Economic Evolution: Updating Marx

The subject for this page is the way that economies evolve as technology progresses.

In writing on this, I’m following in the footsteps of Karl Marx and borrowing some of his thought, though by no means all of it. Marx was an insightful fellow, but his theory suffered from his temporal location in the 19th century when the most advanced economies were just emerging from their feudal/agrarian state into capitalism, and he didn’t live to see what socialist elements might be like as they arose and had to guess at this — often wrongly as it turns out. Also, it’s useful to extend our view to the time before the feudal/agrarian arrangement that Marx took as his starting point and consider the foraging/hunting economy that human beings lived in before civilized life began. If we do that, interestingly enough we find communism, which means that possibly we are evolving from communism ultimately back to communism, by way of agrarianism (what Marx called “feudalism,” which is technically not quite right), capitalism, and socialism.

What is Communism?

The Cold War, alas, distorted the meaning of this word even more than it did the word “socialism,” and it’s common to confuse the idea of a genuine communist economy with the real-world economies of so-called “Communist” countries during the 20th century.

A “Communist” country during that period was “Communist” only in that it was run by something called a “Communist Party.” None of these countries claimed to have a communist economy, although all of them supposedly were heading in that direction. All of them claimed to have a socialist economy, which is also somewhat dubious, but claiming to be communist would have been so obviously wrong that none of them did. A communist economy has never existed in civilized times on a large scale, like that of a city or a nation. But that doesn’t mean it’s unknown. Every family has a communist economy (unless it’s utterly dysfunctional). Small communities organized for some utopian purpose (often religious) have also had communist economies.

In a communist economy, goods are distributed by sharing rather than trade. Property exists, but only in the sense that some things are for personal use and would not conveniently (or in some cases hygienically) be shared around; goods that are made for other people to use are, in a communist economy, given away rather than sold.

A family is able to operate this way because all its members know each other well, and usually trust each other. The same was true of the small bands in which our foraging/hunting ancestors lived, which were pretty much extended families. Trade happened when one band encountered another and violence didn’t happen instead. Within the band, food, clothing, tools, shelter, and other goods were provided to everyone who needed them. An economy that functions in this way is communist.

All other economic arrangements are based on trade rather than sharing. They may encompass giving as well in the form of charitable gifts or gifts between friends and family, but for the most part in order to acquire goods in a non-communist economy, whether it is feudal/agrarian, capitalist, or socialist, one must pay for them with something of value. Money, ordinarily. In fact, trade (and hence money) is so central to all non-communist economies that most people think of “economics” as a study of money. But a communist economy has little use for money.

Can a communist economy exist among strangers? Ordinarily, no, which is why we haven’t had one since our ancestors started farming, except in families and in those utopian communities I mentioned above. I used to think that a civilized communist economy was a complete pipe dream for that reason. A socialist economy, as we’ll see, shares a lot of characteristics with a capitalist economy and it’s easy to see how it could emerge from one. But a communist economy is so radically different from a socialist economy that it’s hard to understand how Marx could have expected it to develop, but in fact there may be a way. It may even be inevitable, albeit for a reason Marx knew nothing about. I’ll come back to that. At the moment, I’ll just note that communism is what our pre-civilized ancestors lived under, but lost in the transition from foraging and hunting to settled farming, which led to population increases and ultimately to life in cities: civilization.

It also led to a number of political, economic, social, and religious developments that together make up what I call the Classical Civilized Paradigm. These included social stratification, increased gender inequality, slavery and serfdom, hereditary monarchy, and organized religion as a partner to the state — and for that matter, it included the state itself. Pre-civilized life was stateless. Along with the state, the first non-communist economic arrangement grew in all its noxious splendor, and I’ll describe it in a bit. First, though, a necessary detour.

