Part I Classical Foundations and Debates - Wiley … I Classical Foundations and Debates ... Karl...

Part I

Classical Foundations and Debates

Edelman/The Anthropology of Development and Globalization Final Proof 12.10.2004 6:22pm page 75


Introduction

‘‘Classics’’ constitute a problematic category. Our selection of articles for this section startsfrom the premise that a work may achieve canonical status for reasons ranging from theelegance of the prose to the coherence of the argument, from the prestige or institutionallocation of the author to the political resonance it generates among influential elites orrestless masses. Whatever their origin, processes of canon formation too often lead to afacile association of a complex thinker with one big idea (Smith and ‘‘the invisible hand,’’for example). The articles in Part I include works from the Enlightenment to the mid-20thcentury by key theorists who have shaped later development debates – an admittedly‘‘presentist’’ perspective (see Stocking 1968). In addition to the authors excerpted (AdamSmith, Karl Marx, Frederick Engels, Max Weber, and Karl Polanyi), this introductiondiscusses two other major figures: Thomas Malthus and David Ricardo.

Adam Smith, almost universally portrayed today as an unambivalent and prescientapostle of the free market, never really elaborated a coherent theory of development.In the 18th century, market relations still existed alongside vestiges of feudal societies.Smith’s ideas about the wealth and poverty of nations mirrored his opinions aboutcapitalists and aristocrats. For Smith, the differences between rich and poor nations,as well as between capitalists or merchants, on the one hand, and nobility on the other,hinged on differences between what he termed productive and unproductive labor (see hischapter below). Rich countries, in Smith’s view reinvested a large proportion of the totalsocial product in the production process; in poor countries, by contrast most of the socialproduct was consumed in maintaining ‘‘unproductive hands.’’ He was not specific aboutwhich ‘‘poor countries’’ he had in mind, but these clearly included ‘‘ancient’’ and ‘‘feudal’’Europe, as well as a number of contemporary cities, such as Rome, Versailles, Madrid, andVienna, where royal courts contributed to ‘‘idleness’’ and ‘‘frivolous’’ consumption. Thewealth of London, Glasgow, and the Netherlands resulted from the ‘‘industry’’ of aproductive labor force and an upper class that lived from profits on capital rather thanrents.

Smith’s claim that ‘‘great nations’’ are sometimes impoverished by ‘‘public prodigality’’could be read as foreshadowing today’s neoliberal attacks on ‘‘big government’’ or ‘‘un-productive spending.’’ It is important to be cautious in treating Smith’s late-18th-centurywork as a kind of sacred writ, laden with solutions to today’s dilemmas. Historians ofeconomic thought have shown that contemporary neoliberals have subtly convertedSmith’s famous ‘‘invisible hand’’ of Providence into an ‘‘invisible hand’’ of the market(Lubasz 1992; Hirschman 1991:15–16).


Rather than a totally convinced champion of market liberalism, Smith harbored manydoubts. In The Wealth of Nations (first published in 1776) he railed against the greed of thepowerful, declaring ‘‘All for ourselves, and nothing for other people, seems, in every age ofthe world, to have been the vile maxim of the masters of mankind.’’ He was not averse, insome circumstances, to maintaining wages above market levels, since ‘‘Our merchants andmaster-manufacturers complain much of the bad effects of high wages in raising the price,and thereby lessening the sale of their goods both at home and abroad. . . . They are silentwith regard to the pernicious effects of their own gains. They complain only of those ofother people.’’ Similarly, he feared that suddenly removing protectionist tariffs could resultin ‘‘very considerable . . . disorder’’ (Smith 1976:III, 437; I, 110; IV, 491). Particularly in hisearlier work (published in 1759), Smith levelled caustic criticism at the conspicuousconsumption of the rich, calling the market a ‘‘deception which . . . keeps in continualmotion the industry of mankind’’ by producing ‘‘trinkets of frivolous utility,’’ such as ‘‘atoothpick, . . . an earpicker. . . [or] a machine for cutting the nails’’ (2000:263, 261).

Population dynamics have long been central to debates about development. Examplesinclude the controversial role of population pressure on resources in the formation ofancient states or the destabilization of contemporary ones, the perennial argument betweenthose who consider population growth a leading cause of poverty and theorists of demand-for-labor or human capital who emphasize inequality and the incentives that poor peoplehave to reproduce (and that affluent people have not to), the place of the demographictransition in improving the status of women, the contentious struggle of women in pro-natalist societies (and elsewhere) for safe forms of contraception and abortion, and theethics of other kinds of natality control (including coercive sterilization programs, infanti-cide, sex-selective abortion, and China’s one-child policy).1 The ideas of Thomas Malthusare always explicitly or implicitly present in these discussions, even two centuries after theirinitial formulation.

