Transcript Economics for Democratic Socialism Drexel University Spring Quarter 2009 Economic Drivers of History • We recall, Marx wrote “The history of all hitherto existing society.

Economics for Democratic
Socialism
Drexel University
Spring Quarter 2009
Economic Drivers of History
• We recall, Marx wrote “The history of all hitherto
existing society is the history of class struggles.” He is
saying that class struggle uniquely determines historical
change.
• This may have gone too far. But the role of classes and
class struggles in driving history was neglected before
Marx.
• Conflict of town and country and division of labor are
interconnected with classes. Purely military and
technological changes may also be important.
• We will assume as a hypothesis that ideas, religions and
such are not drivers, but driven by these material
conflicts.
Marx’ Stages
• For Marx, distinct stages of history correspond to
different class structures.
• Classes, then could not exist in the earliest human
societies, since there was no surplus. This Marx called
“primitive communism.”
• After agriculture emerged, a surplus existed, and was
extracted by means of slavery.
– Some modern Marxists question the existence of a
“slave system.”
• After this system broke down, Feudalism emerged, in
which the Aristocracy extracted the surplus by their
ownership of land.
Capitalism
• Within Feudalism, a new class emerged, the
bourgeois (capitalist) class, which was a able to
defeat the aristocracy in the revolutions of 16421789.
• In the capitalist system, any nonhuman means of
production are owned by the capitalist class,
while the working class can subsist only by
selling their labor in a “labor market.”
Why Stages?
• For Marx, the typical example of social change was the
transition from Feudalism to Capitalism.
• These systems differed in qualitative ways.
• Liberated from Feudalism (to capitalism), society
seemed to enter a period of rapid progress.
• This could support an equally optimistic expectation for
the end of capitalism.
• What follows is a scheme of historical stages of my
own devising, broadly in Marx’ tradition.
• Fair warning: I am an amateur historian, at best.
Hunting and Gathering
• The earliest human societies live by hunting and
gathering.
• They are organized as bands and tribes.
• A tribe is just a group of bands or other groups (lineages)
who league together for cooperation in violence -defensive and aggressive.
• There is no surplus, in that people can obtain only
enough food to survive, and produce a very few other
tangible goods.
• There may, however, be a significant amount of leisure.
“Primitive Communism”
• There is also a good deal of sharing -- because
reciprocal sharing improves the chances of surviving.
• This, then, is “primitive communism.”
• It certainly is not an innocent state. Raiding, theft and
conflicts over hunting grounds and sources of water will
be common enough.
• There are no “noble savages.”
• But theft is not sustainable. A group who are routinely
the victims of theft will starve.
Party!
• The emergence of a surplus will usually coincide with crop
production -- agriculture and horticulture. But a few
exceptions exist.
– In the American Pacific Northwest, native fishermen
were able to produce a surplus and evolved a highly
stratified, elaborate society.
• When a group has a slight food surplus and is in little
danger of theft, the natural response is to throw a party.
– “Big man” societies -- in which prestige accrues to the
best farmer because he can throw the best parties -- are
observed at this stage.
A Puzzle
• In the old world, the nutrition of early farmers seems
worse than that of hunter-gatherers.
• Why did people start to farm?
• Ecological disaster?
• But food from agriculture, if not more ample, was more
predictable.
• Perhaps it was the emergence of exploitation that
accounts for the malnutrition of peasants even in the
earliest agricultural societies.
Sustainable Theft
• Once a group produces a surplus, thieves can come
back for more, routinely.
• They will find it useful to dominate, manage and
conserve this resource.
• On the other hand, the productive group may defend
themselves, appointing a group of specialists in
violence for the purpose.
• However, this group will soon be set apart as a
dominant, exploiting class.
• In either case, the group becomes divided between a
class of armed men and a class of producers.
Tributary Society
• This is a “Tributary Society.”
• Surplus takes the form of tribute extracted by
means of violent threat.
– The term probably originates with Samir Amin,
originally an Egyptian Marxist, but who has been
very critical of Marx’ ideas as “Eurocentric.”
– He stresses that tributary societies can take many
forms, and includes feudalism as one instance.
– I will use the term somewhat more narrowly.
From International Socialism
“… the tributary mode involves a “state class”
based on a public institution, with political rights
to extract surplus from a peasantry …. the crucial
distinction between the tributary and feudal
modes lies in the means by which the surplus is
collected from the peasantry. In the former, it is
through payment of taxation to the state; in the
latter, through payment of rent to private
landowners. … a tributary state taxes landowners
in addition to peasants.”
-- posted in 2004
Rural Tributary Societies
• If there are no considerable towns or cities, the
organization may remain tribal.
• Tribute flows from the weaker to the dominant tribe.
• Probable instances can be cited in Africa, and it may be
that northern Europe in early Roman times had this
form.
• Indeed, “tribe” and “tribute” come from the same Latin
root.
• In any case, the creative societies of the Ancient
Mediterranean were urban tributary societies.
The Ancient System 1
•
•
•
Once towns emerge, they become the key
political units.
