On Fundamental Economic Shifts
Retired Levantine field archaeologist and British Museum curator Rupert Chapman reviews economic shifts from 8,000 BCE to today's "flash crashes."
I. Introduction
We live in a capitalist economic system, but this has not always been the case. There have been several fundamental economic shifts in the human way of life. The purpose of this essay is to introduce them to the general public.
II. Human Society and Economy before the Neolithic Revolution
Throughout most of human prehistory, from the origin of our species down to around 8,000 BCE, our ancestors foraged for food, both plant and animal. During this long period, around 300,000 years, they were seasonally nomadic, following the herds of wild animals on which they preyed and the ripening of the various plant foods which formed the majority of their diets. In this era, all the societies of which we know show evidence of being based on the extended family, which was structured by real or socially imagined kinship relations.
These ancient societies were largely egalitarian—of necessity: if you are (a) nomadic and (b) have no domestic animals to assist with carrying belongings, possessions must be limited—and births must be spaced out because infants and toddlers who can’t keep up with the migrating group must be carried, also. Thus, the human population was globally and locally small and widely distributed across the landscapes. And the fact is, this way of life requires a great deal of land per person if the natural resources are not to be locally exhausted.
Also, throughout this long period, the available technology remained very basic and easily reproduced by most of the population. Thus, no one individual or group of individuals could accumulate “wealth” beyond any other.
These societies appear to have been subdivided primarily by age, with people respecting, for example, the best hunters (male and female) and the best craftspeople (male and female)—and to have moved on their seasonal round by agreement based on the advice of those with the most experience of the crucial factors that determined when they should move their camps.
It is worth noting that these groups were not confined, as are modern hunter-gatherer groups, to the most marginal lands. Rather, they probably ignored these very marginal territories because they didn’t need to endure the stress of living there; therefore, they inhabited the more favorable territories. It is also worth noting that while the older literature speaks of male hunters and female gatherers, more recent studies have clearly shown that this supposedly gendered division of labor didn’t exist, and this research is based both on studies of contemporary surviving “hunter-gatherer” groups and on the archaeological evidence from burials in which male skeletons are accompanied by supposedly “female” artifacts and female skeletons, by supposedly “male” artifacts. It is also worth noting that through this long period the number of sites, and to a lesser extent their sizes, very gradually expands. Although various methods of restricting births were practiced throughout, the population slowly grew.
III. The Mesolithic Economic Shift
Starting around 12,000 BCE, things began to change. The last glaciation period came to an end, and the current interglacial period began. For reasons which remain disputed and unclear, the Pleistocene megafauna, upon which most of these groups had preyed, began to disappear. A completely new adaptation, a completely new technology, was required, and it quickly appeared. While large, heavy spearheads were required for bringing down the Pleistocene megafauna, the smaller animals which came to dominate—the largest being deer and bovines (aurochs)—required smaller projectile points, and these needed to be given greater range and force than the short-range weapons earlier hunters used.
Moreover, we see that the human groups are now larger, that they are moving into what had been marginal environments, and that they are exploiting completely different resources. We see, for example, minute stone tools, tiny flakes—none of which is a tool in itself, but several of which, jointly mounted on a single wooden shaft, make a composite tool. This is a more economical use of raw materials. The preparation of the stone flakes requires greater skill, but the result is a greater variety of projectiles and woodworking tools. We also see the first exploitation of aquatic resources, both freshwater and marine, with both harpoons/fish spears and fishhooks.
In some of the most favorable environments, such as the lands on the Eastern shores of the Mediterranean, semi-permanent settlements began to appear in cultures such as the Natufian. These settlements were enabled by the rich resources in the region, but they had an unintended result—namely, that they lessened the necessity of strict limitations on and spacing of births as there was less need for infants and toddlers to be carried in this new, less mobile way of life. This, in turn, meant that the population grew—if still slowly—at a rate faster than in the previous 300,000 years. This growth of human populations slowly placed greater pressure on the available resources given the available technology, which brought about the first, and perhaps the most significant, of the fundamental economic shifts of human prehistory.
IV. The Neolithic Revolution
In the Middle East around 8,000 BCE, we begin to see the rise of permanent settlements, the first true villages, and they have a new type of economy—initially partial, transitional, and emergent—based on food production, not foraging. It is a mistake to refer to these early villagers as agricultural, a term that implies large-scale operations with surpluses for exchange. They were, in fact, horticultural villages consisting of subsistence farmers producing for their own use. But because they lived in environments with seasons, and their crops were also seasonal—annual, not year-round—they had to produce enough food in the growing season to carry them through the non-growing seasons. Many years ago, the implications of this were clearly seen by the great American palaeobotanist Jack R. Harlan, who wrote:
If a similar situation existed some ten or twelve thousand years ago, one can visualize a few small hunting bands settling down in semi-permanent camps to reap wild cereals as a dependable source of food. If they became dependent to an appreciable extent upon these cereals, they would have had to become rather sedentary. The chaffy grains are bulky and difficult to move in large quantities. (1967:201)
Or, as I believe, Kent V. Flannery put it more succinctly:
“After all, where can you go with a metric ton of cleaned wheat? It requires storage facilities, and it requires that they be sufficiently waterproof so the grain does not sprout during the moist winter season (1973:280).”