Malthus is best known for a simple idea expounded in 1798 in his ‘‘first essay,’’ publishedanonymously after one of the earliest capitalist crises (Cowen and Shenton 1996:18).‘‘Population,’’ he said, ‘‘when unchecked, increases in a geometrical ratio. Subsistenceincreases only in an arithmetical ratio. A slight acquaintance with numbers will shew theimmensity of the first power in comparison of the second’’ (Malthus 1970: 71). Demo-graphic growth, in other words, will outstrip growth in food production unless slowed by‘‘preventative’’ or ‘‘positive’’ checks. Malthus’s admirers and critics have given ‘‘positive’’checks – which included famines, disease, and the ‘‘barbarous practice’’ of exposingchildren to the elements – much more attention (Malthus 1970:89). ‘‘Preventative checks,’’which Malthus (who was an Anglican parson) saw as ‘‘vice’’ and among which he laterincluded ‘‘moral restraint,’’ were ‘‘the sort of intercourse which renders some of the womenof large towns unprolific; a general corruption of morals with regards to the sex, which hasa similar effect; unnatural passions and improper arts to prevent the consequences ofirregular connections’’ (1970:250).

This puritanical and pessimistic outlook was part of a broader, reactionary vision.Malthus inveighed against ‘‘evil’’ progressive taxation, England’s poor laws and the ‘‘dis-gusting passions’’ unleashed in the French Revolution (1872:421; 1970:121). While Mal-thus is most remembered for his alarmism about demographic explosion and agriculturalstagnation, most of his Essay on Population was devoted to critiquing the Enlightenmentbelief in human perfectability held by such thinkers as the Marquis de Condorcet andWilliam Godwin.

Given Malthus’s enduring celebrity, it is perhaps surprising that his best-known idea –that population grows geometrically and agricultural production arithmetically – is notwidely accepted. Malthus’s critics note that he failed to foresee that improved technologies


78 PART I CLASSICAL FOUNDATIONS

would boost food output and significantly reduce ‘‘positive checks’’ on population growth.Similarly, Malthus paid little attention to the age and sex structure of populations or tosexual or marriage practices, all central concerns of contemporary demographers. Nor didhe anticipate the demographic transition from high fertility and high mortality to lowfertility and low mortality, which has been observed in country after country.

Why does Malthus’s ‘‘law’’ of population continue to attract attention? First, Malthusexplained poverty in relation to his ‘‘law,’’ rather than as an outcome of capitalist develop-ment, and he prescribed measures to ameliorate it like those that elites still favor, such asprotecting private property and abolishing the Poor Laws (which provided low-wage jobsfor the able-bodied, apprenticeships for children and cash handouts for those unable towork). Second, technological revolutions in agriculture cannot postpone indefinitelyefforts to stabilize human populations. Third, Malthus’s ‘‘law’’ has had extraordinaryinfluence on a range of thinkers. Darwin attributed to a reading of Malthus’s Essay hisunderstanding of evolution through natural selection as a ‘‘struggle for existence’’ (Darwin1958:42–43.). Spencer, the most influential social Darwinist and a key ideologue of 19th-century economic liberalism, echoed Malthus’s attack on the poor laws, which helped ‘‘theworthless to multiply at the expense of the worthy’’ (Spencer 1961:94). More recently,Malthus’s influence is evident in Hardin’s (1968) ‘‘tragedy of the commons’’ thesis andErlich’s The Population Bomb (1968). The pessimism Malthus expressed in the ‘‘firstessay’’ diminished over his lifetime and, in his treatment of public debt and business cycles,he is sometimes said to have anticipated Keynesianism.

Just as Adam Smith is represented today as an unequivocal advocate of free markets,David Ricardo is hailed for articulating the advantages of unfettered foreign trade and‘‘comparative advantage.’’ The latter doctrine held that each individual, region or nationought to specialize in the production of those goods for which it was best endowed. Butwhere Smith viewed markets as a harmonizing influence, with the ‘‘invisible hand’’ balan-cing the interests of buyers and sellers, Ricardo emphasized the unavoidable antagonismsthat characterize all economies, notably the contradictory interests of town and country,industry and agriculture, and capitalists and landowners. Later economists referred tothese contradictions as ‘‘terms of trade,’’ a concept that became central to neoclassicaltheories of international commerce, as well as to dependency-oriented explanations of‘‘unequal exchange’’ and ‘‘urban bias’’ (see the Introduction to this volume).

Liberal economists, Ricardo among them, waged a protracted campaign against Brit-ain’s early 19th-century Corn Laws (see Introduction to this volume) and protectionism,much of it marked by vitriolic attacks on the avaricious and parasitic British aristocracy.Nevertheless, the industrial interests that opposed the Corn Laws generally were not averseto protectionism in principle. The 1845 repeal of the Corn Laws marked a shift away fromthe protectionism that had enabled Britain to emerge as the first industrial power.

Ricardo’s most succinct explanation of comparative advantage relied on a hypotheticalexample of trading Portuguese wine for English cloth (1975:77–93). Several aspects of thisfamous model deserve consideration. First, Ricardo understood the value of commoditiesas deriving from the labor ‘‘embodied’’ in them or required to make them. This was not anunusual position among political economists of his time but, like Marx’s better knownlabor theory of value, it has no place in neoclassical theory, which explains comparativeadvantages instead as resulting from any difference in production costs – whatever thecause – for a particular item of trade. Second, the main units of analysis for Ricardo arenations, each with a distinct economy characterized by particular profit levels, labor costs,and commodity prices. While comparative advantage is often invoked now to encouragepoor countries to specialize, it is only infrequently remembered that in the context in whichthe doctrine originated nations often had higher levels of self-sufficiency and autonomous


INTRODUCTION 79

decision-making capability than they do today. And third, Ricardo’s example of the wineand cloth is indicative of a penchant for abstraction that runs throughout his work and thatdistinguishes him from political economists (e.g., Adam Smith) who argued more on thebasis of historical data. Ricardo is widely credited with introducing model building intoeconomics (Heilbroner 1972:99).