Larger towns, with denser populations, can field
more effective armies, and so dominate the
villages, extracting surplus in the form of tribute.
Tribute may include slaves but fundamentally
this is not so much a system of exploitation of
slaves by slavemasters as it is one of
exploitation of rural farmers by city people.
The Ancient System 2
•
•
•
Empires exist as hierarchical leagues of cities. The
leisure class are citizens who (principally) live on
tribute.
Cities can also marshal resources for infrastructure
projects.
– This may be a reason why Mesopotamia developed in
this direction very early, as immigration works were
essential.
Hierarchical leagues of cities could be very unstable,
although there are stable cases -- Egypt, Rome.
City-States
• Within an Ancient city, the class that receives
tribute will generally be a minority, comprising
“citizens,” the ritually pure, or Muslims.
• They are the ruling class. Military service is
expected of them.
• Absolutism is more common than
republicanism, but no absolute ruler can exist
without a willing group of armed supporters
who “have skin in the game.”
Feudalism
•
•
•
This system gives way to Feudalism at different times
in different regions. In the Western Roman Empire,
the cities lose their ability to dominate the rural areas,
but the result is that both are defenseless against
“barbarian” invasions, and a true Feudal system
evolves gradually from chaos. Iran and India seem to
have been feudal earlier -- perhaps much earlier. In the
Middle East, it seems that the Classical system
prevailed until the fall of the Ottoman Empire.
Military developments -- the increasing dominance of
cavalry, the invention of the stirrup -- also contribute
to this.
Depopulation due to disease may also contribute.
“Pure” Feudalism
• There are two (main) classes:
– Landlords (aristocracy) who possess land and means
of military defense.
– Peasants
• Peasants consume their own produce
• But must get access to land to produce
• Thus, serve the landlords to get access to land
– Notice that this is not a market system
• Cities are small, mercantile, and pay tribute to
landlords.
Ancient
Feudal
Spain 1
• In Spain, the struggle between the Ancient and
Feudal systems seems to have continued for
about 1000 years.
• Spain was dominated by the Ancient system at
least since 300 BC, first under the influence of
Carthage and then as Roman provinces.
• Spain seems to have been largely feudalized
under the Visigoths after 400.
Spain 2
• The Muslim conquest after 700 returned the Ancient
system, which characterized the Ummayad Caliphate;
but the Ummayad rule (which continued in Spain after it
was supplanted elsewhere) was not able to maintain it
permanently and Spain returned to Feudalism with the
decay of the Ummayad state there.
• The consolidation of a national state began early (1400s)
but the development of capitalism was retarded by
Spain’s New World imperialism.
Town Versus Country
•
•
•
•
In a Feudal system, the landlords in the countryside
dominate the towns and cities.
Extensive market relations exist within the cities from
very early times.
Sometime in the later middle ages in Europe, the
productivity of labor in these urban market systems
begins to increase rapidly, causing the cities themselves
to grow, which feeds back to more productivity growth.
With their new resources, the cities are able to throw off
the domination of the rural landlords.
Bourgeois Revolution
•
•
•
•
The leaders in this liberation of the cities are the
merchants -- the new “capitalist” or “bourgeois” class.
The products are capitalist society, and, later, national
states.
Since land is just another kind of capital in the new
order, in principle the rivalry of town and city is
abolished in capitalism.
(In practice, I think fascism was the last gasp of the rural
domination over the towns -- and of small business over
“big business,” but that goes beyond the story told here).
National States
• The growth of capitalism and that of state power
go hand in hand.
• Capitalist production requires uniform
enforcement of property rights and contracts
over a large territory.
• There has never been a successful capitalism
without a strong state as its partner.
• If you like global capitalism, work for a world
federation!
Dracula
• The Princes Vlad II and III were strongmen in Wallachia
(southern Rumania) who fought to maintain Wallachian
independence from Turkey in the 1400’s.
• Vlad II was known as Dracul, “the Dragon,” and Vlad III
as Dracula, “the little Dragon.”
• Dracula was a particular favorite national hero in
Romania in the Communist period, partly because he
was seen as attempting to suppress feudalism and
establish a national state, a step toward capitalism -- a
progressive step in the 1400’s.
An Important Distinction 1
• In the Ancient and Feudal systems, the exploiting class
were the “ruling class” in a literal sense.
• This cannot quite be true of the bourgeoisie, since they
are not a fighting class.
• In the bourgeois state, soldiers are public employees.
The socialization of war is a key step toward
capitalism!
• Moreover, when capitalists play a political role, either
their business suffers or government does, and usually
both.
An Important Distinction 2
• There are two possibilities
– A strongman, such as Bonaparte
– A parliament, with professional politicians and
“competition for the vote.”
• (Schumpeter preferred leaving government to an
aristocracy, but I suspect he realized that that is
utopian.)
• Parliamentary government seems to work best, so that
authority, too is “socialized” in a step toward
capitalism.
Feedback 1
• What was this feedback
that enabled the cities to
grow so dynamically?
• According to Adam
Smith, the key link is
division of labor.
