economy assignment

Econ 1020

Winter 2019

Overview of Economic History:

The Economic Systems Prior to Capitalism

Outline:

· Historical development and description of pre-capitalist economic systems (up to the end of the 16th century):

Description and comparison on the basis of:

1. TECHOLOGY

2. ECONOMIC INSTITUTIONS

3. SOCIAL INSTITUTIONS

4. IDEOLOGY

· Prehistoric communal societies

· Transition to class-divided civilizations:

· Slave society

· Feudalism

· Assessment of pre-capitalistic economic system: the defining characteristics

PREHISTORIC COMMUNAL SOCIETIES

They emerged 100,000 years ago (when the homo sapiens – our current species – appeared). They lasted for about 90 percent of human history.

· TECHNOLOGY: simple stone tools; hunting and fishing, gathering of fruits and vegetables.

· ECONOMIC INSTITUTIONS: isolated extended families (minimal division of labor between men/women and young/old). Strengthening of communal bonds was the driving force of economic interaction (survival was a concern, but it was not the dominant economic drive) => collective nature of economic institutions (non-market societies).

· SOCIAL INSTITUTIONS: collective decision-making, direct democracy (i.e. consensus of the group).

· IDEOLOGY: collectivist thinking; cooperation; high degree of equality; beliefs in myths; the value of tradition => the belief in collective action was the glue that held each society together.

How did a transition to a class-based civilization occur?

· The ideology, social institutions and economic institutions of the early communal economy all held back rapid technological progress => yet, they were sufficient to promote extremely slow technological progress over the tens of thousands of years.

· Development of better tools and agriculture

· Dramatic increase in productivity => people could produce a surplus above their subsistence needs (using jars from newly developed pottery, people could put more food away for winter to prevent starvation in cold climates).

· From collective labor to division of labor => cumulative process (specialization and development of intellectual work => further increase in productivity).

· Higher productivity => increase in population and social & economic stability (from villages to towns to cities).

· Higher productivity => accumulation of goods and wealth => economic and political inequality.

· Surplus => wealth => wars => wars brought prisoners, who were enslaved.

=> Movement to a system in which some people owned slaves and others were slaves (dominant classes VS subordinate classes).

SLAVE SOCIETY

· TECHNOLOGY: bronze and iron tools; agriculture.

· ECONOMIC INSTITUTIONS: slaves work; masters take the product.

· SOCIAL INSTITUTIONS: Class differentiation; masters rule.

· IDEOLOGY: elitist prejudice, naturalization of slavery, gender discrimination, racism.

Constraints and limitations (after hundreds of years):

1. Economic problem: stagnation of productivity;

2. Safety issues: weakening of the army.

· The decline in safety and productivity made slavery less appealing to the elite + revolts of the slaves (3rd and 4th centuries C.E.)

· On many plantations, slaves were given a little more freedom => SERFS

· Eventually, all Western Europe became a set of feudal manors, consisting of lords and serfs (the most powerful and ambitious lords became kings of large territories).

FEUDALISM

· TECHNOLOGY: the level of technology fell in the early feudal period and increased only slowly thereafter => little innovation.

· ECONOMIC INSTITUTIONS: The countryside was dominated by “manors.” A manor was a social and political entity in which the lord of the manor not only was the landlord, but was also the protector, judge, police chief, and administrator. Each manor was mostly self-sufficient (production for own use, not for the market). Trade involved only goods that could not be produced directly (military and luxury goods for the lords). Towns were the center of manufacturing, which took place through a system of “guilds” (professional associations; division between guild masters, journeymen, apprentices; regulation of both work and social life).

· SOCIAL INSTITUTIONS: legal, economic, and political power was held by the lord of the manor; system of mutual obligations and services up and down feudal hierarchy.

· IDEOLOGY: Christian paternalism (society=family; the notion of “just price”; money-lending at interest was a sin; the desire to accumulate wealth was sharply condemned) => religion played a central role during Feudalism.

Assessment of pre-capitalistic economic system: the defining characteristics

Up to the 16th century (up to the end of Feudalism in Western Europe), markets did not play an important role (they always played a subsidiary role to the main processes of production and distribution). Correspondingly, production and distribution were not based on the search for material gain.

· customs, traditions, and religion were at the basis of economic life.

It is only after the 16th century, in the context of a growing role of trade and merchants, that the idea of personal gain started to emerge.

It is only in the 19th century, after the Industrial Revolution, that we have the introduction of a self-regulating market system (= an economy directed by market prices, and nothing but market prices). This transformation is entirely unprecedented in human history.

· Karl Polanyi (1944) in The Great Transformation: The Political and Economic Origins of Our Time uses the terms “EMBEDDED” VS “DISEMBEDDED” economic systems.

· Before the advent of a market system, production and distribution used to be organized according to 3 principles (or some combination of these 3 principles):

1. RECIPROCITY

2. REDISTRIBUTION

3. HOUSEHOLDING

· “TRADITION” and “COMMAND” explain the functioning of the economy before the advent of capitalism => it used to be the society to provide the institutional rules explaining the functioning of the economy (pure economic motives at the basis of agents’ behavior was an exception rather than the rule).

How Did Feudalism Change? THE TRANSITION TO CAPITALISM

The transition occurred in different ways in different places in Europe. The first transition occurred in England, so we focus on England.

· The transformation did not occur in cities. The transformation occurred first in the English countryside: THE ENCLOSURE MOVEMENT [the first enclosure movement (15th-16th century) and the second enclosure movement (17th-18th century)]. After the second enclosure movement, a transformation occurred from subsistence farming to commercial farming => this led to a transition from feudal relations (maintained by tradition and force) to the monetary relations that characterize capitalism.

1