Comparative advantage is no longer understood in the same way as in Ricardo’s day, butit remains a contentious topic.2 Echoes of the Corn Law debates are present in today’sarguments over ‘‘food sovereignty’’ and over whether agricultural price supports constitute‘‘subsidies in restraint of trade,’’ which would make them illegal under WTO rules. And theterms of trade between agriculture and industry – a central idea for Ricardo – remain aconcern of policymakers and a focus of political struggle in virtually every economicsystem.

In 1848, just weeks before revolutions began to sweep the continent, Karl Marx andFriedrich Engels opened The Communist Manifesto with the famous declaration that ‘‘aspectre is haunting Europe – the spectre of communism’’ (1968:35). The Manifesto standsout among Marx and Engels’ works for its eloquent, sonorous language, its passionate callfor working-class organization, and its scathing descriptions of capitalism. The Economicand Philosophic Manuscripts of 1844 may better describe Marx and Engels’ view ofhuman agency and Marx’s Grundrisse or Capital may contain more detailed analyses ofcommodity fetishism and capitalist (and other) modes of production (1964, 1967, 1973;see also Engels 1972). But it is the Manifesto – probably the most widely read revolutionarypamphlet in history – that in the 19th century most contributed to gaining Marx’s ideas amass audience.

The Manifesto contains one of the most succinct outlines of Marx’s theory of develop-ment. Four themes are central to the excerpt from the Manifesto included below: theubiquity of class struggle, the social contradictions of each mode of production, capitalismas a force for dissolving tradition and generating technological advances, and the capitalistimperative to expand markets. Marx and Engels saw a social class as a group with a commonrelation to the means of production. In capitalist society, property owners and their prole-tarianized employees had an inherently antagonistic relation to each other as they struggledover the division of the social product. Previous societies, too, were distinguished byconflicts between social classes – lords and serfs, masters and slaves, and so on. Historicalprogress – equated in the Manifesto with movement from one mode of production toanother – occurred as emergent social classes found they could not survive as classesunder the existing order and transformed or overthrew it. Thus the capitalist class, chafingunder a highly regulated feudalism, struggled to advance its interests and, in the process,ushered in a new era of bourgeois domination and free trade. Along with this reshaping ofeconomic and political institutions, Marx and Engels said, the bourgeoisie effected acultural revolution, ‘‘drowning’’ the ‘‘religious fervour and chivalrous enthusiasm’’ thatlegitimated noble rule under feudalism, insinuating the cash nexus even into ‘‘sentimental’’family relations, and upending patriarchal relations (which they understood not simply asmale domination – the way the term is often used today – but as the rule of all those whoclaimed authority based on hereditary or divine right).

The Manifesto’s discussion of modes of production is hardly the most sophisticatedin Marx and Engels’ work, but it is arguably the most influential. A mode of production, forMarx and Engels, consisted of relations of production and forces of production; the formerwere the social relations through which labor was mobilized and surpluses appropriated;the latter included the technological and scientific instruments and other material condi-tions with and upon which human labor acts. While Marx and Engels express a grudgingadmiration for the bourgeoisie (‘‘It has accomplished wonders far surpassing Egyptian



pyramids, Roman aqueducts, and Gothic cathedrals’’), they also saw its need to constantlymodernize and expand the forces of production and to amass large numbers of workers ateach production site as ultimately bringing about cyclical crises and its own demise.Constant expansion was an imperative of capitalist economies, and occurred throughboth technological advance and competition and an extension of market relations to newspaces. But the combination of worker alienation and the concentration of huge numbersof workers in factories and mines could produce, in Marx and Engels’ view, proletarianclass consciousness and, ultimately, the overthrow of the bourgeoisie and the advent ofsocialism.

This picture of a succession of modes of production could be read as an evolutionary,Enlightenment-style ‘‘master narrative’’ or as an inexorable, teleological Hegelian processin which history advances toward a predetermined outcome. Such interpretations are notentirely wrong; Marx’s thought was characterized by a tension between the positing ofepochal, evolutionary processes and the recognition of contingent, historically specificforces.3 Marx’s dual role as scholar and militant suggests that he gave greater weight tothe role of ideas and political struggle in history than is acknowledged by commentatorswho paint him as a crude economic determinist. Nonetheless, Marx and Engels’ scheme ofa succession of modes of production was simplified, first by Stalin (1940), then by pro-Soviet Communist Parties throughout the world, and eventually by French ‘‘structural’’Marxists, notably Louis Althusser (Althusser and Balibar 1970) and his followers, whoincluded several prominent cultural anthropologists (e.g., Godelier 1972; Meillasoux1981; Rey 1976).

