Chongzhen revived the Ming Dynasty

The establishment of debt companies pleased many officials but displeased others.

They believed things shouldn't be this way; the imperial court shouldn't be demanding debts from destitute refugees.

Zhu Youjian understood their meaning, and after the meeting, he deliberately kept Liu Lishun behind. He asked him:

"How is the council in Shuntian Prefecture doing now?"

"Can it exercise the powers of Congress?"

After considering it for a moment, Liu Lishun replied:

"It's not enough to just act as the representative of Congress; we need to continue working on our relationship with other government agencies."

"However, the people and officials of Shuntian Prefecture have already accepted the parliament."

"The public is very enthusiastic about the parliament, and although officials are dissatisfied with the parliament's interference, they also believe that the parliament can represent the will of the people."

This is a good start, Zhu Youjian nodded and said:
"Then let's continue to improve it."

"I need the Shuntian Prefecture Council to take responsibility as soon as possible and pass the Currency Law."

"The issuance of vouchers can no longer be delayed; the imperial court needs more money."

Liu Lishun was also aware of the current state of the imperial court, which was in a state of financial strain.

But what he didn't understand was why the imperial court was still so short of money when it had clearly obtained a sum of money by selling land in the Liaohetao region.

He said to the emperor:

"Your Majesty, I have heard that the Liaohetao land was sold, and the court received 24 million taels of silver."

With this income, there is no need to rush to issue vouchers.

"There is no need to collect debts from the public."

Zhu Youjian shook his head and said:
"This income of 24 million taels is not a regular occurrence; once it's spent, it's gone."

"Besides, the development of Northeast China, the resettlement of meritorious officials, the war in Annam, naval shipbuilding, the autumn maneuvers on the Grand Canal... all of these require money."

"Especially this year, with the change of government, many officials need to be transferred and some positions have been added. These are unprecedented events, and funds need to be reserved for them."

Twenty-four million taels of silver may seem like a lot, but it is actually just the imperial court's annual revenue.

Moreover, such windfall gains are best spent on extraneous matters, lest officials treat this income as a routine and squander it lavishly.

Issuing vouchers is the real way to expand revenue sources. The imperial court can obtain a continuous stream of income from them.

Liu Lishun also knew the difference between normal income and extra income, and reluctantly accepted the emperor's explanation.

However, he could not tolerate the emperor allowing his ministers to invest in debt-collecting companies and extract debts from displaced people, considering it a violation of benevolence and righteousness.
"The refugees have nothing, and what the court should do is to provide them with shelter, not to add to their debts."

"What the imperial court should do is to rescue them."

Zhu Youjian had done the same thing before, but now he felt it was too slow.

With the current annual immigration rate of less than one million, when will it be possible to move twenty million or even thirty million people out?

Even under the worst-case scenario, 30% of the people in the northern provinces most severely affected by the disaster will need to be relocated.

At the current speed, it's simply impossible to complete.

Moreover, the gold and silver he offered were insufficient to cover this expense.

Therefore, he had to make immigration a profitable business and get officials involved.

The purpose of allowing officials to invest in debt-ridden companies and putting immigrants in debt is, in essence, this.

He needs to get officials to be more proactive in actively relocating displaced people.

Of course, he couldn't explain it to Liu Lishun so directly. He asked Liu Lishun:

"Isn't it a matter of course to pay back debts?"

"If migrants don't have to repay their debts after moving overseas, what will happen to the creditors who lent them the money?"

Liu Lishun was speechless for a moment, because he could not say that it was permissible to default on debts.

That would be immoral and would also cause chaos in the community.

He could only uphold the principles of benevolence and righteousness and say to the emperor:

"Paying back debts is a matter of course."

"But helping refugees is also a matter of course."

"Your Majesty should, with a benevolent heart, reduce their debts."

Zhu Youjian was speechless, because it was indeed he who had brought up the matter.

Otherwise, the debts of the displaced people would never be mentioned by the imperial court.

If you don't mention it, it can be treated as if it doesn't exist. But if you deliberately bring it up, it makes you seem unkind and like you're forcing the refugees to pay their debts.

To avoid this misunderstanding, he immediately said:
"The reason I established the debt company is to restructure the debts of the displaced people so that they don't have to bear the burden of usurious loans."

"You come from a poor family, so you should know that the biggest burden on ordinary people, besides land rent, is heavy debt."

“Those wealthy people with spare money take advantage of the poor when they are in financial difficulty or encounter unexpected events, and use high interest rates to make the poor indebted.”

"Many poor people's lands were used to pay off their debts because of this."

"This is strictly prohibited by the imperial court, but how could it be forbidden among the common people?"