How to Categorize Economies

When one begins tossing terms around like “socialist” and “capitalist” one runs into conflicting definitions. For example, one classic definition of a socialist economy is one in which the means of production are owned by the state. However, the word is also used to describe today’s economies in Scandinavian countries, and in those countries the means of production are not, for the most part, state-owned. There are also prominent socialist parties in a number of other countries in Europe, and those parties do not advocate state ownership of industry, nor enact it when they win elections. They do, however, advocate other policies which create a more egalitarian distribution of wealth and curb the excesses of capitalism.

It’s not always useful to describe an economy in terms of who owns what, since that is often a legal fiction anyway. For example, in many parts of medieval Europe, all of the land was technically owned by the King. In practice, though, the King had little say over what was done with most of it, and a noble who held land in fief or even a small farmer who wasn’t a serf owned the land for all practical purposes. Also, we say that our capitalist economy in the United States is “privately” owned, but in fact the largest economic entities — big corporations — are communally owned by large numbers of investors, so that “privately” ends up meaning little more than “not by the government” (and even that’s not universally true).

I’m going to suggest that it’s useful and sufficient to describe any economy in terms of just four questions.

  1. How is the majority of wealth produced?
  2. Who does most of the work?
  3. How are the dominant classes, if there are any, determined?
  4. For whose benefit is the economy organized in its rules for ownership, production, and distribution?

In the primitive communist economy of our ancestors, these questions were answered as follows.

  1. The majority of wealth is produced by foraging and hunting for food, with the rest the product of small-scale craftsmanship.
  2. Everyone in the band shares in the labor, except small children.
  3. There are no dominant classes.
  4. The economy is organized for the benefit of the band and its members on an equal basis.

When the answers to these questions are as above, the economy may be called primitive communism. Other types of economy that provide different answers to these questions will deserve different designations.

Agrarian Economies

When our ancestors began farming instead of foraging and hunting for food, the result was a population increase. Farming can produce a lot more food from a given amount of land than foraging and hunting, and this food supported a larger population. There were many consequences flowing from this and also from the amount of back-breaking labor farming requires.

Larger populations meant an exponential increase in the vectors of potential conflict. It meant that all the members of a community no longer knew and trusted each other. For that reason, a communist economy proved untenable. For the first time, humans began to exchange goods mostly by trade rather than by sharing.

There were other consequences as well. By producing a surplus of food, farming allowed some people to engage in activities not related to food production. This meant an increase in manufacturing output and artistic creation, and along with the increased food production these led to accumulations of wealth, supporting a few people in a luxurious lifestyle unknown to hunter-gatherers. This and the increased population led to increased conflict between communities — more war, in other words — and that, too, had consequences. One of those consequences was social stratification, with war leaders and those who were politically skilled and astute assuming dominant positions in society, while the unfortunates captured in war often ended up doing all or most of that hard work necessary to grow food.

It would take too long to go into the process by which all of this happened in detail. I’ll note only that it happened literally everywhere that people began farming and continued it to the point of settling in cities, even in communities that had no contact with one another. The Americas, at the time when Europeans stumbled upon them with such disastrous consequences for the natives, present a snapshot of this process. A few tribes on the Pacific coast, in the Arctic, and in the Amazon jungle still lived by foraging and hunting. A few peoples in Mexico and Central America had developed full-fledged civilizations complete with cities, written language, hereditary monarchy, and organized religion. Most Native Americans lay on a spectrum between these two extremes, having adopted farming and begun to settle in larger communities but not completed the transition. The same process happened in the Old World but, for the most part, much earlier.

All of these agrarian civilizations present us with an economy for which the answers to the four questions are as follows:

  1. Most of the wealth is produced by farming. A small percentage is produced by small-scale manufacturing or the provision of services.
  2. Most of the work is done by forced laborers, either slaves or indentured serfs of some kind. The remainder is done by independent, self-employed farmers and craftsmen, for the most part, with hired labor very rare although not completely unknown.
  3. The dominant classes are initially chosen by military prowess, political leadership ability, and affinity for religious leadership, but after several generations of this by hereditary descent from those who had these qualities.
  4. The economy is organized to benefit the dominant classes of hereditary nobility and the high priesthood. Everyone else is secondary and, by comparison, does without.

