fbpx
01 / 05
Centers of Progress, Pt. 12: Hangzhou (Paper Money)

Blog Post | Human Development

Centers of Progress, Pt. 12: Hangzhou (Paper Money)

Thanks to relative peace, far-ranging trade and cultural openness, Hangzhou prospered and produced many accomplishments, including inventions that we still use today.

Today marks the twelfth installment in a series of articles by HumanProgress.org called Centers of Progress. Where does progress happen? The story of civilization is in many ways the story of the city. It is the city that has helped to create and define the modern world. This bi-weekly column will give a short overview of urban centers that were the sites of pivotal advances in culture, economics, politics, technology, etc.

Our twelfth Center of Progress is Hangzhou in 12th century China, during the late Song Dynasty’s so-called premodern “economic revolution” or period of proto-industrialization. With its innovations in printing and manufacturing, it has been said that the “Song came closer to initiating an industrial revolution than any other premodern state.” The Song dynasty, which spanned from 969 to 1276 AD, was a time of dynamism and invention. Through trade and industry, the Song empire became the richest on Earth. The dynastic capital, Hangzhou, was the wealthiest and most populous city in the world. Song-era China became the first country to print paper money, which is far easier to carry in large amounts than metal coins. Hangzhou served as a money-printing center and a hub of innovation and creativity.

During the Song era, the average Chinese person experienced extraordinary growth in their income level as the economy expanded. The economy grew due to new technological and agricultural advances and efficient trade routes that produced a genuinely nationwide market. The era also witnessed a significant increase in international exchange, as Chinese merchants expanded their trade networks as far as East Africa. Growing wealth helped motivate the adoption of paper money, as people found themselves dealing with larger transactions than in the past.

Today, Hangzhou is one of China’s top commercial bases. It is also the southern terminus of the Grand Canal, which is the world’s longest artificial river and a UNESCO World Heritage Site. True to its rich history of innovation, Hangzhou continues to serve as a hub of enterprise. Hangzhou houses the headquarters of various Internet industry enterprises such as e-commerce giant Alibaba and is a growing technology center. Hangzhou is the heart of the “Hangzhou metropolitan area,” China’s fourth-largest metropolitan area by population, and is home to some 20 million people. Hangzhou is also a popular tourist destination within China. Hangzhou maintains many well-preserved cultural sites showcasing the city’s history. It even has a large history-based theme park—”Song Dynasty Town” or Songchen—filled with costumed reenactors portraying residents from the city’s golden age.

The Italian explorer Marco Polo famously described Hangzhou as “the most beautiful and magnificent city in the world” and called it the “City of Heaven” during a visit in the 13th century AD. While that was after the Song dynasty ended, much of the architecture and wealth of the city that Marco Polo observed was nonetheless a legacy of that era. (A statue of Marco Polo stands prominently in a lakeside park in the city, admiring Hangzhou’s beauty to this day). A common Chinese saying echoes Marco Polo’s sentiment: “Above, there is Heaven; below, there are Hangzhou and Suzhou”—the latter being another beautiful city just to Hangzhou’s north.

Hangzhou has been an important city since the 7th century AD when its Grand Canal was first built to connect the urban center to Beijing. Today, the canal remains the main north-south waterway in China. But the city’s golden age began when the Song dynasty made it their capital. The Song era saw the rapid adoption of woodblock printing, a technology that supercharged intellectual life in the Song dynasty. Hangzhou ranked first in China when it came to both volume and quality of woodblock printing. The technique, which consisted of carving text and pictures into wooden blocks, covering them with ink, and pressing the blocks against  paper, provided a way to mass-produce books, documents, and banknotes.

Woodblock printing developed in Buddhist monasteries to reproduce spiritual texts, with examples dating as far back as 200 AD, and the method was well-established by the 9th century AD. However, it was the Song era that first widely adopted woodblock printing for non-religious purposes. In the 11th century AD, the artisan and inventor Bi Sheng (990–1051 AD) devised movable type. The adoption of printing technology dramatically lowered the cost of books and encouraged the spread of literacy. Not only did widespread printing lead to a veritable tidal wave of artistic output such as poetry and dramatic texts, but it also sped up scientific progress—for example, by aiding the dissemination and advancement of pharmacological and medical knowledge.

