THIS IS WHAT YOU GET
FROM FEUDALISM TO CAPITALISM
As human societies developed into chiefdoms and states, those that managed to overcome the problems of large numbers of people living together developed away from egalitarian government and reciprocal economics toward centralised government and redistributive economics.
FALSE BELIEFS VERSUS REALITY
At this point, it might be worth going over some points that can be learned from this walk through history. Firstly, we can see that the standard theory regarding the origins of money is false. The reasons for this error can perhaps be explained by recognising that people often take the circumstances they grew up in for normalcy. Aristotle, for example, considered the State to be the natural way of life for humans. But then, the only societies the great philosopher knew of were Greek societies of the 4th century b.c. He didn't know about bands or tribes, so his assumption that highly centralised, class-based societies were normal is understandable.
In a somewhat similar manner, economists who have not known anything other than capitalism, socialism and commodity or bank-debt money, have wondered how life might have been organised prior to the invention of money and concluded that it must have been the same market transactions only without the convenience of money to 'oil the wheels of trade'. From this perspective, it would seem as though the predominant economic activity prior to credit or coinage was barter.
In actual fact, our ancestors did not engage in barter, or rather they didn't rely on it as the normal economic activity. Money instead evolved out of credit. Our ancestors lived in small communities where everyone knew everyone else, and where gift exchanges were made with the caveat that such generosity would be reciprocated at a later date, along with peace offerings to appease anyone who had been wronged. Over time, various rules and legislations were established in order to quantify obligations and calculate more precisely when debts were repaid, wronged parties compensated, etc. While it's convenient to have a physical currency, the true nature of money is still best thought of as those rules and legislations that underly our networks of obligation.
David Graeber has argued that economists want us to believe that barter came before money, because if that is so then it justifies the argument that economics is "itself a field of human inquiry with its own principles and laws- that is, as distinct from, say, ethics or politics". Once that is accepted, it then follows that property, markets and money existed prior to political institutions and that there ought to be a separation between markets and the State, with the former restricted to enforcing property rights.
In reality, markets, money and the State evolved together, as societies either failed to resolve their problems and broke apart into smaller tribes or bands, or succeeded and grew into larger chiefdoms or states with economic specialisation, class-based hierarchies and ideologies justifying tribute and redistribution or outright kleptocracy. After all, as Mark Blythe has pointed out, all the component pieces of markets, including the commodification of labour ('employment'), the commodification of natural capital (turning land and natural resources into 'private property') and the commodification of obligations (quantifying and enforcing payment of debts) "are all deeply political projects that involve courts, regulation, enforcement, bureaucracy, and all the rest".
FROM FEUDALISM TO CAPITALISM
With all that in mind let's move on from chiefdoms to the modern world. As we saw previously, chiefdoms are characterised by their having a recognised authority figure-the chief-who makes most of the important decisions and very likely enjoys disproportionate wealth. Also, the greater food-producing capability and economic specialisation of chiefdoms meant that , for the first time, warring groups had a use for their vanquished foe. They could be used in slavery. Those master/slave chiefdoms that developed effective ideologies justifying inequality had a survival advantage over those that did not.
We can see, then, how feudalism came about. This was a system with an essentially agrarian foundation, held together by a system of mutual obligations and services within a vertically integrated society. In other words, people were born into their social, economic, and political states and the ideology of the time- the 'divine right of kings' and all that- legitimised this as the 'natural' state of being.
In some ways the feudal system had features in common with the economic systems that followed. In particular, they have all retained, in one way or another, a society generally divided up into classes of those that produce and those who gain from that production. Those don't necessarily have to be inherited positions in any legal sense, but they often do result from the structural causes of a society prone to kleptocracy, and with an ideology justifying more extreme forms of inequality than would naturally arise. Consider, for example, the libertarian belief in the 'free market', which is often used to justify grotesque executive rewards.
But there are also differences between feudalism and what followed. Most especially, in feudalism the seller generally produced the product others were buying, as described by the equation C-M-C. In other words, you have a commodity, you then sell it, and you then invest that money in the production of more commodities that you sell for more money and so on.
However, over the 13th century improvements to transport in the form of the four-wheeled wagon meant that networks of commerce between more distant markets could be established, and this opened up opportunities for a new kind of middle-man. this middle-man was a non-producing merchant who would buy producers' stock at a discount rate and then sell it for profit in distant markets. This kind of market player operated under the equation M-C-M1. In other words, they began with money, invested in commodities and sold them for more money.
DRIVES AND SYSTEMIC RISK
The merchants opened up the way for the hierarchical systems we are familiar with today, including such things as finding oneself in a position where one is 'employed', often producing reward for others much more than oneself and loved ones, and the singular ownership of production. We also see in this evolution of market activity one of the inherent drives of capitalism, which is the incentive to commodify everything so that it, too, may be sold for profit. For one thing, eventually money was commodified to the point where we would have markets focused almost exclusively on material gain via the act of moving money around (M-M1). While most of us can appreciate how somebody who makes a product that sells millions of units can become legitimately wealthy (assuming the customers were properly informed) it's a lot harder to understand how currency speculators like George Soros can make over £1 billion pounds selling money he didn't own and buying it back at a loss. No real product or problem-solving seems to be involved in such speculations, and if the people involved in such schemes are clever it is arguably comparable to canny scammers more than legitimate entrepreneurs.
Another kind of commodification resulting from the drives of capitalism is the commodification of people, as increasingly they would be defined and qualified by their contribution to the system of labour. Notice, for example, how often people describe their job not merely as what they do to earn a living, but what they are. "I am an accountant", as if this person were a machine or program specifically built to do that task and nothing else.
Along the way, commodity-money in the form of a currency based on metals like gold evolved into the bank-debt money that now dominates the economy. This came about partly because of the constraints that a commodity-backed currency placed on the States' ability to fund wars, but also because of a commercial interest in pursuing more liquid and risk-enabling forms of money. On a positive note, this allowed hitherto unimagined levels of capitalism and entrepreneurialism. But as towns, countries and eventually the world became drawn into ever-more complex webs of commerce, the interconnections of the corporate, financial, and political systems meant that losses anywhere could ripple out and destabilise many other institutions. This gave rise to what is now known as 'systemic risk'.
However, the potential losses inherent to such a risky system would not be spread around evenly nor necessarily felt most keenly by those most responsible for the miscalculation/corruption that caused the problems. The reason for this has much to do with increasingly larger, more complex societies retaining much of the nonegalitarian power structure and ideological justification of wealth appropriation that typified chiefdoms.
This model has even been expanded to the global level, with rich countries taking advantage of the lower bargaining power of poorer countries, perhaps actively encouraging the conditions that lead to that reduction in bargaining power through such tactics as supporting coups that will overthrow more egalitarian leaders and replace them with dictators eager to accept bribes from first-world banking and financial giants that will leave everyone other than the leaders and their cronies massively indebted. That, of course, results in the resources and human labour of such countries being more easily exploited by the rapacious appetites of growth-based consumerism.
This approach was perhaps best expressed by Major General Smedley D. Butler, author of the appropriately titled 'War Is A Racket'. In that book, Major General Butler spoke about how
“I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in...I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903...Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.”
As one might imagine, long before that stage was reached philosophical and political thinkers had long been engaged in the effort to criticise or defend markets and capitalism. We'll look into that next.
REFERENCES
'Debt: The First 5000 Years' by David Graeber
'Guns, Germs and Steel' by Jared Diamond
'Zeitgeist Movement Defined'
'Austerity: The History of a Dangerous Idea' by Mark Blythe