Besides the switch from foraging and hunting to farming as the method of food production, an agrarian economy presented two radical changes from the primitive communism that preceded it. The first is that distribution of wealth was based on trade rather than sharing. Trade isn’t nearly as efficient or equitable at distributing wealth as sharing, and results in lopsided concentrations of wealth over time; however, it works among strangers who don’t trust each other, which sharing doesn’t.

The other massive change is the answer to that fourth question. For the first time, humans had an economy that benefited, by design, those who were already wealthy and powerful, rather than everyone equally.

These two changes would persist under capitalism, although many of the agrarian-economy details would not. The dependence on trade also persists in a socialist economy. The other change, however, socialism reverses.

Agrarian economies lasted a long time, although not as long as primitive communism. The change began some 10,000 years ago, and the form persisted until the industrial revolution began a few hundred years ago. Capitalism, which replaced agrarian economies, is quite new. Socialism is only slightly newer.

Capitalism

The industrial revolution, and the commercial revolution which preceded it, raised the importance of trade and markets. The industrial revolution especially magnified the amount of wealth produced to the point where it became impossible for the traditional ruling classes to keep control over it. What’s more, modern industrial production needed a different approach than worked for agriculture, and forced labor proved inefficient for its purposes. That’s not to say that labor is uncoerced in a capitalist economy, or genuinely “free,” but the type and degree of coercion changed from crude methods to more subtle economic pressure.

The new industrial economy and the old agrarian one existed side by side for a time, but never comfortably. The interests of the commercial elite and that of the planter elite conflicted. This conflict is especially obvious (and bloody) in United States history. It took the hideous American Civil War to resolve it in favor of capitalism. Other countries managed the transition with less carnage, but it was a wrenching change everywhere.

The agrarian economy in the United States was wholly typical except for the lack of titles of nobility, which the U.S. Constitution forbids. The planter elite had a military tradition. Its wealth came from forced labor in its purest form: chattel slavery. After slavery was outlawed by the 13th Amendment, the former slaves were kept in a kind of serfdom through sharecropping and tenant farming arrangements, which was an improvement but really no better than the lot of a medieval European serf. It took the mechanization of the farm itself to end this.

Replacing the agrarian economy was capitalism, an industrialized economy with rules set up to encourage the investment of capital by wealthy individuals and to maximize profitable return on such investment. In contrast to the agrarian economy that preceded it, the dominant class was entirely commercial rather than military or religious, and the privilege accruing by right of birth was greatly reduced. A capitalist economy answers the four questions as follows.

  1. The wealth is produced by a mix of farming, manufacturing, and the provision of services. Over time, as technology advanced, the share of the economy represented by manufacturing and services has increased, while the farming share has declined, even as the absolute quantity of agricultural production has increased greatly. Overall wealth production is immensely greater than in an agrarian economy.
  2. Most of the work is done by paid workers who are coerced through engineered economic necessity rather than by crude force. Laws and property rights are established so as to foreclose successful self-employment by most people, leaving all but a few with no option other than to work for other people’s profits. However, directly forced labor is rare and generally illegal; the economy no longer relies on slavery or serfdom.
  3. The dominant class is chosen almost entirely by commercial success. Wealth drives status. Hereditary privilege has not vanished, but is informal and less rigid than in an agrarian economy.
  4. The economy is organized to benefit the dominant class of capitalists. Very simply, it is set up to facilitate the rich becoming richer.

There’s plenty to complain about in a capitalist economy. It’s undeniably a huge improvement over what went before it, though. This is why, during his life, Karl Marx was always pro-capitalist, a fact that is seldom acknowledged by his detractors. The living question in those days wasn’t capitalism versus socialism but capitalism versus a feudal/agrarian arrangement. Of those two choices, capitalism is clearly the better.