If you could visit Hangzhou during its golden age, you would enter a gorgeous metropolis bursting with art, commerce, innovation, and a spirit of openness. The crowds would have been formidable; by the end of the Song era in 1276 AD, Hangzhou was home to around 1.75 million residents according to some estimates. That is slightly more than the current population of Phoenix, Arizona, but it represented an unprecedented urban concentration of people. While poor by modern standards, the city’s people were then the richest on Earth. Looking out onto the harbor, you would have seen large multi-sectioned ships with up to four decks and a dozen sails at a time when Europeans still traveled in tiny galleys powered chiefly by the muscle of rowers.

Thanks to advances in dyeing and weaving and textile industry developments, the city’s people would have worn a wide variety of beautiful and luxurious robes. You would not have seen many high-ranking women walking around. Despite the era’s many advances, it was also the beginning of “foot-binding” among China’s elite. That cruel practice consisted of repeatedly breaking the bones in women’s feet, starting in early childhood, to contort feet into an unnatural shape that was considered beautiful but made walking physically painful.

In the marketplace, you would see a food culture emerging that has since come to define Chinese cuisine. During the earlier Tang dynasty (the golden age of our tenth Center of Progress, Chang’an), China’s dominant grains were wheat and millet, and the most common drink was wine. During the Song dynasty, rice and tea became the country’s staple food and beverage and have remained so to this day.

You would have been mesmerized by the city’s elaborate architecture. (China’s traditional upturned roofs originated in the Song dynasty). Hangzhou’s striking temples, many of which still stand today, were a testament to the era’s philosophical and spiritual diversity. As writer Eric Weiner put it, “The blending of Buddhist and Confucian thought yielded a remarkably tolerant atmosphere.” Different thought-systems coexisted and thrived. Conversation rose to an art form, and as the city became wealthier, art of all kinds became an important part of everyday life. While in previous eras, poetry was limited to religious subjects, in the Song era, poetry expanded to deal with every topic imaginable, and poetry competitions were frequent.

Hangzhou was the site of great creativity. In the 11th century AD, the polymath Shen Kuo (1031–1095 AD) invented the magnetic compass. He also drew the world’s first topographical map and was the first person to record the process of sedimentation. Shen’s surviving notebooks have garnered comparisons to Leonardo da Vinci’s for their breadth. Shen’s work spanned topics such as mathematics, astronomy, meteorology, geology, zoology, botany, pharmacology, agronomy, archeology, ethnography, cartography, diplomacy, hydraulic engineering, and finance. Shen was also a prolific poet.

Another intellectual of the Song era was Su Tung-Po (1037–1101 AD). He was once a governor of Hangzhou but is better known for his art, work as an engineer, and insightful poetry. Tung-Po’s poetry reveals a self-effacingly unflattering view of government officials:

Families when a child is born
Hope it will turn out intelligent.
I … [o]nly hope that the baby will prove
Ignorant and stupid.
Then he’ll be happy all his days
And grow into a cabinet minister.

Given that many of the city’s advances came from the private sector, Tung-Po’s attitude was understandable. Even paper money was arguably a private sector invention. As early as the Tang dynasty (618–907 CE), the impracticality of transporting strings of heavy coins inspired Silk Road merchants to use paper promissory notes instead to make purchases. (Chinese coins had square holes in the middle to allow for stringing). Private agents originally produced those notes. At the beginning of the Song dynasty, the government recognized the value of that innovation and licensed deposit shops where people could exchange coins for such promissory notes, thus somewhat standardizing the system. Then, in the 12th century, the government gave still greater recognition to the concept of paper money by issuing the first official paper currency, called Jiaozi. Those banknotes often featured intricate illustrations of commerce.

During the golden age of Hangzhou’s “economic revolution,” the Song leaders managed to largely avoid international conflict by defusing tensions with trade agreements and tributary offers. Thus, Hangzhou was mostly at peace during its peak years, leaving its residents free to engage in enterprises that further enriched the city. “Between … 960 and … 1127 [AD], China passed through a phase of economic growth that was unprecedented in earlier Chinese history, perhaps in world history up to this time. It depended on a combination of commercialization, urbanization, and industrialization that has led some authorities to compare this period in Chinese history with the development of early modern Europe six centuries later,” according to the American historian Philip D. Curtin.