Ironically, over time, Marx increasingly questioned the certainty that slavery, feudalism,capitalism, and communism would succeed each other in lockstep fashion. Probably theclearest statement of his opposition to unilineal notions of progress was in his 1881 draftsof a letter to the Russian populist Vera Zasulich, who had inquired about his opinionregarding the fate under capitalism of the peasant commune (mir or obshchina, a pervasiveinstitution in the countryside until well into the 19th century). The political question facingthe populists was whether the rural commune could serve as a springboard for a directtransition to socialism, or whether the proletarianization of the peasantry and the dissol-ution of the mir were part of a necessary capitalist stage that would precede socialism.Marx (unlike later Russian Marxists) inclined toward the former position, suggesting agrowing unease towards the end of his life about universal schemes of history (Shanin1983).

The Communist Manifesto’s analysis of why the bourgeoisie needs ‘‘a constantlyexpanding market’’ has, in recent years, been employed to observe that many features oftoday’s globalization are actually rather old or that Marx and Engels were extraordinarilyprescient (Wood 1998; Katz 2001; Harvey 2000:22–40). There is little doubt that Marxand Engels’ picture of a bourgeoisie that ‘‘must nestle everywhere, settle everywhere, andestablish connections everywhere’’ has a remarkably contemporary ring. The destructionof national industries, the increasingly cosmopolitan character of consumption, and the useof cheap commodities to force ‘‘barbarian nations’’ into ‘‘civilization’’ are – shorn of theirmid-19th-century Eurocentric language – all themes examined in this book and central tolater discussions of development. Fascination with the contemporaneity of the Manifesto’swords, however, may too easily obscure two crucial elements: first, Marx and Engels sawexpanding markets in large part as a means of competition between firms and nationsand of resolving inevitable, periodic crises in the capitalist mode of production; andsecond, their apparent prescience with respect to some dimensions of change existedalongside a certain blindness to the persistence of others, especially nationalism (‘‘nationalone-sidedness and narrow-mindedness become more and more impossible’’) and the ethnic


INTRODUCTION 81

intolerance and religious zealotry which proved to be of such significance in 20th-centuryworld history.

One of the towering figures of early-20th-century social science, Max Weber was, likeboth Smith and Marx, concerned with the conditions that gave rise to capitalism in what hecalled ‘‘the modern Occident.’’ Weber posited the existence of a variety of capitalisms –commercial, speculative, colonial, financial, and even ‘‘political’’ – characterized by acommon profit-making orientation (Weber 1978:164–166). But his theory of capitalistdevelopment is nonetheless frequently represented as being limited to ‘‘the West’’ and asgiving almost exclusive emphasis to religious factors. In The Protestant Ethic and the Spiritof Capitalism, his first major work, he posed ‘‘traditionalism’’ as a major obstacle to thespread of market relations and argued that ‘‘wherever modern capitalism has begun itswork of increasing the productivity of human labor by increasing its intensity, it hasencountered the immensely stubborn resistance of this leading trait of pre-capitalisticlabor’’ (1958:60).4 Contemporary scholarship – and punditry – that privileges ‘‘cultural’’or ‘‘ideological’’ factors in development could be read as echoing Weber’s concern with‘‘rationalizing’’ institutions in order to transcend the heavy weight of ‘‘tradition.’’ The samecould be said of discussions today that try to explain capitalism’s development in the West,and its apparent failure almost everywhere else, as a result of cultural predispositions or theentrepreneurial capacities unleashed in societies with legal systems that applied uniformyet minimal bureaucratic standards to the registration and mortgaging of property, thesigning and enforcement of contracts, and the accountability of officials (e.g., Landes1998; De Soto 2000).

In The Protestant Ethic, Weber suggested that Martin Luther’s notion of the ‘‘calling’’ – a‘‘life-task’’ set by God – provided, for the first time in history, a positive ethical frameworkfor justifying individual accumulation through rational self-discipline, the severing ofobligations to larger kin groups, and the abandonment of traditional notions about justprice and wage levels. This ‘‘social ethic of capitalistic culture,’’ which Weber characterizedas ‘‘the earning of more and more money, combined with the strict avoidance of allspontaneous enjoyment of life,’’ was both cause and effect of the extension of marketrelations to more and more areas of life (1958:53–54). Success on earth, in Calvinist-Protestant doctrine, was evidence of an individual’s membership in the predestined ‘‘elect,’’who were bound for heaven. Yet Weber’s specific claims about Calvinist Protestantismwere considerably more complex and integrally linked to several of his other centralconcerns, notably bureaucracy, rationalization, and the nature of the state.

Weber believed that what energized the modern capitalist economy was not religiousdoctrine per se, but rational social actors, operating within a rationalized legal system thatpermitted individuals to weigh utility and costs and to feel confident about the security oftheir capital. ‘‘Rational’’, for Weber, did not mean ‘‘good’’, ‘‘just’’ or ‘‘right’’. Rather, themodern state and the firm were similar inasmuch as both operated according to formal,bureaucratic criteria rather than the personalistic or familial considerations that governedeconomic life in traditional societies. The frequently cited (and variously attributed) adagethat Weber was arguing with ‘‘the ghost of Karl Marx’’ is thus only partly accurate. Diversescholars sympathetic to Marxist approaches – from Georg Lukacs (1971) to C. WrightMills (1959), Eric Wolf (2001), and Anthony Giddens (1971) – acknowledge majorintellectual debts to Weber, especially his analyses of political power and legitimacy.Other Marxists, including literary theorist Raymond Williams (1977) and anthropologistWilliam Roseberry, echo key aspects of Weber’s thought (though without explicit recogni-tion) in analyzing how ‘‘ideas and meanings are themselves material products and forces’’(Roseberry 1989:54).



