. (1893). The Origin of the Family, Private Property and the State. International Publishers. p. 140. 5 Lenin, V. I. (1947). State and Revolution. Farleigh Press. p. 13. 6 Weber, M. (1970). From Max Weber: Essays in Sociology (Gesth, H. H., Wright, C., trans. & ed.). London: Routledge and Kegan Paul. p. 78.

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if taking the state seriously as a macrostructure… Moreover, coercive and administrative organisations are only parts of overall political systems, which may also contain institutions through which social interests are represented in state policy-making as well as institutions through which nonstate actors are mobilised to participate in policy implementation. Nevertheless, the administrative and coercive organisations are the basis of state power as such”.7 Chinese scholar Tang Shi-Qi put forward that “the state is the sum of institutions and their operating rules that coordinate, organise, and manage all residents within a specific territory, according to certain determined principles, through legal monopoly coercive force”.8 His definition of the state summarised the actual behaviour of modern states and has characteristics of the times.9 From the changes in the concept of state, it clearly shows that the public perception and definition of the state is constantly changing as society develops. The concept of a modern state can be defined in a narrow sense and a broad sense. State in the narrow sense refers to the authority of social management and social service in a specific geographical space, based on social public power, for the purpose of coordinating the distribution of rights of all social strata and protecting the common interests of social groups. State in a broad sense refers to a comprehensive social organisation system with a certain structure and function consisting of factors that are interrelated, interacted and interrestricted in terms of polity, economy, and culture, on the basis of certain human groups in a certain geographical space, for the purpose of eliminating social conflicts, establishing social cooperation, maintaining social order, and promoting social development. The modern state is the basic subject of international law. From the point of view of system theory, based on holism, this book believes that state is an artificial, complex giant system. In addition to the characteristics of general systems in terms of integrity, hierarchy, relevance, and environmental adaptability, it is also embodied in complex structures, complex relationships and complex behaviours. It is a dynamic and open complex system. As a complex giant system, the function of the state is rich and diverse, but its basic function is to coordinate the interest relationships of social groups and classes in the system inside and outside the environment, balance the conflict between human society and the natural environment and promote the coevolution and sustainable development of human society and the natural environment. Since the Renaissance in the West, the ideology of anthropocentrism has once widely affected the development of countries worldwide, but in view of the severe damage caused by human society to the natural environment after the Industrial Revolution, it has begun to restrict the sustainable development of human society. Therefore, it is necessary to deeply reflect and contemplate the idea of anthropocentrism. The basic proposition of this book is to abandon the previous anthropocentrism, carry forward the idea of Heaven and Man are one in traditional 7

Skocpol, T. (1985). States and Social Revolutions. Harvard University Press. p. 29. Tang, S. Q. (1998). The Relationship between State and Society. Peking University Press. p. 32. 唐士其. (1998). 国家与社会的关系. 北京大学出版社. p. 32. 9 Requoted from: Feng, Z. F. (2008). The Game of Theories of the Origin of the State and the Game Theory of the Origin of the State. Literatures (Academic) (08). 冯志峰. (2008). 国家起源说的博 弈和博弈的国家起源说. 文学界(学术版) (08). 8

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Chinese culture, and establish a harmonious relationship between human society and the natural environment. For any nation-state, the ultimate goal of creating a state should be to promote the sustainable development of human society. In other words, the purpose of any nation to create a state is to create a happy life for its people while taking into account the natural environment and other social development.

8.2 The Birth of the Primitive State The emergence of a primitive state is a milestone in the history of the development of human society, marking that human society has entered a higher level of civilisation from a natural state. The appearance of a primitive state is a major event in the history of human evolution, which represents the progression of human beings from a natural person to a social person. The following is a brief description of the generation of the human native state. In primitive society, to resist attacks by wild beasts and carry out cooperative hunting, people form social groups of a certain size and live in groups. It is generally believed that the smallest unit of the initial community organisation in human society is the clan. Here, the community organisation is a sublevel social organisation that transcends the nuclear family and includes organisations such as clans, phratries and tribes. The so-called sublevel social organisation means that its social organisational level is lower than that of the national level, and its social scale is also smaller than that of the national level. Before the formation of the state, it was the dominant form of social organisation. However, after the formation of the state, it was one of the many factors that constituted the state. From the evolution of human society, the community organisation was originally a clan commune composed of primitive humans, and the growth and evolution of the community organisation is manifested in the organisational differentiation and evolution of the clan commune. Therefore, the transformation of primitive community organisations can be analysed by reading the history of clan communes (the birth of the primitive state described below for details). Transformed from a group of man-apes, clan is the first more formal form of social organisation in human society. Community organisations larger than clans include phratries, tribes, and chiefdoms. Clan refers to a socioeconomic unit formed by a common ancestor whose members are tied by blood, also known as a clan commune. Phratry refers to a social community formed by several different clans with blood ties. Tribe refers to a social community formed by the alliance of several clans or phratries living in a certain geographical area. Chiefdom refers to a large-scale organisational form of human society before the emergence of the state in the late primitive society, generally composed of tribal alliances. Anthropological studies have shown that the marriage system of human society has come through communal marriage, polygamous marriage and monogamous marriage. The families corresponding to these three forms of marriage are the communal family, polygamous family (including polyandry and polygyny) and monogamous family (i.e., monogamy). Before the

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formation of clan society, humans lived a barbaric life of communal marriage and incest. After entering clan society, human society experienced two stages: matrilineal clan society and patrilineal clan society.10 Around the time when bronze and stone were used together, the clan society gradually disintegrated due to the emergence and development of private ownership. In the period of matrilineal clan society, all the households were established around maternal blood kinship. At that time, the family system of polyandry was implemented, and people knew only their mothers but not their fathers. In matrilineal clan communes, women were dominant in social and economic life, so family was calculated by maternal lineage, and family property was inherited by the female line. With the further development of social productivity, men were gradually in a dominant position in social and economic life, and the human family system has also begun to gradually transition from polyandry to polygyny. The way of residence for men and women also changed from matrilocal residence to patrilocal residence. Ultimately, the matriarchy in the family relationship was replaced by the patriarchy. In the period of patrilineal clan society, men were the centre of maintaining the entire clan, and all the households in the society were established around the paternal blood kinship, so the family was calculated based on the paternal lineage, and family property was inherited by the male line. The main characteristics of clan communes are as follows: it relies on blood ties to maintain and has marriage taboos (in the clan, marriages between elders and juniors, between brothers and sisters, and even marriages with grandmother or grandfather’s furthest collateral relatives were prohibited), and exogamy was practiced; the means of production were publicly owned by the clan, that the members had equal status, they laboured collectively, and the products were distributed equally; public affairs were managed by the elected clan chief, and major matters (such as blood revenge, sheltering foreigners, etc.) were determined by the clan council composed of clan members. Clan communes formed a common language, customs and religious beliefs on the basis of common economic life. They often used an animal or plant as the totem mark of their clan. Regarding matrilineal clan society and patrilineal clan society, some scholars believed that these two forms are not two stages of social development but two types of social organisations coexisting at the same time. The American political scientist Francis Fukuyama pointed out that patrilineal societies are the most common form of lineage organisation, which was prevalent in China, India, the Middle East, Africa, Oceania, Greece, and Rome. While matrilineal societies are rarer than patrilineal ones, they are still found all over the world, in South America, Melanesia,

10

The Swiss jurist Johann Jakob Bachofen (1815–1887) first proposed in his 1861 book Mother Right that there was a matriarchy in the early forms of human family in primitive society, and pointed out that matriarchy precedes patriarchy. Friedrich von Engels, a German thinker, affirmed Bachofen’s view as a revolution in the study of family history. See: Engels, F. (1893). The Origin of the Family, Private Property and the State. International Publishers. pp. 6–16.

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Southeast Asia, the Southwest United States, and Africa.11 In Papua New Guinea, the highlanders are patrilineal, while many of the coastal groups are matrilineal.12 Due to the development of the three major social divisions of labour in agriculture, handicrafts, and commerce, the social productivity of human society has been greatly improved, thereby laying the material foundation for population production. In the population production activities of the primitive society, on the one hand, clan communes implemented exogamy. Therefore, due to the need for intermarriage between clans, a clan would establish close ties with one or several neighbouring clans, thus forming a tribe or tribal alliance. On the other hand, within a clan commune, as the population continued to multiply and grow, some subclan groups separated from the original clan commune to form a large clan or phratry. As the populations of these large clans or phratries continued to multiply and grow, large clans or phratries formed one after another. These large clans or phratries were closely connected to form a tribe or tribal alliance. This kind of social connection established by marriage in human society is an important reason for the continuous expansion of the scale of community organisations. Among them, marriage systems such as marriage taboos and exogamy have played an important role. It is in fact the result of the continuous consolidation and inheritance of the marriage system, whether the tribe is united by two or more clans through exogamy marriages or is derived from the phratries that were differentiated from clans due to reproduction. It is the continuous consolidation of such a marriage system that human marriage has moved away from endogamy instead of returning to it. It is the continuous inheritance of this marriage system that distinguishes human society from other primates and further eliminates the barbaric state of the past. In the period of clan society, people often needed to deal with the public affairs that belonged to the clan, such as convening clan meetings, allocating prey, organising celebrations, burying clan members, and holding religious sacrifices. As the scale of society gradually develops from clans and phratries to large-scale tribes and chiefdoms, public affairs in community organisations have become increasingly complicated, and the number of people involved in public affairs has also continued to rise. In the end, these people gradually separated from production activities and formed public organisations specialising in public affairs. In the period of primitive society, people who did not directly engage in agricultural and handicraft production were mainly public officials engaged in public affairs (such as tribal leaders, priests, etc.), except for merchants. The formation of this social class laid the organisational foundation for the formation of private ownership. According to the American cultural anthropologist Lewis Morgan’s research on the American Iroquois in the primitive barbaric period, the public organisations and public officials of a clan commune include the assembly of the people, chief, and military commander. “The citizens’ assembly is a mass gathering attended by all members of the clan. It is the highest 11

Fukuyama, F. (2011). The Origins of Political Order: From Prehuman Times to the French Revolution. Farrar, Straus and Giroux. pp. 56–57. 12 Service, Elman R. (1971). Primitive Social Organisation: An Evolutionary Perspective. Random House. pp. 110–111. Ibid., p. 491. Note 28.

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authority of the clan. All major decisions inside and outside the clan are discussed and decided by the assembly of the people, including elections, dismissal of chiefs and military commander, handling of disputes and lawsuits between clan members, decisions on blood revenge, and acceptance of foreigners. The chief and supreme priest, as well as the military commander, are permanent public positions. This kind of position is not fixed to certain people but is elected by all clan members based on a person’s virtues and talents and can be removed at any time. The power of the chief is fatherly and purely moral. The power of the military chief is also very limited, and one can only lead the armed masses and issue orders during wars. This is generally the same in the more advanced social organisations–the phratry and the tribe”.13 The differentiation of public organisations from general community organisations is a long historical process. It experienced two stages: hereditary aristocracy and government officials. In the first stage, the public power of the clan commune was transferred from the clan council to the few aristocrats in the clan, and the associated power organisation institutions gradually transitioned from the primitive democracy to an aristocratic privilege. At this stage, public functions were separated from the clan communes, gradually fixed within the scope of a few aristocratic families, and finally became the sole duty and privilege of these aristocrats. At first, clan leaders or tribal chiefs still retained the tradition of election. However, later, the superficial form of elections was replaced by the inheritance of a particular family. In the second stage, public power was transferred from eupatridae to government officials who were transformed from chiefs and military commanders. The associated power organisation institutions also transitioned from aristocratic privilege to a class-based centralised government. Through the evolution of these two stages, the public function of society differentiated from the general community organisation, and became the basic function of the power organisation that overrode the entire society. The evolution of public functions and the formation of power organisations eventually led to the birth of primitive states. After the emergence of the primitive state, the power organisation “on the one hand, completely concentrated social public functions within a special class, creating a group of officials who specialised in administrative affairs and enjoyed privileges in society. On the other hand, it completely reformed past power institutions and added a whole set of bloated public institutions and functions, such as the standing army, prisons, and administrative agencies. At this stage, the separation of public functions and specific social labour had finally been completed, and the nature of public functions had also undergone essential changes: public servants of the people had become social masters, and public institutions had become violent tools for exploiting and oppressing the working people”.14 Since the end of the 1970s and the beginning of the 1980s, Chinese academic circles have mainly two views on the origin of Chinese civilisation and the time when the state was formed. One view is that the ancient Chinese civilisation and state were 13 Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. p. 55. 刘佑 成. (1985). 社会分工论. 浙江人民出版社. p. 55. 14 Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. p. 57. 刘佑 成. (1985). 社会分工论. 浙江人民出版社. p. 57.

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formed in the Five Emperors Era before the Xia Dynasty. Some of them argued that it was in the Longshan Culture period 5,000–4,000 years ago, while others argued that it was in the Dawenkou Culture or the Hongshan Culture before the Longshan Culture. Another view is that the ancient Chinese civilisation and state were formed in the Xia Dynasty or the archaeological era of the Erlitou culture. Both of these viewpoints were discussed in the combination of archaeology and history, although the first was increasingly supported and gradually became the mainstream.15 For example, Chinese American archaeological anthropologist Zhang Guang-Zhi (1931– 2001) pointed out that from the early Longshan period at approximately 3,000 B. C., thousands of large and small ancient states were distributed in the plains and valleys of China’s Yellow River, Yangtze River and East Coast regions. The upper ruling class had economically exploited the lower classes, and there were struggles between the ancient states that they encroached on the material wealth and human resources of the enemy state as their own through wars.16 Archeological studies have found that in the late Yangshao culture, Hongshan culture, Dawenkou culture, and Longshan culture, the tombs excavated in various places reflect the emergence of aristocracy and the polarisation of the rich and the poor in the society at that time. As early as the late Daxi culture and the late Yangshao culture before the Longshan era, cities had already appeared, while in the Longshan era, cities generally rose up everywhere, and with palaces and other tall buildings built inside. During this period, words or symbols called carved symbols or pottery inscriptions were found in many places; smelted copper wares have also been found in many places, and the Liangzhu culture in Jiangsu and Zhejiang is characterised by rich jade wares. These evidences showed that during the Longshan culture period, a batch of primitive regional states (which can also be regarded as initial states or national states) of small scale and minimal population were born on the land of China. During the Longshan culture period, a number of regional states appeared on the land of China, which is more consistent with the description of the Yao, Shun and Yu periods as wanbang 万邦 ten thousand regions in history books. However, of course, in the so-called ten thousand domains, some of these social groups had evolved into the primitive states, while some had only developed into chiefdoms, and some still remained as tribes.17

15

Wang, Z. Z. (2005). Exploration of Ancient Chinese Civilisation. Yunnan People’s Publishing House. pp. 2–49. The Status Quo and Thinking of the Research on the Origin of Chinese Civilisation. 王震中. (2005). 中国古代文明的探索. 云南人民出版社. pp. 2–49. 中国文明起源研究的现状与 思考. 16 Zhang, G. Z. (1997). The Rise of Ancient Chinese Kings and the Formation of City-States. Yanjing Academic Journal (03). 张光直. (1997). 中国古代王的兴起与城邦的形成. 燕京学报 (03). 17 This paragraph is compiled from: Wang, Z. Z. (2011). Theoretical Exploration on the Origin of Civilization and State. Journal of Graduate School of Chinese Academy of Social Sciences (03):120– 128. 王震中. (2011). 中国文明与国家起源研究中的理论探索. 中国社会科学院研究生院学报 (03):120–128.

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From the integration of history and archaeology, Shen Chang-Yun and Zhang Wei-Lian pointed out18 that in the earliest states that emerged in China, there were widespread social organisations formed by various blood kinships. The birth of the early states in ancient China was different from the birth path of the slave states in ancient Greece and Rome. There was no military democracy in the creation of states in the early days of ancient China. Leaders at all levels in the clan society formed a ruling class through the concentration of power, which makes the basic class structure and social form of the early ancient Chinese states different from the slave states of ancient Greece and Rome. They pointed out that “the officials at all levels within the primitive community had developed from ‘public servants’ to ‘masters of society’ due to the ‘independence’ of their management functions, and further evolved into a class of rulers who enslaved ordinary members of the community, thereby forming the ancient states of our country”.19 They pointed out that before the Xia Dynasty, the social evolution of advanced areas in China experienced a process from an equal clan society to an unequal clan society. The basic organisation of this unequal clan society is what modern anthropologists call the chiefdom. They believed that the internal and external structures of the bang 邦 domains and the guo 国 states in all domains under heaven or all states under heaven in ancient Chinese literature conform to the characteristics of the chiefdom. In the late Longshan culture, the Yao, Shun, and Yu chiefdom complex appeared in the lower reaches of the Yellow River. After the public project of Great Yu controlled the flood, the power of the feudal vassal began to rise, thus turning them from social servants to social masters. They were convinced that the Tushan Meeting was an important symbol of Yu’s consolidation of the royal power and the establishment of the Xia Dynasty. For the early states in other regions outside central China during the Xia, Shang and Zhou Dynasties, they selected the ancient Shu Kingdom as the target. They believed that the society represented by the Sanxingdui Culture had developed to the early state stage. Wang Zhen-Zhong pointed out that in the Wanbang period before the Xia Dynasty, the social entities ruled by Yao, Shun, and Yu were all regional states in the form of initial states. The Yao, Shun and Yu alliance that once existed in central China was actually a confederation of regional states or a confederation of national states. That is, Yao, Shun, and Yu have dual identities. They are both the monarchs of their own regional states, and they have all served successively as leaders or overlords of the confederation of regional states. He believed that the status of the kings of the Xia, Shang, and Zhou dynasties as the co-lord of the world was transformed from the leader or overlord of the confederation of regional states during the period of the Yao, Shun, and Yu alliance. Before the Xia Dynasty, the state in the Longshan Culture period was the primitive regional state that first appeared in China, and the Xia Dynasty was the first unified dynastic state in China with the kingdom as the 18 Shen, C. Y., Zhang, W. L. (2009). Research on the Origin and Formation of Ancient China. People’s Publishing House. 沈长云., 张渭莲. (2009). 中国古代国家起源与形成研究. 人民出版 社. 19 Shen, C. Y., Zhang, W. L. (2009). Research on the Origin and Formation of Ancient China. People’s Publishing House. p. 70. 沈长云., 张渭莲. (2009). 中国古代国家起源与形成研究. 人 民出版社. p. 70.

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core. To this end, he divided the evolution of the ancient Chinese state into three stages: regional state (Zuanxu, Yao, Shun and Yu)—kingdom (Xia, Shang and Zhou dynasties)—empire (Qin to Qing dynasties). The corresponding state structure can also be divided into three forms: a simple regional state with a single system, a dynasty with a complex system and multiple integrations, and a unified state with a county system.20 According to his explanation, the main difference between a regional state and a kingdom lies in whether there is kingship in the social organisation; There can be no kingship or only a budding kingship in a regional state, but the further development of the coercive power in the regional state can form the kingship. Therefore, the next stage of the regional state after further progression is the kingdom. When the kingship appears, the power system of a society truly presents a pyramid-like structure. In the kingdom, the monarch is at the apex of power, and the difference between the monarch and his subjects is structural and institutionalised. Judging from the situation of the Xia, Shang and Zhou dynasties, this kind of kingship was hereditary within the family or clan. War pushed a regional state into a kingdom. War has enabled the budding kingship to grow in the regional state, thereby promoting the process of society from a regional state to a kingdom.21 From the appearance of the first regional states in 3000 B.C. to the establishment of the Xia Kingdom (around the end of the twentysecond century B.C.), it took approximately 900 years. After the establishment of the Xia Kingdom, a social pattern of pluralism and unity appeared on the land of China. The political entity of the whole society was characterised by pluralism and multilevel coexistence. There were not only kingdoms located in central China but also many regional states in various places, as well as chiefdom-type societies and even primitive clan tribal societies. According to Zhang Guang-Zhi’s research, after the Xia Dynasty, regional states (or chiefdoms) merged with each other through wars. There was a tremendous reduction in the total number of political units in China, to twelve hundred at the onset of the Western Zhou (approximately the eleventh century B.C. and to seven at the time of the Warring States (475 B.C.). In the Xia Dynasty and the Shang Dynasty, social organisations were further divided into different levels, and public organisations and power organisations gradually emerged. Through the end of the Shang Dynasty, kinship remained the primary form of Chinese social organisation. This began to change only under the Zhou Dynasty, when true states with standing armies and administrative structures began to emerge.22 Counting from the establishment of the Xia Dynasty, it took approximately 1,000 years to develop from a social organisation in the form of a kingdom to a more formal state organisation. The early vassal states of China were born out of the households in tribes. In China during the early Zhou Dynasty, the entire country was owned by a series of local lords and their kin 20

Wang, Z. Z. (2010). A Brief Discussion on the “Composite” Country in the Xia Dynasty. Literature, History, and Philosophy (01). 王震中. (2010). 夏代 “复合型”国家简论. 文史哲 (01). 21 Wang, Z. Z. (2005). Some Issues in the Research on the Origin of Ancient Chinese Civilization and State. Journal of Historical Science (11). 王震中. (2005). 中国古代文明和国家起源研究中 的几个问题. 史学月刊 (11). 22 Fukuyama, F. (2011). The Origins of Political Order: From Prehuman Times to the French Revolution. Farrar, Straus and Giroux. pp. 99–100.

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groups. The land and the people living on it were patrimony or heritable property that was passed down to descendants. Each ruling lineage raised armies, imposed taxes, and dispensed justice as it saw fit; even during the Spring and Autumn period, “the state resembled an enlarged household; the ruler reigned but did not rule. Ministers were important not because they were kin to the ruler or because they were heads of prominent families”.23 Lewis Morgan in Ancient Society (1877) pointed out that the evolution of public functions in ancient societies was that “in the Lower Status of barbarism the government was of one power, the council of chiefs; that in the Middle Status it was of two powers, the council of chiefs and the military commander; and that in the Upper Status it was of three powers, the council of chiefs, the assembly of the people and the military commander.”24 As the population converged and public affairs increased, these initial public functions became further independent and fragmented, eventually forming a complex set of institutions that divorced completely from society. In ancient Chinese society, the process of gradual differentiation of public organisations and public functions from community organisations is roughly the same as that in Western societies. Legend has it that in ancient times, Yao, Shun, and Yu successively abdicated and handed over the crown to another person who was not a blood kin, showing that the initial public functions in ancient China were not hereditary, and public power was not fixed in the hands of a certain group of people. Later, from the time of written records, the public power of society became the privilege of the tribal aristocracy, and it was only in the Western Zhou Dynasty that the so-called tianzi 天子 Son of Heaven, emperor, zhuhou 诸侯 feudal lord and other titles were created. In the primitive society of China, due to the insufficient and underdeveloped social division of labour, the whole society did not establish a democratic power organisation beyond the family patriarchy. State power had always been established on the basis of family and patriarchal relations, which resulted in the basic pattern of jia tianxia 家天下 all under Heaven belonging to the ruling family in all dynasties in Chinese history. In the birth, growth and evolution of primitive states, the growth and evolution of human social spiritual consciousness is a very important aspect. People have found large-scale sacrificial relics in the sites of the Hongshan Culture, Liangzhu Culture and other civilisations, which were places where people carried out religious activities at that time. The ancestral temples and halls built by people were the public products of society at that time, which contained people’s spiritual beliefs and religious life. The ancestor worship, reproductive worship, sacrifices, memorials, witchcrafts and other activities are the branching of primitive religion in all aspects. In the early states, people tended to closely combine religious ideology with public power so that the two together played an important role in social solidarity. During the Xia and Shang dynasties, the state rule at that time was featured with theocracy, and the 23

Fukuyama, F. (2011). The Origins of Political Order: From Prehuman Times to the French Revolution. Farrar, Straus and Giroux. pp. 107, 109. 24 Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. pp. 58–59. 刘佑成. (1985). 社会分工论. 浙江人民出版社. pp. 58–59.

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public management activities of society were often linked with religious activities. It was until the Shang Dynasty that the whole society was still filled with a strong religious atmosphere. People left a large number of oracle bone characters due to their need for divination. Apparently, the purpose of the Yin people’s divination, worship and other witchcraft activities was to unify the thoughts of all social strata, thereby sanctifying the will of the king of Shang to consolidate the king’s power and strengthen the rule of the state. The etiquette and manners in religious activities later became the social institutions of a social group, which gradually evolved into the feudal rites of early states. According to Zhang Guang-Zhi’s research, during the period of the Three Dynasties, ritual behaviour within lineages was codified in a series of laws. The rites revolved around worship of the lineages’ common ancestor and took place at the ancestral temple that held the tablets inscribed with the ancestor’s name. There were several sections of these temples, corresponding to the level of lineage or sublineage organisation. Lineage leaders reinforced their authority through their control over the rites; failure to correctly observe either the rites or military orders led to severe punishment by the king or higher lineage heads.25 Before the Western Zhou Dynasty in Chinese society, religion had always ruled the entire society, and religious ideology had been adjusting the behavioural norms of the people in the society, which, however, lost its dominance over the society after the Religious Reform Movement in the early Western Zhou Dynasty, and the lizhi 礼制 feudal rites associated was independent from religion. Coupled with the whole set of ideological reinterpretations of the Zhou people, the social behavioural norms of the Western Zhou Dynasty were reconstructed. At the same time, the original religious instruments became the ritual instruments that symbolised state power.26 The birth, growth and evolution of state is accompanied by population production, mental production and material production, which are closely related, interacted and interinfluenced. It is in social communication that people gradually invented language and writing, and it is in their daily production and life that they created religious beliefs, ethical morals, and family systems. With the development of social productivity and the increase in surplus products, some people who specialise in mental production, such as religion, philosophy, literature and art, were gradually differentiated from specific production activities. In primitive society, the spiritual and cultural activities of human beings were mainly religious sacrificial activities and primitive artistic activities. Historical data showed that the division of labour between mental production and material production in human society originated in the early stage of class society, and mental production activities were mainly derived from social public functions. The first public officials who specialised in mental production were priests and historians, as shown in the contents of the earliest Chinese books, Shang Shu《尚书》and I Ching《易经》Book of Documents. Lao Tzu, the great ancient Chinese philosopher, once worked as the Official of Royal Archives for 25

Fukuyama, F. (2011). The Origins of Political Order: From Prehuman Times to the French Revolution. Farrar, Straus and Giroux. p. 100. 26 Yin, H. B. (2007). Some Questions on the Study of the Origins of Civilization. Journal of Social Sciences (04). 尹弘兵. (2007). 关于中国文明起源研究的若干问题. 社会科学 (04).

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the Zhou Dynasty. The Eastern Han historian Ban Gu (32–92) believed that all the scholars and philosophers had all served as officials in the royal family; He said in the Book of Han—Treatise on Literature that “The Confucianism most likely originated from the officials of Education.” “The Taoism most likely originated from the officials of History.” “The School of Yin-yang most likely originated from the officials of Astronomy.” “The Legalism most likely originated from the officials of Laws.” “The School of Names most likely originated from the officials of Rites.” “The Mohism most likely originated from the officials of Rituals.” “The School of Diplomacy most likely originated from the officials of Diplomacy.” “The Syncretism most likely originated from the officials of Policies.” “The Agriculturalism most likely originated from the officials of Agriculture.” “The School of Minor-talks most likely originated from the petty officials of the court.” Literati classes were gradually formed when some literati began to give lectures, cultivate disciples, and compile books, etc. In ancient China, the Chinese intellectual class that engaged in independent mental production activities began to form after Confucius (551 BC–479 BC) first opened private schools. The earliest full-time entertainers in China were court dancers, musicians, luxury art craftsmen, etc. They were born out of the entertainment needs of the ruling class. In the development of human society, the progress of science and technology is an important driving factor. The progress of human science and technology is actually the process of human beings using natural substances for their own use. One of the most important aspects is the creation of tools and the continuous improvement of tools. From the materials for making tools, bamboo, wood, stones, animal bones, etc., are the earliest materials used by human beings. Later, people invented pottery, which is a new use of soil, mainly for the making of bowls, pots and other household utensils. Then, metals such as copper, tin, and iron successively became new materials for people to make tools after the invention of metallurgical technology. In 1989, 475 bronze wares of the middle and late Shang Dynasties were unearthed from the tomb of the Shang Dynasty in Dayangzhou Town, Xingan County, Jiangxi Province. Among them, 75 pieces of six kinds belonged to hand tools, and 68 pieces of twelve kinds belonged to bronze farm tools. These unearthed bronze tools indicated that bronze was used in the production activities of Chinese society, at least in the late Yin and Shang Dynasties at approximately 1,300 B.C.27 The use of metal materials has continuously enhanced the quality and performance of various tools, which in turn has improved the material production efficiency of human society. For instance, metallic copper is more malleable than stones that can be used to invent lighter and more complex tools, while iron is harder than copper that is more suitable for sharper knives and ploughs, etc. When cutting bamboo, weeding, or ploughing fields, iron tools are obviously more efficient than copper tools. Therefore, each discovery and utilisation of new materials has improved the material production efficiency of

27

Wang, D. (2002). Chinese Civilisation: Multicultural Comprehensive Innovation Philosophy. Heilongjiang Education Press. p. 683. 王东. (2002). 中华文明论——多元文化综合创新哲学. 黑 龙江教育出版社. p. 683.

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human beings to varying degrees. Every improvement in material production efficiency enables people to produce more surplus products for exchange under the same conditions of human and material resources, which directly promotes the expansion and prosperity of commodity exchange activities. The expanded commodity exchange market stimulates the development of agriculture and handicrafts, which in turn promotes the deepening of the division of labour and professional development in agriculture, handicrafts and commerce. This is actually an interactive and circular process. The material production activities and mental production activities of human society are interrelated, interinfluenced and interstimulated. On the one hand, human material production is the direct result of mental production (i.e., the invention of new materials and new tools is the result of human understanding of natural materials). On the other hand, human material production has also promoted the continuous enrichment and deepening of mental production, which is reflected not only in the enrichment and deepening of human understanding of natural existence but also in the enrichment and deepening of human understanding of themselves and society. According to archaeological findings, the earliest iron smelting technology in China originated in the early Spring and Autumn Period in the fifth century B.C. At least in the Warring States Period, the use of iron tools was extended to all aspects of social production and life at that time.28 Therefore, since the Spring and Autumn Period, Chinese society has gradually entered the Iron Age. During the Warring States Period, feudal vassals competed for hegemony, and the demand for iron weapons surged in various states, which not only promoted the progress of iron smelting technology but also drove the popularisation of iron weapons. It is known that the famous Hundred Schools of Thought in the history of ancient China were active in the Spring and Autumn Period and the Warring States Period. From the interaction between material production and mental production, the occurrence of the Contention of a Hundred Schools of Thought during this period is obviously not an isolated and accidental social phenomenon. The hundreds of schools of thought specifically include Confucianism, Taoism, Legalism, Mohism, School of the Military, School of Names, School of the Medical Skills, Agriculturalism, Syncretism, School of Diplomacy, School of Yin-yang, and School of Minor-talks. Only from the content of the works of the Hundred Schools of Thought can it be found that the scope of the mental production at that time was so broad, covering almost all aspects of human thought and culture. Through the above description, it is discernible that the birth of a primitive state is a process of the continuous differentiation of social organisations, the stratification of social structures, and the diversification of social functions. On the one hand, social organisations are undergoing differentiation from community organisations → public organisations → power organisations; on the other hand, social form is gradually evolving from clan society → tribal society → chiefdom society, which 28

Han, R. F., Ke, J. (eds). (2007). History of Chinese Science and Technology (Mining and Metallurgy Volume). Science Press. pp. 362, 370. 韩汝玢., 柯俊 (eds). (2007). 中国科学技术史(矿冶 卷). 科学出版社. pp. 362, 370.

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is accompanied by the continuous progress of human society in terms of population production, mental production and material production. Of course, the above only described the general evolutionary pattern of the birth of the prototypic state, while the diversity and complexity of human society determines the diversity of state forms in different parts of the world.

8.3 The Environment, Elements and Structure of the State System In a state’s economic system, the actor at the macro-level is the states and social system. The following analyses the internal and external environments, the constituent elements and the general structure of the state system in modern society.

8.3.1 The Internal and External Environments of the State System The state that exists in a specific natural and social environment has both an external environment and an internal environment, all of which have their own hierarchies.

8.3.1.1

The External Environment of the State System

The external environment of the state refers to the collection of the factors that exist beyond the territorial boundaries of the state and have an impact on the behaviour of the state. The external environment of the state includes the natural environment and the social environment. The social environment here mainly refers to the social system (or international system) composed of other states and international organisations. In terms of system, state is a constituent unit of the large system of human society. Therefore, the entire human society is a collection of worldwide states and international organisations. At present, in addition to approximately 200 sovereign states, there are approximately 10,000 international or intergovernmental organisations and more than 1,000 multinational corporations in the world, which form an international system with a network-like structure. These international organisations include national communities such as the United Nations, European Union, Commonwealth of Independent States, Association of Southeast Asian Nations, Arab League, Association of Caribbean States, and Organization of American States, as well as international economic and cultural organisations such as the World Trade

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Organization, World Health Organization, International Finance Corporation, International Maritime Organization, International Civil Aviation Organization, International Olympic Committee and International Football Federation.29 The natural environment refers to the space composed of the Earth’s surface, atmosphere, and geomagnetic field on which human society depends. It can be divided into the pedosphere, hydrosphere, biosphere, and atmosphere. From the broader perspective of the universe, the Earth itself is also a natural system. The external system that contains the Earth is vertically composed of the three levels of the Earth-Moon system, the Solar System, and the Galactic System. There are even larger natural systems, such as the extragalactic system and the macrocosmic system, in the outer layer. The external factors that affect the state’s development include both the social environment (international system) and the natural environment, but most factors come from the social environment, including other countries and international organisations in polity, economy, human-culture, science, education, law and other aspects. In human history, factors such as wars, trade, population movements, and cultural exchanges between social groups have greatly affected the civilisation process of states. Natural factors related to social development, such as climate change and natural disasters, should also not be ignored.

8.3.1.2

The Internal Environment of the State System

The internal environment of the state system is an organic system composed of human-culture, economy, polity and other factors. The factors within the system are interrelated, interacted, and interinfluenced, forming a complex network. The internal environment of the state has its own hierarchy and functional structure, which changes continuously with the dynamic changes of the state. From the historical process of the development of human society, the state has experienced an evolution from zero to one, from simplicity to complexity, and from low-level to high-level. In this process, the factors that make up the state have also experienced an evolution from zero to one, from simplicity to complexity, and from low-level to high-level. Why is the internal environment of the state system composed of elements such as human-culture, economy, and polity? Or, in other words, why are the human-culture system, the economic system, and the political system the subsystems that make up the state system? This question must be answered from the basic premise of social development and social production activities. It is known that there are two things that need to be down for the survival of a human group: one is to carry out the production of food, clothing and housing, that is, to engage in the production of material products, to maintain the needs of individual survival; the second is to carry out reproduction, that is, to engage in the production of population to maintain the needs of group survival. Min, J. Y. (2012). Evolutionary Pluralism. China Social Sciences Press. p. 264. 闵家胤. (2012). 进化的多元论. 中国社会科学出版社. p. 264. 29

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In primitive society, in addition to facing natural disasters such as earthquakes, hail, floods and wildfires, human beings also needed to fight with tigers, leopards, jackals, wolves and other wild beasts. In the struggles against the sinister elements of these environments, it is obviously more beneficial for human beings to form cooperative groups among individuals. It is in the material production, reproduction and struggles against environmental factors that human beings have gradually increased their understanding of the surroundings and themselves, thus levelling up their own wisdom and civilisation. The process of human beings moving from barbarism to civilisation is the process of discovering knowledge, accumulating knowledge, and transmitting knowledge. Compared with the production activities of material products, the population production of human society is not simple technical processing but the necessary cultivating and educating, as well as the imparting of survival knowledge and life skills to the next generation. Therefore, the human-culture system is obviously an indispensable factor in social development, and it is responsible for the dual functions of population reproduction and humanistic knowledge production. In addition, a normal life means food, clothing, habitation, and transportation, which determines that a society must also be engaged in the production of material products if it is to develop. Therefore, the economic system is obviously an indispensable factor in social development, and it is responsible for the important function of the production of material products. With the further development of society and the deepening of the social division of labour, a need for the production and distribution of public goods arose, and public power was differentiated on the basis of individual power. Collective power gradually evolved into social power, then slowly into state power, and finally further differentiated into a more complex political system. From the development of human society, compared with the human-culture system and the economic system, the political subsystem in the state system was formed relatively late. The production activities in human society include at least three aspects: population production, material production and mental production. Marx and Engels formed the idea that population production, material production and mental production coexist at the beginning of the establishment of historical materialism. Engels developed this idea in his book The Origin of the Family, Private Ownership, and the State. They also particularly emphasised that “These three aspects of social activity are not of course to be taken as three different stages, but just as three aspects or…, three moments, which have existed simultaneously since the dawn of history and the first men, and which still assert themselves in history today.”30 From the ideas of Marx and Engels on social production, especially the ideas expounded by Engels in The Origin of Family, Private Ownership, and the State, it is logical to arrive at this realisation: First, the material production engaged in by human society and the material production relations formed there from are not all social production engaged in by human society and all production relations formed therein. Human social production is a complex system composed of all social productions including population production, material production, and mental production. Correspondingly, the production 30

Marx, K., Engels, F. (1970). The German Ideology. International Publishers. p. 50.

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relations of human society are also a complex system composed of all production relations, including population production relations, material production relations and mental production relations. Second, in the development of human society, the dominant social production and social production relations are not static. In the long primitive age, population production and population production relations had always been in a dominant position and were replaced by material production and material production relations after entering the civilised era.31 In the twenty-first century, material production is unprecedentedly prosperous in human society, and some economically developed countries even have a relative surplus. Since human society entered the information age, emerging sectors dominated by the information sector, creative sector, and cultural sector have gradually taken the lead in the field of social production, while these sectors are in fact the production activities of mental products with science, technology, culture and art as the core content. It is under the dynamics of population production, material production and mental production that the whole human society has evolved from simplicity to complexity, disorder to order, from low-level to high-level, while at the same time, individuals have evolved biologically from ancient apes, Homo erectus, Homo sapiens, primitive humans, to ancient humans and to modern humans. Studies on human biology show that three million years ago, Australopithecus had an adult cranial capacity of 400– 500 cubic centimeters, comparable to that of the chimpanzee and gorilla; two million years later, its presumptive descendant Homo erectus had a capacity of approximately 1000 cubic centimeters; the next million years saw an increase to 1400–1700 cubic centimeters in Homo sapiens (Neanderthal man) and 900–2000 cubic centimeters in modern Homo sapiens.32 With the increase in brain capacity, the intelligence level and mental production capacity of individuals also rise. From the above simple analysis, it can be concluded that a complete state system generally includes at least three elements of human-culture, economy and polity; otherwise, it is not a complete state system. In addition, for a state to carry out normal social production activities, it must have basic knowledge, institutions, and technology. It also needs to pass on the accumulated knowledge, institutions, and technology to future generations through education. Otherwise, this state will fall into stagnation, decay, or the decline of social civilisation and eventually collapse.

31

Hu, H. (2000). The Composition and Evolution of the Production Relations System. Dongjiang Journal (04):86–87. 胡皓. (2000). 生产关系体系的构成和演化. 东疆学刊 (04):86–87. 32 Wilson, E. O. (2000). Sociobiology: The New Synthesis. Belknap Press of Harvard University Press. p. 683.

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8.3.2 The Constituent Elements and General Structure of the State System 8.3.2.1

The Constituent Elements of the State System

Generally, in addition to the four basic elements of territory, human-culture, economy and polity, a complete state system must also have knowledge, institutions, technology, and education, and these factors are the most basic key elements that make up a state system. Among them, territory is a geographical space controlled by a state’s sovereignty, and it is also the material basis for its social production, offering various natural resources for social development. Considering the origin of the territory, in fact, it should belong to a part of the natural environment; therefore, it can be classified into the category of environmental factors. At the macro level of the state, institutional factors are mainly manifested in various forms of legal institutions, such as the constitution, land law, marriage law, and company law. Here, knowledge factors include natural knowledge (environmental knowledge), humanistic and cultural knowledge, economic knowledge, and political knowledge. These key elements that make up a state system can be grouped into two categories: A. Explicit factors (surface factors): environment, human-culture, economy, polity B. Implicit factors (deep factors): knowledge, technology, law, and education The state system is a social organisation composed of citizens (individuals). Citizens are, first, specific individuals. Individuals come from the human-culture system; therefore, the human-culture system should be the core element of the state system. In the human-culture system, individuals are at the centre, followed by households and community organisations. The reason why a society establishes economic and political organisations and engages in economic and political activities is for the survival and development of individuals, not the other way around. Therefore, those social institutions that ignore individual survival and development, suppress individual rights and freedoms, and unilaterally emphasise politics or economics are inhumane and unscientific. With the continuous progress of society, such a system will inevitably be thrown into the dustbin of history. In terms of the system, the elements that make up the state system are also subsystems of the state system. The state system is an organic system composed of the subsystems of human-culture, economy and polity, each of which is relatively independent and has its own unique functions. Among them, the main function of the human-culture system is to bear human beings and to produce and create humanistic and cultural knowledge. The main function of the economic system is to produce, exchange, distribute, and consume material products. The main function of the political system is to provide public services and public goods and to organise, exchange, distribute, and use public rights. From the history of social development, the first social subsystem formed in human society is the human-culture system, followed by the economic system and political system, which are all differentiated gradually from primitive social organisations.

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Just as organisms must adapt to the external environment to survive, a state also needs to constantly adapt to the external environment in the process of growth and development. When the external environment changes, the internal environment of the state must also be adjusted accordingly. This adjustment is mainly manifested in the changes in the composition and coupling relationship of the internal subsystems until the internal environment and the external environment are coupled. The higher the degree of coupling between the internal and external environments of the state, the better the survival and development environment of the state. The coupling process of the internal and external environments of the state is the process of the growth and evolution of the state. If a state cannot maintain good coupling between subsystems such as the environment, human-culture, economy, and polity, under the impact of external forces (i.e., foreign aggression, war, climate change, natural disasters, etc.), it will often lead to the division of social organisations, thereby reducing the scale of society, and may even lead to the collapse of the state system.

8.3.2.2

The General Structure of the State System

The general structure of the state system refers to the general order and form of interrelation, interaction, interinfluence and interrestriction formed among the subsystems within the state system in its dynamic evolution. The general structure of the state system reflects the structural features of the subsystems within a state supporting each other in terms of function and is the basis for the coevolution of the external environment system and the state system, as well as the state system and its subsystems. The state system is a social system composed of subsystems in terms of humanculture, economy, polity, etc., as well as the ecological environment. The subsystems of the state system in terms of human-culture, economy, polity, etc., are relatively independent systems that they can continuously adapt their organisations to changes in the external environment. The growth and evolution of the state system is achieved through the interaction between the subsystems within the state and between the subsystems and the external environment of the state, which determines that the state system itself is also an adaptive and self-organising complex system. In the previous analysis of the constituent factors of the state system, it is concluded that the implicit factors (deep factors) that make up the state include knowledge, technology, law, and education. In modern society, knowledge and technology are increasingly connected; they have penetrated into all fields of social production and have formed a powerful force to promote social development. Therefore, two types of factors, knowledge and technology, can be classified into the science system. At the same time, legal institutional factors are included in the legal system, and social educational factors are included in the education system. In addition, a state’s utilisation of the natural environment in its territory is mainly through resource development, and the result of a state’s development is mainly reflected in the overall development of a society.

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Fig. 8.1 General operational structure of the state and social system

Therefore, from the operation of the state system, the growth and evolution of a state is actually a continuous cycle of resource extraction and social development. Combining the components of the state system, the general operational structure of the state and social system can be drawn (Fig. 8.1). The famous American sociologist Talcott Parsons proposed that a social system should include at least four subsystems: the cultural system, the economic system, the political system and the legal system. What he called the pattern-maintenance and tension-management subsystem (cultural-motivational system) actually includes the two systems of the human-culture and the education in this book,33 but he did not make a further subdivision of the cultural system as in this book. The social system model proposed by Chinese system philosopher Min Jia-Yin34 includes five subsystems: the human production system, the material production system, the cultural information production system, the cultural information database, and the management system. The management system, the material production system and the human production system were included in the political system, the economic system and the human-culture system, respectively, in this book. The cultural information production system and cultural information database he mentioned can be divided into three parts: humanistic and cultural knowledge production, scientific knowledge production and cultural knowledge education, which were classified into the human-culture system, science system and education system of this book, respectively. Human production is not simply the production of biological human but also the production of social human, or in other words, the socialisation of biological human, which includes a society’s cultural education and an individual’s active learning. Therefore, the division of the internal structure of the social system is more reasonable in this book. In Sect. 3.3, this book briefly analyses resources and their forms. If cultural information is also included in the category of resources, the economic system of this book can cover part of the production of cultural information. From the history of social development, the mass media and cultural entertainment in western developed 33

Parsons, T., Smelser, N. J. (1998). Economy and Society. Psychology Press. pp. 46–49. Min, J. Y. (2006). New Model of Social Systems, Three Types of Production and Comprehensive Evaluation Standards. Chinese Journal of Systems Science (01). 闵家胤. (2016). 社会系统的新模 型、三种生产和综合评价标准. 系统科学学报 (01).

34

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countries were increasingly industrialised especially after the end of World War II in 1945. With the further development of the commercialisation of cultural information, the production of cultural information has gradually become a growing and active industry (namely, cultural industry) in the economic system. The core parts of cultural information, such as values, spiritual beliefs, and ethical morals, are apparently impossible to commercialise and industrialise, and they can only be classified into the deep factors of the human-culture system. As seen from Fig. 8.1, the actual operating process of the state and social system can be divided into two chains (the solid arrow in the figure): Chain A (surface factor operating chain): resource development → human-culture system → economic system → political system → social development. Chain B (deep factor operating chain): resource development → science system → legal system → education system → social development. In the operation of the state and social system, the process reflected by Chain A is as follows: humans develop resources for their own use. Individuals, households, and community organisations in the human-culture system continue to consume material products produced by the economic system through market exchanges and provide human resources, humanistic and cultural knowledge and consumer demands to firms and markets in the economic system, which on the one hand directly promotes the continuous increase in the number of firms and industries within the economic system and the continuous improvement of the market system and on the other hand forces the human-culture system and the economic system to put forward more demands of the political system on public services and public goods. This in turn promotes the continuous differentiation of the internal organisation of the political system, the increasingly complex structure, and the continuous improvement of the distribution system. The coordinated development of the human-culture system, the economic system, and the political system ultimately promoted social development. The process reflected by Chain B is that when humans develop resources, they continue to discover different types of knowledge and technologies. The accumulation of this knowledge and technology leads to the birth and growth of the science system, which on the one hand has raised the level of mankind’s understanding of themselves, the natural world, and society, thereby prompting people to continuously adjust, amend and improve the state’s legal systems. On the other hand, the science system and the legal system push the education system to train more professionals, which in turn promotes the continuous differentiation of the internal organisation of the education system, the variety of disciplines, and the improvement of the education system. The coordinated development of the science system, the legal system, and the education system has also promoted social development. In fact, the two processes reflected by Chain A and Chain B are actually combined into one. They jointly promote the social organisation process in the operation of the state and social systems. In the operation of the state and social systems, the political system often plays an important coordinating and organising role. In the actual operation of the state and social systems, all the factors in Chain A and Chain B do not work individually or separately but coordinately and cooperatively.

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That is, every two factors are interrelated, interacted, and interinfluenced and together form a network of production relations within the state and social system. In Fig. 8.1, the dashed double arrow is used to indicate this relationship between them. In the process of growth and evolution, the state and social system have always been communicating with its external environment in aspects of resources, humanculture, economy, polity, science, law, and education. The relations between a state system and its external environment in terms of the natural system, varying international organisations and other countries’ subsystems of human-culture, economy, polity, science, law, education, etc., form a social network outside this state system. In terms of socioeconomic relations, the complete production relation of a state system should be composed of its internal production relations network and its external social relations network. The process of a state system’s growth and evolution is essentially a dynamic process of the entanglement, interaction and influence of the two relationship networks inside and outside the state system. The dual relation networks inside and outside the state system constitute a multidimensional and complex dynamic picture.

8.4 The Human-Culture Subsystem in the State System In the previous analysis of the internal environment of the state system, the humanculture system has not been discussed in full detail and will be elaborated in this subsection.

8.4.1 The Concept of Human-Culture The human-culture in this book includes both the meanings of human and the culture created by human, which is a compound word here. To facilitate the analysis of the problem, the term culture needs to be defined. Speaking of culture, this may be the most commonly used, the most multiplex and the most confusing word of our time. The definitions of culture by scholars worldwide are countless. Similar to what American anthropologists Alfred Louis Kroeber (1876–1960) and Clyde Kluckhohn (1905–1960) listed in Culture: A Critical Review of Concepts and Definitions, there were as many as 164 definitions of culture in the 80 years from 1871 to 1951.35 In view of the main topic of this book, it is impossible to make a detailed analysis from the conceptual history of culture here, which obviously requires a monograph to complete, so that the book only chose to record some important achievements of predecessors and put forward new understandings on this basis.

35

Dong, D. Z. (2011). The Theory of Cultural Circles. Taiwan Showwe Information Co., Ltd. p. 56. 董大中. (2011). 文化圈层论. 台湾秀威资讯科技股份有限公司. p. 56.

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The American Heritage Dictionary defines culture as “the totality of socially transmitted behaviour patterns, arts, beliefs, institutions, and all other products of human work and thought characteristics of a community or population”.36 The British anthropologist Edward B. Tylor, known as the Father of Anthropology, defined culture in his masterpiece Primitive Culture in 1871 as follows: “culture… is that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society.”37 “Culture is the philosophy or cultivation of the mind”, put forward by the ancient Roman philosopher Marcus Tullius Cicero (106–43 B.C.), demonstrating his understanding that culture is produced and exists in the human mind. The Dictionnaire Universel, published in 1690 by Antoine Furetière, defined culture as “soin qu’on prend de rendre une terre fertile par le labour, par l’amendement, d’élever un arbre, une plante” (the care taken to make the land fertile by ploughing and amendment to plant trees or to cultivate plants). It is evident that one of the origins of culture is the accumulation of agricultural labour knowledge. In A Dictionary of Philosophy compiled by former Soviet philosophers M. M. Rozentali (1906–1975) and Yudin (Davel Fdopoviq din, 1899–1968), their definition is that “culture is the sum of material wealth and spiritual wealth created by human beings in the process of social and historical practice.” In 1952, American anthropologists Kroeber and Kluckhohn defined that “culture consists of patterns, explicit and implicit, of and for behaviour acquired and transmitted by symbols, constituting the distinctive achievement of human groups, including their embodiments in artifacts; the essential core of culture consists of traditional ideas and especially their attached values; culture systems may, on the one hand, be considered as products of action, on the other hand, as conditioning influences upon further action.”38 This definition is widely accepted by modern Eastern and Western academic circles and has a wide range of influence.39 Regarding the concept of culture, although there were various views in academia, most of them held that culture has broad and narrow senses. Culture in a broad sense refers to the sum of material wealth and spiritual wealth created by human society in the process of its development, including all material activities and spiritual activities of human society and their creations. It involves all aspects of human social life and is a level consistent with the category of civilisation; Culture in a narrow sense refers to life in the social and spiritual realm developed on the basis of certain material production modes relative to economy and polity. It mainly refers to social phenomena in the conceptual and spiritual fields, including social ideology and social phenomena that are compatible with it, such as social education, science, literature, art, philosophy, morality, law, religion and thought, theories, ideals, beliefs,

36

Cotter, J. P., Heskett, J. L. (1992). Corporate Culture and Performance. Free Press. p. 4. Tylor, E. B. (ed). (1871). Primitive Culture (I). J. Murray. p. 1. 38 Feng, T. Y., He, X. M., Zhou, J. M. (1990). History of Chinese Culture. Shanghai People’s Publishing House. p. 22. 冯天瑜., 何晓明., 周积明. (1990). 中华文化史. 上海人民出版社. p. 22. 39 Requoted from: Min, J. Y. (2012). Evolutionary Pluralism. China Social Sciences Press. pp. 350, 364, 365. 闵家胤. (2012). 进化的多元论. 中国社会科学出版社. pp. 350, 364, 365. 37

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reasoning, emotion, will, etc.40 The Ci Hai《辞海》Lexical Sea explained culture as, in a broad sense, the sum of the material and spiritual production capacity and the material and spiritual wealth created by human beings in the process of social practice. In a narrow sense, spiritual productive capacity and spiritual products include all forms of social consciousness of natural science, technical science, and social ideology. Sometimes it refers specifically to knowledge and facilities in education, science, literature, art, health, sports, etc. As a historical phenomenon, the development of culture has historical inheritance; in a class society, it has a class nature, as well as a national character and a regional character. Cultures of different nationalities and regions have also contributed to the diversity of human culture. As a social ideology, culture is a reflection of the polity and economy of a certain society, and at the same time it has a huge impact on the polity and economy of a certain society.”41 Min Jiayin, a Chinese philosopher of systems, defines culture as42 the sum of sociocultural genetic information within a social system, the accumulation of spiritual creations by members of the past dynasties in the process of survival and production, and the soul of society; Its core is the common totem, belief, world view, way of thinking, value and code of conduct for all members, and its periphery is science and technology, common sense and life skills; Culture encodes the psychic structure and behaviour of the individuals in the social system and encodes the structure and behaviour of the social system to ensure that they can survive in natural and social environments, and through production continue to reproduce and create corresponding civilisational phenotypes; Culture is the ultimate determinant within a social system that ultimately decides its existence, stagnation, reform, and progression. This definition of Min Jia-Yin stressed the information attributes and structural features of culture, which were basically the main characteristics of culture. Its shortcoming, however, is even though the elements were adequately described, yet the conclusion was insufficiently generalised. Niu Long-Fei, a Chinese cultural philosopher, pointed out that culture means culturalisation. It is “the in vitro nonbiological evolution of human beings on the basis of biological evolution.” It is not a specific thing but the dynamic process of human social progress.43 This definition of Niu Long-Fei emphasised the dynamic progression of culture. He captured part of the essence of culture, which is a step higher than the level of understanding of many previous scholars. However, if culture is just human in vitro evolution, where does culture come from? The main flaw of this definition is that it ignores the creative agents of culture. 40

Zhang, H. Y., Huang, S. F. (2007). Ideological Origin of Culture Driving Force Theory. Journal of Hebei North University(Social Science Edition) (06):25. 张海燕., 黄尚峰. (2007). 文化动力理 论的思想渊源. 河北北方学院学报 (06):25. 41 Xia, Z. N., Chen, Z. L. (2009). Lexical Sea. Shanghai Lexicographical Publishing House. p. 1975. 夏征农., 陈至立. (2009). 辞海. 上海辞书出版社. p. 1975. 42 Min, J. Y. (2012). Evolutionary Pluralism. China Social Sciences Press. pp. 378–379. 闵家胤. (2012). 进化的多元论. 中国社会科学出版社. pp. 378–379. 43 Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. pp. 1, 5. 牛龙菲. (1989). 人文进化学. 甘肃科学技术出版社. pp. 1, 5.

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It is known that human evolution actually includes two aspects: one is the physical evolution of the individuals, which can be regarded as human biological evolution, while the other is the evolution of the individual’s brain consciousness, which can be called spiritual evolution. The evolution of individuals in these two aspects unfolds gradually in their interaction with the external environment. In the process of human beings gradually evolving from ancient apes to Homo erectus and then to Homo sapiens, the environment that humans face can be divided into two categories: one is their own kind, and the other is other natural existences. After being born, a primitive human individual first faced his/her family members, then other members of the same species and other natural existences. Therefore, in the formation of his consciousness, the first formation was the cognitive judgment of I and other people, family and other families, similar species and different species. The initial cognitive judgment was obviously vague and hazy, but after forming such a preliminary judgment, he could further determine how to deal with interpersonal relationships. For a primitive man, the interpersonal relationship he dealt with was first the relationship within the blood family (i.e., parent–child, and sibling-sibling, etc.), and then the relationship with other people. It is in dealing with such interpersonal relationships that human beings gradually establish human relations and form ethical morals. Once these ethical morals form group consciousness, they will act on human beings to shape individual consciousness. It is based on such thinking that the book examines the connotation of culture from the source of human evolution and defines culture as the evolution of the human spiritual world. Culture is the coevolution of individual consciousness and group consciousness in terms of knowledge, thoughts, feelings, values, spiritual beliefs, ethical morals, institutional norms and other ideologies in the interaction of human beings with the environment. The result of such progress is manifested on the one hand as the improvement of human intelligence and the specialisation of knowledge, on the other hand as the advancement of awareness and the diversification of knowledge among the entire human group. Here, the concepts of knowledge, thoughts, feelings, values, spiritual beliefs, and ethical morals obviously have some overlaps among them. Further in-depth research and detailed classification are needed. For example, as far as knowledge is concerned, it can be divided into at least three categories. First, knowledge about the laws of individual development can be called humanistic-cultural knowledge (the core of which is values, spiritual beliefs and ethics), and the scientific knowledge system associated with this is the humanities. Second, knowledge about the laws of human group development can be called social knowledge, and the scientific knowledge system associated with it is social science. Third, knowledge about the laws of natural environment development can be called natural knowledge, and the scientific knowledge system associated with it is natural science. To further clarify the concept of culture, it is necessary to distinguish between the two concepts of culture and civilisation. The Dutch cultural scholar C. A. van Peursen clearly pointed out that “culture is not a Noun but a Verb”, while civilisation is a Noun, which is the result of the materialisation of human culture. Chinese scholar Zhang Shen-Fu (1893–1986) also put forward that “culture is an activity,

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and civilisation is a result”.44 The Chinese philosopher Min Jia-Yin proposed that culture is genetic information within the social system (sociocultural genetics), and civilisation is the social phenotype of culture. The relationship between culture and civilisation is similar to the relationship between genotype and gene phenotype in biology.45 Therefore, civilisation usually refers to the cultural achievements obtained by human society at a certain stage, which generally manifests as some specific and materialised cultural products. It is in this sense that the British historian Toynbee said that “civilisation is a dead culture, and culture is a living civilisation”.46 For example, the Acropolis, Parthenon, amphitheatre, colonnades, squares and other buildings left over from ancient Greece represent the civilisation of Western European society in the classical period, which were the cultural achievements of the development of Western culture to the eighth century B.C. to the sixth century B.C. A river can be vividly used as a metaphor for the occurrence and development of human culture. From early ancient times to ancient times, through the Middle Ages, modern times, the cultural process of human beings gradually converged from an initial trickle into a small river and from a silent river slowly into a large river with splashing waves. This river is flowing through modern society and turbulently into the future. Scholars worldwide have given various definitions of culture mainly because river culture has brought together so many cultural achievements created by human beings in modern times. Thus, people only see the appearance of colourful and different cultural products but ignore the true essence of culture.

8.4.2 The Internal and External Environments of the Human-Culture System In modern society, a human-culture system that exists in a specific state system has both an external environment and an internal environment.

8.4.2.1

The External Environment of the Human-Culture System

The external environment of the human-culture system refers to the collection of the factors that exist beyond the boundaries of the household and community organisation, and have an impact on population production, human socialisation, humanistic and cultural knowledge production, and the innovation of social institutions and 44

Requoted from: Min, J. Y. (2012). Evolutionary Pluralism. China Social Sciences Press. p. 371. 闵家胤. (2012). 进化的多元论. 中国社会科学出版社. p. 371. 45 Min, J. Y. (2012). Evolutionary Pluralism. China Social Sciences Press. p. 372. 闵家胤. (2012). 进化的多元论. 中国社会科学出版社. p. 372. 46 Requoted from: Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. p. 24. 牛龙菲. (1989). 人文进化学. 甘 肃科学技术出版社. p. 24.

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cultural education and other activities in a social system. The external environment of the human-culture system includes the natural environment and the social environment. The external system that contains the human-culture system is vertically composed of the three levels of the state system, the social system (state system), and the natural system. Details of the hierarchical relationship of each system in the external environment of the human-culture system are shown in Fig. 3.2 in Chap. 3. In the state system, the systems coexisting with the human-culture system include at least the economy, polity, science, law, and education. These systems that exist in the external environment, more or less, directly or indirectly, will have an impact on the growth and evolution of the human-culture system. For the human-culture system of a specific country, the factors from within the state system are undoubtedly the highest in terms of directness and intensity of impact. At the same time, certain factors from the international system and natural system will also influence the growth and evolution of a state’s human-culture system. For example, Buddhism from India had a profound impact on the human-culture system of Chinese society. Here, the socialisation of people refers to the process of cultivating a born infant without social awareness into an adult with a certain social awareness and a sound personality through cultural education. It can also be said to be the process of transforming a biological person into a social person, which includes cultural education from society and the active learning process of the individual. Humanistic-cultural knowledge refers to all kinds of knowledge related to the growth and development of human beings, including values, spiritual beliefs, ethics, philosophy of life, codes of conduct, literature and art, which overlap in content and remain to be further researched and classified, the core parts of which are values, spiritual beliefs and ethics. Social institutions include institutions related to personal growth, marriage and family, community organisation, humanistic-cultural knowledge, and cultural education. From the perspective of the natural environment, in the early days of human society, factors such as climate, geography, and biology exerted different influences on human groups in different regions. Because of the different production and living environments, human groups in different regions have formed ethnic cultures with different characteristics. For example, in the era of traditional agriculture, human groups living in central China of the Yellow River Basin formed an agricultural culture, while human groups living in the northern grasslands formed a nomadic culture. Due to different climate and geographical conditions, different regions are suitable for different types of plants and animals, which will also affect the culture and art of different social groups. For example, for the Hezhe people living in the Heilongjiang region of northeast China, the rivers and lakes in their living areas are rich in a variety of fish, so the people have been fishing and hunting for a living since ancient times. They use fish skins to make various costumes (including religious costumes), paintings, etc., expressing the aesthetics of their ethnic group with their unique fish skin art. From the perspective of the social environment, the social system of a specific region will be affected by other social systems in its external environment, and the specific influencing factors include war, trade, population movement, and cultural

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exchange. In the previous analysis of the birth of the primitive state, it is concluded that in the era of the Longshan culture, there were thousands of ancient states on the land of China. These ancient states interacted through wars, trades, and population movements. After the Xia Dynasty, different states merged with each other through wars. By the time of the founding of the Western Zhou Dynasty in the eleventh century B.C., the number of states had been reduced to approximately 1,200, and only seven remained by the Warring States Period (475 B.C.). It is through repeated war practice that people gradually accumulate knowledge about war. Sun Tzu’s Art of War and Sun Bin’s Art of War in the Spring and Autumn Period and the Warring States Period are the cultural achievements of society in military warfare at that time. In modern society, relevant factors from other countries and international organisations will also have a certain degree of influence on a state’s internal human-culture system, specifically on polity, economy, human-culture, science, education, and law. Therefore, from the external environment of the human-culture system, the specific factors affecting the evolution of the human-culture system include nature, human-culture, economy, polity, science, law and education, among which the natural environmental factors include climate, geography, and biology, etc.

8.4.2.2

The Internal Environment of the Human-Culture System

The internal environment of the human-culture system is an organic system composed of individuals, households, community organisations and other factors. The factors within the system are interrelated, interacted, and interinfluenced, forming a complex network. The internal environment of the human-culture system has its own hierarchy and functional structure, which changes continuously with the dynamic changes of the human-culture system. By comparing the differences between humans and other primates in social behaviours, Edward Wilson, a famous American social biologist, concluded that human-specific social traits include A, true language, sophisticated culture; B, sexual behaviour is nearly continuous through the menstrual cycle; C, explicit marriage rules on incest and blood relations; and D, an optimum division of labour between males and females.47 The first point reflects the uniqueness of human beings in terms of culture, the second and the third reflect the uniqueness of human beings in terms of fertility and the institution of marriage, and the fourth reflects the uniqueness of human beings in material production. These three aspects correspond to the social production of human beings in terms of mental production, population production and material production. The origin of incest taboo and marriage rules (i.e., institutions of marriage and family) is subject to anthropologists’ studies and verifications. These institutions, nevertheless, have played an important role in the biological evolution of human beings, especially the optimisation of races, at least enabling humans to avoid genetic 47

Wilson, E. O. (2000). Sociobiology: The New Synthesis. Belknap Press of Harvard University Press. p. 684. Figure 27.1.

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diseases and cacogenesis caused by inbreeding. Therefore, the marriage and family system should be an important factor in the internal environment of the human-culture system. Among the numerous social institutions in human society, the marriage and family system is only a type of social institution concerning population production. Human language, writing, painting, music, dance and other cultural and artistic forms are all special cultural tools created by human beings in social production and life. Every cultural tool usually has multiple functions, and their combined forms have more complex and diverse functions. These tools establish various connections between individual consciousness and group consciousness, and the content they carry includes human knowledge, thoughts, feelings, values, religious beliefs, ethical morals and other consciousness information. Humanistic and cultural knowledge is the understanding and cognition of the cultural tools created by human beings. Humanistic and cultural knowledge includes values, spiritual beliefs, ethical morals, philosophy of life, codes of conduct, literature and art, etc., the core of which is values, spiritual beliefs, and ethical morals. The emergence of language is apparently of great significance in human evolution, as some scholars have pointed out that “the emergence of language means not only the development of the brain and the consciousness but also the progress of human learning ability and the emergence of new patterns of inheritance”.48 Language is also a tool created by human beings in its essence. It is a special cultural tool whose main function is to communicate thoughts and feelings between people. When people use symbols or pictures to express their ideology, the symbols or pictures themselves become tools. When they evolve along two paths, they form the writings with the function of recording language and the paintings with the function of aesthetics. When people returned from hunting, they played bamboo flutes, knocked on earthen pots, and danced, and the original music and dance were born naturally. At this time, music and dance itself became tools for people’s entertainment. In fact, music and dance can also be used to express thoughts and feelings. For instance, Mozart’s beautiful serenade expresses the composer’s sweet and joyful feelings; Beethoven’s majestic symphony voices the composer’s profound thoughts on life and destiny. It is apparent that languages, writings, paintings, music and dance are actually special cultural tools created by human beings to express thoughts and feelings. These tools, like other physical tools created by humans, are evolving from simplicity to complexity, from unity to plurality, and from low-level to high-level with the progress of human society. For example, since the language was created by human beings, it has started continuous evolution into different forms, such as natural speech, written words, scientific notation (i.e., molecular formula in chemistry), mathematical formal language (i.e., algebraic operations in mathematics), computer programming language, etc. Its abstraction, precision, richness of meaning and extensive application were constantly enhanced. On the one hand, when cultural tools (i.e., language, writing, painting, music, dance, etc.) that carry human knowledge, thoughts, feelings, values, religious beliefs, ethics and other conscious 48

Fang, Z. X., Jiang, N. E. (1976). The Dialectics of Life Development. People’s Publishing House. p. 204. 方宗熙., 江乃萼. (1976). 生命发展的辩证法. 人民出版社. p. 204.