Factories situated in Hangzhou and the other major Song-era cities of Chengdu, Huizhou, and Anqi printed paper money with a uniform design using woodblocks and six different ink colors. Each city used multiple banknote seal stamps and different fiber mixes in the paper currency they produced to make counterfeiting difficult. In 1175 AD, as many as a thousand employees may have worked in Hangzhou’s paper money factory each day. The earliest money notes expired after just three years, and their use was limited to certain regions of the Song empire. Then, in 1265 AD, Hangzhou’s factories printed the first truly national currency. That currency exhibited a unified design, was accepted across the empire, and its value was backed by silver or gold. The paper money notes were available in various denominations. Unfortunately, that national currency was only used for nine years before a Mongol invasion ended the Song dynasty.

The concept of paper currency proved more lasting than the Song dynasty that created it. The subsequent Mongol Yuan dynasty issued their own paper currency, known as the Chao. However, the Mongols did not tie their currency’s value to anything and printed more and more banknotes until runaway inflation degraded the currency’s worth. Paper money can be susceptible to hyperinflation without sound monetary policy. Paper currency has nonetheless proved to be a lasting and practical invention that is now used worldwide.

For being a hothouse of invention and creativity and the site of an early economic revolution that gave the world paper money, 12th century Hangzhou is deservedly our twelfth Center of Progress. Bolstered by printing technology and paper currency’s efficiency, the Song era saw a steady stream of technological breakthroughs. Those included the compass, the first mechanical clocks, and the invention of forensic science. The economic and technological advancements of the Song era translated into improving living conditions for the average person. By practically every measure of human wellbeing, ranging from sanitation to literacy to average income, China was superior to Europe in the twelfth century. Thanks to relative peace, far-ranging trade, and cultural openness, Hangzhou prospered and produced many accomplishments, including inventions that we still use today.

Our World in Data | Financial Market Development

Mobile Money Accounts Are Surging Globally

“Mobile phones and the Internet have enabled the growth of mobile money accounts in regions with limited banking infrastructure. These accounts provide simple financial services like deposits, transfers, and payments to hundreds of millions of people.

As this chart shows, the number of active mobile money accounts globally has grown from 13 million in 2010 to more than 640 million in 2023. This is based on data published by the GSM Association.

While the adoption of mobile banking was almost exclusive to Sub-Saharan Africa in the early 2010s, Asian countries have seen significant growth in recent years.”

From Our World in Data.

Blog Post | Financial Market Development

The Democratization of Investment | Podcast Highlights

Chelsea Follett interviews Jennifer Schulp about how technology and regulation are shaping the future of investment.

Listen to the podcast or read the full transcript here.

Tell me about some hopeful trends or progress we are seeing in the financial industry.

One of the most hopeful trends in the financial industry is broader access to financial investment. Traditionally, investment in the stock market has been limited to the wealthy. Investing in the stock market is really important because, over the past decades, the S&P 500 has returned approximately 8 percent per year, which is way more than other non-equity investments.

Financial access has improved tremendously over the last 50 years. In the mid-70s, to make a stock trade, you had to call your broker on the phone and tell them what you wanted to trade, and they would charge you something like $50. So, you didn’t want to place a trade unless you were placing a large trade because otherwise, the fee would overwhelm the trade. And you didn’t want to trade very often. All of it made it very difficult for regular people to invest in the stock market. Over the course of decades, those fees came down as there was additional competition brought into the brokerage space.

In the 1990s, we saw the rise of internet trading, which allowed you to place trades on your own. In 2015, Robinhood started offering no-commission trading on a phone app, which allows people to trade regularly without worrying about fees eating into their profits or adding to their losses. People can now take some money from each paycheck and put it in the stock market. That’s been huge. The entire brokerage industry is now moving towards phone access for easy, cheap trading, and that’s made a huge difference in the number and type of people accessing investment in the stock market.

