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.
Chelsea Follett —
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.
Generational Progress on Income Growth Continues in US
“Whether each generation of Americans continues to economically surpass the previous one has recently been called into question. We construct a posttax, posttransfer income measure from 1963 to 2023 based on the Current Population Survey Annual Social and Economic Supplement that allows us to consistently compare the economic well-being of five generations of Americans at ages 36–40. We find that Millennials had a real median household income that was 20% higher than that of the previous generation, a slowdown from the growth rate of the Silent Generation (36%) and Baby Boomers (26%), but similar to that of Generation X (16%). The slowdown for younger generations largely resulted from stalled growth in work hours among women. Progress for Millennials younger than 30 has also remained robust, though largely due to greater reliance on their parents. Additionally, lifetime income gains for younger generations far outweigh their higher educational costs.”
Are Americans Getting Richer? New Data Might Surprise You
Workers have proven resilient over the past decade, despite inflation and valid affordability fears.
Washington Post Editorial Board —
Summary: We introduce the American Abundance Index, which measures living standards by how many hours Americans must work to afford a standard basket of goods, rather than by prices or wages alone. The index uses time prices to show that for most US workers, purchasing power has generally risen over the last two decades, even amid inflation and public pessimism.
The resilience of the American worker is one of the most underreported stories of the 2020s. From red tape to import taxes, successive governments have erected barriers to success. Yet America’s workers have persevered and figured out ways to prosper.
A new American Abundance Index illustrates this. The project from Human Progress, an arm of the Cato Institute, reveals the steady rise of the average worker’s purchasing power. The premise of the index is simple: how many hours do you need to work, compared to the month or year before, to be able to afford the “basket of goods,” which is a standard set of household items and services that comprise the Consumer Price Index used to calculate inflation.
The “time price” is how many hours of work it takes to purchase the basket of goods. The “abundance” is how much of the basket one hour of work can buy. The story told by the index is a very good one: since recordkeeping began, “abundance” for average private sector workers comes out to a net increase of 13.8 percent.
It increased the past year, too. The index shows the average private sector worker saw prices rise by 2.7 percent from December 2024 to December 2025, while their hourly wages grew by 3.8 percent. This means workers could work 1 percent less to buy the same basket of goods. Put differently, workers could afford 1 percent more stuff.
The reason for this is that earnings have continued to outpace inflation. So long as wages increase faster than inflation, the worker gets ahead. And it’s not just desk jobs that have enabled workers to purchase the same amount of goods and services for fewer hours worked. The gain for traditional “blue collar workers” is even higher: a historical net increase of 18.4 percent since 2006.
Despite workers significantly increasing their purchasing power over the past two decades, the past five years have taken a toll. The self-inflicted pain of printing vast sums of money during the pandemic sent the annualized inflation rate to over 9 percent in 2022, far outstripping raises. While inflation is now mostly under control, it has taken time for the gap between wages and inflation to settle, and workers are only now just catching up after their losses during those inflation-heavy years.
Americans continue to rank affordability as a top concern and do not believe the government is doing enough to address the cost of living. These frustrations are understandable. Prices are still rising while tariffs and uncertainty strangle businesses and push consumer confidence to a 12-year low. America’s growth and prosperity story has always been one of fits and starts, and workers are right to demand that government gets out of their way. But the new data make clear that 21st century Americans can still be content about how far they’ve come and optimistic about how far they’ve yet to go.
This article was originally published in the Washington Post on 2/6/2026.
American living standards are best measured in time.
Human Progress Team —
We are excited to share a new tool we’ve been building at Human Progress: The American Abundance Index—an interactive dashboard that tracks US living standards while adjusting for both inflation and rising incomes.
The idea is straightforward: how many hours do you need to work to afford the same basket of goods and services? Using Bureau of Labor Statistics data, the American Abundance Index converts price and wage growth into “time prices”—the amount of work time required to buy the Consumer Price Index (CPI) basket of goods and services—and “abundance,” which is the inverse: how much of that basket one hour of work can buy. When time prices fall, abundance rises, and each hour of work goes further. That’s the measure of affordability that actually matters.