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content combined with their corresponding material carriers, these cultural tools create specific cultural achievements (or cultural products). On the other hand, the same cultural tool often has multiple functions, and their combined forms have more complex and diverse functions. For example, words can record things (i.e., historical facts), express emotional feelings (i.e., poetry) and rational thoughts (i.e., philosophy books), reflect complex real life (i.e., novels), and can also be regarded as a kind of calligraphy art. No matter how numerous and complex these cultural tools (or cultural products) may be and no matter how many derivatives they produce, they all have common features: ➀ they are all created by human beings, and their subjects are human beings; ➁ they are all products of human consciousness, they are the result of human interaction with the environment; ➂ they are significantly different from physical substances; and ➃ they all evolve with the development of human society. Each of us begins to contact, learn, master and apply cultural tools (especially language and writing) in the environment from birth so that our self-awareness can gradually grow and enrich, and our knowledge and personality can accumulate and develop. The process of each person’s physical growth is also the process of knowledge growth and personality development. Therefore, from the perspective of individual growth and development, humanistic and cultural knowledge is also an important factor in the internal environment of the human-culture system. It is known that the growth and development of a person is closely related to cultural education from society and the active learning of the individual. One of the most important aspects is the individual’s learning, mastery and application of various types of knowledge, especially the learning and internalisation of humanistic and cultural knowledge, which not only shapes a person’s basic quality but also cultivates a person’s basic personality. In this sense, an individual who has not fully studied and absorbed humanistic and cultural knowledge and humanistic spirit is actually a person without a sound personality (or a person without sufficient socialisation). In human socialisation, social groups exert a pivotal influence on the education of individual consciousness in terms of values, spiritual beliefs, public morals and social institutions. Therefore, cultural education is also an important factor in the internal environment of the human-culture system. In summary, in a social human-culture system, in addition to the basic factors of individuals, households and community organisations, humanistic and cultural knowledge, social institutions, cultural education and other factors are also critical factors that make up the internal environment of the human-culture system.

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8.4.3 The Constituent Elements and General Structure of the Human-Culture System 8.4.3.1

The Constituent Elements of the Human-Culture System

In the previous analysis, it is concluded that in addition to the three basic elements of individuals, households and community organisations, a complete human-culture system must also be equipped with the critical factors of humanistic and cultural knowledge, social institutions and cultural education. These six categories of factors are the most basic key elements that make up a human-culture system. The German philosopher Jürgen Habermas pointed out that the history of human development is “determined by the interweaving of biological and cultural mechanisms of development (Ineinandergreifen organischer und kultureller Entwicklungsmechanismen bestimmt)”. Biological hybridisation is exogamy (exogamie), and “cultural diversification becomes clear in the variety of social learning processes (…kulturellen Diversifikation, die sich in der Vielfalt der sozialen Lernprozesse verdeutlicht)”.49 American geneticist Dobzhansky pointed out in his 1953 book Genetics and the Origin of Species that “human biology and human culture are two parts of the same system”, “cultural evolution is now more rapid and efficient than biological evolution”.50 It is for this reason that the evolution and development of the human-culture system can be analysed from the two levels of the biological factors and the cultural factors of individual human beings. Therefore, the above six key elements that make up the human-culture system can be divided into the following two levels: A. Biological factors (surface factors): individuals, households, community organisations B. Cultural factors (deep factors): humanistic-cultural knowledge, social institutions, cultural education In fact, some scientists were aware of these two aspects of human evolution in the 1960s and 1970s. For example, in 1970, the French molecular biologist Jacques Lucien Monod (1910–1976) pointed out that, compared with other animal species, human beings are more dependent on the dual evolutive forces of constitution and concept. Man is the heir to this double evolutionary process. In 1973, Italian molecular geneticist Salvador Edward Luria (1912–1991) pointed out that cultural evolution (i.e., the accumulation of experience and ideas in the form of symbols) parallel to biological evolution (i.e., the accumulation of genetic differences) had already begun. The Canadian philosopher Jerry A. Wojciechowski (1985) put forward that

49

Habermas, J. (1976). Zur Rekonstruktion des Historischen Materialismus (Reconstruction of Historical Materialism). Suhrkamp. p. 147. 50 Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. p. 3. 牛龙菲. (1989). 人文进化学. 甘肃科学技术出版社. p. 3.

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Fig. 8.2 General operational structure of the human-culture system

human beings have become the subject of two evolutionary processes of biological evolution and cultural evolution because they have intelligence.51 A social human-culture system needs to constantly adapt to the external environment in its growth and development. When the external environment changes, the internal environment of the human-culture system must be adjusted accordingly until the internal and external environments are coupled. The higher the degree of coupling between the internal and external environments of the human-culture system, the better the growth space for the human-culture system, and the more orderly and healthy the development of the human-culture system. The coupling process of the internal and external environments of the human-culture system is the process of the growth and evolution of the human-culture system.

8.4.3.2

The General Structure of the Human-Culture System

The general structure of the human-culture system refers to the general order and form of interrelation, interaction, interinfluence and interrestriction formed among the subsystems within the human-culture system in its dynamic evolution. The general structure of the human-culture system reflects the structural features of the constituent elements of the human-culture system supporting each other in terms of function and is the basis for the coevolution of the external environment system and the humanculture system, as well as the human-culture system and its constituent elements. From the operation of the human-culture system, the growth and evolution of a human-culture system is actually a continuous cycle of population growth and cultural innovation. Combining the components of the human-culture system, the general operational structure of the human-culture system can be drawn (Fig. 8.2). As shown in Fig. 8.2, the actual operating process of the human-culture system can be divided into two chains (the solid arrow in the figure): A. Biological factor (surface factor) operating chain: population production → individuals → households → community organisations → social progress 51

Requoted from: Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. p. 17. 牛龙菲. (1989). 人文进化学. 甘 肃科学技术出版社. p. 17.

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B. Cultural factor (deep factor) operating chain: mental production → humanisticcultural knowledge → social institutions → cultural education → consciousness progress In the operation of the human-culture system, Chain A reflects the process of population production, social organisation and social progress, and Chain B reflects the process of mental production, cultural innovation and consciousness progress. The two chains are not separated from each other but are intertwined; that is, all the factors and links on these two chains are interrelated, interacted, and interinfluenced, and together they form a network of production relations within the human-culture system. In Fig. 8.2, the dashed double arrow is used to indicate this relationship between them. From the perspective of biological inheritance, the process in which individuals of different generations (i.e., parents and children) in the human-culture system continue to form families and produce a new generation of population is actually a process of constantly recombining biological genes. On the one hand, it promotes the diversification of human biological genetic information, and on the other hand, it also increases the adaptability of human social groups. From the perspective of individual growth and development, it is a continuous learning, mastery and application of cultural tools (especially language and writing) in the human-culture system that the self-awareness can gradually grow and enrich, and the knowledge and personality can accumulate and develop. From the point of view of cultural innovation, this is the constant interaction between individuals and groups to create new ideas, new concepts and new morality and the continuous innovation, revision and improvement of social institutions (including family and marriage systems) to liberate and free the individuals. In terms of the progression of the social system, it is the continuous innovation, enrichment and improvement of the humanistic and cultural knowledge systems (especially value system, spiritual belief system and ethical morals system) in a society, the promotion of the efficiency and function of cultural tools, and the enhancement of the variety, quantity and quality of cultural education, thereby promoting the continuous progress of entire social consciousness. It is under the combined action of these multiple forces and effects that ultimately drives the coevolution of individuals, households, and community organisations throughout society. The evolutionary process of human society is the coevolution of the external cultural achievements (i.e., civilisation) created by human beings and the internal consciousness of individual brains. As Niu Long-Fei put it, this is a process of “infinite expansion of externalisation and internalisation”.52 When a human-culture system is growing and evolving, it is constantly communicating and exchanging personnel, resources, materials, information, knowledge, institutions and education with its external environment in various forms. The relations established between the human-culture system and the natural system, the social system (international system), the state system, and other subsystems in the 52

Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. p. 21. 牛龙菲. (1989). 人文进化学. 甘肃科学技术出版社. p. 21.

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state system in its external environment form the social network outside the humanculture system. In terms of socioeconomic relations, the complete production relation of a human-culture system should be composed of its internal production relations network and its external social relations network. The growth and evolution of the human-culture system is essentially a dynamic process of the entanglement, interaction and influence of the two relationship networks inside and outside the humanculture system. The dual relation networks inside and outside the human-culture system constitute a multidimensional and complex dynamic picture. The Deep Structure of Chinese Culture written by Sun Long-Ji applied the method of structuralism to examine the main characteristics of Chinese cultural behaviour in mainland China, Taiwan and Hong Kong from the phenomenon itself. In the book, he repeatedly emphasised the Chinese people’s passion for food, somatisation disorder, personality dependence, emotional repression and overflow, lack of individuality and rational spirit, etc.,53 accurately depict the group image of contemporary Chinese people. This book can be regarded as another masterpiece of in-depth criticism and reflection on Chinese culture since Lu Xun (1881–1936) and Bo Yang (1920–2008). However, the author paid too much attention to the description of the phenomenon and did not truly grasp the deep structure of Chinese culture. Judging from the general operational structure of the human-culture system presented in this book, Sun LongJi only described some surface factors in China’s human-culture system. In addition, according to the point of view of this book, the cultural structure (or human-culture system) of any society is not static but constantly changing. If we want to reveal the cultural structure of a society, we need to examine it from a dynamic and systematic perspective to obtain a more complete and objective conclusion.

8.4.4 The Main Function of the Human-Culture System As a subsystem of the state system, the human-culture system’s main function is to produce and cultivate people (especially the cultivation of personality) and at the same time to produce humanistic and cultural knowledge (especially values, spiritual beliefs and ethical morals, etc.) in spiritual products and the innovation of social institutions and cultural education. Humanistic and cultural knowledge here refers to the sum of all knowledge about the growth and development of human beings. The humanistic-cultural knowledge system can be regarded as the humanities after systematisation and theorisation. For example, humanistic philosophy, linguistics, psychology, literature, art, ethics, etc., are all within the scope of humanities (but of course, some of these disciplines may overlap with social sciences). Different from this are social knowledge and social science, natural knowledge and natural science, which were briefly defined in the previous article and will not be repeated here.

Sun, L. J. (2011). The Deep Structure of Chinese Culture. Guangxi Normal University Press. 孙 隆基. (2011). 中国文化的深层结构. 广西师范大学出版社.

53

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In the state system proposed in this book, the social sciences and natural sciences are actually classified into the science system; that is, this book classified the production of social knowledge and natural knowledge in human spiritual products as functions of the science system. The reason for this division is only for the convenience of analysis. In fact, there is a close connection between humanistic-cultural knowledge, social knowledge and natural knowledge. The production and cultivation of an individual by a social group is an educational process from a biological man to a social man. In the process of a person from infancy to adulthood, social groups play a pivotal cultural and educational role in the formation and cultivation of individual consciousness in terms of spiritual beliefs, social morals and social institutions. This cultural and educational role is one of the important functions of the human-culture system in a society. The following focuses on analysing the main functions of spiritual belief, public morals and social institutions in social organisations and the connections and differences between them. This involves the subject of Moral Philosophy and Science of Religion. Spiritual belief, public morals, and social institutions are closely connected, significantly differenced, and hierarchically nested. Generally, faith is the foundation of morality, and morality is the foundation of institutions. In social life, human behaviours that exceed the constraints of morality are generally adjusted and regulated by social institutions such as laws. Spiritual belief refers to people’s deep belief, conviction or respect for a certain proposition, doctrine, preaching, phenomenon or power, and the core values thus established in the self-consciousness, by which people judge the value of things and guide their actions. The most common and lasting form of spiritual belief in human society is religious belief. In social life, in addition to religious beliefs, there are also other types of beliefs, such as scientific beliefs, power beliefs, and materialised beliefs. In contemporary China, many people believe in the theory of Marxism, so the belief in Marxism is also a spiritual belief. Power belief refers to people’s strong obsession and deep dependence on social power. In political life, people who have a deep belief in political power can be often seen, and some extreme power believers are often regarded as power worshippers. The so-called materialised beliefs refer to people’s beliefs in certain tangible and specific things. In the tribes of primitive society, people’s worship of their own tribal totems is a materialised belief. Although the specific totem symbols (i.e., the dragon pattern) are abstract, the things these totem symbols represent are concrete. In modern society, because commodities are flooded in all areas of society, money (i.e., currency) is required for exchange to obtain commodities. Therefore, some people gradually have the idea of as long as you have money, you have everything, and the ideology of money is God and money is everything formed in their consciousness, which in other words, is the so-called money fetishism or money worship. In fact, money fetishism or money worship is also a typical materialised belief. Money is only a form of currency; it is a medium for commodity exchange, and its essence is a commodity, that is, a special commodity that acts as a universal equivalent. Since money is a commodity,

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money belief becomes a materialised belief, more precisely, a vulgar materialised belief lacking spiritual connotation. Religious life is an important part of human social life, and religion has many important functions in social evolution. From a cultural perspective, religion is one of the most effective and complex cultural tools created by mankind to integrate social consciousness. Religion is featured with certain stability in social changes as one of the important contents of culture. Religion is people’s belief and reverence for mystical powers or supernatural beings (such as gods). It usually includes several parts, such as religious organisation, teachings (belief and conceptions), precepts, and ritual activities. Religion was born in primitive society. Chinese archaeologists discovered a Goddess Temple at the Niuheliang Hongshan Cultural Site in Lingyuan of Liaoning Province (approximately 3,500–2,900 B.C.), which contained large clay statues of gods, pigs, dragons and birds, as well as pottery sacrificial utensils, showing that the religion of the society at that time had developed to a certain scale and a higher level.54 Religion originated from primitive man’s dependence on and reverence for nature; there are many gods in primitive religions because the natural objects on which human beings depend are different. Religious activities are generally expressed in the form of prayers, sacrifices, practice, meditation, rituals, music and chanting, which are a concrete reflection of people’s social consciousness. In the Introduction to the Critique of Hegel’s Philosophy of Right, Marx pointed out that religion is a reflection of the fantasy in people’s minds of the external forces that dominate people’s daily lives. Therefore, the essence of religion is social ideology, which reflects the unique relationship between human beings and external mystical forces. The Italian thinker Vico pointed out in The New Science that all nations maintain three human customs: all have some religion, all contract solemn marriages, and all bury their dead.55 This indicates that religion, etiquette, etc., play an important role in social life. British historian Toynbee comparatively studied the birth–death history of 21 civilisations in human history. He put forward that culture is the core of civilisation, and religion is the core of culture. When a civilisation is destroyed, religion as the core still remains and matures.56,57 This shows that human religious belief has certain continuity and stability in social changes. In early human society, religion assumed the functions of world interpretation, judicial adjudication, social enlightenment, moral cultivation, and psychological comfort. In modern society, functions such as world interpretation and judicial adjudication have been separated from some religions, but functions such as social enlightenment, moral cultivation, and psychological comfort continue to exist. The belief 54

Su, B. Q., Zhang, Z. P., Yan, W. M. (2014). China Ancient Times. Shanghai People’s Publishing House. pp. 433–435. 苏秉琪 (ed)., 张忠培., 严文明. (2014). 中国远古时代. 上海人民出版社. pp. 433–435. 55 Vico, G. B. (1961). The New Science of Giambattista Vico (Bergin, T. G., Fisch, M. H., trans.). Garden City. p. 53. 56 Toynbee, A. J. (1988). Civilisation on Trial. Oxford University Press. p. 236. 57 Requoted from: Min, J. Y. (2012). Evolutionary Pluralism. China Social Sciences Press. pp. 350, 353. 闵家胤. (2012). 进化的多元论. 中国社会科学出版社. pp. 350, 353.

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system and social consciousness formed by religion is an important part of human social thought, culture and ideology, and it has played a huge role in shaping the human belief system in history. From the perspective of social development, religion often plays an important role in integrating social consciousness, carrying out social enlightenment, resolving social contradictions, stabilising social order, and enhancing social cohesion that cannot be replaced by other social forces. In history, on the one hand, religion was often used by the ruling class as a spiritual tool to deify the regime, strengthen the rule, and enslave the people; on the other hand, religion is also often instrumented by working people as a spiritual tool to resist oppression, eliminate suffering, and seek sustenance. In the ancient Greek and Roman society in Europe and the Indo-Aryan society in northern India, worship of dead ancestors begins in band-level societies; within each small group, there may be shamans or religious specialists whose job it is to communicate with those ancestors. It is belief in the power of dead ancestors over the living that causes tribal societies to cohere.58 In ancient China, people formed the ideology of ancestor worship and blessing from ancestors very early. The ancients believed that after a person died, he would become a god. This is actually a human-based faith in the gods and a belief in supernatural powers. At the same time, Chinese people also have religious beliefs in other gods. In the peasant movement in ancient China, religion also played a role in integrating social consciousness and carrying out social organisation, such as the White Lotus Rebellion that occurred in 1351 at the end of the Yuan Dynasty and the Taiping Rebellion that occurred in 1850 at the end of the Qing Dynasty. In the West, religious teachings have long dominated the integration of social consciousness until the Enlightenment during the Renaissance. Since then, the cultural role of the monk group has been gradually replaced by thinkers, philosophers, litterateurs, writers, poets and artists with humanistic thoughts. In ancient China, since the Three Kingdoms period (220–280), a mixture of Confucianism (with a larger proportion), Taoism and Buddhism that had long occupied the dominant position in integrating social consciousness, until the New Culture Movement initiated by the May Fourth Movement in the early twentieth century, the cultural role of traditional religion was gradually replaced by a group of intellectuals, such as professors, scholars, philosophers, litterateurs, writers, translators, who had studied in the West and possessed new ideas and concepts. Among the spiritual wealth created by human society, whether in the East or the West, a large part of cultural products such as literature, music, painting, sculpture and architecture in fact contain strong religious consciousness, or in other words, that they themselves were created around the theme of religion. Regarding this point, a clearer understanding can be made as long as one takes a look at the Mogao Caves of Dunhuang, the Longmen Grottoes, the Yungang Grottoes, the huge statues of the Dazu Rock Carvings, and the famous cultural relics of other countries in the world.

58

Fukuyama, F. (2011). The Origins of Political Order: From Prehuman Times to the French Revolution. Farrar, Straus and Giroux. p. 60.

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Morality is a conceptual standard for measuring whether people’s behaviour is appropriate and an internal criterion for regulating and adjusting people’s selfbehaviour. Every society usually has this socially recognised moral code system, which often represents the positive value orientation of the society and is the social standard for judging whether people’s behaviour is legitimate or not. Morality can be divided into two categories: personal morals and public morals. Personal morals are moral codes that only involve the behaviour of individuals and between individuals and are used to regulate personal relationships. Social morality refers to the behaviour of social groups and is used to regulate the moral code of public relations. At different times, the social morality that people uphold is often different. In different societies, the moral elements, moral standards and moral order that people value are often different. In the same society at the same time, people from different classes often have different moral values. In addition, even if it is the same type of moral behaviour, its manifestations in different societies (i.e., customs, habits, etc.) are often very different. Morality is also often a general metric by which people evaluate a person’s quality and behaviour. If a person violates public morals, such as not keeping promises, not being filial to parents, engaging in extramarital affairs, etc., people will make negative comments on him/her, resulting in damages to his/her credibility and a decline in his/her reputation. Such social pressure from the surrounding crowd will restrain his/her personal behaviour. Morality and institutions are the norms that regulate and adjust people’s behaviour, wherein connections and differences coexist. Morals are the rules for individuals to restrain their own behaviour, which are active, internal, autonomous, and nonmandatory, while institutions are the rules for social organisations to restrict individual behaviour, which are passive, external, heteronomous, and mandatory. Morals and institutions have different forms and features in different organisational systems of human society. For example, in the household system, public morals take the form of marriage morals, ethical morals, family morals, etc. In the community organisation system, public morals take the form of social morals, religious morals, common morals, etc. In the economic organisation system, public morals are manifested in the form of professional morals, corporate morals, trade morals, etc. Correspondingly, social institutions also include various forms of marriage rules, ethical rules, family rules, social etiquette, religious rules, public rules, career rules, corporate institutions, and industrial institutions. Belief behaviour is the internalised behaviour of individual consciousness, moral behaviour is the regulation of self-behaviour by individual consciousness, and institutional behaviour is the regulation of self-behaviour by individual consciousness in accordance with external rules. From belief behaviour to moral behaviour to institutional behaviour, the practicality of the participants is increasing, while the initiative is weakening. Beliefs are the cornerstone that supports human moral life and fundamentally determine the scope, hierarchy and approach of public moral practice. Morals are the basic driving force for maintaining a stable, harmonious and orderly operating society and have important value and function in the practical activities of human society. In actual social practice, morality and institutions overlap in some respects. In a legal society, the moral bottom line (i.e., the activity boundaries of moral subjects

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determined by moral codes) and the legal bottom line (i.e., the activity boundaries of legal subjects determined by legal norms) for regulating public behaviour should be connected, coordinated and organically linked. That is, at the intersection zone of morals and laws, individual behaviour is regulated by both morals and laws. Whether it is a moral subject or a legal subject, all members of society should maintain the appropriateness and properness of their behaviours, that is, the moral subject should abide by the moral code, and the legal subject should abide by the legal code. One can replace neither the restrictive function of the law with the norm of morals nor the regulating function of the morality with the norm of the law. According to Confucius, the governance of the country should be with virtue and law (i.e., to make morality and law complement each other, see Kongzi Jiayu: Zhipei《孔子家语·执辔》The School Sayings of Confucius: Holding the Reins). On the one hand, the legal system is a social norm formulated by people according to a certain will, and the specific content of the legal system reflects the will of the legislator; on the other hand, the legal system formulated by those who conform to public opinion also contains the basic demands of public morals. Therefore, morality is the source of the most basic principles of law but cannot exist in place of law. In different human societies, after a long evolution, some relatively stable moral contents have become legal provisions, and some moral concepts have been incorporated into the category of religion. In some regions and periods of human society, morality, law, and religion are inseparable from one another. In areas and periods controlled by Islamic law, for example, Islamic doctrine is a written moral system; in ancient China, morality and law also showed a high degree of integration. In modern society, humanistic intellectuals such as thinkers, philosophers, litterateurs, writers, poets and artists are the producers of spiritual and cultural products in the human-culture system. Their real function is to create new ideas, new knowledge, new concepts and new morals for the development of human society (including individual development and group development) to continuously transform, update and improve the original old ideas, old knowledge, old concepts and old morals in society and to update the spiritual realm of the whole society so that the spiritual home of mankind becomes a vibrant, harmonious world full of truth, goodness and beauty! Therefore, in modern society, humanistic intellectuals shoulder the important historical mission to enlighten the public mind and lead to social consciousness and should point out the development trend of society, reveal the issues existing in society, criticise bad habits and morbid phenomena, and use modern media to shout out the feelings and voices of the era, thereby driving the public to continuously modify and improve the value system, mental belief system, and ethical moral system.

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8.4.5 The Production Activities in the Human-Culture System Among them, the main functions of the human-culture system are the bearing and cultivation of humans and the production and innovation of humanistic and cultural knowledge. The production of people is generally completed through households, but the cultivation of people requires the participation of other community organisations (i.e., schools, social training organisations, etc.) in addition to family education. The production of humanistic and cultural knowledge is carried out through the spiritual activities of the individual brain and is generally completed by humanistic intellectuals in society. As far as the development process of the whole human society is concerned, the production activities of these two aspects in the human-culture system are interrelated, interinfluenced and interacted. Humans’ thinking on population production can be traced back to thinkers such as Plato (approximately 427–347 B.C.) and Aristotle in ancient Greece, who proposed that a society should have a moderate population to benefit society. That is, for a specific society, the amount of population production can be neither too large nor too small. The British utopian socialist Thomas More (1478–1535) also noticed the harmonious relationship between population and society and pointed out that the population size of a society should be moderate.59 At the end of the sixteenth century, the Italian thinker Giovanni Botero (1540–1617) put forward some important population ideas. He believed that the reproductive power of human beings is infinite, while the food supply to maintain human existence is limited. The lack of subsistence materials inhibits the growth of the population. War, robbery and various forms of suffering in human society are all due to lack of food. In the West, the idea of pursuing an appropriate population size has actually formed an important part of the Western cultural tradition, and most modern Western rationalists also agree with this idea. For example, the French thinker Jean-Jacques Rousseau and the Enlightenment thinker Paul Holbach (1723–1789) were typical moderate population theorists, and they all believed that a society should maintain a reasonable ratio between population and land.60 In Western society, there were many thinkers who clearly proposed the appropriate population size or pointed out in various ways that the population production in a society should have an appropriate limit, such as Machiavelli, Jacques Necker (1732–1804), Voltaire (1694–1778), Quesnay, Oxalon, Genovesi, Adam Smith, Thomas Malthus, Benjamin Franklin et al.61 However, the most well-known thinker who formulated the population theory was Thomas Malthus. 59

More, T. (1975). Utopia: A New Translation, Backgrounds, Criticism (Adams, R. M., trans.). W. W. Norton & Company. p. 45. 60 Rousseau, J.-J. (1968). The Social Contact (Cranston, M., trans.). Harmondsworth, Penguin. pp. 93–96; Holbach, P. (1773). La Politique Naturelle. Londres. pp. 134, 137, 159. 61 This paragraph is compiled from: Yu, J. Y. (1996). Social and Cultural Basis of Malthus Population Theory. Historical Research (06). 俞金尧. (1996). 马尔萨斯人口理论的社会文化基础. 历史研 究 (06).

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Thomas Malthus is a British demographer and political economist. He is usually regarded as the founder of modern demography. His representative works are An Essay on the Principle of Population (1798) and Principles of Political Economy (1820). The Population Theory described by Malthus in An Essay on the Principle of Population absorbed the population thoughts proposed by Giovanni Botero, whose population thoughts were actually a systematic population theory system integrating the views of predecessors. It focuses on the impact of human natural attributes on population production and pays special attention to the analysis of the relation between the social population and the means of subsistence in consumption, thereby establishing the internal connection between population production in the humanistic system and material production in the economic system. In An Essay on the Principle of Population,62 Malthus made two axioms: First, that food is necessary to the existence of man; second, that the passion between the sexes is necessary and will remain nearly in its present state. In addition, he proposed that these two laws, food and the passion between the sexes, appear to have been fixed laws of human nature. He believed that population, when unchecked, increases in a geometrical ratio, and subsistence increases only in an arithmetical ratio. Because “the power of population is indefinitely greater than the power in the Earth to produce subsistence for man”, the growth of population in a society tends to always be faster than that of subsistence. Therefore, if a society does not suppress the number of people, it will lead to overpopulation and food insufficiency. To balance population and subsistence, he advocated the use of checks to repress, for which he proposed two principal checks, the positive and the preventive checks. The positive check refers to the restrictions imposed on the population that have been born, including deaths caused by poverty and hunger, absolute population reductions caused by wars, plagues, earthquakes and other disasters. The preventive check refers to the adoption of abstinence measures such as late marriage, infertility or fertility reduction to prevent excessive population growth. In Malthus’s Population Theory, he stressed that population should be constrained by the quantity of subsistence and that population growth should and must be in proportion to the growth of subsistence. Malthus put forward his Theory of Effective Demand in Principles of Political Economy, which profoundly influenced Keynes’s economic thought and became the direct source of Keynesian economic theory. Malthus’s concept of effective demand refers to the demand when the supply of goods in the economic system is consistent with the actual demand. At this time, the price that the demander is willing to pay is consistent with the production cost that the producer spends to maintain continued production. He regarded people’s wages, profits and rents directly as components of effective demand; under the condition of effective demand, the market is in an equilibrium of supply and demand. At this time in the economic system, there is neither an insufficient supply of commodities nor overproduction of commodities; he believed that currency is not a pure medium of circulation but also a means of saving. If consumers do not use the currency in their hands to purchase but save, then 62 Malthus, T. (1798). An Essay on the Principle of Population. London: St. Paul’s Church-Yard. pp. 4–5.

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the supply of commodities in the economic system will exceed the actual demand, and there will be slow sales and backlogs of socially produced commodities.63 He believed that capitalist profit is not generated in the production but in the exchange, that is, through the mutual exchange of unequal amounts of labour; He pointed out that the profits in the economy cannot be realised by capitalists and workers but only by a group of unproductive consumer classes (i.e., landlords, officials, health personnel, judicial personnel, etc.). Only the effective demand of these consumer classes can purchase excess products in the economy, and only by maintaining sufficient effective demand can the economic crisis of capitalist overproduction be avoided. He also pointed out that in order to promote the continuous growth of social wealth, it is necessary to maintain sufficient effective demand, and he emphasised that it is the level of effective demand that determines the supply level of the means of subsistence. In discussing the factors that stimulate wealth growth, he not only affirmed the importance of capital accumulation, land fertility and technological progress to wealth growth but also indicated that only with the increase of these factors, but without the corresponding increase in demand cannot maintain the sustainable and stable development of the economy. If looking at the basic ideas expounded in Malthus’s population theory and his theory of effective demand, it will be found that in the theory of effective demand, he stressed that people’s demand for things (material desire) determines the supply of things, while in the population theory, he highlighted the idea that the supply of things determines the growth of the population (expansion of the passion between the sexes). There is inherent logical consistency between his two theories, which together constitute a relatively complete system of economic theories.64 Malthus’s An Essay on the Principle of Population was published before the European Industrial Revolution, which led to a substantial increase in social productivity in Europe, especially in the development of energy sources such as coal and oil. According to statistics, from 1820 to 1950, the global energy supply increased six fold, while the population only doubled. At the beginning of the Neolithic era, there were approximately 6 million people in the world. By 2001, the global population had grown to more than 6 billion. In the past 10,000 years, the global population has increased almost a thousand fold. Most of this growth occurred in the second half of the twentieth century.65 As a result, Malthus’s population theory has been widely criticised for being too pessimistic about human technological progress. Nevertheless, Malthus’s economic theory can better explain the economic development of human society before the Industrial Revolution. Adding political, institutional, scientific, 63

Yang, C. (1996). On the Relationship Between Malthus and Keynes and Friedman. Journal of Xiamen University (Arts & Social Sciences) (01). 杨晨. (1996). 论马尔萨斯与凯恩斯和弗里德 曼的脉承关系. 厦门大学学报(哲学社会科学版) (01). 64 The content of this paragraph is mainly referenced and compiled from: Liang, D., Li, L. X., Sun, X. Y. (2005). On the Logical Consistency between the Malthusian Population Theory and Its Economic Theory. Inquiry into Economic Issues (04). 梁冬., 李卢霞., 孙晓燕. (2005). 理出同源 必有因——浅谈马尔萨斯人口理论与其经济学理论之间的逻辑一致性. 经济问题探索 (04). 65 Livi-Bacci, M. (2017). A Concise History of World Population. Wiley Blackwell. pp. 26–29.

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technological, educational and other factors into its theoretical framework will be able to explain the economic development of modern society. In 1846, The German Ideology, Marx and Engels discussed mental production in human society and demonstrated in detail the relationship between material production and mental production. They pointed out that “the production of ideas, of conceptions, of consciousness, is at first directly interwoven with the material activity and the material intercourse of men, the language of real life. Conceiving, thinking, and the mental intercourse of men appear at this stage as the direct efflux of their material behaviour. The same applies to mental production as expressed in the language of politics, laws, morality, religion, metaphysics, etc., of a people.”66 Engels also expounded the connection between ideology and economic development. He pointed out that “political, religious, juridical, philosophical, literary, artistic, etc., development is based on economic development. However, all these react upon one another also upon the economic basis.”67 After the development of human society to the stage of civilisation, in social material production activities, people’s survival and development are manifested in two basic needs: one is the need for social material living conditions such as clothing, food, housing, and transportation; the other is the need for developmental conditions in terms of intelligence, morality, and aesthetics. It is precisely because of these two basic needs that human society has gradually developed from material production purely to meet physical needs to mental production that focuses on satisfying spiritual needs. With the continuous development of society, human beings increasingly strengthen the production of spiritual needs and finally make mental production independent and differentiated from social material production in a specialised and professional way. This independence and differentiation of mental production is, on the one hand, to more fully meet the increasingly strong spiritual needs of human beings, and on the other hand, it is also the specific requirements of the two production activities. With the continuous development of mental production in society, the cultural quality of individual human beings will also improve, and the spiritual needs of the entire society will increasingly become the main goal of people’s life pursuits. The upgrading of the spiritual needs of human society and the scale and quality of mental production will also develop to a newer and higher level. Among Western social thinkers, a representative scholar who linked the factors of humanistic and cultural knowledge with economic development is the famous German sociologist Max Weber. In his famous The Protestant Ethic and the Spirit of Capitalism (1905), he looked deeply into the important influence of spiritual beliefs, ethics and other factors on the development of the capitalist economy in Western society. In this book, Weber, through the collection and analysis of a large number of empirical materials, examined the generative and developmental relationship between the religious ethics of Protestantism (namely, Calvinism) and the development of modern capitalism after the Reformation in Europe in the sixteenth 66

Marx, K., Engels, F. (1970). The German Ideology. International Publishers. p. 47. Marx, K. (1975). Karl Marx, Friedrich Engels: Collected Works (Vol. 50). International Publishers. p. 265.

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century, arguing that the rise of capitalism is not only due to economic and political reasons but also closely related to the religious beliefs and ethical attitudes of Protestant Christianity and that Protestant thought has actually formed the cornerstone of the modern capitalist spirit. It is these factors that jointly shape the psychological conditions for the rise of Western capitalism and constitute the general living order of modern Western people. Weber’s analysis pointed out that although the concept of capital accumulation did not come directly from Protestant ethics, its respect for industriousness and frugality inadvertently laid the spiritual foundation for capitalism. For example, he believed that in the United States in the eighteenth century, Franklin’s simple aphorisms, which were popular in society, clearly expressed the spirit of capitalism, and it was this spirit that dominated the future development of the American economy, not the grand plans of mercantilist politicians. It was this new religious conception that, in Weber’s view, taught the forerunners of the modern economic order “to regard the pursuit of wealth as not merely an advantage, but a duty. This conception welded into a disciplined force the still feeble bourgeoisie, heightened its energies, and cast a halo of sanctification round its convenient vices.”68 He believed that in the rise of capitalism, reforms in public moral standards have played a key role in turning habits condemned as evils in previous eras into economic virtues in the new era, and the force responsible for this change is the teachings of Calvinism. What needs to be explained here is that among the factors that affect the changes in capitalist economic ethics, it is not only the Protestant ethical thought emphasised by Weber but also the ethical thought of Catholicism, the political thought of the Renaissance, and people’s market speculation. Together, these factors constituted an integral part of a general ideological movement of thought. In addition, the link between morality and economic development is not a one-way relationship but a twoway interactive relationship. As English economic historian Richard Henry Tawney put it that “there was action and reaction, and, while Puritanism helped to mould the social order, it was, in its turn, moulded by it.”69 Weber’s work, despite the heated debate in Western academia, remains one of the classic explanations of the spirit and origins of capitalism. Judging from the social structural framework proposed in this book (Fig. 8.1), Malthus’s economic theory established the connection between population production in the human-culture system and material production in the economic system; Max Weber’s social theory built up the link between the humanistic and cultural knowledge factor in the human-culture system and the material production in the economic system. The relationship between material production and mental production in human society discussed by Marx and Engels involves not only the connection between the economic system and the human-culture system but also the connection between the economic system and the political system, as well as the legal factors in the legal system. Their thoughts also revealed the social evolutionary view of the dynamic change of the social production structure. Therefore, relatively speaking, 68

Weber, M. (1958). The Protestant Ethic and the Spirit of Capitalism (Parsons, T., trans.). Charles Scribner’s Sons. p. 2. 69 Ibid., pp. 10–11.

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the vision of Marx and Engels to observe society appears broader and more comprehensive. Their discussion, however, also has shortcomings: they rejected Malthus’s population theory, the theoretical framework they built is a hierarchical structure similar to a building, and many social factors are mixed together (i.e., factors in ideology), which makes it difficult to use their theories to analyse modern society. The social structural framework proposed in this book in fact integrates the ideological essence of the abovementioned theories of Malthus, Max Weber, Marx and Engels, which not only established the links between human-culture system and economic system, human-culture system and political system, and economic system and political system but also linked them with science system, legal system and education system, thus covering the subject of Cultural Economics, Population Economics, Political Economy, Cultural Politics and other disciplines.

8.4.6 The Evolutionary Mechanism of the Human Culture System How does a society’s human-culture system evolve? What is the evolutionary mechanism for the human-culture system? In the previous analysis of the general operational structure of the human-culture system, social evolution was briefed and will be further discussed here. Regarding the question of the evolutionary mechanism of the material world, philosophers and natural scientists worldwide have conducted many studies and analyses from different perspectives and levels. However, according to the current literature, it is the American systems theorist Ervin Laszlo and the Chinese cultural philosopher Niu Long-Fei who have made a profound contribution to this issue. Among them, Ervin Laszlo’s important output is the General Evolutionary Systems Theory,70 while Niu Long-Fei analysed and revealed the internal mechanism behind the evolution of the material world. Niu Long-Fei, on the basis of synthesising the achievements of Contemporary Molecular Biology, General System Theory, Hypercycle Theory, Self-organisation Theory and other disciplines, combined with the Chinese classical philosophy Zhou Yi and Taoism’s Tai Chi, analysed and demonstrated the general mechanism of the evolution of the material world. In Human-culture-Civilisation Evolutionology and General Evolution Theory, he pointed out that “for any kind of reality, the mechanism of its occurrence is a ‘reciprocating cycle’ of ‘positive feedback, self-generation’ and ‘negative feedback, self-stabilisation’. Here, ‘positive feedback, self-generation’ ensures the ‘heterogeneity’ between the existence of a certain level and the existence of other specific levels; Negative feedback, self-stabilisation ensures the continuity of a certain level of existence in four-dimensional space–time”. He emphasised the circular cyclic relationship in the process of material evolution. Because of the continuous change of this circular cyclic relationship, “new heterogeneous 70

Laszlo, E. (1988). Evolution: The Grand Synthesis. New Science Library.

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Fig. 8.3 Model of the positive–negative feedback reciprocating cycle73

existences continue to occur due to the ‘reciprocating cycle’ of ‘positive feedback, self-generation’ and ‘negative feedback, self-stabilisation’. Thus, the overall system of the big universe with hierarchical differences and cascade structure is gradually formed.” He also pointed out: “The ‘loop’ of ‘positive feedback, self-generation’ has an internal mechanism of ‘to-change’; The ‘loop’ of ‘negative feedback, selfstabilisation’ has an inherent mechanism of ‘not-to-change’. Unifying these two internal mechanisms in the reciprocating cycle of positive feedback, self-generation and negative feedback, self-stabilisation has the feature of simplicity of philosophical ontology. In addition, this is the essence of the philosophy The Book of Changes”.71 He analysed and pointed out that the general evolutionary process of the material world is a dynamic process in which new heterogeneity constantly occurs due to the two mechanisms of positive feedback, self-generation and negative feedback, selfstabilisation; A system in a stable state will be destabilised and self-organised due to a positive feedback mechanism. The result of self-organisation is to create a new structured system on a new level, which will maintain a relatively stable state due to a negative feedback mechanism. This cyclical process will continue to produce new structured systems from the old ones. He explained, “The so-called ‘positive feedback’ is equivalent to the ‘gene recombination’ in biological evolution, while ‘negative feedback’ is equivalent to the ‘lineage inheritance’ of the ‘recombinant gene’. It is the ‘natural or artificial selection’ that determines the system’s ‘negative feedback, self-stabilisation’ or ‘positive feedback, self-generation’”.72 The positive–negative feedback reciprocating model proposed by Niu Long-Fei is shown in Fig. 8.3. Combining the thoughts of Ervin Laszlo’s General Evolutionary Systems Theory and according to the evolutionary principle of the material world revealed by Niu Long-Fei, it can be inferred that the entire material world is based on this self-generation and self-stabilisation cyclic mechanism. Atoms are self-organised 71

Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. pp. 109–110. 牛龙菲. (1989). 人文进化学. 甘肃科学技术出 版社. pp. 109–110. 72 Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. pp. 106–107. 牛龙菲. (1989). 人文进化学. 甘肃科学技术出 版社. pp. 106–107. 73 Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. p. 108. 牛龙菲. (1989). 人文进化学. 甘肃科学技术出版社. p. 108.

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Fig. 8.4 General model of the progression of the physical world75

from elementary particles such as neutrons, protons, and electrons, and inorganic molecules (simple molecules) are self-organised from atoms. Then, organic molecules (complex molecules) are self-organised from inorganic molecules. After that, primitive cells (complex molecular groups) are self-organised from organic molecules. Subsequently, microorganisms (signs of life) are self-organised from primitive cells. Thenceforth, biological species are self-organised from microorganisms; Finally, biological individuals of different species can form social groups of different species. It is in the process of the continuous creation of such a heterogeneous system that the material world underwent a transition through the chain of physical structure → chemical structure → biological structure → social structure,74 while human society was differentiated from animal society, and after a long cultural process, a higher-level social system with a humanistic-cultural structure was finally created. The general evolutionary mechanism of the entire material world can be represented by Fig. 8.4, which is a diachronic process of the hierarchical evolution of various structural systems and a process of synchronic coupling of systems at different levels. In the figure,  represents the system’s negative feedback and self-stabilisation cycle, and “⊕” represents the system’s positive feedback and self-generation cycle. Based on the positive–negative feedback reciprocating cycle model proposed by Niu Long-Fei, combined with the general operational structure of the human-culture system obtained in the previous article (Fig. 8.2), this book explores the evolutionary

74

For more explanation, see: Laszlo, E. (1988). Evolution: The Grand Synthesis. New Science Library. pp. 44–71. 75 Shang, L. L. (1991). A Commentary on Niu Long-Fei’s Human-Culture-Civilisation Evolutionology and General Evolution Theory. Lanzhou Academic Journal (03). 尚乐林. (1991). “伐柯 伐柯, 其则不远”——评牛龙菲着《人文进化学》 . 兰州学刊 (03).

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Fig. 8.5 Evolutionary mechanism of the human-culture system

mechanism of the human-culture system in human society. To facilitate the analysis of the problem, the idea of the positive–negative feedback cycle model can be combined with the general operational structure of the human-culture system to draw the following evolutionary mechanism of the human-culture system (Fig. 8.5). In Fig. 8.5, the lower solid arc represents the positive feedback from social progress to humanistic and cultural production, and the upper solid arc indicates that humanistic and cultural production causes social structural innovation, which in turn promotes social progress. The upper dashed arc represents the negative feedback from the progressed society to humanistic and cultural production, and the lower dashed arc represents that under the negative feedback mechanism of humanistic and cultural production, people keep copying existing social structural information to maintain the steady-state of the social system and thus keep the whole society in the status quo. To establish a theoretical system of humanistic and cultural progression, Niu Long-Fei proposed a set of logically interrelated cultural concepts in terms of wenhua 文化 culture, or evolution of culture & civilization, wenming 文明 civilization, or products of culture & civilization and wenmai 文脉 cultural context, or gene of culture & civilization. According to Niu Long-Fei’s definition, wenming 文明 civilization is “the historical achievement of humanistic and cultural education or Human-SocietyCulture & Civilization Evolution (HSCCE)”; Wenmai 文脉 cultural context is “the information or instruction of humanistic and cultural education or progression from the past to the present about the future and its inheritance and transmission”.76 Later, 76

Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. pp. 44–45. 牛龙菲. (1989). 人文进化学. 甘肃科学技术出版 社. pp. 44–45.

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he replaced the previous term wenhua 文化 culture with the concept of wenxiang 文 象 cultural image, which refers to the products of culture & civilization as historical entities.77 He later gave a new interpretation of the wenmai 文脉 cultural context that it is “the evolutionary information of human civilization stored in the material carrier outside the body” and “the ‘gene’ of human in vitro nonbiological evolution”.78 If wenmai 文脉 is regarded as the gene of culture & civilization, then wenxiang 文象 is the humanistic and cultural phenomenon and cultural reality shaped by the regulation of the cultural gene, which can be specifically understood as the appearance of cultural reality. According to the understanding of the author, wenmai 文脉 here is equivalent to the organic combination of the deep factors of the subsystems in this book, and wenxiang 文象 is equivalent to the realistic combinations of the surface factors of the subsystem in this book. It is in this sense that the entire structural framework of human society established in this book is a further deepening and refinement of humanistic and cultural evolution, as well as a reintegration of cultural studies, economics, political science and anthroposociology. Niu Longfei expressed the general evolutionary mechanism of the human-culture system as “the change of the system state caused by the amplification of the disturbance at the micro level by the macronetwork; It leads to the actual existence of heterogeneous new things, if it is possible to maintain a changed system a relatively stable state in the passage of time”.79 The first half of this sentence is positive feedback, self-generation, and the second half is negative feedback, self-stabilisation. How can this evolutionary mechanism expressed by Niu Long-Fei be understood? For readers to understand, the following analysis is discussed through examples. In ancient times, when a fire broke out in the virgin forest, wild boars, hares and other animals that did not escape in time were burned to death in the bushes. When primitive humans found these burned animals, they went to eat them and found that cooked animal meat was more delicious. Therefore, some people started to apply wildfires in the forest to barbecue animals. In this way, primitive humans learned the original way of using fire. The mutual imitation passed this fire method from one family to another and from one group of people to another. It was discovered that the ooze that had been fired would become extremely hard. Therefore, some people began to use fires to harden clay utensils such as clay bowls and clay pots. As a result, the original pottery was invented. Since then, people could use pottery utensils to cook all kinds of animals they hunted. This pottery-making technique 77

Shang, L. L. (1991). A Commentary on Niu Long-Fei’s Human-Culture-Civilisation Evolutionology and General Evolution Theory. Lanzhou Academic Journal (03). 尚乐林. (1991). “伐柯 伐柯, 其则不远”——评牛龙菲着《人文进化学》 . 兰州学刊 (03). 78 Niu, L. F. (1992). “Taiji-recycle of Hypercycle”: The Fundamental Internal Mechanism of Human-Culture-civilisation Evolution and General Evolution. Academic Journal of Jinyang (03). 牛 龙菲. (1992). “超循环的太极循环”——人文进化与一般进化的根本内在机制. 晋阳学刊 (03). Quoted from the manuscript published on his personal blog after revision of the article on September 1, 1998, see Note 6. 79 Niu, L. F. (1992). “Taiji-recycle of Hypercycle”: The Fundamental Internal Mechanism of Human-Culture-civilisation Evolution and General Evolution. Academic Journal of Jinyang (03). 牛 龙菲. (1992). “超循环的太极循环”——人文进化与一般进化的根本内在机制. 晋阳学刊 (03).

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also passed from one family to another and from one group of people to another. The large quantity of pottery bowls and pots, etc., unearthed from early human activity sites around the world demonstrated the early cultural achievements of mankind. Later, some people used rocks in the mountains to build stoves for cooking. Some of these rocks may be copper ore of higher purity and were found to melt into hot liquid when burned. When the liquid cooled, it became hard and had a golden sheen. Some people tried to use this molten liquid to cast sharps such as shovels and knives, and the first bronze ware was invented. Likewise, this smelting technique was passed from one person to another, from one family to another, and then from one group of people to another. When most people in a region began to use bronze utensils widely, this means that this society had entered the Bronze Age. It is in the interaction of stimulation-innovation-spread with the environment that human society began its own social progress. In the above example, the small disturbance of the fire in the virgin forest to primitive human groups stimulated some individuals in the population. The accidental innovations of these individuals first increased the conscious information in their heads. Then, as they passed on the information (or knowledge) they had acquired to others, others also acquired the same amount of information. When people turned these innovative understandings into practical activities, such as using fire, burning pottery, smelting copper, etc., society began to progress. This is a process from microdisturbance to macroamplification, which is also a cycle of knowledge and practice. The progress of the entire human society is actually a repetitive cycle of cognise → practice → recognize → repractice. In this process, the amount of conscious information continues to increase so that the individual’s consciousness continues to progress. The mutual communication and learning among individuals promote the progress of group consciousness, and the progressed group consciousness in turn drives the progress of individual consciousness (i.e., the process of cultural education), which is actually the coevolution of individual consciousness and group consciousness. The content of specific progress includes the ideologies of knowledge, thoughts, feelings, values, spiritual beliefs, ethics, and institutional norms. This is the essence of the wenhua 文化 evolution of culture & civilization proposed in this book. The result of humanistic and cultural progress in human society is manifested on the one hand as the improvement of human intelligence and the specialisation of knowledge and on the other hand as the advancement of awareness and the diversification of knowledge among the entire human group. The habits or customs instituted by human groups in life and production, after horizontal transmission between social groups and vertical inheritance between different generations, finally became institutional norms within a certain region. These norms are the social institutions of a social group. For instance, primitive humans found that fire often caused disaster if used improperly and that uncontrollable fires can burn houses, people and livestock. To prevent fires, they have formulated storage and usage rules on fire. These rules ultimately constitute a kind of institutional norm. In this way, incest taboos, marriage rules, wedding ceremonies, funeral customs, religious institutions, etc., of human society have gradually evolved into different social institutions. In a specific social group, it is these social institutions that regulate and

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constrain the thinking patterns and behaviours of all individuals. If a society continuously replicates and spreads these social institutions through cultural education to continuously strengthen the information contained in these institutional norms in the individual consciousness, then these strengthened social institutions will keep the entire social structure in a certain steady state. Only when certain individuals in society undergo innovation due to stimulation (i.e., inventing pottery technology, proposing new ideas, etc.), the cultural knowledge of the entire society will increase. When the increased cultural knowledge is continuously spread through education, the awareness of the entire social group will evolve accordingly. When this social group applies the new knowledge learned to practical activities, especially after it is used to change and adjust the original social system, innovations in social structure will occur (which is a process from microdisturbance to macroamplification). If these innovative social structures can be accepted and maintained by the entire social group, then the entire society will actually progress. This is the essence of the idea contained in the evolutionary mechanism of the human-culture system (Fig. 8.5). In the evolution of the human-culture system, the invention of language and writing is of great significance. Clearly, language and writing were not created in a short period of time, nor could they have been invented by a single person alone. Language and writing are important tools of human culture. The process of their creation and invention is similar to the innovation process of pottery and bronzeware mentioned above, but they are more likely to be created in interpersonal communication. People need to communicate with each other, whether in family life (i.e., population production and rearing), in economic activities (i.e., hunting and planting), or in public activities (i.e., religious gatherings, singing and dancing entertainment). It is conceivable that the most primitive language communication between individuals started with ambiguous babbling, or hem and haw, accompanied by various expressions and gestures. However, later with the gradual evolution of human vocal organs (i.e., the throat and tongue), people’s speech began to become clearer and more coherent. When people finally fixed the meanings of some commonly used words, the first human language was born. At the same time, people also recorded things such as the number of cattle and sheep, the image of the Sun and the Moon, etc., with carved marks or simple drawings, which were conventionally given a certain meaning over time, and the first human writing was born. The invention of language enabled the consciousness in the human mind to have for the first time the carrier (sound) that leaves the self . Although this carrier is short-lived (it disappears as the speaker’s voice drifts away) and sometimes fragile (it is difficult to make a sound when a person’s throat or tongue is sick), it builds a cultural bridge for interpersonal communication. The invention of writing enabled the consciousness in the human mind to once again have a carrier (symbol) that leaves the self , and thus human beings overcame the limitation of time on the sound carrier, so that for the first time human consciousness had a visible image outside the body. When symbolic characters were inscribed on physical carriers such as clay tablets, bamboo pieces, stone surfaces, tortoise shells, etc., human ideology had the ability to span time and space. As long as these physical carriers of written words are not destroyed, the information contained in these words will not disappear. The amount of conscious information

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stored in the human mind, as well as the vocabulary used by humans in mutual communication, also accumulates with the increase in human social practice, thus starting the progression of human language and writing. When people combined the voice by sound syllables with the words by carved marks, another important leap took place in the cultural process of human society. The combined use of language and writing makes it easier for individuals to express, communicate, reproduce and spread various complex ideologies. The invention and wide application of language and writing have enabled human society to step out of barbarism and ignorance and have since stepped into a historical era of civilisation. In ancient times, when innovation was carried out by some stimulus or disturbance from the external environment, these stimuli or disturbances were often contingent or random, and these contingencies or randomness often determined the evolutionary path and development level of the human-culture system. For example, if the area a social group inhabits had scarce copper ore resources but rich iron ore resources, the probability of people discovering copper would be very low, and the technology of copper smelting would not be invented. It is more likely that people living there would find iron and invent iron-making techniques. If this social group succeeded in inventing iron-making techniques and making extensive use of iron-made utensils, then they effectively entered the Iron Age. A similar practical example is that people did not find bronze tools in the archaeology of ancient Mayan society, and they were a social group built on the basis of stone civilisation. The continental regions inhabited by different social groups are geographically distinct, and the isolation of natural mountains and rivers blocked their possible communication and integration with other social groups, which eventually led to the formation of different ethnic groups with their unique cultural characteristics. Different ethnic groups have different languages and writings. Due to differences in production and lifestyle, their eating habits, clothing and accessories, living styles and even religious beliefs have different characteristics. During the same period of time, social groups in different regions or different ethnic groups in the same region have great differences in the speed of social development and the degree of civilisation. For example, in the Middle East in the Middle Ages, the Northern Song Dynasty had developed to a very high level of civilisation, but the Tangut people, Mongolian and other ethnic groups around it had not even invented their own national characters, that the Tangut script of the Tangut people was created in 1036, and the Mongolian script of the Mongolian ethnic group was created after 1204. The stimulus or disturbance from the external environment can even change the form of religious beliefs of certain social groups. For example, fishermen living in coastal areas are frequently hit by tornadoes. Strong hurricanes often overturn fishing boats, uproot trees, and even sweep away people and livestock. In ancient times, when people encountered tornadoes, they usually had an inexplicable fear and awe of this incomprehensible natural force. Therefore, some people believed that it was a dragon god in sky casting spells. Therefore, people gradually created the image of the Dragon God according to their imagination and established temples to worship them regularly to pray for the blessing of this god. Because tornadoes mainly come

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from the ocean and are often accompanied by storms and rainfall, people consider that the role of the god Dragon is to supervise rainfall and running water in nature. It is also for this reason that the belief in the Dragon God has gradually spread from coastal areas to other areas of China. Some scholars pointed out from folk beliefs that dragon is a conceptual product formed by people combining various animal images related to water. The basic function of this god is to prosper clouds and rains and manage and operate waters, and its creation is closely related to the worship of water gods.80 In ancient China, when there was no rain or too much rain for a long time, people went to the Dragon King Temple to pray to the Dragon King for good weather. For example, in the thirteenth year of Wanli of the Ming Dynasty (1585), due to the drought and lack of rain in the Beijing area, Ming Shenzong (the Sagacious Ancestor of Ming Dynasty) and Zhu Yi-Jun (1563–1620) personally walked to the Temple of Heaven to pray for rain. Even in contemporary times, such dragon king temples can still be seen in coastal areas such as Shanghai, Yantai, and Yancheng, and even today, there are still people who often go to temples to worship the dragon king. The belief in the dragon god may be the reflection of the ancients’ awareness of the stimulus or disturbance of the tornado. This stimulus or disturbance excited people’s creation to the dragon god, which in turn led to the belief in the dragon god. The specific content of this belief has been continuously spread among people, including horizontal spread among contemporaries and vertical spread among generations, thus forming the belief and worship tradition of dragon god. This spread process is actually a negative feedback, self-stabilisation process. Here, the information of Dragon God’s belief in people’s consciousness belongs to the wenmai 文脉 gene of the culture & civilization category mentioned above, while the dragon king temples in various parts of China and the dragon king statues in the temples belong to the cultural image category. At the Yangjiawa Cultural Site (of the early Neolithic Age, on the edge of the Bohai Sea) from Tashan County of Lianshan District in Huludao City of Liaoning Province, two dragon-shaped patterns (the earliest dragon-shaped pattern found in China at present) made of clay were discovered, indicating that as early as 9,000–7,000 years ago, the belief in dragon god had existed on the coast of Northeast China. In addition, people also discovered dragon and tiger patterns made of clam shells at the Yangshao Cultural Site (of the mid-Neolithic Age) from Xishuipo in Puyang City of Henan Province,81 which shows that by 6,500 years ago, the belief in dragon gods had spread to inland central China. In a social group, too strong negative feedback forces in the human-culture system tend to suppress the public’s innovative activities, thereby inhibiting the emergence and growth of the new structure in the social system. A well-known example is the trial of the Italian natural scientist and philosopher Giordano Bruno (1548–1600) by the Roman Inquisition in the Western Middle Ages. Bruno was imprisoned for Xiang, B. S. (2010). Research on Myths and Folk Beliefs. People’s Publishing House. p. 109. 向 柏松. (2010). 神话与民间信仰研究. 人民出版社. p. 109. 81 Ai, S. Z., Song, Z. H. (2006). History of Chinese Science and Technology (Chronology Volume). Science Press. pp. 16, 33. 艾素珍., 宋正海. (2006). 中国科学技术史(年表卷). 科学出版社. pp. 16, 33. 80

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eight years for opposing Ptolemy’s Geocentrism, promoting Kopernik’s Heliocentrism, and criticising Scholasticism and Ecclesiology. He was finally condemned as a heretic by the Roman Inquisition and was burned to death in Rome’s Campo de’ Fiori on February 17, 1600. This act of the Roman Inquisition suppressed the emergence and spread of new ideas, new concepts, and new knowledge in the field of science, hindered scientific progress in Europe, and to some extent delayed social development. From the simple analysis above, we can also obtain an important conclusion; that is, only open social systems can achieve continuous innovation and evolution, while closed social systems will only become rigid or stagnant. Here, openness includes two aspects: openness to social individuals and openness to social groups. Among them, the openness of individual ideology in society is particularly important because any innovation in all societies originates from the spiritual innovation of individuals. If a society implements a closed social system on the ideology of its individuals (i.e., policies and institutions that restrict or prohibit freedom of thought, freedom of speech, freedom of the press, freedom of assembly, freedom of association, etc.), it will directly limit the spiritual innovation of individuals in that society; no individual spiritual innovation means that the entire society will not be able to progress continuously. Individual free thinking is often the germ of social reform, as Min Jia-Yin put it that “they are the most precious wealth of a society and must be protected. They should be freely spoken, written, and published. They should also be refined and sublimated through free discussion in the group, and become a new flow of information that promotes social evolution”.82

8.5 The Observation of Social Progress from the Perspective of Social Reform Throughout ancient Chinese history, a series of cases concerning the success and failure of social reforms can be explained objectively and rationally by the mechanisms of positive feedback, self-generation and negative feedback, and selfstabilization. The following will discuss the evolutionary mechanism of ancient Chinese society from the perspective of social reform. During the Spring and Autumn Period, Guan Zhong (?–645 B.C.), the chancellor of Qi State, presided over a series of political and economic reforms centred on prospering the state and strengthening the army, for instance, dividing the state into political districts, organising military establishments, establishing a talent selection system, levying taxes according to land classification, prohibiting nobles from plundering private property, developing salt and iron industries, minting currency, and adjusting prices. His reforms achieved remarkable results, which strengthened the Qi state and laid a solid economic foundation for Duke Huan of Qi’s hegemony Min, J. Y. (2012). Evolutionary Pluralism. China Social Sciences Press. p. 230. 闵家胤. (2012). 进化的多元论. 中国社会科学出版社. p. 230. 82

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(The Records of the Grand Historian—Biographies of Guan and Yan). In the early Warring States Period, Li Kui (455–395 B.C.), the chancellor of Wei State, carried out a series of political reforms centred on governing the state by law in Wei State, such as enacting laws, abolishing the privileges of hereditary aristocracy, reforming the hereditary salary system, selecting and appointing talents, rectifying the official system, uniformly allocating arable land, and stabilising grain prices. His reforms made Wei the most powerful vassal state in the early Warring States period. (Book of Han—Treatise on Literature) During the Warring States Period, the military strategist Wu Qi (approximately 440–381 B.C.) carried out reforms similar to Li Kui in the state of Chu in 382 B.C. In the early days of the reform, the politics of the state of Chu was rectified, and the military strength became increasingly stronger, but soon afterward, the reform was hated and opposed by the conservatives of the Chu nobles. After the death of King Dao of Chu in 381 B.C., the conservatives immediately launched a coup. They killed Wu Qi and abolished his reform measures. As a result, Chu, which had a large territory at that time, lost the historical opportunity to unify China. (The Records of the Grand Historian—Biographies of Sun Tzu and Wu Qi) During the Warring States Period, the politician Shang Yang (approximately 395–338 B.C.) carried out two large-scale reforms in the Qin state from 356 B.C. to 350 B.C. He ended the hereditary privileges of aristocrats, established the county system, abolished the well-field system, reformed the household registration, military merit titles, land taxation and other institutions of the Qin State, formulated and implemented severe punishment laws such as the lianzuo 连坐 (to be punished for being related to or friendly with somebody who has committed an offence) and corporal punishment, and rewarded farming and weaving, allowed land trading, and unified weights and measures, as well as folk customs, etc. Shang Yang was greatly influenced by legalists such as Li Kui and Wu Qi, and the laws he promulgated and implemented in the Qin state followed the basic content of Li Kui’s Canon of Laws. Shang Yang’s reforms put the Qin state in great order and rapidly enhanced the strength of the former backward state. Si-Ma Qian (145–90 B.C.), describing the effect of this reform, wrote “ten years of implementation, the Qin people were very happy, that no one would keep lost articles found by the roadside, no more robbers in the forest, and all households have adequate supplies and people lived in contentment. The people were courageous in public battles but ashamed of private fights. The counties and cities were in great order” (The Records of the Grand Historian— Biography of Lord Shang). The Shang Yang Reform was the most thorough social reform among the vassal states during the Warring States Period. This reform not only promoted the development of the Qin state but also drove the transition from the patriarchal feudal system to a centralised system. It laid the foundation for the First Emperor of Qin to establish a unified Qin Empire in the future and had a profound impact on the development of Chinese society. The Northern Song Dynasty politician Wang An-Shi (1021–1086) began to vigorously promote reforms in 1070. Focusing on economic development, he launched a wide range of social reforms, including the formulation and implementation of a series of new laws involving agricultural, handicraft, and commercial development from rural to urban areas. He also reformed the military system to improve

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the quality of the army, as well as the imperial examination system and education system. In terms of economic policy, he promulgated the balanced-delivery law, the market exchange law and the exemption law, which had played a role in restricting the monopoly of big businessmen, reducing the additional burden of taxpayers, and increasing fiscal revenue; implemented the green-sprouts law, the labour recruitment law and the equal-tax law on field compartments, to adjust the relationship between the state, the landlord and the peasants, which escalated the state’s fiscal revenue, and reduced the burden on the peasants; performed the hydraulic labour law, and encouraged public welfare matters such as reclamation of barren land, construction of water conservancy, and construction of embankments. In the aspect of strengthening the military, he launched the general and troops law, the communal self-defence law, the militia-horse law, and the establishment of military equipment supervision, which had played a role in rectifying the army organisation, strengthening military training, and saving military expenditures, thereby improving the quality and combat effectiveness of the army and stabilising the social order. In terms of the education system, the old system of selecting scholars based on poetry and prose was abolished, and the focus of the imperial examinations was on selecting people with real talents and practical learning who were able to benefit society economically. He also rectified the Imperial Academy and set up schools in various prefectures and counties. These measures corrected the previous system defects in talent training and opened up a way for the cultivation and selection of practical talent. However, the reform carried out by him violated the interests of some large bureaucrats and large landlords in the Northern Song Dynasty. Conservatives, including the empress dowagers of the two palaces, royal relatives and a group of scholar-officials, united to oppose the reform. Ultimately, Wang An-Shi was removed from his position as chancellor in 1074. Although he was reinstated the following year, his reform did not receive more support from the imperial court, making it difficult for the reform to continue. Therefore, he resigned in 1076. In April 1085, Emperor Shenzong of Song, Zhao Xu (1048–1085) died. In 1086, conservatives gained power again, and the new laws introduced by Wang An-Shi were basically repealed. In 1127, the Northern Song Dynasty was destroyed by the Jin Kingdom, which was only 41 years after the death of Wang An-Shi. In fact, the content of Wang An-Shi’s reform already has the characteristics and nature of modern social transformation, and it is a key node in the development of ancient Chinese society. It now appears that the failure of this reform has actually determined the evolution direction of Chinese society for the next eight centuries. According to the British economic historian Angus Maddison’s comparative study of the levels of GDP per capita for China and Western Europe between 400 and 2001, approximately 1300, the per capita GDP of Western Europe surpassed that of China.83 This shows that it was after the demise of the Southern Song Dynasty (1127–1279) that the development of Chinese society began to lag behind that of Western society, and the gap between China and the West started to widen. Since the beginning of the 83

Fukuyama, F. (2011). The Origins of Political Order: From Prehuman Times to the French Revolution. Farrar, Straus and Giroux. p. 461. Figure 7.