Adam Smith
Feedback 2
“THE greatest improvement in the productive powers of
labour, and the greater part of the skill, dexterity, and
judgment with which it is anywhere directed, or applied,
seem to have been the effects of the division of labour.
“The division of labour, ... occasions, in every art, a
proportionable increase of the productive powers of labour.
“It is the great multiplication of the productions of all the
different arts, in consequence of the division of labour,
which occasions, in a well-governed society, that universal
opulence which extends itself to the lowest ranks of the
people.”
Division of Labor
• It had been known since Greek antiquity that more
division of labor could lead to improved quality.
• “ … we remember to what a pitch of perfection the
other crafts are brought in great communities,” because
of division of labor, as Xenophon wrote.
• But division of labor cannot have much impact in
agriculture, because people are too far apart. It is a
phenomenon of towns and cities.
• As the techniques of agriculture improve, more and
bigger cities become possible -- so more division of
labor.
Feedback 3
“AS it is the power of exchanging that gives occasion to
the division of labour, so the extent of this division must
always be limited by the extent of that power, or, in other
words, by the extent of the market.”
This leads to a virtuous circle -- bigger markets lead to
more division of labor and so to higher productivity and
thus to bigger markets. Smith then gives many examples
of government interference in markets that limit the
extent of the market and so slow down or stop the
virtuous circle.
(But Smith Despised
Corporations!)
“The directors of [corporations], however, being the
managers rather of other people's money than of their own, it
cannot well be expected that they should watch over it with
the same anxious vigilance with which the partners in a
private copartnery frequently watch over their own. …
Negligence and profusion, therefore, must always prevail,
more or less, in the management of the affairs of such a
company.
“To establish a joint stock company, however, … would
certainly not be reasonable. …”
Linton
• Ralph Linton -- writing in 1936 -- identifies the
advantage of division of labor with growing
knowledge.
• “The shoemaker can have the advantage of iron
tools without learning the smith’s trade, … This
means the only limit to the possible content of a
culture is the combined learning abilities of the
individuals who together compose the society
which bears it.”
Modern Production
• Thus the growth of cities, and of knowledge,
(with printing and improved communication)
set the stage for an explosive growth of
production via increasing division of labor.
• This is modern production:
– Labor productivity is very high and continues to
grow,
– Technologies used are highly complex with division
of labor and “roundabout” methods.
– Thus they also require large investments per person.
Economies of Scale
• Economies of scale are also typical of
modern production.
• Mill saw the connection:
– “The larger the enterprise, the farther the division of
labour may be carried. This is one of the principal
causes of large manufactories.
– “As a general rule, the expenses of a business do not
increase by any means proportionally to the quantity
of business.”
Corporations 1
• Mill continued,
– “Production on a large scale is greatly promoted by …
the formation of joint stock companies. The advantages
of the joint stock principle are numerous and important.
– “But if we look to the other side of the question, we
shall find that individual management has also very
great advantages over joint stock. The chief of these is
the much keener interest of the managers in the success
of the undertaking.
– “... it is a common enough practice to connect their
pecuniary interest with the interest of their employers,
by giving them part of their remuneration in the form of
a percentage on the profits.”
Corporations 2
• Marx saw corporations as a step toward socialism:
• “Thereby: 1) An enormous expansion of the scale
of production and of enterprises, that was
impossible for individual capitals. 2) … It is the
abolition of capital as private property within the
framework of capitalist production itself. 3)
Transformation of the actually functioning
capitalist into a mere manager, administrator of
other people's capital, and of the owner of capital
into a mere owner, a mere money-capitalist.”
Corporations 3
Marx continued,
• “This result of the ultimate development of capitalist
production is a necessary transitional phase towards the
reconversion of capital into the property of producers,
although no longer as the private property of the individual
producers, but rather as the property of associated
producers, as outright social property. On the other hand,
the stock company is a transition toward the conversion of
all functions in the reproduction process which still remain
linked with capitalist property, into mere functions of
associated producers, into social functions.”
Division of Management Labor
• With the growth of knowledge relevant to
management and of large business
organizations, a new category (class?) of
managerial experts emerges.
– Veblen calls these “production engineers.”
– Galbraith’s term is “the technostructure.”
• Unavoidably, they manage collectively, in
groups -- the individual owner-manager is
obsolete.
Managerial Discretion
• By the mid-twentieth century, many economists were
persuaded that corporations do not “maximize profits.”
• Rather, managers have a great deal of discretion.
Shareholders cannot expect more than the rate of return
they could get in smaller businesses, so profit becomes a
lower limit, rather than the sole objective.
• Later in the 20th century, stock options and such are
used to attempt to tie the managers’ interests to those of
the stockholders. (recall Mill!)
• Was this successful? You be the judge.
Conclusion
• Modern production, with division of labor and “capital
intensive” methods, emerges in the cities and enables the
cities to throw off the domination of rural landlords,
under the leadership of the capitalist class.
• Capitalism and nationalism are products of that conflict.
• Division of labor means economies of scale, which in
turn implies very large business organizations.
• Corporations are the result of this process.
• But are they capitalist or socialist bodies?