Importantly, Weber’s ideas about development were informed not just by his study ofProtestantism, but by an inquiry into the sociology of religion that produced studiesof several Asian spiritual traditions and ancient Judaism. The excerpt below from Weber’sGeneral Economic History (1950) suggests the complexity of his views about development,outlines his thesis aboutwhyProtestantism produced ‘‘the spirit of capitalism,’’ and indicateswhy he believed other religious traditions contributed to different development outcomes.

Karl Polanyi –born inVienna, raised inHungaryand later a refugee inBritain, Canadaandthe United States – began writing The Great Transformation (first published in 1944) againstthe background of the great depression, the rise of fascism and World War II. ‘‘Fascism,’’ hedeclared, ‘‘like socialism, was rooted in a market society that refused to function’’(1957:239). Polanyi’s objective was to explain the demise of 19th-century liberalism andthe rise and collapse of the ‘‘self-regulating market,’’ and to formulate a broader critique of‘‘market society’’ (he rarely used the term ‘‘capitalism’’). As Fred Block (2003:282) pointsout, the two key claimsof Polanyi’s book – that ‘‘economy’’ is ‘‘embedded’’ in society and thatland, labor and money are ‘‘fictitious commodities’’ – constituted a challenge to the assump-tion, shared by free-market liberals and Marxists, that ‘‘economy’’ – especially undercapitalism – was an analytically autonomous entity with its own internal logic.

The economy, for Polanyi, was in every society – even ‘‘market society’’ – ‘‘embedded’’ insocial institutions. Concretely, this meant that institutionalized mechanisms of interven-tion in the market – and not only or even primarily the class struggle emphasized byMarxists – shaped economic outcomes of all kinds and particularly systems of distribution(which in turn affected production systems, the starting point of most Marxist analysis). Inarticulating not only the human and financial, but also the environmental consequences ofallowing ‘‘the market mechanism to be the sole director,’’ Polanyi was in many respectsunusually ahead of his time. Giving free rein to the market would, he said, cause ‘‘thedemolition of society’’; the perishing of human beings as ‘‘victims of acute social disloca-tion through vice, perversion, crime, and starvation’’; as well as the defiling of neighbor-hoods and landscapes, pollution of rivers, and the destruction of ‘‘the power to producefood and raw materials. . . . Shortages and surfeits of money would prove as disastrous tobusiness as floods and droughts in primitive society’’ (1957:73).

Polanyi’s claim that land, labor, and money are ‘‘fictitious commodities,’’ the centraltheme of chapter 4 below, is based on a definition of ‘‘commodity’’ that is narrower thanmost. For Polanyi, a true commodity was something produced for sale. Labor, in contrast,was simply ‘‘human activity which goes with life itself,’’ land was originally part of nature,and money was ‘‘merely a token of purchasing power’’ (1957:72). The price of labor, untilthe late 18th or early 19th century, was not subject to the unfettered market, but toregulation by craft guilds or, in Britain, to the Poor Laws, which until their repeal in1834 provided the indigent with a minimum of subsistence – in effect, a floor belowwhich wages could not fall. Land, similarly, was ‘‘outside of commerce,’’ whether becauseof feudal privileges or, in England, Common Law regulations on access to different kindsof property.

Polanyi’s deployment of the term ‘‘fictitious’’ has much in common with today’s post-modernists’ use of ‘‘fiction’’ to mean, not a mendacious invention opposed to truth, butrather ‘‘something made or fashioned’’ – which, as James Clifford (1986:6) has pointedout, is the main connotation of the word’s Latin root, fingere. Land and labor couldbecome commodities, but only through this process of fashioning as human institutionsand cultures changed. This emphasis on human agency – and the rejection of historicalteleologies, ‘‘laws,’’ and beliefs about the inevitability of progress – is another elementof Polanyi’s work that diverges from Marxism and that has a remarkably contemporary


INTRODUCTION 83

ring. If there were historical ‘‘dialectics’’ or ‘‘motors’’ of history, they involved ethicalimperatives and a search for democratic alternatives to the tyranny of both totalitarianismand the market. Although he was born Jewish, as an exile inEngland he forged close relationswith radical Christian groups and some analysts have even described The Great Trans-formation as ‘‘a Christian socialist manifesto’’ (Topik 2001:82, 84–85; Block 2003:278).