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Industrial Revolution in 1800, Western society has developed by leaps and bounds, leaving Chinese society far behind. If Wang Am-Shi’s reforms were successful, the historical development of Chinese society would be different, and the gap between Chinese and Western societies would not be as wide as it was later. However, history is history, which cannot be rewritten by assumptions. Therefore, from the background of world history, Wang An-Shi’s reforms have special value and significance. Niu Long-Fei pointed out that in the development of things, positive feedback, selfgeneration or negative feedback, and self-stabilisation are not sufficient conditions for heterogeneous occurrence or self-organisation. Only the combination of positive feedback, self-generation and negative feedback, self-stabilisation can guarantee the occurrence and existence of new heterogeneous things. The dynamic changes generated by “positive feedback, self-generation” can be regarded as the yang side of things, while the static stability maintained by “negative feedback, self-stablisation” can be regarded as the yin side of things. In this way, in the passage of time, positive feedback, self-generation and negative feedback, self-stabilisation, the yang and the yin are constantly transforming to each other. The dynamic transformation in this reciprocating cycle is similar to a spinning wheel of the dharma, creating the history of things. The Tai Chi Diagram of ancient Chinese Taoism is the symbol of this wheel. The original meaning of the Tai Chi Diagram is to symbolise the constant transformation and the cycle between the yang and the yin, dynamic state and steady state, change and not to change, dynamic state and steady state, positive feedback, self-generation and negative feedback, and self-stabilisation in the stream of time (Fig. 8.6). He called this reciprocating cycle the Taiji cycle. Regarding things, some scholars in ancient China had clearly put forward the Taiji-recycle thought about the development of things. For example, Zhou Dun-Yi (1017–1073), a philosopher of the Song Dynasty, summarised in his Taiji Tushuo《太极图说》Explanations of the Diagram of the Supreme Ultimate, that “because of the abundance of energy within Tai Chi, it began to move and thus produced the yang (the positive cosmic force). When the activity of the yang reached its limit, it reverted to tranquility. Through tranquility, the yin (the negative cosmic force) was generated. When tranquility reached its limit, it returned to movement (yang). Thus, yin and yang generated each other.” In the development of things, the yang and the yin are the premise of each other and go back and forth.84 The internal mechanism of the development of the abovementioned things can also be used to analyse the evolutionary process of a system, especially the occurrenceexistence mechanism of a new structure in a system. In the evolution of a system, when the dynamic state of its positive feedback, self-generation develops to a critical pole, whether it is to return to the steady state of negative feedback, self-stabilisation at the original level or to leap to a new level of steady state, it depends on the specific influential factors inside and outside the system, which are often random. The evolution direction of the system in this critical state can be represented by the 84

Niu, L. F. (1992). “Taiji-recycle of Hypercycle”: The Fundamental Internal Mechanism of Human-Culture-civilisation Evolution and General Evolution. Academic Journal of Jinyang (03). 牛 龙菲. (1992). “超循环的太极循环”——人文进化与一般进化的根本内在机制. 晋阳学刊 (03).

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Fig. 8.6 Endless cycle of Tai Chi

Fig. 8.7 Evolution direction of the critical state system

general evolutionary mechanism of heterogeneous new things occurrence-existence proposed by Niu Long-Fei, as shown in Fig. 8.7. In the figure,  represents the steady state of the system’s negative feedback, selfstabilisation, and “⊕” represents the dynamic state of the system’s positive feedback, self-generation. Now, the direction of the social system structure in the several important reforms in Chinese history mentioned above is analysed through Fig. 8.7. Li Kui, Wu Qi, and Shang Yang, the three legalists in the Warring States Period, will be briefly studied. The reform carried out by Li Kui in Wei State won the strong support from Marquess Wen of Wei, so his movement achieved success in Wei State. The measures he carried out, such as formulating laws, abolishing the privileges of hereditary aristocracy, reforming the hereditary system, selecting and appointing talents, rectifying the governmental system, uniformly allocating arable land, and stabilising grain prices, changed the original political, economic, humanistic, and cultural structure of Wei State. Thus, a new heterogeneous structure was born in the original state system. This new structure is unstable at first, and its transition, as shown in the figure, may develop in many directions (three are shown in the figure). If the external

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environment of Wei State was generally favourable for the reform, such as a good natural environment (good weather, no disasters or epidemics) and good international relations (normal trading, no wars or turmoil), then the new structure formed by the reform would grow smoothly. Similarly, an internal environment conducive to reform, such as support from all social strata and the absence of war or turmoil, would also help the new structure develop. In this way, the reform would progress smoothly, by which the new structure would be fixed, and the Wei State would transition to the steady state of negative feedback and self-stabilisation at a new level. However, if the external and internal environment of Wei State was not conducive, then the reform would come to a premature end. In this way, the new structure of the social system in Wei society created by reform and innovation would not be able to continue. As a result, the operation of Wei society would return to the original steady state of negative feedback and self-stabilisation. Wu Qi implemented reforms similar to Li Kui in the state of Chu in 382 B.C. In the early days of the reform, the politics of the state of Chu was rectified, and military power became increasingly stronger. However, the death of King Dao of Chu in 381 B.C. reversed the entire reform situation. Because Wu Qi’s reforms touched the interests of the conservative aristocrats of Chu State, Wu Qi aroused their envy and hatred. As soon as the death of King Dao of Chu, these conservative forces immediately launched a coup d’etat. Not only did they kill Wu Qi, but they also abolished his reforms. As a result, Chu society would return to the original steady state of negative feedback and self-stabilisation. The evolution direction of the new Chu social structure led by Wu Qi’s reforms can be represented by the downward arrows in Fig. 8.7. If King Dao of Chu hadn’t died so soon and Wu Qi’s reforms were finally successful, then it might be the state of Chu that would eventually unify China, instead of the state of Qin, which was relatively backward at the time. If history evolved in this direction, then China’s subsequent history would be a different picture. This also shows that in the critical period of system evolution, some contingency factors often affect the direction and path of system change. The two reforms carried out by Shang Yang in the Qin state from 356 B.C. to 350 B.C. made the Qin quickly get rid of its backward position and became an economically rich and militarily strong state. The series of reform measures implemented by Shang Yang obviously touched the interests of some noble conservatives in the Qin state, but under the strong support of Duke Xiao of Qin, the reform was successfully implemented. Shortly after the death of Duke Xiao of Qin, although Shang Yang was persecuted by aristocratic conservatives and tortured to death by a car crack, the subsequent King Hui of Qin and his successors continued to implement Shang Yang’s new laws. Therefore, the power of the Qin state was further developed, thus laying the foundation for the subsequent conquering of the six states and the unification of China by the First Emperor of Qin. The success of Shang Yang’s reform was first the creation of the new structure of the positive feedback, the self-generation social system, and then the maintenance of the new structure of the negative feedback, the self-stabilisation social system. The new structure of the social system created by the reform, including the political, economic, humanistic and other system structures of the Qin State, leaped to a higher new level (the change direction of the

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new structure of Qin’s social system can be represented by the upward arrows in Fig. 8.7). This new structure was fixed through the mechanism of negative feedback and self-stabilisation, and was passed on by King Hui of Qin and his successors. After the First Emperor of Qin unified the world in 221 B.C., the series of state systems and political models he implemented throughout China came from the state structure model created by the Qin state since the reform of Shang Yang. Although the Qin Dynasty (221–206 B.C.) established by the First Emperor of Qin was rather short-lived, lasting only 15 years; however, the centralised governance model established by him established a reference model for the rulers of successive dynasties. In ancient Chinese society, for more than 2,000 years since the Qin Dynasty, although social times coincided and the state rose and fell, the governance model and social structure basically followed the model of the Qin Dynasty. The state structure model created by the Qin State since the reform of Shang Yang, the centralised governance model established by the First Emperor of Qin, and the humanistic and cultural structure model built by Confucianism of the Han Dynasty later together constitute the characteristics of the social structure of ancient China during the imperial period. In ancient China, from the Qin and Han Dynasties to the Qing Dynasty, although the general trend of social evolution was gradual progress and there were reforms and innovations in various dynasties, on the whole, the negative feedback and self-stabilisation mechanism of Chinese society often dominated. For example, Wang An-Shi’s reform introduced in the previous article is a very typical example. Looking at the past and present, at home and abroad, social reform always touches on the vested interests of some in power, some social or interest groups. Only by maintaining the original institutional norms and operating order of society can their interests be protected from damage. Therefore, these people basically exist as conservative forces in society. In the history of mankind, almost all the progressive reforms of society will cause the opposition and obstruction of conservative forces without exception. Why do they oppose social reforms? It is rooted in human selfishness and greed. The privileged people do not want to lose their privileges, the landowners do not want to lose their land, and the wealthy people do not want to lose their wealth. These are the concrete manifestations of human selfishness. Dominated by selfishness and greed, people want to have more power and wealth, as well as higher social status and honour. However, if the selfishness and greed in human nature are not regulated and restrained by public morals and the legal system, they will spread and expand in the entire social group! It is the infinite expansion of selfishness, greed and vanity that drives people to pursue higher power, bigger houses, more luxurious carriages and horses, and more servants. However, for a society, whether it is power, land, carriages, horses, or other resources, they are all limited resources; that if one person occupies too much, the others will be affected. Under China’s more than 2,000 years of imperial rule, in the middle and late stages of almost every dynasty, royal relatives, dignitaries and wealthy families enjoyed a luxurious life, while at the same time, bankrupt traders, landless peasants, and homeless refugees were living a life of hunger and cold. At this time, if no reformers come out to transform the social institutions or adjust the social order, then the people will eventually overthrow

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Fig. 8.8 Historical development trajectory drawn by Huang Ren-Yu

the feudal dynasty’s rule, break the rigid social structure, and destroy the original social order through violent revolution. However, from the point of view of social economics, a violent revolution is a costly means of social reform. The reformers in human history, except for some people who were attempting to maintain the original social ruling order, were the human elites who hoped to eliminate social evils, uphold social justice, and promote social progress. They were usually idealists with a humanistic spirit. It is the humanistic spirit contained in their minds that makes them pay attention to individual rights, freedom and growth from a humanistic perspective. It is the idealistic passion hidden in their hearts that makes them abandon their personal safety and start their reform actions to promote social fairness, justice and progress with fearless tenacity. Therefore, the history of the entire human society is a history of repeated games and struggles between human idealism and individual desires, and it is also a continuous renewal of human self-consciousness and improvement of humanistic spirit. In Huang Ren-Yu’s, a wellknown Chinese-American historian, hand-painted historical development diagram, as shown in Fig. 8.8, he realised that “What freedom of choice we are entitled to starts from where we stand, in the footsteps left by our forefathers. The arrows pointing skyward suggest our idealistic tendencies. Moral power has to be a vital force, since the mass movement represented by the drive of each arrowhead, involving selfsacrifice of an enormous magnitude, cannot be launched without some sense of universal justice, genuine or assumed. However, to counter it, there is always a centrifugal pull. Should we call it original sin, or, as Chinese philosophers refer to it, human desire? World history evolves out of the interreaction of the yin and the yang”, and “the ultimate meaning of history, seen in this configuration, resides in its wholesome aesthetic quality…. The dotted portions of the spiral–the prehistory period as well as the unknown future–enable us to sustain our faith in the long-term rationality of history beyond the realm of our mundane experience.”85 “The interreaction of the yin and the yang” proposed by Huang Ren-Yu that promotes the historical process is also the combination of positive feedback, selfgeneration and negative feedback, self-stabilisation put forward by Niu Long-Fei. In a society, human desires come from human nature, while human idealism comes from rational human self-consciousness. The progress and development of human society cannot be separated from idealism; otherwise, human society will evolve toward stagnation or regression, and society will decline. In a specific society, if 85

Huang, R. (1988). China, A Macro History. M. E. Sharpe. p. 265.

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individuals’ desires are excessively expanded, it will lead this society to the rise of the yin (darkness or negativeness) and the fall of the yang (brightness or positiveness). If such a situation is not restrained in time by social governance, it will lead to ugly phenomena such as government corruption, ethical and moral decline, and lack of fairness and justice, which will eventually become even more regular. In a society where the yin is in a rise and the yang is in a fall, reforms are often difficult to succeed, and sometimes even the survival of the reformers cannot be secured, which has been confirmed by the history of Chinese dynasties for more than 2,000 years. From Huang Ren-Yu’s illustration, it is obvious that if a society wants to make continuous progress and development, it needs to coordinate and balance the two forces of yin and yang. On the one hand, it needs to strengthen the idealistic power of society, and on the other hand, it needs to restrict the power of individual desires. To maintain the continuous idealism of society, it is necessary not only to continuously improve the humanistic spirit but also to restrain individual desires by public morals and legal institutions. The pursuit of fairness and justice for the entire society (rather than safeguarding the interests of the ruler) is not only the basic spirit of a modern society under the rule of law but also the essence of Western Economics of Welfare (or the Economics of Happiness) and is also an important content of the modern humanistic spirit. Huang Ren-Yu recognised that the course of human history runs in the form of spirals, while the book discusses the spiral evolution law of human history through the structural investigation of social subsystems such as human-culture, economy, and polity and the systematic synthesis of multiple disciplines. It is in this sense that the ideas of social evolution revealed in this chapter also reflect the philosophy of history in this book.

8.6 The Political System in the State System In the previous analysis of the internal environment of the state system, the political system and its functions have not been discussed in full details, and will be elaborated in this subsection.

8.6.1 The Concept of the Polity/Politics Polity is the social structure created by the development of human society to a certain period of time, which has a major impact on all aspects of social life. As a social phenomenon, political activities appear when society produces class antagonism and the state, and it is always related to the state directly or indirectly. Scholars in different eras have made various discussions on polity from different angles and aspects, but the concept of polity has not yet formed an accepted and precise definition. Generally

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speaking, when people talk about the word politics, it is mostly used to refer to the behaviour of governments and political parties, etc. to govern the state. People’s understanding of political activities has gone through a long historical process, so the connotation of the word polity is constantly changing with the development of social practice. In ancient Greece, the term politics originally referred to the participation of citizens in a city-state in the management of various public lives.86 The citizens of ancient Greek city-states achieved political goals through persuasion. The great ancient Greek thinker Aristotle once said that “the end (or goal) of politics is the best of ends.” British political scientist Kenneth Robert Minogue (1930–2013) pointed out that, “among the Greeks we find most of the conditions of freedom: a life lived among equals, subject only to law, and ruling and being ruled in turn.”87 Then ancient Rome inherited the city-state system of ancient Greece. In the view of the ancient Romans, politics is the activities of the republic, which refer to the common affairs of the people, with the core of establishing and maintaining the republic.88 The political activities of European countries in the Middle Ages were in a transitional period from ancient politics to modern politics. After the downfall of the Western Roman Empire, the city-state system was destroyed, and Europe gradually formed a reward and enfeoffment system. Political activities at this time were no longer public activities that all citizens participate in equally, but were activities that only the king and ministers had the right to engage; Moreover, the means of solving problems in political activities have also changed from the way of speech and persuasion initiated by ancient Greece to the way of force and violence, and the relationship between the head and the citizens has also become the relationship between the rule and the being ruled.89 After the great geographical discovery in the fifteenth century, with the development of economic globalisation, the European countries represented by Spain and the United Kingdom gradually expanded the scope of politics from domestic to international, and expanded the scope of international politics from politics to colonial economy and other aspects beyond geopolitics. In order to protect their own security and interests, these countries gradually incorporate international affairs closely related to their own countries into the daily functions of the government, and handling international relations has thus become an important topic of state politics. In order to manage increasingly complex international affairs, governments of various states have jointly established modern international institutions such as diplomacy and international law, and even authorised the establishment of various international organisations.

86 Hu, Q. M. (1992). Encyclopaedia of China—Political Science. Encyclopaedia of China Publishing House. p. 482. 胡乔木. (1992). 中国大百科全书·政治学. 中国大百科全书出版社. p. 482. 87 Minogue, K. (2000). Politics: A Very Short Introduction. Oxford University Press. p. 10. 88 政治 (Politics). Wikipedia. http://zh.wikipedia.org/wiki/%E6%94%BF%E6%B2%BB. Accessed 18 Mar 2013. 89 Arendt, H. (1998). The Human Condition. The University of Chicago Press. pp. 26–27.

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Western modern politics was developed under the state system established by The Peace of Westphalia90 in 1648; Within each state, the rise of civil society has formed a social relationship based on private interests, so that the economic life of the society has restricted political authority; Secular monarchy or republican regimes need to seek the legitimacy of their rule from economic life, and the function of politics has also become the development of safeguarding economic interests. Therefore, Marx proposed that politics is the superstructure based on the economy, the concentrated expression of the economy, and the sum of various social activities and social relations with political rights as the core. The French Revolution of 1789 had an important impact on modern politics. Politics has since become the umbrella term for all kinds of activities to acquire, maintain, and seize power.91 The French Revolution from 1789 to 1830 not only destroyed the feudal autocracy in France, established the political rule of the bourgeoisie, spread the progressive ideas of bourgeois liberal democracy, but also shook the feudal order of the entire European continent; The Declaration of the Rights of Man and of the Citizen and The Napoleonic Code promulgated during this period had a profound impact on world history. With the French Revolution as an important trigger, the political thought and practice of Western society diverged, one is the bourgeois democracy represented by Western countries such as the United Kingdom, France, and Germany, and the other is proletarian dictatorship represented by the former Soviet Union and other socialist countries. In the 1848 The Communist Manifesto, Marx and Engels proposed that “every class struggle is a political struggle”,92 and their political thoughts have influenced the leaders of the former Soviet Union such as Lenin and Stalin. For example, Lenin put forward that “politics means a struggle between classes; means the relations of the proletariat in its struggle for its emancipation, against the world bourgeoisie”.93 Since the October Revolution occurred in Russia in 1917, the communist countries established in various parts of the world had accepted the political outlook of Marxism, that they regarded domestic politics as a part of the global international communist movement, and formulated the country’s domestic and foreign policies according to relevant theories. In the late twentieth century, after the disintegration

90

Since the middle of the sixteenth century, the European countries have been involved in war for 80 years. Later, the countries reached a series of peace treaties between 1635 and 1648 (these treaties are collectively referred to as the Peace of Westphalia). These treaties changed the balance of political power in European countries, determined the principles of state sovereignty, state territory and state independence that should be observed in international relations, and had an important impact on the development of modern international law. The signing of these treaties created a precedent for European countries to resolve international disputes in the form of international conferences. Therefore, political scientists generally regard the signing of these treaties as the beginning of the nation-state. 91 Sun, G. H. (2003). Introduction to Political Science. Fudan University Press. pp. 1–13. 孙关宏. (2003). 政治学概论. 复旦大学出版社. pp. 1–13. 92 Marx, K., Engels, F. (1999). The Communist Manifesto. Bedford/St. Martin’s. p. 74. 93 Lenin, V. I. (1965). Lenin’s Collected Works (31). Progress Publishers. p. 371.

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of the former Soviet Union and other Eastern European communist countries, such a political pattern only survived in a few countries in the world. In the Spring and Autumn Period in ancient China, that is, the time when Lao Tzu and Kong Tzu lived, this was the period when people in ancient China had the most free and active thinking. In the Warring States period that followed, although the society had been largely divided at that time, the hierarchy between the princes and the people of the vassal states was not very large, so the life of ordinary people at that time was relatively free. The Spring and Autumn Period in China is somewhat similar to the ancient Greek in Europe. At that time, people’s social life was similarly free, and their political life was comparatively democratic, so there appeared the Contention of a Hundred Schools of Thought. Entering the Warring States Period, due to the wars and disputes, the princes of all states were recruiting talents, and people can participate in political activities by their talents. For example, Zhang Yi (378–309 B.C.), an outstanding military strategist, diplomat in the Warring States Period, served twice as chancellor of Qin State and twice as chancellor of Wei State despite his poor family background. By repeatedly exploiting the lianheng 连横 horizontal alliance strategy, he helped to defeat the other states who was applying the hezong 合纵 vertical system, not only making Qin stand out in diplomacy, but also making great contribution to Qin’s expansion of territory, strengthening of state power and unification of China; And Su Qin (? 284 BC), who was also a famous diplomat in the Warring States Period, although he was born in a peasant family, he became the chancellor of the six state by his talents. He persuaded the leaders of the six states to unite against the Qin state through the use of his splendid rhetoric, and played a unique role in coordinating international political affairs. From the Warring States period to before the establishment of the Qin Dynasty, it was a historical period in which the political activities of all states transitioned from comparative democracy to autocracy. After First Emperor of Qin unified China and established the imperial system to the Ming and Qing dynasties, social politics was shrouded in a smog of autocracy, similar to the situation in European society throughout the Middle Ages. It was not until the beginning of modern Chinese society in 1840 that Western modern political thought was gradually introduced into China, and the subsequent 1911 Revolution began the practice of Chinese modern politics. Pre-Qin scholars in China also used the term zhengzhi 政治 politics, but the connotation is quite different from that in the West (including ancient Greece). For instance, the Book of Documents—Charge to the (Duke of) Bi wrote that “the good character of your measures of government, will exert an enriching influence on the character of the people”; and The Rites of the Zhou—Offices of Earth—Grand Official for Exterior Districts stated that “put them in charge of decrees, sentences, and prohibitions in their respective regions”. But in more cases, people used zheng 政 polity and zhi 治 administration separately. Zheng 政 polity mainly refers to the power, institutions, order and laws of the state, and sometimes also means morality and self-cultivation in line with etiquette; While zhi 治 administration indicates the governance of the state, the education of the people, and also a society in great order. The term zhengzhi 政治 politics in ancient China, in a large sense, refers to the political affairs of the monarchs and ministers in the imperial court to manage

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and rule the state. Politics in ancient China permeated the daily life of individuals, and morality was the metric for measuring political activities; Under such politics, which relies more on morality for regulation, there was a lack of institutional norms.94 The modern term zhengzhi 政治 in Chinese comes from the term 政治 coined by Japanese when translating Western languages with Chinese characters. When politics was introduced to China from Japan, people could not find the corresponding term in Chinese. Sun Yat-Sen (1866–1925), the great pioneer of the democratic revolution in modern China, believed that zhengzhi 政治 should be used to translate politics, for which he explained in 1924 that “political affairs are the affairs of the people, administration is management, and the management of the affairs of the people is politics.”95 This statement of Sun Yat-sen was very influential in China at that time. Due to the complexity of politics, different disciplines and scholars have different understandings of politics. For example, the French sociologist Raymond Aron (1905–1983) proposed in his book Democratie et Totalitarisme that “Politics has a broad and a narrow definition. A narrow definition of politics refers to the activities of political organisations, such as political parties, parliaments, and governments; A broader definition means the operation of power at every level of human interaction.”96 French political scientists F. Goguel and A. Grosser put forward in the book La Politique en France that “politics is the sum total of all institutions, organisations, and behaviours related to the governance of a state’s public affairs. These organisations and actors seek to establish a regime, control its actions or replace it if necessary”.97 For another example, in the early days of political science in the United States, politics was understood as a political system represented by the constitution, laws and formal institutions. Modern Western economics regarded political relations as an exchange relation. Most economists studied politics from the perspective of individualism, believing that politics should serve the market, and that political activities are a series of calculations and operations conducted by rational economic men for their best interests.98 For example, American economist James Mcgill Buchanan (1919–2013) examined political activities from a theory of collective choice. He believed that the market and the State are both devices through which men exchange Sun, G. H. (2003). Introduction to Political Science. Fudan University Press. pp. 1–13. 孙关宏. (2003). 政治学概论. 复旦大学出版社. pp. 1–13. 95 Sun, Y.-S. (1924). Three Principles of the People · Civil Rights · Lecture 1. In: History Research Office of Guangdong Academy of Social Sciences., Research Office of the History of the Republic of China at Institute of Modern History of Chinese Academy of Social Sciences., Sun Yat-sen Laboratory of Department of History at Sun Yat-Sen University (eds). (1986). Complete Works of Sun Yat-Sen (9). Zhonghua Book Company.; See also Sun, Y.-S. (1981). Selected Works of Sun Yat-Sen (2). People’s Publishing House. p. 661. 孙中山. (1924). 三民主义·民权主义·第一讲. In: 广东省社会科学院历史研究室., 中国社会科学院近代史研究所中华民国史研究室., 中山 大学历史系孙中山研究室 (eds). (1986). 孙中山全集 (9). 中华书局.; See also 孙中山. (1981). 孙中山选集 (2). 人民出版社. p. 661. 96 Aron, R. (1965). Democratie et totalitarisme. Gallimard. 97 Goguel, F., Grosser, A. (1984). La Politique en France. Armond Colin. 98 Sun, G. H. (2003). Introduction to Political Science. Fudan University Press. pp. 1–13. 孙关宏. (2003). 政治学概论. 复旦大学出版社. pp. 1–13. 94

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of goods and services.99 The emergence of behaviourism made power a major factor in people’s understanding of political activity. The early behaviourist political scientist Harold Dwight Lasswell (1902–1977) assumed that “political science…is the study of influence and the influential”.100 Robert Alan Dahl (1915–2014), a well-known contemporary American political scientist, also believed that a political system “is any persistent pattern of human relationships that involves, to a significant extent, power, rule, or authority.”101 After the rise of neo-institutionalist political science, people turned their perspective from the excessive attention to power to the study of various political institutions. From a legal point of view, politics is a legal phenomenon, a process of legislation, law enforcement, and law-abiding; In the view of some jurists, the state is set up to enforce the law; Some scholars even believed that the state itself is a juristic person.102 Modern management regards politics as a public management activity, that is, politics is the process of formulating and implementing public policies for coordinating the interests of different groups. From the perspective of sociology, political activities are actually an important function of human society. Political organisations and political relations are the products of the division of labour and the evolution of human society into an advanced stage. The purpose of political activities is to coordinate the benign operation of the society and promote the sustainable development of the society. It is precisely in view of the complexity of politics that if only analysing from the perspective of a certain discipline, one-sided conclusions will often be drawn. A more comprehensive understanding of political activities can be obtained from a holistic perspective with the method of General System Theory. David Easton, a well-known American political scientist and founder of the political system theory, explained politics as an activity that revolves around the government’s formulation and implementation of policies, and is an activity that realises the authoritative allocation of values for a society; He proposed that a political system is an act or interactive act that prescribes the authoritative allocation (or coercive decision) of values for society and implements it. It is composed of political groups, institutions and authorities, surrounded by natural, biological, social and psychological external and internal environments, and at the same time has the ability to adapt to environmental pressure and the function of feedback information; The political system and the environment form an interactive connection, and the continuity of the system is achieved through the continuous process of input, output, feedback, and re-input.103 This book also gives a simple definition of polity from the perspective of system. Polity is a social system with particular structure and functions, and an organic totality composed of power organisations, public rights, and public institutions. Its 99

Buchanan, J. M., Tullock, G. (1999). The Calculus of Consent: Logical Foundations of Constitutional Democracy. Liberty Fund. p. 18. 100 Lasswell, H. D. (1950). Politics: Who Gets What, When, How. Peter Smith. p. 25. 101 Dahl, R. A. (1963). Modern Political Analysis. Prentice-Hall. p. 6. 102 Kelsen, H. (1949). General Theory of Law and State (Wedberg, A., trans.). Harvard University Press. p. 181. 103 Easton, D. (1965). A Systems Analysis of Political Life. John Wiley.

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core function is to manage and coordinate public affairs through the organisation, exchange, distribution and use of public rights; Political activities are embodied in the interactive process in which community organisations, public organisations, and power organisations in society jointly handle public affairs under the constraints of public institutions such as the constitution. The ultimate goal is to promote the continuous progress and development of the entire society through the use of public rights. It is not difficult for readers to see that David Easton used the basic concepts and principles of System Theory and Cybernetics to analyse political life, political behaviour and political phenomena; In addition to using the ideas of General System Theory, this book also combines the thinking methods of structural functionalism and social evolution theory, which is the uniqueness of this book.

8.6.2 The Internal and External Environment of the Political System In modern society, a political system that exists in a specific state system has both an external environment and an internal environment.

8.6.2.1

The External Environment of the Political System

The external environment of the political system refers to the collection of the factors that exist beyond the boundaries of a state’s public organisation and power organisation and have an impact on the organisation, exchange, distribution, and use of public rights. The external environment of the political system includes the natural environment and the social environment. The external system that contains the political system is vertically composed of the three levels of the state system, the social system (state system), and the natural system. Details of the hierarchical relationship of each system in the external environment of the political system is shown in Fig. 3.2 in Chap. 3. In the state system, the systems coexisting with the political system include at least the human-culture, economy, science, law, and education. These systems that exist in the external environment, more or less, directly or indirectly, will have an impact on the growth and evolution of the political system. For the political system of a specific country, the factors from within the state system are undoubtedly the highest in terms of the directness and intensity of impact. At the same time, certain factors from the international system and natural system will also influence the growth and evolution of a state’s political system. Here, the power organisation refers to the social organisation that actually holds the public rights in a society, and its basic function is to organise, exchange, distribute and use the public rights of the society. In modern society, the power organisation of a state includes administrative, taxation, financial, legislative, judicial, public security, national defence and other organisational departments (China’s people’s

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governments at all levels from the central to the provinces are equivalent to the administrative organisations here, and are the core part of the social power organisation). Public organisations refer to social organisations whose main function is to provide public goods or public services, including basic scientific research and education institutions. In modern society, the complexity and diversity of social needs resulted in the complexity and diversity of public products or public services, and also caused the overlap between public organisations and certain community organisations (i.e., literary societies) and corporate organisations(i.e., for-profit private elementary schools). From a broad perspective, power organisations also belong to the category of public organisations. From the perspective of social rights, the rights of power organisations are the intersection of the rights of all public organisations in society, so power organisations can be regarded as higher-level public organisations.

8.6.2.2

The Internal Environment of the Political System

The internal environment of the political system is an organic system composed of community organisations, public organisations and power organisations and other factors. The factors within the system are interrelated, interacted, and interinfluenced, forming a complex network. The internal environment of the political system has its own hierarchy and functional structure, which changes continuously with the dynamic changes of the political system. In order to sort out the elements in the internal environment of the political system, the book starts with the analysis of the situation of early human society. In the gatherer-hunter groups of early human societies, people lived together as clans. In order to better survive, people need to form a group of a certain size to jointly resist the attacks of tigers, wolves and other beasts, and also need to cooperate with each other when hunting large animals in groups, which can also be observed in the predation of some animals. It is in such social activities as collective defence against beasts, collective hunting, and collective prey sharing that production and life need to continuously deepen the division of labour and coordination among people within a community organisation. It on the one hand, improves the adaptability of human social groups, and on the other hand, enables individuals to discover and accumulate more social knowledge, and the society to create public awareness, including religious beliefs and public safety, etc. Under the domination of public consciousness, people have created various public organisations, and the corresponding public institutions. In the period of primitive society, due to people’s ignorance and awe of natural phenomena such as earthquakes, thunder, lightning, wildfires, hurricanes, and floods, etc., belief in supernatural powers or existences (gods) arose, and the primitive religion of human society was thereafter emerged. After the emergence of primitive religions, people initially engaged in some relatively simple prayer under the leadership of shamans, which later evolved into more complex worship ceremonies and sacrifices. People built temples specially for the worship of gods, and some shamans were also differentiated from production activities and became professional priests.

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In the long-term religious activities, customary ritual norms and sacrificial customs were created naturally, which are actually the early forms of the religious institutions of human society. The temple here is actually a public product of a human community, and the religious institutions are the public institutions of this community. With the gradual development of human society, the scope of public goods required by community organisations had been continuously expanded, and the public awareness of community organisations had also been enriched. For example, in terms of public safety, in addition to defending against predatory beasts, people also needed to guard their domesticated animals from the plundering by other tribes. The plundering and warfare between tribes eventually led to the birth and specialisation of warriors within the tribe; When these warriors were differentiated from production activities and became specialised warrior class, this social group was equipped with its own army. The public organisation of this social group was born naturally in the process of arranging dispersed individuals into close-knit, cooperating armies. The army (or joint defence force) differentiated from the community organisation is the public organisation of this social group, and the leader responsible for managing, coordinating and commanding the army is the manipulator of public rights. Such a manipulator may be a shaman who presided over religious activities in a community organisation, a patriarch of a clan, a chief of a tribe, or a hero of a nation. With the further development of human society, community organisations had also been differentiated, and more public organisations had emerged. For example, in order to maintain the daily operation of the army in the tribe, each family in the social group needed to provide labour products to support these warriors. In order to build public goods such as temples or farmland irrigation facilities, each family needed to dispatch labour of a certain quantity. For this reason, there needed to be someone in the community organisation who was specially responsible for collecting labour products or organising labours. These labour products or labour are the early embryonic form of taxation in human society. With the gradual increase of taxation activities, those who were responsible for collecting labour products or organising labour were also differentiated from production activities and became specialised taxation personnel; The increase of tax personnel gave birth to the tax organisations. Similarly, in order to reasonably allocate the public revenue of community organisations to different purposes (i.e., supporting soldiers, manufacturing weapons, building temples, establishing farmland irrigation facilities, etc.), the relating financial managers and financial organisations were created. Judicial personnel and judicial organisations were designed to arbitrate and mediate conflicts and disputes between individuals, families and community organisations. In some societies, the original judicial function was included in religious organisations. From this, it is clear that the public organisation of human society was differentiated from the original community organisation, and accordingly public rights were produced and continuously expanded. After the further evolution of these public organisations and their public rights, they eventually evolved and differentiated into the power organisations and political rights of primitive states. It can be observed, through the above simple analysis, that the gradual differentiation of human society from community organisations to public organisations,

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and then to power organisations, is accompanied by the continuous accumulation, renewal and expansion of human society in terms of social knowledge, public institutions and public rights. The social knowledge, public institutions and public rights here specifically include all knowledge, institutions and rights related to social development in human society in administration, taxation, finance, legislation, judiciary, public security, national defence, scientific research and education.

8.6.3 The Constituent Elements and General Structure of the Political System 8.6.3.1

The Constituent Elements of the Political System

Generally speaking, in addition to the three basic elements of community organisation, public organisation, and power organisation, a complete political system must also have social knowledge, public institutions, and public rights, and these six categories of factors are the most basic key elements that make up a political system. The French sociologist Raymond Aron pointed out that the social structure, as an objectified social reality, includes a system of ideas and a system of action, and its essence is the structural characteristics of society; He regarded the whole society as an interconnected totality, and considered the mutual influence of various factors, rather than putting one particular factor as the only determinant.104 It is also for this reason that the evolution and development of the political system can be analysed from the two levels of the organisational factors and the ideological factors of human society. Therefore, the six key elements that make up the political system can be divided into the following two levels: A. Organisational factors (surface factors): community organisations, public organisations, power organisations B. Ideological factors (deep factors): social knowledge, public institutions, public right Because the political system is a social organisation composed of individuals, whether it is a community organisation, a public organisation or a power organisation, it is an organisation established on the basis of individual rights. Therefore, to establish a complete system of public rights, we must first establish individual rights. Establishing individual rights is the premise and foundation for establishing public rights. If there is no individual right, the public right, which is the intersection of individual rights, will lose its foundation of existence, thus leaving room for the 104 Li, L. B., Zhao, W. L. (2011). Searching for Individual Freedom within Social Structure: On Raymond Aron’s Sociological Theory. Journal of Shanxi University (Philosophy and Social Science Edition) (03). 李路彬., 赵万里. (2011). 在结构中寻找自由 雷蒙·阿隆的社会学思想评析. 山西 大学学报(哲学社会科学版) (03).

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executives to turn the public right into a private tool. Only when individual rights are established can the boundary between individual rights and public rights, as well as the boundary between the rights of public organisation and the rights of power organisation be drawn, and the rights and obligations of the individuals, community organisations, public organisations, and power organisations can be truly defined. A rationally designed political system should be an organic system that not only pays attention to the rights of individuals and community organisations, but also takes into account the rights of public organisations and power organisations, and at the same time can effectively restrain the abuse of rights by power organisations; It should not be a social tool only to safeguard the rights of the ruling group or strengthen the rights of the power organisation, nor should it become a private tool for some privileged classes or interest groups to seek privileges or private interests. The individual right mentioned above are in fact human rights. Chinese political scientist Yu Ke-Ping pointed out “the so-called human rights are the basic rights that everyone has or should have. ‘Everyone’ is entitled to all the rights and freedoms, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, birth or other status, property, culture, and talent, etc. ‘Rights’ are the demands of each individual on the government or society, not on the individual. ‘Basic’ means that human rights are the foundation of all other rights, without which no other rights can be discussed.”In the Universal Declaration of Human Rights promulgated by the United Nations in 1948, 28 human rights are listed, these rights include equality, constitutional liberties (i.e., freedom of religion or belief, expression, peaceful association, movement and residence, personality, free choice of employment, correspondence, peaceful assembly, etc.), equal protection of the law, full equality to a fair and public hearing by an independent and impartial tribunal, the right to a nationality, equal rights as to marriage, during marriage and at its dissolution, the right to seek and to enjoy in other countries asylum from persecution, equal suffrage, the right to share in social benefits (the right to social security, the right to education, the right to enjoy the economy, the right to rest and leisure, the right to cultural entertainment, etc.), property rights, the right to pursue happiness, etc. On December 16, 1966, the United Nations General Assembly adopted the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, which were open to all countries for signature, ratification and accession. The two conventions entered into force on March 23, 1976 and January 3, 1976, respectively. The Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, and the International Covenant on Economic, Social and Cultural Rights are known as the Universal Charter of Human Rights. On October 27, 1997, Qin Hua-Sun, Permanent Representative of China to the United Nations, signed the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights on behalf of the Chinese government at the United Nations Headquarters in New York. On February 28, 2001, the Standing Committee of the Ninth National People’s Congress of China made a decision to ratify the International Covenant on Economic, Social and Cultural Rights, and on March 27, 2001, the ratification was

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Fig. 8.9 Relations between individual right and public organisation right at all levels in the state system

submitted.105 The establishment and protection of individual rights has now attracted the attention of governments all over the world, and the concept of individual rights has begun to take root in the hearts of the people. In a specific state system, the relationship between individual rights, public organisation rights, and power organisation rights, as well as the relationship between local power organisation rights and central power organisation rights, can be simply expressed in Fig. 8.9. In his 1955 book The Opium of the Intellectuals, Raymond Aron analysed the impact of ideological beliefs on society and individuals. He examined the reality of the former Soviet Union and demonstrated the falsity of its democracy; He pointed out that using an ideology to analyse society and guide social actions will not only fail to realise the social picture depicted by ideology, but will also lead to the despotism of society and constrain the freedom of individual actions.106 Raymond Aron’s social thought underscored the importance of openness in social governance and pointed out avenues for the progress of social consciousness. In ancient Chinese society, due to the supremacy of imperial power and the interests of the ruling group, coupled with the squeeze of the family patriarchal system, there was almost no room for individual rights (except the emperor himself) in the whole society. As a result, the personality of the people became independent and distorted, which not only severely restricts the free growth of individual spirit, but also hampers the progress of Chinese society for a long time. The most typical example is that many reformers of the past dynasties in China, after implementing the reform, no matter whether successful or not, often cannot even guarantee their personal security, which in fact creates a negative feedback incentive. In such a social

105 Requoted from: Guo, W., Pei, Z. Q. (2008). Political Openness Issues in the Pursuit of Democratic Politics. Theory and Reform (02). 郭伟., 裴泽庆. (2008). 民主政治追求中的政治公开问题. 理 论与改革 (02). 106 Li, L. B., Zhao, W. L. (2011). Searching for Individual Freedom within Social Structure: On Raymond Aron’s Sociological Theory. Journal of Shanxi University(Philosophy and Social Science Edition) (03). 李路彬., 赵万里. (2011). 在结构中寻找自由 雷蒙·阿隆的社会学思想评析. 山西 大学学报(哲学社会科学版) (03).

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environment, how many people are willing to actively participate in social reform? How can a society that lacks active change grow and progress rapidly? A state’s political system needs to constantly adapt to the external environment in its growth and development. When the external environment changes, the internal environment of the political system must be adjusted accordingly until the internal and external environments are coupled. The higher the degree of coupling between the internal and external environments of the political system, the better the growth space for the political system, the more orderly and healthy the development of the political system. The coupling process of the internal and external environments of the political system is the process of the growth and evolution of the political system. For a specific state, the internal and external environment of the state is constantly changing. Therefore, a state’s reform should become a daily activity in the state’s political operation, rather than a passive behaviour.

8.6.3.2

The General Structure of the Political System

The general structure of the political system refers to the general order and form of interrelation, interaction, interinfluence and interrestriction formed among the subsystems within the political system in its dynamic evolution. The general structure of the political system reflects the structural features of the constituent elements of the political system supporting each other in terms of function, and is the basis for the co-evolution of the external environment system and the political system, as well as the political system and its constituent elements. From the operation of the political system, the growth and evolution of a political system is actually a continuous cycle of organisational innovation and political progression. Combining the components of the political system, the general operational structure of the political system can be drawn (Fig. 8.10). As can be seen from Fig. 8.10, the actual operating process of the political system can be divided into two chains (the solid arrow in the figure): A. Surface factors operating chain: social organisation innovation → community organisations → public organisations → power organisations → political organisation progress

Fig. 8.10 General operational structure of the political system

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B. Deep factor operating chain: social concept innovation → social knowledge → public institutions → public rights → political concept progress In the operation of the political system, Chain A reflects the process of social organisation innovation, community organisation differentiation, public and power organisation diversification, and political organisation progression. Chain B reflects the process of social concept innovation, social knowledge differentiation, public institutions and rights diversification, and political concept progression. The two chains are not separated from each other, but intertwined; That is to say, all the elements and links on these two chains are interrelated, interacted, and interinfluenced, and together they form a network of production relations within the political system. In Fig. 8.10, the dashed double arrow is used to indicate this relationship between them. From the perspective of social organisation innovation, different community organisations in the political system are continuously combined to form new types of community organisations, and which will differentiate into new types of public organisations. The new type of public organisation will generate new types of public rights, which will lead to the diversification of political organisations in the political system, thereby increasing the adaptability of the political system. From the perspective of social concept innovation and management innovation, this is the continuous innovation of social knowledge, perfection of public institutions, and improvement of the organisation, exchange, distribution and use efficiency of public rights, so as to continuously improve the level of public management and service quality. From the evolution of the political system, this is a process in which political concepts are constantly updated and progressed, the efficiency of power organisation is improved, the types and quantities of public products are enriched, and the public rights and public awareness of the entire society are elevated. It is under the combined action of these multiple forces and effects that ultimately drives the co-evolution of community organisations, public organisations and power organisations throughout the entire political system. When a political system is growing and evolving, it is constantly communicating and exchanging the personnel, resources, rights, knowledge, institutions and information with its external environment in various forms. The relations established between a political system and the natural system, the social system (international system), the state system, and other sub-systems in the state system in its external environment form the social network outside the political system. In terms of socio-economic relations, the complete production relation of a political system should be composed of its internal production relations network and its external social relations network. The growth and evolution of the political system is essentially a dynamic process of the entanglement, interaction and influence of the two relationship networks inside and outside the political system. The dual relation networks inside and outside the political system constitute a multi-dimensional and complex dynamic picture.

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8.7 The Dynamic Structure of the Social System The birth of primitive state is a process of continuous differentiation of social organisations, stratification of social structures, and diversification of social functions, which is accompanied by the continuous progress of human society in terms of population production, mental production and material production. It is precisely in the gradual differentiation of the social system that the economic system separates from the human-culture system, and the political system separates from the human-culture system and the economic system. At the same time, the relevant knowledge, technology, law, institutions, culture, education and other factors closely related to these three systems are constantly progressing and growing. They gradually converged and integrated into sub-systems such as the science system, legal system and education system of the social system. This book divides the internal structure of the state system into sub-systems such as human-culture, economy, polity, science, law, and education, which is actually a specific description of the social structure when human society has developed to the modern era. In modern society, all countries in the world form a large social system. Therefore, the state system belongs to the subsystem of the human social system. A specific state is actually a small-scale social system. From the external environment of the social system, the external ecological environment’s supply of resources to the society is a necessary condition for social growth and evolution; While from the internal environment of the social system, human demand within the society is the primary dynamics for social development. In the previous analysis of the development factors of the state system, it is concluded that the specific factors that affect the development of a state include natural environment, human-culture, economy, polity, science, law, and education, etc. Therefore, from the social system at the state level, the general factors affecting social development are human demand and resource supply, while the specific factors include human-culture, economy, polity, science, law, and education, etc. Through the above simple analysis, it is concluded that the key driving factors affecting the development of the social system mainly include the following eight categories: General factors: human demand and resource supply; Specific factors: human-culture, economy, polity, science, law, education. For the convenience of analysis, the specific drivers that affect the social development are divided into two categories: A. Explicit factors (surface factors): human-culture system, economic system, political system B. Implicit factors (deep factors): science system, legal system, education system If the general and specific factors that affect the development of the social system and the social operating process are combined, the relation between the dynamics behind social development can be drawn (Fig. 8.11).

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Fig. 8.11 Relation between the dynamics behind social development

The evolution of a social system not only includes the co-evolution of various subsystems in the social system, but also the continuous optimisation of the natural ecological environment. Because the natural environment not only offers living space for human society, but also provides various resources for human production and life; If the natural environment is destroyed, the development of human society will become unsustainable. From Fig. 8.11, we can see that the process of human social development is manifested in the optimisation of natural ecology, human-culture evolution, economic development, and political democracy on the one hand, and also manifested in the improvement of human spirit, scientific progress, prosperous legal system, and education perfection on the other hand. The combined effect of these factors determines the evolution path and degree of development of a social system. In the evolution of human society, driven by human demand factors and resource supply factors, the social system carries out a cyclic operation process of ecological input → resource output → resource utilisation → social development. From the internal environment of the social system, the evolution of a social system is manifested in the continuous creation, differentiation, and growth of the humanculture system, the sub-systems, such as economy, politics, legal system, education, and science, are successively differentiated from the human-culture system. In this process, the exchange of matter, energy and information between the social system and its external environment has always been carried out, and it is this exchange that promotes the growth and evolution of a social system. In the evolution of the social system, these six factors within the society do not work individually or separately, but coordinately and cooperatively. That is to say, every two factors are interrelated, interacted, and interinfluenced, and they together form the internal dynamic relationship network for the development of this social system (from the perspective of socio-economic relations, they also jointly form the internal production network of

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this social system). This interrelationship is represented by a dashed double arrow in Fig. 8.11. In the process of growth and evolution, a social system has always been interacting and communicating with other societies in its external environment in terms of polity, economy, human-culture, science, law, and education. The relationships between a social system and other societies, states, international organisations, and natural environments in its external environment form the external social relationship network of the social system, which, from the perspective of the dynamic factors of social development, also jointly constitute the external dynamic relationship network. From socio-economic relations, the complete production relation of a social system should be composed of its internal production relations network and its external social relations network. The process of a social system’s growth and evolution is essentially a dynamic process of the entanglement, interaction and influence of the two relationship networks inside and outside the social system. The dual relation networks inside and outside the social system constitute a multi-dimensional and complex dynamic picture. A social system needs to constantly adapt to the external environment in its growth and development. When the external environment changes, the internal environment of the social system must also be adjusted accordingly. This adjustment is mainly manifested in the changes in the composition and coupling relationship of the internal sub-systems until the internal and the external environment are coupled. The higher the degree of coupling between the internal and external environments of the social system, the better the survival and development environment of the society. The coupling process of the internal and the external environment of a social system is the process of the growth and evolution of the social system. The analysis in Chaps. 4 and 5 shows that the evolutionary process of a firm system or a sector system is a cyclical helix, while the evolution of a national economic system is a cyclical super-helix, as discussed in Chap. 7. Similarly, the evolution of a social system is also a cyclical super-helix. In other words, the evolutionary process of a social system includes numerous cyclical sub-system helices, and which has many smaller systems inside, that is, a large spiral cycle possesses multiple small spiral cycles, and a small spiral cycle possesses multiple micro spiral cycles. From this, we can know that the dynamic factors in the development of social system have actually formed an interwoven complex giant system of all types, all levels, and all structures. Among the dynamic factors in the development of social system, the needs of human beings are the most fundamental source. The demands of human society have a tendency to develop from low-level to high-level. When the original lowlevel needs are met, new and higher-level needs will arise. The trend of the needs of human society from low-level to high-level determines the long-term development of human society from low-level civilisation to high-level civilisation. In a specific social system, if people have no needs, then the society will lose its primary force for development. It is precisely because the needs of human beings are never-ending that the pace of development of human society will never stop.

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If comparing a social system to a vehicle, then the power system of social development is the engine, and the needs of human beings are the fuel used by the engine. To get a vehicle up and running, in addition to continuously delivering fuel to the cylinders of the engine, the coordination of different components such as the engine’s delivery system, ignition system, combustion system, conversion system, cooling system, lubrication system, and crank linkage is required to convert the chemical energy released by the combustion of the fuel into mechanical energy. Through a series of complex transmission processes of gear mechanisms, the vehicle can finally be driven forward. Similarly, the normal operation of human society also needs to deliver the needs of human beings to the power system of social development in an orderly manner, and to make the elements of the power system cooperate and coordinate with each other, so that the whole society can maintain a healthy, harmonious and virtuous cycle. In the dynamic system of social development, if the sub-systems such as human-culture, economy, and polity, etc. can complement, coordinate, and support each other, then the entire social dynamic system will exert a synergistic effect of 1 + 1 ≥ 2, which will promote the development and progress of the entire society; On the contrary, if the sub-systems are incompatible, inconsistent, and contradict with each other, then the entire power system will show the antagonistic effect of 1 + 1 < 2, which will hinder or delay the development and progress of the entire society. The National System is an organic system composing of sub-systems such as human-culture, economy and polity. Each sub-system is relatively independent and has its own unique functions. Among the three sub-systems of social system in terms of human-culture, economy and polity, the main function of the human-culture system is to cultivate human beings and to create humanistic and cultural knowledge, and its core control mechanisms are beliefs and morals; The main function of the economic system is to produce, exchange, distribute, and consume material products, and its core control mechanisms are market and government; The main function of the political system is to provide public goods and public services, and to organise, exchange, distribute, and use public rights, and its core control mechanisms are democracy and law. From the long-term evolutionary process of human society, among all the dynamics for social development, the most important factor comes from the human-culture system within the social system. While in the human-culture system, the level of human spiritual realm and public morals ultimately determines the degree of civilisation of a society. In the growth and evolution of a social system, its internal human-culture, economy, polity, science, law, education and other sub-systems are interrelated, interacted, interinfluenced and interrestricted. That is, each sub-system plays a role in the influence and restriction of other sub-systems, and the change of any one of the subsystems will cause the changes of other sub-systems to varying degrees. For instance, changes in the political system will inevitably lead to varying degrees of changes in human-culture, economy, law, and education, and vice versa. Apparently, at different stages of the growth and evolution of the social system, the relative positions of these sub-systems are not fixed, but are often in alternation. For example, in a particular period of time, political system plays a leading role in social development, while in another period, economic system become critical. Therefore, in the management

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practice of the social system, from the internal factors of the social system, it is necessary to pay attention to the dynamic collaborative management of the six aspects at the same time, instead of only focusing on one of them. Regarding the dynamic factors of social development, the German philosopher Habermas pointed out that under contemporary social conditions, after the scientifictechnical progress has become the real engine of the development of the productive forces (nachdem der wissenschaftlich-technische Fortschritt zum eigentlichen Motor der Entfaltung der Produktivkrafte geworden ist), the evolutionary priority will pass from the economic system to the education and science system. (der evolutionäre Primat vom Wirtschaftssystem auf das Bildungs- und Wissenschaftssystem ubergeht).107 This shows that he had noticed the dynamics of social development dynamic factors, as well as the corresponding leading role different dynamic factors play in different stages of social development.

8.8 The Main Mechanisms Behind the Development of the Social System The development of a social system from small to large, from low-level to highlevel, is a process of continuous evolution of the society over time. In this process, division of labour and coordination, differentiation and stratification, gradual change and disruptive change are important important mechanisms behind the evolution of social systems. These mechanisms are described below.

8.8.1 The Mechanism of Division of Labour in Social Development The earliest person world-wide to discuss the division of labour is Guan Zhong in the Spring and Autumn Period in ancient China. As early as around 700 B.C., Guan Zhong put forward the theory of Settlement between the Four peoples. He advocated that the people within the state should be divided into four occupational groups: scholars (which refers to officials and literati), farmers, workers, and merchants, and they should live in fixed places according to their professions. Xun Zi (about 313–238 B.C.), a thinker at the end of the Warring States Period, also discussed the importance of social division of labour. He put forward that only by dividing labour can human groups avoid disputes and exert human power. In Europe, Xenophon and Plato in ancient Greece were the first to systematically discuss the idea of division of labour. The ancient Greek historian Xenophon summed up the basic division of labour in society as the labour of the leader and the labour of the executor. He 107

Habermas, J. (1976). Zur Rekonstruktion des Historischen Materialismus (Reconstruction of Historical Materialism). Suhrkamp. pp. 53–54, 159.

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paid special attention to the analysis of the division of labour in the direct labour process, and revealed its function and causes. The ancient Greek philosopher Plato believed that the division of labour is the foundation of a state and a condition for achieving social equality. The ideal state he designed was organised according to the principle of division of labour. For example, he divided society into three classes: producers, defenders, and rulers, and categorised them according to their occupations into peasants, handicraftsmen, merchants, warriors, and philosophers who managed the state, etc.108 The systematic scientific research on the social division of labour mainly began in modern society. The rise of the capitalist mode of production has prompted the extensive and in-depth development of the division of labour in human society, and the issue of the division of labour has therefore attracted widespread attention from economists from all over the world. Since William Petty and Adam Smith, almost all economists have discussed the division of labour to varying degrees. Among them, Adam Smith is a master of the theory of the division of labour in classical economics. He emphasised the important role of division of labour in improving social productivity and made a systematic demonstration of this role. He revealed the relationship between the division of labour and market exchange, and clarified the market’s restriction on the development of division of labour. British mathematician Charles Babbage (1792–1871) proposed in 1832 that the division of labour applies not only to manual labour or between manual labour and mental labour, but also to mental labour itself. He also pointed out that the division of labour within the firm can improve efficiency and reduce labour costs. Frederick Winslow Taylor (1856–1915), an American classical management scientist, by means of experiments, separated workers’ intellectual activities from physical activities, planning functions from executive functions in corporate production, thus establishing the scientific management within the firm. Some sociologists have also discussed or studied the social division of labour, such as August Comte (1798– 1857), Spencer and Durkheim. British sociologist Spencer used the differences in the natural environment to explain the causes of social division of labour. From the moral sociology, French sociologist Durkheim studied the value and causes of division of labour, and revealed the relationship between personality development and social development. He believed that the division of labour originates from the survival competition in the social field, and the reason for the change of the social division of labour lies in the density and volume of the society. He also assumed that the real value of the division of labour is that it is the organic link that connects social organisations.109 The utopian socialists, such as Claude-Henri de Rouvroy (1760–1825), Charles Fourier (1772–1837), and Robert Owen (1771–1858), based on the constraints and drawbacks of the division of labour on the free development of human personality, put forward the idea of eliminating occupational division of labour, urban–rural division of labour, and worker-peasant division of labour, and 108

Wu, Y. H., Zhang, J. X. (2014). History of Foreign Economic Thoughts. Higher Education Press. p. 19. 吴宇晖., 张嘉昕. (2014). 外国经济思想史. 高等教育出版社. p. 19. 109 Durkheim, E. (1960). Division of Labor in Society (Simpson, G., trans.). The Free Press of Glencoe Illiois.

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conceived the form of labour organisation after the elimination.110 The idea of the division of labour, which requires a monograph if to discuss, can only be briefly listed here due to length limitations. Marx and Engels applied the method of historical materialism to study the social division of labour in a broader perspective, and the discussions of division of labour almost run through their major works. These include the Economic and Philosophic Manuscripts of 1844, The Poverty of Philosophy, Economic Manuscripts of 1857– 58, Economics Manuscripts of 1861–63, Das Kapital, The German Ideology, The Principles of Communism, The Housing Question, The Origin of the Family, Private Property and the State, and Anti-Dühring, etc. After Marx and Engels, Lenin and Stalin further developed the questions regarding the social division of labour. Lenin’s works on the division of labour mainly include A Note on the Question of the Market Theory, The Development of Capitalism in Russia and several economic treatises after the October Revolution. In Economic Problems of Socialism in the USSR, Stalin expounded the nature, trends and policy propositions of urban–rural division of labour, worker-peasant division of labour, and brain-body division of labour. Marx separated the social division of labour into two different aspects: the division of labour of the subject (i.e., the division of labour among labourers) and the division of labour of the object (i.e., the division of the labour itself), and pointed out that with the disintegration of the basis of human resources as the main body of labour, the division of labour among labourers will inevitably disappear, while the division of the labour itself will not, which, on the contrary, will become more detailed with the development of production. Marx also revealed that division of labour is a form of socialised labour, which is determined by a certain historical level of productivity development, and is a historical process that objectively produces, develops, and finally sublates; The cause of the division of labour is first of all material conditions, and the main factors include the formation of surplus labour time, the progress of production tools, the expansion of production scale, the development of labour types, the increase and concentration of the population, and exchange activities. Under the influence of these objective factors, the division of labour is gradually formed; First came the natural division of labour between men and women and between regions, and then the three great social divisions of labour in terms of agriculture, industrials, and commerce, while at the same time, the basic social division of labour between productive labour and non-productive labour, material labour and spiritual labour, as well as urban and rural areas, was gradually formed; The historical role of social division of labour includes two aspects: on the one hand, it is the lever for the progress of social productivity, and on the other hand, it is the source of social inequality. Regarding the role of division of labour in promoting the progress of social productivity, the Marxist theory of social division of labour particularly emphasises the great significance of division of labour in improving the socialisation level of productive forces and establishing scientific labour organisations; Regarding the 110

The literature in this paragraph is compiled from: Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. pp. 1–16. 刘佑成. (1985). 社会分工论. 浙江人民出版社. pp. 1–16.

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social inequality caused by the division of labour, the Marxist theory of social division of labour did not discuss the influence of the division of labour on people in an abstract way, but from the basic historical materialism, it specifically examined the role of the division of labour on all levels of social organisations, scientifically clarified the constraints of division of labour on human development, private ownership, commodity economy, and class relations. The Marxist theory of division of labour is featured with strict systematicity. As Liu You-Cheng pointed out that “Marxism regarded social practice as the driving force of human history, and clarified the origin, development and future of the division of labour from the basic practice of human beings—material production activities and its historical development. It has a solid realistic basis and a strong sense of history. At the same time, Marxism treated the division of labour as the overall structure of society, which is neither limited to the division of labour at a certain stage of social development, nor a certain aspect of the phenomenon of division of labour, but proposed a systematic explanation of the social division of labour from the combination of the vertical lines of history and the cross-section of each era. Therefore, the Marxist theory of division of labour is the first scientific and complete explanation of the phenomenon of division of labour.”111 Literally, division of labour refers to the process of continuous decomposition of human labour (or work), a concept adopted by most economists and sociologists. For example, Liu You-Cheng described the division of labour as follows: “The so-called division of labour is the division of the total social labour into several parts that are independent and mutually dependent; Correspondingly, members of society are fixedly allocated to different types of labour. In short, the division of labour is ‘the coexistence of different kinds of labour’”.112 To illustrate the principle of the division of mental labour in the mind, Charles Babbage gave an example in his 1832 book On the Economy of Machinery and Manufactures that during the French Revolution, a man named M. Prony creatively applied Smith’s principle of division of labour to this calculation work when he was making a decimal mathematical table. He divided the whole work into three types, and handed them over to three professional groups; The first section was formed out of five or six of the most eminent mathematicians in France; The second section consisted of seven or eight persons of considerable acquaintance with mathematics; and their duty was to convert into numbers the formulae put into their hands by the first section, and to verify these calculations without the necessity of repeating; The members of the third section, whose number varied from sixty to eighty, received certain numbers from the second section, and, using nothing more than simple addition and subtraction, they returned to that section the finished tables; Through this division of labour, the three sections computed the seventeen large folio volumes, thus successfully completing the work that initially

111

Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. pp. 16–20. 刘佑成. (1985). 社会分工论. 浙江人民出版社. pp. 16–20. 112 Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. p. 21. 刘佑 成. (1985). 社会分工论. 浙江人民出版社. p. 21.

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seemed impossible.113 Here, Babbage’s division of labour actually includes the division of labour of the subject (i.e., the division of labour among labourers) and the division of labour of the object (i.e., the division of the labour itself). Therefore, in a broader social sense, the division of labour can be understood from two aspects: the division of social organisations and the division of social functions. From the long-term history of human society, whether it is the division of labour in social organisations or the division of labour in social functions, their evolutionary process is a historical process of gradual differentiation, and their abstract form is actually similar to the branching of trees in nature. It is of great cognitive value to understand the process of social division of labour as a natural bifurcation, which at least helps the public to establish a mathematical model for the process of social division of labour, so as to carry out corresponding logical analysis. The earliest human society was a gathering-hunting society. At this stage, humans depended on hunting natural substances directly from nature to survive. People generally took collective actions when engaging in gathering or hunting activities. At this time, the human group had not yet appeared the division of labour. Everyone was a hunter and a fisherman at the same time, and they were in a natural equality. Natural division of labour is the earliest division of labour in human society. The natural division of labour mainly includes two aspects: one is a division of labour established on a purely physiological basis within the primitive clan communes due to differences in sex and age; The second is a division of labour established between the primitive communities (i.e., clans, phratries, or tribes), on the basis of the diversity of regional resources and natural products due to the differences in their natural environments and the resulting labour methods.114 The natural division of labour within the primitive clan commune includes the division of labour in terms of sex, age, physical quality, and spiritual quality, among which the natural division of labour between men and women is the most fundamental. For example, in primitive family organisations, men were responsible for hunting and fishing, while women were responsible for cooking, weaving, and sewing.115 The basic form of natural division of labour among primitive communities is regional division of labour. For example, clan communes near lakes and seasides mainly depend on fishing for a living, while clan communes near mountains and forests rely on hunting. Studies in sociobiology have shown that australopithecus have shifted from the forest to the savanna five million years ago, and by three million years ago the primates such as man-apes, baboons (Papio) have appeared. About a million year ago, Homo animals began to accelerate their evolution to Homo erectus. Crude stone implements were made by chipping, and rocks were pulled together to form what

Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. p. 7. 刘佑 成. (1985). 社会分工论. 浙江人民出版社. p. 7. 114 Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. p. 43. 刘佑 成. (1985). 社会分工论. 浙江人民出版社. p. 43. 115 Marx, K., Engels, F. (1972). Selected Works of Marx and Engels (IV). People’s Publishing House. p. 155. 马克思., 恩格斯. (1972). 马克思恩格斯选集(第四卷). 人民出版社. p. 155. 113

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appear to be the foundations of shelters.116 The Peking Man, who was discovered in Zhoukoudian cave of Fangshan in Beijing in 1929, could already use artificial fire about 500,000 years old.117 The use of fire is undoubtedly an epoch-making great invention in human history. It is with fire that human beings can eat cooked food, fire pottery and smelt metal. Collective hunting activities in the grassland environment, on the one hand, promoted the evolution of human bodies, such as walking upright on two legs and freeing hands to grasp tools, and on the other hand, pushed the progression of human brains and minds, such as making various hunting tools. For a long time, the tools used by people were directly derived from nature (i.e., wooden sticks and stones), and some stones were ground into stone knives, stone axes and other tools for use. During this period, the technical level of human beings was in the Stone Age. About 10,000 years ago, humans gradually learned to domesticate animals and cultivate plants, and agriculture was invented. With the development of agricultural production activities, a part of human groups gradually separated from the original gathering-hunting society to specialise in crop cultivation and animal husbandry, and thus appeared the first great social division of labour in human society. Thanks to the invention of hunting tools such as bows and arrows, ropes, and fishing nets, etc., humans had been able to capture more animals. “As the prey gradually increased, people kept wild animals that could not be consumed for a while, and started the labour of domesticating animals. Dogs were the first beasts domesticated by humans, which was related to the need for hunting. Since then, sheep, pigs, goats, cattle, etc. had been domesticated in the Metal Age, then the horses and camels”.118 With the increase in the quantity of animals kept, people left the virgin forest to go to river valleys and grasslands for grazing, eventually forming nomadic tribes. “The first to separate from the primitive peoples were the Aryans and the Semites. The former roamed India and the steppes of the Oxus, Sarthe, Don and Dnepr rivers, while the latter in the steppes of the Euphrates and Tigris”.119 At the same time as the formation of nomadic tribes, other human groups developed plant-based production activities in the vicinity of large rivers. The earliest cultivation activities in humans may have originated from the specialisation of early grass seed collection. It was in the process of collecting grass seeds that people accidentally discovered that the plant seeds scattered in the moist soil could germinate and grow new plants, thereafter people started planting activities. The grains such as foxtail millet, proso millet, rice, wheat, and soybeans that people later cultivated were the result of people’s long-term bit by bit selection. With agricultural development, especially the development of crop cultivation, some human groups had gradually formed agricultural tribes who lived a 116 Wilson, E. O. (2000). Sociobiology: The New Synthesis. Belknap Press of Harvard University Press. pp. 706, 707. 117 Lu, J. X., Xi, Z. Z. (1997). Colour Illustration of Chinese History of Science and Technology. China Science and Technology Press. pp. 3, 5. 卢嘉锡., 席泽宗. (1997). 彩色插图中国科学技术 史. 中国科学技术出版社. pp. 3, 5. 118 Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. p. 46. 刘佑 成. (1985). 社会分工论. 浙江人民出版社. p. 46. 119 Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. p. 46. 刘佑 成. (1985). 社会分工论. 浙江人民出版社. p. 46.

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settled life. “According to historical data, the birthplace of agriculture was in several major subtropical rivers - the Euphrates, Nile, Indus and Yellow River basins”.120 In 1995, Chinese archaeologists discovered artificially cultivated rice (one of the earliest artificially cultivated rice specimens in the world) and the earliest pottery products in China at the Yuchanyan cave of Daoxian County in Hunan Province (about 8,000 B.C.).121 Numerous early human agricultural sites have been found in the Yellow River and Yangtze River basins, and these findings suggest that agriculture had become an important labour sector in China at least in the middle of the Neolithic Age. The second great division of labour in human society is the separation of handicrafts from agriculture and the formation of craftsmen class, happened approximately at the advanced stage of primitive society. Human handicraft activities and other human labour occur almost simultaneously. Because people need to make all kinds of tools to survive. For example, activities such as making stone tools, firing pottery, weaving, and spinning are all handicraft activities. It can be said that the first primitive man who made a stone into a stone axe was the inventor of handicrafts. At the end of the 1970s, an early human site (6,000–5,000 B.C.) discovered in Peiligang Village of Xinzheng in Henan Province, unearthed China’s earliest spinning wheel,122 indicating that spinning had become a type of handicraft activity of people as early as the Neolithic period. in the early human site of Qianshanyang in Wuxing of Zhejiang Province (about 4,700–5,200 years ago), people found more than 300 bamboo-woven artefacts (, including baskets, baskets, reed mats, bamboo ropes, etc.) and delicate textiles such as hemp pieces, silk pieces, ribbons, and silk threads,123 which shows that at least in the late primitive society in China, bamboo weaving was quite developed, and sericulture and silk reeling were invented and used in textiles. Since the seventh or eighth thousand B.C., humans have been using natural copper to make utensils; But it was not until after 4,000 B.C. that humans invented the technology of artificial copper smelting. Its appearance marked the birth of human metallurgy, and the beginning of human society into the copper age. Through archaeological activities, people discovered the earliest artificially smelted bronze artefacts at the Susa site (4,100–3,900 B.C.) in Iran; and the early human copper smelting site in Timna, the Sinai Peninsula of Israel (4,000–3,000 B.C.); Copper alloy pieces containing lead and tin were found at the late Yangshao Cultural site in Jiangzhai in Shaanxi Province of China (3,500–3,000 B.C.).