In 2020, during the pandemic, we saw a massive rise in retail trading that many wrote off to people being bored while they were stuck in their homes. However, a lot of those investors have remained in the market, so what might have started as a pandemic-induced interest in the stock market has become part of a long-term trend towards additional retail trading that has brought in more racial minorities, more low-income people, and more young people.

Easy and cheap trading has also allowed people to experiment with the stock market and learn by doing. There was a study that came out not too long ago by FINRA and NORC at the University of Chicago that looked at the investors who opened accounts in 2020. And they found that those who stayed in the market showed an increase in their financial literacy. Having this access helped them allocate their capital better. So, we have more people invested in the larger economy, and they are getting smarter about it. The benefits will compound over time.

What are some of those potential benefits?

Certainly better personal financial outcomes. Of course, some people are going to make poor decisions. You can’t say, “Because you put money in the market, you’ll be better off.” But for people looking for long-term investment options, the stock market is the greatest wealth generator we’ve ever seen.

I think this could also drive economic growth for a couple of reasons. One, investment gives people a stake in society and the economy, and that itself can drive growth. Two, having retail investors put money that might otherwise be under the mattress or in a low-interest savings account into businesses allows those businesses to flourish.

Are there any benefits for those who are trying to start businesses?

That brings up a new set of questions. What we’ve been talking about so far has been retail investment in public equities markets. But the stock market doesn’t generally provide startup capital. You have to be a mature company to want to bring an initial public offering that gets you listed on the stock exchange. Private market investing is where startup investing happens. And in the United States, far more money is raised in private markets than in public markets. The average person is not allowed to partake in private investment in the United States, as well as in most economies across the world. In the US, you need to be what’s known as an accredited investor, which essentially means you make more than $200,000 a year or you have a net worth of over a million dollars.

This is a very arbitrary standard. You could win the lottery tomorrow and suddenly become an accredited investor, and that doesn’t make you any smarter at investing than you were the day before. It doesn’t make you any more of a capable investor than someone who, say, studied startup investing in their MBA program but isn’t yet making enough money to be allowed to invest themselves. And all of this is a problem because it means the government is standing in the investor’s shoes and making decisions for them. Are they smart enough? Are they rich enough? Is this a good idea for them?

Let’s talk about entrepreneurs, as you asked. People trying to start businesses tend to turn to their community. They tend to raise money from the people that they know best. But if you are a minority or live in a rural or low-income area, you likely don’t know many people who meet that accredited investor standard. You’re already at a disadvantage in raising money and getting your business off the ground. That hurts entrepreneurs in less wealthy communities, the economy as a whole, and potential investors who don’t have the opportunity to share in the growth of that business.

The house recently passed three bills looking to reform the accredited investor definition; two have codified an SEC modification to the rule allowing people who have passed certain securities tests, such as brokers or investment advisors, to qualify as accredited investors, even if they’re not wealthy enough. The third bill is a bit broader; it opens up the testing concept to allow, if passed by the Senate and signed by the President, anyone who passes a test to be able to invest as an accredited investor. There will be costs associated with the testing, and it doesn’t get at the underlying paternalism, but it is a step in the right direction.

Could you talk about ESG?

ESG is actually two distinct concepts, and it’s important to identify which one we’re talking about. It can be broken down into a dichotomy that I’ve borrowed, which is value versus values investing.

“Value investing” in the form of ESG just refers to using environmental, social, or governance factors to analyze whether a company faces risks that might affect its financial performance. Where ESG sounds a little bit different is when we think about it as “values investing.” That kind of ESG is about sacrificing financial return to reach a certain outcome with your investment, like lowering carbon emissions. Of course, investors should be free to invest their money as they see fit. If they want to invest in saving the whales, they should have that opportunity. But it gets trickier when a company or asset management firm makes those decisions about what to do with their investors’ money without being upfront with them. That’s a question of disclosure and whether or not the funds are being clear with investors.

