Chapter 138: Merits and Demerits
The Qingmiao Law concerned the interests of countless common people, landlords, and court officials. It was a matter of great importance and could not be decided by just a few words from Zhao Huan and Li Gang.
After all, this was a national policy that was abolished, and the Qingmiao Law must have encountered serious problems during its implementation.
If achievements are the main thing and problems are secondary, how could upright gentlemen like Sima Guang, Ouyang Xiu, Su Shi, Fu Bi and Han Qi deny the Qingmiao Law based on a single case?
In the decades since the Qingmiao Law was abolished, many ministers, such as Zhang Dun and Cai Jing, have studied the reasons for the failure of the Qingmiao Law and put forward suggestions for improvement, but no one can guarantee whether it can play the due role.
The geographical conditions, economic conditions, and cultural environment of each region are different. What may be successful here may not work there. It is difficult to summarize a set of effective guiding ideologies that can be promoted nationwide.
Zhao Huan asked Li Gang to take the lead in reviewing the data recorded by the Ministry of Revenue, summarizing the experiences and lessons, and agreed to give a work report three days later. He then began to study in the conference room of the Funing Palace.
From the perspective of later corporate management, Zhao Huan believed that the Qingmiao Law was a micro-loan business.
Taking into account the subject, object and purpose of this business, telling a brand story and packaging it well, it can also be called a state-owned capital agricultural benefit financial project.
It is called state-owned capital because the starting capital for the Qingmiao Law was the imperial grain reserves and it was implemented under the leadership of the imperial court. The grain reserves used were from the Taihu warehouse, which was worth approximately 15 million strings of cash.
It is called "benefiting farmers" because the target users are very clear, namely the low-income farmers who are in financial difficulty during the period when the old crops have been eaten and the new crops have not yet matured.
It is called a financial project because the loaned money must be recovered with interest. It is not disaster relief or assistance, but a business.
Since it is a business, no matter how good the concept is or how great the purpose is, the essence of business is to make money. If you want to maintain it, you must at least achieve a balance between income and expenditure.
The key to whether a financial project can be successfully completed lies in risk control, and the money loaned out must be able to be recovered with interest.
There is no risk-free financial project in the world, so bad debts are inevitable, which requires that the bad debt ratio be strictly controlled within a certain range.
If the operating costs and bad debt losses combined exceed the interest income, then the total account will inevitably be a loss. Unless the court continues to subsidize it with fiscal revenue, this business will inevitably fail.
When Song Shenzong ascended the throne, the annual fiscal revenue was about 50 million taels, and the annual expenditure was also about 50 million taels. The court had no money at all, so it was impossible to provide subsidies.
Knowing this, let’s calculate whether the Qingmiao method project can make money, or how to make money.
Profit = Revenue - Operating Cost - Bad Debt Loss.
The income is easy to calculate. With an annual interest rate of 20%, according to the records of the Ministry of Revenue, the starting capital of this project was 15 million guan. A simple calculation shows that the theoretical income is 3 million guan.
The interest rate for Qingmiao is stipulated to be 20%, which sounds very high, but if you think about it carefully, it is actually not that high.
Some people may think that the current interest rate on bank deposits is much lower than this, 0.3% for a one-year current account and only 3% for a fixed deposit, but that is the bank borrowing money from you, not lending it to you.
If you have done credit card installment, or used Huabei, business loan, etc., you know that a daily interest rate of 0.05% is normal. So how much is this interest per year?
In fact, it is not 18%, but about 36%, because you have to repay part of the principal every month, that is, equal installments of principal and interest or equal installments of principal.
Profit = 3 million guan - operating costs - bad debt losses.
What are the operating costs? Local government loan agencies need to pay salaries, right? Business trips require travel expenses, right? Distributing grain from the national reserves incurs shipping costs and losses, right? Official salaries, transportation costs, losses from floods and droughts, and losses from rats and birds.
According to the records of the Ministry of Revenue, the official salary of the Director of the Grain and Oil Division that year was 500,000 strings of cash, and the travel expenses and losses during the transportation of grain were 700,000 strings of cash, totaling 1.2 million strings of cash.
Profit = 3 million strings of cash - 1.2 million strings of cash - bad debt loss.
In other words, the bad debt losses were controlled within 1.8 million guan.
Having talked about operating costs, let's calculate the bad debt losses. We will consider the smallest group of ten households as required by the Qingmiao Law.
Suppose the Ministry of Revenue has a principal of 100 taels of silver in County A, and lends 10 taels to each of 10 farmers at an interest rate of 20%. If all the money is repaid, the Ministry of Revenue can recover the 100 principal and 20 taels of interest. This is an ideal situation.
However, if two farmers cannot repay the loan, only 12 taels can be recovered from each of the eight farmers, for a total of 96 taels, which is a loss in the overall account.
If the default rate is higher, for example, 5 people default, then in order to recover the principal of 100 taels, the other 5 people must each pay back 20 taels, which is 100% interest.
The next question is, the people of the Song Dynasty are hardworking, kind, gentle and honest. Will there be widespread breach of contract?
Yes.
Because it has nothing to do with morality, but with the harvest, agricultural civilization is really fragile.
The economy of agricultural civilizations has always been dependent on the weather. Droughts, floods, insect plagues, locust plagues, frost disasters, and hailstorms are all unbearable.
Even without disasters, the rice yield per mu during the reign of Emperor Shenzong was generally only more than 100 kilograms. The situation was even more difficult in some barren areas in the north where droughts occurred nine out of ten years, and the grain yield per mu was often less than 100 kilograms.
After farmers take out loans, they can only pray for good weather and a good harvest, so that they can ensure that in the fall they will have enough harvest to repay the loan and have enough food left to support their families.
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