Liu, Y. C. (1985). Social Division of Labour. Zhejiang People’s Publishing House. p. 47. 刘佑 成. (1985). 社会分工论. 浙江人民出版社. p. 47. 121 Ai, S. Z., Song, Z. H. (2006). History of Chinese Science and Technology (Chronology Volume). Science Press. p. 14. 艾素珍., 宋正海. (2006). 中国科学技术史(年表卷). 科学出版社. p. 14. 122 Ai, S. Z., Song, Z. H. (2006). History of Chinese Science and Technology (Chronology volume). Science Press. p. 18. 艾素珍., 宋正海. (2006). 中国科学技术史(年表卷). 科学出版社. p. 18. 123 Zhejiang Provincial Cultural Relics Management Committee. (1962). Report on the First and Second Excavation of Qianshanyang. Acta Archaeologica Sinica (02):73–92. 浙江省文物管理委 员会等. (1962). 钱山漾第一、二次发掘报告. 考古学报 (02):73–92. 120

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A large amount of smelting copper slag was found in the late Hongshan Cultural site of Niuheliang in Lingyuan of Liaoning Province (3,500.–3,000 B.C.).124 The invention of copper smelting technology and the application of metallic copper and copper alloys are conducive to the manufacture of copper tools that are finer than stone tools, and the application of copper tools can effectively improve the production efficiency of handicrafts. For example, people can use copper to cast various bowls, plates, basins, tripods and other tableware, which is obviously more convenient for people to store and prepare food; Copper can also be used to make textile equipment such as spinning wheels, which helps people to weave finer fabrics and produce better clothes; Tools such as knives, axes, chisels, and scissors, etc. can be made of copper. The use of these tools allows people to chop, process bamboo, and weave more efficiently. The exquisite ancient bronzes in museums world-wide can well demonstrate the wide application of metallic copper. The wide application of copper tools has improved the production efficiency of the handicrafts on the one hand, and promoted the professional development of various handicraft industries on the other hand. When the handmade goods can meet the needs of family life and there is a certain surplus, people can exchange the remaining products for other products. With the further development of exchange, people’s demand for various handmade products continues to expand, thus giving birth to a group of professional handicraftsmen. For example, the more than 300 bamboo weaving artefacts found at the Qianshanyang site mentioned above reflect that there may have been specialised bamboo weaving craftsmen in the society at that time. In a society, the mass production of copper utensils obviously requires more professional coppersmiths to complete. In addition, the independent development of handicrafts is also related to the natural division of labour in different regions. In areas dominated by agriculture, the natural division of labour in different regions is generally underdeveloped, and handicrafts in these areas are often subordinate to agriculture, and are difficult to differentiate. The social division of labour in China’s primitive society belongs to this type. In places with relatively developed regional division of labour, handicrafts occupy a relatively important position in social production activities from the very beginning, and it is easier for handicrafts in these regions to develop independently. The social division of labour in primitive societies in some parts of Western Europe is of this type. As far as the historical development of human society is concerned, since the invention of agriculture by humans, agricultural production has always been in the dominant position of social production in the entire ancient society, while handicraft production only a relatively small proportion. It was not until the development of modern capitalist machinery industry that industrial production began to gradually dominate the whole social production. The third social division of labour is the separation of commerce and production (agriculture and handicrafts), and the formation of merchant class. In The Origin of the Family, Private Property and the State, Engels pointed out that “civilisation 124

Han, R. F., Ke, J. (ed). (2007). History of Chinese Science and Technology (Mining and Metallurgy Volume). Science Press. p. 175. 韩汝玢., 柯俊 (ed). (2007). 中国科学技术史(矿冶卷). 科学 出版社. p. 175.

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strengthened and increased all the established divisions of labour, particularly by intensifying the antagonism between town and country…and added a third division of labour, peculiar to itself and vitally important: it created a class that took no part in production, but engaged exclusively in exchanging product–the merchants.”125 Commercial activity refers to the exchange of products between people. The creation of commerce is not the same as the creation of specialised merchants. In the natural division of labour in human society, due to the differences in the natural environment where each primitive clan commune is located, the products produced by different social groups have certain differences. It is this difference of product type that leads to the product exchange behaviour among people. For example, one primitive clan made a living by growing millet, while another primitive clan relied on sheep herding. There are obvious differences between millet and sheep. Due to the needs of life, the exchange behaviour between the two clans naturally occurred, and this product exchange activity was a commercial activity. In primitive society, the surplus products of each clan were very small at first, and naturally this kind of exchange could not happen. However, with the gradual improvement of social productivity, the surplus products gradually increased, and the exchange of products between different clans or tribes also developed accordingly. At first, people engaged in specific agricultural production activities and also exchanged surplus products, and their identities were both farmers and small businessmen; When the social demand for commodities increased and the extent of the market was further expanded, some people who used to hold two jobs would be differentiated from specific agricultural or handicraft production activities to specialise in commodity exchange activities. As a result, professional businessmen were born. An important condition for the emergence of professional merchants is that the demand for commodity exchange is large enough that specialising in commercial exchange activities is sufficient to maintain the merchant’s life. The first two social divisions of labour in human society improved the productivity of the entire society, thereby enabling the society to create more surplus products, which in turn created preconditions for the expansion of the scale of commodity exchange. When the corresponding conditions were ripe, professional businessmen would be born. The fourth social division of labour in human society is the differentiation of public organisations from general community organisations, which gave birth to the social management class and the primitive state. This process occurred approximately in the transitional stage from the late primitive society to the civilised society. The first few social divisions of labour in human society are in the economic field, while the fourth social division of labour is in the social and political field. The first three divisions of labour laid the economic foundation and created the necessary material conditions for the fourth division of labour. The fourth division of labour is the continuous development and leap of the first three divisions of labour. In addition to the production activities of material products, the social production activities of human beings also include the production activities of human beings and the production activities 125

Engels, F. (1893). The Origin of the Family, Private Property and the State. International Publishers. p. 136.

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of mental products. The production activities of human beings actually include two aspects: birth and education. To organise the reproductive activities of human beings smoothly, it is necessary to establish a complete set of production relations such as corresponding ethics, family institutions, cultural education, etc. The gradual establishment and continuous improvement of these production relations is actually the incessant enrichment of human self-consciousness, as well as the production of spiritual products such as humanistic knowledge. In the development of human society, whether it is the reproductive activities of human beings, the production activities of mental products, or material products, it is a historical process from simplicity to complexity, from low-level to high-level, and from primitive to civilised. In this process, the social organisation of human society is also evolving from simplicity to complexity, from low-level to high-level. As the evolution of social organisation progresses to a certain stage, public organisations are differentiated from general community organisations, and the fourth social division of labour in human society naturally occurs. Through the simple description of several large divisions of labour in human society, it is apparent that every division of labour in human society is a process of differentiation of social organisations. From an abstract perspective, these divisions of labour actually form a continuous bifurcation process. This bifurcation process is very similar to the branching process in nature (i.e., trees and rivers, etc.). It is on the basis of this understanding that the bifurcation law in nature can be borrowed to analyse the phenomenon of social division of labour. American physicist M. Feigenbaum studied the bifurcation phenomenon with period-doubling through mathematical analysis. He discovered in 1976 that there are two universal constants in the bifurcation phenomenon, and his research results were published in the Statistical Physics, Vol. 19. If the graph of things constantly bifurcating is depicted on a two-dimensional plane composed of X-axis and Y-axis (Fig. 8.12), the bifurcation regularity revealed by Feigenbaum can be seen more vividly: As the bifurcation progresses, the bifurcation distance in the horizontal axis direction (shown by the AB line segment and the BC line segment in the figure) is gradually shortening, while the ratio of the former bifurcation distance to the latter bifurcation distance is the constant δ; The bifurcation width in the vertical axis direction (shown by the FH line segment and the GI line segment in the figure) is also gradually attenuated, while the ratio of the width of the previous bifurcation to the width of the latter bifurcation is also the constant α. Feigenbaum found that the constant δ and the constant α are both irrational numbers, where δ = 4.669201609…, α = 2.502907…. The two constants δ and α reflect the ubiquitous quantitative characteristics of bifurcation phenomena. According to this important discovery of Feigenbaum, one cannot only qualitatively prove the bifurcation behaviour of the system, but also analyse the bifurcation situation of the system quantitatively. Feigenbaum’s discovery shows that in the evolution of natural systems, their geometric images and bifurcation figures have infinitely recursive, self-similar geometric structures. That is to say, one natural thing as a totality has a structure similar to its parts, or the same

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Fig. 8.12 Self-similarity of things constantly bifurcating

behaviour of one thing will appear repeatedly on some smaller scales.126 In layman’s terms: the totality of the system has a similar structure to the subsystems that make up it, and the bifurcation behaviour in the evolution of the system will be repeated in the evolution of its subsystems. The bifurcation law discovered by Feigenbaum can be regarded as the further deepening of the modern fractal theory. This discovery reveals that elements reflect the totality, and the multi-level, multi-angle, multi-dimensional relationship between the part and the whole, which provides a new methodology for people to understand the world. The Marxist theory of social division of labour pointed out that with the disintegration of manpower as the main body of labour, the division of labour among workers will inevitably disappear, and the division of the labour itself will become more detailed with the development of production. Combined with the actual situation of social production activities in developed countries, the Marxist theory of social division of labour has indeed revealed the historical regularity of the development of social division of labour. For example, with the application of automation technology and microelectronic information technology in production activities, socalled unmanned factories have emerged in some countries. There is almost no person in the processing workshop of the factory, and the entire production activities are controlled by engineers and technicians with different professional knowledge. In this example, the jobs of the original manual workers are almost completely replaced by various machines, that is to say, the division of labour among the manual workers has disappeared. However, the division of mental labour among engineers and technicians has not disappeared, but has become finer. From the division of labour in the entire human society, the social division of labour in primitive society was relatively simple (i.e., agriculture and handicrafts, etc.). When human society developed to modern times, the division of labour in all walks of life became considerably detailed. And Chen, Q. R. (2005). Natural Philosophy. Fudan University Press. pp. 119–120. 陈其荣. (2005). 自然哲学. 复旦大学出版社. pp. 119–120. 126

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when it comes to the creative industry in contemporary society, its sophistication has reached the division of labour among individuals. When it is refined to individuals, the overlapping of the division of labour among people is increasing, which is actually a state of chaos. Looking at the bifurcation diagram shown in Fig. 8.12, when things bifurcate to a certain extent, they finally enter the chaotic region. Therefore, the division of labour mechanism of social development can be well explained by using the bifurcation law in fractal theory.

8.8.2 The Mechanism of Coordination in Social Development In the evolution of a society, division of labour and collaboration are the two most basic development mechanisms. In social development, people have long noticed the role of division of labour, which has been discussed above. In contrast, people don’t pay enough attention to the understanding of coordination mechanism. Social division of labour enables the sub-systems within a social system to specialise, deepen, and refine; Social coordination encourages the sub-systems to connect, complement and coordinate. If there is no division of labour and coordination, no society can smoothly evolve from small to large and from low-level to high-level. Social division of labour is actually the concrete manifestation of the bifurcation law in social development, while social coordination is the exhibition of the synergy law. From a long-term perspective, the human-culture, economy, polity, science, law, education and other sub-systems of a state are constantly evolving from unity to plurality, from low-level to high-level, and from simplicity to complexity under the combined effect of the bifurcation law and the synergy law. The term coordination is derived from the Greek and means to work together.127 Humans have long had the idea of coordination. For example, Xun Zi, a thinker at the end of the Warring States Period, pointed out that what makes humans stronger than animals lies not in the ability of individuals, but in the cooperative power of groups. Because “humans can form groups and connect individuals into a totality, which animals cannot do”, therefore, human beings who are “not as powerful as oxen and not as fast as horses” are able to control oxen and horses (Xunzi: The Rule of a True King). The ancient Greek philosopher Plato discussed not only the division of labour among people, but also the coordination between people when discussing the Utopia. In 1893, the French sociologist Durkheim also proposed the idea of social coordination when discussing the social division of labour. The concept of social solidarity he put forward refers to the coordinated state of social organisations. He proposed social solidarity, which refers to the social bonds that bind individuals together, which is a relationship between individuals and individuals, individuals and groups, groups and groups based on shared emotions, morals, beliefs or values, and a state of association characterised by bonding or attraction; The basis of social solidarity 127

See the Preface by Hermann Haken in Zeng, J., Zhang, Y. F. (2000). Social Synergy. Science Press. 曾健., 张一方. (2000). 社会协同学. 科学出版社. 参见赫尔曼·哈肯所写的 “序言”.

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is the shared values and moral norms of members of society, that is, a collective consciousness or collective conscience; He divided social solidarity into two types: mechanical solidarity and organic solidarity. Mechanical solidarity refers to a social connection mode with weak division of labour and strong individual homogeneity established by connecting individuals together through a strong collective consciousness. Organic solidarity refers to a social connection mode with developed division of labour and strong individual heterogeneity established by connecting individuals through mutual dependence.128 American sociologist Parsons applied integration to express a concept similar to Durkheim’s solidarity. The integration means that the various parts of the system can be coordinated into a functioning totality. Its function is to keep the behaviours of all units of the system consistent according to the unified needs of the system, and to suppress and reverse their deviant behaviours, so as to promote the harmony and cooperation of the entire system.129 Parsons’ concept of integration has elevated Durkheim’s concept of solidarity to the level of the system, and in fact already has the meaning of social synergy. Hermann Haken, the wellknown German physicist and founder of synergy, published the book Synergetics: An Introduction in 1977, and later published books such as Advanced Synergetics, in which he systematically discussed synergetics. Synergetics pointed out that an open system is the result of the combined action of many subsystems to generate structure and function on the macro scale, and there is a relationship of mutual influence, mutual interaction and mutual restriction among the various subsystems that make up the system. These relationships can be described by different variables, including both fast variables and slow variables. Slow variables account for only a few, but slow variables dominate the changes of fast variables. He called this dominant slow variable order parameter, and it is precisely under the synergistic effect of order parameter and other variables that the entire system evolves from one structure to another new structure; The evolution of the system is controlled by the order parameter, and the final structure and order degree of the evolution depend on the magnitude of the order parameter; In different systems, the specific meaning of the order parameter is different. The size of the order parameter can be used to indicate the degree of macroscopic order of the system. When the system is in disorder, the order parameter is zero. When the external conditions change, the order parameters also change. When the system evolves to a critical point, the order parameter increases to the maximum, at this time, the system will spontaneously appear macroscopic order structure in time, space or function.130 In 2000, on the basis of the synergy theory proposed by Haken, Zeng Jian and Zhang Yi-Fang absorbed some research results of nonlinear dynamics, chaos theory, self-organisation theory and catastrophe theory, and extended the application of synergistic principles to sociology. It expounded 128

Durkheim, E. (1960). Division of Labor in Society (Simpson, G., trans.). The Free Press of Glencoe Illiois. 129 Parsons, T., Smelser, N. J. (1998). Economy and Society. Psychology Press. pp. 24, 46–49. 130 Haken, H. (2005). Synergetics: Secrets in Nature (Ling, F. H., trans.). Shanghai Translation Publishing House. 赫尔曼·哈肯. (2005). 协同学: 大自然构成的奥秘 (凌复华., trans.). 上海译文 出版社.

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social issues such as social synergy and the emergence, existence and evolution of human society.131 From the perspective of the growth and evolution of a society’s human-culture system, the social division of labour first began with the natural division of labour between male and female individuals within primitive clans, then between clans, then between tribes, then between chiefdoms, and finally between states, which is a process of continuous upgrade of the level of division of labour and specialisation. The development of division of labour and specialisation not only improves production efficiency, but also increases the types of economic organisations (i.e., sectoral organisations, exchange organisations, distribution organisations, etc.). With the non-stop expansion of economic organisations, the economic system is born and develops. The interaction between the human-culture system and the economic system further promotes the division of labour and specialisation among various factors within the two systems. Due to the needs of social coordination, people’s demand for public organisations has increased, which has prompted the differentiation of public organisations from general community organisations, and also the separation of political organisations (i.e., royal power organisations, defence organisations, etc.) from public organisations. With the continuous increase of public organisations and political organisations, political system was born and evolved naturally. From the development of human history, the sub-systems of a social system in terms of economy, polity, law, education, and science are all born and gradually developed from the original human-culture system along with the development of social division of labour. On the one hand, under the action of bifurcation laws, each of these subsystems is further differentiated into finer system factors. On the other hand, under the action of the law of synergy, these sub-systems and the factors within each sub-system are interrelated, interacted, interinfluenced and interrestricted. In fact, in the evolution of a specific state system, it is precisely because of the coupling, restriction, and coordination between these sub-system factors that they jointly determine the evolution path and growth speed of a state. From the perspective of a specific state system, there are extensive relations of production, exchange, distribution and consumption among the various subsystems that make up a state, and which have gone beyond the production, exchange, distribution and consumption existing in a state’s economic system. It is concluded in Chaps. 4 and 5 that the focus of traditional economics is mainly on the relationship between production, exchange, distribution and consumption in the field of material production. According to the analysis framework of states and societies proposed in this book, it is conspicuous that a state’s human-culture system produces human resources and humanistic-cultural knowledge, economic system provides material products (individual products), political system offers public services and public

202. Zeng, J., Zhang, Y. F. (2000). Social Synergy. Science Press. 曾健., 张一方. (2000). 社会 协同学. 科学出版社.

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goods, science system outputs abundant scientific knowledge and professional technology, legal system makes laws and institutional norms, education system replicates and inherits scientific knowledge and cultivates abundant professional talents. Between these systems, there are also relations of production, exchange, distribution, and consumption similar to those in economic systems. They are interrelated, interacted, interinfluenced and interrestricted. Only when they achieve a benign coupling and coordination between them, can the entire state system achieve healthy, harmonious, and orderly development. To realise these production, exchange, distribution and consumption activities within the state system, the power and public organisations within the political system are indispensable to actively organise coordination and social works. In fact, this is the subject of the Political Economy and the Public Management, and also a question discussed in Public Economics, Social Economics and Economic Sociology. From the analysis of the state system and the social system (or the international system), the action mechanisms of the bifurcation law and the synergy law can be listed, as shown in Table 8.1. From the state system, the sub-systems that make up the state include the humanculture, economy, polity, law, education, science and other sub-systems. Among them, each sub-system forms a collaborative network. For example, the network between agriculture, industrials, and services within the economic system, the scientific network between social sciences, natural sciences and various interdisciplinary sciences and professional technology within the scientific system, the network between the legislative system, the judicial system and the law enforcement system within the legal system, the network between family education, school education, and on-the-job social training within the education system. Every two sub-systems in the state system form a collaborative network, which is mainly realised by the exchange system and distribution system at the state level. The specific co-leaders are the state power organisations (i.e., administrative organisations, tax organisations, financial organisations, etc.) and some public social organisations. For example, the state tax organisation obtains tax revenue from the economic system, and allocates part of the funds to the science system, the legal system, and the education system through the financial organisation. The scientific results produced by the scientific system, the legal services provided by the legal system, and the professional talents cultivated by the education system offer supports for the smooth operation of the human-culture system, the economic system and the political system. From the perspective of social system (or international system), the world can be roughly divided into Christian cultural society, Islamic cultural society, Buddhist cultural society, Confucian-Taoist cultural society, and others according to the influence of different religions and cultures. These systems make up the subsystems of the world system, within each of which forms a network-like synergistic relationship (i.e., the cultural and economic network formed by China, North Korea, South Korea, Japan, Vietnam and Singapore within the Confucian-Taoist cultural society in East Asia). And the network-like synergistic relationship is also formed between each two subsystems, which is realised through the international market system and international cultural exchanges at the international level. The specific leaders of these

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Table 8.1 Mechanism of bifurcation and synergy Hierarchy

Results after bifurcation

Synergistic mode inside the system

Synergistic mode between the subsystems

Dominator of synergy

Social system (International system)

Christian culture society

Christian social network

Islamic cultural society

Islamic social network

Buddhist cultural society

Buddhist social network

Confucian-Taoist cultural society

Confucian-Taoist social network

Other cultural societies

Other social networks

International market system (including international trade, international cooperation, etc.), international cultural exchanges (international conferences, study abroad, religion, translation of works, etc.)

International political organisations, international economic organisations, international cultural organisations, political, economic leaders and cultural leaders of different countries

Political system

Political system network

Legal system

Legal system network

Power organisations Public organisations

Human-culture system

Human-culture system network

Education system

Education system network

Science system

Science system network

National distribution system, exchange system (including regional trade, regional cooperation, regional exchanges, etc.)

Economic system

Economic system network

State system

collaborations are international political organisations (i.e., the United Nations, the European Union), international economic organisations (i.e., the World Bank, etc.), international cultural organisations, and political, economic, and cultural leaders of different countries. In terms of the closeness of synergy and interconnection, the synergy within the state system is far closer than the synergy between the international systems. This is because the current international community coordination mechanism is not perfect, the number of such organisations is relatively small and their strength is rather weak. If an international organisation like the United Nations is strong enough in operation and influence, there is a reason to believe that in the near future, the entire human beings on earth will cooperate to become a social group with a unified global consciousness and able to face global issues.

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From the long-term history of human society, factors, including population movement, cultural exchange, commodity trade, war and colonisation, technological diffusion, climate geography, etc., which are often interrelated and interacted, play an important synergistic role between different societies world-wide. For example, in cultural exchanges, international conferences held in different parts of the world, foreign students sent by different countries, religions spread in different regions, books translated into different languages and distributed in various places, etc., can all enhance the mutual communication, mutual understanding and mutual recognition of different cultural groups, so as to coordinate people’s cognition and behaviour world-wide, and to play the role of social synergy. War colonisation is a way of conquest by force, so that a tribe (or nation) imposes its own social system, religious belief, production technology, way of life, etc. on the conquered, so as to achieve the integration and coordination of different regional social groups. In the world history, the Persians, Romans, Mongols and Turks had launched some large-scale military conquests. Although these activities had brought serious disasters to many states and peoples, they had objectively intrigued a social synergy to varying degrees. In terms of science and technology communication, ancient Chinese technologies such as paper making, printing, compass, and gunpowder spread to the West, and modern Western industrial technologies such as steam engines, electric motors, and machine manufacturing spread to China, which have played an important role in promoting the coordinated development of Eastern and Western societies. The growth and evolution of a state system is accompanied by the collaborative growth and evolution of the subsystems of human-culture, economy and polity. In this process, the evolution of the human-culture system, the evolution of the economic system, and the evolution of the political system are coupled to each other, forming a mutually coupled co-evolution among the three. The analysis of Chap. 7 shows that in the national economic system, the evolution of economic organisation is a cyclical super-helix. Similarly, in the human-culture system and the political system, the evolution of cultural organisation is also a cyclical super-helix. So, the evolution of a state system is also a cyclical super-helix. A state system evolves from one structure to another under the self-regulation and self-organisation of its internal subsystems of human-culture, economy and polity, thus obtaining the order of the entire society. The hypercycle in the synergistic mechanism of social development has attracted the attention of relevant experts and scholars. For example, Qian Xue-Sen, a wellknown Chinese scientist, believed that there are large cycles of the components in a national socio-economic system, and which constitute the organic circulation movement of the interaction between economy and natural environment, social environment and world environment of the whole large system. In order to ensure the continuation and development of this cycle, three aspects need to be done: first, the best structure of the cycle should be established and selected (i.e., the components of the system should have reasonable proportions, mutual coordination, and complete functions); Second, it is necessary to ensure that the material flow, energy flow and information flow inside and outside the system and between the components are interactive and unimpeded; Third, it is necessary to incessantly improve the prediction, feedback, adjustment and control capabilities of the system, so as to promote

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the constant amplification and value-added of the overall function of the system.132 Here, Qian Xue-Sen actually discussed the control of the human social system. Regarding the control of the social system, Zeng Jian and Zhang Yi-Fang pointed out from the perspective of social coordination that “the order parameter is the law, the content of the law, the strength of law enforcement and supervision”.133 The order parameter refers to the means or tool to control social ordering. Judging from the long-term history of human social development, the legal institutions are indeed an effective tool to control social orderliness. Throughout ancient Chinese history, all major social changes generally started from changing the legal system. Some of the famous reform movements mentioned above are examples. Whether it was the reforms initiated by Guan Zhong, Li Kui, Wu Qi, Shang Yang and others during the Spring and Autumn Period and the Warring States Period, or Wang Anshi’s reforms during the Northern Song Dynasty, or Zhang Ju-Zheng’s (1525–1582) reforms during the Ming Dynasty, all of them started with the legal institutions that coordinate the social order. The history of the rise and fall of ancient Chinese society had repeatedly proved that all prosperous times attached great importance to the establishment and perfection of the legal institutions, while debauched monarch, tyrant, treacherous and corrupt officials, rogues, liars, local ruffians, hooligans, and thugs were active in a corrupt system which showed declining rule of law. Therefore, to achieve social control, the establishment and improvement of a state’s legal system is pivotal. However, the establishment and improvement of a state’s legal system cannot rely solely on the state’s legal system itself (i.e., legislative bodies), which requires the internal relationships clarified among the state’s human-culture, economy, polity, law, education, science and other sub-systems, the essential relationship between them fixed in the form of a legal system, and dynamically adjusted according to the actual needs of social development, so that the state’s legal system can effectively regulate and control the order of each sub-system, and achieve mutual cooperation and collaboration in social public management. Another important aspect of establishing social order is to start from perfecting the moral systems of the society. The legal institutions are more to coordinate and regulate the relationship and behaviour between social organisations from the macro aspect, while the social morality is more to coordinate and regulate the relationship and behaviour between individuals from the micro aspect. To maintain a virtuous circle of society, both the legal systems and the moral systems are indispensable. As Zeng Jian pointed out that “to ensure the order of the entire social activities, not only each social activity must have its own ‘rules of the game’, but also each participant must have its own ‘professional ethics’ and ‘code of conduct’”.134 In urban traffic order, if there is no coordination and regulation of traffic rules, the traffic will fall Zeng, J., Zhang, Y. F. (2000). Social Synergy. Science Press. pp. 125–126. 曾健., 张一方. (2000). 社会协同学. 科学出版社. pp. 125–126. 133 Zeng, J., Zhang, Y. F. (2000). Social Synergy. Science Press. p. 171. 曾健., 张一方. (2000). 社 会协同学. 科学出版社. p. 171. 134 Zeng, J., Zhang, Y. F. (2000). Social Synergy. Science Press. p. 77. 曾健., 张一方. (2000). 社 会协同学. 科学出版社. p. 77. 132

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into chaos. If the traffic rules are in place, but the police do not enforce the law according to the rules, or the drivers and pedestrians only care about their own roads instead of following the traffic rules, the traffic order will also be in chaos. Parsons pointed out that to achieve social control and system integration, in addition to the legal institutions, religious institutions, interpersonal norms and other means are also needed135 ; The religious institutions and interpersonal norms he mentioned include religious beliefs, morality and ethics, as well as professional norms. Therefore, the operating order of a normal society is inseparable from the dual constraints of law and morality. If there are only legal constraints but no moral constraints, or only moral constraints but no legal constraints, it is difficult for any society to operate in an orderly, healthy, harmonious and sustainable manner; If both law and morality are missing, then this society will gradually decline due to anomie and disorder! Confucius’ student Min Zi-Qian (536–487 B.C.) once asked Confucius about the way to govern a state. Confucius responded that “if a state is governed without virtue and the rule of law, the people will have no self-cultivation; Without self-cultivation, the people will be confused and not follow the right path.” (Kongzi Jiayu: Zhipei《 孔子家语·执辔》The School Sayings of Confucius: Holding the Reins). Confucius’ thought of governing the state are valuable in managing the current anomie of social order in China. Chinese society needs to seek a healthy and harmonious development path in the mutual coordination of human-culture, economy and polity. The principle of Synergetics shows that whether a system can play a synergistic effect is determined by the synergy of the subsystems within the system. The better the coordination between the subsystems, the better the overall function of the entire system will be. If the sub-systems in a state system and the factors within the subsystems can cooperate and coordinate around a common goal, then the entire state system can produce a synergistic effect of 1 + 1 ≥ 2; Conversely, the constrain, conflict and chafe between the subsystems within the state system will lead to increased internal friction and low operating efficiency in the entire society, and it will be difficult for each subsystem in the social system to perform its due functions, causing the entire state to fall into chaos and disorder. Therefore, only when the subsystems within the state system coordinate and cooperate, reduce internal friction, and give full play to their respective roles and functions, can the entire state system achieve an orderly state of benign operation.

8.8.3 The Mechanism of Differentiation and Stratification in Social Development The analysis of society from the perspective of social differentiation and social stratification is an important aspect of sociology. The most representative sociological theories in this regard are Marx’s theory of social class, Durkheim’s theory of social division of labour, Max Weber’s theory of social stratification, Parsons’ 135

Parsons, T., Smelser, N. J. (1998). Economy and Society. Psychology Press. pp. 46–49.

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theory of structural functionalism, Luhmann’s social systems theory. Below is a brief introduction to their main ideas. The main ideas of Marx’s theory of social class are: ➀ Social division of labour is the basis of social stratification and promotes social structural changes. Marx believed that the social division of labour is the basis for the origin and existence of social stratification and social classes, and social division of labour promotes social development and changes in social structure; ➁ Social stratification and social class are based on the mode of possession of means of production as the main criterion; ➂ The existence of social class also requires necessary conditions such as social culture and self-awareness. The main idea of Durkheim’s theory of social division of labour is: ➀ Social division of labour makes social existence possible. In his view, social division of labour not only provides cohesion for society, but also determines its structural characteristics; ➁ The social division of labour promotes the social order, enhances the organic unity of the society, and also constitutes the social and moral order; ➂ Abnormal social divisions cause social unrest; ➃ An ideal society is an organic integration of a highly developed social division of labour and social solidarity. Durkheim believed that the social crisis was essentially a moral crisis, and he advocated comprehensively strengthening the regulating function of social moral norms. He promoted the establishment of multi-level social morality systems adapted to the structure of social division of labour to ensure that all parts of the increasingly complex social division of labour systems are organically combined on the basis of interdependence. The main idea of Max Weber’s theory of social stratification are: ➀ Social stratification is the basis for understanding sociological methods and multidimensional indicators. He pointed out that the essence of social stratification is the unequal distribution of social resources in society, that is, different social groups or people with unequal social status occupy the things that are valuable in society, such as wealth, income, prestige, and educational opportunities, etc. Therefore, he believed that the three standards of wealth-economic standard, status-social standard and power-political standard should be used to stratify society, thus creating a precedent for using multi-dimensional indicators to study social stratification structure; ➁ The multi-dimensional indicators of social stratification are class, rank and political party (power); ➂ The essence of social stratification is the possession and distribution of social resources.136 Talcott Parsons is the founder of modern American sociology. As a representative of structural functionalism in sociology, the structural functionalism and methodology he advocated once occupied a dominant position in Western sociology in the 1950s and 1960s. His early theories tended to construct macro-sociological theories, and later began to shift his theoretical research from macro-level to micro-level. He made important contributions to the development of modern sociology. His major 136 Yang, J. H. (2007). From Marx to Luhmann: Research and Enlightenment on Social Differentiation and Integration. Order and Progress: Research on Social Construction, Social Policy and Harmonious Society—The 20th Anniversary of the Establishment of the Zhejiang Sociological Society and the 2007 Academic Annual Meeting Paper Collection. 杨建华. (2007). 从马克思到卢 曼: 社会分化与整合研究及启示. 秩序与进步: 社会建设、社会政策与和谐社会研究 浙江省 社会学学会成立二十周年纪念暨2007学术年会论文集.

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works include The Structure of Social Action, The Social System, Toward a General Theory of Action, Economy and Society, Structure and Process in Modern Societies, Sociological Theory and Modern Society, and The System of Modern Societies, etc. His research field is very broad, and his works had made extensive discussions on social stratification, economic organisation, modern occupations, bureaucracy, legal institutions, democratic processes, science, education, family, socialisation of children, social modernisation, religious secularisation, deviance, gender roles, pathological roles and mental health, racial issues and countercultural issues. Parsons synthesised Durkheim’s thought of social division of labour and Marx’s and Max Weber’s thought of social stratification, and put forward the theory of structural functionalism. Parsons’ concept of differentiation refers to the process of decomposing a system or a unit into two or more systems or units. That is, the society derives and separates some new units that are structurally and functionally different from an original unit (i.e., the production function is differentiated from the traditional family to form an independent social unit–the firm). He believed that differentiation is an inevitable path for social change, and social change is a process of differentiation, adaptation, maintenance and reintegration. The theory of structural functionalism means that, with social changes and social progress, the social system is functionally differentiated into different functional subsystems, and there are only functional differences but no hierarchical differences between the subsystems. According to Parsons’ understanding, the social system should at least include the cultural system, the economic system, the political system and the legal system. The main ideas of Parsons’ theory of structural functionalism137 are: ➀ The structural differentiation of functional systems is the path of social change. He explained the process of social and cultural change with the viewpoint of evolution, and pointed out that society is transformed from simple to complex through variation and differentiation, and then to a higher level of reintegration. ➁ Social differentiation is the premise and condition of social change. He pointed out that the process of social change generally goes through the stages of differentiation, adaptability improvement, accommodation and Value generalisation. Here, adaptability improvement means that after social differentiation, the range of resources available to the social units becomes wider, so that the social units get rid of some of the original limitations. Accommodation refers to the process by which a society incorporates emerging resources and structures into the larger social structure. Value generalisation suggests to raising social values to a higher level of generalisation, thereby legitimising new resources and structures in society. ➂ The more important aspect of social differentiation is the differentiation of society in structure and function. The social structure that Parsons proposed includes six aspects of social stratification, cultural legalisation, bureaucratic organisation, monetary economy and market, generalised norms, 137 Yang, J. H. (2007). From Marx to Luhmann: Research and Enlightenment on Social Differentiation and Integration. Order and Progress: Research on Social Construction, Social Policy and Harmonious Society—The 20th Anniversary of the Establishment of the Zhejiang Sociological Society and the 2007 Academic Annual Meeting Paper Collection. 杨建华. (2007). 从马克思到卢 曼: 社会分化与整合研究及启示. 秩序与进步: 社会建设、社会政策与和谐社会研究 浙江省 社会学学会成立二十周年纪念暨2007学术年会论文集.

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and democratic association. Different subsystems of a society have different functions. For example, the legal system undertakes the functions of social integration and control. ➃ Social differentiation is a sign of the degree of social progress. According to the different degrees of social differentiation, he divided human society into three types of social differentiation of slightly differentiated society, relatively differentiated society and highly differentiated society. He believed that the process of social change and development is the process of constant differentiation of social structure and social function, and the degree of social structure differentiation is an important criterion for the degree of social modernisation. The differentiation of social structure refers to the transformation of a single structure that undertakes various functions to multiple structures that undertake multiple functions. At the micro level of society, structural differentiation is reflected in the differentiation of individual roles in society; At the macro level of society, structural differentiation manifests itself as the development of social division of labour. For example, in a traditional slightly differentiated society, the social unit of the ancient family structure undertakes various functions such as economic production, political organisation, religious activities, and social education. When the society developed into a modern industrial society, the functions originally undertaken by the family were gradually separated. The economic production function was undertaken by firms. The political organisation function was undertaken by specialised government organisations. Activities such as religious ceremonies were transferred to public places of worship such as churches and temples. Social education functions were mainly carried out by educational organisations such as schools. Modern families only retain basic functions such as sex, childbearing, and emotional communication. In modern society, with the continuous development of society, the scope of social division of labour has not only jumped out of regional boundaries, but also spread out on a global scale, and the differentiation of social structure and social function has become more and more refined, which is exactly the social phenomenon that Parsons revealed. ➄ Status and honour are an important dimension of social stratification. Social stratification is the vertical structure of society, which reflects the inequality of society. It is actually the ordering of the inequality of social status and wealth possession of different groups in society. Parsons’ social stratification thought not only inherited Durkheim’s social division of labour to promote social progress and social solidarity, but also advanced the theoretical research on social stratification proposed by Marx and Max Weber. He regarded the emergence of social stratification as an important aspect of the evolution of the ever-increasing adaptive capacity in social life, an evolutionary breakthrough and a great achievement in various forms that bring about social progress.138 German sociologist Niklas Luhmann made important innovations to Social Systems Theory, and he is an outstanding contemporary sociologist. Like Parsons, he also advocated a unified theoretical framework to explain complex social phenomena, so his research field is very wide, including administration, law, economy, science, religion, art, semantics, mass media and other disciplines. Luhmann put forward his 138

Sanderson, S. K. (1991). Macrosociology: An Introduction to Human Society. New York: Harper Collins Publishers Inc. pp. 126–127.

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social systems theory on the basis of synthesising Parsons’ system view and general system theory. His theoretical focus is on the relationship between a social system and its external environment and on analysing the mechanisms that reduce the complexity of the system’s environment. His major books include Soziale Systeme: Grundriß einer allgemeinen Theorie (Social systems: an Outline of a General Theory, 1984), Die Wirtschaft der Gesellschaft (The Economy of Society, 1988), Die Wissenschaft der Gesellschaft (The Science of Society, 1990), Das Recht der Gesellschaft (Law as a Social System, 1993), Die Kunst der Gesellschaft (Art as a Social System, 1995) and Die Gesellschaft der Gesellschaft (Theory of Society, 1997) and other works. In these works, he emphasised that the definition of the system cannot be separated from the definition of the environment; In his view, any kind of human action and the various events and processes associated with this action can constitute a relatively independent general system; He believed that the basic factor and basic relationship that constitutes a social system is Kommunikation. Since actors show different behaviours, all social systems are built on the basis of mutual communication between actors. Luhmann’s sociological thought was greatly influenced by system theory at first. Since the 1980s, he had advocated a paradigm shift in sociology, gradually from Parsons’ structural functionalism to the theoretical models of cognitive biology and cybernetics. He sublated the previous theory of social differentiation and integration, constructed the social theory of new structural functionalism, put forward the idea that social functional differentiation is the core of modern social differentiation, and emphasised the high self-productivity of the social system. Luhmann divided the human society in recent thousands of years into ancient society, pre-modern highly civilised society and modern society according to the level and type of differentiation of society. Ancient society refers to primitive society or tribal society; Pre-modern highly civilised society refers to the society whose social functions are not completely differentiated, such as Chinese, Indian, Islamic, Greco-Roman, continental European, Anglo-Saxon and other civilised societies; Modern society refers to industrial society and even post-industrial society. During the evolution of these three societies, three different forms of social differentiation have occurred, namely, divisional differentiation, class differentiation and functional differentiation. Divisional differentiation is a social differentiation based on equality, such as the separation of tribes engaged in planting from the original people who lived by gathering. The social groups before and after separation have only the differentiation of the division of labour and the separation of geographical space, but no difference of rank, which is actually a kind of horizontal differentiation of society. Class differentiation is a social differentiation based on inequality. Social groups before and after separation are divided into sub-systems of different levels (including classes or strata), which is actually a vertical differentiation of society. Functional differentiation is a social differentiation based both on the functional equality within the system and on the functional inequality between the system and its environment, which contains both equality and inequality. It forms part of the system according to specific functions (i.e., polity, economy, etc.). Ancient societies were basically differentiated according to divisions, pre-modern highly civilised societies were basically

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differentiated according to social classes or strata, and modern societies were basically differentiated according to social functions. Therefore, modern social system contains maximum system complexity. Luhmann believed that modern society is a highly differentiated society whose basic feature is the rapid differentiation of functions, that is, modern society and its institutions have become more and more specialised, autonomous, technological and abstract. If the traditional society evolves with the differentiation of social classes as the central axis, then the modern society changes and evolves with the differentiation of social functions as the central axis. In Luhmann’s view, it is the continuous differentiation of the functions of the systems in modern society that leads to the self-separation of the social system, that is, the large-scale social structure formed in modern society from modern times quickly differentiates into social systems of multiple structures and various types, thereby complicating the differentiation process of social systems and multi-levelling the system itself. Luhmann argued that, in modern society, the social system has not only differentiated into their respective subsystems, but each subsystem has developed its own medium of communication (i.e., power in the political system, capital in the economic system, love in the family system, etc.). Within each subsystem, a corresponding binary structure commensurate with the communication medium is formed (i.e., power/no power in the political system, capital/no capital in the economic system, legal/illegal in the legal system, etc.), which produces the reflective character of the system (i.e., money and money transactions, learning about learning, anticipation of expectations, norms about norm-setting, etc.). It is based on this reflexive characteristic that the social system can reproduce itself. In this way, the social system has the ability to be self-referential and highly autonomous. These capabilities make modern society a self-observing, self-describing, and selfregulating society. In postmodern society, the social function is further differentiated, it is self-referencing, self-shaping, self-regulating, and self-reproducing. In this way, the growing functional differentiation and independent autonomy of the whole society will lead to the decline of control over the social system. Therefore, contingency factors have also increased substantially in the development of modern society. Therefore, the postmodern society is a society full of contingency and hidden risks.139 Through the brief description of social theory from Marx to Luhmann, it is discernible that social differentiation has at least three basic dimensions of social division of labour, social stratification, and system functional differentiation. It is discernible that throughout the historical changes of human society, social change is the diachronic and synchronic unfolding of social differentiation in these three dimensions. Social division of labour is the basis and condition for social stratification and system functional differentiation, and it is the prerequisite for social 139 Yang, J. H. (2007). From Marx to Luhmann: Research and Enlightenment on Social Differentiation and Integration. Order and Progress: Research on Social Construction, Social Policy and Harmonious Society—The 20th Anniversary of the Establishment of the Zhejiang Sociological Society and the 2007 Academic Annual Meeting Paper Collection. 杨建华. (2007). 从马克思到卢 曼: 社会分化与整合研究及启示. 秩序与进步: 社会建设、社会政策与和谐社会研究 浙江省 社会学学会成立二十周年纪念暨2007学术年会论文集.

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differentiation. Social differentiation is built on the basis of social division of labour, which is the premise and fundamental cause of social differentiation. This is the basic viewpoint of Marxism and is also recognised by other classic sociologists. The social differentiation caused by the social division of labour will give rise to the evolution of the social structure, and when the social structure evolves to a certain extent, it will cause the differentiation of the social structure, which is accompanied by the differentiation of the social functions. The result of social differentiation is the birth of new sub-systems in the social system, that is the formation of new social structures and social functions at macro-level; the emergence of new social organisations and new professional departments at meso-level; the creation of new social occupations and new personal roles at micro-level. Therefore, the differentiation of family organisation, the differentiation of community organisation, the differentiation of social class, the differentiation of human-culture system, the differentiation of firm organisation, the differentiation of industry and sector, the differentiation of economic system, the differentiation of power organisation, the differentiation of political organisation, the differentiation of political system, and the differentiation of state system etc., are the products of social differentiation. The more specialised the division of social labour, the more complex the social differentiation. The development of the social division of labour will inevitably have a significant impact on the structure and function of the social system. On the one hand, social division of labour promotes social changes and social development, while on the other hand, social division of labour pushes the continuous growth of human rationality. American sociologist Neil Joseph Smelser (1968) believed that social differentiation refers to a process in which more specialised and autonomous social units are established. These highly differentiated units will appear in various aspects such as economy, family, culture and political system with the process of social development; He also pointed out that “differentiation by itself is not enough to lead to modernisation. Development is a process of interaction between differentiation (the existing social division of labour) and integration (connecting differentiated structures on a new basis).140 From Marx to Luhmann, they all advocated that social development is the unity of social differentiation and social integration. Social differentiation encourages social development by promoting social structure and social function differentiation. At the same time, the differentiation of social structure and social function must be based on the corresponding social integration, which can provide an orderly and stable social environment for social development. The level of social differentiation is generally positively correlated with the level of social development, and the degree of social order and stability is closely related to moderate social integration. The process of human social evolution is actually the continuous differentiation and reintegration of social systems, as well as the continuous optimisation and perfection of social structure and social functions. Social development is actually a continuous alternation of social social differentiation and social integration.

140

Smelser, N. J. (1993). Change Mechanisms and Adaptation Mechanism for Change. Social Sciences Abroad (02). 斯梅尔塞 (1993). 变迁的机制和适应变迁的机制. 国外社会科学 (02).

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8.8.4 The Mechanism of Gradual Change and Disruptive Change in Social Development Since human beings differentiated from the man-apes and transformed into Homo erectus, human society has been constantly evolving and developing. The evolution of human society has gone through a process from unity to plurality, from low-level to high-level, and from simplicity to complexity, which is also an alternation between gradual and disruptive changes. During the evolution of human society, the structure and function of the social system are gradually changing, and the properties of each element within it will undergo qualitative changes when the amount of change accumulates to a certain extent, which will cause the social system to change abruptly. The evolution of the social system is a repeated and continuous process that alternates between gradual change and disruptive change, which promotes social transition from one state, or level, to another. It is precisely because of the evolutionary mechanism of gradual change and disruptive change that the social system realises the evolution process from unity to plurality, from low-level to high-level, and from simplicity to complexity. From the long-term evolution of the human-culture system in human society, the invention of language and writing has brought about a major leap in human society. It was this leap that took mankind out of the savagery of the animal world and into the civilised world. As Edward Wilson pointed out that, “All of man’s unique social behaviour pivots on his use of language, which is itself unique. …The basic attributes can be broken down, and other features of the transmission process itself can be added, to make a total of 16 design features. Most of the features are found in at least rudimentary form in some other animal species. But the productivity and richness of human languages cannot be remotely approached even by chimpanzees taught to employ signs in simple sentences. The development of human speech represents a quantum jump in evolution comparable to the assembly of the eucaryotic cell”.141 The scientific symbolic language (i.e., the molecular formula in chemistry) and the mathematical formal language (i.e., the algebraic operation in mathematics) that appeared in the process of language evolution can be regarded as the gradual changes of language evolution. After human beings entered a civilised society, the successive inventions of papermaking technology and movable type printing technology spread the ideological information carried by human language to a wider area, thus promoting the evolution of human society again. After A.D. 1400, European-based civilisation shifted gears again, and knowledge and technology grew not just exponentially but super-exponentially142 ; The accumulation of knowledge and professional technology laid the necessary foundation for the industrial revolution in Europe in the eighteenth century. Since the invention of the symbolic language 141

Wilson, E. O. (2000). Sociobiology: The New Synthesis. Belknap Press of Harvard University Press. p. 693. 142 Wilson, E. O. (2000). Sociobiology: The New Synthesis. Belknap Press of Harvard University Press. pp. 710, 713, Fig. 27.7.

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and writing, the language and writing have started a slow evolutionary process with the development of human society. On February 14, 1946, the birth of the world’s first electronic computer in the United States was of epoch-making significance that humans enabled the machines they created to have artificial intelligence. Since then, humans have realised the interaction with machine tools. The computer programming language produced and developed with computer technology is actually an extension of human language to machine tools, and it is also another major invention of human language tools. Obviously, the invention of computer programming language is another disruptive change in the evolution of human language. Therefore, purely from the perspective of technology and tools, the evolution of human cultural tools is actually an alternation between gradual changes and disruptive changes. From the long-term evolutionary process of the economic system in human society, the invention of agriculture 10,000 years ago was a major disruptive change, which is often described by some Chinese and foreign scholars as the agricultural revolution of human society. It was this disruptive change in the economic field that prompted human society to shift from a gathering-hunting economy to a plantinganimal husbandry economy. The development level of human society has also jumped from the primitive society of lower civilisation to the agricultural society of higher civilisation. Since then, the agricultural production of human society has been in a slow evolutionary process. In the whole agricultural society period, although the differentiation of handicrafts and commerce occurred, in general, the economic production activities of the whole human society have always been in a gradual change stage of slow development. Until the eighteenth century, the Industrial Revolution, which first began in Britain and then gradually spread to Europe and the United States, caused a disruptive change in the economic field of human society, which prompted the economic system of human society to change from an agricultural economy to an industrial economy. Since the Industrial Revolution, all social groups involved in this process have begun an unprecedented process of industrialisation and urbanisation, that a large number of agricultural people who originally lived in rural areas began to leave agricultural production activities and migrated to cities of all sizes to participate in industrial production activities. The occurrence of the Industrial Revolution made the development level of human society jump from the previous agricultural society to the industrial society at a higher stage of civilisation. Since the middle of the twentieth century, due to the important progress of science and technology (especially electronic information technology) and cultural education, some countries in the world have undergone a transition from an industrial society to an information society (or post-industrial society); But world-widely, human society is still in the evolution from traditional agricultural society to modern industrial society. Therefore, from the long-term evolutionary process of the economic system in human society, it is actually an alternation of gradual changes and disruptive changes. From the long-term evolution of the political system in human society, in the primitive society, the social organisation in the human society was still at a low level of differentiation, and the political system had not yet been differentiated from the primitive society; After the invention of agriculture, with the differentiation of social organisations, the main factors of the political system gradually evolved and formed.

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In the late primitive society, the political system was differentiated from the humanculture system and the economic system, and the primitive state was born naturally. The birth of the political system in human society is actually a major disruptive change of the social structure and the social function in the social system, which made human society jump from the pre-civilisation state of primitive society to the civilisation stage of primitive state. In this process, the organisational form of human society also transitioned from smaller clans to larger tribes, from tribes to chiefdoms, and finally from chiefdoms to primitive states. In the development process of human society, these organisational changes have embodied the characteristics of a ladderlike transition, and the political organisations of the society have also embodied a trend of evolution from unity to plurality, from low-level to high-level, and from simplicity to complexity. This point can be clearly explained from the research results of archaeology and anthropology143 of scholars such as Kent V. Flannery (1972): (1) Band type of society: Archaeological examples include the Late Palaeolithic of Near East (10,000 B.C.), and ethnographic examples are the Eskimo and Shoshone of the North American Indian tribe; At a later stage, archaeological examples include the Paleo-Indian and Early Archaic of U.S. and Mexico (10,000–6,000 B.C.), and ethnographic examples are Kalahari Bushmen and Australian Aborigines; Such community organisations implemented local group autonomy. Their members enjoyed egalitarian status, and ephemeral leadership in political activities; (2) Tribe type of society: Archaeological examples include Pre-Pottery Neolithic of Near East144 (8,000–6,000 B.C.), and ethnographic examples are the Sioux of North American Indian tribes; At a later stage, archaeological examples include early Formative of Inland Mexico (1,500–1,000 B.C.), and ethnographic examples are New Guinea Highlanders and Southwest Pueblos; Such community organisations are pantribal sodalities, and politically unranked descent groups; (3) Chiefdom type of society: Archaeological examples include the Samarran in ancient Palestine and the Jordan River region (5,300 B.C.), the Gulf Coast Olmec of Mexico (1,000 B.C.), and ethnographic examples are Tonga and Hawaii in the Western Pacific; At a later stage, archaeological examples include the Mississippian of North America (A.D. 1200), and ethnographic examples are the Natchez (now extinct), Nootka, and Kwakiutl of North American Indian groups; Such community organisations are ranked descent groups. They implemented hereditary leadership, and redistributive economy. Full-time craft specialisation had appeared at that time; (4) State type of society: Archaeological examples include classic Mesoamerica, Sumer on the lower Euphrates, Shang China, Imperial Rome, and ethnographic

143

Wilson, E. O. (2000). Sociobiology: The New Synthesis. Belknap Press of Harvard University Press. p. 712, Fig. 27.6. 144 Geographically generally refers to southwestern Asia and northeastern Africa.

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examples include France, England, India, and U.S.A; At the state level, stratification had appeared, kingship and bureaucracy had been implemented in political activities, codified law had been created, and military draft and taxation had emerged. Through the previous analysis of the birth process of primitive states, it is obvious that there are stages of gradual change and disruptive change. For example, the transition stage of human society from matrilineal clan society to patrilineal clan society, and the transition stage from chiefdom society to primitive state can be regarded as the disruptive change stages of social structure in the process of social evolution. In the transition of human society from matrilineal clan society to patrilineal clan society, the family structure in the social system has shifted from an organisational structure centred on the paternal lineage to an organisational structure centred on the maternal lineage. In the transition of human society from chiefdom society to primitive state, the public organisations in the social system have undergone horizontal structural differentiation based on equality to vertical structural differentiation based on inequality. In terms of the long-term transformation of ancient Chinese social forms, the period from the Spring and Autumn and the Warring States to the establishment of the Qin Dynasty was the stage in which Chinese society transitioned from a vassal state to a centralised empire. The period from the Opium War in 1840 to the establishment of New China in 1949 was the transition stage of Chinese society from a centralised empire to a modern state. The whole society has undergone intense turmoil and social changes during these two stages, which can also be viewed as the disruptive change stages in the process of social evolution. Judging from the historical facts, the structure and function of the entire social system have undergone tremendous changes in Chinese society, whether it is in the transition phase from a vassal state to a centralised empire, or from a centralised empire to a modern state. This is specifically manifested in the changes in the humanculture, economy, polity, science, law, and education sub-systems of the state system. Relatively speaking, the two long periods from the birth of the primitive state to the end of the Western Zhou Dynasty, and from the establishment of the Qin Dynasty to the end of the Qing Dynasty, basically belong to the gradual change stage in the process of social evolution, because the changes took place during these two periods in the structure and function of the entire social system were relatively small and slow. From the perspective of social innovation, the process of social evolution is a process of punctuated equilibrium, that is, a relatively long incremental innovation process is interrupted by short-term disruptive innovations, followed by another relatively long process of incremental innovation. A social system realises the development and change of society through intermittent innovation in all aspects in terms of human-culture, economy, polity, science, law, and education. The innovation of the social system in these aspects leads to gradual changes in the internal elements of the social system, and when the amount of change accumulates to a certain extent, these elements will make disruptive changes; When the human-culture, economy, polity

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and other elements of a social system have undergone significant changes, the structure and function of the entire social system will encounter disruptive changes, which will lead to the disruptive change of the social system as a totality. If the disruptive change pushes the social system to progress, the result of the the disruptive change is the improvement of the overall function of the social system and the expansion of its adaptability. If the disruptive change pulls the social system to regress, the result of the the disruptive change is the reduction of the overall function of the social system and the shrinkage of its adaptability. As for the natural environment on which human society depends, the natural environment is relatively stable in a certain period of time, but it has been changing in the long run. Changes in the natural environment can also be divided into two evolutionary forms: gradual change and disruptive change. For example, the gradual formation of the Earth’s atmosphere, hydrosphere and pedosphere in the long-term natural evolution of the Earth is a gradual change; While volcanic eruptions, earthquakes, and climatic changes are disruptive changes. The gradual and disruptive changes in the natural environment often also have a major impact on human society. When the natural environment is slowly changing, human society can adapt to changes in the natural environment through its own active innovation (i.e., technological invention) and local adjustments (i.e., population transfer). But when the natural environment undergoes disruptive changes, human society often needs to make quick responses or make global adjustments to adapt to the changes in the natural environment. For a specific state, in terms of the social environment (or international environment) in which the state exists, the international environment is relatively stable in a certain period of time, but is still constantly changing in the long run. Changes in the international environment can also be divided into two evolutionary forms: gradual change and disruptive change. For example, in the long-term historical evolution of the international society, the gradual formation of international organisations, that is, the cultural circle (i.e., the Islamic culture that emerged in the Arabian Peninsula in the early seventh century), economic circle (i.e., the European Community that was gradually created between 1951 and 1967) and political circle (i.e., the United Nations, which has gradually developed from 1945 to the present) in the international environment, are the gradual changes; The major technological breakthroughs, social institutional reforms, social revolutions, war outbreaks and other forms of change are disruptive changes. Major disruptive changes in the social environment often have a pivotal impact on the future development of a state. The October Revolution in Russia that occurred on November 7, 1917, for instance, not only changed the historical process of Russia, but also affected the development direction of Chinese society. When the international environment is slowly changing, a state can adapt to changes in the external environment through its own active innovations (i.e., gradual institutional changes, general technological inventions) and partial adjustments (i.e., adjustment of foreign trade policies). When the international environment undergoes disruptive changes, a state often needs to make quick responses (i.e., urgently stop the import of related meat products when an animal epidemic occurs) or make global adjustments (i.e., timely mobilise troops and arrange defence front when an invasion occurs) to adapt to changes in the external environment.

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The following uses the Catastrophe Theory to explain the process of gradual change and disruptive change in the transition of the social system. Through the above analysis, the important factors affecting the development and evolution of the social system are mainly as follows: Surface factors: ecological environment, human-culture system, economic system, political system Deep factors: resource development, science system, legal system, education system The final result of the development of a social system is, on the one hand, the differentiation of social organisations and the deepening of social division of labour, which can be explained by the degree of social bifurcation; On the other hand, it is manifested in the ideological innovation of individuals and the renewal of consciousness of groups in the social system, which can be explained by the degree of social structural innovation. The ten dimensions are used to more vividly describe the evolution of the social system, and the process diagram of the gradual change and the disruptive change in the development of the social system is drawn (Fig. 8.13). The ten dimensions of Fig. 8.13 are: ➀ ecological optimisation; ➁ resource utilisation; ➂ human-culture progress; ➃ science progress; ➄ economic progress; ➅ legal progress; ➆ political progress; ➇ education progress; ➈ social bifurcation; ➉ structural Innovation. The dotted concentric circles in Fig. 8.13 represent the degree of civilisation and adaptive survivability of a social system, the small circle indicates that the society is in a lower civilisation with weaker adaptive survivability, and the big circle indicates Fig. 8.13 Process of gradual change and disruptive change in the development of the social system

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that the society is in a higher civilisation with stronger adaptive survivability. With the growth and development of society, the degree of civilisation and adaptability of the social system has gradually raised from a lower level to a higher level. In this process, the factors affecting the development of the social system have also evolved from few to many, from small to large, from simplicity to complexity, and from low-level to high-level. From the dynamic process of the growth and evolution of the social system, in the evolution of social scale from small to large, the adaptive survivability from weak to strong, and the level of civilisation from a lower-level to a higher level, the evolutionary trajectory of the social system in ten dimensions is a gradually expanding spiral (as the solid spiral lines shown in Fig. 8.13). A complete process of a social system evolving from axis ➀ to axis ➉ and back to axis ➀ is called a cycle of social evolution. In a cycle of social evolution, the intersections of spiral lines and ten axes are the disruptive points in social evolution, and the others are the gradual changes. Between the intersection points of the spiral and the axis, the social system is in a stable state, and social evolution during this period is gradual, while at these intersections and the stages near them, the social system is in an unstable state, and the evolution of society during this period is disruptive. Some crucial social bifurcations and important cultural innovations often occur in the disruptive change stage of social system evolution. When the social system completes a cycle of evolution, pushed by the new demand for development, the society will begin to enter the next cycle of evolution, and evolution of social system will get ready for another round of alternation between gradual changes and disruptive changes. In this cycle, with the gradual enhancement of human society’s ability to optimise the ecological environment and develop and utilise resources, social organisations and individual human beings have made continuous progress that the level of social productivity has been advanced, social relations of production have been further complicated, and the overall adaptability of society has been strengthened, and the level of social civilisation has also been raised to a higher level. In the actual social system, the disruptive change in the evolution of a state system is realised through the interaction between the factors inside and outside the state. The factors that cause the disruptive change of the state system may come from the external environment of the state (i.e., sudden climate change in the natural environment, disruptive changes in the international political landscape, sudden outbreaks of international wars, etc.) or from the internal environment of the state (i.e., major changes in social institutions, sudden outbreaks of social revolutions, major breakthroughs in scientific and technological innovation, etc.).

8.9 The Evolutionary Trajectory of the Social System The history of the changes in the internal structure and external form of the human social system over time is the evolutionary trajectory of the social system. The evolution of social system is a combined result of external pressure and internal dynamics.

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A society will progress when its social system has sufficient supply of external resources and strong internal demand for human development; while it will stagnate or regress when its external resource supply becomes insufficient and its internal development demand is weakened. From the above diagram of the relation between the dynamics behind social development (Fig. 8.11), it is evident that the practical activities of human society start with ecological optimisation (including social resource utilisation), and end with social development (including social cultural evolution). In this process, the dynamics for social development are formed by the two chains of: Chain A (surface factor chain): ecological optimisation → human-culture system → economic system → political system → social development Chain B (deep factor chain): resource utilisation → science system → legal system → education system → cultural progress Chain A reflects the operation of the surface factors of the social system, and Chain B reflects the operation of the deep factors of the social system. In the evolution of the social system, the above ten factors are closely linked and coordinated to jointly promote social development. If these ten factors are used as ten dimensions to reflect the development and evolution of the social system, the evolutionary trajectory of the social system can be drawn (Fig. 8.14). The ten dimensions in the figure are: ➀ ecological optimisation; ➁ resource utilisation; ➂ human-culture system; ➃ science system; ➄ economic system; ➅ legal system; ➆ political system; ➇ education system; ➈ social development; ➉ cultural progress. Fig. 8.14 Evolutionary trajectory of the social system (Helix Network)

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In Fig. 8.14, the five concentric circles from small to large represent the degree of civilisation reached by human society in the primitive age, agricultural age, industrial age, information age and future age (i.e., the second circle from the inside out represents the level of civilisation reached by human society in the agricultural age); From the second circle onwards, each dimensional axis begins to appear smaller branches, which further fork to form even smaller branches. These branches or forks represent the division of labour or differentiation in society (i.e., the small branches on axis ➄ represent the division of labour or differentiation of the economic system in the society, such as the differentiation of industries or markets). The mechanisms of division of labour and coordination, differentiation and stratification, gradual change and disruptive change in the development of social systems can all be vividly shown in this picture. In the development and evolution of human social system, the society is growing in these ten aspects, that is, expanding outwards in the ten dimensions. It is not difficult to find that with the passage of time, the running trajectories of the social system in Chain A and Chain B are two gradually expanding spirals with the same starting point. In the growth and evolution of the social system, these ten aspects are interrelated, interacted and interinfluenced. Therefore, in fact, Chain A and Chain B are developing and evolving in an intertwined spiral shape, which is similar to the double helix structure of biological DNA. The development of the system is a history of continuous evolution throughout time. From birth, growth to maturity, the social system experiences a process from unity to plurality, from low-level to high-level, and from simplicity to complexity. With the continuous expansion of the social scale, the number of sub-systems within the social system is rising, the system structure and system functions are becoming increasingly diverse and complex, and the interconnection, interaction and interinfluence between the sub-systems within the social system are becoming cumulatively sophisticated. The trajectory of the the social system depicted in Fig. 8.14 is the overview of social development revealed in this book, and it is a well-structured dynamically evolving spiral diagram. In the actual human society, the development of the social system in these ten dimensions is not always synchronised evenly, but fluctuates frequently that some factors (i.e., political system) may change fast, while some (i.e., humanculture system) may change slowly. Therefore, the trajectory of the development and evolution of the social system is not necessarily a smooth and regular spiral. In the development and evolution of the social system from small to large, from low-level to high-level, the ecological environment also experiences a process from unity to plurality, from low-level to high-level, and from simplicity to complexity. The evolution of ecological environment and the evolution of human society are carried out simultaneously through the interaction between human society and ecological environment. The interaction of internal and external factors in the social system forms two layers (i.e., surface layer and deep layer) of network relations, which constitute a multi-dimensional complex dynamic picture. The helix network above (Fig. 8.14) describes the evolutionary history of human society in a simplified and vivid way, which is of great value and significance for

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humans to understand the mechanisms behind social progress, to reintegrate fragmented knowledge systems, and to guide social practices. For example, this diagram provides a holistic picture of a system that fully reflects the state of human social development. According to this diagram, a brand-new holistic framework can be used to reorganise past human historical documents, so as to discover more causal relationships hidden behind historical phenomena; The human knowledge system can also be scientifically reclassified according to the above ten dimensions to make it more systematic, hierarchical and organic. For another example, the degree of development of different societies (or states) can be comprehensively evaluated according to the above ten dimensions, rather than just a few indicators such as economic indicators (i.e., GDP). One day, if human social science develops to a sufficiently precise level of quantification (like quantitative relationships in mathematics), more precise helix network diagrams can be used to guide specific social practice activities, making the production and living conditions of human society in a healthy, harmonious and orderly virtuous circle.

8.10 The Book’s Historical Philosophy and Views of Social Evolution Every nation-state in the world has its own history of development. But how to understand the essential laws of the historical development process? This actually involves the central question of the philosophy of history. In 1725, the Italian thinker Vico published The New Science, thus establishing the basics of the philosophy of history. In 1756, the French Enlightenment thinker Voltaire clearly put forward the concept of philosophy of history in his Essay on the Manners of Nations. He pointed out that philosophy of history is a philosophical understanding of history, which understands history as a whole, grasps the basic principles that govern history and its implied meaning.145 In 1837, the German thinker Hegel’s Lectures on the Philosophy of History was published. His philosophy of history took the development of human consciousness as the centre to construct a unified picture of world history, and exerted a broad influence in the Western intellectual circles. The historical materialism founded by Marx is actually a philosophy of history established on the basis of critically inheriting Vico’s thought and Hegel’s philosophy of history. By the beginning of the twentieth century, the focus of Western scholars’ thinking on the philosophy of history shifted from exploring the development law of history itself to analysing the nature and methods of historical cognition, which led to the rise of postmodern philosophy of history. Postmodern philosophical thought has impacted on the philosophy of history since Vico, Hegel and Marx. In

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Yang, G., Zhang, L. B. (2008). Philosophy of History: From Origin to Post-Modernity. Academic Monthly 04:32–39; Burns, R. M., Pickard, H. R. (2000). Philosophies of History: From Enlightenment to Post-Modernity. Wiley-Blackwell. p. xi.

