Notes on Economic History (1)
Economics before Mercantilism
The object of these notes is to provide a general introductory guide for those who would like to know more about the subject of Political Economy. They cover the period from early times to Marx and set out the main developments and theories that arose during that time, using as a key the Materialist Conception of History.
Engels in his preface to the 1888 edition of the Communist Manifesto says: “The ‘manifesto’ being our joint production, I consider myself bound to state that the fundamental proposition which forms its nucleus belongs to Marx. That proposition is: that in every historical epoch the prevailing mode of economic production and exchange, and the social organisation necessarily following from it, form the basis upon which is built up, and from which alone can be explained, the political and intellectual history of that epoch.”
That proposition is, in short, the Materialist Conception of History.
By the term economics is meant throughout these notes the study of the production and distribution of wealth. Such a study must take into consideration historical, geographical and many other factors, always bearing in mind that behind the abstractions are real people, who combine, deliberately or otherwise, to produce and distribute wealth.
Neither in classical antiquity, nor yet in the Middle Ages, did there arise any finished systems of economic thought. In those epochs, when men’s thoughts were concerned with the heroic and supernatural, the economics of life was regarded as of little importance. Only when, as today, life is dominated by the forces of competition and struggle, is civilised life dominated by economic considerations to the extent we know it today. Even in those earlier ages, however, economic thought such as it was showed signs that it had arisen out of earlier forms of society, and developed and evolved with these societies.
It is an error to picture the course of economic development as though mankind has passed simply from a primitive form of society to a slave-owning form, then to a Feudal one, and finally to a Capitalist economy. At all times there have been lesser economic groups that formed integral parts of the larger, nation-wide or world-wide complexes.
During the primitive period of man, in the Stone Age, the exchange of things went on, and there are proofs of the existence of some form of primitive trading as far back as the Bronze Age, since the constituents of bronze (tin and copper) are not generally found together. At the beginning of historical times, in Babylon, Persia, Carthage, Egypt, Greece and Rome, there was a well-developed form of trade, with industry carried on for export, together with monetary systems and credit.
The beginnings of economic science itself go back to Plato and Aristotle. Plato (347 B.C.) and Aristotle (322 B.C.). made some contributions to economic science, but as far as economics is concerned, mention need only be made of Aristotle’s remarks on money, interest and taxation. Aristotle saw the essential nature of money as this: “That it is an intermediary in the exchange of utilities, thus acting as a medium of exchange.” To him, however, it is sterile; “it brings forth no children.” It cannot of itself produce any goods; therefore interest is wicked. This teaching was to have a great influence in the later Feudal period.
The economic thought of the Middle Ages was dominated by the teachings of Thomas Aquinas (1274), who derived from Aristotle and the Roman civil and canon law the concept of a “just price.” Aquinas held that there were two kinds of justice:
Compensatory justice, or the justice of exchange.
In the matter of price, justice is found in the equality of mutual benefit in an exchange. What determines income is not the supply and demand of labour, but a normal outlook, the customary and average mutual adjustments between the individuals who exercise functions. To quote Aquinas, “Wherever a good is to be found, its essence is due measure.” Thus we get the idea of income that is “suitable” or “proper” to a man’s position in society. Interest on money, or usury, is frowned upon. “Money is a medium of exchange, its use is in its consumption.” Consequently, for the use of borrowed money it is wrong, or at least improper, to expect anything beyond simple repayment. Aquinas does make exception in the case of tenancy, hire and credit for goods supplied. In later years, missed opportunities for gain, and loss incurred by or injury to the lender, became good grounds for demanding interest.
The prohibition of interest or usury is basically designed for an economy based on land as property, that is Feudal society, which endeavoured to keep money, and those ideas that flow from an economy based on money, under control.
Economic ideas, and the practical application of them, show a gradual growth and conflict as the old Feudal society begins to decline. The development which economic science made after this period are bound up with the growth of towns and the increasing power of the traders. The early stage of these developments is generally known as the Mercantile period and this will be dealt with in our next issue.