by Glenn Rogers
How can this analogy be used to understand capitalism? The idea that the economic system people used 400 years ago or 10,000 years ago was not capitalism because it was not as complex as the capitalism of the 21st century is the same as saying the Model T was not a car because a car is a machine that can do the sorts of things that a 2018 Ford Taurus can do. Saying that since the Model T could not do the things a Taurus can do, it cannot be called a car is just silly. Of course it was a car. Cars today are just more complex than they used to be. And thank God they are. So it is with capitalism. It is more complex today than it was 400 or 10,000 years ago, and we are better off because it is. But fundamentally it is still what it was in ancient times: individuals who own the means of production (even if the means of production is a small herd of goats) engaging in free enterprise in order to make a profit.
To provide a more concrete illustration of what I’m talking about, let me reference James Fulcher, who teaches Sociology at the University of Leicester in England. In his book, Capitalism: A Very Short Introduction, Fulcher refers to Ellen Meiksins Wood (whom I referred to in the introduction) stating that his explanation of the development of capitalism is essentially the same as hers. He then goes on to explain that capitalism “is essentially the investment of money in the expectation of making a profit, and huge profits could be made at some considerable risk by long-distance trading ventures of this kind,” (2).
While technically no one could say that Fulcher’s definition is wrong, it certainly does not conform to the standard definitions of capitalism in economic dictionaries. Technically it is correct to say that there is an expectation of profit in a capitalistic venture. However, to define capitalism simply as intending to make a profit is at best incomplete, which can lead to confusion and misunderstanding. Fulcher further confuses the issue a few pages later when he says, “Capitalists existed before capitalism proper. Since the earliest times merchants have made money by investing in goods that they sold at a profit,” (13). Note that what those merchants did in those “earliest times” fits his own definition of what capitalism is, but he is saying that what they did was not capitalistic because capitalism didn’t exist then. How could they have been capitalists without engaging in capitalism? He’s so determined to advocate standard socialist (Marxist) rhetoric regarding capitalism that his comments do not even make sense. He is self-contradictory, which is unfortunate. It is also unnecessary. Why not just follow the standard definitions and acknowledge that capitalistic free enterprise has been around as long as people have been doing business? That idea, of course, brings us back to the point of our study: a brief history of capitalistic free enterprise.
What We Will See
It is my contention (and I am by no means the first to suggest this) that when one looks at the archeological evidence regarding ancient economies, one finds that after the transition from hunter-gatherer tribal bands to settled village living, societies were, economically speaking, capitalistic in nature, engaging in free enterprise. The right to private property existed in the ancient world, and the right to do what you wished with your property existed alongside it. People sold what they had to sell and bought what they needed to buy in the market based on prices that were perceived (by customers) to be fair. Archeological evidence that this was the case is plentiful. So why do we need to argue it? Because socialists do not want to admit that humans living in social groups have pretty much always chosen to engage in capitalistic free enterprise. It sort of undercuts their argument that capitalism is not the best way for people to live.
Some socialists have an acute dislike for capitalism and very much need to make it something other than what it is. They redefine it as they do so they can demonize it, making it the scourge of the twentieth and twenty-first centuries. Why? Because they decry the ideas of personal freedom, responsibility, and self-sufficiency that go along with being self-determined people. They envision a fairytale society without social class or status, one in which everyone is made artificially equal (or nearly so), so that people throughout society live in the same artificially created social strata whether they have earned a position there or not. In fact, hardcore socialists would argue that living together in a society should not be about earning anything, but about being sure that everyone is given what they need. So the government, they argue, needs to tax wealthy people more heavily than they currently do, taking a great deal of whatever money the wealthy have earned.
During his 2016 presidential campaign, Bernie Sanders said if he were elected, he would push for an 80% tax on the wealthy. Then, with all of that additional money, the government can redistribute that wealth in the form of social programs to make sure that everyone, whether he or she earned it or not, has an equal share (or nearly equal share) of everything. Socialists dislike wealth inequality and are, therefore, big on redistributing the wealth that others have earned. We will discuss this more in later chapters.
It is important to remember that some “socialists” aren’t really socialists at all. They are not advocates of the government takeover of all business and industry. They are not necessarily opposed to capitalism. They are social program advocates, who want to increase the tax rate on the wealthy so the government can fund social programs such as free healthcare, free college tuition, and other safety net kinds of programs for everyone in the country. But would providing such things really be good for people, and would it be fair to require the wealthy to pay for them? These are important questions that we will consider.
Summary
Economic dictionaries (and other sources as well) define capitalism as an economic system in which the means of production are privately held. The owners of the means of production make decisions regarding both production and distribution, pricing their goods or services according to what consumers are willing to pay. Academics, however, schooled in Marxist thought, prefer to redefine the word in a way that allows them to claim that capitalism is a new system and not a very good one. This, however, as we have seen, is problematic. As we begin our survey of economic history in Chapter 2, we shall see that capitalism, as it is normally defined, has been around for a very long time.