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addition to providing people with profound thoughts and multi-dimensional perspectives, it also set off a wave of historical nihilism that is anti-rational, anti-essential, and anti-objective. The proliferation of postmodern philosophical thought not only shattered the complete picture of human understanding of the world, but also dispelled the essential regularity of historical development. It deconstructed the value, meaning and motivation of human beings to transform the world and to pursue an ideal society, thus bringing modern society into the abyss of value collapse, loss of belief, moral degeneration, and emptiness of life. Since the 1940s and 1950s, with the gradual establishment of systems science including System Theory, Information Theory, Cybernetics, Dissipative Structure Theory, Synergy, Hypercycle Theory, Catastrophe Theory, Chaos Theory, the paradigm of systems science thinking has provided a new set of ideas and methods for people to re-explore a unified new framework of historical philosophy. This chapter applies exactly the System Theory Method advocated by Systems Science, which is an exploratory thinking and re-synthesis of the basic laws and the dynamic structure of social and historical evolution. What are the driving forces behind the historical process of human society? From the historical development dynamics, there are three main paradigms of history in the past: the first believes that the power of matter pushes history forward, which is known as Marx’s historical materialism; The second thinks that the power of religious culture drives history, which is the historical idealism expounded by Max Weber in The Protestant Ethic and the Spirit of Capitalism; The third holds that the form of social structure is the driving force, which is originated from Durkheim’s historical paradigm. Fernand Braudel’s (1902–1985) Annals School of historiography is its derivative. From the composition of the social system, Marx chose the economic subsystem as the driving force of social development; Weber selected the cultural subsystem as the reason for historical progress; Durkheim took politics, information, social class, nationality and other social structures as the entry point for understanding historical changes. The synergistic philosophy of history proposed by young scholar Huang Lei believed that the aggregate composed of the political subsystem, economic subsystem, cultural subsystem and biological subsystem of the social system determines the development of history. Different social subsystems become order parameters of other subsystems at certain historical nodes.146 In January 1929, French historians Marc Léopold Benjamin Bloch (1886–1944) and Lucien Febvre (1878–1956) founded the journal Annals: économies, sociétés, civilisations, thus creating the Annals School of historiography. Annals School believed that all factors in history play a role in historical change, and it gathered historians to a broader field of study, where thousands of social people, various natural, geographical, technical, economic, social, psychological, religious phenomena have replaced previous individual figures and political events as the main objects of historical research. The research methods they advocated are not limited to one pattern,

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Huang, L. (2012). Synergy Theory and Philosophy of History. China Social Sciences Press. p. 14. 黄磊. (2012). 协同论历史哲学. 中国社会科学出版社. p. 14.

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whether it is geography, demography, ethnography, linguistics, economics, technology, psychology, or philosophy, as long as they can explain history. The representative of the Annals School, the well-known French historian Fernand Braudel, in the process of studying the development of capitalism from the fifteenth century to the eighteenth century, examined all the factors in history, including polity, economy, culture, environment, transportation, energy, climate, geography, technology, history, institutions, characters, language, and folk customs, etc. And he held that which decisive dynamic factor in the process of historical change is random and accidental.147 This chapter expounds a brand-new historical philosophy based on the evolution of ancient Chinese society. This book integrates the ideological achievements of many scholars, and reclassifies and restructures the key factors in historical development from the perspective of the structure and function of the social system. From the point of view of history, this book basically agrees with the comprehensive and the grand view of history advocated by the Annals School. Braudel’s representative works, The Mediterranean and the Mediterranean World in the Age of Philip II and Civilization and Capitalism, 15th–18th Century are huge in length, rich in content and all-encompassing. The social relations they reflected are complicated, which often makes readers fall into the sea of details and cannot grasp the key factors of historical development. This book, however, sorts out the key factors in historical evolution and emphasises their interconnections, interinfluences, and interactions. If human beings on the Earth are considered as a social system, then the external environment of this social system is the natural ecosystem composed of the crust, ocean, biosphere and atmosphere. From a system perspective, the analysis of the evolutionary history of human society needs to explore the interaction between human society and the natural ecological environment. The philosophical thought of history expounded in this chapter actually provides a global historical framework with systems thinking. In fact, some scholars who studied economic history, global history or environmental history have made useful explorations in this area. For example, in terms of economic history, the historical view of Kenneth Pomeranz of the California school is more representative. He advocated that world history should overcome the tendency to focus too much on material culture, and should look at culture, polity, economy and environment together. He pointed out that one of the shortcuts is to combine world history with social history.148 In The Great Divergence: China, Europe, and the Making of the Modern World,149 he examined the social and economic conditions of Europe and East Asia in the eighteenth century. He believed that the industrialisation of Europe and the establishment of world domination after the mid-nineteenth century were not the inevitable result 147

Huang, L. (2012). Synergy Theory and Philosophy of History. China Social Sciences Press. pp. 40, 255. 黄磊. (2012). 协同论历史哲学. 中国社会科学出版社. pp. 40, 255. 148 Pomeranz, K. (2007). Social History and World History: From Daily Life to Patterns of Change. Journal of World History 18(1):69–98. 149 Pomeranz, K. (2000). The Great Divergence: China, Europe, and the Making of the Modern World Economy. Princeton University Press.

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of Europe’s unique advantages over East Asia, but an unintended consequence of chance. But in the writing of economic history, the most innovative and important work in recent years is As Time Goes By: From the Industrial Revolutions to the Information Revolution co-authored by the British scholar Christopher Freeman and the Portuguese scholar Francisco Louçã.150 They introduced the long-wave theory of the business cycle into the writing of economic history, through which they pointed out: Capitalism has experienced five Kondratiev long waves from its birth to the present, and each long wave is an organic totality composed of five subsystems of technology, science, economy, polity and culture. New technology clusters that appear at regular intervals are the fundamental driving force for social evolution and economic growth, while other subsystems provide a complete supporting structure for each new technology cluster. In terms of global history, American historian David Christian’s Maps of Time: An Introduction to Big History,151 The Human Web: A Bird’s-Eye View of World History152 by J. R. McNeill and William H. McNeill, British environmental history professor Felipe Fernandez-Armesto’s The World: A History153 and Civilizations: Culture, Ambition, and the Transformation of Nature154 are representatives in this regard. In the aspect of environmental history, A New Green History of the World: The Environment and the Collapse of Great Civilizations155 by Clive Ponting,Jared Diamond’s Guns, Germs, and Steel: The Fates of Human Societies,156 and Plagues and Peoples157 by William H. McNeil are representatives of this aspect.These works examined the development of Chinese social history in the context of world environmental changes, and discovered the commonalities and features between China and the world’s environmental changes from the perspectives of environmental factors, human activities and environmental awareness. From the perspective of methodology and thinking paradigm, what this book advocates is system historiography and structuralist historiography. From the perspective of historical philosophy, the major viewpoint of this book is that the development momentum of human society is determined by the joint force of human-culture, economy, polity, science, law and education, among which the predominant factor (or force) is not fixed, but is always in dynamic change in different historical stages of social development. From the perspective of historical research, the historical view of this book is more inclined to the global view of history. The so-called global view of 150

Freeman, C., Louçã, F. (2001). As Time Goes By: From the Industrial Revolutions to the Information Revolution. Oxford University Press. 151 Christian, D. (2004). Maps of Time: An Introduction to Big History. University of California Press. 152 McNeill, J. R., McNeill, W. H. (2003). The Human Web: A Bird’s-Eye View of World History. W. W. Norton & Company. 153 Fernandez-Armesto, F. (2006). The World: A History. Pearson College Div. 154 Fernandez-Armesto, F. (2002). Civilizations: Culture, Ambition, and the Transformation of Nature. Free Press. 155 Ponting, C. (2007). A New Green History of the World: The Environment and the Collapse of Great Civilizations. Penguin Books. 156 Diamond, J. (1999). Guns, Germs, and Steel: The Fates of Human Societies. W. W. Norton. 157 McNeill, W. H. (1976). Plagues and Peoples. Anchor.

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history refers to “looking at the interaction between different cultures, emphasising the form and content of the interinfluences between different cultures, and focusing on the ‘process’ of establishing interconnections”. “The vertical and horizontal development of the region is simultaneously described in units of interconnected ‘networks’”.158 Throughout the book, it is apparent that from the macroscopic scale of time and space, the long-term evolutionary mechanism of the entire human social system follows two basic laws of the bifurcation law and the synergy law, while the social system embodies the remarkable characteristics of the collective complexity, the operational periodicity, and the structural fractality at the same time. The general trend of its evolution and development is a gradually expanding spiral from simplicity to complexity, from disorder to order, and from low-level to high-level. The analysis and discussion in this book show that the evolution of human society is an interweaving and spiral helix network consisting of multi-dimensional dynamics (Fig. 8.14)! In the development process of human society, although its general trend is gradual progress, yet it is not simple and linear, but full of complexities. At different stages of the evolution of a social system, the development state may present one of the three trends of progression, regression, stagnation, or a mixed state of the three trends. For example, in the Yuan, Ming and Qing dynasties in ancient China, the human-culture system of the society was closed and conservative, the economic system was relatively recovered and developed, the political system was autocratic and degenerate, and the entire social development was rigid and stagnant. During the progression of a social system, some internal structures or functions may decline or stagnate to some extent; Similarly, during the regress of a social system, some internal structures or functions may also undergo some degree of progression or stagnation. From the development of social system in terms of time, the evolution of social system does not proceed at a uniform speed, but manifests itself as slow and fast, sometimes gradual, and sometimes disruptive. From the internal structure of the social system, the evolution of each sub-system of the society is not homogeneous and synchronised, but is rather independent and disparate, which is manifested in particular stages of social history, that some sub-systems progressed and developed, while some stagnated or even regressed. Therefore, the overall evolution of the social system is the unity of bifurcation and synergy, gradual change and disruptive change, quantitative change and qualitative change, order and disorder, as well as progression and regression. Through the comprehensive study of the structure and function of the social system, especially the comprehensive analysis of the hierarchy, structure, function and operating process of the economic system within the state system, the book expounds the dynamic structure and its features, as well as the evolutionary laws of 158

Liu, X. C. (2008). The “Global History View” and the Compilation of World History in Early Modern Times. Global History Review (00):23–39. 刘新成. (2008). “全球史观”与近代早期世界 史编纂. 全球史评论 (00):23–39.

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the economy and the society, thus depicting an overview of the evolution and development of human society. Traditional disciplines such as economics and sociology based on the Reductionism Method, continuously divided, simplified, and refined the society. In the end, people’s understanding to the world became one-sided, isolated and illiberal that they heard the part instead of the totality, considered a singular tree the one and only truth but ignored the vast forest of truth in all its totality. Railing on utter ignorance, their versions of the world could only be fragmented, incomplete and chaotic.

Chapter 9

The Main Dynamics and the Features of Social Development in Ancient China

This chapter follows Chap. 8, taking the long-term structural changes of ancient Chinese society as a case study to provide historical facts for the theoretical framework of the state and social system. The chapter first expounds the main dynamics and the features of social development in ancient China according to the general structure of the state and social system from the three aspects of the human-culture system, economic system and science system; expounds the role of synergistic factors such as population movement, cultural exchange, commercial trade, and technological spread in promoting social development by combining the historical facts of ancient China; and comprehensively discusses the important influence of the natural environment on the historical development of human society by synthesising the relevant research results in terms of climate, geography, population and history from the perspective of climate change. To discuss the social structure proposed in this book from the perspective of historical facts, the book briefly examines the structural changes of ancient Chinese society in the aspects of human-culture, economy, science and technology and discusses the important influence of the natural environment (especially climatic factors) on social and historical development. Through these contents, readers can have a more perceptual understanding of the basic ideas of the dynamic theory of social evolution proposed in the book. It should be noted that political factors and legal factors obviously have an important influence on the development of a society that cannot be ignored, but given that many descriptions have been made in previous Chinese history books, this book will not repeat them here.

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9.1 The Structural Features of the Human-Culture System in Ancient China1 In the evolution of ancient Chinese farming civilisation, family, clan and lineage have always been the basic units of social life, social production and social interaction. Individuals live in a progressive social community composed of household, family, nation and state. In this social community, the family and the state are highly isomorphic, and they are closely related to each other to form an inseparable familystate community. As Jiang Yi-Hua, a professor at Fudan University, pointed out, “in this family-state, social morality, social rites, social economy, social polity, social culture, begin with family ethics and clan ethics, and gradually expand outward to the region, the state, and the world. Any individual, from birth, growth, ageing to death, is a part of the social community that gradually ascends from the family to the state”.2 As far back as the Xia and Shang dynasties, religious theocracy once ruled the entire society, and in the social life of the Chinese ancestors, belief in gods and religious witchcraft had long occupied an important position. It was not until the Western Zhou Dynasty that the dominance of religious theocracy began to decline and was replaced by the rising feudal kingship. Especially in the Spring and Autumn Period and the Warring States Period, the enlightenment of the hundred schools of thought liberated people from the domination of religious witchcraft. During the five and a half centuries of the Spring and Autumn Period and the Warring States Period (770–221 B.C.), the human-culture system of Chinese society was composed of intertwined and coexisting ideological cultures, such as the benevolent culture advocated by Confucianism, the universal love advocated by Mohism, the natural culture advocated by Taoism, the culture of ghosts and gods advocated by the School of Yin-yang, and the legal culture advocated by Legalism. Looking at the structure of the human-culture system, it is obvious from Fig. 8.2 that although the time of birth, development and maturity of each school is different and their ideas overlap from time to time, in terms of their core ideas, Confucianism valued family relationships, emphasising the important role of cultural education and the regulating function of ethics and morality on society. Mohism attached great importance to personal value, stressing people-based governance, practicality and thriftiness. Taoism advocated nature, pursuing health maintenance, and the harmonious coexistence between human beings and the natural environment. The School of Yin-yang believed in ghosts and gods and promoted the belief in gods and religious witchcraft; Legalism valued utility and highly regarded the function of legal institutions to regulate social order. The ideological spirit, values, beliefs and morals of each school formed the humanistic-cultural knowledge system of society at that time. From the perspective 1

The main content of this section was first published on the 3rd issue of Descendants of Yan and Huang in 2015 at Shanghai with the title “Structural Features of the Human-Culture System of Ancient Chinese Society”. 2 Jiang, Y. H. (2012). The Roots of Chinese Civilisation. Shanghai People’s Publishing House. pp. 65–66. 姜义华. (2012). 中华文明的根柢. 上海人民出版社. pp. 65–66.

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of social consciousness, this humanistic and cultural knowledge was embodied in specific philosophical thoughts, religious beliefs, moral ethics and corresponding social institutions. Ancient Chinese philosophical thought originated in the late Shang and early Zhou periods and was brewed in the Spring and Autumn Period and the Warring States Period. The foundational works include Hong Fan《洪范》 , Tao Te Ching《道 德经》and Yi Zhuan《易传》 . Hong Fan was originally a set of behavioural norms for ruling the country proposed to the monarch at the end of the Shang Dynasty, and the wuxing 五行 five elements (i.e., water, fire, wood, metal, earth/soil) in it had far-reaching influence. Tao Te Ching is a philosophical work written by Lao Tzu, a great thinker in the Spring and Autumn Period. It mainly discussed the ways of self-cultivation, state governance, military use, and health preservation. Yi Zhuan is a collection of ten essays formed by Confucius and his later Confucian scholars by interpreting the ancient divination book I Ching based on Confucian philosophical thought. It can be said that philosophical works such as Hong Fan, Tao Te Ching and Yi Zhuan laid the foundation for Chinese classical philosophical thought. During the Spring and Autumn Period and the Warring States Period, the Hundred Schools of Thought formed by Confucianists, Taoism, Mohism, Legalism, School of the Military, School of Diplomacy, School of Names, School of Yin-yang, School of the Medical Skills, Agriculturalism, School of Minor-talks and Syncretism, etc., played a grand symphony of the thoughts of that era! The spirit of traditional Chinese culture can be viewed as the result of the intermingling of the thoughts of the masters in the Spring and Autumn Period and the Warring States Period. The schools of thought at that time were surging and fighting in different vassal states at different periods of social development. In terms of the size of believers and long-term influence, the Confucian school should be the first. Confucius, the founder of Confucianism, is both a great thinker and an outstanding educator. The private school he created broke the monopoly of the aristocratic group on cultural education at that time and expanded the scope of education to ordinary people. He widely recruited students to teach Confucianism, and it is said that there were as many as 3,000 disciples, including 72 high-caliber students alone, thus playing an important role in the establishment, spread and development of Confucianism. After Qin Shi-Huang unified China by means of military conquest, although it was unified politically and in form, in terms of deep factors such as human-culture, the society at that time was not unified in spiritual beliefs, ethics and cultural education. In fact, this unification was not completed until Emperor Wu of Han implemented Dong Zhong-Shu’s (179–104 B.C.) proposal to dispose of the hundred schools of thought and respect only Confucianism. From this point, in the development and evolution of a social system, the structural innovation of its political system and of its human-culture system are not necessarily completed at the same time. In the early Western Han Dynasty (206–136 B.C.), Taoism once became the mainstream of society. It was not until 136 B.C. that Confucianism was elevated to the status of state religion by Emperor Wu of Han, that Confucianism began to occupy an important position in Chinese society. In 2 B.C., Buddhism was introduced

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to China from India,3 which began to infuse the cultural life of the Chinese. By the end of the Eastern Han Dynasty, it had been widely spread among the people. Under the influence of Buddhism, Taoism evolved from Taoist School, and became the native religion of China. In the late Eastern Han Dynasty (126–144), Taoism took shape in religious organisations and started to spread widely among the people. Therefore, since the beginning of the Three Kingdoms (220–280), Chinese traditional culture has formed a multicultural pattern with Confucianism, Taoism and Buddhism coexisting and interacting with each other. In ancient Chinese society, the school of thought that best reflects the isomorphism of family and state is Confucianism. As said in The Book of Rites—Great Learning, “things being investigated, knowledge became complete. Their knowledge was complete, and their thoughts were sincere. Their thoughts being sincere, their hearts were then rectified. Their hearts being rectified, their persons were cultivated. Their persons being cultivated, their families were regulated. Their families being regulated, their states were rightly governed. Their states being rightly governed, the whole kingdom was made tranquil and happy. From the Son of Heaven down to the mass of the people, all must consider the cultivation of the person the root of everything besides.” This elaboration is the ideological source of the social ideal of self-cultivation, family regulation, state governance, and peace of the kingdom pursued by the Confucian intellectuals of all dynasties in China. Since Emperor Wu of Han dismissed the hundred schools and solely revered Confucianism, Confucian thought has dominated the history of Chinese society for more than 2,000 years, thus establishing a social community composed of individuals, families, clans, nations, and states. The most significant structural feature of the family-state community in ancient Chinese society is the hierarchical structure, with the household as the core expanding layer by layer. This community “is from individuals to families, from families to clans, from clans to villages, from villages to counties, from counties to states, and from the states to the world, forming a hierarchy of differences progressively. In the community at each level, such as family, clan, village, county, and imperial court, there is also its own hierarchical pattern of differences.”4 In ancient Chinese society, family mottos, clan rules, lineage rules, village conventions, official rules, minister rules, and lord rules, etc., formed the institutional system of the entire society, from the human-culture system and the economic system to the political system. These different levels of institutions maintain the stability and operation of the entire social-state system. In ancient China, Confucianism attached great importance to family relations, especially the population production function of the family. In the view of ancient Chinese Confucianism, among the two kinds of social production, the production of 3

Li, F. H. (1998). The Study of Chinese Buddhism Is of Profound Significance: Commemorating the Two Thousand Years of the Introduction of Buddhism to China. Studies in World Religions (03). 李富华. (1998). 中国佛教研究意义深远——纪念佛教传入中国二千年. 世界宗教研究 (03). 4 Jiang, Y. H. (2012). The Roots of Chinese Civilisation. Shanghai People’s Publishing House. pp. 67–68. 姜义华. (2012). 中华文明的根柢. 上海人民出版社. pp. 67–68.

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humans and the production of means of subsistence, the production of humans has a more important meaning. The production of means of subsistence is ultimately for the production of humans. Therefore, ancient Chinese Confucianism attributed the human ethics of organizing the production of humans to benevolence and made it above all concepts of civilisation. Regarding the specific meaning of benevolence, Chunqiu Yuan Ming《春秋元命》recorded that benevolence is two people together, meaning that “the ceremony of marriage was intended to be a bond of love between two (families of different) surnames, with a view, to secure the continuance of the family line, and to secure the services in the ancestral temple” (The School Sayings of Confucius—Explanation of Marriage), which essentially is the instinct to preserve blood love.5 In other words, the essential connotation of Confucian benevolence is to organise the production of humans through marriage and family. In this ancient Chinese civilisation model centred on benevolence, which attached great importance to the production of humans, the production of subsistence means has always taken the production of humans as its ultimate goal. Taking benevolence as the axis is one of the essential characteristics of Chinese classical civilisation.6 The Book of Rites is an ancient Chinese guidebook of feudal rites compiled in the Western Han Dynasty. In this book, Confucianism not only weaves a network of elaborate etiquette in all aspects of daily life, such as clothing, food, housing, transportation, weddings and funerals, as well as knowledge exploration and state governance but also elaborates on the origin and the function of ritual from the philosophical heights of cosmology, history and human nature. The importance that Confucianism attaches to population production can be clearly seen from the relevant remarks in this classic of Confucianism. The Book of Rites—Meaning of the Marriage Ceremony is a special article explaining the meaning of marriage institutions. The article begins by saying, “the ceremony of marriage was intended to be a bond of love between two (families of different) surnames, with a view, in its retrospective character, to secure the services in the ancestral temple, and in its prospective character, to secure the continuance of the family line. Therefore, the superior men, (the ancient rulers), set a great value upon it.” Why do people need a set of grand etiquette when a man and a woman get married? According to Confucianism, marriage is important because of three aspects: first, it connects two families; second, it secures the services in the ancestral temple; and third, it secures the continuance of the family line. It is clear that in marriage and family relations, Confucianism values succession and continuance, and the family traditions pass on from one generation to the next. In the Confucian concept, marriage between a man and a woman can only be a solemn event in the family and has nothing to do with personal happiness. In ancient China, after an adult man and woman got married, if the woman failed to give birth, the man could just marry another woman as his second wife, and rich people could even Tomonobu Imamichi. (1987). 爱について (About Love) (Xu, P., Wang, H. B., trans.). Beijing Life·SDX Joint Publishing Company. p. 37. 今道友信. (1987). 关于爱 (Xu, P., Wang, H. B., trans.). 北京生活·读书·新知三联书店. p. 37. 6 Niu, L. F. (1989). Human-Culture-Civilisation Evolutionology and General Evolution Theory. Gansu Science & Technology Press. pp. 142–143. 牛龙菲. (1989). 人文进化学. 甘肃科学技术出 版社. pp. 142–143. 5

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marry one or two more women as concubines. In traditional Chinese ethical cognition, polygyny is a natural thing that can be perceived from the vivid descriptions in Honglou Meng《红楼梦》“Dream of the Red Chamber”. Such a family structure of polygamy can also be seen in the families of primates such as apes, orangutans and baboons in nature. Thus, the family organisation of ancient China seems to have preserved the animal traits of primitive societies. In Confucianism, the concept of marriage, which is passed down from generation to generation, still has a profound impact on family life in modern Chinese society. This can be used to explain why China’s population is growing so rapidly, making China the most populous country in the world. In ancient Chinese society, benevolence is a moral category with a very broad meaning, which originally refers to mutual love between people. Confucius regarded benevolence as the highest moral principle, moral standard and moral realm and constructed Confucian moral systems with this as the centre. According to statistics, in the 20 articles of the Analects, the term benevolence appears as many as 105 times, such as the benevolent loves others, the world returns to benevolence, etc. Confucianism regarded the behaviour of filial piety as the root of benevolence and filial piety as a specific way to realize benevolence. For example, Confucian speeches such as “Are not filial piety and obedience to elders fundamental to the actualisation of fundamental human goodness?” (The Analects of Confucius—Xue Er) “Of all (creatures with their different) natures produced by Heaven and Earth, man is the noblest. Of all the actions of man there is none greater than filial piety” (The Classic of Filial Piety), and “there are three things which are unfilial, and to have no posterity is the greatest of them” (The Works of Mencius—Li Lau I) and other Confucian remarks clearly express this idea. Filial piety here means honouring the elders and raising the offspring. Filial piety is the core of family ethics in ancient Chinese society and refers to the interpersonal relationships established by people starting from things around them, such as filial piety to their parents. Liang Shu-Ming (1893–1988), a famous cultural scholar, pointed out that ancient Chinese society was an ethicsbased society. He put forward that the Chinese people “promoted the development of family relations and organised society with ethics, dissolving the relationship between individuals and groups”. He believed that Chinese culture is the culture of filial piety that “first, Chinese culture is derived from family life, not from the group. The parent–child relationship is the core of family life, and the term filial piety is the key to its culture… Second, on the other hand, Chinese culture is the opposite of the individual-centred self-centredness of modern Western cultures. Mortality is always a spirit of selfless love, but this spirit will naturally radiate out with filial piety as the core. Third, the social order in China depends on etiquette and customs, unlike Western countries that rely on laws… Moreover, morality is the foundation of etiquette and customs, and all morality must be derived from filial piety, as stated in the Classic of Filial Piety.”7 Zhang Dong-sun (1886–1973) vividly described ancient Chinese society in his book Rationality and Democracy, where he wrote that “The 7

Liang, S. M. (1987). The Essentials of Chinese Culture. Xuelin Publishing House. pp. 77–80, 307–308. 梁漱溟. (1987). 中国文化要义. 学林出版社. pp. 77–80, 307–308.

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social organisation in China is a big family composed of multiple layers of countless small families. The ‘family hierarchy’ contained in it is that the ruler is the father of a state, and the ministers are the sons of the ruler. In such a hierarchically organised society, there is no concept of the individuality”.8 Therefore, benevolence and filial piety constitute the core of traditional Chinese culture. Among them, benevolence refers to family-based reproductive activities, while filial piety refers to the production and social relations based on family fertility. In ancient Chinese society since 220 AD, in the traditional Chinese culture dominated by Confucianism, Taoism and Buddhism, Confucianism has undoubtedly been in the core position. The ideological core of Confucius, the founder of Confucianism, is benevolence. Confucius took filial piety as the foundation of the practice of benevolence and righteousness, that the first thing he demanded students was filial piety. Confucian masters such as Zengzi, Mencius, and Xunzi all put filial piety in the highest position of life ethics. The Classic of Filial Piety, which was formed during the Warring States Period, concentrated on Confucian filial piety thought. This classic not only discusses the filial piety in the family but also extends this ethics to state governance. It can be said that it laid the foundation for Confucianism to govern the state with ethics. Confucianism closely integrated benevolence, rites and filial piety. Benevolence is its philosophical thought, rites are the centre of all institutions, and filial piety is its specific approach. The Book of Rites—A Summary Account of Sacrifices says that “of all the methods for the good ordering of men, there is no more urgent than the use of ceremonies. Ceremonies are of five kinds, and there is none of them more important than sacrifices… It is by sacrifice that the nourishment of parents is followed up and filial duty to them Perpetuated… The first and greatest teaching is to be found in sacrifice… In sacrifice, there is recognition of what belongs to ten relationships. The method of serving spiritual Beings; the righteousness between ruler and subject; the relation between father and son; the degrees of the noble and mean; the distance gradually increasing between relatives; the bestowment of rank and reward; the separate duties of husband and wife; impartiality in government affairs; the order to be observed between old and young; and the boundaries of high and low. These are what are called the (different duties in the) ten relationships.” The ten relationships in the sacrificial ritual mentioned here are ethical norms in the feudal rites, and it is these norms that determine the hierarchical order of Chinese feudal society. Among them, serving spiritual Beings refers to religious activities such as offering sacrifices to gods and ancestors, which is an extension of family and clan filial piety culture. Among the ten relationships, the ancients put “the method of serving spiritual Beings” in the first place, which shows the great importance people attach to religious activities. Rites refer to etiquette or feudal rites, which are the institutions and the formality used to regulate interpersonal relationships in ancient society. In ancient China, the laws of the state since the Qin and Han dynasties were all legislated with rites, and the unity of rites and punishments was the main feature of the laws of the dynasties. The laws of ancient China are strongly characterised by 8 Requoted from: Liang, S. M. (1987). The Essentials of Chinese Culture. Xuelin Publishing House. p. 90. 梁漱溟. (1987). 中国文化要义. 学林出版社. p. 90.

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feudal ethics and rites, which means that men are not created equal before the law, and the implementation of the law is determined by social rank. A general survey of the history of the judicial system in ancient China will show that not only the royal family, the royal family, the aristocracy, the bureaucrats and the gentry received the privilege that corporal punishment does not go up to senior officers but also the people of different status within a family have different sentencing principles. As Dong Da-Zhong pointed out, “the one in the position of ‘Yang’ has received corresponding institutional guarantees, while those in the position of ‘Yin’ are severely suppressed”. For example, the Qing Code promulgated in the 29th year of Guangxu stipulated that “every child or son’s child who strikes his paternal grandparents or parents, or a wife or concubine who strikes her husband’s paternal grandparents or parents will beheaded. If he kills them, he will be sentenced to death by slicing… If a clild or son’s child violates an order and the grandparents or parents in an improper manner beat and kill him, then they will receive 100 strokes of the heavy bamboo. If there is intentional killing, then the penalty is 60 strokes of the heavy bamboo and penal servitude of one year”. In ancient Chinese law, the phenomenon of different punishments for the same crime due to status and inferiority also existed in the handling of family property. The law also reflects obvious inequality in the relationship between husband and wife, as well as wife and concubine. In the Qing Code, if there is striking and injuring of a concubine, then the penalty for striking and injuring the wife is reduced by two degrees. If (the injury) amounts to death, then punished with 100 strokes of the heavy bamboo and penal servitude of three years; If the husband unintentionally kills the wife or concubine, there is no punishment; If the concubine strikes the husband, then add (to the penalty for a wife striking a husband) one degree, and punished with penal servitude of three years one year or one and a half years regardless of injury. If (the action results in) a fracture or worse, then the penalty is beheading.9 How can such inequality, unfairness and injustice be able to continue in Chinese society for more than 2,000 years? This not only shows the emptiness of individual rights and the proliferation of feudal ethics and rites in the Chinese humanistic and cultural tradition but also reflects the rigidity of humanistic spirit and the lag of legal thinking. In ancient Chinese society, both the family and the entire dynasty relied on feudal rites to maintain the social hierarchy. In a feudal family, the head of the family or the head of the clan often had the power of life and death over the members of the family. If a family member violated family rules or acts unfilially, they would be severely punished by the family patriarchal law. The specific methods include corporal punishment, beating, driving out of the family, burying alive, drowning, etc. These patriarchal institutions seriously suppressed the growth of individual rights and shackled the independent and free development of personality. Like a set of rigid templates, it shaped the psychological structure of generations of Chinese people, putting them on the life path designed by Confucianism. A person’s growth is inseparable from the environment in which he lives. Family is the first environment in which Dong, D. Z. (2012). Notes on Twenty-Four Filial Piety. unpublished. Chapter 1. 董大中. (2012). 二十四孝札记. 未出版. 第一章. 9

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an individual lives. Generations of Chinese had been living in a family environment composed of feudal rites and patriarchy since childhood. How could their psychology and personality not be affected? Scholars such as Sun Lung-Kee pointed out that Chinese people lack individuality and an independent spirit.10 Only by analysing the Chinese family environment and cultural traditions can one find the real reasons for this result. In ancient China, the term filial piety has existed since the inscription of oracle bones. Dong Da-Zhong pointed out that filial piety existed long before the emergence of class society and became a habit of people’s life; in the era of Yao and Shun, filial piety had become a recognised value standard.11 Book of Documents—Lord Chen described that “being filial, and friendly with your brethren, can you display these qualities in the exercise of government”, which may be the earliest exposition of by means of filial piety ruling all under the heaven recorded in Chinese history. The Classic of Filial Piety described that “anciently, when the intelligent kings by means of filial piety ruled all under heaven, they did not dare to receive with disrespect the ministers of small states”, reflecting that people in the Spring and Autumn Period and the Warring States Period have applied filial piety to state governance. However, it was the Han Dynasty that clearly put forward by means of filial piety ruling all under heaven as a strategy for state governance and fully implemented it. At the beginning of the establishment of the Han Dynasty, Liu Bang, Emperor Gaozu of Han, absorbed Confucian intellectuals to participate in politics, and it was they who brought the Confucian ideas of benevolence and filial piety into the central government of the Han Dynasty. One of the most important figures was Shu-Sun Tong. Shu-Sun Tong was instructed to combine ancient rites with Qin’s rites and formulated a set of court rites for the Han Dynasty, as well as the ancestral temple rites. These rites he formulated contained strong Confucian ethics. For example, the ancestral temple rites he formulated were the institutions of by means of filial piety ruling all under heaven, and the addition of filial piety to the emperor’s posthumous law may also come from his creation.12 The development of filial piety in the Han Dynasty, in the words of Hu Shi (1891–1962), has formed a religion of filial piety. In the process of promoting Confucian culture, Dong Zhong-Shu, a great scholar, played an important role. In the early years of the Western Han Dynasty, Confucianism was on an equal footing with other schools, each of which had its own followers. In the fifth year of Jianyuan (136 B.C.), under the active suggestion of Dong Zhong-Shu, Emperor Wu of Han implemented the strategy of dismissing the hundred schools and solely revering Confucianism. Since then, Confucianism has emerged from various schools of thought and has been elevated to the status of state religion. In his philosophical work Luxuriant Dew of the Spring and Autumn Annals, Dong Zhong-Shu combined Sun, L. J. (2011). The Deep Structure of Chinese Culture. Guangxi Normal University Press. 孙 隆基. (2011). 中国文化的深层结构. 广西师范大学出版社. 11 Dong, D. Z. (2005). Dong Yong’s New Theory. Beiyue Literature & Art Publishing House. p. 6. 董大中. (2005). 董永新论. 北岳文艺出版社. p. 6. 12 Ou-Yang, Z. S. (1998). Collected Works of Hu Shi (V). Peking University Press. p. 76. 欧阳哲 生. (1998). 胡适文集(第5卷). 北京大学出版社. p. 76. 10

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the Yin-yang concept of the School of Yin-yang with Confucian social and political philosophy. The principle of yin and yang and five elements was used to explain all things in the universe and human ethics and put forward the systems thinking of Heaven and Man are one. The three essential relationships and five constant virtues13 proposed by him have influenced Chinese society for more than 2,000 years and have a profound and long-lasting educational effect on society. To maintain the orthodox status of Confucianism, he also created important social institutions. He first initiated the system of taking an official position through examinations and advocated the use of Confucian classics as the basis for these examinations,14 which are the prototype of Chinese imperial examination commonly practiced in the Sui Dynasty. Dong Zhong-Shu’s theory of yin and yang and the five elements provided a strong philosophical basis for filial piety. It was under his vigorous advocacy that the rulers of the Han Dynasty regarded by means of filial piety ruling all under heaven as the most important policy of a state. In the Han Dynasty, by means of filial piety ruling, all under heaven was manifested in all aspects of people’s political, economic, educational and social life. For example, in the Han Dynasty, a commandery governor could nominate a private citizen for an official post. The nominee was selected for an outstanding record of filial piety and honesty. During the 400 years from Emperor Wen of Han (Liu Heng, 203–157 B.C.) to the end of the Eastern Han Dynasty, a total of 30 talented people and 113 filial and honest people, such as Confucianist Dong Zhong-Shu, medical scientist Hua Tuo, literati Xu Shen, scientist Zhang Heng (78–139), etc., were nominated from various places. As an important measure in the construction of the civil service system in Chinese history, this nomination policy has been followed by many dynasties since then. The Han Dynasty also vigorously popularised filial piety education. During the reign of Emperor Wu of Han, the imperial court “ordered all the counties and states in the kingdom to establish school officials” (Book of Han—Upright Officials) to teach Confucian classics. In the third year of Yuanshi (A.D. 3), under the reign of Liu Kan, the Emperor Ping of Han, the Han Dynasty established a local school system. The government-run schools went further from the county to the village and included the Classic of Filial Piety as a must-read for schoolchildren (Book of Han—Annals of Emperor Ping, 1 BCE—5 CE, at that time the Classic of Filial Piety was a self-cultivation textbook for elementary school students15 ). The Han Dynasty used imperial power to implement filial piety, which was a concentrated expression of the formation of a religion of filial piety. It was also a turning point in the alienation of filial piety from the original family ethics to a political philosophy. Since the Han Dynasty, successive dynasties have attached great importance to the implementation of filial piety. For example, Tang Xuan-Zong Li Long-Ji (685–762) also wrote a preface for the Classic of Filial Piety 13

Three essential relationships are between ruler and subject, father and son, and husband and wife; And five constant virtues are justice, politeness, wisdom, fidelity and benevolence. It highly summarises the core values and basic spirit of Chinese traditional morality. 14 Feng, Y. L. (1996). A Brief History of Chinese Philosophy. Peking University Press. p. 166. 冯 友兰. (1996). 中国哲学简史. 北京大学出版社. p. 166. 15 Qian, X. T. (1999). Qian Xuantong Collection (IV). China Renmin University Press. p. 193. 钱 玄同. (1999). 钱玄同文集(第四卷). 中国人民大学出版社. p. 193.

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to advocate filial piety and made an annotation for the book; Emperor Wenzong of Tang (Li Ang, 809–840) also included the Classic of Filial Piety in the Twelve Classics. In the Southern Song Dynasty, the Classic of Filial Piety was put into the Thirteen Classics, and it was a must-read book for scholars. Under the advocacy of the rulers from the Han Dynasty to the Ming and Qing Dynasties, the thought of filial piety has been deeply rooted in Chinese society and has formed a wide range of influences. The tradition of village school children reading the Classic of Filial Piety even continued until the May Fourth Movement in the twentieth century.16 The real purpose of implementing filial piety by the rulers of successive dynasties was mainly to maintain and consolidate the rule of feudal dynasties in hopes of obtaining the same loyalty and filial piety people show to their parents so that everyone would become a loyal servant to the imperial court. Filial piety, as a kind of ethics in the family, has a rational core that is worthy of being carried forward in modern society, but it is problematic to generalise it to the level of state governance. Honouring parents, respecting the old and cherishing the young are virtues worth advocating in any state or nation worldwide. However, Confucianism linked filial piety with loyalty to the monarch, extended this ethics from the family to the state, raised it to the status of state religion, and finally turned it into a ruling tool for the feudal monarch to enslave the people. This is the solid spiritual shackle on the Chinese people, which seriously hinders the progress and development of Chinese society. Since A.D. 220, the three cultural elements of Confucianism, Taoism and Buddhism have been interacting, communicating and evolving. During the Wei and Jin Dynasties, Taoism derived metaphysics by absorbing the dwindling Confucian classics of the two Han Dynasties and the elements of Buddhism.17 From the fifth century (the beginning of the Southern and Northern Dynasties) to the seventh century (the beginning of the Tang Dynasty), Buddhism gradually evolved into the Tiantai Sect, Huayan Sect and Zen Sect with Chinese local characteristics in combination with the psychological feature of the Chinese people.18 After the rise of the Tang Dynasty, Taoism, which was designated the state religion, flourished, and Taoist temples were spread all over the country.19 During the prosperous Tang Dynasty, Confucianism was revived. Confucian scholars absorbed elements of Taoism, metaphysics and Zen and developed Confucianism into a complete religion. In the Song Dynasty, the power of Buddhism declined, the Taoist school of mathematics emerged, and Confucianism was revived again. In the Southern Song Dynasty, under the influence of Zen and Taoism, neo-Confucianism was developed from Confucianism. In the Yuan Dynasty, neo-Confucianism was advocated by those in power. In the Ming Ou-Yang, Z. S. (1998). Collected Works of Hu Shi (V). Peking University Press. p. 409. 欧阳哲 生. (1998). 胡适文集(第5卷). 北京大学出版社. p. 409. 17 Min, J. Y. (2012). Evolutionary Pluralism. China Social Sciences Press. p. 361. 闵家胤. (2012). 进化的多元论. 中国社会科学出版社. p. 361. 18 Requoted from: Chang, N. D. (2009). A Brief History of Chinese Thought. Shanghai Classics Publishing House. pp. 58–60. 常乃惪. (2009). 中国思想小史. 上海古籍出版社. pp. 58–60. 19 Requoted from: Chang, N. D. (2009). A Brief History of Chinese Thought. Shanghai Classics Publishing House. p. 65. 常乃惪. (2009). 中国思想小史. 上海古籍出版社. p. 65. 16

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and Qing dynasties, the rulers even included neo-Confucianism in the imperial examinations, and the influence lasted for more than 500 years. In the Yuan, Ming and Qing dynasties, with Confucianism as the core, the three religions were integrated and developed independently. In the Yuan, Ming, and Qing dynasties, the implementation of closed policies and cultural despotism by the ruling clique declined the humanistic spirit and the social culture, resulting in the stagnation and rigidity of Chinese social ideology and culture for more than 600 years. In general, among the three basic production activities (i.e., population production, material production and mental production) of human society, ancient Chinese society attached great importance to population production, looked down on material production, and relatively neglected mental production. In population production and cultivation, it is manifested as household-oriented, paying too much attention to ethical and moral education and family patriarchal norms, but ignoring the cultivation of personality, which inhibited individuals’ independent spiritual growth. In material production, it is manifested as attaching importance to agriculture and inhibiting industrials and commerce. In mental production, it is reflected in the emphasis on perceptual emotions (i.e., developed literature and poetry), but rational thinking (i.e., philosophical thoughts are mostly vague), on humanities instead of science and technology (i.e., inventions and innovations could not be widely used), and on synthesis rather than analysis (i.e., the specialisation of disciplines was not developed enough). This structural feature of social production in ancient China determines the differences in the characteristics of Chinese society and Western society and between the two types of civilisation. Tracing the source, it will not be difficult to find that this difference mainly originates from the structural difference of the human-culture system between the two civilisations. For example, the human-culture in Western society often focuses on innovation, while the human-culture in Chinese society pays more attention to ancient times. Western society is often individual-oriented, while Chinese society is family-oriented. The rule of law in Western society is higher than the rule of man. In Chinese society, the rule of man is always higher than the rule of law. Western society implements separation of state and religion, while Chinese society implements integration of state and religion.

9.2 The Rise and Fall of Market Economy in Ancient China Anyone who has studied Chinese history or read the general history of China knows that China’s nearly 4,000-year history of civilisation is complicated and confusing, full of the rise and fall of the country, and changes. Through the fogs of history, it is not difficult to find that ancient Chinese history has two significant periodic characteristics, the periodicity of regime change and the periodicity of state separation and reunification. The periodicity of regime change means that the process of dynasties changing and ruling groups taking turns in power has cyclical characteristics, which are often summed up as historic periodicity. The periodicity of state separation and reunification refers to the cyclical characteristics of the continuous

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alternation between state division and reunification, as Luo Guan-Zhong revealed in the opening chapter of The Romance of the Three Kingdoms, “it is a general truism of this world that anything long divided will surely unite, and anything long united will surely divide”. A state is a social system composed of elements (or subsystems) such as humanculture, economy, and polity. The historic periodicity mainly reflects the cyclical changes of political elements (or political subsystems) within a state, or more precisely, the cyclical changes of the regime in the state’s political system. According to the nature of the system, it can be known that the elements (or subsystems) within the system are interrelated, interacted, and interinfluenced, and the change of any one element (or subsystem) will cause other elements (or subsystems) to change. Therefore, the cyclical changes of a state’s political elements (or political subsystem) will inevitably lead to corresponding cyclical changes in other components (or subsystems). However, because each element (or subsystem) has its own structure, the periodicity of each element (or subsystem) has its independent features. The following section discusses the cyclical features in the evolution of the ancient Chinese socioeconomic system. Due to the limitations of ancient historical documents, the book can only start from the social and economic development of the Qin and Han dynasties. Given the time span of more than 2,000 years, we can only describe a general situation of the long-term changes of the ancient Chinese social and economic system. Chapter 6 has elaborated the long-term transition of ancient Chinese agriculture, so here, we will only brief the long-term transitions of ancient Chinese industrials, commerce and market economy.20 Handicrafts and market transactions in ancient Chinese society were quite developed as early as the Shang Dynasty. In the Western Zhou Dynasty, the division of labour was more detailed. At that time, there were hundreds of types of professions, such as potters, carpenters, jade workers, textile workers, leather workers, metal workers, and weapon manufacturers. At the turn of the Qin and Han Dynasties, China experienced a period of war and turmoil in which warlords fought for hegemony. When the Qin Dynasty collapsed and the Han Dynasty prospered and a unified socially stable centralised state power was established, the first economic prosperity of agriculture, manufacturing and commerce appeared in ancient Chinese history. During the rule of Wen and Jing (179–141 B.C.), the rulers of the Han Dynasty adopted the strategy of governing by noninterference and implemented the economic policies of giving the people a respite by imposing light taxes and labour and following the desires of the people without interference, which led to the emergence of a prosperous age of Wen and Jing for approximately 40 years in the Han Dynasty society. Si-ma Qian described in The Records of the Grand Historian—Biographies of Usurers that “with the rise of the Han Dynasty and the unification of all under heaven, the checkpoints were 20

The following literature on ancient Chinese manufacturing and commerce as well as market economy are compiled from: Wei, S. Looking at the Periodic Rise and Fall of Market Economy from Chinese History. China Economic Net. 韦森. 从中国历史看市场经济的周期性兴衰. 中国 经济网. http://www.ce.cn/xwzx/gnsz/gdxw/200704/26/t20070426_11173813.shtml. Accessed 26 Apr 2007.

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opened and the ban on mining mountains and lakes was lifted. Therefore, wealthy merchants were able to travel all over the country and trade goods smoothly and contentedly”. During the rule of Wen and Jing, the national transportation and market transaction network gradually formed, which promoted the urbanisation and the progress of science and technology at that time. At that time, in addition to the capital Chang’an, there were also Luoyang, Handan, Linzi, Wan (now Nanyang), Chengdu, etc. There were also other large and small businesses all over the country. During the Western Han Dynasty, industries such as ceramics, textiles, dyeing, winemaking, salt making, carriage building, shipbuilding, metallurgy, and bronzeware were very developed. The smelting technology at that time was relatively advanced, and craftsmen generally adopted the method of blast furnace ironmaking, which directly promoted the rapid development of the steel handicraft industry and thus had a profound impact on the economic sectors in the Han Dynasty. During the prosperous age of Wen and Jing, China’s market economy reached its first peak in ancient Chinese history. The commodity economy and technological progress at that time had developed some conditions that could allow the primary handicrafts to upgrade to a higher stage. The Chinese economic historian Fu Zhu-Fu (1902–1985) once pointed out that during the Western Han Dynasty, China was “not inferior to the level achieved by the steel industrials during the British Industrial Revolution in the eighteenth century in terms of production technology, production and quality of steel, and China was two thousand years earlier”. Accompanied by the prosperity of the market, however, during the rule of Wen and Jing, there was a huge disparity and polarisation between the rich and the poor in all social strata. just as the Book of Han—Treatise on Trade portrayed that “the rich and the officials amassed great fortunes, while the poor and the weak became more miserable”. On the other hand, with the accumulation of merchant capital, the power of the merchant class gradually grew, which made the rulers of the Han Dynasty feel the potential threat to their own autocratic rule. It is for these reasons that the rulers of the Han Dynasty launched a crackdown on wealthy businessmen and curbs on the market economy. In 135 BC, Emperor Wu of Han began to forcefully implement unified purchase and sales policies such as equitable taxation 均 输 and balanced standard 平准. At the same time, profitable industries such as salt, iron, and wine, which were originally operated by private manufacturing and commerce, were forcibly returned to the government. This is the jinque system 禁榷制度 monopoly system in ancient Chinese history in which the government monopolises the transportation and trade of important goods. In addition, the Han Dynasty plundered or devalued the large amount of monetary wealth accumulated by merchants by increasing merchants’ taxes, confiscating merchants’ property, and constantly changing the currency system; it also demeans the social status of businessmen through various personal insults. It was these policies and measures that broke down the originally prosperous private manufacturing and commerce in the Han Dynasty and suppressed the growth and expansion of the market economy. The monopoly system and the suppression of commerce initiated by Emperor Wu of Han, as a successful example of rulers controlling society and ensuring the source

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of income for the court, were mimicked by the rulers of subsequent generations and had a far-reaching impact. For more than two thousand years, the rulers of ancient Chinese society have repeatedly adopted similar institutions and measures, creating a set of strong shackles that have long restricted the spontaneous expansion and free growth of the market economy within society! The social turmoil and economic destruction that began in the late Eastern Han Dynasty lasted for more than half a century. After the reunification and social stabilisation in the Western Jin Dynasty, the market economy of the society recovered slightly. Then, came the social turmoil and economic destruction from the Southern and Northern Dynasties to the early Sui Dynasty, which continued until the early years of Zhenguan (A.D. 627) under the reign of Emperor Taizong of Tang (Li Shi-Min, 599–649). After the Tang Dynasty unified China, the market economy was restored in a politically unified and socially stable environment. During the pre-Tang Dynasty, not only was agriculture rapidly recovered, but commercial trade was also developed; the economic growth and social prosperity of this period lasted for approximately 120 years. During the Tianbao reign of Emperor Xuanzong of Tang (A.D. 742), the social economy gradually reached its peak. However, while the economy of the Tang Dynasty was booming, the corruption and extravagance of the ruling clique and the land annexation of the rich and gentry became increasingly serious, causing a large number of farmers to lose their land and become refugees, and the social disparity between the rich and the poor was extremely critical. “Crimson gates reek with meat and ale, while on the streets are bones of the frozen dead… When I came in the gate, I heard crying out, my young son had died of hunger” (Du Fu’s Going from the Capital to Fengxian County, Singing My Feelings [five hundred words]) is a true portrayal of the social reality at that time. Various internal contradictions, class contradictions, ethnic contradictions, and contradictions between the central imperial power and local forces continued to intensify, eventually leading to the An Lushan Rebellion in A.D. 755–762. The Rebellion caused huge damage to the social economy at that time, and the subsequent separatist regimes and peasant uprisings led by Huang Chao made it difficult for commodity circulation and trade. From the middle and late Tang Dynasty to the Five Dynasties and Ten Kingdoms period, the social turmoil and destruction that lasted for approximately 200 years completely destroyed the commodity economy developed in the prosperous Tang Dynasty. In A.D. 960, after Zhao Kuang-Yin and Emperor Taizu of Song (927–976) established the Song Dynasty, he implemented some economic institutions and policies that were conducive to the development of the market economy and commodity trade. Except for some handicraft sectors (such as the tea industry), which are monopolised by the government, the government generally no longer intervened or controlled private economic activities in other industries, and the restrictions on the location, scope and market opening time of commodity markets were lifted. From the Spring and Autumn Period until the Tang Dynasty, the commodity market was limited to a fixed location and a small area, and there were strict regulations on the opening time of the market. The abolition of these restrictive regulations by the Song Dynasty played an important role in promoting the development of the market and prospering

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commodity trading. From then on, merchants from all over the world could conduct trading activities day and night, and manufacturers and merchants were free for the first time. These reforms of the economic system released the market vitality that had long been constrained by various controls, thus promoting the unprecedented prosperity of commerce and market trade in the Song Dynasty. From A.D. 960 to the end of the eleventh century, the market economy of Song Dynasty society has been continuously growing; handicrafts such as mining, metallurgy, processing, shipbuilding, textile, sugar, and papermaking have all achieved great development and have made great progress in production technology. According to the estimate of the British scholar Robert Milton Hartwell (1932–1996) in A Revolution in the Chinese Iron and Coal Industries During the Northern Sung, the iron output of China during the Northern Song Dynasty (A.D. 960–1127) had reached 2.5–5 times that of England and Wales in 1640 and was equivalent to the total iron output of Europe (including the European part of Russia) in the eighteenth century (approximately 145–180,000 tons). In the Song Dynasty around AD 1000, China’s market economy reached the second peak in ancient Chinese history. The commodity economy and technological level at that time had developed some conditions close to the European Industrial Revolution. Scholars even believed that, from comprehensive economic development and technological progress, the level of social and economic development in China at that time was similar to that of European countries in the seventeenth and eighteenth centuries. However, it is unfortunate that the more than 100 years of economic prosperity in the Northern Song Dynasty were interrupted by aggression by the northern people, and the social economy was severely damaged again. Although the Southern Song Dynasty (A.D. 1127–1279) was weak in military and settled in the area south of the Yangtze River, it still maintained its rule for approximately 150 years. During that time, the market economy and private manufacturing and commerce centred on Lin’an (now Hangzhou) were still prosperous, especially shipbuilding and foreign trade. At that time, China’s overseas trade included Korea, Japan, Southeast Asian countries, India, Persia and Arab countries. However, this prosperity was interrupted by the invasion of the Mongolian army. After the Mongolians entered central China and established the Yuan Dynasty Empire (A.D. 1206–1368), the Yuan Dynasty government promoted and used banknotes throughout the country, which pushed the circulation and use of banknotes in a wider range of the world (in Europe, paper money did not emerge until the end of the seventeenth century. In the 1740s, David Hume still spoke of “this new invention of paper”, an invention that the Founding Fathers contemplated with profound suspicion when the century came to its close21 ) Because the rulers adopted a state management system that integrates the military and the government, the development of the private market economy had been greatly suppressed. However, in the middle and late Yuan Dynasty, the market economy, manufacturing, commerce and trade still achieved certain growth and prosperity, and some southeastern cities even surpassed Europe at that time. 21

Spiegel, H. W. (1991). The Growth of Economic Thought. Duke University Press. Social Sciences Press. p. 70.

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After the establishment of the Ming Dynasty (A.D. 1368–1644), the founding emperor Zhu Yuan-Zhang (1328–1398) adopted the basic state policies of rest and recuperation to restore and value agriculture. In terms of economic development, the Ming government organised farmers to build water conservancy and improve farm tools and encouraged the cultivation of cash crops such as cotton, tea, peanuts, and tobacco, thus promoting agricultural development. In terms of manufacturing and commerce, in addition to continuing to use the craftsman household system of the Yuan Dynasty,22 the Ming Dynasty government implemented a series of policies and measures to strictly control the business activities of private businesses, thus hindering the development of the private market economy. The textile and metallurgical industries in the Ming Dynasty were very developed; some historians estimate that the iron output in the early years of Yongle in the Ming Dynasty alone had reached the entire iron output of Europe in the early eighteenth century. In the middle and late Ming Dynasty, political corruption and market economic development coexisted in the social economy. Beginning in the Chenghua (1465) period, the Ming government became increasingly corrupt, the emperor took the lead in plundering the wealth of the state, and the officials, gentry and landlords wantonly annexed land, which intensified social contradictions. During the reign from Emperor Jiajing (1522) to Emperor Wanli (1573), the Ming government gradually loosened its control over the market economy, private market trade developed accordingly, the commodity economy of most parts of the country (especially the Jiangnan region) began to prosper, and private handicrafts and commerce flowered unprecedentedly. Many economic historians believed that in the middle and late Ming Dynasty (i.e., at the end of the sixteenth century and the beginning of the seventeenth century), China’s handicrafts, mining, metallurgy, commerce, transportation, foreign trade, etc., have all flourished at that time. In the middle of the Ming Dynasty (1522– 1573), China’s market economy reached the third peak of economic development in ancient Chinese history. Many scholars believed that compared with the industrial, commercial and technological development levels of other countries worldwide at the same time, China was the country with the most developed economy and the most prosperous manufacturing and commerce in the world at that time. However, in the late Ming Dynasty, defunct imperial law, political paralysis, and economic decline led to a comprehensive financial crisis, followed by large-scale peasant uprisings, and the Ming Dynasty eventually fell with the entry of the Qing army. After the Manchu Qing Dynasty took control of central China in 1644, the Qing government initially followed the basic state policy of valuing agriculture and suppressing commerce in the past dynasties and implemented a very strict sea prohibition order in the early decades of the Qing Dynasty. However, in a stable social 22

A household registration management system implemented in the Yuan Dynasty for handicraftsmen. The handicraftsmen in the Yuan Dynasty formed their own category in terms of household registration. They were required to engage in handicraft production such as construction, textiles, weapons, and handicrafts in the bureaus established by the government. The government regularly distributed food rations to the craftsmen and their families; The Yuan Dynasty government stipulated that all those who were incorporated into the household registration must inherit from generation to generation and could not leave their registration at will.

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environment, the market economy of the whole society has prospered again. Especially during the more than 130 years of the High Qing era (1661–1795), the total national economy and social population increased on a large scale at the same time. Paul Kennedy, an American scholar, estimated in his book The Rise and Fall of Great Powers that in 1750, China’s manufacturing output was 8.2 times that of France and 17.3 times that of the United Kingdom. In 1830, China’s manufacturing output was 5.7 times that of France and three times that of the United Kingdom. The population of China at that time increased from approximately 65 million in the eighth year of Shun-Zhi (1651) to 360 million in the Jiaqing Reign (1812). In the late Qianlong and Jiaqing reigns (1796–1820), the Qing government began to corrupt, and social contradictions continued to intensify. Uprisings such as the Taiping Rebellion and the Nian Rebellion continued one after another. The Opium War, the Sino-French War and the First Sino-Japanese War broke out one after another, which once again severely damaged China’s market economy. Under internal and external troubles, the Qing Dynasty eventually came to its demise. By reviewing the history of the market economy in ancient Chinese society for more than 2,000 years, it can be found that since the Qin and Han dynasties, China’s market economy has shown an obvious cyclical rise and fall, which was closely related to the replacement of dynastic regimes. There is often a causal relationship between the two. On the one hand, it reflects that the political system in the state system has an important influence on the economic system, and this influence is generally exerted through institutional factors such as economic policies. Specifically, any system that conforms to the law of economic development will promote economic growth, and any system that violates the law of economic development will hinder economic growth. On the other hand, the economic system in the state system has an important reaction to the political system, which is generally reflected through the social distribution institutions. The specific reflection is that in the early and mid-terms of each dynasty, the social distribution institutions are rather fair and reasonable, manufacturing and commerce are more prosperous, and people are able to live and work in peace and contentment, thus supporting the stability of the political system, while in the later period of each dynasty, the social distribution institutions are unfair and unreasonable, and corruption and profligacy lead to the disparity between the rich and the poor and the polarisation of the entire society, which inflames various contradictions and triggers social revolutions, wars and turmoil, leading to instability and collapse of the political system. In the past two thousand years, the market economy had at least three peaks in ancient China, and as early as the Northern Song Dynasty in A.D. 1000, China’s commodity economy and technological level at that time were already close to the conditions of the modern European industrial revolution, but this did not happen in China. Moreover, China’s capitalist economy had not developed and was rather weak even until the late Qing Dynasty. In addition to many reasons, such as polity, culture, technology, and war, institutional factors are obviously an important reason. Wei Sen, a professor at Fudan University, stated that “since Emperor Wu of Han, the policies of valuing agriculture and suppressing commerce and jinque system 禁榷制 度 monopoly system that had been adopted repeatedly by the Chinese dynasties are

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the most important restrictive factors that hinder the development of China’s market economy in the long history of more than 2,000 years.”

9.3 The Rise and Fall of Science and Technology in Ancient China Ancient Chinese science and technology have an important historical position in the history of world science. It began to accumulate in ancient times, which laid the foundation in the Spring and Autumn Period and the Warring States Period. It enriched and improved in the two Han, Wei, Jin, Southern and Northern Dynasties, continued to develop in the Sui, Tang and Five Dynasties, and reached its peak in the Song Dynasty. After Wanli in the Ming Dynasty, it started to lag behind the West in the same period, but there was still slow progress. Throughout the entire history of ancient Chinese science and technology, it was in the leading position in the world before the sixteenth century. Since the Axial Age of Human Civilisation, Chinese and Western cultures and sciences have begun to diverge, and each has embarked on a different development path. Ancient Chinese science and technology has a unique system different from that of the West, and its formation and development also have its own history, characteristics and internal laws. Its development process has generally gone through six stages, and these six stages form a large cycle. The general context of its development is23 : 1. 2. 3. 4. 5. 6.

Birth period: the Spring and Autumn Period and the Warring States Period; Specification determination period: the period of two Han dynasties; Theoretical development period: Wei and Jin to Sui and Tang Dynasties; Peak period: Song Dynasty; Utility period: Ming Dynasty; Decline period: Qing Dynasty.

Ancient Chinese science is based on the natural view of holism and preformation theory, which is significantly different from the scientific tradition based on atomic theory and constitutive theory originating from ancient Greece in the West. In simple terms, according to the ancient Greek view of nature, the natural world is composed of a combination of certain elementary particles (i.e., atoms). This view of nature leads Western science to explore the nature of things in terms of decomposition and composition. From ancient China’s view of nature, the natural world itself is an indivisible whole that has evolved from zero to one and from small to large. This view of nature led ancient Chinese science to grasp the nature of things in a comprehensive and connected manner. “All things in the cosmos arise from being. Being arises from nonbeing”; “The Tao produced One; One produced Two; Two 23

Li, S. H. (2002). The Basic Model and System of Chinese Science. Philosophical Research (03). 李曙华. (2002). 中华科学的基本模型与体系. 哲学研究 (03).

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produced Three; Three produced All things” (Lao Tzu, Tao Te Ching Chap. 40, 42), for instance, are succinct expressions of this understanding of the formation of all things in the universe. The origin of ancient Chinese thought based on holism and preformation theory can be traced back to Zhou Yi. Zhou Yi was written in the early years of the Western Zhou Dynasty. The Spring and Autumn Period in China was on the axis of human civilisation. Like ancient Greece, ancient India and Hebrew culture, Chinese culture began to shift from the focus on destiny to the pursuit of realm,24 thus fundamentally determining the mainstream spirit and value orientation of Chinese culture. According to Li Shu-Hua’s point of view, the Spring and Autumn Period and the Warring States Period were the transition periods of the I Ching from witchcraft to science, and the pivot point of this transformation was in Yi Zhuan.25 Yi Zhuanwas a collection of essays whose teachings originated from Confucius and were written in the hands of Confucius’ later studies.26 It used the unity of opposites of yin and yang, heaven and earth, hardness and softness to explain the changes of all things in the universe, proposed that the interaction of opposites is the universal law of the change of things and the source of the transformation of all things, and explained the process of the change of things by the mutual transformation of opposites. It emphasised the unceasing nature of cosmic changes, put forward that ideas such as poverty give rise to the desire for change and that things will develop in the opposite direction when they become extreme, and stressed the importance of the sense of urgency and constant changes that one should be prepared for danger in times of safety and should strive to better oneself constantly and never slacken, all of which laid the theoretical foundation for the development of ancient Chinese dialectics. Yi Zhuan interpreted the cultural and scientific significance of I Ching with a brand-new philosophical thought, understood nature from the universal laws of the universe, as well as life and destiny, and for the first time clearly clarified the ancient Chinese view of nature. Therefore, it can be regarded as the oldest natural philosophy in China. Yi Zhuan was the first to put forward scientific thought relatively completely, laying the philosophical foundation of traditional Chinese scientific norms,27 and stipulated the basic categories of ancient Chinese science, “thus making I Ching a basic model and 24

Huang, K. J. (1998). The Life Sentiment of Confucius and the Primitives of Confucianism-From Destiny to Realm. Selected Works of Huang Ke-Jian. Guangxi Normal University Press. 黄克剑. (1998). 孔子之生命情调与儒家立教之原始-从命运到境界. 黄克剑自选集. 广西师范大学出版 社. 25 Li, S. H. (2002). The Basic Model and System of Chinese Science. Philosophical Research (03). 李曙华. (2002). 中华科学的基本模型与体系. 哲学研究 (03). 26 From Si-Ma Qian’s The Records of the Grand Historian—Autobiographical Afterword of the Grand Historian, Ban Gu’s Book of Han—Treatise on Literature, to Kong Ying-Da’s Notes and Commentaries on Zhou Yi in the Tang Dynasty, scholars at that time believed that the ten chapters of Yi Zhuan were written by Confucius. However, many modern scholars have shown based on archaeological data that the articles in Yi Zhuan were not formed in the same period, and their authors did not come from one single person. The traditional view that they were all written by Confucius have been denied by most scholars. 27 Dong, G. B. (1993). Science History Compendium of I Ching. Wuhan Publishing House. p. 7. 董光璧. (1993). 易经科学史纲. 武汉出版社. p. 7.

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a symbolic system for people to gain insight into and grasp the universal law of the generation and evolution of all things in the universe instead of a simple divination book”.28 During the Warring States Period, scholars of the Jixia School of Qi State integrated the Five Elements from the ancient calendar, astronomy, and geography with the medical Yin-Yang theory and formed a unified Yin-Yang and Five-Element theory, thus establishing a more practical ancient scientific model. In the Han Dynasty, the theory of Yin-Yang and Five Elements was incorporated into the framework of I Ching studies, thus forming a unique system of Chinese I Ching Symbolic Mathematics. It integrates I Ching, the Yin-Yang Five Elements, and the stem-branch timing method with the basic structure of the Yin-Yang and the Five Elements. It takes Zhou Yi as the operating symbol system and integrates this system into a universal symbolic model of the generation and evolution of all things in the universe. Thus, conditions were prepared for the establishment of the disciplines of ancient Chinese science. With the formation of this unique scientific model and operational symbol system, the main branches of ancient Chinese science, such as astronomy, mathematics, traditional Chinese medicine, and agronomy, were successively established during the two Han Dynasties. The general situation is as follows: 1. Astronomy In ancient China, the most influential theories of the structure of the universe mainly include canopy-heavens theory, sphere-heavens theory and infinite empty space cosmology. The canopy-heavens theory originated in the late Shang and early Zhou Dynasties more than a thousand years ago, the sphere-heavens theory originated in the middle of the Warring States period at the latest, and the infinite empty space cosmology was an astronomical thought developed from the philosophical thought of the Warring States period. In the Han Dynasty, the canopy-heavens theory was gradually replaced by the sphere-heavens theory. The theory on the origin and evolution of the universe gradually formed a relatively complete theory by the Han Dynasty. For example, Huainan Masters—Patterns of Heaven, which was written in the Western Han Dynasty, put forward a relatively complete theory of the creation of the universe and explained the creation of the universe with the idea that “being arises from nonbeing”. Another example, Zhang Heng, an astronomer in the Eastern Han Dynasty, gave a complete description of sphere-heavens theory. He proposed that the heaven is a complete sphere, and “the land is like the yolk of an egg” surrounded by the heaven instead of a dome-like hemisphere, as the canopy-heavens theory believed.29 Zhang Heng’s theory of the celestial sphere and the armillary sphere and armillary phenomenon he created laid the foundation for the basic theory of ancient 28

Li, S. H. (2002). The Basic Model and System of Chinese Science. Philosophical Research (03). 李曙华. (2002). 中华科学的基本模型与体系. 哲学研究 (03). 29 Xu, F. X. Theory of the Universe. In: Song, Z. H., Sun, G. L. (2000). Illustration of Chinese Ancient Scientific and Technological Achievements. Zhejiang Education Publishing House. pp. 44– 45. 徐凤先. 宇宙理论. In 宋正海., 孙关龙. (2000). 图说中国古代科技成就. 浙江教育出版社. pp. 44–45.