Capitalism appears to be short-lived, though, as he foresaw, if not quite in the same fashion as he foresaw it. Several socialist economies already exist today, and those that remain capitalist for the most part (such as the United States) are in visible transition, with public agitation against income inequality and demands for curbs on corporate rapacity. In fact, it’s likely that future historians will see capitalism as a brief transition phase in which the incredible power of an industrialized economy was tied to antiquated notions of privilege.

But then, socialism may also be a brief transition. We may end up with a communist economy after all.

Socialism

Both the agrarian economy and capitalism emerged as the product of technological advances. Socialism is different. It emerged from the abundance produced by a capitalist economy and its extreme maldistribution of wealth, without need of further technological progress. Those who had to do the work resented being paid an inadequate and unfairly low share of what their labor produced. Change was demanded, and over time, not without conflict and opposition, the demands are being met.

Conflicts between rich and poor occurred in agrarian times, too, but with an important difference. Before the industrial revolution, there really, truly wasn’t enough to go around. It was materially impossible for everyone to live comfortably. Despite their ostentation, the wealthy actually didn’t siphon off that great a share of the total, and redistributing their wealth to the poor would have left the poor very little better off.

That’s not the case in a capitalist economy with its enormous increase in wealth production. It’s quite possible in a capitalist economy for everyone to be well housed, well educated, well fed, well clothed, provided with modern medical care, transported where they need or want to go, and entertained. Or at least it would be possible except that a capitalist economy doesn’t care about doing this; it’s organized to benefit the rich, not everyone.

That’s the difference between a capitalist economy and a socialist one: the answer to that fourth question. A socialist economy answers the four questions as follows.

  1. As in a capitalist economy, wealth is produced by a mix of farming, manufacturing, and services, with the latter two representing an increasing share as time passes and technology improves.
  2. As in a capitalist economy, most work is done by paid workers, although the barriers to successful self-employment are lower, and consequently wages higher and coercive pressure less.
  3. As in a capitalist economy, the dominant class is defined by commercial success; however, they find their privileges and power significantly dampened by law and regulation designed to redistribute wealth and protect people from exploitation.
  4. The economy is organized to benefit everyone in the society on an equal basis, or a reasonable approximation thereof.

A socialist economy, then, is a capitalist economy with its prevailing rationale turned about. Profits and returns on investment are downgraded in importance and made secondary to the public welfare. (Nonetheless, they tend to be high, as the relatively egalitarian wealth distribution results in a boost in consumer demand and higher sales of goods and services.)

How this is accomplished varies from one society to another. Sometimes key industries are nationalized and publicly owned, sometimes they remain privately owned but are tightly regulated. Wealth redistribution is achieved by a mix of empowering labor through unions, legal requirements, and steeply graduated taxation to pay for public services such as free education and health care. In a socialist economy, no one is poor. Everyone lives comfortably. Some are still richer than others, but the extremes presented by a capitalist economy don’t exist.

Industrialized, advanced economies today all present some aspects of socialism, although how much varies widely. Scandinavia, and to a lesser extent the rest of western Europe, has enough socialism in the mix that it’s reasonable to call these economies by the socialist label. The United States has about the least socialism and the most capitalism of any advanced economy, but even here we have not had a purely capitalist economy for many decades, and it’s about to become a good deal less so if the current public agitation is any indicator.

One thing to note from all this is that socialism requires a fully industrialized economy. Socialism emerges from capitalism, not from its agrarian predecessor. Attempts in the 20th century to leapfrog directly to socialism from a pre-capitalist base, which happened in all countries that called themselves “Communist,” were not successful. Marx was wrong about many of the particulars of the path, but right that socialism would emerge from capitalism itself, as a result of its internal contradictions and the conflict between classes. Although the transition is far from complete, that has happened and continues to happen, and there’s no reason to expect it to be reversed.

What now? Marx theorized that a socialist economy would be a classless society, and without class conflict there would be no need for property, and so no need for the state, which would gradually wither away. The end result would be a communist economy, based as in pre-civilized times on sharing rather than trade.