According to the provisions of the Ming Dynasty Code, any private lending of money or pawning of property shall not yield more than three percent interest per month, and even if there are many months, the interest shall not exceed one percent of the principal.

This is the source of Zhu Youjian's regulations that interest rates exceeding 3% per month, 36% per year, or 100% per unit were considered usurious and would not be supported by the imperial court.

However, when enforced by the public, it has never been strictly enforced, and there are many ways to circumvent it.

For example, the loan term "Nine Out, Thirteen Back" appears to have a low interest rate, but in reality, because only nine out of ten yuan is given and interest is deducted in advance, the interest rate rises sharply, turning it into usury.

The imperial court had no way to prohibit such things. The interest rate on paper was different from the actual interest rate.

Liu Lishun, being from a humble background, was certainly aware of this situation.

But he still harbored illusions, and said to the emperor:

“If criminals can be pardoned, I believe Your Majesty should issue a decree to pardon the debts of displaced people.”

Zhu Youjian laughed upon hearing this and said to him:
“The criminals were arrested by the imperial court, so of course I can grant them a pardon on behalf of the imperial court.”

"But the debts of the refugees are not owed to the imperial court. Do you think those creditors will obey the imperial decree?"

"You are a government official, don't be so naive."

“Not everyone will heed my decrees, and besides, such a decree is simply impossible to issue.”

Liu Lishun fell silent. Although he was somewhat idealistic and naive, after serving as a local official for several years, he knew how difficult it was to implement policies.

With his current understanding, it's not hard for him to guess that even if such an order were issued, not many creditors would heed it.

Moreover, given the performance of the court officials at the meeting, they would never agree to forgive the debt.

Even if the emperor wrote an edict, the cabinet would not countersign it, so such an edict would have no effect whatsoever and could not even be issued.

Having abandoned his illusions, he realized that ministers also had selfish motives, and so did rural gentry.

Matters concerning interests cannot be resolved simply by the emperor issuing a decree.
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After making Liu Lishun realize reality, Zhu Youjian advised him:

"Debt companies certainly have disadvantages, but we must also see their advantages."

"Tell me, which is easier to manage: the landlords scattered throughout the countryside, or the thirty debt companies?"

"Is it more convenient for the censor to keep an eye on debtor companies, or on all the landlords who lend money?"

This is obvious, Liu Lishun said:
“There are many landlords in the countryside, so it’s naturally easier to manage a debt company.”

"Your Majesty's meaning..." Having somewhat grasped the emperor's thoughts, Liu Lishun said:
"Does His Majesty mean that keeping an eye on thirty debt companies will make it easier to ban usury?"

Zhu Youjian laughed heartily and nodded, saying:
"exactly!"

"When you draft a debt bill in Congress, you can stipulate that all debts deemed usurious can apply for debt restructuring and be transferred to debt corporations."

"Wouldn't this make it easier to eradicate loan sharking?"

Liu Lishun was delighted to hear this and sincerely admired the emperor.

They actually came up with such a method to ban usury in the private sector.

It's conceivable that once this measure is implemented, those in the private sector who owe large sums of money will be able to apply for debt restructuring and have their interest recalculated.

Under the supervision of science and technology officials and members of parliament, debt companies cannot openly raise interest rates like local gentry, otherwise they would face the risk of having their licenses revoked.

It can be said that the emperor's move was to let the debt companies and the gentry fight each other, thereby reducing the people's debt.

Moreover, debt companies will also get involved because they can gain more profits.

Why does this happen? A thought seemed to flash through Liu Lishun's mind, but he couldn't figure it out.

At this point, Zhu Youjian explained further:

"To eradicate usury, the government must stand on the side of the people."

"This is the ideal situation, but it is very difficult in reality. Because landlords and wealthy families who lend money have more money and resources to make the government favor them."

"Therefore, I have established debt companies that allow officials to hold shares, and these companies are responsible for debt restructuring and for litigating against the landlords and wealthy landowners who lend money."

"Do you think the government will favor either the debtor corporations or the wealthy landlords?"

It is obvious that a government composed of officials will naturally favor debt companies in which they have invested.

The emperor's move was essentially making the debtor companies bear the responsibility of confronting the landlords and wealthy landowners.

In that case, shouldn't the debtor company make some profit from it?

Liu Lishun gained a deeper understanding of the positive significance of debt companies.

But in this way, both the debtor companies and the public benefit, so who suffers?
The flash of inspiration that had just crossed Liu Lishun's mind was now clear:
"It's the creditor!"

The wealthy landlords who lent money were the ones who suffered the most.