Here is the larger question with which we need to be concerned: is the socialist approach to society and economics viable? Is socialism—whether it is actual real socialism or just a handful of expensive social programs—the best way for people to live? That is part of what we will consider after our brief journey through economic history. But as we begin our journey, we need to be clear that the term capitalism, as it is defined by specialists who are simply interested in defining it, means private ownership of the means of production and distribution, where the market determines prices. Having established what the word means, let us begin our historical survey.
Chapter 2
The First Great Social Transition
Humans did not always live in societies as we do now. For many thousands of years human beings lived as nomads in small family or tribal bands following flocks and herds from place to place. These small bands of people were usually comprised of from ten to fifty people. As the animals moved from one place of water and grazing to another, the small tribe of people followed. The men of the group would hunt; the women would gather grains, fruits, and vegetables. Thus, archeologists refer to these people as hunter-gatherers. Their form in interaction was probably egalitarian, that is, everyone in the group had a voice in matters that concerned the group, and shared equally in the group’s resources—which was mostly the food that they gathered or hunted. Their tools and weapons were made of stone, bone, and wood; their clothes were made of animal skins. It was a simple life. They hunted, gathered, and made what they needed. Remarkably, they lived well. There was little disease and sickness among them, and because they enjoyed a protein rich diet (plenty of meat), they were big and strong. Since they were a family group, they had nothing that resembled a social structure. They had no economy per se, though as they interacted with other family bands, especially as
they sought marriage partners for their children, they probably traded goods with each other.
From Hunter-Gatherers to Settled Villagers
Some archeologists estimate that humans may have lived as hunter-gatherers for over one hundred and twenty-five thousand years. Then, perhaps 12,000 years ago (precise dating is difficult), a change occurred. As seasons changed—rainy season to dry season—herds of animals would move from one source of water to another, from one source of grazing to another. As they did, hearty bands of humans would follow, hunting and gathering as they moved along with the animals. The animals followed a circuitous route, visiting the same water holes and grazing fields over and over again, from year to year. Over a period of several years, each tribal band would visit those same places over and over again as well. Since the women were the ones gathering the fruit, vegetables, and grains, they would have noticed that as they returned to a given location the same fruits, vegetables, and grains were available to them. They were smart. They figured out how the process worked, and may have even intentionally scattered (planted) some of the seeds they gathered, so there would be food available the next year. They came to understand the process of what today is known as dry farming.
At some point, we surmise, some of the women spoke to the men in the group, explaining that they knew how to grow food and that it was not necessary to travel all the time. Since travelling was difficult for the older people and the young children in the small band, why not settle in one place, a place where there was adequate water, and grow food to eat. The men would still need to hunt, but there was no need for the entire family to travel all the time. The men could build shelters to live in (houses) and the women would farm—planting and waiting for the rain. Eventually they would figure out irrigation. But for the time being, dry farming was what they understood.
At the same time, some of them (the men perhaps) began to understand that some animals, especially goats and sheep, could be domesticated. If one could develop a herd of goats or sheep, going on a hunt would no longer be necessary. One could settle down in a given location, grow grain, fruits, and vegetables (those that would grow in that area), tend flocks and herds, and not have to travel for days or weeks to hunt meat. Slowly, the idea caught on, and settled village living became a reality.
Granted, this is a very brief overview of a complicated transition that took generations to occur. But it is probably how it happened. And it represents the single most important social transition in the history of humankind.
The Development of Early Societies and Economies
As one small family band settled in the area we now know as ancient Mesopotamia building small houses to live in, other nomadic bands became aware of this new way of living and, quite naturally, looked into it. Perhaps they talked with the people who had established this small village and then discussed it within their own group. Perhaps they decided to continue their nomadic lifestyle for a time while they considered making a change themselves. Perhaps they considered it another season or two. But eventually, other nomadic bands joined that first family in the little village they had established. They built their own small houses nearby, and the little village became a little bigger. A village that began with fifty people grew in a few years to a village of several hundred. Each family group grew some grain and perhaps some vegetables and fruit. They probably had some sheep and goats as well. Depending on how close they were to either one of the two rivers that ran through the area, the Tigris or the Euphrates, some of the men may have become fisherman. Some of the men also continued to go off for days at a time to hunt.
Initially, everyone probably got along. But eventually, because you had several family groups living in close proximity and interacting on a daily basis, challenges developed. When they had been nomadic bands, each family unit made up their own rules, had their own traditions and ways of solving problems. But now that those different family groups were trying to live together in one village and interact with each other, they were going to need some agreed upon rules for how their small society would function. When it became apparent that something needed to be done, a representative from each family, probably the oldest man in each family group, formed a new group—the village elders. They got together to talk things over and reach some consensus regarding rules (social norms) for how they would live in their village. This was likely how the concept of a law code came into being.