Interestingly, one of the things that was discovered about wheat placed in such watertight storage, especially if it is a rock-cut silo lined with waterproof plaster, is that the stored grain gives off CO2, which, being heavier than oxygen, settles in the silo and kills any insects which may have gone in with the grain, or any small rodents.
The Neolithic Revolution had a number of further notable effects. The first of these is that, released from the requirement of constant movement, these newly sedentary societies were also freed from the need for strictly spaced births. The result of this is the world’s first population boom. The archaeological record reveals a dramatic increase in both the number and size of the settlements. This, in turn, created a requirement for more food, which meant the clearing of more fields in which to grow it. This had an effect which has only been realized in the last twenty years, one encapsulated in the Ruddiman Hypothesis (Ruddiman 2010). On the basis of an extremely detailed study of the natural cycles (the Milankovitch Cycles), Ruddiman showed that from about 8,000 BCE, the changes in climate across the planet ceased to follow the course predicted on the basis of the natural cycles. One result of this is that when the post-Pleistocene interstadial should have ended—and the cooling which should, by now, have led to the onset of a new glaciation period—the planet instead continued to warm.
Another effect of the Neolithic Revolution, and the sedentarization of human societies, is that people could have more possessions. The need for containers, both for the storage and the cooking of food in particular, led to the development of the world’s first synthetic material—pottery. The malleability of clay, and the fact heat hardens modeled clay so that it retains desired shapes, enabled an almost unlimited variety of forms for an almost unlimited variety of purposes. In the late Neolithic Period people discovered, in various regions, a common natural material, native copper, which was also extremely malleable. Copper was initially worked by cold hammering; however, this was limited because it made the material brittle. This problem could be corrected by heating the metal, which restored its malleability, a process known as annealing. The process of working copper continued to develop when it was discovered that it also occurred as an ore within rock from which it could be recovered by smelting, which enabled it to be cast into shapes which would have been difficult to achieve in any other way. In certain regions, natural deposits of copper occurred in which the metal wasn’t pure, but a natural alloy containing a mixture of copper and arsenic—which was both harder and easier to cast than copper alone—natural arsenical bronze.
In the latter part of the Neolithic Period (sometimes called the Chalcolithic Period) and in certain regions around the world, especially major river valleys with low rainfall but fertile alluvial soil, techniques of small-scale irrigation were developed that enabled still larger populations and greater craft specializations, and which required changes in social structures to cope with the relationships within and between populations. Gradually these developments led to the next great economic shift.
V. The Urban Revolution
For the whole of the period from around 10,000–3,500 BCE, people lived in settlements which ranged in size from small hamlets to large villages. These societies were organized primarily on the basis of kinship, either actual or fictive: nuclear families and close extended families were actual clans, and more amorphous groups were fictive and changeable as circumstances changed. These societies weren’t strictly hierarchical, but primarily based on authority and on seniority. Most were patrilineal, but some were matrilinial. Throughout this period, however, the population continued to grow, especially in a handful of great river valleys—the Nile Valley, the Tigris-Euphrates Valley, the Yangtze River Valley, the Mekong River Valley, and in the Valley of Mexico and the Andes. The population in these areas grew both in size and in centralization until, in time, a new form of settlement emerged—the city.
It is hard to define the term city. However, most would agree that cities comprise a large and concentrated population and that they bring together and professionalize the previously part-time specialists in various crafts, such as potting, metalworking, and weaving. These now-full-time specialists must be supplied with food in exchange for their products. Because the much larger, denser population inevitably involves many more inter-relations than the villages, the kinship organizations became increasingly inadequate as a mechanism for conflict resolution, so a different form of social organization emerged. It sat atop the continuing kinship organization of the families. This organization, which was socially invested not only with authority but also with coercive power, is what has come to be known as “the state.”
The state takes many forms, different in various places and at various times, but it is always centralized to some degree, it is always the primary administrative system, and it always has a monopoly on coercive power. It is also, crucially, always hierarchical, with an elite at the top of society and with various socioeconomic grades beneath. This new social organization was a radical break with everything that had gone before, at least as great as the previous shifts.
