On the moral economy that existed before the advent of capitalism

Excerpted from John Restakis, in ch. 1 of Humanizing the Economy:

“Severing the social dimension of economics, including the role of public institutions such as government, from the supposed “pure” operations of commerce violated both common sense and the traditional operations of market economies since their inception in the 14th century. The role of collective interests – the public good – in regulating the operation of markets had never been questioned until the advent of the Industrial Revolution in England. It was here that the notion of the autonomous economy was first articulated as a corollary to the social transformations attending industrialization and the growing influence of capital. And it was here, too, that the traditional relations between markets on the one hand, and the underlying economic organization of society on the other, were entirely recast.

In the past, markets were closely monitored and controlled by social and political forces that acted to protect what was conceived as the public interest from the negative effects of market forces. The meticulous management of markets was thus a familiar feature of medieval city life. State regulation and local custom combined to protect the public interest. In local trade, there was careful regulation of food supplies through the transparency of transactions. Middlemen were strictly prohibited in order to protect the populace against the inflation of prices. Later, when the state played a central role in the development of internal markets between cities, the social interest was again paramount in the control of competition to avoid the emergence of monopolies. It was well understood that unrestricted competition leads to monopoly, a truth that seems lost on conventional economic thinking. Indeed, this conception of market forces operating within recognized social and moral limits persisted well into the 18th century. During the late 1700s in England, there were regular outbreaks of riots when food prices transgressed these limits. As noted by E.P. Thompson, in the popular mind the prevalence of what he termed a “moral economy” still governed the rules of the marketplace. People expected to buy their provisions in the open market and even in times of shortage, they expected prices to be regulated by custom also. Here is John Wesley’s contemporary account of what happened in James’ Town, Ireland when this custom was violated. The “mob” –

– …had been in motion all the day; but their business was only with the forestallers of the market, who had bought up all the corn far and near, to starve the poor, and load a Dutch ship, which lay at the quay; but the mob brought it all out into the market, and sold it for the owners at the common price. And this they did with all the calmness and composure imaginable, and without striking or hurting anyone.

Similarly, in Honiton in 1766 lace-workers seized corn on the premises of the farmers, took it to market themselves, sold it and returned the money and even the sacks back to the farmers.

Economic systems that preceded the Industrial Revolution were inseparable from the broader realities of social relations; the regulation of markets was essential for the delicate balance between commerce and the social system that surrounded it. The same principle held true for primitive economies. The primacy of social relations and the individual’s identity as a social being first and foremost was the basis of human society and the economic systems that sustained it. The conduct of economics as an expression of social values was also an integral part of the civic humanism that was epitomized in the great urban cultures of central Italy at the dawn of the Renaissance era. Three principles stand out in this conception of urban civilization: the social identity of the individual as expressed in the notion of citizenship; the sovereignty of the people in a free society; and the orientation of economic activity to the common good, which alone justifies it. It was this humanistic view of economics as a social good that was supplanted by the Industrial Revolution and the utilitarian philosophy of Bentham that was its intellectual expression.

Contrary to the common view that modern market society grew out of humankind’s natural propensity to barter and engage in commercial exchange for profit, the organizing principles for economic systems right up to the advent of the Industrial Revolution were reciprocity, redistribution, and family-based farming or some combination of the three. And as noted above, the popular attitudes that accompanied a moral conception of economy continued well into the early industrial age. In this framework, the orderly production and distribution of goods was secured by a wide range of personal motives that were guided by well-established rules of social conduct. The profit motive was not prominent among them. This is not to say that there was not a class of individuals that pursued gain just as avidly as businessmen do today.

Iris Origo’s illuminating study of merchant life in 14th century Italy makes this clear. Her protagonist, the Prato merchant Francesco di Marco Datini, pursued profit with a gusto that would be perfectly at home on Wall Street today. His life’s motto, “In the name of God and of Profit,” appeared like a talisman on the first page of his business ledgers and was a quintessentially medieval marriage of the pious and the profane. But this single-minded drive for profit was still restricted to a relatively small class of merchant specialists. It did not serve as the founding principle of the economy as a whole. As will be illustrated over the course of this work, the principles of reciprocity and redistribution that shaped the contours of economic life remain vital, if unnoticed, in modern economies as well, each playing a central role in forms of economic activity embodying social values that are once again coming to prominence.

Some readers may object that in describing this social immersion of economics in pre-industrial societies I am idealizing pre-industrial life. This would misread my intention. Who would want to advocate a return to a time when by almost any measure, life for the average individual was unimaginably harsher, shorter and more precarious than what we know today? Rather, my purpose is to correct some received assumptions about the history and nature of economics as a body of thought and practice. I wish to stress that the splitting off and ascendance of economics over social values has not been the inevitable process that some would have us believe, and that the balance of social and spiritual values with those of commerce that was a feature of pre-industrial life is a matter of the utmost importance. The nurturing of a spiritual life is inseparable from the cultivation of social and personal values that supercede those of commerce. I am arguing that the loss of this balance has cost humanity dearly.

The great economic historian Karl Polanyi argued that the emergence of the market system we live with today required the devaluing of all those patterns of social organization that were embodied in the production and exchange of goods for motives other than personal gain. When all transactions are turned into monetary transactions, all incomes must derive from the sale of something; it was precisely this reduction of all societal transactions to a commercial purpose that marks a radical break and discontinuity with everything that came before. For this to happen, people’s motivation had to change from subsistence, or mutual benefit, or the welfare of society as a whole to the single motive of personal gain.

For Polanyi, the conflation of narrow market operations with the broader economy and social life as a whole was a direct consequence of re imagining society as an analogue to the industrial process of machine production. In what can only be described as a mechanics of dehumanization, the essential elements for the sustenance of an organic human life – shared use of land, meaningful labour, and socially embedded personal identity – were deprived of their social meaning and turned instead into commodities to supply the needs of an autonomous market system. And as the nature of that market system evolved, so too did the manner in which these elements come to be manipulated.”

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