Polanyi’s engagement with anthropology was evident throughout The Great Transform-ation, but particularly in the chapter on ‘‘Societies and Economic Systems’’ and in the noteson sources that accompanied it (1957:43–55, 269–273). Basing his work largely on thewritings of Bronislaw Malinowski and Richard Thurnwald, he described how societies, inthe Trobriand Islands and elsewhere, were organized not around market exchange butrather around reciprocity and redistribution. Non-market forms of distribution were also acentral theme in Polanyi’s second major work, Trade and Markets in the Early Empires(1957), co-edited with anthropologist Conrad Arensberg and economist Harry Pearson. Itwas this collection that formed a sort of charter for what became the ‘‘substantivist’’ schoolof U.S. economic anthropology, which insisted, following Polanyi, on the ‘‘embeddedness’’of the economy in social institutions and which locked horns over the following twodecades with an emerging school of ‘‘formalists’’ who believed in the applicability ofneoclassical models even to non-market societies.5

A second wave of interest in Polanyi began in the 1990s, with the institution of biannualinternational conferences and an outpouring of new literature, including a new edition ofThe Great Transformation with a foreword by the former chief economist of the WorldBank, Joseph Stiglitz, who had become an acerbic critic of neoliberalism. There is littledoubt that this new interest reflects the great resonance of Polanyi’s ideas in the era ofglobalization. As Stiglitz (2001:vii) indicates, ‘‘his arguments – and his concerns – areconsonant with the issues raised by the rioters and marchers who took to the streets inSeattle and Prague in 1999 and 2000 to oppose the international financial institutions.’’

The classical theorists whose works are discussed above, especially those of the 18th and19th century, are sometimes relegated to the ‘‘prehistory’’ of development thought, primar-ily because they concentrated on the economics of western Europe and North Americarather than on the poorer countries (Arndt 1987:30–35). As we indicate in the volumeIntroduction and in Part II, however, their influence on the development debates and, insome cases, the anthropology of the second half of the 20th century was profound. Nor wastheir interest limited to the wealthy countries of the North. Most had significant concernswith other parts of the world, especially Asia, as well as comparative sensibilities that arepart of what makes their works of continuing relevance even today.

NOTES

1 A useful, if partisan, overview is Harris and Ross 1987. See also, Ross 1998.2 Porter (1990) has argued that ‘‘clusters’’ of related and supporting industries confer advantages

on particular firms, nations or regions. He defines ‘‘vertical clusters’’ as groups of firms linkedthrough buyer-seller relations. Horizontal clusters are made up of industries that produce for thesame market, use related technologies, employ similarly skilled labor, or depend on the samenatural resources.

3 On this and related themes, see Donham (1999, 1990) for a subtle reading of Marx (andcontemporary theorists) in a cultural history of the Ethiopian revolution.

4 Compare this with Marx and Engels’ (1968:38) assertion that in the bourgeois epoch ‘‘all fixed,fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are sweptaway. . . All that is solid melts into air.’’

5 Anthropologists spilled a large amount of ink on this theoretical controversy. For a succinctsummary of the key issues see LeClair and Schneider (1968).



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(May):14–36.



1

Of the Accumulation of Capital,or of Productive and Unproductive

Labour

Adam Smith

There are Two Sorts of Labour,Productive and Unproductive

There is one sort of labour which adds to the valueof the subject upon which it is bestowed: there isanother which has no such effect. The former, as itproduces a value, may be called productive; thelatter, unproductive labour. Thus the labour of amanufacturer adds, generally, to the value of thematerials which he works upon, that of his ownmaintenance, and of his master’s profit. Thelabour of a menial servant, on the contrary, addsto the value of nothing. Though the manufacturerhas his wages advanced to him by his master, he, inreality, costs him no expence, the value of thosewages being generally restored, together with aprofit, in the improved value of the subject uponwhich his labour is bestowed. But the maintenanceof a menial servant never is restored. A man growsrich by employing a multitude of manufacturers:he grows poor, by maintaining a multitude ofmenial servants. The labour of the latter, however,has its value, and deserves its reward as well asthat of the former. But the labour of the manufac-turer fixes and realizes itself in some particularsubject or vendible commodity, which lasts forsome time at least after that labour is past. It is,as it were, a certain quantity of labour stocked andstored up to be employed, if necessary, upon someother occasion. That subject, or what is the samething, the price of that subject, can afterwards, ifnecessary, put into motion a quantity of labourequal to that which had originally produced it.The labour of the menial servant, on the contrary,does not fix or realize itself in any particular sub-

ject or vendible commodity. His services generallyperish in the very instant of their performance, andseldom leave any trace or value behind them, forwhich an equal quantity of service could after-wards be procured.

Many Kinds of Labour BesidesMenial Service are Unproductive

The labour of some of the most respectable ordersin the society is, like that of menial servants, un-productive of any value, and does not fix or realizeitself in any permanent subject, or vendible com-modity, which endures after that labour is past,and for which an equal quantity of labour couldafterwards be procured. The sovereign, forexample, with all the officers both of justice andwar who serve under him, the whole army andnavy, are unproductive labourers. They are theservants of the public, and are maintained by apart of the annual produce of the industry ofother people. Their service, how honourable,how useful, or how necessary soever, producesnothing for which an equal quantity of servicecan afterwards be procured. The protection, secur-ity, and defence of the common-wealth, the effectof their labour this year, will not purchase its pro-tection, security, and defence for the year to come.In the same class must be ranked, some both of thegravest and most important, and some of the mostfrivolous professions: churchmen, lawyers, phys-icians, men of letters of all kinds; players, buf-foons, musicians, opera-singers, opera-dancers,&c. The labour of the meanest of these has a


certain value, regulated by the very same principleswhich regulate that of every other sort of labour;and that of the noblest and most useful, producesnothing which could afterwards purchase orprocure an equal quantity of labour. Like thedeclamation of the actor, the harangue of theorator, or the tune of the musician, the work ofall of them perishes in the very instant of itsproduction.