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9 The Main Dynamics and the Features of Social Development in Ancient …

Chinese astronomy and the basic norms and systems for astronomical observation. The Zhuanxu calendar of Qin and the Taichu calendar of Han marked the formation of the basic framework of the ancient Chinese calendar closely related to astronomy. 2. Mathematics In the Han Dynasty, the publication of Nine Chapters on Mathematical Art established the basic system of mathematics using calculation as a tool and featuring number theory and algorithms. 3. Medical Science From the Warring States Period to the Han Dynasty, a relatively complete and mature system of traditional Chinese medicine was formed. During the Warring States Period, the Inner Canon of the Yellow Emperor《黄帝内经》established the theoretical system of traditional Chinese medicine in ancient China. During the Qin and Han Dynasties, The Divine Farmer’s Herb-Root Classic《神农本草经》built up the basic theory and system of traditional Chinese medicine and drug taxonomy in ancient China. In the Han Dynasty, Treatise on Febrile and Miscellaneous Diseases《 伤寒杂病论》written by the first-generation medical sage Zhang Zhong-Jing set up the basic theory and system of traditional Chinese medicine in ancient China based on the basic principle of syndrome differentiation and treatment. The superb medical skills of the surgical master Hua Tuo represent the basic characteristics and level of ancient Chinese traditional Chinese medicine surgery, anaesthesia, and physical therapy. 4.

Agronomy

The publication of Fan Shengzhi Shu《氾胜之书》The Book of Fan Shengzhi in the Han Dynasty indicated that the foundation of the crop cultivation theory in ancient Chinese agricultural planting had been formed.30 The ancient Chinese science and technology system includes three major parts: theoretical disciplines, empirical disciplines and practical technologies. The theoretical disciplines were dominated by astronomy and mathematics, including musical rhythms and calendars. The empirical disciplines were dominated by traditional Chinese medicine and agronomy, including astrology, alchemy, geology, and architecture.31 The combination of theoretical and empirical disciplines with real life and production practice creates practical technologies. Practical technologies occupied a large proportion of ancient Chinese science and technology and reached a very high level of development. For example, sericulture and silk weaving, porcelain firing, metal smelting, and water conservancy projects in ancient China all reached a high level. Among them, the design and construction of Dujiangyan and Lingqu can be regarded as systematic projects with the most holistic ecological thought in ancient 30

The contents of the above two paragraphsare mainly referenced from: Li, S. H. (2002). The Basic Model and System of Chinese Science. Philosophical Research (03). 李曙华. (2002). 中华科学的 基本模型与体系. 哲学研究 (03). 31 Li, S. H. (2002). The Basic Model and System of Chinese Science. Philosophical Research (03). 李曙华. (2002). 中华科学的基本模型与体系. 哲学研究 (03).

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581

society. The relationship between theoretical disciplines, empirical disciplines and practical technologies is similar to the relationship between water, fresh fish and canned fish. The water breeds fresh fish, which can then be used to make canned fish. Some scholars regarded the standard of Western science as the only evaluation standard and believed that there was no science in ancient China, while some believed that ancient China only had highly developed technology but without corresponding scientific systems. From the relationship between theoretical disciplines, empirical disciplines and practical technologies, these views are obviously illogical and isolated. These one-sided views suggested that fish could grow naturally without water for nourishment or that people could produce canned fish without the basic premise of water and fish. How absurd! In the ancient Chinese science and technology system, the three parts of theoretical disciplines, empirical disciplines and practical technologies are often integrated together. Similar to a pot of juice made by mixing different traditional Chinese medicines, it is quite difficult to separate the chemical components in it. In modern science and technology systems, however, the boundaries between basic science, applied science and practical engineering technology are relatively easy to draw. Without basic science, there will be no applied science, and without the development of basic science and applied science, there will be no development of practical engineering technology. The three have formed an organic interrelational, interinfluential and interrestrictive whole. Knowing this is helpful to understand the characteristics of the ancient Chinese science and technology system. For more than two thousand years, ancient Chinese science has developed with the development of its philosophical foundation (mainly Taoist thought) and basic scientific model (the system with Zhou Yi as its core) and its rise and fall. The general context of the theoretical development of ancient Chinese science is as follows: During the Spring and Autumn Period and the Warring States Period, philosophical thoughts such as Tao Te Ching and Yi Zhuan were born. From the Warring States period to the Han Dynasty, an ancient scientific model that integrated the Five Elements Theory, the Yin-Yang Theory, the I Ching Symbolic Mathematics Theory and the stem-branch timing method was gradually formed. The rise and development of metaphysics in the Wei and Jin Dynasties deepened the development of Lao-Zhuang thought and the philosophical connotations of Zhou Yi, which promoted the theoretical study of ancient Chinese science and brought the first peak of ancient Chinese scientific development. The Neo-Confucianism of the Song and Ming Dynasties further developed Taoism and I Ching Mathematica, mathematical theories in ancient Chinese science, and brought about the second peak of ancient Chinese scientific development. Since the mid-Ming Dynasty, people began to shift the focus from theoretical research to the practical application of various theories, thus promoting the application of a large number of practical technologies in ancient China. However, at the same time, theoretical disciplines began to decline, especially

582

9 The Main Dynamics and the Features of Social Development in Ancient …

astronomy and mathematics. By the end of the Ming Dynasty, the astronomical official system at that time was extremely corrupt, and there were few astronomical officials who could understand the ancient astronomical books.32 Jin Guan-Tao, Pan Hong-Ye and Liu Qing-Feng, in their research on the history of science and technology in China, decomposed science and technology into three categories: theory, experiment and technology. They carried out quantitative and statistical analyses on the major scientific and technological achievements in China and the West over the past two thousand years.33 They discovered that in different civilisations, the proportion of the three achievements of theory, experiment and technology is quite different. In the West, theories account for a relatively high proportion. Since the eighteenth century, the proportions of theory, experiment and technology have basically tended to be the same (approximately one-third each), while in ancient China, almost any dynasty in history accounted for more than 60% of technological inventions. Compared with Western societies, ancient China was obviously weaker in theory and experimentation. The results of their measurement and statistical analysis of ancient Chinese scientific and technological achievements are shown in Table 9.1. They also took the score of scientific and technological achievements as the ordinate and the time axis of AD as the abscissa to draw the net growth of ancient Chinese science and technology (Fig. 9.1), which vividly reflects the relationship between the growth of science and technology and the sociopolitical and economic structure of the past dynasties. The technological development level of ancient China showed oscillation with the periodic rise and fall of feudal dynasties, indicating that the technological growth of a dynasty was closely related to the degree of centralisation and the development of the commodity economy in that dynasty. This periodic oscillation has created a huge obstacle to the accumulation and inheritance of ancient Chinese technological achievements. Ancient Chinese technology is often inherited through secret transmission between fathers and sons and is monopolised by guilds or government-run industries. This closeness of ancient technology is an important reason for the loss of a large number of technologies. For example, in the Song Dynasty, China invented the thirty-two power storage and hydraulic large spinning machine, and its output was 30 to 50 times that of the small spinning wheel. According to records, the big spinning wheel “spins hundreds of catties from day to night without any hard work, which can replace female workers and save double the wages”.34 Similar textile machinery did not appear in the West until before the Industrial Revolution, which was part of a series of technological developments in 32

The contents of this paragraph are mainly referenced from: Li, S. H. (2002). The Basic Model and System of Chinese Science. Philosophical Research (03). 李曙华. (2002). 中华科学的基本 模型与体系. 哲学研究 (03). 33 Jin, G. T., Pan, H. Y., Liu, Q. F. Cultural Background and Evolution of Scientific and Technological Structure. in Journal of Dialectics of Nature. (1983). Science Tradition and Culture. Shaanxi Science & Technology Press. 金观涛., 攀洪业., 刘青峰. 文化背景与科学技术结构的演变. in 自 然辩证法通讯杂志社. (1983). 科学传统与文化. 陕西科学技术出版社. 34 Wang, Z. (1963). Wang Zhen’s Treatise on Agriculture (XXII). China Agriculture Press. p. 521. 王祯. (1963). 王祯农书(卷22). 农业出版社. p. 521.

69

8

23

100

0

0

Qin

85

9

6

Western Han

76

14

10

Eastern Han

86

1

13

Wei and Western Jin

72

13

15

Southern and Northern Dynasties

98

0

2

Sui

81

11

8

Tang

–

–

–

Five Dynasties

90

6

4

Northern Song

74

7

19

Southern Song

80

12

8

Yuan

81

3

16

Ming

59

1

40

Qing

35

Jin, G. T., Liu, Q. F. (2011). Prosperity and Crisis: On the Ultra-stable Structure of China’s Society. Law Press. p. 327. 金观涛., 刘青峰. (2011). 兴盛与危 机——论中国社会超稳定结构. 法律出版社. p. 327.

2

86

Technology

12

Theory

Experiment

Spring and Autumn and Warring States

Dynasty

Table 9.1 Proportion of theory, experiment and technology in the total score of Chinese dynasties (%)35

9.3 The Rise and Fall of Science and Technology in Ancient China 583

584

9 The Main Dynamics and the Features of Social Development in Ancient …

Fig. 9.1 Net growth of ancient Chinese science and technology (in 50 years)37

the Western Industrial Revolution.36 It is such a commendable developed technology, but it disappeared without a trace with the fall of the Song Dynasty! As shown in Fig. 9.1, the development of ancient Chinese science and technology in the Eastern Han, Northern Song and Ming dynasties showed three relatively significant peaks, especially in the Eastern Han and Northern Song dynasties. It also reflects to a certain extent that social material production has an important role in promoting the development of science and technology. Ancient China was founded on agriculture, and the scientific development of agriculture played a pivotal role in the history of ancient Chinese science and technology. Zhong Shou-Hua made a quantitative analysis of ancient Chinese agricultural achievements based on the book Annual Records of Chinese Agricultural History,38 and his conclusions correspond to the development of the abovementioned ancient Chinese scientific theories. According to the four major categories of agriculture (i.e., tillage agriculture, including meteorology, land use, farmland water conservancy, farm tools, fertilisers, crops, tillage cultivation, plant protection), animal husbandry (i.e., livestock, veterinary), sideline (i.e., storage and processing, horticulture, tea, sericulture, beekeeping and economic insects) and fishery (i.e., fish culture), he made statistics on the agricultural achievements contained in the Annual Records of Chinese 36

Jin, G. T., Liu, Q. F. (2011). Prosperity and Crisis: On the Ultra-Stable Structure of China’s Society. Law Press. pp. 330–332. 金观涛., 刘青峰. (2011). 兴盛与危机——论中国社会超稳定 结构. 法律出版社. pp. 330–332. 37 Jin, G. T., Liu, Q. F. (2011). Prosperity and Crisis: On the Ultra-stable Structure of China’s Society. Law Press. p. 331. 金观涛., 刘青峰. (2011). 兴盛与危机——论中国社会超稳定结构. 法律出版社. p. 331. 38 Min, Z. D. (1989). Annual Records of Chinese Agricultural History (Science and Technology). China Agricultural Press. 闵宗殿. (1989). 中国农史系年要录(科技编). 农业出版社.

9.3 The Rise and Fall of Science and Technology in Ancient China

585

Table 9.2 Scientific and technological achievements in ancient Chinese agriculture Dynasty

Project

Total

Agriculture Division I

Agriculture Division II

Arable Proportion Animal Sideline Fishery Sub Proportion farming (%) Husbandry Total (%) Shang

38.09

3

8

2

13

61.91

21

Western Zhou

24

48

5

10

11

26

52

50

Spring and Autumn Warring States

48

49.48

18

28

3

49

50.52

97

Qin and Han

78

56.12

20

37

4

61

43.88

139

Wei, Jin, Northern and Southern Dynasties

55

48.67

15

41

2

58

51.33

113

Sui and Tang

38

38.38

20

35

6

61

61.62

99

107

45.34

23

98

8

129

54.66

236

Ming

65

57.02

11

30

8

49

42.98

114

Qing

66

56.90

19

26

5

50

43.10

116

Total

489

49.64

134

313

49

496

50.36

985

Song and Yuan

8

Agricultural History (Science and Technology) by historical period. The results are shown in Table 9.2. For example, the technical achievements of arable farming (crop cultivation) are analysed, and statistics are divided into nine categories (including meteorology, land use, farmland water conservancy, farm tools, fertilisers, crops, tillage cultivation, plant protection, and agricultural books) according to the historical period. The results are shown in Table 9.3. In Table 9.3, the number of Farm Tool is 88, and the number of Tillage Cultivation is 71. These two categories have the largest number, accounting for 1/3 (32.5%) of the total number of scientific and technological achievements in arable farming (crop cultivation). It is apparent that the innovation of farm tools and the progress of tillage cultivation techniques can best reflect the scientific and technological development of intensive farming and meticulous farming in ancient China.39 39

The above three paragraphs (including Tables 9.2 and 9.3) are compiled from: Zhong, S. H. (1992). Econometric Analysis of the Development of Agricultural Science and Technology in

2

4

9

5

1

2

6

2

8

39

Western Zhou

Spring and Autumn Warring States

Qin and Han

Wei, Jin, Northern and Southern Dynasties

Sui and Tang

Song and Yuan

Ming

Qing

Total

Meteorology

Project

Shang

Dynasty

56

8

7

16

3

3

8

9

2

0

Land use

50

3

2

9

9

4

15

6

2

0

Farmland irrigation

88

7

3

28

12

10

12

10

5

1

Farm tool

37

4

10

7

1

5

8

2

0

0

Fertiliser

53

8

5

8

3

11

6

2

6

4

Crop

71

8

13

10

2

15

16

3

3

1

Tillage cultivation

57

11

14

13

3

5

6

3

2

0

Plant protection

Table 9.3 Quantity of scientific and technological achievements in ancient Chinese arable farming (crop cultivation)

38

9

9

10

3

1

2

4

0

0

Agricultural treatise

489

66

65

107

38

55

78

48

24

8

Total

586 9 The Main Dynamics and the Features of Social Development in Ancient …

9.3 The Rise and Fall of Science and Technology in Ancient China

587

If the number of scientific and technological achievements is taken as the ordinate and the time length of different dynasties is taken as the abscissa, the scientific development of agriculture in ancient China can be drawn according to the data in Tables 9.2 and 9.3. It is conspicuous from the graph that the development curve of agricultural science and technology in ancient China generally presents a saddle shape. The two peaks of the saddle shape correspond to the agricultural development in the Qin and Han Dynasties and the Song and Yuan Dynasties, of which the highest peak is the Song and Yuan Dynasties (the total number of agricultural achievements is 236). The saddle-shaped curve of the scientific development of agriculture in ancient China is composed of the two peaks of the Qin and Han Dynasties and the Song and Yuan Dynasties. This feature basically corresponds to the development of ancient Chinese scientific theories; that is, the innovation of scientific theories should precede the prosperity of the corresponding agricultural technology, which is expressed as the number of specific outcomes. In the history of ancient Chinese social development, the Song Dynasty is undoubtedly a period worthy of attention and serious study. During the Song Dynasty, the whole country not only made important progress in polity, economy and culture but also made brilliant achievements in science and technology, which were not only the peak in ancient China but also in the leading position in the world at that time. Three of the four great inventions of ancient China, movable type, compass and gunpowder, were born in the Song Dynasty. At the same time, in civil service, culture and art, social education, rice cultivation, urban commerce, etc., the Song Dynasty also reached an unprecedented level. The culture and technology of the Song Dynasty actively promoted the development of social productivity and had a profound impact on Chinese society and even human civilisation. Some overseas scholars even called the Song Dynasty the Renaissance of China. Then, in what aspects of science and technology did the Song Dynasty make important achievements? Based on relevant research results at home and abroad, the Song Dynasty made important achievements in more than a dozen aspects, such as astronomy, mathematics, medicine, geography, printing, compass, gunpowder and firearm, agriculture, machinery manufacturing, construction, metallurgy, porcelain, and mining, and is far ahead of the world in some aspects of astronomy, mathematics, medicine and other disciplines. The achievements made in astronomy in the Song Dynasty were mainly reflected in astronomical observation technology and the astronomical calendar. In the Northern Song Dynasty, Su Song (1020–1101), Han Gong-Liang and others built a set of large-scale comprehensive astronomical instruments in 1088, the Water Transport Instrument Observatory. This group of instruments integrates the armillary sphere, standard watch, timer and chronopher. It has a high degree of automation and is the most advanced astronomical instrument in the world at the end of the eleventh century. The three inventions of the movable roof, the automatic turning device and Ancient China. Science of Science and Management of S.& T. (03). 钟守华. (1992). 中国古代农 业科技发展的计量分析. 科学学与科学技术管理 (03).

588

9 The Main Dynamics and the Features of Social Development in Ancient …

the mechanical escapement are hundreds of years earlier than the invention of similar equipment in Europe.40 In terms of the astronomical calendar, the Tongtian Calendar formulated by Yang Zhong-Fu in the Southern Song Dynasty in 1199 has the time value of a year accurate to 365.2425 days, which is the earliest in the history of the world’s calendar. The famous European calendar Gregorian Calendar also applied this value, but it is approximately four hundred years later than Tongtian Calendar.41 In terms of mathematics, famous mathematicians such as Qin Jiu-Shao (1202– 1261), Li Ye (1192–1279) and Yang Hui appeared in the Song Dynasty. Qin JiuShao’s Mathematical Treatise in Nine Sections (1247) mainly described the numerical solution of higher-order equations and the first-order congruence solution. Li Ye’s Sea Mirror of Circle Measurements (1248) and Old Mathematics in Expanded Sections (1259) mainly described the use of algebraic methods to formulate equations and explore the geometric relationship between right triangles and inscribed circles. Yang Hui’s Detailed Explanation of Mathematical Treatise in Nine Sections (1261), Daily Algorithms (1262) and Yang Hui’s Algorithms (1274–1275) mainly explained practical mathematics and various simple algorithms. In modern computational mathematics, when solving numerical solutions of higher-order equations, the Qin JiuShao program, an extremely simple method, was commonly applied. This is the addition, multiplication and extraction method created by mathematicians in the Song Dynasty, which was first proposed by Jia Xian of the Northern Song Dynasty and finally completed by Qin Jiu-Shao of the Southern Song Dynasty. In Europe, the British mathematician William George Horner (1786–1837) did not propose a similar solution until 1819, which was 572 years later than Qin Jiu-Shao and more than 700 years later than Jia Xian. Regarding the column method of algebraic equations, Europe did not propose until the sixteenth century, and the method proposed by Li Ye in the Song Dynasty was three centuries ahead of the Europeans.42 In medicine, the Song Dynasty also made outstanding achievements. Classified Materia Medica (1082–1083) compiled by Tang Shen-Wei, a folk doctor of the Northern Song Dynasty, summed up the achievements of Chinese pharmacology before the Northern Song Dynasty. It is a masterpiece of herbal books.43 The book contains 1,580 kinds of medicines and 294 pictures and introduces the form, authenticity and specific usage of medicines. After the book was released, it went through 40 Institute of History of Natural Science, Chinese Academy of Sciences (ed). (1995). Scientific and Technological Achievements in Ancient China. China Youth Publishing House. Mechanics Part 4, Astronomy Part 1, 4. 中国科学院自然科学史研究所 (ed). (1995). 中国古代科技成就. 中国青年 出版社. 机械 Part 4, 天文学 Part 1, 4. 41 Institute of History of Natural Science, Chinese Academy of Sciences (ed). (1995). Scientific and Technological Achievements in Ancient China. China Youth Publishing House. Astronomy Part 5. 中国科学院自然科学史研究所 (ed). (1995). 中国古代科技成就. 中国青年出版社. 天文学 Part 5. 42 Institute of History of Natural Science, Chinese Academy of Sciences (ed). (1995). Scientific and Technological Achievements in Ancient China. China Youth Publishing House. Mathematics Part 1, 6. 中国科学院自然科学史研究所 (ed). (1995). 中国古代科技成就. 中国青年出版社. 数 学 Part 1, 6. 43 Fang, J. K. (1990). Reading Methods of Classified Materia Medica. Chinese Archives of Traditional Chinese Medicine (03). 房景奎. (1990).《证类本草》阅读方法. 中医函授通讯 (03).

9.4 The Main Synergistic Factors of Society in Ancient China

589

a period of revision and publication and has been used for more than 500 years.44 Song Ci (1186–1249), a forensic doctor in the Southern Song Dynasty, published the Record of Redressing Mishandled Cases (1247), which is the first systematic monograph on forensic medicine in China and in the world. This book not only includes the main contents of forensic science, such as on-site inspection, postmortem phenomena, autopsy examination and identification of various casualties. It also involves medical knowledge of physiology, anatomy, etiology, pathology, pharmacology, diagnosis, treatment, medicine, internal medicine, surgery, gynecology, pediatrics, orthopedics, first aid, etc. After this book was published, it was widely circulated and was still popular until the Ming and Qing Dynasties. Later, it spread to North Korea, Japan, the United Kingdom, France and other countries and was well received by foreign forensic scientists. In Europe, the first Western forensic monograph written by Fortunatus Fidelis (1550–1630) did not appear until 1602, which was more than 350 years later than Song Ci’s Record of Redressing Mishandled Cases.45 In addition to outstanding achievements in science and technology, the Song Dynasty also achieved vigorous development in culture and art such as philosophy, literature, art, acrobatics, traditional (Chinese) opera, and music. The thoughts and works of philosophers such as Cheng Hao and Cheng Yi in the Northern Song Dynasty and Zhu Xi, Zhang Shi, and Lü, Zu-Qian in the Southern Song Dynasty promoted the revival of Confucianism and gave birth to Neo-Confucianism, encouraging the integration and development of Confucianism, Taoism and Buddhism. The Song Dynasty not only gave birth to far-reaching writers such as Ouyang Xiu, Su Xun, Su Shi, Su Zhe, Wang Anshi, Zeng Gong, etc., but also produced thousands of poets and lyricists, who had created a large number of magnificent poems that are still popular today.

9.4 The Main Synergistic Factors of Society in Ancient China In ancient Chinese society, science and technology were enclosed in various industries, and such closeness was not conducive to the accumulation, inheritance and development of science and technology. However, it should also be noted that different states or different nationalities actually play a role in spreading science and technology through population movement (including immigration), cultural exchanges, and commercial trade. Different countries or nations spread science and 44

Liu, J. Y. Tang Shen-Wei and “Zheng Lei Materia Medica”. China Journal of Traditional Chinese Medicine. Tang Han Chinese Medicine Net. 刘建英. 唐慎微与《证类本草》 . 中国中医药报. 唐汉 中医药网. http://www.chinesemedicines.net/history/200704/103308.html. Accessed 23 Apr 2007. 45 Institute of History of Natural Science, Chinese Academy of Sciences (ed). (1995). Scientific and Technological Achievements in Ancient China. China Youth Publishing House. Medicine Part 7. 中 国科学院自然科学史研究所 (ed). (1995). 中国古代科技成就. 中国青年出版社. 医药学 Part 7.

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technology through cultural exchanges and commercial trade, which is an active behaviour, such as the spread of printing and compassing in countries around the world. The spread of science and technology through population flow between different countries or nations is often achieved passively through wars and other means, such as the spread of gunpowder and gunpowder weapons in countries around the world. In ancient societies, the main reasons for population movement and migration included war, government-organised migration, and people’s voluntary migration. However, war is the main reason. War objectively promotes the integration of ethnic groups and the widespread of cultural knowledge, science and technology. Therefore, from the development of the entire human society, factors such as population flow (including immigration), cultural exchanges, and commercial trade among countries worldwide have formed an important mechanism for the coordinated development of the entire human society. In ancient Chinese history, there were mainly three large-scale population movements and ethnic integration. The first was from the Spring and Autumn Period and the Warring States Period to Qin’s unification of China; the second was from the end of the Eastern Han Dynasty through the Three Kingdoms and the two Jin Dynasties to the Southern and Northern Dynasties; and the third was from the coexistence of ethnic regimes of the Song, Liao, Xia and Jin ethnic groups to the unification of the Yuan Dynasty. Each of these three periods involved large-scale population movements, which enhanced the integration and connection between different ethnic groups, thus laying the foundation for the establishment and development of a multiethnic country. In ancient China, the main reasons for population movement and migration were wars, immigration, and the division of national regimes. To consolidate the regime and strengthen the rule and management of the frontier areas, the feudal rulers of China in past dynasties often organised large-scale immigration activities. For example, during the Warring States Period and Qin Dynasty, to prevent the Huns from going south, the First Emperor of Qin sent Meng Tian to lead 300,000 troops to attack the Xiongnu, build the Great Wall, and migrate the people inland to develop production and strengthen border defenses. After conquering the Yue people in the south, Qin established three counties, Xiang, Guilin and Nanhai, and moved 500,000 people from central China to these areas. Except for a few dynasties, such as the Southern Song Dynasty, the North, where the ancient political centre of China was always located, dynasties were often changed, and disputes arose. During the war, people often moved their families to the south to avoid disasters. For example, the Rebellion of the Eight Princes occurred during the two Jin Dynasties, and various forces in the ruling group fought each other for 16 years. Later, the disaster of Yongjia occurred, and the war and strife pushed the people of all ethnic groups into extreme hardship. To avoid wars, famines, hunger and epidemics, a large number of people in central China moved southwards, which set off the first wave of large-scale immigration in ancient China, with a population of more than one million. Since then, every major political change (i.e., the Northern Expedition of Zu Ti, the Battle of Feishui, the Northern Expedition of Liu Yu, the Southern Invasion of the Northern Wei Dynasty, etc.) in northern central China will trigger a larger-scale southward

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migration. In A.D. 494, when Tuo-Ba Hong, Emperor Xiaowen of Northern Wei, moved the capital from Pingcheng (now Datong) to Luoyang, most of the Xianbei people who were originally in Pingcheng moved south along with them. The total number of nobles, bureaucrats, troops and people was approximately one million.46 The An Lushan Rebellion that occurred during the Tianbao reign of Emperor Xuanzong of Tang led to a two-hundred-year-old separation of feudal towns, which brought serious disasters to the people. The war led to the large-scale migration of the northern population to the south, resulting in another large-scale immigration wave in ancient Chinese history. The immigrant population flowed not only to the Yangtze River Basin and the Pearl River Basin but also to the South China Sea. In the land of China before the Song Dynasty, civilisation in central China had always been in a leading position in ideology, culture, science and technology, and economic development. This advanced civilisation in central China often had a strong attraction to neighbouring states and regions, thus prompting the flow of people from these regions to central China. For example, from the Eastern Han Dynasty to the Wei and Jin Dynasties, the Xiongnu, Xianbei, Jie, Di, Qiang and other ethnic groups living in the western and northern borders of China, attracted by the advanced civilisation of central China, began to move inland one after another since the Eastern Han Dynasty. In the early years of the Western Jin Dynasty, there were hundreds of thousands of Xiongnu, Xianbei, and Jie people, and more than 500,000 Di and Qiang people moved inland, living in the vast areas south of the Great Wall in present-day Gansu, Shaanxi, Shanxi, Hebei and Liaoning.47 During the Wei, Jin, Southern and Northern Dynasties, the inward migration of various ethnic minorities in the frontier also promoted the flow and migration of the Han people in central China, thus setting off large-scale migration waves in ancient Chinese history. From a state perspective, the northern people mainly flowed in three directions during this period: northeast, northwest and south. The branch that flows to the northeast took shelter under the Murong regime of Xianbei. The branch that flows to the northwest settled in the field of Zhanggui (255–314) in Liangzhou. The branch that flows to the south lived in the homeland of Sun Wu.48 According to statistics, in the first few years after Anno Domini, the Han population was mainly concentrated in Hebei, Henan, Shanxi, Shandong and most of Hubei, Anhui and Jiangsu and then steadily decreased, while the population south of the Yangtze River increased significantly; A.D. 280–464, the population south of the Yangtze River increased more than fivefold, and the population growth during this period could not have been so significant without immigration from the 46

Requoted from: Li, K. J. (2006). Re-Discussion of Ethnic Migration in the Wei, Jin, Southern and Northern Dynasties. Journal of Southwest Minzu University (Humanities and Social Science) (06). 李克建. (2006). 再论魏晋南北朝的民族迁徙. 西南民族大学学报(人文社科版) (06). 47 The information in this paragraph about the population flow in ancient China is mainly compiled from: Zhang, Z. X. (2004). An Analysis of the Causes of Population Flow in Ancient China. Journal of Suzhou University (03):11. 张占先. (2004). 中国古代人口流动原因探析. 宿州师专学 报 (03):11. 48 Chen, Y. Q., Wan, S. N. (1987). Chen Yin-Que’s Lectures on the History of the Wei, Jin and Southern and Northern Dynasties. Huangshan Publishing House. 陈寅恪., 万绳楠. (1987). 陈寅 恪魏晋南北朝史讲演录. 黄山书社.

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north. At the same time, due to the massive inward migration of other ethnic groups, the population of central China, where the Han people originally lived, has more than tripled. However, the population of the northwest region north of the Yellow River decreased greatly during A.D. 2–138, from nearly 430,000 to slightly more than 140,000, continued to decrease during the Wei, Jin, Southern and Northern Dynasties, and remained at approximately 30,000.49 It is discernible from this that during the Wei, Jin, Southern and Northern Dynasties, China’s population flow and migration scale were large. In ancient China, the southward migration of northern minorities was mostly carried out in the form of war. For example, it was the war of southern aggression against the Song Dynasty by the Liao, Jin, Yuan and other northern nation-states that led to the flow and migration of a large number of people from the north to the south, thus transferring the political, economic and cultural centre of the Song Dynasty to the south of the Yangtze River and bringing various advanced cultural knowledge and science and technology from the Northern Song Dynasty to southern China. These large-scale population movements not only encouraged the integration of ethnic groups but also drove the spread of cultural knowledge and science and technology in a wider range, thereby promoting the common development of the economy and culture of different ethnic states and regions. During the macroevolution of ancient Chinese history, the large population flow and migration caused by frequent wars and turmoil led the economy of ancient Chinese society to radiate from the centre to the surrounding areas in waves. In particular, the horizontal expansion of agriculture in geographic space pushed the economic centre of ancient China to shift from west to the east first and then from north to south, which clearly outlined two basic development trajectories. It was the waves of immigration that drove the social and economic expansion of ancient China from the Yellow River Basin to the Yangtze River Basin and then to the Pearl River Basin and the Minjiang River Basin. Throughout ancient Chinese history, the great migration and flow of ethnic groups had a profound impact on the horizontal expansion of the ancient society and economy, which not only greatly boosted the economy of ethnic regions but also triggered their cultural changes. Especially since the Wei and Jin Dynasties, the Han people in central China have moved to Liaodong, Hexi, Jiangnan and other regions in large numbers to escape the war, which not only brought advanced production tools and farming techniques to the local people and played an important role in developing the local economy but also brought more civilised cultural customs and ways of life. The impact of great ethnic migration on the cultural changes of ethnic groups mainly includes the domiciles of ethnic groups (especially minorities), dietary patterns, clothing and hairstyles, ethnic languages, customs, and religious beliefs. For example, taking the Qiang people in Wuhu as an example, after moving to central China, the Qiang people gradually changed their residence from living by following 49

Li, J. The Formation of the Chinese Nation. in Liu, M. X. (1996). Modern Chinese Academic Classics-Li Ji Volume. Hebei Education Press. p. 267. 李济. 中国民族的形成. in 刘梦溪. (1996). Modern 中国现代学术经典·李济卷. 河北教育出版社. p. 267.

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the water and grass to settlements by farming; their diet gradually changed from milk, cheese, beef and mutton to basically the same as the inland ethnic groups; their clothing changed from cold-resistant animal products as the main raw materials to cotton and silk products such as cotton cloth and satin; their hairstyle also changed from the original disheveled hair style to braided hair style; in customs, the way of burial after death was changed from cremation to inhumation; in terms of religious belief, they gradually abandoned the inherent primitive religion and began to believe in Buddhism; and other inward-migrating ethnic groups, such as the Xiongnu, Xianbei, Di, etc., have also undergone more or less changes in their cultural customs and lifestyles.50 In ancient society, the connections between population movements, cultural exchanges, and commercial trade in the regions worldwide were partial and intermittent, which resulted in the extremely slow spread of cultural knowledge and science and technology in the ancient world. In modern society, however, these factors are connected globally and frequently, thus speeding up the spread of cultural knowledge and science and technology around the world. Especially after the emergence of the Internet and its widespread use, a huge information network with close connections has been formed between regions and states worldwide, truly forming a unified totality that is interrelated, interinfluenced and interinteracted. In this sense, ancient society’s function of spreading cultural knowledge and science and technology through war has been completely replaced by the function of the Internet, and war has completed its historical mission. Therefore, in addition to the need to defend national sovereignty and people’s security, war should completely withdraw from the historical stage of human society. In today’s world, any great statesman with a high realm and a global vision should abandon the outdated thinking of confrontation and war but actively promote political dialog, cultural exchanges, commercial trade and scientific and technological spread between societies. He should be committed to bridging international relations of mutual coordination and common progress and to building up a scientific institutional system to drive the common development of the entire human society on Earth.

9.5 The Impact of the Natural Environment on Social Historical Development51 Why did the peoples from the north repeatedly invade the south in ancient Chinese history? Regarding this issue, some Chinese and foreign scholars have pointed out through research that this is because the cyclical changes, especially the cooling, 50

Li, J. H. (2003). The Resettlement of Ancient Minorities and the Change of the Culture. Journal of Tianshui Normal University (04). 李吉和. (2003). 古代少数民族迁徙与文化变迁. 天水师范 学院学报 (04). 51 The content of this section was first published in the May 2014 issue of Bo Xue under the title The Impacts of Natural Environment on Social Historical Development.

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of the climate have caused the periodic deterioration of the natural ecological environment in the middle and high latitudes, putting the northern nomadic society into periodic production and life crises, which in turn triggered periodic southward migration for living space. This point of view is undoubtedly more important and worthy of attention. Although the migration of the northern ethnic groups in China in the past dynasties was the result of the combined effect of political, military, economic, and social factors, changes in the natural geographical environment are obviously an important factor that cannot be ignored. The following is a systematic discussion of the important influence of the natural environment on social and historical development from ten aspects, including human thoughts on the natural environment, the importance of climate to society, the relationship between climate and human civilisation, the impact of climate pulsation on human civilisation, the long-term characteristics of climate change in China’s historical period and the impact of climate change on the southern migration of northern ethnic groups, ancient warfare, demographics, socioeconomics and China’s rise and fall cycle.

9.5.1 Relevant Thoughts About the Influence of the Natural Environment on Human Society As early as the eighteenth century, the famous French thinker Montesquieu (1689– 1755) pioneered the theory of geographical materialism. In his book The Spirit of the Laws published in 1748, he put forward the view that factors such as climate and soil in the geographical environment affect the national character and social and historical development and expounded that the geographical environment, especially climate, soil, and habitat, has an impact on a nation’s physiology, psychology, character, customs, morality, spiritual outlook, religious belief, laws and political institutions. He particularly highlighted the role of geographical factors, especially climatic factors, in the development of human society and history.52 The German philosopher Hegel regarded the geographical environment as the geographical basis of history. In his book The Philosophy of History, he linked geographical environment with national character, social life, and material production, noting the influence of material production on all aspects of human social life. His attention to geographical environmental issues is broader in scope and perspective, and his observations are more profound, which is more in line with the reality of human history than Montesquieu’s thought.53 The British historian Henry Thomas Buckle (1821–1862) revealed the influence of the natural material world on history in his book History of Civilization in England. 52

Montesquieu, B. (2001). The Spirit of Laws (Nugent, T., trans.). Batoche Books. pp. 246–321. Li, X. Z. (2009). Geographical Environment and Human society: A Comparison Between Montesquieu and Hegel. Eastern Forum (04). 李学智. (2009). 地理环境与人类社会——孟德 斯鸠、黑格尔 “地理环境决定论”史观比较. 东方论坛 (04).

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He believed that human beings are a part of nature, and human history is also governed by natural laws. He explained the historical development of human society in terms of climate, soil, food and natural state and used abundant examples to prove the important role of food, land and natural environment in social organisation; Although he pointed out that the geographical environment has an important influence on the development of human history, he is not entirely a geographical environmental determinist.54 German human geographer Friedrich Ratzel (1844–1904), in his book Anthropogeographie published in 1882, discussed the influence of various natural conditions on human historical development and cultural characteristics. He believed that human beings are the product of the geographical environment. He stressed the natural basis of social systems and attached great importance to the constraints of the natural environment on people. He took location, space and boundaries as three groups of geographical factors governing the distribution and migration of human beings and on this basis proposed the organic state conception and concept of lebensraum (living space).55 American geographer Ellen Churchill Semple (1863–1932) inherited Ratzel’s view of environmental determinism. In her works such as American History and its Geographic Conditions (1903) and Influences of Geographic Environment (1911), she discussed the influence of geographical environment on human physique, ideology and culture, economic development and national history, highlighting the decisive role of natural geographical conditions. However, she abandoned Ratzel’s organic state conception and pointed out that the influence of the geographical environment on social history is mainly through economic and social activities.56 The American cultural geographer Ellsworth Huntington (1876–1947) focused on the study of the relationship between climate and landform, climate and civilisation. He regarded climate as the determinant of social development, state strength, racial advantages, economic success, and even saw climate as the most important factor in the development of civilisation. He emphasised the decisive role of climate on the formation and development of civilisation; his important works mainly include books such as The Pulse of Asia, Civilization and Climate and Mainsprings of Civilization. After his investigations in northern India and the Tarim Basin in China from 1903 to 1906, he published The Pulse of Asia in 1907. In the book, he put forward the view that foreign aggression and civil strife in Chinese history are related to climate change, such as the Invasion of the Five Barbarians in the Eastern Jin Dynasty and the Khitan Jurchen Bandit in the Northern Song Dynasty, all because of the drought in central China and Central Asia, and all ethnic groups were forced to take risks for 54

Li, X. Q. (2004). Buckle’s History of Civilization in England and Its Influence in China. Journal of Historical Science (08). 李孝迁. (2004). 巴克尔及其《英国文明史》在中国的传播和影响. 史 学月刊 (08). 55 Bai, G. R. (2005). Introduction to Geographical Science. Higher Education Press. pp. 205–206. 白光润. (2005). 地理科学导论. 高等教育出版社. pp. 205–206. 56 Fu, W. (2006). Theoretical Sources of Ecological Anthropology—II. 付文. (2006). 生态人类学 的理论来源述论(二). http://blog.sina.com.cn/s/blog_3edd5431010005zh.html. Accessed 22 Aug 2012.

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their livelihoods. He believed that the large-scale outward expansion of the Mongols in the thirteenth century was also due to the drying of the climate in settlements and the deteriorating conditions of pastures.57 After that, he put forward climate pulsation for the first time in Civilization and Climate (1915), highlighting the decisive role of climate on human civilisation. He believed that climate is the driving force of human culture, the main cause of population movement, the master of energy, and an important factor that distinguishes national characteristics.58 He also proposed the insight that the most basic changes in human civilisation came from human adaptation to climate from the Asian river valleys to the cooler regions of Europe.59 In Mainsprings of Civilization (1945), he put forward the hypothesis that there is an internal connection between the movement of the Sun and human physiology and psychology.60 He believed that a mild climate is more conducive to the production of rational thought and pointed out that the highest form of religion exists in the temperate zone, which is more conducive to people’s intellectual activities, including not only religious beliefs and ritual characteristics but also material civilisation.61 Regarding the influence of the geographical environment on the development of human society, Marx and Engels also made scattered discussions, such as the Economic and Philosophic Manuscripts of 1844 (1844), The German Ideology (1846), Anti-Dühring (1878) and Das Kapital (1867, 1885, 1894). They believed that human beings and the natural world are closely related, interinfluenced, and interrestricted, and the relationship between the two is constantly changing. The interaction between human beings and nature has a fundamental impact on the generation and development of human thinking and intelligence. They also attached great importance to the influence of the geographical environment on historical development and established historical theories directly on the premise of the influence of nature. They divided history into two closely related and mutually restrictive aspects: natural history and human history. They put forward a dialectical man-land relationship theory whose core ideas include the following: Man is a product of nature. Changes in food types prompted the transition from man-apes to humans. The physiological phenomena of hand/feet division of labour and upright walking are mainly the result of the action of nature. Humans use fire, eat cooked food, create syllable language, etc. are all inseparable from the influence of nature. Different geographical 57

Guan, Y. B. (2010). Research on Geographical and Environmental Factors of the Great Ethnic Migration. Journal of Northwest Minzu University (Philosophy and Social Sciences) (03):123. 管彦 波. (2010). 民族大迁徙的地理环境因素研究. 西北民族大学学报(哲学社会科学版) (03):123. 58 Li, X. P., Peng, Y. W. (2011). Management Culture: “Soil”, Tradition and Innovation. China Military Photo Centre. 李秀朋., 彭云望. (2011). 管理文化: “土壤”、传统与创新. http://tp.chi namil.com.cn/2011/2011-04/23/content_4425513.htm. Accessed 2 Nov 2012. 59 Western Sociologist: Huntington. Sociology Perspective Forum. 西方社会学家: 亨廷顿. 社会 学视野论坛. http://www.sociologyol.org/bbs/viewthread.php?tid=1612. Accessed 12 Oct 2012. 60 Western Sociologist: Huntington. Sociology Perspective Forum. 西方社会学家: 亨廷顿. 社会 学视野论坛. http://www.sociologyol.org/bbs/viewthread.php?tid=1612. Accessed 12 Oct 2012. 61 Liu, M. (2006). Examine “the Environment Decision”: The Enlightenment of “Human Type”. Journal of Xinjiang Normal University (Natural Sciences Edition) (03). 刘明. (2006). 重新审视 “ 环境决定论”. 新疆师范大学学报(自然科学版) (03).

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environmental factors, such as the Earth’s climate, geography and production, have different influences on the development of human society. Human beings can change the natural world and create new living conditions, thus reacting to the geographical environment. This reaction mainly includes two forms of production and war. With the development of society and the increase in human knowledge, the means of human reaction to nature will increase, and the ability of humans to use, control and transform nature will also enhance. With the emergence and development of productive forces and the relations of production, the relationship between human beings and the geographical environment has experienced a development process from direct to indirect. The interaction between human beings and the geographical environment occurs through the transmission of productive forces and the relations of production.62 The Russian philosopher Georgii Valentlnovich Plekhanov (1856–1918) systematised the geographical environment thought of Marx and Engels and put forward some important ideas on this basis. He pointed out that the basis for the interaction between the geographical environment and human society is productive forces, and the geographical environment has an effect on human society through productive forces and the relations of production. With the growth of social productive forces and the change in its nature, the effect of the geographical environment on human society will also change; differences in the geographical environment are the natural basis for the social division of labour. The division of labour brings exchanges, and exchanges promote production. Geographical diversity stimulates people’s needs and abilities, which in turn drive the adoption of methods to improve production techniques. On the one hand, growing productivity restricts the attributes of the geographical environment, while the attributes of the geographical environment indirectly affect social consciousness through links such as productivity and social relations. On the other hand, the nature of the geographical environment determines the nature of productivity, the attributes of the geographical environment restrict the growth speed of productivity, and the geographical environment affects social institutions through the state of productivity.63

9.5.2 The Vital Impact of Climate on Human Society The natural environment has an important influence on human society, which is mainly manifested in the climate and geography formed by the natural environment on the production and life of human beings. 62

Hou, P. X. (1986). On the Marxist View of Geographical Environment. Journal of Northwest Minzu University (Philosophy and Social Sciences) (04). 侯丕勋. (1986). 论马克思主义地理环 境观. 西北民族学院学报(哲学社会科学版) (04). 63 Ren, C. X. (2001). On the Differences Between Prehanov and Marx’s Geographical Theories. Journal of Shangrao Normal University (02). 任春晓. (2001). 论普列汉诺夫与马克思地理环境 理论的差别. 上饶师范学院学报 (02).

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Here, the climate of 2010 is taken as an example to see the impact of climate on China. In 2010, the annual average temperature in China was 9.5 °C, 0.7 °C higher than normal, the tenth warmest year since 1961. The average temperature in winter (December 2009 to February 2010) was −3.6 °C, which was 0.7 °C higher than the same period of the year (−4.3 °C). The average temperature in summer (June–August 2010) was 21.5 °C, which was 1.1 °C higher than the same period of normal years and the highest value in the same period in history since 1961. The precipitation this year was 681 mm, 11.1% more than normal. This year, 4,121,000 hectares of crops were damaged in China due to low temperature freezing and snow disasters. From November 2009 to April 2010, a rare sustained low-temperature disaster occurred in Northeast China and North China over the past 40 years. From January 1 to 6, 2010, the north was hit by a strong cold wave. The extreme minimum temperature in most of northeast and northeastern Inner Mongolia reached −40 ~ −30 °C, and the temperature in some areas was below −40 °C. From January 17 to 23, most of China was hit again by a strong cold wave. Rare sea ice appeared in the Bohai Sea, and the sea ice area has been the largest in history since 2000. Low temperature had a serious impact on the growth of winter wheat and rape, causing winter wheat to overwinter significantly earlier, a large proportion of weak seedlings and a delay in turning green. From January to March 2010, the most severe snow disaster occurred in northern Xinjiang since meteorological records began. The snow depth in northern Xinjiang is generally more than 25 cm, the maximum snow depth in Altay is 94 cm, and that in Fuyun is 88 cm, all breaking through the historical limit of winter. Low temperature freezing and snow disasters led to casualties and heavy economic losses to the local area. In 2010, a total of 2,180,000 hectares of crops were damaged by wind and hail in China, with a direct economic loss of 35.09 billion yuan. For example, from May 3 to 8, the Chongqing area suffered from rare wind and hail, which affected 1.576 million people and killed 33 people. From August 5 to 10 and from August 15 to 18, Jiangxi Province suffered two wind and hail disasters, which affected 478,000 people and killed 16 people. At the same time, some areas suffered from extreme heat. For example, from June 23 to 29, the temperature in Huma in Heilongjiang was as high as 40.5 °C, Jiagedaqi was 39.7 °C, Mohe was 39.3 °C, and Erguna in Inner Mongolia was 39 °C. The daily maximum temperature of 32 weather stations in Northeast China has exceeded the historical extreme value; high temperature and little rainfall have led to many forest fires in Heilongjiang and the Daxinganling forest area of Inner Mongolia. Heavy rainfall has led to natural disasters such as flash floods, mudslides, and landslides in many places. For instance, from June 27 to 28, heavy rainfall caused a landslide in Gangwu Town of Guanling County in Guizhou Province, resulting in 42 deaths and 57 missing. On July 13, heavy rainfall in Xiaohe Town of Qiaojia County in Yunnan Province touched off flash floods and mudslides, resulting in 19 deaths and 26 missing. On August 7, short-term heavy rainfall occurred in Gannan Prefecture in Gansu Province, triggering a huge torrent and debris flow in Zhouqu County, resulting in more than 1,700 deaths (including missing). In that year, seven typhoons (i.e., Chanthu and Fanapi, etc.) landed in China, causing heavy losses to coastal provinces such as Fujian and Guangdong. The typhoons caused a total of 146 deaths (including missing) and direct economic

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losses of 16.64 billion yuan. According to statistics, in 2010, the direct economic losses and deaths caused by climate-induced disasters and secondary disasters in China were the largest in the past decade. This is the year China has suffered the most from climate disasters since the beginning of the twenty-first century.64 In recent decades, global climate change has aroused widespread concern around the world, and its cause has also become an important topic of research by scientists worldwide. At present, a widely known view is that the excess carbon dioxide emitted by human production has caused the greenhouse effect, thereby causing global warming. It is known that the Earth is a system composed of the core, mantle, crust, ocean, biosphere, and atmosphere, while located within the solar system and constituting the Solar System, a celestial body of this Natural System, which is situated in the larger cosmic environment of the Galactic System. Therefore, the Earth is bound to be significantly influenced by other celestial bodies in the cosmic environment, especially by the direct influence of the Sun in the solar system. From a system perspective, the factors affecting Earth’s climate change range from the factors inside its own system (internal causes) to the factors in its external environment (external causes). Earth’s climate change is a comprehensive result of the combined influence of internal and external factors. Human society is only a biological group in the Earth’s biosphere. Although human beings have an increasing impact on the Earth’s natural environment, human activities are only one of many factors that affect Earth’s climate change, which is obviously not the only reason. From system theory, it is obviously one-sided and too simplistic to emphasise only that the greenhouse effect of human activities causes global warming. In fact, the factors affecting climate change are very complex and can be roughly divided into two categories: natural factors and human factors. Natural factors can be divided into the Earth system, solar system and galactic system, mainly involving solar radiation and solar activity, the interaction between the Earth and other celestial bodies, the atmospheric circulation of the Earth system, the ocean circulation and various movements of the Earth, such as crustal movement, volcanic activity, geomagnetic changes, and rotation changes. Human factors mainly involve changes in geographical state caused by human activities (i.e., farmland reclamation and urbanisation), pollution of the natural environment, destruction of ecological balance, and massive emissions of greenhouse gases. Since the Industrial Revolution, human society has had a rising influence on the Earth’s natural environment. Scientists worldwide have carried out in-depth research on climate change from different angles. Changes in the Earth’s rotation period, the Earth’s magnetic field, ground pressure, sea surface temperature, sea level, ocean carbon sequestration, tropical rainfall, subtropical cloud cover, thawing of polar glaciers, sunspot cycle, UV radiation from the Sun, the Sun’s charged particles, the cycle of the Sun’s magnetic field, the radius of the Earth’s orbit, the gravitational force of the planet on the Earth, the floating of the solar system on the galactic plane and many other phenomena 64

Wang, Z. Y., Zeng, H. L., Gao, G., Chen, Y., Si, D., Liu, B. (2011). Climatic Characters in 2010’ China. Meteorological Monthly (04). 王遵娅., 曾红玲., 高歌., 陈峪., 司东., 刘波. (2011). 2010 年中国气候概况. 气象 (04).

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have been noticed, and it has been found that these phenomena seem to be related to Earth’s climate change to some extent. Some suggested that it is the geological movement of the Earth caused the climate change, some proposed that it is the ocean circulation, some the changes in the ecological environment, some the atmospheric circulation, some the changes in the Earth’s orbit, some the changes in solar activity, some the planet’s gravitational force on the Earth, and some even put forward that climate change is triggered by the influence of dust nebulae when the Sun crosses the galactic plane. On the issue of global climate change, human beings once again have a debate similar to the blind man touching the elephant. Since the establishment of the United Nations Intergovernmental Panel on Climate Change (IPCC) in 1988, with the active promotion of the previous World Climate Conferences and the extensive publicity of the media in various countries, most people in the world have been convinced that the Earth is warming and that global temperatures will continue to rise in the future. However, some scientists have pointed out that, based on astronomical observations and in-depth research, the global temperature will not rise but will fall in the future.65 The research results of experts such as Liu Yu from the Institute of Earth Environment of the Chinese Academy of Sciences showed that the four extremely warm periods of A.D. 401–413, A.D. 604–609, A.D. 864–882, and A.D. 965–994 in central and northern China (the temperature changes in this area can respond to those in the northern hemisphere of the Earth) occurred before the Industrial Revolution, which is obviously difficult to explain by the increase in atmospheric carbon dioxide concentration caused by human activities.66 In addition, scientists have found that global warming began long before the Industrial Revolution through the study of ice cores collected at depths of up to 3,000 m in Greenland and Antarctica.67 As early as 1969, Professor Willi Dansgaard from the Institute of Physics at University of Copenhagen of Denmark used the radioisotope method of oxygen to study ice collected from the Greenland glacier. He discovered that the temperature in Greenland over the past 1,700 years showed obvious periodic changes.68 To illustrate the characteristics of climate change, a scientific research result was published in September 2010 by relevant experts such as Zheng Jing-Yun from the Institute of Geographical Sciences and Natural Resources Research at the Chinese Academy of Sciences. This achievement is a sequence map of temperature changes 65

Zhang, H. (2010, January 20). “I Am a Lonely Minority”-Interview with Russian Astronomer Abdusamatov. Science and Technology Daily. 张浩. (2010, 1.20). 我是个孤独的少数派”——访 俄罗斯天文学家阿卜杜萨马托夫. 科技日报. 66 Wang, Y. (2009, May 7). Xi’an Scholars: Solar Radiation May Be the Main Factor of Climate Warming. Xi’an Evening News. 王燕. (2009, 5.7). 西安学者: 太阳辐射或是气候变暖主因素. 西 安晚报. Xinhua Net. http://www.sn.xinhuanet.com/2009-05/07/content_16455934.html. Accessed 5 Nov 2012. 67 Zhang, H. (2010, January 20). “I Am a Lonely Minority”-Interview with Russian Astronomer Abdusamatov. Science and Technology Daily. 张浩. (2010, 1.20). 我是个孤独的少数派”——访 俄罗斯天文学家阿卜杜萨马托夫. 科技日报. 68 Dansgaard, W. et al. (1969). One Thousend Centuries of Climate Record from Camp Century on the Greenland Ice Sheet. Science, p. 378. Figure 2.

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Fig. 9.2 Sequence of temperature changes in the winter half-year in eastern China in A.D. 200069

in the winter half year in eastern China in A.D. 2000 (Fig. 9.2) drawn by researchers who have spent more than a decade using historical documents, tree-ring dating, modern meteorological observations and other methods to quantitatively calibrate the phenological differences between ancient and modern times. In this figure, the winter half-year refers to the period from October to April this year, the scale resolution is 30 years, and the broken line is the connection of the 3-point moving average. The results of this study show that there are 200–300-year and quasi-600-year cycles of temperature changes in eastern China, and there have been at least 4 warm phases in the winter half-year temperature in eastern China since the past 2000. The research proves that long-term climate change is cyclical; the twentieth century is not the only stage of climate warming, and the degree of warming and the rate of warming have not exceeded the highest levels that have occurred in the past 2000 years. On a centennial scale, the twentieth century was slightly lower than the two warm phases of the Medieval warm phase (i.e., A.D. 930–1100 and A.D. 1200–1310) and was comparable to the Sui and Tang warm phases (A.D. 570–770). From the centennial warming rate, the warming rate of the twentieth century is similar to that of other climates that have shifted from cold to warm in the past 2000 years.70 On March 10, 2020, the World Meteorological Organization’s Statement on the Global Climate in 2019 showed that71 2010–2019 was the warmest 10 years on record, and 2015–2019 was the warmest 5 years on record. Global warming is accelerating as the level of greenhouse gas continues to rise. To protect the natural environment for human survival, countries around the world should change the development model that is highly dependent on petrochemical energy and should apply more 69

Source: Zheng, J. Y., Shao, X. M., Hao, Z. X., Ge, Q. S. (2010). An Overview of Research on Climate Change in China During the Past 2000 Years. Geographical Research (09), Fig. 1. 郑景 云., 邵雪梅., 郝志新., 葛全胜. (2010). 过去 2000 年中国气候变化研究. 地理研究 (09), 图1. 70 Zheng, J. Y., Shao, X. M., Hao, Z. X., Ge, Q. S. (2010). An Overview of Research on Climate Change in China during the Past 2000 Years. Geographical Research (09). 郑景云., 邵雪梅., 郝志 新., 葛全胜. (2010). 过去 2000 年中国气候变化研究. 地理研究 (09). 71 Liu, Q., Shang, X. Q. World Meteorological Organization: Global Warming Momentum Remains Unchanged, Record May Be Broken in the Next 5 Years. Xinhua Net. 刘曲., 尚绪谦. 世界气象组 织: 全球变暖势头不变, 未来5年可能再破纪录. 新华网. http://www.xinhuanet.com/2020-03/11/ c_1125697085.html. Accessed 11 Mar 2020.

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renewable energy, such as wind power and photovoltaics, to achieve sustainable social and economic development.

9.5.3 The Connections Between Climate Change and Human Civilisation Studies by scholars have shown that there is a close connection between Earth’s climate change and the development of human civilisation. Climate factors have a very important impact on the origin of civilisation, the rise and fall of dynasties, ethnic relations, population distribution and migration, and military and political struggles. As early as the 1980s, American scholar Bret Hinsch conducted research on the relationship between climate change and China’s historical development.72 He discussed the relationship between climate change and the history of China in various periods by linking the changes and impacts of climate change in East Asia, Europe and North America. By analysing the relationship between climate change and history from the Neolithic Age to the Qing Dynasty, he pointed out that climate change affected all aspects of China by influencing the development of agriculture. The periodic changes in the warm phase and the cold phase are a process of competition and integration between the two ecological environments of nomadic civilisation and agricultural civilisation. During the warm phase, China’s economy is booming, the nation is unified, and the country is prosperous, while in the cold phase, the drastic changes in the climate trigger economic recession, nomadic invasions, peasant uprisings, state divisions, and the southward shift of economic and cultural centres; He believed that climate is one of the decisive factors in the political fate of northern China during historical periods and stressed the importance of studying historical events by taking the world climate as a whole. “As a result of this agricultural orientation, all phenomena which we associate with civilisation in the core areas of China depended directly on the prosperity of agriculture”, he discussed that, “A decline in agricultural production decreased the economic surplus necessary for flourishing urbanisation, commerce, warfare, administration, intellectual pursuits, arts and crafts”. Serious climatic change could therefore affect all sectors of society. This thesis has been well documented in regard to many civilisations. Some polities, grounded on a more fragile ecological foundation than China, were even destroyed by major climatic change. Scholars have made arguments for this effect regarding Egypt, Mycenae, Palmyra, Greenland and Mali”; he also stressed that “Simplistic reductionism, relying on deterministic links between climatic change and most major political and social phenomena, can only distort the complex reality of the past.

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Hinsch, B. (1988). Climate Change and History in China. Journal of Asian History 22(2).

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However, by taking climate into account in building up a multifold understanding of past events we can only add to our understanding of Chinese history”.73 Climate change affects not only the formation of sea and land on the Earth’s surface but also the distribution of water sources and organisms on the land. The climatic and geological differences in areas on land determine the disparities in water sources and biological distribution, thus forming different geographical features. Human survival requires a suitable climatic and geographical environment, as well as water and food sources (plants or animals). To survive, human beings must choose areas with abundant water and food sources. As the Russian philosopher Plekhanov pointed out, differences in the geographical environment are the natural basis for the social division of labour. On the Eurasian continent, due to climatic reasons, large grasslands grow in the northern regions with higher latitudes. The people living here are limited by the geographical conditions and can only develop the production methods of hunting and animal husbandry. In subtropical regions with slightly lower latitudes, the climatic conditions are suitable for the growth of plants such as foxtail millet, proso millet, wheat and hemp. The people living here naturally developed the production method of farming and planting. This initial geographical environment difference led to the social division of labour between animal husbandry and crop cultivation in agricultural production in ancient human society. Due to differences in geographical environment and production methods, people’s lifestyles in distinct regions also differ. For example, for people who live on animal husbandry, their main products are cattle, sheep and other livestock, so they eat animal meat as their main food, drink milk, wear animal skins, and live a nomadic life. The main products of those who make a living from plantations are foxtail millet, proso millet, wheat, hemp, cotton, tea and other plants. Therefore, they eat grains and other plants as a staple food, drink tea, wear cotton garment, and live a life of spring planting and autumn harvest. In long-term production and life, there is a constant interaction between human beings and the geographical environment. This interaction pushes the generation and development of human thinking and intelligence. As a result, humans gradually learned to use fire, eat cooked food and create syllable language. It is precisely because of the differences in production and lifestyle that people in distinct geographical areas have gradually formed unique cultures with local characteristics. The uniqueness of their culture is mainly manifested in the great differences in language, diet, clothing, residence, marriage, customs, etc., which have strong geographical characteristics, as the old saying goes that “people are a reflection of their environment”. It is the various local cultures that, after long-term accumulation, integration and development, finally formed ethnic differences in human society. The nomadic people living in the northern grassland area and the farming people living in the Yellow River Basin in central China have significant differences in cultural representation, such as language, diet, clothing, residence, marriage, and customs. If these differences are traced back to the source, it will not be difficult to find that the original 73

Hinsch, B. (1988). Climate Change and History in China. Journal of Asian History 22(2):131– 132, 159.

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differences originated from the distinctions in climate and geographical environment. It can be found from this that the following relationship chains existed in the birth and evolution of different civilisations in ancient society: differences in (climate and geology) → differences in geographical environments → differences in (water sources and production) → differences in geographical distribution of the human race → differences in social division of labour (nomadic, farming) → differences in production methods → differences in lifestyle → differences in ethnic cultures → differences in social civilisation.

The geographical environment is a necessary condition for the existence and development of human society and has an important impact on social development. There is no country in the world whose history is not marked by the influence of its geographical environment. In the early days of human society, most of the means of subsistence were directly taken from nature, when gathering and hunting were still important economic activities. The older the development stage is, the greater the dependence of human society on the geographical environment, but even in a primitive society, the development speed of human society and the superiority of the geographical environment are not proportional. As Marx pointed out, the geographical environment and human society are in constant movement and change, but they influence and restrict each other. In the change of geographical environment, climate change is the main aspect. Climate change is the most profound and important type of natural change affecting human society. Climate change will inevitably cause corresponding alterations in the quantity and features of land resources in human society, which will prompt humans to change the method of land use. The change in land use will trigger the change in agricultural output and in turn will affect the population distribution in regions. The changed population distribution will lead to reforms in a state in many aspects, such as human-culture, economy and polity. Conversely, state reforms in terms of human-culture, economy and polity will also cause changes in population distribution in different regions. Such transformation will bring about changes in the distribution and utilisation of land resources, thus affecting the geographical environment. Therefore, from the analysis of the impact of climate change on different historical periods in China, the relationship between humans and land has formed an interconnected relationship chain.74 This chain of relationships can be simply expressed as follows: climate change → changes in land resources → changes in land use → changes in agricultural output → changes in population distribution → changes in state factors.

Climate change has a crucial influence on agricultural output, which is directly reflected in the impact of air temperature on the plant growth rate and growth period. Crops are sensitive to changes in weather. For example, soybean seeds similar to the Chinese varieties planted at a temperature of 16 °C sprout half as quickly as those in temperatures of 21–32 °C. Moreover, the rate of growth for the plant throughout 74

Wang, Z., Zhang, P. Y., Zhou, Q. B. (1996). The Impacts of Climate on the Society of China During Historical Times. Acta Geographica Sinica (04). 王铮., 张丕远., 周清波. (1996). 历史气 候变化对中国社会发展的影响. 地理学报 (04).

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its lifecycle increases markedly as temperature increases.75 The impact of climate change on agricultural production and human life is more concentrated in winter. Disasters such as snow and ice disasters often occur in the cold winter, damaging crops and killing livestock, which in turn affects the production and life of human society. In addition to temperature, another element of climate, precipitation, also has a significant impact on the growth of crops and human life. Climatic change influences agricultural production by affecting temperature and rainfall. For example, the harvest of hay, one of the most vital crops of traditional Icelandic agriculture, declines by 15–17% as a result of a one degree Celsius decline in average summer temperature.76 Excessive precipitation will lead to disasters such as mudslides, landslides and waterlogging. Too little precipitation will lead to disasters such as drought and locust plague, and in severe cases, it will also lead to dry water, withered grasslands, and desertification of land, which directly affects the production and life of human society. Some scholars have pointed out after studying some prehistoric cultural sites that the dominant factor leading to the decline of the Yangshao culture in the Guanzhong region of China77 and the extinction of the Longshan culture in the middle and lower reaches of the Yellow River78 may be the climate and drought. The study of the monsoon precipitation intensity index records also showed that dynasty replacements occur mostly during periods of weak monsoon rainfall.79 Research by D. L. Johnson and H. Gould proved that agricultural harvests in Mesopotamia (present-day Iraq) were closely related to climate change. Climate change triggers famines and wars that lead to periodic population declines.80 It is well depicted in Chinese historical books that in different historical periods, droughts caused years of drought and locust plague, a thousand miles of dry farm, and the wilds were full of dead bodies of the starved. Peasant uprisings, ethnic wars and social unrest were often triggered when natural disasters were severe.

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Hinsch, B. (1988). Climate Change and History in China. Journal of Asian History 22(2):134. Bryson, R. A. (1974). Heyuppskera: An Heuristic Model for Hay Yield in Iceland. Research Institute Netri As, Bulletin 18. Requoted from: Hinsch, B. (1988). Climate Change and History in China. Journal of Asian History 22(2):132. 77 Zhang, P. Z., Cheng, H., Edwards, R. L., et al. A Test of Climate, Sun, and Culture Relationships from an 1810-Year Chinese Cave Record [J]. Science (322):940–942. 78 Wu, W. X., Liu, T. S. (2004). Possible Role of the “Holocene Event 3” on the Collapse of the Neolithic Cultures Around the Central Plain of China [J]. Quaternary International (117):153–166. 79 Zhang, P. Z., Cheng, H., Edwards, R. L., et al. A Test of Climate, Sun, and Culture Relationships from an 1810-Year Chinese Cave Record[J]. Science (322):940–942. 80 Johnson, D. L., Gould, H. (1984). The Effect of Climate Fluctuations on Human Populations: A Case Study of Mesopotamian Society. In: Biswas, A. K. (ed). Climate and Development. Dublin: Tycooly. pp.117–138. 76

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9.5.4 The Impact of Climate Pulsation on Human Civilisation The American cultural geographer Ellsworth Huntington proposed in his 1907 book The Pulse of Asia that the northern nomads had invaded the view that the foreign aggression of the northern nomads was due to the malfunctioning pastures dried by the climate. In Civilization and Climate (1915), he further put forward the theory of climate pulsation. He drew two curves of historical climate change (dry curve and wet curve) and inferred the conclusion of climate pulsation: After a drying cycle begins, the grasslands dry up and turn into deserts, which pushes the nomads to migrate out, resulting in a series of migrations and conquests. The climate pulsation theory proposed by Huntington was a sensation before the 1960s but has since been gradually forgotten. In the 27 years from 1934 to 1961, Toynbee, a well-known British historian, successively published his 12-volume masterpiece Historical Research. In Historical Research, Toynbee summed up two salient features when nomads in Asia, Africa and Europe invaded farming areas: One is the simultaneous complication of the nomads invading farming areas, and the other is that the nomadic invasion is highlighted with an active period and a stationary period. From this, he found that the historical period of nomadic invasion of agricultural areas has its periodicity, and the period is approximately 600 years. In the 600-year cycle, the first 300 years were active and the last 300 were stationary, and in the first century of every active period, nomadic aggression was particularly rampant. Toynbee found that the active and stationary cycles of nomadic aggression were very similar to the dry and wet curves of historical climate change drawn by Huntington. He thus asserted that the climatic pulsation that Huntington proposed is the incentive that governs this complication and periodicity. After Toynbee’s Historical Research came out, Huntington’s climatic pulsation once again attracted people’s attention.81 Gray attempted to solve the apparent contradiction between divergence of shortterm weather and convergence of long-term climate patterns by theorising that major changes in temperature are caused by a climatic disturbance that moves slowly westward around the Northern Hemisphere, making a complete circuit in approximately 600 years.82 Glaciologists have discovered that significant advances and declines in glaciers often occur simultaneously in several parts of the world, a finding that is corroborated by evidence from this period.83 This shows that in the long run (i.e., on a centennial scale), the pulsation of the global climate, especially the changes in temperature, is basically synchronous. This allowed the two great empires of the

81 Li, X. P., Peng, Y. W. (2011). Management Culture: “Soil”, Tradition and Innovation. China Military Photo Centre. 李秀朋., 彭云望. (2011). 管理文化: “土壤”、传统与创新. 中国军事图 片中心. http://tp.chinamil.com.cn/2011/2011-04/23/content_4425513.htm. Accessed 2 Nov 2012. 82 Gray, B. M. (1975). Japanese and European Winter Temperatures. Weather (30):359–368. Requoted from: Hinsch, B. (1988). Climate Change and History in China. Journal of Asian History 22(2):159. 83 Hinsch, B. (1988). Climate Change and History in China. Journal of Asian History 22(2):138.