Now, as he described the process that’s quite frankly balderdash. It won’t happen that way. We still have a huge population and plenty of vectors for conflict, not all of which have anything to do with class struggle. We still have a society of strangers who don’t trust each other. We can’t distribute wealth by sharing in such a society, not without a massively overbearing state that would surely be rank with corruption.

But there’s one thing that Marx never considered, which paradoxically may make him right in the end after all.

Communism?

What he didn’t consider is that technology continues to progress, and it is rapidly separating the production of wealth from human labor. Already, most of the hard, back-breaking work that used to be necessary to grow crops or to make industrial goods is done by machines. Increasingly, the same is true of mental work. Even creative work is surely not immune, although that is of course the hardest part to automate.

Already, machines can do everything a lawyer does except appear in court. Machines can handle every part of a doctor’s job except a bedside manner. Machines can do science. We’re not far from the time when machines can do art; they already can after a fashion although the programs could use some improvement. In the end, all that will be left for humans to give one another will be the human touch itself: friendship, love, and the sharing of ideas.

Before much longer, we are going to have to separate the idea of income from that of work. It will no longer be possible to distribute wealth by paying people for their labor; their labor will simply not be needed. And yet payment of wages is central to wealth distribution in a socialist economy as it is in a capitalist economy. It just works better — when it works at all.

The first step in the transition from socialism to communism may be something that’s already being talked about, the payment of a guaranteed income to all citizens of a society. This would be income not for working, but merely for existing. It’s definitely going to happen. The values of a socialist society along with the decline of work will require it.

The second step is a bit more visionary, and can happen only once that guaranteed income is in place and people get used to the idea that they don’t have to work for a living and that there’s plenty to go around. It’s to dispense with money as a medium of wealth distribution. With everyone being given their livelihoods instead of having to exchange something of value for them, what’s the point of pretending to require such an exchange? In the end, we will simply have the wealth that the machines produce for us available in abundance to whoever needs and wants it. And this will be a communist economy, although not quite as stateless as Marx imagined it.

In an advanced communist economy, the four questions are answered as follows.

  1. Wealth is produced by farming, manufacturing, and the provision of services, just as in a capitalist or socialist economy.
  2. Almost all the work is done by machines. What remains in the way of creative endeavors and personal services requiring human attention is not regarded as “work,” but is done happily by those who love to do it (as in fact it is today, with money a secondary motivation pursued only because it is needed).
  3. There are no dominant classes.
  4. The economy is organized for the benefit of everyone, with everyone sharing in the incredible abundance produced by a fully mechanized and automated economy.

And so we may come full circle. It’s quite possible that people of the future will recognize communism as the natural economic arrangement of humanity, what our ancestors lived under for the overwhelming majority of time that our species has existed. The several thousand years of relatively primitive civilization in which we had first a feudal/agrarian, then a capitalist, and then a socialist economy, may be seen as a rough and, unfortunately, an unavoidable transition from primitive communism to advanced communism.

Note: those who have read my little e-book Reclaiming Socialism may observe that my thinking has changed slightly on a couple of subjects since I wrote that book. I’m no longer quite as disparaging of Eurosocialism as I was then. I still don’t think it’s the most elegant or desirable way to implement socialism, but hey, it works. I think the fact that I’m an American may have distorted my thinking a bit, due to the political failure of the New Deal system here.

I’ve also come around on the question of whether we can have a communist economy in a modern world. I still don’t know what Marx was smoking, given the technical realities of the 19th century, but given those of the 21st it looks a good deal more likely.

One response to “Economic Evolution: Updating Marx

  1. interesting…i wrote something some time ago on similar lines (though not as well) where i raise a question as to whether the westphalian model of sovereign nations having a monopoly on violence, and hence on wealth creation/storage/distribution, are weakening and giving way to commercial enterprises with less scruples…maybe you could answer the question i ask (http://kedargadgil.blogspot.in/2010/01/future-of-sovereignty.html)

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