Government mandates are the key place to focus on here because, ultimately, the market should decide whether investing in ESG is the right way to go. Europe has decided, writ large, that the way to tackle climate change is to centrally plan how money will flow through the financial system to choke off funds for non-green investment. Supporting that is a host of European directives on sustainable finance that include a lot of disclosure by companies about how they, too, will meet net-zero goals. Europe has what we in the securities industry refer to as a “double materiality standard,” where European companies are not only supposed to disclose information that might impact the company’s financial performance but also how their company impacts society and the environment. All of this comes with pretty heavy costs.

The United States is now considering how far to follow Europe down that line. The Securities and Exchange Commission (SEC) has proposed a sweeping climate risk disclosure framework. It’s different from the European framework in that the SEC at least recognizes that they don’t get double materiality; the SEC is only allowed to require companies to disclose information that investors might find useful in deciding whether to invest in the company. However, the SEC’s climate risk disclosure rule goes well beyond that. It would require all US public companies to disclose an awful lot of information about climate risk, including scope one, scope two, and, for many companies, scope three, greenhouse gas emissions. What’s important here is that this type of disclosure is not a small undertaking. It’s going to be a massive drag on public companies.

You also oppose government rules that would restrict voluntary ESG-related disclosures. Can you tell me about that?

Sure. There’s been some legislation introduced, some of it passed, from state-level Republican legislatures that prohibits the use of ESG in investment. But this broad prohibition is also not the right answer. In fact, it is itself values-based and seeks to impose an ideology onto investing.

In addition, there are real costs to blanket prohibitions of ESG. One is that ESG as value investing can sometimes yield better returns. Pensions in some states that have introduced legislation to prohibit the consideration of ESG factors have released analyses showing that over the course of 10 years, the pensions might be losing billions of dollars in returns by having their investment pool artificially limited.

Another example is Texas, which prohibits localities from doing business with financial firms that are, quote, “boycotting the fossil fuel industry.” A study done not too long ago showed that the cost of municipal borrowing has gone up in Texas because many firms exited the market, meaning taxpayers in Texas are now paying more for municipal building projects. We shouldn’t forget that narrowing the scope of investment opportunities also narrows the opportunities for growth.

Could you speak about the potential impact of AI on investment and the financial industry?

Many people don’t understand how much AI is already part of the investment industry. For example, AI is already involved with investment research, predicting stock value, and portfolio management. That’s all going on behind the scenes.

I think that there’s real potential with respect to financial advice. AI could make investment advice as accessible as trading on your phone is today. For a long time, we’ve had what are known as robo-advisors, which are essentially chatbots with a narrow tree of advice based on a set of questions. More sophisticated large language models could give individualized investment advice that considers all sorts of circumstances at a very low cost. In the future, you may be able to go on your computer or phone and tell the LLM, here’s what my investments look like; what should I do next? That’s powerful stuff, assuming that the regulators allow something like that to happen.

The Human Progress Podcast | Ep. 50

Jennifer Schulp: The Democratization of Investment

Jennifer Schulp, the director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives, joins Chelsea Follett to discuss how technology and regulation are shaping the future of investment.

Blog Post | Science & Technology

AI Is a Great Equalizer That Will Change the World

A positive revolution from AI is already unfolding in the global East and South.

Summary: Concerns over potential negative impacts of AI have dominated headlines, particularly regarding its threat to employment. However, a closer examination reveals AI’s immense potential to revolutionize equal and high quality access to necessities such as education and healthcare, particularly in regions with limited access to resources. From India’s agricultural advancements to Kenya’s educational support, AI initiatives are already transforming lives and addressing societal needs.


The latest technology panic is over artificial intelligence (AI). The media is focused on the negatives of AI, making many assumptions about how AI will doom us all. One concern is that AI tools will replace workers and cause mass unemployment. This is likely overblown—although some jobs will be lost to AI, if history is any guide, new jobs will be created. Furthermore, AI’s ability to replace skilled labor is also one of its greatest potential benefits.

Think of all the regions of the world where children lack access to education, where schoolteachers are scarce and opportunities for adult learning are scant.

Think of the preventable diseases that are untreated due to a lack of information, the dearth of health care providers, and how many lives could be improved and saved by overcoming these challenges.

In many ways, AI will be a revolutionary equalizer for poorer countries where education and health care have historically faced many challenges. In fact, a positive revolution from AI is already unfolding in the global East and South.