As they learned to live together, some of them may have been better at growing grain than others. Some may have been better at maintaining a healthy herd of sheep or goats. Others may have had skill at tanning hides from which to make leather goods—sandals, belts, bags, clothing, and so forth. Some were good at fishing; some learned how to make bricks out of mud to use for building. Those who had lots of grain but not enough goat’s milk would have traded some of their grain for some goat’s milk. The guy who made leather goods would have traded his sandals or belts for fish or grain. The first economic activity was probably a barter system—trading what you had for what you needed.
But what if the guy who made leather goods wanted to trade for fish or grain, but the people who had fish and grain didn’t need additional leather goods? What was the leather man to do? He couldn’t trade his leather for the things he needed. The barter system had limitations.
The thing to notice here is this: each person owned property he could trade for what he needed or wanted, and there was no organization or entity beyond the individual owner who dictated what could be traded for what, or how much the traded items were worth. Those ancient exchanges of goods occurred in a context of what we could call free enterprise.
In time, with the success of the first village, village A, other nomadic groups decided to establish their own village, village B, some distance away. They would have gone through a similar process of establishing a law code for their village and would have utilized a barter system for the exchange of goods. In time, villages C, D, and E were also established. Village A was close to the river, and fish became a major part of its small barter economy. The other villages were too far away from the river for fishing to be part of those village economies. Village C was in an area where there was sufficient grazing for large herds of sheep and goats, but village D was established where grain grew especially well. If village B, C, D, and E wanted fish, they would need to send someone to village A to trade for fish. Suppose the people from village D brought grain, but the fishermen in village A didn’t need grain? You see the problem. Eventually, some form of money that all the villages could agree on and use needed to be adopted so people could buy and sell rather than trade.
Additionally, a merchant class developed—men whose business it was to travel from village to village to buy and sell using the agreed upon medium of exchange. Was there an entity of some sort that regulated the economic activity of these villages? No, there was not.
The Economies of the Ancient World
For a time, a number of scholars believed that the religious establishments of the different villages (or cities once they were large enough to be called cities) regulated the local economies. They claimed that the temple owned and controlled the land and therefore the economy—which would have made them socialistic in nature. However, the information upon which they based their conclusion was incomplete, (Samuel Kramer, The Sumerians: Their History, Culture, and Character, 75). More recent scholarship has revealed that though the local temple owned land and herds and was wealthy and powerful, it did not control the economy. Kramer has noted that:
[E]ven the poor managed to own farms and gardens, houses, and cattle. The more industrious of the artisans and craftsmen sold their handmade products in the free town market, receiving payment either in kind or in “money,” which was normally a disk or ring of silver of standard weight. Traveling merchants carried on a thriving trade from city to city and with surrounding states by land and sea, and not a few of these merchants were probably private individuals rather than temple or palace representativ
es (74).
What is he describing? Sounds an awful lot like free enterprise. And since the people engaging in the free enterprise owned the goods they sold, and sold them with the expectation of making a profit, it was capitalistic free enterprise.
In his book, Ancient Mesopotamia: Portrait of a Dead Civilization, A. Leo Oppenheim refers to another development related to ancient capitalism. He explains that there was “a remarkable degree of economic mobility: poor people expect to become rich; the rich are afraid of becoming poor, both dread interference from the palace administration,” (87).
What does this observation suggest? It suggests that while a local temple could exercise influence on economics, it did not always do so, and the prospect of earning a nice profit was indeed possible. Also, Oppenheim discusses that ancient Mesopotamian economics included the practice of “making capital—staples or silver—a commodity for the use of which interest was charged,” (88). What does this mean? It means that one could borrow money and be charged interest on it. Sounds rather capitalistic, doesn’t it?
On this point Gwendolyn Leick provides some important information. In her book, The Babylonians: An Introduction, she says:
Moneyed individuals would lend silver for a variety of purposes, not just to meet obligations of repayment but also to finance a variety of business ventures … One citizen of Old Babylonian Ur, for instance, called Dumuzi-gamil, began by borrowing 500 g of silver from wealthy merchants with a partner, at the rate of 23.9 percent, for a period of five years. This start-up capital allowed him to engage in a variety of business activities, such as providing bread for the Nanna temple, lending out money himself, as well as acting as an agent to the lending section of the Nanna temple. He had several different partners and contracts with different sectors of the Ur society, the temple, the merchants, and the palace who also depended on him for the provision of bread and possibly meat. We see from this example that the system worked well as an investment of surplus capital by moneyed individuals who did not wish to engage personally in the time-consuming and risky business. By making substantial loans of nearly 30 percent they almost tripled their initial outlay within the five years. For Dumuzi-gamil the different activities he could start up with the advanced money provided him with a good income. He and his colleagues were able to exploit an economic niche created by the institutional practice of subcontracting managerial services, (88).
