Before the Tuoba chieftains established themselves as rulers in a Chinese-style administration system, the politics of permanent warfare against the northern non-Chinese states of Xia, Beiyan and Beiliang made it necessary to rob and plunder objects the nomad aristocracy needed. This robbing campains for a long time was the base of Northern Wei economy, supplying the ruling class with grain and food, cattle and horses, gold and money, but also with workforce like peasants, craftsmen, officials. Often, peasant households consituted presents and rewards of the political and military rulers for the chieftains (youzhang 酉長; babu dafu 八部大夫) of their tribal alliances. The Tuoba rulers installed special officials (dianshi 典師) to control the conquered farms.
After occupying a considerable part of northern China, the alliance of nomad tribes (buluo 部落) was dissolved and the former warrior aristocracy was encouraged to settle down and to engage in agricultural acitivites. The main reason for this new civil politics were the fact that after more than 200 years of war, the economy of northern China totally languished. Landless people wandered around in the search for food and new employment after escaping war, famine, natural desasters, heavy tax burdens or cruel landowners. The former nomads now settling down and gradually becoming Chinese now needed a supply for their administration, the state urgently looked for higher tax revenues. As a first measure of a new administration system, members of the Tuoba and Non-Tuoba (wuwan 烏丸) aristocracy were installed as governors (zongdang 宗黨) over local territory. After Emperor Tuoba Gui 拓跋珪 (Emperor Daowudi 道武帝) had shifted the capital to Pingcheng 平城 (modern Taiyuan/Shanxi) in 398 and started to make use of the traditional Chinese adminstration rules and customs (like official system, administration structure, state rites, standardizing measures and weights, introducing a state calendar, founding a state academy with Confucian education, forcing the Tuoba people to "knot their hair and wear Chinese hats" shufa jiamao 束髮加帽), first measures were undertaken to set up household registers (huji 戶籍) and to allot parts of land to private peasants in the area around the capital (jingji 京畿). But the most part of agriculturable land in north China was cultivated in the form of state-run agricultural military colonies (tuntian 屯田) or not tilled at all and instead used as pasture land (muchang 牧場). For the next seven decades, the economic system of Northern Wei was a combination of robbing, agrarian colonies, pasturing and normal field cultivation. The aristocracy and large landowners (zongzhu 宗主) were installed as overseers (duhu 督護) and patrons of the peasantry. To escape corvée labour and tax paying, too many peasants sought be employed by the gentry. The number of state-owned private peasant households (bianhu 編戶) was far outweighted by the number of household secretly belonging (thus called yinhu 隱戶) to the household of magnates. Not enough free peasants meant also a low grain production and few regular tax payers. Furthermore, the officialdom of the early Northern Wei period was not educated enough to run an effective government, and too many separate "kingdoms" of large estate owners existed that were quasi independent from the central government.
Under the reign of Xiaowendi 孝文帝 who moved the capital to Luoyang, two officials named Li Anshi 李安世 and Li Chong 李衝 proposed the introduction of the equal-field-system (juntianfa 均田法 or juntianzhi 均田制). Every person, even slaves, were granted a fixed size of land that they had to cultivate lifelong. A certain part was destinated as field for grain (lutian 露田), the rest (sangtian 桑田) for the cultivation of mulberry trees or hemp. Officials were likewise given a certain amount of land that was bound to the office, not to the person. Selling the land was prohibited. It was therefore necessary to set up accurate household and land registers. Except tax in grain, the peasants had to deliver tax in kind (silk, materials) according to their age and gender, and in corvée labour; this tax system was called zudiaofa 租調法. The magnates as administratorial overseers of the population were replaced with officials in three categories (sanzhangzhi 三長制), five families constituting a neighborhood (lin 鄰), five neighborhoods a hamlet (li 里), and five hamlets a commune (dang 黨). The direct positive result of these measures were a larger tax and tribute revenue for the state, a tighter control of the peasant households, a consolidation of the central state power and of the social structures in vertical and horizontal direction, the integration of Tuoba and other Non-Chinese into the Chinese majority, a recovery of the whole economy after centuries of warfare and calamities, and finally an institutional base for the economic system of the Sui and Tang Dynasties.
Besides agriculture, great measures were undertaken to recover old canals and dykes, to revitalize trade and commerce, the production of state-monopoly goods like iron, salt and silk. The capital Luoyang was supplied by three large markets. While silk (juanbo 絹帛) was still a common currency, the three-pence coin (sanzhuqian 三銖錢) was introduced in 495. There was an intensive trade between north and south China, and with the western territories.
But like in earlier and later centuries too, the general tendency of peasants to engage as tenant farmers to escape tax and corvée also prevailed during the later part of the Northern Wei Dynasty. The vicious circle of the heavy tax burden of the free peasants should never be defeatable: free peasants left or sold their soil and became tenant farmers, the rest of the free peasants therefore had to pay even higher taxes, and again people sold their land to magnates. With the rise of Buddhism as state religion, monasteries played an important role as employers of tenant farmers on the large lands that believers had granted the monastery. From 574 on, several state campaigns against Buddhist monasteries occurred - not because of religious motives, but to gain back official land and taxable peasants.
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