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ancient world, the Romans in the West and the Han Dynasty in the East, to simultaneously enter a period of warm climate. In both China and Europe, this Little Ice Age lasted from approximately 1200 to beyond 1400. Climatic changes of this time in Europe included an expansion of glaciers, a lowering of the tree line, and an expansion of bogs and lakes as wetness increased. The social costs of this ecological upheaval were severe. Crop failure, famine, abandonment of farmland, and epidemics all characterised the late Middle Ages84 ; during the same period in China, the climate became extremely cold after a brief warm period. In the winter of 1309, the canal froze, and in 1329 and 1353, Taihu Lake froze twice. The lake ice was several feet thick, and the nearby orange trees were frozen to death by this severe cold.85 During the thirteenth and fourteenth centuries, Mongols continued to invade and migrate to the south, and wars and various disasters decreased the total population of China by more than half (approximately 55 million).86 Between 1347 and 1353, Europe lost a quarter to a third of its population during the severe cold.87 In the seventeenth century, when the coldest and longest Little Ice Age came, between 1618 and 1648, Europe broke out the most tragic and slaughtered war in history. Wars, famine and epidemics devastated Europe’s population; in China, however, the population plummeted by 43% (approximately 70 million) between 1620 and 1650 due to war, starvation and plagues.88 According to earth science data, for every 1 °C drop in temperature, the boundary between the temperate zone and the warm temperate zone on Earth will move south by approximately 200 kms. Taking the vast grassland in northern China as an example, if the annual average temperature in the north drops by 1 °C, the local grassland will decrease by 200 kms in latitude; and if the annual average temperature drops by 2–3 °C, the grassland will be reduced by at least 400–600 kms in latitude.89 For northern China, a drop of 1–2 °C in the annual average temperature will also lead to a shortening of the frost-free period, which will have a serious impact on the growth of plants, especially crops. The most direct effect is the shortening of the growth period. Since China has a monsoon climate, lower temperatures mean less precipitation, and the resulting prolonged drought will have more adverse effects on agricultural production. From this point of view, this slight change in temperature will have a strong impact on the vegetation ecology in the northern region, and the 84

Hinsch, B. (1988). Climate Change and History in China. Journal of Asian History 22(2):152– 153. 85 Zhu, K. Z. (1973). A Preliminary Study of China’s Climate Change in the Past Five Thousand Years. Scientia Sinica (02):177. 竺可桢. (1973). 中国近五千年来气候变迁的初步研究. 中国科 学 (02):177. 86 Jiang, T. (1993). Modern Chinese Population History. Zhejiang People’s Publishing House. 姜 涛. (1993). 中国近代人口史. 浙江人民出版社. 87 McEvedy, C., Jones, R. (1978). Atlas of World Population History. London: Allen Lane. 88 Jiang, T. (1993). Modern Chinese Population History. Zhejiang People’s Publishing House. 姜 涛. (1993). 中国近代人口史. 浙江人民出版社. 89 Guan, Y. B. (2010). Research on Geographical and Environmental Factors of the Great Ethnic Migration. Journal of Northwest Minzu University (Philosophy and Social Sciences) (03). 管彦波. (2010). 民族大迁徙的地理环境因素研究. 西北民族大学学报(哲学社会科学版) (03).

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decrease in the grassland vegetation area will naturally have a significant consequence on the production and life of local nomads. From a global perspective, when humans invented agriculture, the entire world formed two types of social civilisations centred on the Eurasian continent: One is the farming civilisation located in the narrow strip between the 23rd parallel north latitude (the Tropic of Cancer) and the 35th parallel north latitude; One is the nomadic civilisation on the Eurasian steppe between the 40th parallel and the 55th parallel. On the narrow strip occupied by the farming civilisation, there were 5 ancient farming civilisations, namely, the Cretan civilisation near the Mediterranean Sea, the ancient Egyptian civilisation in North Africa, the Mesopotamian civilisation on the Tigris and Euphrates, the Haraba civilisation in the Indus Valley (predecessor of Indian civilisation), and the Chinese civilisation in the Yellow River Basin (referring to the Xia, Shang and Zhou dynasties). On the Eurasian steppe in the north, from the Xing’an Mountains in East Asia to the lower reaches of the Danube River in Western Europe, there was a group of people who lived a nomadic life. Such confrontation between farming in the South and herding in the North lasted from 3000 B.C. to A.D. 1500. In world history, there have been three large-scale invasions of nomadic civilisation against farming civilisation. The first major invasion occurred between 2000 B.C. and 600 B.C., mainly initiated by Indo-European nomads who migrated to the central Eurasian steppe. This invasion damaged several farming civilisations in western China to varying degrees, resulting in the transformation of the forms of these farming civilisations. It also gave birth to the second generation of civilisation (i.e., classical civilisation) in human history, including ancient Greece, ancient Rome, the Persian Empire, ancient India and the Qin and Han empires in the East. The second greatest invasion occurred from the second century B.C. to the fourth century A.D., mainly initiated by the nomadic Xiongnu in northwestern China, which led to the collapse of almost the entire classical civilisation system. The third great invasion occurred in the early thirteenth century AD, mainly initiated by the Mongols and Turks in the eastern Eurasian steppe. Led by Genghis Khan and his successors, Mongol invaders swept through almost the entire Eurasian continent from the East China Sea to the Black Sea coast of Eastern Europe.90

9.5.5 The Long-Term Features of Climate Change in Chinese History In the 1970s, Zhu Ke-Zhen (1890–1974), a famous Chinese meteorologist, applied the phenology method to study climate change in China over the past five thousand years and comprehensively revealed the long-term characteristics of China’s climate 90

Li, X. P., Peng, Y. W. (2011). Management Culture: “Soil”, Tradition and Innovation. China Military Photo Centre. 李秀朋., 彭云望. (2011). 管理文化: “土壤”、传统与创新. 中国军事图 片中心. http://tp.chinamil.com.cn/2011/2011-04/23/content_4425513.htm. Accessed 2 Nov 2012.

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Fig. 9.3 Curve of winter temperature change in different historical periods in China93

change. Since then, scholars have used different methods to study the climatic conditions of China in various historical periods, which can be seen intuitively through the curve of winter temperature change in different historical periods in China (Fig. 9.3). Figure 9.3 is created on the basis of China’s winter temperature change in the past five thousand years91 drawn by Zhu Ke-Zhen and combined with China’s temperature change in the Past Five Thousand Years92 mapped by meteorologist Ren Zhen-Qiu and astronomer Li Zhi-Sen according to the relative positions of the Earth and the planets. Zhu Ke-Zhen’s results pointed out that in the past five thousand years in China, in the first two thousand years from the Yangshao Culture to the Yin Ruins in Anyang, the annual average temperature in the Yellow River Basin was approximately 2 °C higher than that of the present. After that, the annual average temperature fluctuated by 2–3 °C; the cold period appeared in 1000 B.C. (late Yin and early Zhou), A.D. 400 (Six Dynasties), A.D. 1200 (Southern Song) and A.D. 1700 (late Ming and early Qing). In the past two thousand years, the Han and Tang dynasties were relatively warm periods. The climate became cold shortly after the beginning of the Three Kingdoms and continued until the beginning of the Tang Dynasty; after the end of the Tang Dynasty, the climate turned cold again. By the fifteenth century, it gradually 91

Zhu, K. Z. (1973). A Preliminary Study of China’s Climate Change in the Past Five Thousand Years. Scientia Sinica (02):186. 竺可桢. (1973). 中国近五千年来气候变迁的初步研究. 中国科 学 (02):186. 92 Ren, Z. Q., Li, Z. S. (1980). The Impact of Planetary Motion on Climate Change. Chinese Science Bulletin (11):503, Fig. 2. 任振球., 李致森. (1980). 行星运动对气候变迁的影响. 科学通 报 (11):503, 图2. 93 Source: Yang, Z. L, Yang, Z. Y. (2002). Study on Vicissitudes of Air Temperature and History in Ancient China. Journal of Tianjin University (Social Sciences) (01):59, Fig. 1. 杨正瓴., 杨正 颖. (2002). 中国的气温变化与历史变迁关系的初步研究. 天津大学学报(社会科学版) (01):59, Fig. 1.

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entered the Little Ice Age, during which the temperature fluctuated several times. Until the end of the Little Ice Age in the early twentieth century, the climate warmed again. Experts such as Wang Zheng, Zhang Pi-Yuan, and Zhou Qing-Bo conducted systematic research on China’s climate change in the past two thousand years in three years and found that94 : During the two thousand years, the climate of China was bounded by the year A.D. 1230, which was warmer in the early stage and colder in the later stage. There were several major climate disruptive changes in Chinese history, which occurred in A.D. 280, around A.D. 880, A.D. 1230–1260, and A.D. 1816–1831, among them, disruptive climate change occurred in A.D. 1230–1260 was the largest in the past two thousand years. In the past two thousand years, climate change was drying out China, and the most rapid drying period was A.D. 280–500; A.D. 480–500, the climate underwent a major turning point. The climate of China started from wet to dry with the year A.D. 500 as the dividing point; after the monsoon retreated after A.D. 880, desertification in eastern China increased.

9.5.6 The Connection Between Climate Change and the Southward Migration of Northern Ethnic Group In ancient Chinese history, the numerous southern invasions and immigration movements of northern nomads greatly affected the historical process of Chinese farming civilisation. Scholars have put forward different explanations for the reasons for the repeated southern invasions of the northern nomads, such as the innate interest in profit, population expansion, trade obstruction, and the theory of plunder.95 However, today, it seems that the main reason should be caused by the ecological environment crisis caused by climate. In recent years, scholars in China have conducted research on issues such as the impact of climate change on ethnic migration and have achieved some results. For example, Zhang Li pointed out after studying climate change and the phenomenon of northern peoples moving southward in ancient China that during the cold phase from 1000 to 850 B.C. in the Western Zhou Dynasty, there were frequent movements of the northern nomads to the south; during the cold phase from the first few years after Anno Domini to A.D. 600, the ethnic minorities living in northeastern and northwestern China had begun to move south from the cold frontier since the Eastern Han Dynasty. During the cold phase A.D. 1000–1200, the Khitan, Tangut, Jurchen, Mongols and 94

Wang, Z., Zhang, P. Y., Zhou, Q. B. (1996). The Impacts of Climate on the Society of China During Historical Times. Acta Geographica Sinica (04). 王铮., 张丕远., 周清波. (1996). 历史气 候变化对中国社会发展的影响. 地理学报 (04). 95 Xiao, Q. Q. (1972). Review of Various Reasons for the Southern Invasion of Nomads in North Asia. Shih-Huo Monthly (Taipei) (12). 萧启庆. (1972). 北亚游牧民族南侵各种原因的检讨. 食 货月刊 (12).

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other ethnic groups in the north led troops to battle the south, resulting in frequent wars between states. In the coldest period A.D. 1640–1700, the Qing army invaded southern fortress and established the Manchu Qing Dynasty regime.96 Scholar Wang Hui-Chang systematically studied the relationship between the latitude changes of the southern border of the national regime established during the southward migration of the northern nomads since the Qin and Han dynasties (Table 9.4) and the long-term climate fluctuations in China, and he came to the conclusion: From the corresponding analysis of the changes in China’s climate in cold, warm, dry and wet and the rise and fall of the dynasties, it is evident that the warm and humid climate period has been shortened, the cold and arid climate period has been prolonged and the degree of aridification has become increasingly serious over the past 2,000 years, which tempted the nomads outside the Great Wall to step into the Yellow River-Yangtze River Valley. The rise and fall of dynasties in China and the changes in the southern boundary of the nomadic regimes all show a synchronous correlation or resonance with the fluctuations in the climate. He pointed out that the climate began to be dry and cold from the fifteenth century during the cold phase from the beginning of the Northern Song Dynasty to the end of the Qing Dynasty (1000–1900). From 1627 to 1641, the Yellow River basin experienced an unprecedented 14 consecutive years of watershed drought. Climate change initially triggered the confrontation between the Liao, Jin and Song dynasties and later led to the domination of nomadic groups in the Yellow-Yangtze River valley by the Yuan and Qing dynasties.97 Climate change affects nomads and farming peoples differently. Nomadic people live on hunting and animal husbandry. Their main means of production and subsistence are horses, cattle, sheep and other livestock. To keep these livestock, they need enough grassland and water. The grassland and water sources are greatly restricted by the climate and geographical environment, which determines that their ability to resist natural disasters is extremely weak. When encountering drought and icy weather, water sources will be reduced, and grasslands will wither, directly leading to the death of livestock herds, which will seriously threaten the survival of nomadic peoples. Chinese history books have repeatedly recorded the significant impact of climate-induced disasters on the northern nomadic society. Take the Huns during the two Han Dynasties as an example that “(in the first year of Taichu) in winter, the Huns suffered heavy rain and snow, and many animals died of hunger and cold” (The Records of the Grand Historian—Treatise on the Xiongnu); “(In the fourth year of Zhenghe) months of rain and snow had killed livestock, infected people with diseases, and prevented crops from maturing”; “(In the second year of the Earth Festival) the Xiongnu people were starving, and 16–17% of the people and livestock died” (Book of Han—Traditions of the Xiongnu [part 1]); “(In the twenty second year 96

Zhang, L. (1997). Climate Change and the Southward Movement Northern Peoples in Ancient China. Journal of Xuchang University (04). 张利. (1997). 气候变迁与我国古代北方民族的南下. 许昌师专学报 (04). 97 Wang, H. C. (1996). The Relationship Between the Migrating South of the Nomadic Nationalities in North China and the Climatic Changes. Scientia Geographica Sinica (03). 王会昌. (1996). 2000 年来中国北方游牧民族南迁与气候变化. 地理科学 (03).

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Table 9.4 Latitude changes of the southern boundary of the nomadic regimes in the past dynasties98 Stage

Epoch

Political boundaries (North/South)

Latitude (N)

Equivalent present location name

I

Qin

Xiongnu/Shanggu Commandery

41°42’

Paotao Yingzi, Taibus Banner, Xilin Gol League, Inner Mongolia Autonomous Region

Western Han

Wuhuan/Youzhou Governor Shanggu Commandery

41°18’

Ertaidong, Zhangjiakou City, Hebei Province

Eastern Han

Xianbei/Youzhou Governor Shanggu Commandery

40°56’

Northeast of Zhangjiakou City, Hebei Province

Three Kingdoms

Xianbei/Wei, Youzhou Shanggu Commandery

40°56’

As above

Western Jin

Xianbei/Youzhou Shanggu Commandery

40°56’

As above

Eastern Jin

Former Qin/Eastern Jin, Yuzhou Geyang County

32°18’

Linhe of Exian in Henan Province

Southern and Northern Dynasties

Northern Dynasty: Northern Qi/Southern Dynasty: Chen

30°24’

Xiahe Town, Xishui County, Hubei Province

Sui

Tujue/Zhuo County

44°00’

South of Abag Banner, Xilin Gol League, Inner Mongolia

Tang

Uyghur/Hebei Dao, Guizhou

43°30’

Tsagaan Nuur, Xilin Gol League, Inner Mongolia

Five Dynasties Ten Kingdoms

Khitan/Northern Zhou

39°24’

Tayayi, Laiyuan County, Hebei Province

Northern Song

Liao/Northern Song

39°06’

Nanguantou, Yixian County, Hebei Province

Southern Song

Jin/Southern Song

32°18’

Linhe Town, Xi County, Henan Province

Yuan

South Rim of Mainland China

22°30’

Ganghou, Huidong County, Guangdong Province

II

Punctuated period

III

IV

(continued)

98 Source: Wang, H. C. (1996). The Relationship Between the Migrating South of the Nomadic Nationalities in North China and the Climatic Changes. Scientia Geographica Sinica (03). 王会昌. (1996). 2000年来中国北方 游牧民族南迁与气候变化. 地理科学 (03).

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Table 9.4 (continued) Stage

Epoch

Political boundaries (North/South)

Latitude (N)

Equivalent present location name

Ming

Tatar/Capital Kaiping Guard

42°40’

North of Plain and Bordered White Banner, Xilin Gol League, Inner Mongolia

Qing

South Rim of Mainland China

22°30’

Port of Huidong County, Guangdong Province

➀ is based on the latitude change on the E longitude at 115°00’ ➁ The Yuan and Qing dynasties only took the latitude of mainland China

of Guangwu) successive years of drought and locust plagues left the Xiongnu arid lands of thousands of miles, the vegetation was exhausted, the people and animals were famished, and consumed more than half of them” (Book of the Later Han— Treatise on the Southern Xiongnu). It is apparent from these records that nomadic peoples like the Xiongnu, with a wider area and stronger national power, were so vulnerable when faced with natural disasters, not to mention other small tribes and small states in the north. For the farming people in central China, their ability to resist natural disasters is relatively strong. When faced with drought and icy weather, even if there is no harvest in the cold winter, they can still rely on the food reserves in summer and autumn to survive. When climate change is in the warm phase of the long cycle, the temperature and humidity are relatively high, and precipitation will be comparatively abundant, whether it is a high-latitude temperate region or a low-latitude subtropical region, which is not only conducive to the growth of crops but also to the growth of grassland vegetation. At this time, the production activities of the farming and nomadic peoples will be developed correspondingly, the people’s lives will be relatively stable and comfortable, and the population of each country will increase. When climate change is in the cold phase of the long cycle, the climate becomes cold as the temperature decreases, and the decrease in precipitation will lead to drought and subsequent natural disasters. As a result, the production and life of the farming and nomadic peoples will be adversely affected. Climate change has a greater impact on temperate grassland areas. As the temperature turns cold and the climate becomes arid, the grassland belt will move south, and the grassland ecological environment will continue to deteriorate. The deterioration will lead to the reduction of water sources, the withering of large areas of grasslands, and even desertification in severe cases. These consequences will directly threaten the production and life of nomads. The impact of climate cooling on nomads is reflected not only in the reduction of grasslands and the death of livestock but also in the lagging effect of population growth during warm phases. In this way, when the climate turned into a cold phase, under the direct threat of the environment and huge population pressure, to compete for increasingly scarce aquatic and grass resources, large-scale tribal wars and tribal mergers were

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ignited among the originally independent nomadic tribes on the Eurasian steppe. The result of the annexation would lead to the rise of the steppe empire. Driven by the existential crisis caused by ecology, the emerging grassland empire started to launch large-scale aggression, plunder and migration to the farming areas.

9.5.7 The Connection Between Climate Change and Ancient Wars In recent years, scholars have found that there is a strong connection between war and climate change through superimposed research on the relationship between climate change and ancient war, thus revealing the impact mechanism of climate change on social development from a deeper level. Climate change first affects the productive capacity of the land, thereby constraining agricultural output and food supply. The continuous growth of the population will create a relative shortage of food resources, usually meaning famine, conflicts and wars, and a decrease in the population. Population collapse, however, increases the per capita supply of food resources, which in turn leads to relative peace and rapid population growth. Human warfare, driven by climate change, modulates the dynamic balance between population size and food resources. The interaction of these factors within the social system forms a historical rhythm unique to agricultural societies. David D. Zhang, and Peter Brecke conducted a systematic study on the relationship between global climate change and war and population during the period A.D. 1000– 1900. They published a study in Proceedings of the National Academy of Sciences (PNAS) in December 2007, stating that long-term fluctuations in war frequency and population changes followed the cycles of temperature change. Cooling impeded agricultural production, which brought about a series of serious social problems, including price inflation, war outbreak, famine, and population decline successively; worldwide and synchronistic war peace, population, and price cycles in recent centuries have been driven mainly by long-term climate change.99 Based on quantitative analysis of different geographical environments, different social structures and different regions, their research not only explained the laws of most wars in human history in time and space but also clearly revealed that the relative shortage of food resources is one of the most basic reasons for war outbreaks in ancient society. Given the importance of this research, we highlight some of their main conclusions below: 1. The analysis of the frequency of wars in Europe, Asia, and the arid areas of the Northern Hemisphere (NH) also shows significant correlations with the temperature anomaly for their geographical patterns. Among them, as arid regions are the most vulnerable to climate change, the highest coefficient should and does 99

Zhang, D. D., Brecke, P., Lee, H. F., et al. (2007). Global Climate Change, War, and Population Decline in Recent Human History. In: Proceedings of the National Academy of Sciences of the United States of America, 4 December 2007.

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appear in the war frequencies for the arid areas of the NH; Europe and Africa have either large cold areas or desert areas relatively vulnerable to cooling, and warfare there is highly correlated with the temperature anomalies. The impact of temperature is lower for Asia, probably because much of the continent for which there are conflicting data is subject to a wet tropical or subtropical environment, where a fall in temperature would have a smaller effect than elsewhere on agricultural production and would not reduce food resources to the same extent because there is more alternative food. 2. By studying Chinese history, they found that the number of war outbreaks and population collapses in China is significantly correlated with NH temperature variations and that all of the periods of nationwide unrest, population collapse, and dynastic change occurred in the cold phases of this period. Data recorded in Chinese warfare history back to A.D. 1000 shows that all war peaks occurred in a cold climate, and multiple war–peace cycles closely followed the NH’s temperature variations. The temperature–war correlation is also statistically significant, and population declines followed every high war peak. The cold and dry climate drove the northern and western tribal states to enter central China. 3. By studying the changes in population growth rates in Europe and China in A.D. 1000–1900, they discovered significant correlations and coincident timing between temperature change, war frequency, and population growth rate at different temporal and spatial scales; Cooling may have contributed to widely separated human disasters during the cold periods. The paths to those disasters operated through a reduction in agricultural production. The reduction is mainly because the cooling brought about a shortening of the growing season and a reduction of available land for cultivation. Shortages of food resources (reflected in price rises) instigated conflicts and demographic declines. 4. They plotted European and Chinese agricultural output, grain yield, food (wheat and rice) prices, population size, population growth rate, war frequency and other data during A.D. 1500–1800 into a curve with the years as the horizontal axis (all data filtered at 410-year resolution). After comparing the curve with NH’s temperature anomalies during the same period, they found that the fluctuations of all six components are the same in terms of macrotrends, turning points, and oscillation magnitude for both Europe and China at a time when both regions were detached, economically, politically, and geographically. The fluctuations of all of the factors were in a successive order and corresponded to the temperature change. This shows that the impacts of climate change on agricultural production in Europe and China were synchronised during this period; on the one hand, the colder climate led to a reduction in agricultural harvests. When agricultural production decreased, wheat prices increased. When prices reached a certain level, more wars erupted. On the other hand, population growth rates were influenced by both war frequency and food supply per capita (reflected in cereal prices) and dramatically dropped to negative values when agricultural production was at its lowest levels, cereal prices reached their highest level, and peaks in war frequency occurred. Such a human ecological and social disaster reduced population sizes and even caused catastrophic population collapses. After the slump in population

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size, food supply per capita increased (as reflected in decreased prices), and the incidence of war declined. Europe and China are strong cases illustrating that the long-term cycles of war outbreaks and population decline originate in large part from a fundamental driver, climate change; War and depopulation have been important adaptive choices in preindustrial society. 5. Their findings also shed light on the importance of other human adaptive choices in responding to disasters such as war outbreaks and population collapse. At the country and local scales, the social mechanisms might have lessened, postponed, or even eliminated on occasion war outbreaks and population declines during bouts of mild or short cooling. For instance, before A.D. 1400, war outbreaks and population decreases in China immediately followed every decline in temperature. After that, the short cooling in the fifteenth century did not generate a period of war outbreak and population decline. The times of war outbreak and population decrease in response to great temperature declines were postponed by 30 years in the seventeenth and nineteenth centuries, possibly because of the work of institutions and technological development. After A.D. 1700, the base level of war frequency in China decreased because the Qing emperors had united all troublesome tribal states in the western and northern marginal areas. 6. With the development of human society and technological progress, the adaptability of human society to climate change has been significantly enhanced. From a long-term and global perspective, compared with the period A.D. 1000–1400, the population growth rate driven by technological revolution and social development was 30% in the period A.D. 1400–1700 and 310% in the period A.D. 1700– 1900. It also reduced the climate dependence of the growth rate of the population (after A.D. 1400), postponed the time of population decrease, and accelerated subsequent population recovery. For instance, the demographic shocks in the NH before A.D. 1400 had no time delays between the population growth rate drops and the temperature drops, but afterward, the shocks were delayed by 20 and 40 years, respectively, in the seventeenth and nineteenth centuries. The gradual increase in time delays for the NH population declined. 7. Their explanation for the link between climate change and human warfare is as follows: In the late preindustrial era, in order to adapt to climate change and mitigate ecological stress, in addition to migration, human beings faced choices including warfare, economic change, innovation, trade, and peaceful resource redistribution; The agrarian society established political boundaries in populated areas limited mass migration; the result of such mass migration, when it occurred, often was war; Economic change was a costly and slow process that involved changing cultures, technologies, and habits. When the speed of human innovation and its transfer were not fast enough to keep pace with rapid ecological change, famine and disease became difficult to avoid. Trade and redistribution under the condition of shrinking resources would not help much because the ecological stress was at a global or very large regional scale. Human social development in the form of international and national institutions was not strong enough to buffer the tensions caused by food resource scarcity. Therefore, war and population decline became common consequences of climate-induced ecological stress.

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Wang Jun-Jing and Ye Wei pointed out that climate change is one of the important factors affecting dynastic cycles. The vast majority of wars in the historical periods in China occurred during periods of cold climate. The continuous low temperature caused famine, turmoil, and eventually war outbreaks. A cooler climate coincides with an increase in the number of wars and cycles of dynastic change.100 Zhou Xin and Zhou Hui-Qing found after studying war frequency in China from 1000 to 1900 that the number of wars in ancient China had significant periodic characteristics. The maximum period of 263 years corresponds to the replacement of dynasties. They believed that the reason for the significant periodicity in war frequency is related to the periodicity of climate change. They pointed out that climate change has a triggering mechanism for war, and the intensity of monsoon precipitation is an important factor in triggering wars. The reduction of monsoon precipitation triggers widespread droughts, which in turn lead to famine, then social unrest and eventually wars; they also emphasised that state management policies to effectively address climate change can reduce the occurrence of war.101 The relationship between climate and war can be seen through the example of the Song Dynasty (960–1279). According to Zhu Ke-Zhen’s research, in the early twelfth century, China’s climate began to intensify and turn colder. Regarding the degree of coldness at that time, a more intuitive impression can be obtained from ancient documents. In A.D. 1111, Taihu Lake in the Yangtze River Basin was completely frozen. The ice was thick enough for vehicles, and the cold weather killed all the citrus trees in Dongting Mountain of Taihu Lake. A.D. 1131–1260, in Lin’an (now Hangzhou), the capital of the Southern Song Dynasty, snowfall was not only more frequent than usual but also extended into late spring. During the Southern Song Dynasty, the average temperature in April in Hangzhou was 1–2 °C colder than it is now. A.D. 1153–1155, when the Jin Dynasty dispatched envoys to Hangzhou, they saw that the canal near Suzhou was often frozen in winter, and the boatman had to always prepare a hammer to break the ice to open the way. In A.D. 1170, the Southern Song poet Fan Cheng-Da (1126–1193) was dispatched to the Jin Dynasty. When he arrived in Beijing at the Double Ninth Festival (October 20 of the Gregorian calendar), he saw snow all over the West Mountains. The freezing of the South Canal near Suzhou in winter and the snow all over the West Mountains near Beijing in October are extremely rare today but were common in the twelfth century, which shows how cold the climate was at that time.102 Experts such as Wang Zheng pointed out that the disruptive climate 100

Wang, J. J., Ye, W., Zhu, L. D., Li, F. Q., Tian, Z. M. (2008). Relationship Between Climate Changes and Wars in the History of China. Journal of Zhejiang Normal University (Natural Sciences) (01). 王俊荆., 叶玮., 朱丽东., 李凤全., 田志美. (2008). 气候变迁与中国战争史之间 的关系综述. 浙江师范大学学报(自然科学版) (01). 101 Zhou, X., Zhou, H. Q., Qiao, H. Y., Qin, L. (2011). A Preliminary Study on the Periodicity of the Chinese Ancient Wars. Journal of Taishan University (06). 周鑫., 周慧清., 乔海英., 秦利. (2011). 中国古代战争发生频率周期性的初步研究. 泰山学院学报 (06). 102 Zhu, K. Z. (1973). A Preliminary Study of China’s Climate Change in the Past Five Thousand Years. Scientia Sinica (02):175–176. 竺可桢. (1973). 中国近五千年来气候变迁的初步研究, 中 国科学 (02):175–176.

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change that occurred in A.D. 1230–1260 was the largest in the past two thousand years. China’s climate has become dry and cold since A.D. 1230, and the monsoon retreated as early as AD 880, resulting in reduced rainfall.103 The climate became dry and cold, and rainfall decreased in a short period of time, which first caused the ecological environment of the northern steppe region to deteriorate sharply. At the same time, as the geographical temperate zone moved south, the original grassland also began to wither on a large scale. In severe winter, disasters such as snowstorms and ice disasters frequently occurred, and these disasters often killed herds of cattle, sheep and other livestock. This will inevitably have a major impact on the production activities of the Khitan, Tangut, Jurchen, Mongolian and other nomads living in the northern region, thus putting their lives in trouble. To eliminate the predicament of survival, these nomads will take desperate risks and frequently launch large-scale aggression and plunder to the warmer and more prosperous Song Dynasty. According to statistics, during the 319 years of the Song Dynasty reign, there were 551 large and small wars, and the average annual number of wars reached 1.72, much higher than the historical average number of wars.104 In the Song Dynasty, the Song Dynasty was adjacent to Tibet in the west, Dali and Dayue in the southwest, Liao, Western Xia and Jin in the north, and Mongolian tribes in the north. The threats faced by the Song Dynasty mainly came from the north. The Liao Dynasty (907–1125), founded by the Khitan people, occupied most of the territory of Northeast China and North China. The Western Xia dynasty (1038–1227) established by the Tangut people occupied a part of the northwest territory. The Jin Dynasty (1115–1234), founded by the Jurchen tribe, occupied most of the territory of the Northeast. From A.D. 985, some tribes of the Tangut people attached to the Liao State began to occupy the territory of the Northern Song Dynasty; after A.D. 997, they forced the Northern Song Dynasty government to cede some territories by force; after Li Yuanhao (1003–1048) established the Daxia Dynasty in 1038, he went south to invade the Northern Song Dynasty many times. In A.D. 1004, the Liao army invaded the Song territory from the south. In the following year, Song and Liao entered into a peace treaty to reach the Chanyuan Treaty. Since then, there has been no large-scale war between Song and Liao for more than 100 years. Since the beginning of the twelfth century, the Jin people have invaded North China from the northeast and continuously attacked Liao. In 1120, the Jin army captured Shangjing (in present-day Chifeng City), the capital of Liao. In 1121, Jin occupied half of the territory of Liao. In 1124, Jin occupied most of the territory. In 1125, Jin attacked and destroyed the Liao Kingdom, occupying a large area north of the Qinling Mountains and the Huaihe River. Only half a year after the destruction of Liao, in October 1125, the Jin army went south to invade the Song Dynasty. In 1126, Jin smashed Dongjing (now Kaifeng), the capital of the 103

Wang, Z., Zhang, P. Y., Zhou, Q. B. (1996). The Impacts of Climate on the Society of China During Historical Times. Acta Geographica Sinica (04). 王铮., 张丕远., 周清波. (1996). 历史气 候变化对中国社会发展的影响. 地理学报 (04). 104 Wang, J. J., Ye, W., Zhu, L. D., Li, F. Q., Tian, Z. M. (2008). Relationship Between Climate Changes and Wars in the History of China. Journal of Zhejiang Normal University (Natural Sciences) (01). 王俊荆., 叶玮., 朱丽东., 李凤全., 田志美. (2008). 气候变迁与中国战争史之间 的关系综述. 浙江师范大学学报(自然科学版) (01).

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Northern Song Dynasty. In 1127, Jin captured Emperor Huizong of Song (Zhao Ji, 1082–1135) and Emperor Qinzong of Song (Zhao Huan, 1100–1156), the Northern Song Dynasty perished, and the Jin Dynasty controlled the northern Huaihe River and most of the northeastern Qinling Mountains. In 1115, when the Jin Dynasty was established, the capital was selected in Huining Fu (now Acheng District, Harbin City). In 1153, Jin moved the capital to Zhongdu (now Beijing), then to Bianliang (now Kaifeng) in 1214, and Caizhou (now Runan, Henan) in 1233. In 1204, Temujin (1162–1227) unified the Mongolian tribes on the Mongolian Plateau, and in 1206, he established the Mongolian Khanate. After 1208, the Mongolian army began to continuously attack the Jin from the north and quickly occupied the vast area north of the Great Wall. In 1213, it broke through the Great Wall defence line and entered the Yellow River Plain. In 1215, the Mongolian army occupied the central capital of the Jin Kingdom (now Beijing). In 1218, Mongolia destroyed Western Liaon, conquered Central Asia in 1219 to the Volga River Valley in Eastern Europe, and returned to the east in 1225. In 1227, Mongolia destroyed Western Xia and then began to crusade against Jin. In 1232, the Mongolian-Jin battle was fought on Sanfeng Mountain in Junzhou, and the main force of the Jin army was exhausted. In 1234, the MongolianSong coalition forces smashed Caizhou City, and the Jin Dynasty perished. In 1235, the Mongolian army began to invade the Southern Song Dynasty. The Mongolian army marched west again and once approached the hinterland of Eastern Europe in 1241; in 1246, Tibet was surrendered. After that, the Mongolian army began to invade the south continuously, destroying Dali in 1253 and the Southern Song regime in 1279. The demise of the Song Dynasty was not only due to the corruption of its ruling class, the incompetence of the emperor, the rule of treacherous officials, diplomatic missteps and weak military forces but also because of the repeated impact of frequent wars on its regime, which dried up its limited financial and material resources in the exhaustion of coping. Especially in the historical period when the climate had cooled sharply in the past two thousand years, the Song Dynasty was faced with a crazy and powerful enemy that was constantly moving south to compete for living space driven by extreme weather. Under the destruction of the Mongolian army, the glorious farming civilisation created by the Song Dynasty could not escape the fate of destruction in the end!

9.5.8 The Impact of Climate Change on Demographics in Ancient China Climate change has a large impact on population distribution. In the warm and humid Han Dynasty, China’s population distribution was mainly concentrated in the area of the Yellow River basin north of Qinling-Huaihe, especially in the middle and lower reaches of the Yellow River in Shaanxi, Shanxi and Henan. At that time, the population of the north was approximately 43 million, while the south was only

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approximately 14 million, and the population proportion of the south to the north was approximately 1:3. During the late Wei Dynasty, the population of northern China accounted for approximately 62% of the state’s total. At that time, there were 85 prestigious counties in the state, 65 in the north and only 20 in the south. Although the population had moved considerably south, the densely populated areas were still in the north. It was not until the Yuan Dynasty that the population of the South surpassed that of the North. Before the Yuan Dynasty, the population proportion of the south to the north was approximately 1:2 in most periods. In a few periods, due to wars and incomplete statistics, the population proportion of the south to the north was approximately 1:1. In general, the North consistently outnumbered the South. In the Song Dynasty, the population proportion of the south and the north was 36.5:63.5, which changed greatly in the Yuan Dynasty and was 84.75:15.25. However, under the reign of Emperor Hongzhi of Ming (1488–1505), the population proportion of south and north stabilised at 3:2, which is basically similar to modern times. The population change in the northern and southern regions of China is basically consistent with China’s A.D. 1230–1260 climate change, which is inseparable from the southward shift of agricultural planting belts caused by climate change after A.D. 1260. In addition to climatic factors, war apparently also affects the migration and distribution of populations. The peasant uprisings at the end of the Eastern Han Dynasty and the Sui Dynasty and the melee of warlords once pushed the population to move south, but the original population distribution pattern was quickly restored after the war. In contrast, the impact of war on population migration and distribution is short-term and temporary, while the impact of climate change and environmental change is long-term and far-reaching. Climate change not only causes changes in the proportion of population distribution in northern and southern China but also causes changes in the population distribution in eastern and western China. During the warm and humid Han and Tang Dynasties, the western regions of China supported a larger population. Since the end of the Tang Dynasty, the retreat of the monsoon and the intensified desertification of the western regions have caused the population distribution to move from west to east. Since A.D. 1230, the climate in the western regions has been relatively cold, the land bearing capacity has declined, and the population has also decreased, thus laying a natural foundation for today’s national population distribution pattern. The general trend of the modern climate was established from the Yuan Dynasty, and the population distribution showed a basic pattern demarcated by the Hu Line.105 In the Yuan Dynasty, climate change, snowstorms and drought disasters in the northern region migrated a large number of herdsmen to the south. At that time, southward migration occurred not only in central China but also in Inner Mongolia and Mongolia. According to the book Kang Ji Lu, from the founding of Temujin in A.D. 1206 to A.D. 1308, “868,000 poverty-stricken households came from the north due to natural 105

A geo-demographic demarcation line that reflects the macrocharacteristics of China’s population distribution, that is, most of China’s population live east of the line, whereas west of line has only a tiny percentage of population. It is a straight line stretching from the city of Heihe in Heilongjiang to Tengchong in Yunnan, diagonally across China. This line was proposed by Chinese population geographer Hu Huan-Yong in 1935 and was internationally regarde as the Hu Line.

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disasters” in Mong and Yuan empire. Such large-scale population emigration in Inner and Outer Mongolia indicates that the degree of deterioration of the local ecological environment caused by climate change has been very serious. In fact, since A.D. 1240, the Mongolian region had been experiencing droughts for years, and historical records depicted that the local “weeds spontaneously combusted, cattle and horses died in nine out of ten cases, and the masses have no means to live” (History of Yuan—Annals of Emperor Dingzong), which shows the serious deterioration of the environment.106

9.5.9 The Impact of Climate Change on the Social Economy in Ancient China Climate change is critical to the economy in ancient society. During the Western Han Dynasty, the Guanzhong area was the national population centre and the economic centre at the same time. According to The Records of the Grand Historian—Biographies of Usurers, “the land of Guanzhong was one-third of all under heaven, and the population was no more than three-tenths; however, in terms of wealth, it accounted for six-tenths”. In the Tang Dynasty, the north was still the economically developed area of the country. For example, in the eighth year of the Tianbao reign of Tang, the total amount of grains collected in the northern region accounted for 75.9% of the whole state. In A.D. 880, the climate suddenly changed, the monsoons receded, and the economic importance of the northern regions began to decline during the period A.D. 880–1230. During the Yuanfeng reign of Northern Song (1078–1085), the amount of money and grain collected in the northern region dropped to 54.7%. After the Yuan Dynasty, the south grew into an economically developed area. During the Hongwu reign of Ming (1368–1398), the amount of money and grain collected in the northern region dropped to 35.8%. When China’s climate was at its peak during the Little Ice Age, a major event occurred when Manchus entered central China. In 1816, due to disruptive climate change, China entered a cold climate stage, and the national agricultural yield generally decreased by 1.0–1.2%.107 The colder weather ended the so-called Qianlong Heyday. By the 1880s, various contradictions had pushed the Qing Dynasty into a precarious situation. Climate change obviously had a significant impact on the economic development of ancient societies.108 106

The above two paragraphs are complied from: Wang, Z., Zhang, P. Y., Zhou, Q. B. (1996). The Impact of Historical Climate Change on China’s Social Development. Acta Geographica Sinica (04). 王铮., 张丕远., 周清波. (1996). 历史气候变化对中国社会发展的影响. 地理学报 (04). 107 Wang, Z., Zhou, Q. B., Liu, X. L. (1995). A Sudden Climate Change in the Early Nineteenth Century. Progress in Natural Science (03). 王铮., 周清波., 刘啸雷. (1995). 十九世纪上叶的一次 气候突变. 自然科学进展 (03). 108 Wang, Z., Zhang, P. Y., Zhou, Q. B. (1996). The Impacts of Climate on the Society of China During Historical Times. Acta Geographica Sinica (04). 王铮., 张丕远., 周清波. (1996). 历史气 候变化对中国社会发展的影响. 地理学报 (04).

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9.5.10 Climate Change and the Rise and Fall of China From the Xia Dynasty to the Qing Dynasty for nearly 4,000 years, the historical drama of dividing or integrating has been staged continuously on the land of China. In the warm phase, the whole society is integrated—economic prosperity, national harmony, state unity. In the cold phase, the whole society is divided—economic recession, national war, state division. In the history of ancient China, the political territory of Chinese society has undergone a cyclical change that which is long divided must unify; that which is long unified must divide. This periodicity is consistent with the change in climate. For example, during the warm phase of the two Han Dynasties and the warm phase of the Sui and Tang Dynasties, powerful central China effectively extended its sphere of influence to the western regions of China and Central Asia. For 360 years, from the Three Kingdoms to the Northern and Southern Dynasties, the politics of Chinese society were divided, which coincided with the cold phase of climate change. The warm phase of the Sui and Tang Dynasties ended in the mid-Tang.109 After that, central China lost its control over the western regions. This change is also inseparable from climate change. After the An Lushan Rebellion, armies from central China withdrew from the Western Regions. Although the climate improved again in the later period, central China was unable to conquer the west. Around A.D. 880, the climate changed abruptly, and the Chinese climate entered a period of fluctuation between cold and warm. During this period, political divisions occurred all over China. Central China entered the period of Five Dynasties and Ten Kingdoms. Tibet and Uyghur in western China, which were originally unified in the warm phase, started political division. The early and powerful Tibet Dynasty was divided, the Uyghur Dynasty disappeared, and the Nanzhao Dynasty also experienced internal divisions. Between A.D. 1230 and A.D. In 1260, the disruptive global climate change deteriorated the ecological environment in Mongolia. The sudden climate change stopped the Mongol army from continuing its westward expedition to Central Europe and instead went south to invade the Jin and Song dynasties. The main reason is that the damage to the ecological environment by the colder climate made production and life in the central hinterland of Mongolia difficult, which directly led to difficulties in the support and supply of its western expedition army. In this way, going south to plunder the Jin Song Dynasty, which had a better environment, became their first choice to solve the problem of survival. The development of world history may have taken a sharp turn because of climate change. During the Southern and Northern Dynasties and the Five Dynasties, two major political divisions occurred in China. For the reasons for these splits, there are profound climatic factors in its background. Scholars such as Wang Zheng believed that the cooling climate provides objective conditions for the internal division of 109

Man, Z. M. (1990). Re-Discussion on China’s Climate Features in the Tang Dynasty. In: Shi, Y. F. Research Progress on China’s Climate and Sea Level Changes (I). Ocean Press. pp. 20–21. 满志敏. (1990). 唐代中国气候特征再探讨. In: 施雅风. 中国气候与海面变化研究进展(一). 海 洋出版社. pp. 20–21.

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the state. The colder climate first led to a general decline in agricultural harvests in China. Due to the limited supply of food in the capital region, the central army’s food supply was the first problem, and once the central government mobilised a large amount of food from other provinces, it intensified the conflict of interest between the central and local governments. To reduce the burden of food supply, the central government often dispatched capital troops to other provinces. However, once the provinces controlled the army and defied orders from higher or central authorities, the intensification of the contradictions between the central and local governments eventually led to the division of political division. During the Northern and Southern Dynasties and the Five Dynasties, the clues to the split in Chinese society and polities are climate change → declining agricultural yields → tax burdens make farmers rebellious → central government is unable to suppress → launching local military suppression → local warlord power growth → central and local conflicts of interest intensify → central government loses control of local warlords → state political division. Therefore, climate change has created objective conditions for state division. For example, in the last years of Tang, the Huanghuai region suffered from drought. In A.D. 875, a locust plague occurred due to the drought that “The locusts travel from east to west, covering the sun and passing through the arid land” (Comprehensive Mirror in Aid of Governance《资治通鉴》, Vol. 252). Agricultural disasters and heavy tax burdens triggered peasant uprisings by Wang Xian-Zhi and Huang Chao (820–884). The Tang Dynasty employed Zhu Wen, Li Ke-Yong, Wang Jian, Dong Chang, etc., to suppress the peasant uprising movement, but these local warlords eventually established themselves as kings and became the culprits of splitting the state. On the eve of the demise of the Tang Dynasty, the central government was only able to receive food taxes from the capital region and several neighbouring provinces, and the unified central dynasty finally collapsed.110 In ancient Chinese history, there was only one case in the middle of the Ming Dynasty (1368–1644), in which there was no change in dynasties during the cold period. According to Zhu Ke-Zhen’s research, during A.D. 1470–1520 and A.D. From 1620 to 1720, China’s winter was in a cold phase; during A.D. 1550–1600, the climate in winter was in a warm phase.111 During the 276 years of Ming Dynasty rule, two extremely cold phases of the Little Ice Age were encountered from 1470 to 1520 and from 1620 to 1720. The Ming Dynasty passed the first cold phase but perished in the second cold phase. There were wars and frequent invasions from northern ethnic groups in the cold phase of the mid-Ming Dynasty. In particular, the wars broke out between the Ming Dynasty and the Mongolian Tatar tribes, and the troops of the northern nationalities even reached the gate of the city. The government of the Ming Dynasty managed and responded appropriately in all aspects, thus defusing the danger of the fall of the dynasty. In terms of monsoons and precipitation, the 110

The above two paragraphs are complied from: Wang, Z., Zhang, P. Y., Zhou, Q. B. (1996). The Impact of Historical Climate Change on China’s Social Development. Acta Geographica Sinica (04). 王铮., 张丕远., 周清波. (1996). 历史气候变化对中国社会发展的影响. 地理学报 (04). 111 Zhu, K. Z. (1973). A Preliminary Study of China’s Climate Change in the Past Five Thousand Years. Scientia Sinica (02):179. 竺可桢. (1973). 中国近五千年来气候变迁的初步研究, 中国科 学 (02):179.

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intensity of monsoon precipitation was generally weak during A.D. 1300–1700. The war frequency in this period was generally high but lower approximately 1600. Scholars such as Zhou Xin believed that this was the credit of the appropriate policies and measures of the Ming government at that time.112 In fact, according to Zhu KeZhen, during the period from A.D. 1550–1600, China’s winter was in a relatively warm period, which can also be confirmed from the research results published by Zheng Jing-Yun in September 2010 (Fig. 9.2). Therefore, it is more plausible to use the relatively warm climate to explain the lower war frequency approximately 1600. Of course, while emphasising the impact of climate change on social development, one must not lose sight of the importance of social factors such as government management and legal policies. As pointed out by scholars such as Zhou Xin, in the ten years from 1572 to 1582, the great scholar Zhang Ju-Zheng assisted Emperor Shenzong of Ming in carrying out a series of reforms in polity, economy, education, and military affairs. In terms of polity, the Kaocheng Fa 考成法 (results assessment method) was adopted to rectify the administration of officials, which improved the administrative efficiency of the government. In terms of economy, a series of measures have been adopted, such as reducing redundant officials, increasing income and reducing expenditure, measuring and checking the land across the state, recovering the lands that were concealed and annexed by royal family members, nobles and local officials, and implementing the single-whip-tax reform and other tax policies, etc., to effectively solve the problem of financial crisis. In terms of military affairs, Zhang Ju-Zheng vigorously rectified the border defence, and deployed Li Cheng-Liang (1526–1615) to guard Liaodong Qi Ji-Guang (1528–1588) to guard Jimen, thus maintaining the peace and stability of the frontier. After the implementation of these series of reform measures, the Ming dynasty’s economy and military power prospered with unified government orders, full treasury, and peaceful borders (History of Ming -Biography of Zhang Juzheng). From 1582 to 1620, although Zhang Ju-Zheng had passed away and Emperor Shenzong of Ming was out of government affairs, the Ming bureaucracy could still barely maintain its operation, thus making Ming society comparatively stable and warless. ∗ ∗ ∗ The research results published in September 2010 by Zheng Jing-Yun of the Chinese Academy of Sciences introduced in the previous article showed that there are 200–300-year and quasi-600-year cycles of temperature changes in eastern China. That is, the half-cycle of the climatic pulsation is 300 years, which is close to the cycle of southern invasion of northern nomads in ancient China and the dynastic change of central China and is also consistent with the cycle of nomadic invasion of farming areas discovered by Toynbee. From the long-term climate change in the Northern Hemisphere, there is a large cycle of approximately 600 years in world history that justifies Huntington’s climate pulsation theory. 112

Zhou, X., Zhou, H. Q., Qiao, H. Y., Qin, L. (2011). A Preliminary Study on the Periodicity of the Chinese Ancient Wars. Journal of Taishan University (06). 周鑫., 周慧清., 乔海英., 秦利. (2011). 中国古代战争发生频率周期性的初步研究. 泰山学院学报 (06).

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In summary, in ancient China, the climax of the northern nomadic people’s periodic southward migration corresponds to the cold climate, and the hidden chain of causality behind it is climate change → ecological crisis → economic deterioration → ethnic migration → war turmoil → destruction of civilisation. This chain of causality is the real key to uncovering the mystery of ancient Chinese social and historical cycles. This series of chain changes, on the surface, it seems that everything started with climate change. However, at a deeper level, the root cause is the high dependence of the nomadic economy on the natural environment, making it difficult for nomads to form a set of social adjustment mechanisms to deal with natural disasters, thus determining the fragility, mobility and aggressiveness of nomadic civilisation. The high dependence of the nomadic economy on the natural environment was mainly determined by the low level of productivity at that time. The earlier the historical period of human society, the stronger the dependence of human beings on the natural environment; the lower the development level of human social productivity, the greater the impact of the natural environment on human society. With technological progress and productivity development, the adaptability of human society to the natural environment will continue to enhance. By examining the structural changes of ancient Chinese society in terms of humanculture, economy, science and technology and analysing the impact of the natural environment (especially climatic factors) on social and historical development, it is clear that the historical development of human society is an extremely complex and dynamic process that must not be explained by any paranoid theory, such as economic determinism, political determinism, technological determinism or environmental determinism.

Appendix

Relations Between the Book’s Theory and Marx’s Theory

The theoretical framework of the state and social structure proposed in the book is comprehensively formed on the basis of drawing on and integrating the thoughts of many scholars, especially the relevant thoughts of great thinkers such as Marx. The specific content of the social system structure and social dynamic structure proposed in the book is apparently different from the original ideas of these thinkers. To enable readers to understand the main ideas presented in the book more clearly, it is necessary to explain the important differences between the old and new thoughts, especially the main differences between the book and Marx’s core ideas. It is generally believed that Marx’s social development dynamics theory mainly includes the following aspects1 : ➀ Human society is a living organism. Human society is based on the organic connection and mutual restriction of various elements based on production. The development of social history is manifested in the interaction between social elements. ➁ The contradiction between productive forces and the relations of production, economic base and superstructure are the basic contradictions of society and the fundamental driving force for the development of human society. ➂ In a class society, class struggle is the direct driving force for social development. ➃ History is created by the masses, and the masses are constrained by the development of social and material relations when creating history. ➄ The development of social history is realised through historical synergy. ➅ Science is a revolutionary force in the highest sense. With regard to the above-mentioned ideas of Marx, the production of human society mentioned in ➀, although the social production emphasised by Marx and Engels includes population production, material production and mental production, however, as far as the overall content of its theory is concerned, Marx’s theory actually focused on the analysis of material production and their production relations, while less or insufficient attention was given to the analysis of mental production and 1 Pang, Y. Z. (2004). Contemporary China’s Scientific Outlook on Development. CPC Central Party School Press. pp. 112–114. 庞元正. (2004). 当代中国科学发展观. 中共中央党校出版社. pp. 112–114.

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their production relations. For better analysis, this book classifies material production and its production relations into the economic system, population production and its production relations, as well as the production of humanistic knowledge in mental production into the human-culture system and the production of social knowledge and natural knowledge in mental production into the science system. In fact, this book highlights the analysis of mental production. Regarding the model of productive forces and the relations of production, economic base and superstructure constructed by Marx’s theory in ➁, this book carries out a comprehensive transformation, reorganisation and deepening of system theory, evolution theory and structural functionalism and proposes the overall analytical framework from micro, meso to macro to integrate the humanities and social sciences, such as cultural studies, economics, and political science, into a unified theoretical framework, thereby making the whole theory more inclusive and explanatory. In this regard, the theoretical ideas proposed in this book can also be viewed as a further deepening and important innovation of Marxist theory. Regarding the class struggle put forward by Marx in ➂, this book believes that this view is more suitable for explaining traditional agricultural society and early capitalist society, especially for explaining the disruptive change stages, but not suitable for explaining the gradual change stages in the development of human society. As far as the current development of human society is concerned, the concept of class struggle should be abandoned, and the idea of benevolence, peace and coordinated development among human beings should be vigorously promoted. In ➃, Marx’s assertion that history is created by the masses is biased in the author’s perspective, which downplays the huge differences that exist among human beings. It is impossible to compare Newton and Einstein’s important role in the development of human society to that of an ordinary farmer. This book fully agrees with the idea of ➄. The idea of science on ➅, which the authored believed, is also partial. In fact, science may also be a huge destructive force, which can either bring happiness to mankind, or cause disasters. If not, why should the international community now limit the proliferation of nuclear weapons and nuclear equipment? For the development of a specific society, science only has the value of a social tool and can only exert its value when coordinating and cooperating with social systems in terms of human-culture, economy, polity, law, and education. Why did the Song Dynasty develop scientific achievements but fail to avoid the fate of decline? This is the reason. In Marx’s Social Dynamics, the model of productive forces and the relations of production, economic base and superstructure is the core, which is analysed and discussed in detail. The focus of Marx’s Social Dynamics is the fundamental dynamics of social development. This theory pointed out that the basic contradiction of society is the contradiction between productive forces and the relations of production, as well as the economic base and superstructure, and the fundamental driving force of social development lies in the movement of basic social contradictions. The social forms of human beings include five basic forms: primitive society, slave society, feudal society, capitalist society and communist society. The movement of basic social contradictions leads to the replacement of social forms, thereby promoting the continuous development of society. The movement of basic social contradictions is the deep

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root of social change and social development. Among them, productivity is the ultimate decisive force of social development, which is rooted in the needs of people’s survival and development. Productive forces determine the relations of production, and the economic base determines superstructure. The production mode of material goods determines social life, including economic life, political life, and cultural life. The continuous development of productive forces leads to constant reforms in the relations of production, then the changes in the economic base, and changes in the superstructure and ideology subsequently, which react to the productive forces, thereby promoting the development of a society from a lower stage to a higher stage. According to the core concepts and logical relations of Marx’s Social Dynamics, Marx’s model of productive forces and the relations of production, economic base and superstructure can be represented by Fig. A1. In Fig. A1, the black solid arrows indicate the decision or domination of the former category to the latter category, and the white hollow arrows indicate the reaction of the former category to the latter category. For instance, productive forces determine the relations of production, and the relations of production have an adverse effect on productive forces. Economic base determines political superstructure, and political superstructure has an adverse effect on economic base. Production mode determines social form, and social form has an adverse effect on production mode. In Marx’s theory, there are two interpretations of the concept of economic base in broad and narrow sense: the economic base in a broad sense refers to the entire material production under a certain social production mode, including productive forces and the relations of production; Economic base in a narrow sense refers to “the sum total of the dominant relations of production in the society”.2 Political superstructure refers to the totality of the predominant political organisation, social power, legal system, governing facilities, and the ideological system associated with this in a state. Social ideology refers to the cultural achievements that a society has accumulated in its long-term production and life, including science, art, morality, customs, and religion. The current textbooks on Marxist theory in China basically explained the dynamics of social development according to the layered recursive model shown in Fig. A1. From Fig. A1, this model resembles a tall building. Judging from the architectural concepts of base and superstructure, Marx metaphorised the internal structure of human society into a building. As British sociologists José López and John Scott pointed out, “Marx’s base/superstructure model saw social structures as layered into levels that lie above and below one another, much as the floors if a building rise to various levels above its foundations. The model of systems and subsystems set out by Parsons and other functionalists saw social structures nested within one another, such as the rings of an onion or a Russian Babushka doll. Where Marx’s physical

2 Xue, W. J. (2004). Scientific Connotation of Fundamental Social Contradictions. Journal of PLA Nanjing Institute of Politics, (02). 薛伟江. (2004). 社会基本矛盾运动原理的科学内涵——从协 同动力学的观点看. 南京政治学院学报, (02).

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Fig. A1 Illustration of Marx’s theory model of social dynamics3

imagery stressed the ‘vertical’ depth of the social, Parson’s imagery moved sociological analysis toward an awareness of its ‘lateral’ depth.”4 Marx’s model reflected the hierarchy of social structure and, to a certain extent, revealed the hierarchical structure of traditional agricultural society. However, a complex network relationship has already been formed between various elements in modern society. Under such circumstances, if this theoretical model of Marx continues to be applied to analyse contemporary society, it will often appear inadequate. Some scholars at home and abroad have discussed the limitations of Marx’s social dynamics. Scholar Zou Shi-Peng pointed out that the central axis of the traditional 3

Zou, S. P. (2003). The Difficult Problem of Traditional Theory of Social Development and Some Reflections. Teaching and Research (05):41. 邹诗鹏. (2003). 传统社会发展动力学说的解释性难 题及其反思. 教学与研究 (05):41. This picture refers to Zou Shi-Peng’s illustration in this article, but some adjustments had been made. 4 López, J., Scott, J. (2000). Social Structure. Open University Press. p. 87.

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Marxist theory of social dynamics is the “economic-political” system. It revealed social development on the economic and political levels, but it did not reveal social development on the cultural level, nor did it provide enough explanation for the continuous improvement and sublimation of the human spiritual world. He believed that this theory puts aside the natural ecology and the rich communication of human beings and is nested based only on the concepts of productive forces and the relations of production, which is especially suitable for explaining the transition from the traditional agricultural society to the industrial society, because it raised productive forces to a high position, and is just right for demonstrating the industrialisation dimension of social development; It restored the entire social interaction and life relations to production relations and determined all social relations between people in the production link, which is precisely the production priority that industrialisation emphasises to control economic activities and even the whole life activities with production links; Its emphasis on the dominance of the political superstructure in the superstructure is not only in line with the authoritarian rule based on private ownership stressed by industrial society but also in line with the political value orientation of civil society based on private ownership, but which, however, due to the transformation from a Taoist society5 to a law society, is increasingly difficult to describe the power structures of modern society and the approach it is governed in terms of the political superstructure; Because the industrial society highlighted practical value, the materialisation dimension of the entire social development guided by this theory is also to meet the materialisation needs of the industrial society, which causes the human spirit and culture to be directly excluded from the mainstream evaluation system; This theory is only suitable for describing the structure of the scarce and conflicting social type, but not the rich and civil society type, nor the mature industrial society and postindustrial society. Based on the development of modern society, he emphasised the need to reunderstand the contemporary social structure and its integration mechanism. He believed that the social structure should be divided into four systems in terms of the economic system, political system, cultural system, and environmental system. The modern social structure is a network system with complex relationships composed of multiple structures or subsystems, such as economy, polity, culture and environment. The relationship between the subsystems is not a single decisionmaker-and-decision-taker relationship, nor a closed, single-line ladder structure, but an open, interactional, interpenetrating, and interrestrictive relationship. He believed that science and technology have an overall integration effect on the social system, and a systematic, interactive and differentiated way of thinking must be used to understand the social development system.6 In Marx’s social dynamics, productive forces and the relations of production are a pair of important categories, especially the concept of productive forces, which 5

Refers to a traditional society that is guided by the values, ideas and ideals put forward by ancient sages to govern society, thereby achieving governance and order. 6 Zou, S. P. (2003). The Difficult Problem of Traditional Theory of Social Development and Some Reflection. Teaching and Research, (05). 邹诗鹏. (2003). 传统社会发展动力学说的解释性难题 及其反思. 教学与研究, (05).

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is a fundamental concept with supporting significance. In Marx, productivity represents the material production capacity of society, which reflects the relationship between man and nature, that is, man’s ability to transform nature for survival. In the process of human beings transforming nature, the actual role and function of productivity require different social subjects to cooperate, thus forming a particular production relationship. “In the social production which men carry on they enter into definite relations that are indispensable and independent of their will; these relations of production correspond to a definite stage of development of their material powers of production.”7 In the current textbooks on Marxist theory in China, the expressions of productive forces and the relations of production are simplistic, thus losing their rich connotations. People generally viewed productive forces as the ability of people in society to conquer and transform the natural world. Regarding the definition of the relations of production, textbooks usually put it as “the relations between people formed in production activities”, while some textbooks as “the relationships that occur directly between people in the process of material production and is the material communication relationship between people”.8 It is known that in a socioeconomic system, in addition to the production link, there are also links such as exchange, distribution and consumption. Therefore, it is obviously one-sided and stuffless to describe the entire complex economic relationship with only one link. In addition, the communication activities between people in modern society are not limited to the economic field but also include the cultural field and the political field. Restricting the relations of production to the field of economic activities obviously cannot fully depict the complex communication between people in modern society. If readers want to find the internal connection between Marx’s theoretical model and the theoretical model of this book, according to the analytical framework proposed in this book, they can roughly compare the actual connotations of the two categories of productive forces and the relations of production, as shown in Table A1. It is obvious from Table A1 that the theoretical framework proposed in this book makes a more comprehensive classification of the relations involved in the productive forces and the relations of production in Marx’s theory to give these two concepts a richer and more specific connotation. In addition, the book also specifically expounds population production and its production relations, mental production and its production relations in human society (Sect. 8.4), which is where Marx’s theory is relatively weak. In addition to the pair of productive forces and the relations of production, the economic system and political system proposed in this book can correspond to the broad economic base9 and political superstructure in Marx’s theory. This book 7

Marx, K. (1904). A Contribution to the Critique of Political Economy (Stone, N. I., trans.). Chicago: International Library Publishing Co. p. 11. 8 Xiao, Q. (1994). Principles of Marxist Philosophy (I). China Renmin University Press. p. 359. 肖 前. (1994). 马克思主义哲学原理(上册). 中国人民大学出版社. p. 359. 9 The economic base in Marx’s theory corresponds to the leading sector in this book. For example, in a traditional agricultural society, the leading sector in the production field is agriculture, and in a modern industrial society, the leading sector is industrials.

At the microeconomic level, it It includes the relationship is equivalent to the book’s between the elements within the Overall Corporate Competence firm system, such as, entrepreneur–knowledge, entrepreneur–institutions, entrepreneur–technology, entrepreneur–organisations, entrepreneur–resources, entrepreneur–products, organisations–knowledge, organisations–institutions, organisations–technology, organisations–resources, organisations–products, resources–knowledge, resources–institutions, resources–technology, resources–products

Firm

Production relations within the system

Relations of production

Productivity

Hierarchy

Table A1 Connotation comparison of productive forces and the relations of production

It also includes the relations formed by the natural and social environmental factors in the firm system and its external environment (i.e., states, governments, laws, firms, markets, households, scientific research institutions, educational organisations, etc., especially suppliers, distributors, customers, partners, competitors and other stakeholders)

Social relations outside the system

(continued)

Please refer to the general operational structure of the firm system in Sect. 4.5 (Fig. 4.6)

Notes

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Productivity

At the mesoeconomic level, it is equivalent to the book’s Overall Sectoral Competence

Hierarchy

Sector

Table A1 (continued) Relations of production

It includes the relationship between the elements within the sector system, such as, firm–knowledge, firm–institutions, firm–technology, firm–resources, firm–markets, firm–products, markets–knowledge, markets–institutions, markets–technology, markets–resources, markets–products, resources–knowledge, resources–institutions, resources–technology, resources–products

Production relations within the system It also includes the relations between the sector system and its external environment in terms of the natural system and the social system (i.e., the subsystems of human-culture, economy, polity, science, law, education and other systems in the state system)

Social relations outside the system

(continued)

Please refer to the general operational structure of the sector system in Sect. 5.4 (Fig. 5.2)

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Productivity

At the macroeconomic level, it is equivalent to the book’s Overall Competence of Social Production, that is, the overall capacity of producing, exchanging, distributing, and consuming material products in the national economic system

Hierarchy

National economy

Table A1 (continued) Relations of production

It includes the relationship between the elements within the national economic system such as sector system–science and technology, sector system–economic system, sector system—cultural education, sector system–exchange system, sector system—distribution system, sector system–social consumption, exchange system–science and technology, exchange system–economic system, exchange system–cultural education, exchange system–distribution system, exchange system–social consumption, distribution system–science and technology, distribution system–economic system, distribution system–cultural education, distribution system–social consumption

Production relations within the system It also includes the relations established between the economic system and the natural system, the social system (international system), the state system, and other subsystems in the state system in its external environment

Social relations outside the system

(continued)

Please refer to the general operational structure of the national economic system in Sect. 7.2 (Fig. 7.1)

Notes

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Productivity

At the level of the state system, it is equivalent to the comprehensive competence of the state system to develop resources in this book

Hierarchy

State

Table A1 (continued) Relations of production

It includes the relationship between the subsystems (or elements) within the state system such as human-culture system–science system, human-culture system–legal system, human-culture system–education system, human-culture system–economic system, human-culture system–political system, human-culture system–social development, economic system–science system, economic system–legal system, economic system–education system, economic system–political system, economic system–social development, political system–science system, political system–legal system, political system–education system, political system–social development

Production relations within the system It also includes the relations between the state system and its external environment in terms of the natural system, various international organisations and other states’ subsystems of human-culture, economy, polity, science, law, and education, etc

Social relations outside the system

(continued)

Please refer to the general operational structure of the state and social system in Sect. 8.3 (Fig. 8.1)

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Productivity

At the global social system level, it is equivalent to the comprehensive competence of the social system to optimise ecology (i.e., nature transformation and resource utilisation) in this book

Hierarchy

Global society (International)

Table A1 (continued) Relations of production

It includes the relationship between the subsystems within the social system such as human-culture system–science system, human-culture system–legal system, human-culture system–education system, human-culture system–economic system, human-culture system–political system, human-culture system–social development, economic system–science system, economic system–legal system, economic system–education system, economic system–political system, economic system–social development, political system–science system, political system–legal system, political system–education system, political system–social development

Production relations within the system It also includes various relationships formed between the social system and other societies, states, international organisations, and natural environments in its external environment

Social relations outside the system Please refer to the diagram of the relation between the dynamics behind social development in Sect. 8.7 (Fig. 8.11)

Notes

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provides a brand new definition of the economic system and the political system. In addition, the book decomposes and categorises the ambiguous concept of ideology in Marx’s theory, putting the conceptual superstructure into the deep factors of the political system, the scientific component of social ideology into the science system, and the elements of art, morality, customs, and religion in social ideology into the deep factors of the human-culture system. The connotations and respective social functions of the components in ideology are more clearly defined, which is a reasonable transformation of Marx’s theory. In other words, the structural model of the state and social system proposed in this book breaks through the hierarchical structure of the social elements described by Marx’s theoretical model. It is proposed that the human-culture, economy, polity and other elements in the social system are in a flat juxtaposition, which are treated as the subsystems of the state and the social system. In fact, it is a brand-new deconstruction, classification, reorganisation and further analysis of Marx’s social elements such as productive forces, production relations, economic base, superstructure and ideology. In Marx’s view, the development of a society is ultimately determined by economic factors (such as productive forces), and this book considers this view to be one-sided. This book believes that the development of a society is determined by the joint force of human-culture, economy, policies, science, law and education. In different stages of social development, the predominant factors (or forces) are constantly changing. From the long-term evolution of human history, the development of a society is ultimately determined by human-culture factors (i.e., the overall human cultural quality, spiritual beliefs, and moral standards). This is the biggest difference between this book and Marx’s theory. Human society is the product of gradual evolution and separation from the natural environment. The economic system and political system of human society are also differentiated from primitive society after society has developed to a certain stage. The main body of society is human, not commodity production in the economic field, nor the power or the ruling groups that hold public rights in the political field. Therefore, the development of human society should ultimately be attributed to the all-round development of mankind itself, which, however, also requires the entire society to maintain coordinated development in all aspects of the natural ecology, the human-culture system, the economic system, the political system, the science system, the legal system, and the education system. In terms of the driving force of the development of human society, whether it is economy, polity, or science, it is obviously an isolated and one-sided point of view to emphasise either side alone.