Improving Equality through Education and Health Care

In India, agricultural technology startup Saagu Baagu is already improving lives. This initiative allows farmers to increase crop yield through AI-based solutions. A chatbot provides farmers with the information they need to farm more effectively (e.g., through mapping the maturity stages of their crops and testing soil so that AI can make recommendations on which fertilizers to use depending on the type of soil). Saagu Baagu has been successful in the trial region and is now being expanded. This AI initiative is likely to revolutionize agriculture globally.

Combining large language models with speech-recognition software is helping Indian farmers in other ways. For example, Indian global impact initiative Karya is working on helping rural Indians, who speak many different languages, to overcome language barriers. Karya is collecting data on tuberculosis, which is a mostly curable and preventable disease that kills roughly 200,000 Indians every year. By collecting voice recordings of 10 different dialects of Kannada, an AI speech model is being trained to communicate with local people. Tuberculosis carries much stigma in India, so people are often reluctant to ask for help. AI will allow Indians to reduce the spread of the disease and give them access to reliable information.

In Kenya, where students are leading in AI use, the technology is aiding the spread of information by allowing pupils to ask a chatbot questions about their homework.

Throughout the world, there are many challenges pertaining to health care, including increasing costs and staff shortages. As developed economies now have rapidly growing elderly populations and shrinking workforces, the problem is set to worsen. In Japan, AI is helping with the aging population issue, where a shortage of care workers is remedied by using robots to patrol care homes to monitor patients and alert care workers when something is wrong. These bots use AI to detect abnormalities, assist in infection countermeasures by disinfecting commonly touched places, provide conversation, and carry people from wheelchairs to beds and bathing areas, which means less physical exertion and fewer injuries for staff members.

In Brazil, researchers used AI models capable of predicting HER2 subtype breast cancer in imaging scans of 311 women and the patients’ response to treatment. In addition, AI can also help make health resource allocations more efficient and support tasks such as preparing for public health crises, such as pandemics. At the individual level, the use of this technology in wearables, such as smartwatches, can encourage patient adherence to treatments, help prevent illnesses, and collect data more frequently.

Biometric data gathered from wearable devices could also be a game-changer. This technology can detect cancers early, monitor infectious diseases and general health issues, and give patients more agency over their health where access to health care is limited or expensive.

Education and health care in the West could also benefit from AI. In the United States, text synthesis machines could help to address the lack of teachers in K–12 education and the inaccessibility of health care for low-income people.

Predicting the Future

AI is already playing a role in helping humanity tackle natural disasters (e.g., by predicting how many earthquake aftershocks will strike and their strength). These models, which have been trained on large data sets of seismic events, have been found to estimate the number of aftershocks better than conventional (non-AI) models do.

Forecasting models can also help to predict other natural disasters like severe storms, floods, hurricanes, and wildfires. Machine learning uses algorithms to reduce the time required to make forecasts and increase model accuracy, which again is superior to the non-AI models that are used for this purpose. These improvements could have a massive impact on people in poor countries, who currently lack access to reliable forecasts and tend to be employed in agriculture, which is highly dependent on the weather.

A Case for Optimism

Much of the fear regarding AI in the West concerns the rapid speed at which it is being implemented, but for many countries, this speed is a boon.

Take the mobile phone. In 2000, only 4 percent of people in developing countries had access to mobile phones. By 2015, 94 percent of the population had such access, including in sub-Saharan Africa.

The benefits were enormous, as billions gained access to online banking, educational opportunities, and more reliable communication. One study found that almost 1 in 10 Kenyan families living in extreme poverty were able to lift their incomes above the poverty line by using the banking app M-Pesa. In rural Peru, household consumption rose by 11 percent with access to phones, while extreme poverty fell 5.4 percent. Some 24 percent of people in developing countries now use the mobile internet for educational purposes, compared with only 12 percent in the richest countries. In lower-income countries, access to mobile phones and apps is life-changing.

AI, which only requires access to a mobile phone to use, is likely to spread even faster in the countries that need the technology the most.

This is what we should be talking about: not a technology panic but a technology revolution for greater equality in well-being.