[ . . . ]In the opulent countries of Europe, great cap-

itals are at present employed in trade and manu-factures. In the ancient state, the little trade thatwas stirring, and the few homely and coarse manu-factures that were carried on, required but verysmall capitals. These, however, must have yieldedvery large profits. The rate of interest was no-where less than ten per cent. and their profitsmust have been sufficient to afford this great inter-est. At present the rate of interest, in the improvedparts of Europe, is no-where higher than six percent. and in some of the most improved it is so lowas four, three, and two per cent. Though that partof the revenue of the inhabitants which is derivedfrom the profits of stock is always much greater inrich than in poor countries, it is because the stockis much greater: in proportion to the stock theprofits are generally much less.

That part of the annual produce, therefore,which, as soon as it comes either from the ground,or from the hands of the productive labourers, isdestined for replacing a capital, is not only muchgreater in rich than in poor countries, but bears amuch greater proportion to that which is immedi-ately destined for constituting a revenue either asrent or as profit. The funds destined for the main-tenance of productive labour, are not only muchgreater in the former than in the latter, but bear amuch greater proportion to those which, thoughthey may be employed to maintain either product-ive or unproductive hands, have generally a predi-lection for the latter.

The proportion between those different fundsnecessarily determines in every country the generalcharacter of the inhabitants as to industry or idle-ness. We are more industrious than our fore-fathers; because in the present times the fundsdestined for the maintenance of industry, aremuch greater in proportion to those which arelikely to be employed in the maintenance of idle-ness, than they were two or three centuries ago.Our ancestors were idle for want of a sufficientencouragement to industry. It is better, says theproverb, to play for nothing, than to work for

nothing. In mercantile and manufacturing towns,where the inferior ranks of people are chieflymaintained by the employment of capital, theyare in general industrious, sober, and thriving; asin many English, and in most Dutch towns. Inthose towns which are principally supported bythe constant or occasional residence of a court,and in which the inferior ranks of people arechiefly maintained by the spending of revenue,they are in general idle, dissolute, and poor; as atRome, Versailles, Compiegne, and Fontainbleau.If you except Rouen and Bourdeaux, there is littletrade or industry in any of the parliament towns ofFrance; and the inferior ranks of people, beingchiefly maintained by the expence of the membersof the courts of justice, and of those who come toplead before them, are in general idle and poor.The great trade of Rouen and Bourdeaux seems tobe altogether the effect of their situation. Rouen isnecessarily the entrepot of almost all the goodswhich are brought either from foreign countries,or from the maritime provinces of France, for theconsumption of the great city of Paris. Bourdeauxis in the same manner the entrepot of the wineswhich grow upon the banks of the Garonne,and of the rivers which run into it, one of therichest wine countries in the world, and whichseems to produce the wine fittest for exportation,or best suited to the taste of foreign nations.Such advantageous situations necessarily attracta great capital by the great employment whichthey afford it; and the employment of this capitalis the cause of the industry of those two cities.In the other parliament towns of France, verylittle more capital seems to be employed thanwhat is necessary for supplying their own con-sumption; that is, little more than the smallestcapital which can be employed in them. Thesame thing may be said of Paris, Madrid, andVienna. Of those three cities, Paris is by far themost industrious: but Paris itself is the principalmarket of all the manufactures established atParis, and its own consumption is the principalobject of all the trade which it carries on. London,Lisbon, and Copenhagen, are, perhaps, the onlythree cities in Europe, which are both the constantresidence of a court, and can at the same time beconsidered as trading cities, or as cities whichtrade not only for their own consumption, butfor that of other cities and countries. The situationof all the three is extremely advantageeous, andnaturally fits them to be the entrepots of a greatpart of the goods destined for the consumption ofdistant places. [ . . . ]


88 ADAM SMITH

Increase or Diminution of the Capitalof a Country Consequently Increases

or Diminishes its Annual Produce.

The proportion between capital and revenue [ . . . ]seems every-where to regulate the proportion be-tween industry and idleness. Wherever capital pre-dominates, industry prevails: wherever revenue,idleness. Every increase or diminution of capital,therefore, naturally tends to increase or diminishthe real quantity of industry, the number of pro-ductive hands, and consequently the exchangeablevalue of the annual produce of the land and labourof the country, the real wealth and revenue of allits inhabitants. Capitals are increased by parsi-mony, and diminished by prodigality and miscon-duct. [ . . . ]

[ . . . ]Parsimony, by increasing the fund which is des-

tined for the maintenance of productive hands,tends to increase the number of those handswhose labour adds to the value of the subjectupon which it is bestowed. It tends therefore toincrease the exchangeable value of the annual pro-duce of the land and labour of the country. It putsinto motion an additional quantity of industry,which gives an additional value to the annualproduce.