Appendix

Selected Book Reviews

A New Framework for Economic Theory: Helix Network Theory Zhu Min, Jiang Jiang The title of Helix Network Theory is easy to associate with a particular law of physical science, but its subtitle The Dynamic Structure and Evolution of Economy and Society intuitively gives the research object and the application scope of the book. The reason to name the theory Helix Network is the author’s sober awareness of the development of the entire human society is a wave-like advance and an upward spiral, which is in fact the same as anything else, while at the same time, human society as a whole, like everything else, is multidimensional and three-dimensional. The book’s preface reads, “the evolution of human society is an interweaving and spiral helix network consisting of multidimensional dynamics”, which is the author’s worldview and the book’s argument. The worldview is the basis for the formation of values. Only a correct understanding of the world and of the relationship between the people and the world can lead to the formation of correct values, and in turn, the establishment of correct values will lead to a richer and more complete scientific worldview. Where four aspects of value characteristics: objectivity, subjectivity, sociality and historicity, and multidimensionality. Among them, the latter two aspects were precisely explained and analysed in this book. The subject of value relations is featured with sociality and historicity, so people’s needs, practices, and the forms of need satisfaction also present such characteristics. The multidimensional or comprehensive nature of each subject’s value relationship requires that people must conduct an all-sided investigation of the value of a value object in order to decide on trade-offs when creating or realising value. Where, then, is the sociality and historicity underpinning the book’s arguments? It is quite obvious that the author is ambitious to create a theoretical framework of a dynamic and nonequilibrium thinking paradigm, that is, to integrate the core parts © Fudan University Press 2023 R. Gan, Helix Network Theory, https://doi.org/10.1007/978-981-19-8803-5

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of micro- (the Economics of Enterprise), meso-micro- (the Economics of Sector), meso-macro- (Regional Economics and National Economics), and macro-economics (State Economics and International Economics) under the assumption of a comprehensive dynamic disequilibrium, rather than the general equilibrium of Neoclassical Economics, to carry out a full analysis. The power that emerges from his research is vivid on the paper. In economics, mainstream economic research, especially neoclassical economics, has long been dominated by static general equilibrium thinking paradigms. The use of dynamic nonequilibrium thinking is quite important for the innovation and development of economic theory. Whether to look at the world statically or dynamically is forming today’s fundamental distinction between classical economics and new economics. In other words, if mainstream economics abandons the static mode of thinking and introduces a dynamic mode of thinking in the future, it is not difficult to foresee that an unprecedented paradigm shift will inevitably occur in economics and even the entire social sciences. Its transformative significance may be comparable to the influence of Newton and Einstein on the natural sciences and the entire scientific field.

A New Theoretical Framework for the New Economy How is the multidimensionality or comprehensiveness of the new economy reflected in the book? This book not only discusses the outer core of the social system, such as the human-culture system, the economic system and the political system but also argues for the inner core, such as the science system, the legal system and the education system. The economic system is fully elaborated by dividing it into the firm system, the sector system, and the national economic system. Compared with the tendency to look at problems locally or even departmentalisation, it sees the world as a totality, focusing on corporate economy (micro), sectoral economy (meso-micro), regional economy (meso-macro), national and international economy (macro). If this system of thinking continues to be applied, who can say that the economic theory cannot be further rewritten? Samuelson is unique in integrating macroeconomics and microeconomics, realising the third-grand synthesis in the history of economic theory by publishing Economics. Half a century ago, when Economics came out, John Kenneth Galbraith, a professor at Harvard University, wrote the first book review. He predicted that “the next generation will follow Samuelson to study economics.” Over the past half century, with the transformation of the world economy and the development of economics, this book has been constantly revised and supplemented, and it has long become the best-selling economics textbook in the world. To date, it has been translated into more than 40 languages, including French, German, Italian, Swedish,

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Spanish, Portuguese, Japanese, Chinese, Arabic, Russian, Hungarian, Czech, Romanian, and Vietnamese. It appears that the followers are not merely the next generation but also the generation after the next generation. Who can deny that future generations will not learn economics and social sciences from the perspective of this book? Time will tell. No discipline comes out of contemplation, and apparently openness to learning is the right approach to research. The book draws on the theories and thoughts of two sociologists, Parsons and Min Jia-Yin, on the structure of social systems, which is certainly not that kind of copy without reservation but an inheritance with choice. Through critique and inheritance, Helix Network Theory fully absorbs the essence of economics, social and natural sciences and refines and sublimates various doctrines, thoughts, theories, and viewpoints. Among them, in terms of economics, this book not only draws on Marxist political economy but also integrates the ideas of classical economics, neoclassical economics, and new classical economics.

Fractal of Economic and Social Systems? It should be pointed out that the concept of fractal of the economic and social system proposed in this book is similar to the infra-marginal analysis proposed by the famous economist Professor Yang Xiao-Kai. Yang Xiao-Kai believed that infra-marginal analysis is the resource allocation problem when given the division of labour and the level of specialisation, including price, cost, output, etc. The premise of this analysis is given division of labour structure, which is super marginal analysis. Based on this understanding, Yang Xiao-Kai solved two problems by applying a series of nonlinear optimisation methods. The first is how the division of labour or the economic organisational structure evolves, and the second is how resources are optimally allocated under a certain division of labour or economic organisational structure. Among them, the second point is the marginal analysis in traditional economics, and the first point is a super added on the basis of marginal analysis. Together, they can also form a unique structure with geometric beauty. The two major laws that the long-term evolutionary mechanism of the entire human social system revealed by Helix Network Theory—the law of bifurcation and the law of synergy, etc.—all demonstrate this unique, geometrically beautiful structure. From the human-culture system, the economic system and the political system in the outer core of the social system to the science system, the legal system and the education system in the inner core of the social system, the fractal features of self-similarity, hierarchy, and recursiveness in the general structure of these different economic levels are what this book seeks to address, and what economist Yang Chun-Xue considers to be “the most unique and impressive”. However, what is truly impressive is how comprehensive the book is. This network aims to net the essence of as many disciplines as possible. Taking economic science as an example, the concepts based on micro, meso and macro appear in the book one by one, from the nature of the firm to its evolutionary trajectory, from the division of

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labour to the life cycle of the sector, from the economic environment to the mechanism, from the concept of the state to the reform and transformation, etc. This is by no means a simple list of concepts but an organic integration of the author’s insights when elaborating and discussing related concepts. The first is the organic integration from the outside, that is, the connection between the chapters. In the physical world, neutrons, protons and electrons constitute atoms, different atoms combine to constitute molecules, different molecules combine to constitute complex molecules, complex molecular groups constitute objects, and different objects constitute the world. In the economic world, firms constitute sectors, sectors constitute regions, regions constitute states, and states constitute the world. The description of the whole economy and society in the book is from micro to mesomicro to meso to meso-macro to macro. Following the author’s vision, a system of economic society gradually emerges from small to large, from parts to the whole. The main line of analysis contained within it, which is essence-environmentelement-structure-efficiency-competence-dynamics-mechanism-cycle, is also quite clear. It is precisely around this main line that the discourses on philosophy, biology, political science, sociology, economics, and systems science and system theory methods have been presented to readers. Readers can follow the author’s steps to swim in the vast ocean of studies, theories, and thoughts of human society and acquire and share the fruit of wisdom step by step.

New Explorations in Economics Academic economists have researched various theories in the ivory tower, and their works and articles are composed of a large number of assumptions, mathematical formulas, and econometric models. After extreme simplification, it seems to be closer to a purely instrumental discipline that has universal value only when it is completely separated from politics and society. However, this depoliticisation of economics is carefully considered to mean that only after removing political, can economics argue that economic behaviour reflects a psychology of individualism rather than institutions constructed in social form. From this, it can be further concluded that the principle of laissez-faire is in accordance with the laws of nature. The argumentation of Helix Network Theory obviously goes beyond the previous exploration of economics. Can the author hold high the banner of systems science and use the method of system theory to achieve valuable theoretical innovation? From the point of view of system science, economic and social research should focus on the comprehensive and accurate examination of the objects from the interrelated, interacting, and interrestricting relation between the whole and the parts (elements), as well as the whole and the external environment, to best address and research the problem. After reading the whole book carefully, it is not difficult to appreciate the methods of using system theory to study and transform objective objects. Starting from a holistic point of view, the comprehensive analysis of the relations within the system, that between elements and elements, elements and systems, systems

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and environments, and this system and that system, can help to grasp its internal connection and regularity and to effectively control the system to even transform an old world and build a new one. Regarding system theory, there are a series of basic principles, the most important being integrity, structural functionalism, and interconnection. The economic and social issues discussed in the book are multidimensional and three-dimensional, so integrity and interconnection are definitely necessary and sufficient conditions. Regarding structural functionalism, it is clear from the above comments that this book also grasps the groundwork. The structure and function of the system are dialectically unified. First, structure is the basis of function, and function is the attribute of structure. If the structure is different and in general the function is also different, the structure determines the function. Second, the same structure may have multiple functions. Different structures can also obtain the same functions. Therefore, when analysing and studying various systems, the dialectical development law of system structure and function must be well mastered. In the system carefully constructed by the author, the elements and elements, elements and systems, systems and environments of human-culture, economy, polity, science, law, and education are finally woven into a giant spiralling helix network in the book. As the ancients used to say, “rather than long for fish next to a pool, it would be better to go home and weave a net”, which is a pragmatic attitude based on the past and the present to inspire the future. For economics, the relationship between the government and the market is an enduring and central issue, and Helix Network Theory provides a dynamic explanation for this. It is worth mentioning that the book’s argument is supplemented by the basic paradigm of biological evolution, which also adds another perspective to the Helix Network Theory. Economics is forever 21, suggested Samuelson, but what about the social sciences as a whole? What about the Helix Network Theory?

The Three Breakings and Three Buildings of the New Economy Like Gan Run-Yuan, the author of the book and the originator of Helix Network Theory, we are also exploring new economics, but in a small way compared to the former’s ambition to build a theoretical edifice. Based on the continuous observation and research on the new economy in the past ten years, the author summarises and refines the new economic rules (Zhu Min, 2016, 2017) with three breakings and three buildings as the core, aiming to explain and enlighten the transformation and innovation of the Internet + big data era. Three breakings, namely, intermediary-breaking, boundary-breaking, rulebreaking. This is a description and summary of the decentralisation, cross-border innovation, and rule reconstruction that are taking place in the current transition

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between the old and the new order. Intermediary-breaking refers to the massive coordination and decentralisation of the Internet, which has broken down the traditional division of labour, and has significantly weakened or is even eliminating many traditional intermediaries. Boundary-breaking means that the Internet + connects everything, and that big data enables resources to be used far and wide, tending towards zero marginal cost and breaking down the boundaries of organisations, industries and states. Rule-breaking refers to the rapid iteration and subversion of the new economy, where people are increasingly seeking individuality and sharing values, and where old rules and commandments are beginning to fall short. Three buildings, namely, ambition-building, intelligence-building, and systembuilding, means that in this transformation, individuals, organisations, and states should establish systematic thinking such as strategic layout, intelligence integration, and system construction. Ambition-building (strategic layout) means to see the big picture and sorting out new strategic goals, and to be down-to-earth and having lofty aspirations and great ideals. Intelligence-building (intelligence integration) refers to growing in strength and participating in new trends wisely, cultivating internal strength and being determined to win or achieve the goal. System-building (system construction) refers to persistently rewriting and formulating new rules, and dripping water wears through rock is the way to victory. As soon as the prototype of the abovementioned three breakings and three buildings were proposed, some from academia praised it as an approachable innovation methodology, with profound insights and self-contained systems, and they are looking forward to deepening and improving. We are very much flattered and sincerely hope that the philosophy of transition to the new economy will be more colourful. Together with Gan, we will create a fascinating chapter of new economic theory and advocate for the development of the new economy in China and around the world. * Zhu Min, editor-in-chief of the New Economy Weekly, director of the New Economy Research Office at the Development Research Centre of the State Council, Ph.D. in Economics. Jiang Jiang, Ph.D. in International Economics, University of Paris I PantheonSorbonne, currently working in a domestic research institution. * This article was originally published in China Reading Weekly on March 29, 2017.

A Book That Took 10 Years to Write: After Reading Gan Run-Yuan’s New Book Helix Network Theory Cao Wei In September 2016, Fudan University Press published Gan Run-Yuan’s socioeconomic work Helix Network Theory—The Dynamic Structure and Evolution of Economy and Society. I learned that this is Gan’s ten-year brainchild of his toil, blood

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and sweat. Gan is not a scholar working in the research system. He neither teaches in universities nor does research in academic institutions. He wrote this book not for professional title or career advancement but purely out of interest in pursuing knowledge and exploring truth. Under the current background of academic disciplinisation, professionalisation and utilitarianisation in China, this spirit of exploring knowledge for truth is particularly invaluable. As a person who loves to read, I took the time to read this nearly 500,000-word carefully, and I was very inspired. I would like to share some insights and experiences after my reading.

Systems Thinking, Systems Construction Helix Network Theory used the philosophical thinking of systems science, the basic paradigm of biological evolution and the method of structural functionalism to explain social and economic operations. The structure, hierarchy and logic of the whole book are novel, vivid and clear. In my opinion, Gan Run-Yuan’s work deserves the attention and consideration of Chinese economic circles in at least two aspects: The first is methodological systems thinking, and the second is systems construction on the basis of comprehensive research. Helix Network Theory applied systems thinking to analyse economics and put economics in a broader social environment for investigation. In this book, Mr. Gan adopted the methods of system theory in complex sciences for the study of economics rather than using simple linear methods. The movement and changes of anything in the world are related to a certain time and space. The economic activities of human society are also operated gradually in certain space–time, so the study of economic phenomena cannot be separated from two corresponding factors, time and space. Through a historical investigation of economic phenomena, Gan pointed out that “socioeconomic systems are similar to biological organisms that socioeconomic systems also have a history of birth, growth, and evolution. Research on economic phenomena cannot be separated from specific time and space. Therefore, in essence, Economics is a historical discipline” (Helix Network Theory, p. 50). In economics research, it is not possible to use purely logical deduction or mathematical analysis to study natural phenomena. In fact, economic phenomena, like all social phenomena, are closely related to specific time and space. For this reason, socioeconomic systems are complex systems, and the method of applying complex science to analyse and study complex systems will be more scientific and reasonable. In this book, Gan pointed out that the basic structure of the current human social system includes six systems, namely, the human-culture system, the economic system, the political system, the science system, the legal system, and the education system. From the perspective of social organisms, these six systems are not isolated or unrelated but are interrelated, interacted, and interinfluenced. However, the current economics mainly analyses and studies the production activities within the economic system and does not fully sort out the interaction between the economic system and

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the other five major systems. The main issue with the mathematical analysis methods advocated by mainstream economics is that it cuts off the links between social systems and makes an isolated, one-sided and simplified interpretation of economic phenomena through purely logical interpretation. Similar to measuring the size of an object, if the numbers before the decimal point are not accurately estimated, then what is the point of calculating the numbers after the decimal point? The distance from Beijing to Shanghai is approximately 1270 kms. If this number is inaccurately estimated, for example, it is estimated to be 1000 kms, then even if we accurately calculate the distance from Beijing Railway Station to Tiananmen to 2732.34 m, it is meaningless, because the distance from Shanghai to Beijing Tiananmen is not 1002.73234 kms! Although the results seem accurate, they are horribly wrong. The system constructed by Gan’s theory estimates the numbers before the decimal point, while many mathematical studies popular in economics solve the numbers after the decimal point. Gan made it clear in the very beginning in the book’s foreword that “this book advocates a systematic, holistic, and connected perspective to look at the entire world and the human society and is committed to depicting a complete, comprehensive and orderly picture of the evolution of human society.” Economics is the study of the pattern of the economic system in the social system. From the social structure, the economic system is a subsystem of the whole social system organism. To study the pattern of the economic system, it is necessary to study the entire social system, which is actually a holistic worldview. Without a scientific and holistic worldview, one will easily fall into the overreaching misinterpretation, turning a blind eye to the vast forest and hearing the part instead of the totality. Therefore, Gan adopted a comprehensive method, and constructed a unique theoretical system through sprawling narratives. At present, people are keen to discuss economist rankings, journal rankings, impact factor rankings, etc., whether in newspapers, the Internet, media, or on university campuses. As a result, academic papers and various mathematical models are overwhelmingly everywhere. In the academic environment where the division of labour is increasingly refined, scholars are often satisfied with the description, discussion and analysis of some trivial things. Coupled with the quantitative assessment of academic performance in China, the public cares only about how many papers scholars have published in what level of journals but does not care about how many these papers are related to reality and how much the essence of things is touched. In the current mainstream research in Chinese economics, in regard to sprawling narratives, it seems to be a derogatory term. Everyone is working on small problems under the assumption of ceteris paribus, and comprehensive research in the sprawling narratives is often considered a top-down unrealistic utopian idea. However, this book went against the mainstream, abandoned the reductionist method, adopted the system theory method, attempted to conduct comprehensive research across disciplines and built a theoretical system of its own. This is indeed worthy of the attention and reference of Chinese academic theorists!

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Mainstream Economics has Fallen into a Misunderstanding and Crisis At present, due to excessive academic division of labour and mathematical analysis, mainstream economics has actually fallen into a one-sided, isolated and fragmented misunderstanding and crisis. Helix Network Theory bucked the trend, carried out interdisciplinary synthesis, and constructed a theoretical framework that integrates micro-, meso- and macro-economics. Helix Network Theory summarised the laws of the evolution and development of human society into the four laws of bifurcation, synergy, fractals and periodicity. Among them, regarding the law of bifurcation and periodicity, scholars have conducted a great deal of research and discussion, and this book specifically discusses the laws of synergy and fractals. To a certain extent, the publication time of Helix Network Theory can also illustrate the periodicity of the academic paradigm shift. The transformation of human academic paradigms, like everything else in the world, has its periodicity. If the transformation cycle of the academic paradigm is simply divided into a peace period and a crisis period (or into a summer boom period and a winter cold period), then the academic paradigm also has periodic characteristics. During the period of peace and prosperity, the academic world is prosperous, colourful and even too flashy, but during the period of crisis and cold, the once glorious theories are smashed into the sand, and only a few theories can stand up to the winter as proudly as the plum blossom. In terms of the comprehensiveness, inclusiveness and explanatory power of the theory, Helix Network Theory happens to be a plum blossom that can stand proudly during the cold period of crisis. The mainstream paradigm of Western economics presents a constructiondeconstruction cycle. The current mainstream economic paradigm was formed after World War II. If the oil crisis in the 1970s and the subprime mortgage crisis in 2008 are not included, today is generally in a period of peace and prosperity. The rigour of the mathematical method makes it relatively easy to gain academic consensus. The great success of physics makes it the mother of science. Therefore, in international academia, a discipline without a formula is often not considered a complete discipline. At present, the mainstream research paradigm of economics is represented by logical deductive modelling and quantitative empirical evidence. Such a research paradigm has social significance by providing people with more research positions as the discipline is becoming increasingly subdivided. The establishment of such courses in universities can also provide good thinking training for college students. However, this lack of originality and risk-free academic paradigm is often incapable of solving the major crisis of the times. In this situation, like the best players of simulated stocks in the real stock market, the business school students studying simulated cases in the real market, and the soldiers trained in peacetime in the real battlefield, they are always out of touch with the complex social reality! At present, the research paradigm of mainstream economics in China basically follows this paradigm of Western economics. In the early days of China’s reform and opening up, many of the first group of overseas students had a background in

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mathematics, physics and chemistry. After going abroad, some changed their majors to economics. The advantages of this group of students lie in mathematical logic and econometric modelling, but their thinking and language abilities are relatively weak. When these students returned home after completing their studies, they brought their best subject knowledge and research paradigms into the universities and research institutions where they worked. As they became leaders, the research paradigms they advocated became the basic research paradigms promoted by Chinese universities and research institutions. This is the historical formation process of the mainstream paradigm of Chinese economics, which has caused path dependence in the research process of modern Chinese economics. In times of peace and prosperity, this economic paradigm will not be challenged. However, over time, the groups on which this paradigm is based are more likely to form vested interest groups. Only major crises would challenge their economic theories. In addition, crisis often comes abruptly, like a black swan that people did not expect. The main paradigms of social science include positivism, historical evolutionism, structural functionalism, social criticism, and postmodernism. Positivism is the mainstream paradigm of modern social science research. From the types of research paradigms, the current mainstream paradigm of Western economics research is the positivist paradigm dominated by mathematical methods, while Helix Network Theory adopted the two paradigms of historical evolutionism and structural functionalism. In terms of philosophical thinking, the mathematical methods currently applied in Western economics draw more on the methods of classical mechanics in physics. Its space–time view is based on Newton’s classical mechanics system. Helix Network Theory integrates the system theory method of complex science, and its space–time view is referenced from Einstein’s General Theory of Relativity. From this point of view, the philosophical foundation of the mainstream research paradigm of Western economics has fallen behind! Since French economist A. Cournot introduced mathematical methods into economics research in 1838, after more than 170 years of efforts by economists worldwide, mathematical economics has now developed into an important branch of economics. At present, in modern economic theory, neoclassical economic theory, which is known for its mathematical analysis, has occupied a dominant position. However, it is certain that economic neoclassicalism and its mathematical tools are not able to interpret complex problems such as the organicity of social economies. As the Austrian economist Friedrich von Wieser (1851–1926) put it, “An investigation confining itself to this narrowest group of theoretical problems, a group open to extreme idealisation, may resort to mathematical expression as the most exact instrument for formulating results. However, an investigation passing by decreasing abstraction to the remaining problems of theory will find itself compelled to discard, in its further advance, the mathematical formula. None of the great truths of economic theory, none of their important moral and political applications, has been justified by mathematical means” (see Preface II written by economist Yang Chun-Xue). At present, the mainstream research paradigm of Western economics is represented by logical deductive modelling and quantitative empirical evidence. A glance at economics journals, it is not difficult to find that a large number of papers published

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by contemporary economists belong to the field of mathematical economics, many of which are often reduced to blackboard economics and self-entertainment in an ivory tower because they do not touch the essence of reality. Empirical research is the consensus of current mainstream economics. To apply existing tools, mainstream economists will not hesitate to adopt completely unreasonable assumptions and use the dogmas of Western economics to tailor social reality. They have fallen into a one-sided, isolated and fragmented misunderstanding without knowing. The mistakes of mainstream economics do not fully emerge because there is no major economic crisis. The use of linear, simple physical methods to study economics may be able to muddle through the boom times of the world economy after World War II. However, in the twenty-first century, especially after the world financial crisis in 2008, such an approach to study economics will appear inadequate and difficult to adapt to the development of the times. There are various indications that the current mainstream economic research has fallen into a misunderstanding and crisis!

Should Economists Not Be Moral? The article ‘Immoral’ Economics (Dushu 读书, 1998 (06)) written by Fan Gang, a well-known economist, began by pointing out that economic analysis cannot be separated from ethics and morality, but suggesting that such inseparability only takes moral norms as an exogenous condition or constraint, and put forward that the policy recommendations or institutional design proposed by economics do not depend on the level of morality, and it is more realistic to assume that people work with extremely low levels of morality. At the end of the article, he wrote that “we might as well declare that economists are ‘immoral’. Follow your own path, and let people talk!” The last sentence of Fan Gang’s article caused great controversy. His words should be understood in a certain context. That is, he believed that economics is an empirical discipline, and morality is standardised and is uneasy to be precise and to cater to all tastes. Therefore, if moral factors are to be considered, the variables will be too complex to conduct empirical research. From a methodological point of view, mainstream economists represented by Fan Gang treated the economic system as a simple system and therefore used linear and simple physical methods to study economics. However, in fact, the human social system is a super complex giant system, and the economic system as one of its subsystems is also a complex system. For complex systems, it is appropriate to use the systems science method of studying complex problems; if linear and simple physical methods are still applied for analysis and research, there will be great limitations. Helix Network Theory divided the human social system into a surface structure consisting of a human-culture system, economic system, political system and other subsystems and a deep structure composed of a science system, legal system, education system and other subsystems. The author put belief and morality into the deep structure of the human-culture system. If the framework proposed by Helix Network

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Theory is applied, one can clearly find that the factors in the economic system (i.e., the economic actor individual) and the factors in the human-culture system (i.e., morality) are entangled together. When economists study economic issues, if they only consider the factors in the economic system without considering the factors in the human-culture system, they will miss the forest for the trees. In fact, Fan Gang made such a mistake. ∗ ∗ ∗ According to Gan’s observation and understanding, the current human society is in a disruptive change period, and world history has started a new Axial Age. Chinese society and the world are undergoing profound changes, and the world is about to enter a great era of new ideas and new changes! At this critical point, history requires more interdisciplinary and cross-field erudite all-rounders, those who do academics for academics, not for livelihood or for promotion. As new historical opportunities come, we look forward to the birth of more original ideas and theories that are beneficial to human harmony, social development, and civilisation improvement! * Cao Wei, associate professor of School of Finance and Statistics at East China Normal University, Ph.D. in Economics. * This article was originally published in the Anecdotes column of the Hong Kong Economic Herald on May 11, 2017.

Afterword

This is my first monograph on Economics, and it is also a social science work that I have accumulated over ten years of reading and thinking. When I was at university, I was always very interested in the humanities and social sciences, despite the fact that I was studying science and engineering. Although I majored in science and engineering, I always paid close attention to the humanities and social sciences. After graduating from university, except for a few years at the China Venture Capital Research Institute, I have been working in the news and publishing industry of my choice. Being in the midst of China’s transition from a planned economy to a market economy, and due to my profession, I have had extensive exposure to different aspects of social life: the colourful social phenomena, the changing fashion trends, and the ups and downs of the people are like a vivid historical drama that keeps passing in front of my eyes, and while they enriched my experience, they also made me feel confused from time to time. What is the fundamental driving force of social development? What is the relationship between culture, economy and polity? Will the development of the market economy inevitably lead to the decline of public morality? What factors govern the direction of history in social changes? Questions like this had always been bothering me. To unravel these confusions, I hoped to look through society and seek answers through the minds of philosophers. To this end, I have read the works of many Western philosophers, including Plato, Schopenhauer, Nietzsche, Sartre, and Russell. However, I found that the thoughts of these philosophers could not fully answer my doubts. As a result, I have gradually extended my search to the fields of culture, history, anthropology, sociology and economics. Although the scope of reading was extended, still I felt that the development laws of human society are complicated and confusing. When reading some economics books, many of the economic principles, mathematical formulas and curves were always inscrutable to me. They seemed to be a big obstacle to my learning about the social sciences. To remove this obstacle, I was determined to start a systematic course in economics. From June 1999 to June 2001, I attended the postgraduate course in finance offered by the Graduate School of the Chinese Academy of Social Sciences. © Fudan University Press 2023 R. Gan, Helix Network Theory, https://doi.org/10.1007/978-981-19-8803-5

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My initial knowledge of economics was acquired from the professors Yang ChunXue, Chen Dong-Qi and Jing Lin-Bo from the Chinese Academy of Social Sciences. For more than a decade since then, I have been using my spare time to read economic works of different schools at home and abroad. In the process of reading, I found that the knowledge of economics is not systematic but fragmented, confusing, and contradictory. Nevertheless, this is not unique to economics. Similar situations also exist in other social disciplines, especially sociology. In the more than 20 years after graduating from university, I have successively purchased a large number of classic masterpieces in social sciences, a large part of which are published by the Commercial Press and Beijing Life·SDX Joint Publishing Company. In my spare time, they have been the spiritual nourishment for my mind. How many quiet and peaceful days they have spent with me, and how much joy and comfort they have brought me! With the broadening of the scope of reading and the accumulation of knowledge, I discovered that reading has always been my greatest pleasure, and the knowledge acquired from books became the real wealth I possessed. In addition to my busy work, I was occasionally caught in the fear of the passage of time. Sometimes in the dead of night, sometimes when I wake up in the morning, a voice will linger in my mind: “What are you reading for? If you don’t pass on the knowledge they carry to others, you are just trifling away your time!” “What is the use of your reading? Without new creations of these thoughts, your brain is just a racetrack for other people’s thoughts!” Those sounds upset me. With the increasing age, I feel more obliged to write out the knowledge and ideas that I have accumulated in my head. And this moment suddenly came. One day in April 2010, a Taiwanese friend who was engaged in cultural and creative work came across me on a business trip to the mainland. When he confirmed that I had been involved in the compilation of Creative Economics, which was published in traditional Chinese in Taiwan, and that I had supervised a 26-episode cartoon, he wanted to coauthor a book with me about cultural creativity. We hit it off immediately. He would collect and write Taiwan cases, and I would collect and write mainland cases. After several discussions, we drew up an outline for the compilation of the book in January 2011 and prepared to gather relevant information separately in February of that year. In the second half of 2011, when I borrowed several books on cultural creativity from the library, I found that some basic problems in economic theory need to be sorted out; otherwise, some deep-seated problems in economic operation cannot be explained clearly. I decided to put aside the writing of cultural creativity after much deliberation and attempted to sort out the basic framework of economic theory. As a result, this book before the readers was born out of my repeated thinking and constant revisions. The book took me two full years from January 2012 to mid-December 2013. During the composition, I read at least 40 monographs on economics and social sciences and downloaded and consulted nearly 500 papers, including 20 doctoral dissertations and master’s theses from CNKI.com (China National Knowledge Infrastructure) and relevant research institute websites. The reading notes I made exceeded 360,000 words according to a rough estimate. After reading, I found that the homogeneity of papers is serious. There are quite a number of papers that are pieced

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together and may be used for conferring of academic titles. There are very few high-quality papers with truly innovative and valuable ideas. I assumed this may be a reflection of the result of Chinese academia’s long-term emphasis on quantity, instead of quality! Where these papers are of reference value have been carefully cited in the corresponding chapters of the book. In the bibliography at the end of the book, I only listed the catalog of relevant books and dissertations. Among them, the dissertation of Dr. Chen Jun-Chang, the 2009 graduate of Business Administration from Jiangxi University of Finance and Economics, left me a deep impression. His rigorous learning and earnest attitude are in particular unforgettable. Chen JunChang’s doctoral dissertation is entitled Analysis on the Non-linear Industrial or Economic System, with a total of over 700,000 words, 600 pages, and 191 references. I believe you will be surprised when you learn that Dr. Chen spent 7 years studying hard for this dissertation! His dissertation criticised the views of 75 famous economists, proved and expanded some assumptions and theorems of new classical economics, studied the formalisation of the division of labour with specialisation in government affairs, and explained China’s 5,000-year historical process and the 30-year sectoral development of reform and opening up with the evolutionary game theory method. In the 8 years of his Ph.D., Dr. Chen Jun-Chang is said to have carefully studied nearly 400 monographs, for which he drained up his physical and mental energy and even used up all his money and took on debt. In early April 2012, I read his paper twice a week, and I also consulted some of his other papers. The ideas he expounded in his discussion brought me many inspirations, such as making me confirm that the division of labour is one of the basic mechanisms of social evolution and that economic operation is essentially a dynamic nonequilibrium process. Although I do not directly cite his papers in this book, I have to admit that his critical spirit and the courage to construct theoretical edifices in his papers have indeed inspired me a lot. It is because of his perseverance, tenacity and rigorous study style that I was able to get rid of impetuous emotions to read the literature and to sift the true from the false in earnest. It was also encouraged by his pioneering and innovative spirit that I was able to endure loneliness and persist in continuous thinking and repeated integrating and built a theoretical framework of social economy by absorbing the strengths of others. Here, I would like to express my sincere respect to Dr. Chen Jun-Chang! When this book was about to be completed, in the early morning of July 24, 2013, my sister in Lanzhou informed me that “father is in critical condition due to cerebral haemorrhage and is being hospitalised”. I had to stop writing and immediately packed up and took a flight to visit my dying father in Lanzhou. Unexpectedly, at 3:30 pm the next day, my father died! A forestry technician and primary and secondary school teacher, my father was a man of many talents, specialising in painting, calligraphy and horticulture, playing musical instruments such as the flute and harmonica, as well as mastering a skillful set of woodworking techniques. He had a lifelong passion for photography and travel, and travelled extensively throughout China. When I think of his voice, face and smile, scenes from the past come to mind: The animated movie Havoc in Heaven that I watched in the open-air plaza while riding on my father’s

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shoulders; The way he rode a bicycle to send me to a school far away; His oldfashioned dual-lens camera, which he bought a long time ago, that snapped pictures of me in front of flower beds or sculptures in the park when we were travelling… When I took him and mother to the Shanghai World Expo in the summer of 2010, he was as excited as a young man to wander through the pavilions of various countries… Every time I think of how much my father raised me, I cannot help but cry. Alas! Father left too soon for me to finish and publish this book while he was still alive, which is my biggest regret! In the process of writing this book, Ms. Cheng Bei-Li, the president of Shanghai Magnolia Volunteer Network, helped me register the library card of Shanghai Library, which enabled me to easily borrow professional books. Here I would like to express my deep gratitude! I would also like to thank my middle school classmate Guo Ming for helping me check and download some critical papers and Wang Lian-Fang for helping me apply for the CNKI recharge card! It was the support and help of these friends and classmates that allowed me to appreciate the preciousness and warmth of friendship, which to a certain extent accelerated the progress of writing this book. In addition, Xu Hui-Ping, the president of the Economic Management Branch of Fudan University Press, and Song Chaoyang, the vice president, had done much work for the smooth publication of this book. The editor in charge of this book, Lu Jun-Jie, carefully reviewed the entire book and put forward some amendments. Without their support and help, this book would not have been successfully published and met with readers. Here, I especially express my sincere thanks to them! Gan Run-Yuan May 2016

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Name Index

A Abernathy, 188 Adizes, Ichak, 117, 122 Akamatsu, Kaname (Japanese: 赤松 要; 1896–1974), 347, 355 Alchian, Armen Albert, 121 Amano, Motonosuke (1901–1980), 305 Anaximander (Greek: ’Aναξ´ιμανδρoς Anaximandros 610–545 B.C.), 30 Aristotle (384–322 B.C.), 4 Armesto, Felipe Fernandez, 556 Aron, Raymond (1905–1983), 505 Arouet, François–Marie (1694–1778; known by his nom de plume Voltaire), 479 Arrow, Kenneth J. (1921–2017), 62 Arthur, William Brian, 63, 98, 150 Asbby, W. Ross, 24 Atkinson, John (1858–1940), 155

B Baba, Masao (1923–1986), 363 Babbage, Charles (1792–1871), 520 Bai, Gui (Chinese: 白圭), 229 Bai, Yang (Chinese: 柏杨; 1920–2008), 473 Ban, Gu (Chinese: 班固; 32–92), 451 Barnett, 119, 258 Barney, 130 Baskin, Ken, 122 Baum, 111, 122, 127, 210 Becker, Gary Stanley (1930–2014), 46 Beer, Anthony Stafford (1926–2002), 24 Benz, Karl Friedrich (1844–1929), 147 Bertalanffy, Ludwig (1901–1972), 24 Bhaskar, Roy (1944–2014), 58 © Fudan University Press 2023 R. Gan, Helix Network Theory, https://doi.org/10.1007/978-981-19-8803-5

Bloch, Marc Léopold Benjamin (1886–1944), 554 Bohr, Niels Henrik David (1885–1962), 21 Borland, Jeff, 208, 209 Botero, Giovanni (1540–1617), 479, 480 Bower, 122 Braudel, Fernand (1902–1985), 554 Brecke, Peter, 614 Bruno, Giordano (1548–1600), 492 Buchanan, James McGill (1919–2013), 505, 506 Buck, John Lossing (1890–1975), 343 Buckle, Henry Thomas (1821–1862), 594 Buffon, Georges-Louis Leclerc (1707–1788), 30 Bunge, Mario Augusto (1919–2020), 24 Burgelman, 122, 123 Burns, R.M., 118

C Cacciatori, Eugenia, 146 Cai, Xiang (Chinese: 蔡襄; 1012–1067), 307 Campbell, Donald Thomas (1918–1996), 44 Chandler, Alfred Dupont (1918–2007), 130 Chase, Martha Cowles (1927–2003), 39 Chenery, Hollis Burnley (1918–1993), 347, 361, 397, 407 Chenery, Hollis Burnley (1918–1993), 398 Chen, Fu (Chinese: 陈旉; 1076–?), 291, 307, 308 Cheng, En-Fu (Chinese: 程恩富), 155 Cheng, Hao (Chinese: 程; 1032–1085), 589 Cheng, Yi (Chinese: 程颐; 1033–1107), 589 665

666 Chen, Ren-Yu (Chinese: 陈仁玉; 1212–?), 308 Christian, David, 556 Cicero, Marcus Tullius (106–43 B.C.), 462 Clark, Colin Grant (1905–1989), 224 Clark, John Bates (1847–1938), 155 Coase, Ronald Harry (1910–2013), 168, 208, 216 Coclanis, Peter A., 260, 290, 335 Comte, August (1798–1857), 520 Copernicus, Nicolaus (Polish: Mikołaj Kopernik; German: Niclas Koppernigk, modern: Nikolaus Kopernikus; 1473–1543), 4 Cowan, George A. (1920–2012), 11 Crick, Francis Harry Compton (1916–2004), 39 Cugnot, Nicolas-Joseph (1725–1804), 147 Cui, Shi (Chinese: 崔; 103–170), 306 D Dahl, Robert Alan (1915–2014), 506 Daimler, Gottlieb (1834–1900), 147 Dai, Tian-Yu (Chinese: 戴天宇), 108, 135 Dansgaard, Willi (1922–2011), 600 Darwin, Charles Robert (1809–1882), 29, 45 Davenport, T.H., 135, 136 Debreu, Gérard (1921–2004), 62 Deng, Ju-Long (Chinese: 邓聚龙), 25 Descartes, René (1596–1650), 4, 25 Diamond, Jared Mason, 556 Dobzhansky, Theodosius (1900–1975), 36, 38, 470 Dokuchaev (Bacili Bacileviq Dookuyeqaeeav, 1846–1903), 337 Dong, Chang (Chinese: 董昌; 846–896), 623 Dong, Da-Zhong (Chinese: 董大中), 566, 567 Dong, Zhong-Shu (Chinese: 董仲舒; 179–104 B.C.), 561 Dopfer, Kurt, 69, 108–111, 136 Drucker, Peter Ferdinand (1909–2005), 114, 129 Drucker, Peter Ferdinand (1909–2005), 89, 106 Du, Fu (Chinese: 杜甫; 712–770), 573 Durkheim, Emile (1858–1917), 47 E Easton, David (1917–2014), 440, 506

Name Index Eigen, Manfred (1927–2019), 24 Einstein, Albert (1879–1955), 17, 18 Eisenhardt, 123 Eldredge, Niles, 36, 37 Elvin, Mark, 344 Engels, Friedrich (1820–1895), 29

F Fan, Cheng-Da (Chinese: 范成大; 1126–1193), 617 Fan, Li (Chinese: 范蠡; 536–448 B.C.), 229 Febvre, Lucien (1878–1956), 554 Feigenbaum, Mitchell Jay (1944–2019), 528 Fei, John C.H. (Chinese: 费景汉; 1923–1996), 363 Fidelis, Fortunatus (1550–1630), 589 Fisher, A.G.D., 224, 246, 347, 356, 397 Fisher, Ronald Aylmer (1890–1962), 38 Flannery, Kent Vaughn, 546 Foss, 168 Foster, John, 108 Fourastié, Jean (1907–1990), 347, 356 Fourier, Charles (1772–1837), 520 Franklin, Benjamin (1706–1790), 4 Freeman, Christopher (1921–2010), 74, 127, 210, 318, 556 Freeman, Christopher (1921–2010), 74 Friedman, Milton (1912–2006), 46, 121 Friedmann, Alexander (1888–1925), 18 Fukuyama, Francis, 443, 444, 448–450, 476, 495 Furetière, Antoine (1619–1688), 462 Fu, Zhu-Fu (Chinese: 傅筑夫; 1902–1985), 572

G Galton, Francis (1822–1911), 45 Gamow, George (1904–1968), 18 Gates, Bill, 106, 178 Genovesi, 479 Goguel, François (1909–1999), 505 Goldschmidt, Richard (1878–1958), 36 Gould, Stephen Jay (1941–2002), 36, 37 Gray, B.M., 606 Grosser, Alfred, 505 Grove, Andy (1936–2016), 178 Guan, Zhong (Chinese: 管仲; ?–645 B.C.), 493 Gu, Ji-Fa (Chinese: 顾基发), 25

Name Index H Habermas, Jürgen, 470, 519 Haeckel, Ernst (1834–1919), 35, 47 Haken, Hermann, 24, 530, 531 Haldane, John Burdon Sanderson (1892–1964), 38 Hamel, 120, 122, 168 Han, E. (Chinese: 韩鄂), 307 Han, Gong-Liang (Chinese: 韩公廉), 587 Hannan, 122, 127, 210 Hansen, 119, 258 Han, Yan-Zhi (Chinese: 韩彦直), 307, 308 Hardy, Godfrey Harold (1877–1947), 38 Hartwell, Robert Milton (1932–1996), 574 Hawking, Stephen William (1942–2018), 21 Hayek, Friedrich August (1899–1992), 392 He, Chuan-Qi (Chinese: 何传启), 155 Heene, 168 Hegel, Georg Wilhelm Friedrich (1770–1831), 9 Heisenberg, Werner Karl (1901–1976), 21 He, Lian-Cheng (Chinese: 何炼成), 176 Hershey, Alfred Day (1908–1997), 39 Hertz, Heinrich Rudolf (1857–1894), 16 Heskett, James, 178, 462 Higgins, Benjamin Howard (1912–2001), 363 Hinsch, Brett, 602, 603, 605–607 Hirschman, Albert Otto (1915–2012), 347 Hitler, Adolf (1889–1945), 45 Hodgson, Geoffrey Martin, 58, 146, 168 Hoffmann, Walther Gustav (1903–1971), 347 Holbach, Paul (1723–1789), 479 Holland, John Henry (1929–2015), 24, 48 Horner, William George (1786–1837), 588 Huang, Chao (Chinese: 黄巢; 820–884), 573, 623 Huang, Kai-Nan (Chinese: 黄凯南), 145, 146 Huang, Lei (Chinese: 黄磊), 554, 555 Huang, Ren-Yu (Chinese: 黄仁宇; 1918–2000), 435, 500, 501 Huang, Zong-Zhi (Chinese: 黄宗智), 344 Hua, Tuo (Chinese: 华佗), 568, 580 Hubble, Edwin Powell (1889–1953), 18 Hume, David (1711–1776), 574 Huntington, Ellsworth (1876–1947), 595, 606 Hu, Shi (Chinese: 胡适; 1891–1962), 567 Huxley, Julian, 38 Huxley, Thomas Henry (1825–1895), 44

667 J Jefferson, Thomas (1743–1826), 4 Jia, Gen–Liang (Chinese: 贾根良), 73, 110, 138 Jiang, Yi-Hua (Chinese: 姜义华), 560 Jiang, Zi-Ya (Chinese: 姜子牙), 229 Jia, Si-Xie (Chinese: 贾思勰), 291, 306 Jia, Xian (Chinese: 贾宪), 588 Jin, Guan-Tao (Chinese: 金观涛), 24, 582 Johnson, Douglas L., 605 Jukes, Thomas Hughes (1906–1999), 41 K Kaldor, Nicholas (1908–1986), 63, 68 Kalecki, Michal (1899–1970), 155 Kang, You-Wei (Chinese: 康有为; 1858–1927), 321 Kennedy, Paul, 324, 576 Keynes, John Maynard (1883–1946), 266, 391 King, Jack Lester (1934–1983), 41 Klir, George Jiˇrí (1932–2016), 24 Kluckhohn, Clyde (1905–1960), 461 Knudsen, Thorbjørn, 146 Koestler, Arthur (1905–1983), 58 Kogut, 120, 130, 176 Kong, Qiu (Chinese: 孔丘; 551–479 B.C.; known as Confucius 孔子), 451 Kotter, John Paul, 178 Kroeber, Alfred Louis (1876–1960), 461 Kropotkin (1842–1921), 44 Kuznets, Simon Smith (1901–1985), 224, 358 L Lamarck, Jean-Baptiste (1744–1829), 30 Langlois, 120, 168 Lasswell, Harold Dwight (1902–1977), 506 Laszlo, Ervin, 19, 24, 73, 434, 484–486 Lawrence, 119 Leibniz, Gottfried Wilhelm (1646–1716), 4 Lenin, Vladimir (1870–1924), 392 Leontief, Wassily (1905–1999), 347 Lewis, William Arthur (1915–1991), 347 Li, Ang (Chinese: 李昂; 809–840), 569 Liang, Qi-Chao (Chinese: 梁启超; 1873–1929), 5, 321 Liang, Shu-Ming (Chinese: 梁漱溟; 1893–1988), 564 Li, Cheng-Liang (Chinese: 李成梁; 1526–1615), 624 Liebig, Justus (1803–1873), 337

668 Li, Er (Chinese: 李耳; known as Laozi (or Lao Tzu) 老子, or Lao Dan 老聃), 11, 450, 504, 561, 578 Li, Gen-Pan (Chinese: 李根蟠; 1940–2019), 293, 298, 299, 301, 302 Li, Hong-Zhang (Chinese: 李鸿章; 1823–1901), 323 Li, Ke-Yong (Chinese: 李克用; 856–908), 623 Li, Kui (Chinese: 李; 455–395 B.C.), 494 Li, Long-Ji (Chinese: 李隆基; 685–762), 568 Lin, Yifu (Chinese: 林毅夫), 425 Li, Shi-Min (Chinese: 李世民; 599–649), 573 Li, Shu-Hua (Chinese: 李曙华), 578 Liu, Bang (Chinese: 刘邦; 256–195 B.C.), 567 Liu, Che (Chinese: 刘彻; 156–87 B.C.), 74 Liu, Han-Min (Chinese: 刘汉民), 176 Liu, Heng (Chinese: 刘恒; 203–157 B.C.), 568 Liu, Kan (Chinese: 刘; 9 B.C.–6 A.D), 568 Liu, Qing-Feng (Chinese: 刘青峰), 582 Liu, You-Cheng (Chinese: 刘佑成), 522 Liu, Yu (Chinese: 刘裕; 363–422), 590, 600 Li, Xiao-Ming (Chinese: 李晓明), 114, 118, 124, 130, 131, 171, 196 Li, Ye (Chinese: 1192–1279), 588 Li, Yuan-Hao (Chinese: 李元昊; 1003–1048), 618 Li, Zhi-Sen (Chinese: 李致森), 609 Lomonosov, Mikhail (Mikhaylo) Vasilyevich (Russian: Mihail (Mihalo) Vasileviq Lomonosov; 1711–1765), 4 López, José, 629 Lorsch, 119 Louçã, Francisco, 74, 318, 556 Lucas, Robert Emerson, 208 Lu, Gui-Meng (Chinese: 陆龟蒙), 307, 308 Luhmann, Niklas (1927–1998), 11 Lü, Jin-Hua (Chinese: 吕锦华), 19, 20 Lu, Ming-Shan (Chinese: 鲁明善; 1271–1368), 307 Luo, Guan-Zhong (Chinese: 罗贯中), 571 Luo, Zhen-Yu (Chinese: 罗振玉; 1866–1940), 291, 319 Lü, Pu-Wei (Chinese: 吕不韦; 292–235 B.C.), 229 Luria, Salvador Edward (1912–1991), 470 Lu, Xun (Chinese: 鲁迅; 1881–1936), 473 Lu, Yu (Chinese: 陆羽; 733–804), 307, 308

Name Index Lü, Zu-Qian (Chinese: 吕祖谦; 1137–1181), 589 Lyell, Charles (1797–1875), 31

M Machiavelli, Niccolò (1469–1527), 440 Machlup, Fritz (1902–1983), 225 Maddison, Angus (1926–2010), 324, 495 Malinowski, Bronislaw (1884–1942), 47 Malthus, Thomas Robert (1766–1834), 46, 480 Mandelbrot, Benoit B. (1924–2010), 25, 85 Marshall, Alfred (1842–1924), 62 Marx, Karl Heinrich (1818–1883), 4 Maslow, Abraham Harold (1908–1970), 241 Matsumura, Seiji (Japanese: 松村清二), 36 Matsushita, Konosuke (1894–1989), 178 Maxwell, James Clerk (1831–1879), 16 Ma, Yi-Long (Chinese: 马一龙; 1499–1571), 310 McNeill, John Robert, 556 McNeill, William Hardy (1917–2016), 112, 556 Mendel, Gregor Johann (1822–1884), 35, 336 Meng, Ke (Chinese: 孟; known as Mencius 孟子), 302, 565 Meng, Tian (Chinese: 蒙恬), 590 Meng, Yang (Chinese: 孟氧; 1923–1997), 6 Miller, James Grier (1916–2002), 25 Mill, John Stuart (1806–1873), 97 Min, Jia-Yin (Chinese: 闵家胤), 9, 24, 73, 74, 459, 463, 465, 493, 641 Minogue, Kenneth Robert (1930–2013), 502 Min, Zi-Qian (Chinese: 闵子骞; 536–487 B.C.), 537 Mitchell, Wesley C. (1874–1948), 90 Miyazawa, Kenichi (1925–2010), 363 Monod, Jacques Lucien (1910–1976), 470 Montesquieu (1689–1755), 594 Moore, James F., 122 More, Thomas (1478–1535), 479 Morgan, Lewis Henry (1818–1881), 46 Morgan, Thomas Hunt (1866–1946), 35, 36, 38 Morin, Edgar, 68 Morita, Akio (1921–1999), 178 Motoo, Kimura Motoo (1924–1994), 40 Mou, Qi-Zhong (Chinese: 牟其中), 421, 422

Name Index Murmann, Johann Peter, 374 Myers, Ramon H., 344 Myrdal, Karl Gunnar (1898–1987), 63, 67

N Naisbitt, John, 106 Necker, Jacques (1732–1804), 479 Nelson, Richard, 119, 120, 122, 146, 168, 176 Neumann, John (1903–1957), 5 Newton, Isaac (1643–1727), 4, 15 Ng, Yew-Kwang (Chinese: 黄有光), 209, 251 Niu, Long-Fei (Chinese: 牛龙菲), 61, 434, 435, 463, 472, 484–488, 496, 497, 500 North, Douglass Cecil (1920–2015), 46

O Ohlin, Bertil Gotthard (1899–1979), 404 Ou-Yang, Xiu (Chinese: 欧阳修; 1007–1072), 307 Owen, Robert (1771–1858), 520 Oxalon, 479

P Pan, Hong-Ye (Chinese: 攀洪业), 582 Pareto, Vilfredo (1848–1923), 70 Parsons, Talcott (1902–1979), 72 Penrose, Edith Elura Tilton (1914–1996), 130, 168 Petty, William (1623–1687), 347, 354 Peursen, Cornelis Anthonie (1920–1996), 464 Piaget, Jean (1896–1980), 44 Pigou, Arthur Cecil (1877–1959), 154 Pisano, Gary, 170 Planck, Max (1858–1947), 28 Plato (Greek:
λατων ´ Plát¯on; 427–347 B.C.), 90, 479, 519, 520, 530, 651 Poincaré, Jules Henri (1854–1912), 25 Polanyi, Michael (Hungarian: Polányi Mihály; 1891–1976), 135 Pomeranz, Kenneth, 555 Ponting, Clive (1946–2020), 556 Popper, Karl Raimund Popper (1902–1994), 44 Porat, Mac Uri, 225, 226, 246 Potts, Jason, 108 Prahalad, 120, 122, 168 Prigogine, Ilya (1917–2003), 24

669 Prusak, L., 135, 136 Ptolemy, Claudius (Greek:
τoλεμα‹oς Ptolemaios Latin: Claudius Ptolemaeus 90–168), 15

Q Qapaghan Qaghan (Chinese: 默;汗; ?–716), 301 Qian, Hui (Chinese: 钱辉), 42, 111, 114, 118, 124, 127, 130, 170, 176, 177, 183, 211, 258 Qian, Xue-Sen (Chinese: 钱学森 1911–2009), 23, 24, 27 Qi, Ji-Guang (Chinese: 戚继光; 1528–1588), 624 Qin, Guan (Chinese: 秦观; 1049–1100), 307, 308 Qin, Hua-Sun (Chinese: 秦华孙), 511 Qin, Jiu-Shao (Chinese: 秦九韶; 1202–1261), 588 Quesnay, François (1694–1774), 347 Qu, Yong-Yi (Chinese: 曲永义), 155 R Radcliffe-Brown, Alfred (1881–1955), 47 Ranis, Gustav (1929–2014), 363 Rapoport, Anatol (Russian: Anat´oli Bor´isoviq Rapop´ort; 1911–2007), 24 Ratzel, Friedrich (1844–1904), 595 Ren, Zhen-Qiu (Chinese: 任振球), 609 Ricardo, David (1772–1823), 153 Richardson, George, 167 Romanelli, 122, 123 Romer, Paul Michael, 208 Rostow, Walter Whitman (1916–2003), 347 Rousseau, Jean-Jacques (1712–1778), 4 Rouvroy, Claude-Henri (1760–1825), 520 Rozentali, Mark Moisevich (1906–1975), 462 Russell, Bertrand (1872–1970), 5, 651

S Samuelson, Paul A. (1915–2009), 97 Say, Jean Baptiste (1767–1832), 70, 91 Schleiden, Matthias Jacob (1804–1881), 31 Schrödinger, Erwin (1887–1961), 21 Schultz, Theodore William (1902–1998), 105, 371 Schumpeter, Joseph Alois (1883–1950), 121

670 Schwann, Theodor (1810–1882), 31 Scott, John, 629, 630 Semple, Ellen Churchill (1863–1932), 595 Service, Elman Rogers (1915–1996), 46 Shang, Yang (Chinese: 商鞅; 395–338 B.C.), 313, 494 Shannon, Claude Elwood (1916–2001), 24 Shao, Chang (Chinese: 邵昶), 248, 249 Shen, Chang-Yun (Chinese: 沈长云), 447 Shen, Kuo (Chinese: 沈括; 1031–1095), 4 Shinohara, Miyohei, 347, 359, 407 Shi, Zhen-Rong (Chinese: 施振荣), 178 Shuen, Amy, 120, 170 Shu-Sun Tong (Chinese: 叔孙通), 567 Si-Ma, Qian (Chinese: 司马迁; 145–90 B.C.), 494, 571, 578 SI-Ma, Yan (Chinese: 司马炎; 236–290), 314 Simon, Herbert Alexander (1916–2001), 5 Simpson, George Gaylord (1902–1984), 36 Skocpol, Theda, 440, 441 Smelser, Neil Joseph, 459, 531, 537, 543 Smith, Adam (1723–1790), 2 Song, Ci (Chinese: 宋慈; 1186–1249), 589 Spencer, Herbert (1820–1903), 32 Spender, 120, 130, 176 Stalin, Joseph Vissarionovich (1878–1953), 392 Stalker, 118 Stigler, George Joseph (1911–1991), 208 Suarez, 188 Sun, Bo-Liang (Chinese: 孙伯良), 106 Sun, Lung-Kee (Chinese: 孙隆基), 567 Sun, Luo-Ping (Chinese: 孙洛平), 155 Sun, Yat-sen (Chinese: 孙中山; 1866–1925), 505 Su, Qin (Chinese: 苏秦; ?–284 B.C), 504 Su, Shi (Chinese: 苏轼; 1037–1101), 589 Su, Song (Chinese: 苏颂; 1020–1101), 587 Su, Xun (Chinese: 苏; 1009–1066), 589 Su, Zhe (Chinese: 苏; 1039–1112), 589

T Taishi, Esen (Mongolian: scn; Chinese: 也先), 301 Tang, Shen-Wei (Chinese: 唐慎微), 588, 589 Tang, Shi-Ping (Chinese: 唐世平), 8, 9, 11 Tang, Shi-Qi (Chinese: 唐士其), 441 Taylor, Frederick Winslow (1856–1915), 337, 520 Teece, David John, 120, 170

Name Index Temujin (Chinese: 铁木真; Genghis Khan; 1162–1227), 619 Tesla, Nikola (1856–1943), 4 Thompson, 119 Thom, René (1923–2002), 25, 189 Tinbergen, Jan (1903–1994), 363 Toffler, Alvin, 106 Toynbee, Arnold Joseph (1889–1975), 87, 475 Tuo-Ba, Hong (Chinese: 拓; 467–499), 314 Tushman, 119, 122, 123, 188 Tylor, Edward Burnett (1832–1917), 46

U Utterback, 188 Uyomov, Avenir Ivanovich (Russian: AAveenirp Ivaanooviq Umoov 1928–2012), 25 V Van Valen, Leigh (1935–2010), 42, 258 Veblen, Thorstein B. (1857–1929), 46, 66 Vico, Giovanni Battista (1668–1744), 68, 553 Vinci, Leonardo da (1452–1519), 4 Vollmer, Gehard, 44 Vries, Hugo (1848–1935), 36

W Walras, Léon (1834–1910), 62 Wang, An-Shi (Chinese: 王安石; 1021–1086), 494 Wang, Chao-Ke (Chinese: 王朝科), 155 Wang, Hui-Chang (Chinese: 王会昌), 611 Wang, Jian (Chinese: 王建; 847–918), 623 Wang, Jun-Jing (Chinese: 王俊荆), 617 Wang, Mang (Chinese: 王莽; 45 B.C.–23), 314 Wang, Xian-Zhi (Chinese: 王仙芝), 623 Wang, Yang-Ming (Chinese: 王阳明; 1472–1529), 4 Wang, Yu-Hu (Chinese: 王毓; 1907–1980), 304 Wang, Zhen (Chinese: 王祯; 1271–1368), 291, 307, 308, 610, 617, 622 Wang, Zhen-Zhong (Chinese: 王震中), 447 Wang, Zhuo (Chinese: 王灼), 307 Watson, James Dewey, 39 Weber, Max (1864–1920), 434 Wei, Hong-Sen (Chinese: 魏宏森), 24 Weinberg, Wilhelm (1862–1937), 38

Name Index Wei, Sen (Chinese: 韦森), 576 Welch, Jack, 178 Wernerfelt, 120, 122, 130, 168 Whirt, Leslie (1900–1975), 46 Whitehead, Alfred North (1861–1947), 58 Wicksell, Knut (1851–1926), 67 Wiener, Norbert (1894–1964), 5 Wilson, Edward Osborne (1929–2021), 7, 42, 456, 467, 524, 544, 546 Winter, Sidney Graham, 119, 120, 122, 136, 146, 168 Wojciechowski, Jerry A., 470 Wright, Sewall Green (1889–1988), 38 Wu, Cheng-Ming (1917–2011) (Chinese: 吴承明), 324 Wu, Da-You (Chinese: 吴大猷; 1907–2000), 5, 7 Wu, Jie (Chinese: 乌杰), 24 Wu, Jin-Ming (Chinese: 吴金明), 248, 249 Wu, Qi (Chinese: 吴起; 440–381 B.C.), 494 Wu, Xiao-Jiang (Chinese: 吴晓江), 33 Wu, Xue-Mou (Chinese: 吴学谋), 25 Wu, Ze-Tian (Chinese: 武则天; 624–705), 301

X Xenophon (440–355 B.C.), 99 Xian, Gao (Chinese: 弦高), 229 Xu, Guang-Qi (Chinese: 徐光启; 1562–1633), 291 Xun, Kuang (Chinese: 荀况; 313–238 B.C.; known as Xunzi 荀子 or Master Xun), 519, 530, 565 Xu, Shen (Chinese: 许慎), 568 Xu, Xing (Chinese: 许行), 302 Xu, Zhuo-Yun (Chinese: 许倬云), 302, 303

Y Yamazawa, Ippei, 356 Yang, Hui (Chinese: 杨辉), 588 Yang, Shen (Chinese: 杨; 1687–1785), 310 Yang, Xiao-Kai (Chinese: 杨小凯; 1948–2004), 208, 209, 249, 251, 425, 641 Yang, Zhong-Fu (Chinese: 杨忠辅), 588 Ye, Wei (Chinese: 叶玮), 617 Ying, Zheng (Chinese: 嬴政; First Emperor of Qin 秦始皇; 259–210 B.C.), 230 Young, Allyn Abbott (1876–1929), 63, 67, 208, 216 Yuan, Long-Ping (Chinese: 袁隆平), 338

671 Yudin, Pavel Fyodorovich (Russian: Paaveel Fdorpoooviq din; 1899–1968), 462 Yu, Guo-An (Chinese: 于国安), 155 Yu, Ke-Ping (Chinese: 俞可平), 511

Z Zander, 120, 130, 176 Zeeman, Erik Christopher (1925–2016), 189 Zeng, Gong (Chinese: 曾巩; 1019–1083), 589 Zeng, Guo-Fan (Chinese: 曾国藩; 1811–1872), 323 Zeng, Guo-Ping (Chinese: 曾国屏), 24 Zeng, Jian (Chinese: 曾健), 531, 536 Zeng, Shen (Chinese: 曾参; 505–435 B.C.; known as Zengzi 曾子 or Master Zeng), 565 Zhang, Dian (Chinese: 章典; Zhang, David D.), 614 Zhang, Dong-Sun (Chinese: 张东; 1886–1973), 564 Zhang, Guang-Zhi (Chinese: 张光直; 1931–2001), 446 Zhang, Gui (Chinese: 张轨; 255–314), 591 Zhang, Heng (Chinese: 张衡; 78–139), 568 Zhang, Ju-Zheng (Chinese: 张居正; 1525–1582), 536, 624 Zhang, Li (Chinese: 张利), 610 Zhang, Pei-Gang (Chinese: 张培刚; 1913–2011), 263 Zhang, Pi-Yuan (Chinese: 张丕远), 610 Zhang, Rui-Min (Chinese: 张瑞敏), 178 Zhang, Shen-Fu (Chinese: 张申府; 1893–1986), 464 Zhang, Shi (Chinese: 张栻; 1133–1180), 589 Zhang, Wei-Lian (Chinese: 张渭莲), 447 Zhang, Yi (Chinese: 张仪; 378–309 B.C.), 504 Zhang, Yi-Fang (Chinese: 张一方), 531, 536 Zhang, Ze-Duan (Chinese: 张择端), 230 Zhang, Zhong-Jing (Chinese: 张仲景), 580 Zhao, Huan (Chinese: 赵桓; 1100–1156), 619 Zhao, Ji (Chinese: 赵佶; 1082–1135), 619 Zhao, Kuang-Yin (Chinese: 赵匡胤; 927–976), 573 Zhao, Xu (Chinese: 赵顼; 1048–1085), 495 Zheng, Jiangsui (Chinese: 郑江绥), 176

672 Zheng, Jing-Yun (Chinese: 郑景云), 600, 624 Zhong, Shou-Hua (Chinese: 钟守华), 584 Zhou, Dun-Yi (Chinese: 周敦颐; 1017–1073), 496 Zhou, Hui-Qing (Chinese: 周慧清), 617 Zhou, Qing-Bo (Chinese: 周清波), 610 Zhou, Shi-Hou (Chinese: 周师厚; 1031–1087), 307 Zhou, Xin (Chinese: 周鑫), 617, 624 Zhu, Ke-Zhen (Chinese: 竺可桢; 1890–1974), 608, 609

Name Index Zhu, Wen (Chinese: 朱温; 852–912), 623 Zhu, Xi (Chinese: 朱熹; 1130–1200), 589 Zhu, Yi-Jun (Chinese: 朱; 1563–1620), 492 Zhu, Yuan-Zhang (Chinese: 朱元璋; 1328–1398), 575 Zhu, Zhi-Chang (Chinese: 朱志昌), 25 Zou, Shi-Peng (Chinese: 邹诗鹏), 630 Zuo, Zong-Tang (Chinese: 左宗棠; 1812–1885), 323 Zu, Ti (Chinese: 祖逖; 266–321), 590