Although there hasn’t been a completely self-sufficient society since the beginning of the Neolithic—the pre-pottery Neolithic B culture in Southern Jordan was in distant, down-the-line trade relations with the obsidian mines of Eastern Anatolia by 8,000 BCE—the new cities came increasingly to engage in trade. In the case of the great river valleys, this was a necessity, as their primary resource was mud, the supremely fertile soil that gave them abundant crops, while timber, stone, metal ore, and the like had to be obtained from outside their own territory. This led them to develop a notional standard of value in terms of which, for purposes of exchange, any product could be rated. Note that this involves a standard of value, but not coinage, which didn’t appear until around 700 BCE.
As society became hierarchical, religion changed. Religion, which had been decentralized, shamanistic, and frequently animistic, and had begun at least as far back as the Middle Palaeolithic, now saw the emergence of a hierarchic system of deities, the creation of a new architectural type, the temple, and new socioreligious roles, the priest and the priestess. This religious hierarchy was, from the beginning, closely allied with the “secular” hierarchy and frequently, but not always, united with it at the highest level.
From the point at which the state emerged, initially within individual cities, each controlling its own hinterland, two things also followed. First, because land was wealth—and the more land you controlled the wealthier you (the elite) were—the rise of the state also saw the rise of territorial expansionism. From this came the early empires. It is worth noting that while the first cities were largely linguistically homogeneous, and probably their citizenry identified as an ethnic group, the empires were conquest entities, all about power and control, incorporating territory and whoever lived in it. All the early written evidence suggests that these empires were ethnically diverse, and that while the elite of the conquering power sat atop the imperial social hierarchy, the conquered groups were simply fitted into the lower ranks of the existing hierarchy. In later periods we know, for example, that the Hellenistic rulers identified their deities with those they encountered in other countries, creating a syncretistic and polytheistic system which didn’t require that the conquered peoples change their religions. The same thing was true of most aspects of material culture, although, given that the conquering societies were also the social and economic elites, it is frequently possible to identify local imitations of elite material culture created and used by aspirational subjects of empire, as well as directly imported goods. Also, from the point at which the state emerged, there was a continual experimentation with different types of organization, from the highly bureaucratic absolute monarchies of the great river valleys of Eurasia and the Americas to the more loosely structured states in which power was decentralized to a greater or lesser degree.
From around 3,000 BCE onward, these empires rose and fell, competed and traded with one another, always resting upon an agricultural base, using rudimentary forms of machinery and expanding production mainly by employing larger numbers of craftsmen, rather than by changing their methods of manufacturing. Some states and empires were more centralized, with manufacture and trade operating as royal monopolies, while others saw the rise of merchant enterprises operated by other agents within the society. By the Hellenistic Period (330 BCE to the rise of the Roman Empire), there were merchant bankers who financed trading expeditions. By this time also different states and empires had begun issuing coinage, stamped with a royal seal, as a guarantee of the metallic content.
This era of states and empires continued throughout Eurasia and the Americas from 3,000 BCE until around 1,750 CE, when the next fundamental economic shift began.
VI. The Shift to Industrial Capitalism
As a lifelong student of long-term history, one fact of which I am constantly aware is the way in which the balance within economies shifts through time. Braudel, in his masterful study of capitalism (Braudel 1983a; Braudel 1985, Braudel 1983b), demonstrates the operation of capitalism well back into the Medieval Period, and, thereby, the falsehood of associating the Industrial Revolution and the emergence of capitalism: the Industrial Revolution merely opened up a fresh opportunity for investment and the earning of profit, an opportunity upon which the capitalists, who were always on the lookout, seized.
At the time when the Industrial Revolution began, the dominant portion of the economy was in agriculture. Those who had money invested in land and earned vast amounts from both arable farming and animal husbandry. There were also, of course, already manufacturers, but they were small-scale, local, and craft, not industrial. Their numbers, production, and prices were regulated by trade associations known as guilds. Weaving was, for example, mainly done at the household level. Only later were weavers employed (as was Silas Marner) on a contract basis.
There was always commerce—trade both in-country and internationally. The idea that there was ever a period of either local or national “self-sufficiency” is false, so the economy of any country was always mixed, with a shifting balance through time.
Beginning in the late 18th century with a constellation of technological changes on land and sea, inventive individuals began to develop new means of supplying power: the water wheel (not a new invention, but one newly refined) and the steam engine—new modes of transportation: canals on land—improved merchant ships at sea—and new means of producing iron and steel. All made it possible to create new machines to do old jobs.
These machines are said to be more efficient, but what does this mean? Production always involves costs, but the major cost of production is always the cost of labor. Whether it is agriculture or manufacturing, labor is the greatest ongoing cost. And in a capitalistic, competitive economy, the pressure on producers is to bring their products to the market at the required quality and for the lowest price. There are two main ways of doing this. The first is to drive down wages and salaries by maintaining a large pool of unemployed potential labor so that those who are lucky enough to be in work must accept whatever you are willing to pay them. The second is to add more automation, thus eliminating the need to pay wages and salaries. The Industrial Revolution eliminated the craft workers, but absorbed most into the new factories; similarly, it eliminated most of the agricultural laborers, who, likewise, were absorbed into the factories. In the Deep South, the existence of slavery enabled the great landowners to fend off the Industrial Revolution throughout the first half of the 19th century, and sharecropping perpetuated that system and fended off the Industrial Revolution for a further century—until the 1960s.