Conceptually, this work builds off of Superabundance, a book by our editor, Marian Tupy, and his coauthor and Human Progress board member, Gale Pooley. Their core argument—that abundance is best measured in time—forms the foundation of the project. The index itself was built by our Quantitative Research Associate, Jackson Vann.
Users can select multiple worker categories, compare short- and long-run trends, and even see wage growth modeled to reflect real career progression rather than freezing workers in place. All the calculations are transparent and replicable, with the full dataset and code available on GitHub.
So what does the index actually say about American standards of living?
Over the past 12 months, inflation rose 2.68 percent while hourly earnings for the average private-sector worker grew 3.76 percent. As a result, the CPI basket became 1.05 percent more abundant. Since 2006, it has become nearly 14 percent more abundant—roughly equivalent to adding an hour of purchasing power to the average workday.
Why Your Groceries Are Cheaper than Kevin McCallister’s
Since 1990, grocery abundance has increased by 43.2 percent and pizza abundance by 285 percent for blue-collar workers. If you were upskilling, it was 186 percent for groceries and 610 percent for pizzas.
Gale L. Pooley —
Summary: A famous grocery run in Home Alone appears to illustrate how much nominal prices have risen since the film came out in 1990. But a look at sticker prices alone misses the bigger picture. When costs are measured against what people earn, everyday food looks far more affordable than it once did. Thanks to rising nominal wages and ongoing innovation, modern households enjoy far greater abundance, even when nominal prices appear higher at first glance.
In the 1990 movie Home Alone, eight-year-old Kevin McCallister went grocery shopping. He bought a half gallon of milk, a half gallon of orange juice, a TV dinner, bread, frozen mac and cheese, laundry detergent, cling wrap, toilet paper, a pack of army men, and dryer sheets. His bill came to $19.83.
Professor Christopher Clarke at Washington State University does an annual price analysis of Kevin McCallister’s shopping basket and estimates that today’s price for those items would be around 114.5 percent higher ($42.54) than was the case in 1990. But, as my readers know quite well, things can become more expensive and more affordable at the same time. How is that possible? It’s possible because wages typically increase faster than prices. In the past 35 years, blue-collar hourly wages have increased by 207.7 percent, from $10.32 per hour in 1990 to $31.76 today.
Kevin’s basket in 1990, in time prices, would have cost 1.92 hours compared to 1.34 hours today. The time price of Kevin’s basket has fallen by 30.2 percent. For the time it took to earn the money to buy the basket of goods in 1990, you get 1.432 baskets today. Grocery abundance has increased by 43.2 percent.
If you got your first job in 1990 as an entry-level worker and have been upskilling for the past 35 years and are now an average worker, your hourly wage rate increased 511.3 percent: from $6.03 an hour in 1990 to $36.86 an hour today. Your grocery basket time price fell by 65 percent, giving you 2.86 baskets today. Your grocery abundance has increased by 186 percent.
In the movie, the McCallister family also orders 10 pizzas, and the bill comes to $122.50 (plus tip). That would put the time price for 1990s blue-collar workers at 11.87 hours, or about one hour and 11 minutes per pizza.
Professor Clarke did a price check on how much 10 classic cheese and pepperoni pizzas cost at a Little Caesars pizzeria near the McCallister’s home today—it comes to only $98.09 (plus tip). The nominal price has actually shrunk! That would put today’s time price at 3.08 hours for the 10 pizzas, or about 18.5 minutes per pizza. The time price has fallen by 74 percent. That means that for the time it took to earn the money to buy one pizza in 1990 you get 3.85 pizzas today. Pizza abundance has increased by 285 percent. If you are an upskilled worker, your pizza time price fell by 85.9 percent, giving you 7.1 pizzas today for the time price of 1 in 1990, thus increasing your abundance by 610 percent.
Hopefully you didn’t forget to count the kids before taking off on Christmas vacation this year! And remember, life can become more abundant every day if people are free to innovate.
Find more of Gale’s work at his Substack, Gale Winds.