"Once they are identified as engaging in usury and forced into debt restructuring, they can forget about receiving interest."

"Even the principal will be discounted, and there's a possibility we won't be able to get it back."

"His Majesty is letting officials prey on the wealthy, not on the homeless."

Suddenly realizing the strangeness of the situation:

Although the debt-collecting company is supposed to collect debts from the public, the ones who actually suffer the most are the wealthy rather than the general public.

People who owe usurious loans can be protected from usury by debt companies.

They are actually the beneficiaries.

This left Liu Lishun bewildered, wondering why things had turned out this way.

If you have any questions, ask the emperor. Liu Lishun asked the question on the spot.

Zhu Youjian thought for a moment, then pointed to the pond in the West Garden and said:

There's a saying: "Big fish eat little fish, little fish eat shrimp."

"If we consider ministers as big fish, wealthy families as small fish, and the common people as shrimp."

"What were the big fish and the little fish eating before the debt company was established?"

They were eating dried shrimp together!

Liu Lishun quickly came to this conclusion.

In the past, government officials and wealthy families often colluded to exploit the common people.

After the emperor established the debt company, things changed. The debt company took over the loans from the big players and then demanded repayment from the ordinary people.

This is the normal order, not the big fish and the small fish teaming up to eat the shrimp.

The emperor distributed the benefits among the ministers and wealthy households.

Once Liu Lishun understood, he no longer opposed the establishment of the debt company.

Instead, he said enthusiastically:
"I believe that debt companies should also have special powers, such as the power to collect debts by force."

“Strict supervision should be exercised over acts of violent debt collection and the pawning of wives and daughters by the public.”

"Such behavior should be classified as illegal lending, just like usury, and included in the scope of debt restructuring."

"If such a thing happens within the scope of business and no inquiry is made, it means that the local debt company is not qualified and should be assessed for approval."

Use debt-financed companies to combat these practices.

Zhu Youjian nodded in approval, believing that this would increase the role of debt companies.

It would be best to concentrate all the criminal activities in the financial sector into debt companies, which would make it easier for the imperial court to supervise them.

He said to Liu Lishun:

"Debt companies should also benefit creditors, making it easier to conduct business."

"While creditors will be monitored by debt companies and prevent them from engaging in illegal lending, they don't have to worry about debtors absconding and losing their principal."

“For debtors who refuse to repay their debts, creditors can also sell the debts and hand them over to a debt collection company for recovery.”

"The parliamentary ethics committee also needs to establish a credit record and cooperate with financial institutions such as debt companies and money exchange banks to improve the credit system."

"All cases of overdue debts and illegal lending should be recorded to facilitate the assessment of the creditworthiness of the parties involved and reduce lending risks."

All of this is aimed at improving the financial order. In a well-ordered system, those who operate legally can obtain higher returns.

Liu Lishun no longer objected to this and agreed to everything.

Furthermore, he proposed a solution that made Zhu Youjian ponder deeply:
"Your Majesty, I believe that taxes owed to the government can also be considered as debts."

"For impoverished families who are unable to pay their debts, the government may reduce or waive them as appropriate."

"However, for those who are able to pay but deliberately delay payment, I believe that the task of collecting outstanding payments should be undertaken by the debtor company."

“If they still refuse to pay, then force them into bankruptcy, have the debtor company take over the assets, and force the defaulters to emigrate overseas.”

This suggestion was something Zhu Youjian hadn't expected.

He previously stipulated that paying taxes and serving in the military are basic obligations of citizens, and that defaulting on taxes would result in the freezing of citizenship.

However, this approach might gain widespread acceptance once the traditional rites and music are reinstated, as many people don't really care about citizenship these days.

The only way to clear up the backlog of debts is to force officials to do it and include it in their performance evaluation.

However, levying taxes has always been regarded as a form of tyranny, and many self-righteous officials are unwilling to do it.

Now, Liu Lishun's proposal shows another possibility:
The government can package up the outstanding debts and give them to debt companies to collect debts from large clients.

They can even have the debtor company audit its taxes. If they discover tax evasion, they can then pursue the debt.

This will be a significant improvement to the Ming Dynasty's tax collection system, greatly reducing tax evasion.

Compared to the government, debt companies operating in the private sector have a clearer understanding of each company's assets and the amount of taxes they should pay.

They have more methods; they can do many things that the government cannot.

Therefore, Zhu Youjian agreed to Liu Lishun's suggestion and allowed him to conduct a pilot program in Shuntian Prefecture.

As long as the taxes transferred to the imperial court remain unchanged, Shuntian Prefecture can outsource the collection of outstanding debts to debt collection companies. (End of Chapter)