Initially the pool of unemployed/underemployed labor was maintained within individual countries, but as the economy became more globalized through the 20th century, it became possible to maintain that pool, and utilize it, internationally.
This is what the Industrial Revolution really was—a shift in the balance of the economy from the dominance of a labor-intensive agricultural sector to the dominance of a labor-intensive industrial manufacturing sector. So, both preindustrial agriculture and early industrial manufacturing were labor intensive. Even the machines needed tending and maintenance, so when capitalists gained great profit, and invested that profit in a new industrial plant, they created new jobs and paid new wages and salaries. But the wealth didn’t trickle down, it flowed in a circulation. And the people who were paid spent their money buying the products they had helped to produce. This is what is meant by the term “the circulation of money.” And all of this was enabled by the slowly expanding capitalist financial sector.
VII. The Shift to Financial Capitalism
No economy is ever static, and the balance is now shifting again. To see what is really happening now, we need to look beyond the traditional industrial pursuit of cost-cutting—whether that involves the moving of manufacturing into cheap labor areas or the automation of manufacturing to eliminate human labor completely—and look more closely at the mechanism of the Crash of 2007-2008 and what it tells us about the changes to capitalism that are happening before our eyes but that are not really being commented upon. We need to look at Collateralized Debt Obligations—CDOs, for short.
For the details of how these spectacularly complex and sophisticated financial instruments work and for their role in the Crash, I recommend All the Devils Are Here: The Hidden History of the Financial Crisis (McLean, B. and J. Nocera, 2010). These details are important, and it is a fascinating story in its own right, but I want to take if it further and to draw out the implications of the CDO and what the Crash of 2007-2008 really shows us.
The first thing to note is the truly epic sums of money which were tied up in these financial instruments. A popular billion is 1,000 million—(a mathematical billion, of course, is a million million)—and a trillion is 1,000 billion, or a million million million. And the Crash involved tens, or even hundreds, of trillions of dollars. Let that sink in for a moment.
Now consider that the most valuable corporations on earth are not worth more than billions, any of them. What this means is clearly that the big money is no longer in those corporations: the big money, the capital, is now in financial instruments of various kinds. This, of course, is why Trickle-Down Economics no longer works (if it ever did).
From the beginning of the Industrial Revolution until sometime in the twentieth century, when capitalists invested their money in businesses of various sorts—whether manufacturing, wholesale, retail, or commerce and whether investing in a new business or expanding an existing one—that investment created real jobs, whether unskilled, semi-skilled, highly skilled, or white collar. But a CDO creates no jobs. Nor does any other such financial instrument. Wall Street and all other such exchanges around the world have nothing to do with business in the traditional capitalist sense. They make (and lose) money buying and selling financial instruments. What is more, even that process of buying and selling financial instruments is increasingly automated, and one of the latest forms of market fraud is the use of computer programs to create a “flash crash” that lasts only milliseconds, within which staggeringly short time the automated system can buy or sell large quantities of equities to great profit. A single clever programmer can do this. No labor force is required.
Where this new form of capitalism will take the world, whether it will survive or not, remains to be seen. What is crystal clear, however, is that this is a fundamental economic shift accompanying the fundamental technological shift away from a basis of burning something to produce power to extracting power from renewable sources—and from human labor to computerized production.
Bibliography
Braudel, Fernand
1983a Civilization and Capitalism 15th-18th Century: Volume I: The Structures of Everyday Life: The Limits of the Possible, London, William Collins Sons & Co.
1985 Civilization and Capitalism 15th-18th Century: Volume II: The Wheels of Commerce, London, Fontana Press.
1983b Civilization and Capitalism 15th-18th Century: Volume III: The Perspective of the World, London, William Collins Sons & Co.
Flannery, Kent V.
1973 “The Origins of Agriculture,” in Siegel, B.J., Beals, A.R., and Tyler, S.A. (Editors), Annual Review of Anthropology, Volume 2, Pages 270-310, Palo Alto, California: Annual Reviews Press.
Harlan, Jack R.
1967 “A Wild Wheat Harvest in Turkey.” Archaeology, Volume 20:3 (June 1967), Pages 197-201.
McLean, B. and Nocera, J.
2010 All the Devils Are Here: The Hidden History of the Financial Crisis, London, Penguin Books, Ltd.
Ruddiman, W.F.
2010 Plows, Plagues, and Petroleum: How Humans Took Control of Climate, (Princeton Science Library, 46), Princeton, New Jersey, Princeton University Press.
This was an excellent essay to read!