[ . . . ]The prodigal perverts [savings] in this manner.

By not confining his expence within his income, heencroaches upon his capital. Like him who per-verts the revenues of some pious foundation toprofane purposes, he pays the wages of idlenesswith those funds which the frugality of his fore-fathers had, as it were, consecrated to the main-tenance of industry. By diminishing the fundsdestined for the employment of productive labour,he necessarily diminishes, so far as it depends uponhim, the quantity of that labour which adds avalue to the subject upon which it is bestowed,and, consequently, the value of the annual produceof the land and labour of the whole country, thereal wealth and revenue of its inhabitants. If theprodigality of some was not compensated by thefrugality of others, the conduct of every prodigal,by feeding the idle with the bread of the industri-ous, tends not only to beggar himself, but toimproverish his country.

[ . . . ]Great nations are never impoverished by private,

though they sometimes are by public prodigalityand misconduct. The whole, or almost the whole

public revenue, is in most countries employed inmaintaining unproductive hands. Such are thepeople who compose a numerous and splendidcourt, a great ecclesiastical establishment, greatfleets and armies, who in time of peace producenothing, and in time of war acquire nothing whichcan compensate the expence of maintaining them,even while the war lasts. Such people, as theythemselves produce nothing, are all maintainedby the produce of other men’s labour. When multi-plied, therefore, to an unnecessary number, theymay in a particular year consume so great a shareof this produce, as not to leave a sufficiency formaintaining the productive labourers, who shouldreproduce it next year. The next year’s produce,therefore, will be less than that of the foregoing,and if the same disorder should continue, that ofthe third year will be still less than that of thesecond. Those unproductive hands, who shouldbe maintained by a part only of the spare revenueof the people, may consume so great a share of theirwhole revenue, and thereby oblige so great anumber to encroach upon their capitals, upon thefunds destined for the maintenance of productivelabour, that all the frugality and good conduct ofindividuals may not be able to compensate thewaste and degradation of produce occasioned bythis violent and forced encroachment.

[ . . . ]Apart from increase or diminution of capital

different kinds of expense may be distinguished.As frugality increases, and prodigality diminishesthe public capital, so the conduct of those whoseexpence just equals their revenue, without eitheraccumulating or encroaching, neither increasesnor diminishes it. Some modes of expence, how-ever, seem to contribute more to the growth ofpublic opulence than others.

The revenue of an individual may be spent,either in things which are consumed immediately,and in which one day’s expence can neither allevi-ate nor support that of another; or it may be spentin things more durable, which can therefore beaccumulated, and in which every day’s expencemay, as he chuses, either alleviate or support andheighten the effect of that of the following day.[ . . . ]

[ . . . ]As the one mode of expence is more favourable

than the other to the opulence of an individual, sois it likewise to that of a nation. The houses, thefurniture, the clothing of the rich, in a little time,become useful to the inferior and middling ranksof people. They are able to purchase them when


OF THE ACCUMULATION OF CAPITAL 89

their superiors grow weary of them, and thegeneral accommodation of the whole people isthus gradually improved, when this mode of exp-ence becomes universal among men of fortune. Incountries which have long been rich, you willfrequently find the inferior ranks of people in pos-session both of houses and furniture perfectlygood and entire, but of which neither the onecould have been built, nor the other have beenmade for their use. [ . . . ] The marriage-bed ofJames the First of Great Britain, which his Queenbrought with her from Denmark, as a present fitfor a sovereign to make to a sovereign, was, a fewyears ago, the ornament of an ale-house at Dun-fermline. In some ancient cities, which either havebeen long stationary, or have gone somewhat todecay, you will sometimes scarce find a singlehouse which could have been built for its presentinhabitants. If you go into those houses too, youwill frequently find many excellent, though anti-quated pieces of furniture, which are still very fitfor use, and which could as little have been madefor them. Noble palaces, magnificent villas, greatcollections of books, statues, pictures, and othercuriosities, are frequently both an ornament andan honour, not only to the neighbourhood, but tothe whole country to which they belong. Versaillesis an ornament and an honour to France, Stoweand Wilton to England. Italy still continues to

command some sort of veneration by the numberof monuments of this kind which it possesses,though the wealth which produced them hasdecayed, and though the genius which plannedthem seems to be extinguished, perhaps from nothaving the same employment.

[ . . . ]The expence [ . . . ] that is laid out in durable

commodities, gives maintenance, commonly, to agreater number of people, than that which isemployed in the most profuse hospitality. Of twoor three hundred weight of provisions, which maysometimes be served up at a great festival, one-half, perhaps, is thrown to the dunghill, and thereis always a great deal wasted and abused. But if theexpence of this entertainment had been employedin setting to work masons, carpenters, upholster-ers, mechanics, &c. a quantity of provisions, ofequal value, would have been distributed among astill greater number of people, who would havebought them in penny-worths and pound weights,and not have lost or thrown away a single ounce ofthem. In the one way, besides, this expence main-tains productive, in the other unproductive hands.In the one way, therefore, it increases, in the other,it does not increase, the exchangeable value ofthe annual produce of the land and labour of thecountry.

[ . . . ]


90 ADAM SMITH

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